Primoco UAV Investor Presentation Q3 2024 – sUAS Information

Pricey Shareholders, 

Let me inform you in regards to the monetary outcomes of Primoco UAV SE on the finish of the 3Q 2024, replace you in regards to the final quarter and share with you the corporate’s plans for additional improvement.  

Primoco UAV SE’s gross sales reached CZK 444 million as of 30 September this 12 months, a rise of 45% year-on-year. EBITDA for the primary three quarters of this 12 months reached almost CZK 170 million, up 34% year-on-year.  

We’ve been assembly our long-term EBITDA margin goal of over 40% and different firm efficiency indicators, corresponding to free money, are additionally rising considerably. As of 30 September, it amounted to almost CZK 300 million, thrice greater than on the similar interval final 12 months. We will due to this fact depend on our personal funding to speculate sooner or later improvement of the corporate, and we don’t require use any financial institution loans or subsidies. The numerous year-on-year improve in financial indicators, led by revenue and income, is predominantly because of the rising worldwide demand for our One 150 UAVs, built-in sensor tools and all equipment, which collectively kind a full-fledged and extremely aggressive unmanned platform for navy and civilian use.  

For the reason that starting of this 12 months, Primoco UAV has delivered 24 One 150 UAVs to clients. In whole, Primoco UAV has signed new contracts for 26 UAVs this 12 months. Negotiations for the supply of tons of extra machines are at a complicated stage – given the complexity of the contracts concerned and the truth that main clients usually embrace public establishments of assorted nations (governments, safety forces, armed forces, and many others.), the size of time from coming into negotiations with the shopper to signing the contract is commonly tough to foretell.  

In view of the above, it’s doable that a number of the contracts at a complicated stage of improvement might not be lastly signed this 12 months however will likely be accomplished in 2025. If this have been to occur, the unique plan for this 12 months’s gross sales of round CZK 1 billion and EBITDA of over CZK 440 million may not be absolutely met. However that’s solely a timing distinction; which means that Primoco UAV won’t lose these gross sales and income. The projected financial indicators for 2025 would then be larger. The important thing takeaway is that Primoco UAV enterprise alternatives are continually rising, and we’re seeing growing buyer curiosity in our options. The Primoco One 150 is already the best-selling European-made UAV within the medium-heavy UAV class and holds roughly 30% world market share in its class in response to SIPRI.  

As well as, we’re regularly supplementing the income generated from gross sales of UAVs to clients with revenues generated from crew coaching and repair contracts. General, whereas it is a comparatively small contribution when it comes to share of turnover, this phase of our enterprise will develop into extra essential as the whole variety of Primoco UAVs in operation grows all over the world. Within the third quarter of 2024, for instance, we signed a brand new service contract value CZK 12 million with one among our first clients. Primoco UAV have been in service for this buyer for greater than 5 years with none issues and with correct upkeep and servicing they excel in reliability and sturdiness.  

Key Financial Indicators  

(Preliminary IFRS, unaudited, consolidated, in thous. CZK)  

Preparation for the Building of our New Manufacturing Plant  

Two years in the past, when it grew to become clear that Primoco UAV’s imaginative and prescient was coming to fruition and we have been capable of construct a dynamically rising enterprise on a greenfield web site, we began working intensively on a undertaking for a brand new manufacturing, service and coaching centre. Sadly, the Czech Republic is without doubt one of the most tough nations on the earth when it comes to building administration and allowing processes. If we didn’t begin preparations to extend manufacturing capability and construct top-quality amenities sufficiently prematurely, it might have occurred that the required capability wouldn’t have been accessible though we wanted to switch the present premises with new and larger ones. So, in these circumstances, we began planning to extend our capability early, somewhat than ready for the variety of new orders to succeed in our present manufacturing capability. It’s essential to look far sufficient forward and put together for additional development in time.  

Initially, we supposed to pay attention all the weather of contemporary twenty first century aerospace manufacturing on our airport premises. Nonetheless, we encountered obstruction from the native council of Čížová, which demanded CZK 20 million only for agreeing to the funding plan with out being prepared to ensure something. Subsequent negotiations sadly didn’t deliver an settlement, so with due care and accountability to all shareholders, we turned our consideration to the close by industrial zone within the cadastre of city of Písek. Its representatives, not like the council in Čížová, has agreed to our plans and accredited the sale of the required land. The brand new manufacturing plant will due to this fact be situated straight in Písek, and we’ll construct an expert facility for flight operations on the land we now personal within the space across the airport in Krašovice.  

