Dear Shareholders,
As we start a New Year, which I can say will be extremely exciting for Primoco UAV SE, please look back with me on our record year of 2023 while I summarize the key pillars of our company’s sixfold to eightfold year-on-year growth in key metrics and offer you an update on the outlook for the period ahead.
The current tense geopolitical situation in the world is having an impact on the security industry, which is experiencing the steepest growth in defence investment in decades. In addition to the need to secure the supply of traditional defence equipment or replenish stocks to appropriate levels, there is also a growing demand for technologically advanced systems and services. Keeping up with market demands is only possible through the continuous development of production capacity, development skills and cooperation between the various players in the industry. I am very pleased that in the field of advanced unmanned systems, Primoco UAV has been able to fulfil these ambitions over the past year, strengthening the foundations for its long-term and sustainable development.
Financial and Business Results (preliminary, consolidated and unaudited)
In 2023, Primoco was able to capitalize on the relentless interest of its existing and new customers and take advantage of the growing market demand for its dynamic growth. The result is a more than sixfold year-on-year increase in revenues to CZK 598 million and EBITDA increased eightfold to CZK 241 million with an operating margin of 40%. The company’s best-ever financial performance reflects the growing demand for UAVs, spare parts, pilot training, complex aerial work and other high value-added Primoco UAV services.
| 31/12/2022 | 31/12/2023 | |
| Revenues | 103,236 | 598,114 |
| Cost | -73,633 | -356,777 |
| Operating profit/loss | 29,603 | 241,337 |
| EBITDA | 29,811 | 241,122 |
| Profit before tax | 30,578 | 234,777 |
| Income Tax | 767 | 44,870 |
| Profit after tax | 29,811 | 189,907 |
| Fixed Assets | 36,156 | 50,005 |
| Current assets | 130,324 | 339,157 |
| of which – inventory | 66,315 | 58,670 |
| of which – bank accounts and cash | 63,161 | 277,724 |
| of which – receivables | 848 | 2,763 |
| Active estimates and accrued expenses | 0 | 244 |
| Total assets | 166,480 | 389,406 |
| Equity | 114,506 | 336,529 |
| Short-term liabilities | 51,974 | 52,877 |
| Long-term liabilities | 0 | 0 |
| Total liabilities | 166,480 | 389,406 |
Undoubtedly, not only the war in Ukraine, but also the aforementioned geopolitical uncertainties in other regions play a role in the increase in demand for advanced UAVs. A number of European countries have decided to increase their defence spending. Those who were previously sceptical about unmanned systems are quickly reassessing their previously often sceptical attitude towards UAVs and those who have not yet fully realised their indispensable role in equipping armies, but also other security forces for whom UAVs and their capabilities are important in a wide range of civilian applications – from intelligence services to integrated rescue systems.
Primoco UAV supplies customers with more than just One 150 UAVs, which are among the world’s top in their category with their flight parameters, wide range of basic or optional equipment and low operating and acquisition costs. Our solutions are comprehensive and include the ability to equip aircraft with dozens of different devices and sensors depending on the intended use – EO/IR cameras, calibration sensors, SIGINT/ELINT sensors, communication repeaters and other advanced technologies. All this is certified in accordance with European standards.
Primoco’s global market position, partnerships and aviation experience
Thanks to Primoco UAV, the Czech Republic is the world’s second largest supplier of medium-sized UAVs. According to the renowned Swedish Institute for Peace Research SIPRI, a total of 69 dual/military use UAVs with a take-off weight of up to 250 kilograms have been sold globally in 2022. Data from national defence systems licensing registries show that the medium-sized UAV market segment is dominated by manufacturers from the United States with two-thirds and our company Primoco UAV with one-third. In the category of heavy aircraft with a take-off weight of over 250 kilograms, another 120 unmanned machines were delivered. The global market, with the exception of the pandemic Covid year of 2021, has been growing steadily by tens of percent per year in recent years and the Czech Republic plays a significant role in it.
Our aircraft are currently flying hundreds of hours per month during actual combat reconnaissance operations and civilian missions of all kinds. As a result, we have a huge amount of real data and valuable customer feedback at our disposal at all times, allowing us to work efficiently on improvements and further upgrades to our aircraft. Primoco UAVs can thus keep pace with current mission needs over the long term, adapt to the environment in which they are deployed, and reliably deliver the results users expect.
