Special Report: The company flagged strong full-year revenue guidance as it continues to build out its global customer base.

Advanced drone engine manufacturer Orbital UAV (ASX:OEC) has rounded out a big year in 2020 with another strong set of half-year results.

The results were highlighted by a 67 per cent increase in revenue to $19.046m, a mark of increased traction with its global client base.

OEC’s revenue growth is underpinned by its long-term contract with Insitu, a defence-sector subsidiary of global aerospace giant Boeing.

Orbital is the primary engine supplier for Insitu’s entire fleet of unmanned aerial vehicles (UAVs), with a deal to manufacture and ship five fully assembled engine propulsion systems.

Heading into the first half of 2021, OEC has two Insitu engine models in production, with the third model now in development.

With a strong pipeline of ongoing work, the company expects top line revenue growth to remain consistent in H2 2021, as it flagged full-year revenue guidance of between $30-40m.

The company booked net operating profits of $600,000 in the six months to December 31 and closed out the half with $12.4m in the bank.

With multiple industry contracts in a sector that has high barriers to entry, Orbital CEO Todd Alder said the company is now well-placed to capitalise on a multi-billion dollar market opportunity.

In that context, the company said its contract with Insitu gives it a key competitive advantage it can leverage into additional contract work.

“Our position as primary UAV engine supplier to Boeing-Insitu, as well as the additional engine development partnerships and programs we continue to secure, provide an exciting pathway for continued improvement in our financial results,” Orbital said.

In presenting the half-year results, Alder cited independent research from industry consulting firm the Teal Group, which said global UAV production spend rose to $US5.6bn in 2020.

Looking ahead over the next decade, cumulative global UAV investment will total almost $US100bn.

“Orbital UAV’s current market opportunity has UAV production spend at US$15.7 billion over the next 10 years,” Alder said.

Within those broader tailwinds, Alder said the company is focused on what it has to do operationally to build and establish market share in the global UAV sector.

“We have a clear focus on what we must deliver; increasing market share, a commitment to profitability, and positive operational cash flows that fund our strategic objectives,” Alder said.

In the near-term, investors can look forward to the completion of OEC’s third engine production line for Insitu, as well as progressing its other development contracts through to completion and bringing additional customers into its pipeline.

“We continue to expand our product offering and deliver on our customers’ requirements for globally leading spark ignited, heavy fuel propulsion systems for tactical UAVs,” Orbital said.

This article was developed in collaboration with Orbital UAV, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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