TONNER DRONES S.A. Delta Drone acquires Weesure and becomes world leader in drone security services
STRATEGIC PLAN
Delta Drone has come to an agreement to acquire the security company Weesure to use drones the industry. This is in line with its strategy of proposing a drone as part of the security team, which adds significant value to customers in terms of price and efficiency.
FACT
Through this acquisition, Delta Drone could reach €35m in sales in FY21 (with €20m corresponding to the consolidation of Weesure Securities) and expects to reach €50m in sales in FY22, by joining the big European players of the security industry. The group aims a positive EBITDA in 2021 and a positive EBIT by 2022, if the sanitary restrictions lessen in the near future. Weesure Group has over 1,400 employees (700 in France and 700 in Africa). Delta Drone plans to acquire 100% of Weesure Securities and Weesure Services and 25% of Euro Protec and Weesure Africa.
ANALYSIS
The Weesure Group is split in four main companies:
- Weesure Securities: (Delta Drone plans on obtaining a 100% stake) This is a traditional security company which has clients such as Veolia, Siemens, Vinci and the French Ministry of Justice. Most of its contracts have a duration of 3-4 years, which gives high sales visibility in the long term. It is expected to generate €20m in 2021.
- Weesure Services: (Delta Drone plans on obtaining a 100% stake) This specialises in the complementary services of private security at cultural and sporting events.
- Euro Protec: (Delta Drone plans on obtaining a 25% stake) This is a newly-acquired company by the Weesure Group and specialises in security solutions (cameras, alarms, etc.) and generates €1m in revenues.
- Weesure Africa: (Delta Drone plans on obtaining a 25% stake) This specialises in security services in Africa and generates €1.5m in revenues.
The security industry will always need human employees, as some tasks are inaccessible to machines. However, having a drone agent to assist them in their duties has numerous advantages. The ISS Spotter is a security drone that is autonomous as, once the path or alarm systems are implemented, the drone does not need human assistance. It will perform its tasks and will recharge automatically. Therefore, the drone works 24/7 and will be faster and more precise than any person. It is also more convenient to send a drone than a person into dangerous situations or hard to access locations. There is also a possibility for the drone to be controlled by a user, enabling the person to access the cameras of the drones manually.
ISS Spotter
Source: Delta Drone website
It also has significant cost reduction impications for customers. On average, a security agent’s salary, working 24/7 for a year would be the equivalent of around €200,000 a year. The same service on the ISS Spotter drone wwould cost €80,000 a year, a 60% cost cut.
The implementation process of using drones in security services is relatively straight forward. Delta Drone’s technology is easily adaptable to any existing system. The traiining of the employees to manage a team with a drone can take between one afternoon, for the security guards working with it, to a couple of weeks, for the engineers designing the paths that the ISS Spotter will follow. It is therefore a quick process to upgrade an existing security service with new drone solutions.
Price and new technology are important criteria when customers choose their security provider. Using drones could be an essential competitive advantage, as no other companies possesses such an advanced drone technology in security services. In addition, its newly-acquired size is also an advantage. Having greater sales figures and company size allows Delta Drone to accept bigger contracts that may not have been accessible to it before, hence broadening its addressable market.
The security industry has historically always had low margins of between 1% and 2%. Therefore, the most lucrative strategy of the industry is to grow and use economies of scale to increase margins. These synergies are part of Delta Drones’ strategy, which has already centralised its formation centre with Weesure. In the mid-term, these synergies could reach an additional 1-2% of margins.
Drone Agents can also help boost profits. On top of being a competitive advantage that helps signing new contracts, one drone does the working hours of 5.5 “classic employees” for 40% of the price. They can now afford to be cost competitive, while generating more margin. There is no licensing plan needed with the merger of the historical security service with the new drone technology. However, there might be less need for human staff in the long run as the technology improves, meaning that excess staff can be used for new contracts without having to augment the number of employees.
The historical contracts of Weesure are split between permanent missions and particular events. The permanent segment has shown resilience through the pandemic, but sporting and cultural events have strongly declined and have not recovered yet. The sanitary restrictions that prevent major events from taking place will negatively impact the security business. Most of the previously mentioned positive perspectives depend on a return to a normalised environment in the mid-term.
IMPACT
The increase of sales and the positive guidance of the company will lead us to review our target price. 2021 might still not show the margins promised through this new acquisition, as the COVID-19 presence is still a concern and restructuring will have to take place before we can see the synergies between the two groups. We will review our sales perspective for 2021 and readjust upwards the margins for 2022.