A brand new manufacturing plant in Písek and a contemporary coaching centre on the premises of the corporate’s personal airport Písek – Krašovice signify key initiatives for the long run improvement of Primoco UAV. Each websites are just one,000 meters aside, which can enable us to reap the benefits of vital synergies and to consolidate the actions which might be presently unfold throughout completely different places within the Czech Republic.  

In Q3 2024, we took a major step ahead on this undertaking. We accomplished the acquisition of land within the Písek industrial zone the place our new manufacturing plant will likely be situated. In whole, the corporate already owns over 303,000 sq. metres of land in each places, which it acquired at a mean value of round CZK 400 per metre. The combination funding in all of the plots quantities to CZK 125 million.  

The second location, Písek – Krašovice Airport, has been owned by Primoco UAV since 2019. The choice to amass our personal airport was one of the essential milestones within the firm’s ten-year historical past, because it supplied a key base for our additional improvement. Primoco UAV additionally has a devoted airspace for testing UAVs, coaching new pilots or flying new plane. We’re the one firm of its variety in Europe with an identical in-house infrastructure, which is admired by clients, companions and rivals.  

The entire price range of the undertaking is roughly CZK 750 million, a part of which has already been invested, significantly within the buy of land. We at the moment are on the stage of accomplished land buy, accomplished architectural examine and superior course of evaluation in manufacturing. On the similar time, we’re engaged on the development documentation, after which we’ll apply for a constructing allow. In parallel, we’re getting ready a young for the overall contractor. The finalisation of the undertaking and manufacturing capability improve are estimated at 2027.  

Certifications 

In October 2024, Primoco UAV SE was pre-approved as the primary of its variety on the earth for unmanned operation in response to the IOGP 696 normal of the Worldwide Affiliation of Oil & Gasoline Producers. This affiliation brings collectively all main oil and gasoline processors and producers from all over the world. The usual units out the technical and organisational necessities for the secure and sustainable operation of UAVs for the good thing about mining firms, for instance for monitoring hundreds of kilometres of pipelines (checking for doable leaks and leakages) or mining fields and platforms. That is an especially demanding normal, underneath which no UAV operator on the earth has but been accredited. Primoco UAV SE met the overwhelming majority of the necessities and consequently acquired a pre-approval for six months. Throughout these 6 months, it should put in place procedural changes for full compliance with the usual and conduct flight operations with remaining verification scheduled for the top of 2024. We’ll then obtain everlasting IOGP 696 certification, which can enable the corporate to supply our plane or aerial providers to any oil and gasoline infrastructure operator worldwide.  

The corporate additionally expects to finish the very demanding and essential certification course of in response to STANAG 4703 (AEP-83B) as quickly as December 2024. It’s the prime normal that ensures that the UAV will likely be acceptable for operation by nationwide aviation authorities in all North Atlantic Treaty Group member nations and different nations accepting NATO requirements. As soon as the kind certificates has been obtained, it should not be essential to undergo the demanding processes of allowing operation in every nation individually. This can considerably speed up the deployment of Primoco UAVs into service and the power of shoppers to make use of them instantly for coaching and operational missions.  

The NATO STANAG 4703 certification covers over 200 areas of exams. This contains, for instance, airframe power exams, materials exams, endurance and purposeful exams of aggregates, complete load modelling calculation reviews, floor and flight efficiency exams in addition to documentary exams.  

Primoco UAV has constructed two flight prototypes for these exams in addition to two airframes for power testing. It additionally supplied dozens of purposeful samples of assorted aggregates and tons of of fabric samples. A take a look at programme and methodology needed to be developed for every space to be examined. Typically this was the primary time on the earth that such an exercise was carried out on a UAV. Based mostly on the programme and methodology, the take a look at was then carried out and evaluated in response to the accredited process.  

After the completion of the exams, the overwhelming majority of which, together with probably the most demanding ones, have already been efficiently accomplished by our One 150 UAV, the plane will likely be granted a sort certificates. This doc certifying the compliance of the UAV and its efficiency and options with the necessities of navy laws will give Primoco UAV a major benefit over rivals of their class. Not like different producers, Primoco UAVs will have the ability to display compliance with the NATO normal because of a three-year certification course of.  

Minority Shareholder Letters 

Throughout October 2024, the members of the Board of Administrators and Supervisory Board of Primoco UAV acquired letters from minority shareholders Gabriel Fülöpp and Plath Company GmbH with a number of questions. As Primoco UAV SE has persistently ensured that every one shareholders, no matter the variety of shares held, have entry to info on the identical phrases and on the similar time, I’ve included a number of the info requested within the previous sections of this letter, and I reply the rest of the questions under:  

Relationships with Associated Events  

One of many questions involved Primoco Investments s.r.o., which is listed as a associated celebration within the Annual Report of Primoco UAV SE. The connection right here is that I, Ladislav Semetkovský, am the only real shareholder and controlling particular person of Primoco Investments s.r.o., whereas I’m additionally the bulk shareholder and Chairman of the Board of Administrators of Primoco UAV SE. This relation stays legitimate, as does the data, fairly transparently acknowledged within the Annual Report, that Primoco Investments s.r.o. didn’t perform any exercise in 2023 and that there have been no contractual relationships between the corporate and Primoco UAV SE in 2023.  

