Concerning H1-21

Delta Drone’s half year earnings suffered from a combination of delayed business (lasting Covid impacts on orders) and delayed booking of acquisitions (Weesure, pushed back to FY22). Essentially flat sales at c.€7m were matched by an operating loss at €-4.3m vs. €-3.9m a year ago. The bottom line was nevertheless at break even thanks to the booking of a €5.3m gain on the fair value of investments, which is a one-off and is not expected to carry on in FY22.

The NAV has been adjusted to reflect more accurately the company’s growth outlook. Weesure Group segment multiples have been reviewed downwards, as the price of the Weesure Group was expected at around €5m euros by the management. Since there is value creation in this merger, we have estimated the total value of the Weesure segments at c.€10m (€5m above its estimated cost), vs the €16m previously mentioned. We have also removed the cash from the Delta Drone International entity, as its financials are fully consolidated.

Since the merger of Weesure group is now expected to occur in FY22, we have changed the expected sales for FY21. In addition, we believe the number of drones sold organically to this business has been over-estimated, and we now expect c.40 ISS Spotter drones sold in FY22 vs 72 drones previously. This has significantly impacted the gross margin, as the high level of drone volumes would have been highly profitable. We now expect the EBITDA to remain negative up to FY23, as the negative business momentum is continuing.

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