For example, during the summer of 2023, we completed a new software and hardware version of the Primoco UAV One 150 control system. This is the next step, which, based on flight experience, allows us to move towards maximum automation and even greater safety off-air traffic. We have invested three million crowns in this project alone and customers are already appreciating the results in real missions.
Thanks to its focus on innovation and commercial success, Primoco UAVs are increasingly attracting interest from major players in the world of aviation and business. In June 2023, we signed a memorandum of understanding with Airbus Defence and Space and its subsidiary Airbus DS Airborne Solutions (ADAS). In December 2023, the agreement was extended to include a commercial agency agreement, which opens up opportunities for Primoco to reach out to Airbus Defence clients.
Orders and outlook for the following period
In 2023, we produced and delivered 33 aircraft, an almost threefold increase compared to 2022. At the same time, we have created the conditions for further production growth in view of the advanced stage of negotiations on further orders for several dozen aircraft and we expect a further significant increase in the economy this year. At the same time, we have created the conditions for further production growth as negotiations for several dozen more aircraft for 2024 are well advanced. In total, we have produced over 150 machines since Primoco UAV was founded, which are in daily operation in many different places on the planet. We want to continue to work on diversifying our target markets. In addition to the dominance of Europe, this will include Asia, the Middle East and Africa.
The preparation of the project documentation for the revitalisation of the Písek – Krašovice airport area is also continuing. In addition to the new assembly hall, the project also includes the construction of a control centre for the operation of Primoco UAVs worldwide, a modern pilot training centre and a research department for the development and testing of new technologies. The total planned investment is approximately CZK 750 million. A significant part of this amount will go towards the robotization and machinery of the modern factory. We expect to start the building permit procedure in 2024, with construction to follow in 2026. From 2027, we expect Primoco UAVs to gradually move to new premises and increase the total delivery capacity to 250 machines per year, more than triple the current level. In addition to expanding domestic production capacity, we are also working on a secondary production project for One 150 abroad.
Certification and corporate events
In November 2023, we terminated our contract with the Military Technical Institute s.p. for breaches of contract by this company. At the same time, we have realigned the continuation of the military certification process NATO STANAG with the Department of Defence and the Department of Military Aviation Oversight (ODVL) with the goal of completing the One 150M type certificate in 2024.
At the General Meeting held on 1 December 2023, the shareholders also voted on changes to the company’s Board of Directors and Supervisory Board. Ladislav Semetkovský, Petr Kováč and Romana Wyllie will be new members of the Board of Directors. Jakub Fojtík, Vladan Ševčík and Jan Sechter were elected members of the Supervisory Board. Petr Babický, Jan Venglář and Rostislav Kuneš became members of the Audit Committee.
Shares
At the December General Meeting, the shareholders voted to apply for admission of all 4,708,910 Primoco UAV registered ordinary shares in book-entry form, constituting the entire share capital of the company, to trading on the regulated Prime Market organized by the Prague Stock Exchange. Primoco UAV shares are currently traded on the START market of the Prague Stock Exchange. The upcoming transition to the Prague Stock Exchange’s Prime Market, which is planned for the near future, is connected with the mandatory introduction of financial reporting according to IFRS. Primoco works on this project in co-operation with the consulting company EY. At the same time, we plan to increase the proportion of the company’s free float from the current 18 percent to the target 25 percent.
Shares of Primoco UAV have seen significant growth in the past year thanks to good financial results and a positive outlook for the future. While on 31 December 2022 the securities were trading on the stock exchange at CZK 410 apiece, by the end of December 2023 their price had risen to CZK 885. The company’s market capitalization now exceeds four billion crowns. The increase in the market value of Primoco UAVs is also reflected in the volume of share trades executed. According to the Prague Stock Exchange, Primoco was the most traded title on the PX START market in 2023.
I would like to conclude this look back at the year 2023 and the outlook for the next period by thanking you for your support and trust, which we greatly appreciate and without which we could not succeed together. At the same time, I would like to wish you a successful 2024, both professionally and personally.
Best regards,
Ladislav Semetkovský
CEO and Majority Shareholder
10 January 2024