Nonetheless, in August 2024, Primoco UAV SE entered right into a lease settlement with Primoco Investments s.r.o. for a Piper M600 turboprop plane. The worth of the contract is CZK 300,000 per 30 days and Primoco UAV is actively utilizing this service. As the corporate continues to develop and its enterprise actions are world, it’s changing into increasingly more frequent to search out ourselves in a collision between two essential negotiations in numerous components of Europe. With no extremely versatile air service (common scheduled flights are out of the query and chartering a traditional non-public jet doesn’t make financial sense), it might not be doable to satisfy all of the obligations of Primoco UAV and thus reap the benefits of the numerous enterprise alternatives supplied to the corporate.  

The leased Piper M600 plane can be utilized by Primoco UAV SE for analysis and improvement functions – lessors of comparable plane often don’t enable something to be put in on/into their machines, whereas it’s vital for our firm’s wants – proudly owning our personal plane solves this contradiction and permits our machines to be effectively tailored to essential capabilities to be used on the trendy battlefield. This contains analysis into distant management of unmanned plane from a manned plane at a secure distance and real-time info reception. These capabilities may be essential within the fashionable battlefield surroundings of sign jamming and enemy plane motion. Primoco UAV is already implementing this idea in collaboration with Airbus Defence and Helsing AI.  

So as to not exceedingly burden Primoco UAV SE’s steadiness sheet with the acquisition and operation of its personal plane, I made a decision to buy the Piper M600 plane into my private possession by way of my very own firm Primoco Investments s.r.o. I additionally use the machine for personal flights and hire them to 3rd events.  

Board of Administrators, Supervisory Board and Audit Committee  

One other query was directed on the functioning of the Board of Administrators. Primoco UAV SE is a usually managed firm. The Board of Administrators meets repeatedly, its members attend conferences (of which there are, in fact, minutes) and all members of the Board of Administrators and the Supervisory Board have an outline of what’s taking place within the firm. Primoco UAV SE is certainly not a one-man firm, though I based the corporate and as its consultant, I attempt to be energetic within the media – at all times for the good thing about the corporate and its shareholders.  

Buy of Land, Actual Property vs. Potential Lease  

Primoco UAV SE has lengthy held the view that key components for its enterprise and improvement should be owned. As a result of the corporate develops and manufactures its personal elements for the UAV, it is usually capable of certify it. If we had the components developed and provided by exterior firms, the demanding certification course of could be unfeasible. Equally, the corporate owns, for instance, vehicles, equipment and airport. Beneath this philosophy, the corporate needs to construct a contemporary facility by itself land not just for manufacturing and repair, but in addition for pilot coaching and air site visitors management. A few of these capacities can’t be rented. The truth is, there is no such thing as a skilled coaching centre for unmanned aviation and air site visitors management in Europe as we speak with ample tools. On this respect, we will likely be distinctive within the continent.  

Employees Prices  

The corporate now employs 56 workers, together with exterior workers associated to the certification of plane to NATO requirements. All employers within the Czech Republic at the moment are going through rising personnel prices. Folks’s actual wages within the Czech Republic have fallen sharply and by leaps and bounds within the wake of the inflationary wave, so the stress to offset this shock is regularly growing. As well as, Primoco UAV is dynamically rising as an entire and creating on this surroundings. This entails the necessity to improve the variety of staff, which additional will increase personnel prices as an entire. Furthermore, the Czech Republic has one of many lowest unemployment charges within the EU. Corporations that fail to retain staff (and wage is without doubt one of the foremost motivators) subsequently incur monetary prices when it comes to money and time to find, recruiting and coaching new staff.  

In abstract, Primoco UAV SE treats all prices prudently and with due care, together with personnel prices. The typical wage of a professional manufacturing employee in our firm (with the manufacturing plant in Prague, the place labour is the most costly) is CZK 53,000 gross per 30 days.  

