Strat Aero Plc (LON:AERO) Chief Executive Officer Tony Dunleavy caught up with DirectorsTalk for an exclusive interview to discuss their acquisition of Aero Kinetics, FAA certification and future transactions
Q1: We’ve just seen your announcement of your acquisition of Aero Kinetics, now this seems like a big transaction for Strat Aero, can you tell us why you’ve bought the business?
A1: Yes, well as I’ve said about our strategy before, we want to be a full solution provider, both in the commercial and the military market. So in the commercial market, what Aero Kinetics gives us is the actual ability to adapt drones to client situations especially the communications and software built into drones so for example, let’s imagine a Fortune 100 type client wanted to manage a fleet of drones and they wanted them to communicate directly with command and control, Aero Kinetics gives us the ability to do that, to adapt the software with the technology they bring.
Q2: Why is FFA type certification so important?
A2: Well, that’s a concept that comes largely from aviation industry so to have a drone or a UAV with FAA type certification would mean that that drone was authorised to fly in the United States and later on in the rest of the world to aviation standards. That’s going to be extremely important to very large companies, especially Fortune 100 type companies, where use cases would mean things like night-time flight, flying over urban areas, flying away from line of sight would be very important and one would expect an FAA type certified aircraft-type drone would be the first to get those exceptions. Likewise those types of large companies, in the States especially, tend to be extremely worried about insurance liability and cross- state regulations and again FAA type certification helps them significantly with those concerns.
Q3: Are there any other big advantages?
A3: Certainly one advantage of this business is the connections that Aero Kinetics and its founder Hulsey Smith have developed. They’ve very deep roots in very large corporate America, they’ve got a very impressive roster of pipeline connections, I’ve spoken myself with some of these people and I believe it will gives us a lead into much larger contracts that we perhaps otherwise wouldn’t be able to obtain.
Q4: So is this the end of transactions for Strat Aero Plc or are there others to follow?
A4: In the commercial full solutions space that we’re targeting, Aero Kinetics now gives us the full capability because we already have the software and we already have the service provider training and regulation, so future acquisitions in the commercial space will largely be infill type acquisitions, maybe a unique piece of software for a technology we like or maybe a geographical-type acquisition to get us a head start in a particular territory. I would definitely think in the military side of things, we still haven’t completed our full solution provider type strategy so I would expect news in the future there.
Q5: I’m guessing it’ll probably take time to get contracts with the types of large business that you want to go after with Aero Kinetics, is there any more news on shorter term revenue?
A5: Yes, so we did announce recently some news on Geocurve and we basically said that there was a £10 million pipeline there and a number of those contracts are being worked on at the moment and they should come to fruition over the next 6 months, there are a couple of possibilities before Christmas but we’re not fully in control of that, that depends of the client. So yes, I’m quite optimistic with that and we do have some things we’re working on in the background. It’s also worth noting that in parts of our business model, especially in the service parts of our business model, it’s not always about contracts, many times we’re working away generating with revenue, revenue with clients, not necessarily under a contract basis, just like, think about any professional service provider, like a lawyer for example, they work all year for the client then charge fees but they don’t necessarily have a contract that says that. So our business model is very much I mixed model so yes, in answer to your question, I do expect some news in the not too distant future.
