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ASX-Listed Counter Drone Solutions Provider, DroneShield Gaining Momentum Amid COVID-19

  • September 08, 2020 07:16 PM AEST
  • Team Kalkine
ASX-Listed Counter Drone Solutions Provider, DroneShield Gaining Momentum Amid COVID-19

Summary

  • Global unmanned aerial systems market is expected to witness strong growth, with increasing uptake of drones in several industries.
  • DroneShield, a global leader in drone security technology, has secured multiple orders from government agencies with high credit rating.
  • First half revenue of the company grew by 45%, with substantial demand and interest for its products, throughout the COVID-19 period.
  • Recent capital raising of approximately $17 million would enable the company to pursue significant opportunities across the US, European, Australian, Asian and other markets.
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Military and government agencies continue to experience increase in budget, on the back of factors like government investments to stimulate economies and macroeconomic tensions. Consequently, businesses in the related space such as drone security technology provider DroneShield Ltd experienced substantial demand and interest for their products amid the COVID-19 period.

Drone technology is one of those industries that are likely witness more growth opportunities in the future. The global uptake of drones in the defence sector, in addition to other industries like agriculture and health is likely to support the global unmanned aerial systems (UAS) market.

In that backdrop, let us discuss DroneShield, an ASX-listed drone technology company, covering its previous few key announcements and stock performance.

DroneShield Ltd A Drone Security Technology Provider

DroneShield Ltd (ASX: DRO) is a global leader in drone security technology, based in Sydney (Australia), with offices in Virginia (US) and London (UK). DRO has developed pre-eminent drone security solutions that protect people, critical infrastructure and organisations from intrusion from drones. Its solutions have been deployed on a global level by government, law enforcement, military, critical infrastructure, and other commercial customers.

Orders from European Government Agencies with High Credit Rating

During end-August 2020, the company updated to have secured orders from government agencies of two separate European countries for its products.

First order is from a significant European Government customer for its DroneSentinelTM multi-sensor detection system, powered by the DroneShieldCompleteTM Command-and-Control engine, and a DroneGun TacticalTM portable counter drone solution. This order follows a smaller order from an existing customer in July. Under this order, the company is anticipating receiving full payment prior to shipment, likely at end-September 2020.

Source: DRO ASX Update

Second order is for a number of portables such as DroneGun TacticalTM, DroneNodeTM and RfPatrol MKIITM from the Ministry of Defence of a different European country. The order represents the first sale in that particular European country. Of the total amount, nearly 50% is expected in September 2020, with remaining on shipment in the last quarter of 2020.

Do Read: How these drone technology companies are performing?

1H20 Revenue Up 45%, All-Time Record Customer Cash Receipts and Grants in 2Q20

For 1H 2020 ended 30th June 2020, in a market update on 28th August 2020, the company highlighted several key achievements including the following:

  • DRO secured numerous contracts and successful trials with high profile marquee customers, for a range of DroneShield products.
  • The company is continuing to move into the SaaS space via subscription pricing models on a range of its products.
  • DRO worked on rapid development and enhancement of DroneShield technologies, which include RfPatrol MKIITM, DroneSentry-XTM, and Artificial Intelligence/Machine Learning software engines for its RF and Optical sensors.
  • DroneShield is accelerating its supply chain and manufacturing capabilities, which include opening of a new manufacturing facility in Western Sydney.
  • DRO continues to work towards the implementation of a formal contract with respect to the previously announced $70- $85 million Middle Eastern bid. Its near-term high conviction pipeline includes a number of additional multi-million-dollar opportunities, globally.

During 1H 2020, the company reported revenue from continuing activities amounting to $3,593,897, reflecting a rise of 45% from $2,475,144 recorded in the same period a year ago. Net loss after tax for the period amounted to $1.17 million, down 56% from $2.67 million in 1H19. The company witnessed all-time record customer cash receipts and grants for Q2 2020 of $2.1 million.

The company is positioned as a pioneer and a leader in the drone business with a number of differentiated products. In addition, growing international tensions are leading to further increase in security and defence budgets. Moreover, its target verticals such as oil & gas, mining, law enforcement, and maritime & vessels remain substantially unaffected by coronavirus.

At the end of June 2020, the company had $4 million in cash, enabling it to boost sales and engineering teams, as well as demo/sale inventory and manufacturing processes. DroneShield seeking to pursue rapidly emerging significant opportunities across the Australian, Asian, US, European, and other markets.

Equity Raising of $17 Million

Early in August 2020, the company announced a capital raising program involving a placement and a share purchase plan.

DRO successfully closed the placement during mid-August 2020 with sophisticated, professional and institutional investors, raising $7.5 million through issue of 60 million fully paid ordinary shares at an issue price of $0.125 per share.

Moreover, the company completed the share purchase plan on 3rd September 2020 with applications received for ~$15.3 million (before costs). However, the board will be accepting ~$9.5 million (before costs) in applications. The SPP shares are expected to start trading on 11th September 2020.

Proceeds of approximately $17 million, before costs and after the scale-back, are planned to be directed towards:

  • Quickly scaling the sales and marketing resourcing to support current momentum in the US, Europe and other locations.
  • Additional resourcing (including inventory) to support airport trials.
  • Scaling up the Australian engineering team to support rapid product refinement with respect to end user feedback.
  • Investment in long lead items for sale inventory to enable rapid sales and demonstrations
  • Repayment of the $600,000 R&D Tax Incentive Loan.
  • General working capital purposes.

Stock Performance

At the close of trading session on 8th September 2020, the stock of DRO settled at $0.155 per share, indicating a fall of 8.824% against its previous closing price. The market capitalisation of DRO stood at $53.12 million and its stock has provided shareholders with a return of more than 21% in the time span of one month.

(All currencies in AUD unless or otherwise stated)

 

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