The administration of Primoco UAV SE, together with myself, has a wage set based mostly on the approval of the Basic Assembly. In my case it’s CZK 200 thousand a month. Nothing is uncommon within the enterprise. Furthermore, I handle an organization with a multi-billion market capitalization, traded on the Prague Inventory Alternate and with a worldwide attain, which isn’t the case for a lot of different CEOs. As well as, our Gross sales Division receives bonuses for efficiently negotiated contracts, which can be frequent within the trade. These charges are a part of the employment contracts with our subsidiary Primoco UAV Defence s.r.o. and are solely paid after every transaction is accomplished and the acquisition value is paid in full.  

Audit

The corporate has been audited since its basis. The Audit Committee and the AGM accredited a brand new auditor this 12 months – Grant Thornton. As well as, the corporate makes use of the providers of the consulting firm Ernst & Younger within the space of IFRS reporting. We use the SAP Enterprise One info system, which we applied in 2019, to handle your complete firm. In 2023, we produced switch pricing documentation in extra of our statutory obligations. This doc has been accredited by the Directorate of the Monetary Workplace for the Capital Metropolis of Prague.    

Medium-term Plans and Co-operation  

Along with the development of recent manufacturing, coaching, service and management capabilities, which I’ve described in additional element on the earlier pages of this letter, we plan to develop our present operations within the defence (as a reconnaissance UAV) and civil segments (calibration of airport methods) in 2025 and 2026. In the meanwhile, I can not describe these plans intimately with the intention to preserve a aggressive benefit. I can reveal, nonetheless, that also they are associated to the certification processes we’re going by way of, which I’ve additionally described above. We estimate the medium-term supply potential to those areas to be within the decrease tons of of drones per 12 months past the segments by which we already function.  

Along with the collaboration with Airbus Defence, Primoco UAV SE is engaged on a strategic partnership with one of many different main firms within the trade. In the meantime, our co-operation with Airbus Defence is gaining momentum each within the area of plane gross sales and within the improvement of recent applied sciences – particularly within the area of synthetic intelligence. We’re additionally co-operate with Helsing, a German firm that focuses on AI. However, now we have terminated our partnership with Plath GmbH.  

The event of our UAVs and their capabilities is going down on a lot of different ranges along with testing components of synthetic intelligence. Amongst different issues, we’re getting ready a brand new technology of extraordinarily dependable, economical and highly effective Primoco Engines. We’re additionally increasing the vary of sensors and thus the chances of utilizing UAVs in navy and civilian missions.  

A really superior undertaking within the space of securing the strategic infrastructure of the state includes creating an answer in co-operation with T-Cellular to cowl areas affected by pure disasters with a cell sign utilizing UAVs. For instance, within the case of the September floods within the Moravian-Silesian and Olomouc areas, it turned out that cell sign outages basically sophisticated the co-oordination of rescue work, evacuations of individuals and the next distribution of vital assist. A conveyable base transceiver station (BTS) may be put in in our UAVs to re-transmit mobile alerts. Due to the One 150 distinctive endurance (as much as 15 hours within the air with out refuelling), the cell sign may be reliably supplied till the bottom BTS stations are repaired.  

Furthermore, 2025 will likely be marked by continued digitalization at Primoco UAV SE. The transformation from a small firm initially listed on the Prague Inventory Alternate’s Begin Market to a big firm whose securities are traded on the principle Prime Market, and which has additional dynamic development forward of it, requires full digital documentation and digitization in response to each aerospace and navy requirements.  

Conclusion 

Pricey Shareholders, Primoco UAV SE, with its transition to the Prime Market of the Prague Inventory Alternate this 12 months, has lastly accomplished the early interval of its improvement and has develop into not solely one of many world leaders within the area of unmanned aerial automobiles, but in addition a serious participant on the Czech inventory and enterprise market. Inside ten years for the reason that institution of the corporate with a single thought, this has been a rare achievement. With out your belief it might have been unattainable to realize such success, and I wish to thanks for investing your cash, time and infrequently feelings in Primoco UAV.  

Nonetheless, no success comes with out ache. The expansion of Primoco UAV brings an enormous accountability however opens a worldwide potential. The revenues and income we’re aiming for within the medium time period are estimated at billions of Czech crowns. Our buying and selling companions embrace the governments of probably the most economically highly effective nations on the planet. In such an surroundings the stress naturally builds up – from rivals, clients, suppliers and minority shareholders. Nonetheless, we don’t see it as a risk, however as a motivation to be even larger and higher. All the workers at Primoco UAV, led by the administration, are prepared for the long run challenges, have the perfect competences and stipulations to realize it, and are dedicated to pulling collectively and directing the crew for fulfillment, which in fact contains you, the Shareholders.  

Type regards and my greatest needs for nice autumn days,  

Ladislav Semetkovský  

Chairman of the Board of Administrators  

Majority Shareholder

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