30 July 2007
Sweden's New UAV Player
CybAero Seeks Bigger Niche in Expanding Global Market
By Gerard O'Dwyer
CybAero AB, a small Swedish UAV company, hopes that going public will raise its profile with military customers around the world.
The company's listing on the Stockholm Stock Exchange's First North index comes as CybAero is spending heavily to secure military contracts in the Middle East, Europe, Asia and the United States.
"The First North listing represents a very important step in Cyb-Aero's development," said Mikael Hult, the company's chief executive. "It will enable us to finance new development programs and carry out the key investments that we need through share issues rather than using loans. This is a very exciting time for CybAero."
Started up in 2003, CybAero designs and manufactures customized helicopter UAVs (HUAVs) and related sensors for military and civilian applications. Much of the research and development underpinning the company's technology was conducted through a joint project between Sweden's Totalförsvarets Forskningsinstitut (National Defense Research Agency) and the University of Linköping in the years preceding 2003. CybAero's main product, the APID 55, comes in fixed-wing and helicopter versions.
Hult used CybAero's initial public offering on June 13 to raise his personal stake to 639,530 shares, 11.5 percent of all shares in the firm. The equity stake positions Hult as the biggest shareholder in CybAero, putting him ahead of Rune Löderup, a Swedish investor who holds a 9.1 percent stake.
"It was natural that I would want to acquire a significant holding in CybAero," Hult said. "I deeply believe that this company has the potential to make a huge impact in the UAV market globally, and I am confident this can happen sooner rather than later."
CybAero is projecting annual revenues of $85 million within five years, and a 10 percent operating profit margin by then, he said.
The growth estimates are based on the expectation that the market demand for UAVs and HUAVs will grow significantly in Europe and the United States over the next three to 10 years, a Stockholm defense industry analyst said.
"The most reliable estimate for the United States is that the market for fixed-wing and rotary UAVs could be worth $17 billion by 2012 and up to $6.3 billion in Europe," the analyst said. "CybAero believes it can be among the top four players worldwide, and right up there with the current leaders in this segment, Yamaha's R-Max and Austria's Schiebel Camcopter."
Saab Defense, part of Sweden's largest aerospace company, is also investing heavily in UAV technologies. In 2005, subsidiary Saab Aerosystems bought an APID 55 HUAV to use as a platform for its Skeldar vertical-takeoff-and-landing (VTOL) UAV. This new-generation effort is a collaboration between Saab and CybAero.
Under a parallel agreement with CybAero, Saab acquired the rights to develop a derivative of the APID 55 to meet anticipated requirements of Sweden's military.
But the agreements with Saab do not mean that CybAero plans to downgrade the military side of its operations, Hult said.
"Producing and selling UAVs with defense applications to the military worldwide will be our primary business," he said. "UAVs for the civilian markets will be secondary."
Saab also is working on the fixed-wing design of another UAV, the Skeldar V-150, the analyst said.
"Saab is hoping to have a fully operational Skeldar V-150 in place in time to support the Nordic Battle Group 11," the analyst said. "Based on this goal, Saab will need to have a working version available in 2009 and the fully operational version in 2011. This is a tight schedule."
Middle East Market
CybAero should have little problem raising the capital it needs to develop and sell its UAVs worldwide, said Charles Wilken, an industry analyst with Mangold, a Stockholm investment bank.
"There is a lot of investor interest in CybAero," Wilken said. "The company has a base in Sweden and operations in the United States ... and the United Arab Emirates. It is well-positioned to go global."
The Middle East has been CybAero's most important international market. In 2004, it sold seven APID 55 systems to the United Arab Emirates (UAE), and it is developing another UAV with the UAE's military. Three APID 55s have been delivered, and the other four are scheduled to be delivered by the end of this year.
The APID 55 system delivered to the UAE comprises an HUAV with sensors, a ground control station and a transportation vehicle. The APID 55 has a payload of up to 20 kilograms, a maximum takeoff weight of 160 kilograms, and a control system that can guide the HUAV, including takeoff and landing, without operator intervention.
For guidance, the APID 55 uses an inertial navigation system and a GPS receiver. It has a 55-horsepower diesel engine, which powers a Bell-Hiller rotor system with a 3.3-meter main rotor.
The military applications of the APID 55 include battlefield damage assessment, radio jamming, target acquisition and mine detection. But its fundamental missions are intelligence, surveillance and reconnaissance in poorly accessible, hostile areas.
The APID VANTAGE unmanned helicopter, CybAero's second export product, can carry a payload of sensors and imaging gear for border patrol, search and rescue and surveillance.
Like the APID 55, the APID VANTAGE can be flown by an operator or set to fly on a preprogrammed route. Its cost ranges from $300,000 to $1 million.
CybAero's prospects of gaining a strong U.S. foothold improved in March, when it signed a letter of agreement with the U.S. Naval Research Laboratory (NRL) to work on a number of helicopter UAV projects with the U.S. Navy. The laboratory's UAV is about the same size as the APID 55 but has different qualities and performance capabilities, Hult said.
"CybAero founded our American subsidiary, CybAero LLC [based in Stamford, Conn.], to support the NRL project and serve our other North American customers," Hult said. "We see the United States as a very important market for us."