Primoco UAV, the Czech manufacturer of unmanned aircraft, increased sales and established new international collaborations in the first half of 2021. However, due to the deterioration of Czech-Russian relations there is a risk of losing contracts in Russia.

Sales of the Czech manufacturer of unmanned aerial vehicles Primoco UAV SE reached CZK 12.8 million in the first half of this year and increased by 34% compared to the same period in 2020. Since January, the company has been able to start negotiations for new contracts in new markets, but due to pandemic restrictions limiting travel, these activities have been complicated and delayed. Primoco UAV SE is also restrained by the speed of the bureaucracy in parts of the state administration in the Czech Republic, especially the Civil Aviation Authority, in connection with the issuance of the necessary certification required by European legislation. This limits the speed of expansion which the company needs to meet the growing demand for its unmanned aircraft.
  • Primoco UAV SE, the manufacturer of unmanned aircraft, increased sales by 34% in the first half of 2021. However, due to pandemic measures that complicated travel and regulatory restrictions in some markets, the results for the first half showed a loss.
  • The outlook for the next period is favourable due to the stabilisation of the coronavirus situation. In addition to ending restrictions on international trade, innovation and new foreign collaborations will also help sales. However, due to the deterioration of diplomatic relations there is a risk of losing contracts in Russia.
  • In the Czech Republic, the company tested its One 150 aircraft for military use in co-operation with the army. At the same time, it has progressed to the second phase of military certification, which it expects to complete in accordance with NATO standards in the first half of 2022.
  • In April, the company successfully subscribed for new shares and raised a total of CZK 90.5 million from 300 new shareholders for its further development. Primoco UAV shares on the Prague Stock Exchange rose by 20% to CZK 290 in the first half of the year.

Operational and Sales Information

The Czech manufacturer of unmanned aircraft Primoco UAV SE in the first half of 2021 increased sales by 34% year-on-year to CZK 12.8 million. It has succeeded in doing so mainly thanks to its ongoing activities to expand its customer base. However, due to the complications caused by the pandemic, the company’s first-half EBITDA loss was CZK 14 million. “The centre of gravity of our business lies abroad, often in countries outside the European Union, where access has been considerably more difficult owing to the coronavirus pandemic this year. This has delayed not only deliveries under existing contracts, but also negotiations on new contracts,” describes Ladislav Semetkovský, co-founder and CEO of the company.

However, Semetkovský said the outlook for the next period is favourable, given the stabilisation of the pandemic situation. “Not only are the restrictions that have made it difficult to build trade relationships and export gradually coming to an end in many countries, but the state of emergency has reminded many governments around the world once again how useful and flexible unmanned aircraft can be,” says the CEO of Primoco UAV SE adding that the company continues to operate completely free of debt, bank loans, subsidies, or other financial obligations.

Despite unfavourable external circumstances, Primoco UAV SE managed to achieve several successes in the international field in the first half of this year. For example, in February 2021, the company unveiled its One 150 aircraft at the Aero India 2021 exhibition and entered into a memorandum of co-operation with BEML, a leading Indian technology company. “Thanks to the capabilities of our Indian partner, we are confident that our unmanned aircraft will be a huge asset for civilian sectors such as monitoring the condition of railway lines or mining areas, as well as for law enforcement, border surveillance and monitoring missions,” says Semetkovský.

Just one month later, Primoco UAV SE entered into an agreement with MEST in Riyadh, Saudi Arabia, to represent the company in the Gulf region and establish a joint venture. In addition to supplying unmanned aircraft to clients in the Middle East, a service and training centre will be established in Saudi Arabia. Later in the year, a number of presentations and flight demonstrations have already taken place to end customers in the region, with the company expecting its first contracts in 2022.

In addition to establishing new business collaborations, Primoco has also been active in the field of innovation. In June 2021, it equipped its One 150 aircraft with a ballistic parachute rescue system and subsequently successfully tested the entire device. The main purpose of the system is to protect valuable cargo carried by the machine, such as highly sensitive sensors, in the event of a technical failure, while preventing potential damage to the ground. The technology will enable safer flights over areas of increased risk, such as densely populated areas.

