ASX-bound attack drone maker Innovaero scales up to beat market ‘saturation’

WA’s ASX-bound attack drone company, Innovaero, will use the proceeds of its proposed $40 million initial public offer to crank up production and crack offshore markets before the globe is saturated by wannabes.

Innovaero, which is already supplying the Australian Defence Force, has mulled a float for several years but believes the wait has it better positioned to tackle booming global demand for military drones.

“We have grown and matured, and our product range has got the right focus now,” chief executive Greg Tunny said.

“And importantly, the market’s appetite and willingness to look at defence-centric businesses has changed really significantly,” he said.

With Ukraine’s use of drones against Russia redefining warfare and defence budgets swelling to meet geopolitical uncertainty, Innovaero is expected to list next month or in August with a strong tailwind as armed forces around the world scramble to add drones to their inventories.

The company already has $34.7m of contracts under its belt, including $21m for its portfolio of flagship OWL, one-way armed drones, which were developed in collaboration with the ADF and are designed to fly to a targeted area carrying munitions, loiter until a target is located and conduct a strike.

Founded by Mike von Bertouch 20 years ago, Innovaero developed the sophisticated airborne camera technologies used by former ASX listings Spookfish and Nearmap before refocusing its expertise on defence after Russia’s 2022 invasion of Ukraine.

“Sadly, for the world, that’s where the growth is at the moment,” Mr Tunny said..

The eye-catching success of the drone in the Ukraine-Russia war has triggered a proliferation of products, but Innovaero believes it can match it with the best of them once the company scales up production.

“Within the competition, there are some good players, there’s quite a few dodgy players . . . (and) there’s other companies with quite decent products,” Mr Tunny said.

“There will shakeouts in the industry, at the same time, people will see quite a bit of evolution in the next four or five years.”

Innovaero can currently make 250 drones a year by hand in batches from its factory in Bibra Lake, but a new plant using robotic technologies being developed in Jandakot will significantly boost annual capacity to 2500.

The group raised $17m from pre-IPO investors in November, with management using it to buy back control of the company from British defence contractor BAE Systems.

Mr Tunny says the company is making money, but needs more to scale up production to take quicker advantage of demand.

“The company is travelling well, we have an order book, we are profitable, we are cashflow positive,” he said.

“This (IPO) raise is about positioning ourselves for the future and accelerating certain things, like product development and taking our products into national markets (offshore).”

Innovaero didn’t “want to be the last competitor to get on the traction curve,” Mr Tunny said.

“We’re building winged munitions that have substantive range and a substantive warhead, but we still need to build at a reasonable scale.

“There’s still a good window of opportunity; we’ve seen a lot of products come to the market but a lot of it is pretty unrefined, a lot of it is done in a big rush.

“The quality to go with the quantity will come with the next phase of development, so we need to get products into the market sooner rather than later and we need to capture key markets before they are saturated.”

Innovaero sees strong potential to sell into the US, Britain and Japan, some NATO countries and other markets