DroneShield shares propelled 71 per cent on EU police deal

DroneShield shares propelled 71 per cent on EU police deal

Australian technology group DroneShield (ASX: DRO) has been selected by the European Union (EU) as the preferred anti-drone solution for its police forces.

Under the agreement DroneShield will roll out its technology that can deactivate drones that appear as threats across a range of police units in the EU.

The ASX-listed company says it expects its agreement with the EU to produce "material" periodic sales over an extended period of time, with orders to commence from this quarter.

DRO shares surged 71.4 per cent on the news to reach $0.18 each, although this is still well short of the $0.265 they were trading at on 2 January. 

The deal is expected to also allow DroneShield to sell more of its products to EU police departments, such as its wearable drone detector RfPatrol and its vehicle and fixed site products.

"This is the first framework rollout of counterdrone equipment by any Government customer, anywhere in the world," says Droneshield CEO Oleg Vornik.

"In addition to the substantial nature of this contract, we expect for this to set a standard for DroneGun Tactical procurement by other Government customers in the EU and globally, helping fasttrack additional acquisitions.

"Importantly, this win of the competitive tender by DroneShield illustrates that security is at the forefront of governments globally as well as the fact that, after a brief interruption caused by the COVID crisis, global procurement processes have resumed."

The EU deal is the latest win for DroneShield whose counter-drone tech has been in high demand from governments globally.

In March the company penned a $460,000 order from a United States Government agency and in September 2019 the company entered into a "watershed" deal with UK-based global telco BT Group.

Despite these recent wins DroneShield has not been immune from the effects of COVID-19.

The resulting economic crisis dampened DroneShield's customer cash receipts during the quarter ending 31 March 2020 to $424,000 which was "substantially below expectations".

However DroneShield's customer orders were not affected, and current orders placed by customers as at 31 March 2020, totalling $4.2 million, are expected to continue unabated.

"The Company is fortunate in that a majority of its customers are governmental agencies and, as a result, the credit risk faced by the Company in the current environment is small compared to that faced by businesses whose customers are private enterprises and customers," said DroneShield in late April.

"The Company continues to manufacture products and undertake its research and development, and sales activities."

In fact, the COVID-19 crisis presents a range of opportunities for the company considering international tensions have heightened which DroneShield says will result in an increase in security and national defence budgets.

Consistent with this expected trend DroneShield received payment for a third order placed by the Australian Department of Defence for its products over the last few months.

"Just like the crisis has unintended consequences in a number of industries, it has produced unexpected positive consequences for DroneShield," DroneShield said.

"By way of example, the drop in the Australian dollar has made the value of currently outstanding orders, expressed in US dollars, more significant. More importantly, it has made DroneShield, whose costs are largely Australian dollar denominated, much more cost and price competitive internationally."

The company says it is confident that its existing cash balance (which was $3.57 million as at 31 March 2020) is sufficient to meet its capital requirements until the end of the 2020 calendar year.

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