In August 2021, the company, in co-operation with Norwegian Special Mission, completed tests in Iceland in the field of flight calibration and inspection of airport radio security – i.e. radio navigation systems such as VOR, ILS, DME or military TACAN, as well as optical elements such as VASI, PAPI and other means used to accurately approach aircraft. These important systems must undergo periodic calibration to verify that their characteristics comply with the required standards. Tests in Iceland have shown that the Primoco UAV can fully replace manned machines for calibration work at a significantly lower cost. The favourable results thus open several new possibilities for the commercial use of the aircraft.

Supply to Iraq and diplomatic obstacles in Russia

In the first half of 2021, Primoco concluded a new contract for the delivery of aircraft worth €2 million, and by the end of the year it expects to have signed three more contracts worth €11 million. In total, 14 aircraft will be delivered to customers in Africa, Europe, and South America. At the same time, a total of 5 One 150s were delivered to Iraq this year under a previously concluded contract, with the same customer planning to purchase additional aircraft in the near term.

Primoco at the same time continues to negotiate new contracts in more than 40 countries worldwide, with an average time from start to conclusion of contracts of two years. “Interest in Primoco UAVs is now growing especially in the armed forces worldwide,” said Ladislav Semetkovský, co-founder and CEO of the company.

He also confirmed that with the One 150, the company is also successful in contracting civil aerial work, a service in the industry known as Drones as a Service (DaaS). But this is where policy externalities get in the way. Although the AO Primoco BPLA subsidiary in the Russian Federation has won several such contracts this year, it cannot start implementing them. The reason is the significant deterioration of Czech-Russian relations after the expulsion of Russian diplomats from the Czech Republic, due to which the company has not yet received permission to operate flights. “I am personally conducting negotiations at the highest level and trying to contribute to the resolution of the situation, but there is a risk that the state authorities will refuse to grant permission, which in the extreme case could lead to the closure of our subsidiary in Russia,” said Semetkovský. He added that the projected sales in Russia this year amounted to one million Euros, while next year it was expected to be ten times that. On the part of the Czech Republic, Primoco UAV SE has a valid export permit for the provision of aerial work in the Russian Federation until 31 December  2022. However, the company has been successful in offering DaaS services in other countries, e.g. Slovakia or Finland in the past.

Army tests and military certification are going well

In addition to establishing new international partnerships and continuously innovating unmanned aircraft and their accessories, Primoco also continues to develop co-operation with Czech security and armed forces. After the Police of the Czech Republic tested the Czech unmanned machines in border surveillance in 2020 during the state of emergency, several days of tests were also carried out in September 2021 in co-operation with the Czech Army. The Primoco UAV One 150 was configured for this purpose exactly according to the army’s specifications and subsequently performed test flights over the territory of the Libavá military unit. The aim was mainly to familiarize the military specialists with the aircraft itself and to verify the communication systems for battlefield communications support and optical reconnaissance sensors.

Parallel to the testing of the Primoco UAV One 150 by the Army of the Czech Republic, the military certification of the One 150M is also underway from 2020. This year it has already progressed to the second phase, when on 30 September 2021 the aircraft successfully took off from the factory airport in Písek under the military registration 0498. Primoco expects to complete certification to NATO STANAG 4703 in the first half of 2022.

The tardiness of the Civil Aviation Authority undermines the company’s ability to grow

“While the cooperation with the Ministry of Defence of the Czech Republic and a number of other state authorities and bodies from the Ministry of Foreign Affairs of the Czech Republic, through the Czech National Bank to the Office of the President of the Republic, is very professional and exemplary, which I appreciate, at the opposite pole stands the Civil Aviation Authority, which is one of the key entities in terms of our business. Although we have duly applied for a LUC (Light UAS Certificate) in accordance with European legislation, without which it is not possible to participate in tenders for the provision of aerial work in the EU, we have not received it after five months,” says Semetkovský and adds that Primoco is now negotiating with the Ministry of Transport. In co-operation with a reputable law firm, it is also considering a claim against the CAA for damages for maladministration.

Trading on the stock exchange and new share subscription

Since 2018, the company’s shares have been traded on the START market of the Prague Stock Exchange. From the beginning of 2021 to the end of the first half of the year, they appreciated by 20% to CZK 290 per share. In addition, in April 2021, Primoco UAV SE successfully completed a new issue of securities in the amount of CZK 90.5 million and increased the number of shareholders from 100 to more than four times. The company will use the funds raised for its further development. Among other things, it will prepare for the construction of a new production plant at the airport in Písek – Krašovice, which Primoco owns.

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