Special Report: The 2020 result caps off a breakout year for the company, as it establishes traction with a global client base.

Advanced drone engine manufacturer Orbital UAV (ASX:OEC) announced its preliminary full-year results, and the market applauded.

Shares in the company rose by another 12 per cent at the opening bell to $1.41, after it flagged full-year revenues of $33.8m – at the upper end of previous guidance ($25m-$35m).

The strong growth flowed through to underlying core earnings of $2.3m and a full-year net profit of $1.7m (up from a $5.9m loss in 2019).

Highlighting a “commitment to ongoing profitability”, Orbital said it continues to build momentum with a global client base underpinned by its long term contract with Insitu Inc., a wholly owned subsidiary of the Boeing Company.


Path to profitability

While 2020 has been a big year so far for the company, the result is a by-product of a multi-year focus on establishing the intellectual property required to build its market-leading drone engine technology.

Speaking with Stockhead recently, Orbital CEO Todd Alder said the strategic vision first implemented back in 2017 is starting to pay dividends.

“It’s important to understand that it takes years of work with Tier 1 defence companies to establish credibility,” Alder said.

“You can’t just knock on the door and land a deal. It takes years to establish relationships and that’s just part one.”

“Then it’s a multi-year process to develop prototypes and build confidence. It’s one thing to get approval from a company like Boeing, but getting to a comfort level where they’re prepared to send the product out to US defence forces takes a lot of work.”


Further revenue growth ahead

Having booked a record full-year revenue result, the company said it expects further growth in 2021 with early revenue guidance of between $40-$50m.

“Customer demand remains strong and existing business and projected outlook has not been affected by the COVID-19 pandemic,” the company said.

Growth will be underpinned by the Insitu contract, where Orbital is contracted to bring five engine models into production and began shipping the second model in January this year.

In addition, 2020 has seen the company establish traction across global markets, highlighted by deals to develop a hybrid propulsion system for global aerospace giant Northrop Grumman, and a new contract with one of the biggest defence companies in Singapore.

Revenue growth will be “provided by a combination of increased product demand and an expansion of Orbital UAV’s product range”, Alder said.

“We look forward to demonstrating further progress against our UAV strategy throughout FY21 and continuing to deliver on our financial targets.”

Orbital Corporation (ASX:OEC) share price chart



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.