AlphaValue Corporate Services Fundamental Analysis FR
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Drone Volt

CR
Bloomberg   ALDRV FP
Aerosp. & Defence Equipt.  /  France  Web Site   |   Investors Relation
Waiting for Aquiline Drones' IPO
Target
Upside 182%
Price (€) 0.03
Market Cap (€M) 11.4
Perf. 1W: -8.79%
Perf. 1M: -31.4%
Perf. 3M: -41.3%
Perf Ytd: -55.3%
10 day relative perf. to stoxx600: -9.49%
20 day relative perf. to stoxx600: -20.7%
Earnings/sales releases22/03/2022

Q4 21: getting closer to break-even

Through a record year in sales and strong cost containment, Drone Volt has published its best annual net results since 2015. The coming fiscal year is expected to be the milestone of major technological innovations for the group, which should strengthen its existing partnerships and could lead to new contracts. Strategical acquisitions have also broadened its product and service portfolio, which should lead to robust growth in FY22.


Fact

• FY21 sales stood at €8,617k, a 48% increase yoy and a 21% increase vs pre-COVID-19 levels.

• FY21 gross result stood at €2,986k, 2% above the initial release in January 2022 and a 75% increase yoy.

• FY21 EBIT stood at €-2,705k, €5.5m above FY20 levels and €800k above pre-COVID-19 levels.

• FY21 net result stood at €-1,257m (excluding the added value generated by the 50% sales of Aerialtronics), €5.4m above FY20 levels and €1.5m above pre-COVID-19 levels.

• Strong balance sheet position, with net cash position of c. €3.5m allowing for external growth.

• Drone Volt acquired Skytools and Viking Drone, and launched the Heliplane. New acquisitions are expected in FY22.

• Stock warrants and stock options have been distributed to employees and partners, which could dilute the value of existing stocks by an additional 7%.


Analysis

Strong profitability

In January, Drone Volt had already released preliminary figures including the sales figure and the gross profit. The recent results published on 16 March included the remaining lines to the net result, which appeared far stronger than what we had expected. Opex was roughly flat yoy, despite the tremendous growth in sales. Wages, which account for a third of the total opex, even decreased yoy. This suggests that Drone Volt has the right structure to expand its sales without increasing its costs significantly. In the following years, the wage structure is expected to increase in absolute terms, linked to Drone Volt’s recent/potential future acquisitions and the related additional employees. In addition, now that restrictions are less of a burden, Drone Volt is planning on travelling to exhibitions (like the IEEE in the US), which is expected to increase expenses. Whether opex increases relative to sales in FY22 will depend on Drone Volt’s capacity to execute its contracts and take on board new customers.

There were also several one-offs which significantly increased profitability in FY21. A €900k exceptional income linked to the loss of Drone Volt’s previous CEO, a low interest expense due to its successful deleveraging and tax income that made up nearly 50% of the negative EBIT. D&A also stood below our expectations, as the H2 figure amounted to 50% of the figure recognised in H1. All these factors have led to a strong net result of €-1,257m.

This result does not incorporate the added value linked to the sale of 50% of Aerialtronics at a valuation of €15m. It has added €6.6m of profit in FY21, which can’t be recognised in the P&L according to IFRS norms. However, considering this highly profitable operation, Drone Volt has reached a theoretical net result of €5.4m.

FY22 full of innovation

Drone Volt has ambitious targets for this year. First, it is planning to sell the first series of its Linedrone. This has been a long time coming, but Drone Volt and Hydro-Quebec have obtained strong performances of their current prototype. They are performing final tests to ensure that the drone can fly through harsh environments and will be ready soon for commercialisation. We see significant advantages of using this drone, which will replace helicopter interventions on high voltage lines as it is cheaper to manoeuvre and more precise in its inspection. Hydro-Quebec has already stated it would be interested in acquiring three drones.

Secondly, Drone Volt is working on developing its hydrogen fuel cell which will be implemented on all its larger-sized drones (namely the Hercules 10 and 20 and the Heliplane). On top of the positive environmental impact of flying zero-emission drones, it would also increase the time of flight of these drones. This is a crucial aspect for agriculture spraying and for surveillance missions, which are the two end-markets to which the Hercules 20 and the Heliplane are exposed to.

Finally, through the acquisition of Viking Drone, Drone Volt has acquired intellectual property on technology that it is willing to extend to all its drones. It has acquired an anti-collision software and the technology which could enable its drones to be connected to the cloud. The latter has sparked the interest of Aquiline Drones which seems keen on having connected drones in its catalogue. Hence, the development of this technology could be a catalyst that encourages Aquiline Drones to restart the execution of the Hercules 2 contract, currently on hold.

Aquiline Drones, still looking for cash

As we had discussed in our previous publication, the Aquiline Drone sales in Q4 had been disappointing with only seven Hercules 2 drones sold. So far, the execution of the contract has not advanced, as the US partner is lacking cash for expansion. However, the licensing contract with Drone Volt is still expected to reach USD1,350k in FY22, and the rest will depend on Aquiline Drone’s capacity to sell its products. There could be potential upside, as Aquiline Drone is working towards an IPO which could provide the firm with the cash it needs to complete the Hercules 2 contract execution.

Strong balance sheet enables acquisitions

Through its deleveraging and the heavy capital increase in December, Drone Volt now has a strong net cash position of c. €3.5m which will enable it to grow externally. It has already acquired SkyTools and Viking Drone to expand its services and technological assets. Future acquisitions are expected in the coming quarters, which we believe is a positive given Drone Volt’s prior profit realised through M&A.


Impact

Due to the stronger than expected profitability, we will have to revise our estimates upwards for the coming years, as the cost structure has been over-estimated. The diversification of its customer base linked to its recent acquisitions is also a positive given that Aquiline Drone sales are uncertain in the short term. We believe Drone Volt has successfully managed to improve its proprietary drone portfolio and is well set for growth in FY22. We will revise our estimates upwards.


Updates

18 May 22 Other news/comments
Could the French government be a new major ...

26 Apr 22 Earnings/sales releases
Q1 22: integration of the acquisitions is progres...

24 Mar 22 Target Change
All eyes on Aquiline Drones

22 Mar 22 Earnings/sales releases
Q4 21: getting closer to break-even

28 Jan 22 Earnings/sales releases
Q4 21: best sales in its history

20 Oct 21 Earnings/sales releases
Q3 21: strong contract execution, as promised

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