Drone Volt

Drone Volt saw a significant increase in expenses during the first semester, which was a drag on margins. The rise in marketing expenses (especially related to exhibition participations) amounted to €250k. In addition, through the acquisition of Viking Drones, Drone Volt recruited 3 top-notch engineers which have to be paid, leading to a 25% increase in the wage bill. This was combined with Aquiline Drone’s announcement stating that it would no longer pay the license contract. This will remove c.€650k of potential revenues in H2-22, which is pure profit for Drone Volt. Hence, we expect the gross margin for the coming semester to be below that of H1-22. We still expect growth in the H2-22 yoy and believe that the major one-off costs have already been accounted for in the H1-22 P&L statement.

We have reduced the NAV to account for the slower growth than previously expected. Although we have increased the sales expected from Distribution thanks to the acquisition of SKYTOOLS (and its strong performance), we have adjusted downwards the Royalties revenues following the Aquiline Drone announcement and the Drone Volt Factory revenues given the slow execution of the promised contract from the Hungarian customer and Aquiline Drone.

Due the decreased profitability, we have reviewed downwards Drone Volt’s cash generation. In addition, its inventory has slightly increased while we had been expecting a material decrease over the year. While the Hungarian and Aquiline Drone contracts have been postponed, Drone Volt has
managed to diversify its customer base and we believe its short-term growth is intact. The switch from products to services will also drive profitability. Hence, we have increased our DCF EBITDA long-term growth rate from 9.5% to 11% to account for this. The LineDrone as a service could be a major catalyst if the commercial traction is strong.