DroneShield shares traded with heavy losses on Wednesday. The half-year report presented during the night did not meet the high expectations.
DroneShield: Flying too high?
Behind the shares of the Australian drone defense specialist DroneShield have had an extremely successful year on the stock market so far. The shares have risen by almost 350 percent since the turn of the year. The long-term performance is even more impressive, with price gains in the four-digit percentage range.
The reason for the continued high level of investor interest is the growing importance of drones in warfare. The Russian war of aggression in Ukraine has made it clear what possibilities arise even from small units - and how important it is to be able to protect yourself against them.
Share with double-digit losses after figures
On Wednesday, however, the share suffered a severe setback. The shares lost 10.4 percent on the Sydney stock exchange amid high trading volumes, and on Tradegate they recorded losses of 7.8 percent in the morning (as at 09:30).
The reason for this is the company's half-year report presented during the night. This proves that the share price is far too far ahead of business development and that the company's valuation is far too high from a fundamental perspective.
Strong growth, improved profitability
Compared to the same period a year ago, revenue increased by 210 percent to 72.3 million Australian dollars (AUD; 40.4 million euros). This resulted in a 144 percent increase in profit for the period, which amounted to AUD 2.12 million (EUR 1.2 million). A year ago, the company had generated a loss of AUD 4.8 million (EUR 2.7 million).
Cash flow also improved significantly. After AUD -30.2 million (EUR 16.9 million) in the first half of the previous year, the operating outflow amounted to only AUD -8.7 million (EUR 4.9 million). With the help of capital measures, DroneShield was nevertheless able to increase its cash and cash equivalents to AUD 203.8 million (EUR 113.8 million) and thus invest in the expansion of its production.
Production facilities planned in Europe and the USA
The demand for further company growth is certainly there. The company put its order backlog at AUD 2.34 billion (EUR 1.31 billion) following an increase of 113 percent. The number of large orders in particular has grown: in its presentation, DroneShield mentions 13 orders with a value of over AUD 30 million (EUR 16.8 million) and 52 others with a value of at least AUD 5 million (EUR 2.8 million).
In view of the war in Ukraine, the Group's most important customer region is currently Europe, where 36% of the revenue generated this year was generated. The order backlog in this region amounts to AUD 969 million (EUR 540.9 million), followed by the USA with an order volume of AUD 697 million (EUR 389.1 million).
The company is therefore planning production facilities in Europe and the USA in the near future. DroneShield also intends to generate a growing proportion of its revenue from the Software-as-a-Service (SaaS) business.
My opinion:
It is quite normal for the company to deflate from time to time. However, I assume that sales and profits will continue to grow dynamically.
