A month ago, PBS Group published a short press release. In it, you said that you had received an offer to sell the company to Michal Strnad's arms group. And that you turned it down. How long has CSG been circling you?
For several years now. Now it was more relevant because we are growing and there is more interest from different investors and groups. There have been several offers this year alone. That was one of the reasons why we made it public that our 100% shareholder was not interested in selling PBS. In order for the interest to subside a little bit.
How much did CSG offer you?
The offer was in the region of billions of crowns, in the range of five to six billion crowns.
That's not completely low.
If you take PBS and its current financial performance, plans for the next years together with know-how and secured long-term contracts, I think the value of PBS Group is higher. Multiple.
The value of a company is often calculated by EBITDA. What are the expectations for this year?
At the level of 600 to 650 million crowns. But within three to five years it will be completely different. We will end this year with sales of around two billion crowns.
Where should PBS be in five years?
We will be fully established in the US, Asian and European markets as a full-fledged aircraft engine manufacturer. We will consolidate our position as one of the most important global players. We will also expand our product portfolio through collaborations like the one we have with Lockheed Martin. PBS is now growing in volume, mainly in jet engines, by about 300 percent year-on-year in 2024. Next year we expect growth of more than 200 percent.
In fact, we've gone from dozens of engines produced to hundreds and now we're going to move into the thousands. But we also have a strong civilian sector, from APUs for helicopters (they help with the main engines and provide electrical power for on-board systems before take-off - ed.) to cryogenics (devices for liquefying and transporting helium or nitrogen - ed.) or our own foundry. All this will be evaluated in the coming years.
A one-off dispute with Bester Generacion UK over the construction of a biomass power station in north Wales, which is behind the group's energy arm, could damage you. What's the status of this litigation?
This is a separate matter and has no bearing on the future of PBS Group. The amount in dispute has already been precautionary for over a year. I trust that the dispute will be resolved soon. (The amount in dispute is £17.5 million, or over half a billion crowns - editor's note). We are not ruling out operating in the energy sector because of this, although aerospace is the main one.
PBS has a successful track record in the rocket engine segment, competing with global giants with billions of dollars in sales. Isn't there a risk for you that these large corporations will become more involved?
We are not sleeping either. This is one of the reasons why we are looking at localizing our production in the United States, where we already supply some government projects. Meanwhile, we have a sales and service technology centre in Atlanta. In recent weeks, we assembled and tested an engine for the first time with our partner in Florida directly on US soil. And we're selecting sites where we will manufacture in the US ourselves.
Final production will be at least in two locations, but we are not averse to acquisitions. We are recruiting people from blue-collar to managerial positions and ideally within a year our US subsidiary will be fully operational. Within two to three years, we anticipate sales of around $100 million (about CZK 2.5 billion) in the United States.
India is so far mainly associated with APUs for helicopters for PBS Group. Will jet engines for missiles also be developed? From 2025 onwards, production in India must also be localised by law.
We can deliver significant numbers of jet engines as early as next year. I believe that within two to three years we will be selling hundreds of engines in India, and most of them will be manufactured there. The potential there is in the thousands. We are also working together to develop the final applications for which they will be used.
The cooperation with Ukrainian Ivchenko Progress on the AI-PBS 350 engine, which is your largest, is quite crucial for PBS. Will the production start this year in Velká Bíteš?
More likely in the first half of 2025, but we are already able to supply these engines in cooperation with Ivchenko. In Bíteš, we will start production in tens of units per year, gradually reaching hundreds of units.
Can these engines be already sold elsewhere than Ukraine?
The needs of Ukraine are of course influential and decisive. However, cooperation is accelerating all the more so that we are able to produce in Bíteš as soon as possible.
Your most powerful engine of your own design is the TJ 200. But you're behind schedule with that one. When will it be ready?
We are finishing final development tests, intensive commercial activity has started and we have several potential customers. We anticipate that 2025 will already see the first deliveries to prototype and development projects.
I assume you want to keep moving up in engine performance. What about new product development?
We have a newly established design office in Prague, we have development in Brno and Velká Bíteš, we are building our own development in the USA and gradually in India. We are able to improve performance even within our existing engines. But we are also looking at engines with more thrust. I don't want to be completely specific, but also thanks to the cooperation with Ivchenko we can get to two to three times the existing performance. We are also trying new technologies and materials or 3D printing. In addition to jet engines, we have several development projects focused on APUs. Last year at the Paris Aerosalon, we presented the new Spark 40. We have a cooperation with the Turkish company TAI. We are working with Pratt & Whitney in the US to develop a completely new product.
You are also involved in a new fuel grid design for Lockheed Martin's F-35 fighter jets. You're there with One3D and the HiLASE Laser Center. Has development already begun? What's going to happen next year?
Since the signing in May, we have already completed the evaluation by the US government, passed the security clearance and in September received the so-called contract award, which gave the project the green light. The first excavation meeting has already taken place and work has begun. We hope to complete the development even earlier than 2028. Then we can join the supply chain, because the fuel grid would be manufactured here. It is a very interesting project for us in the future.
Did the security clearance also apply to your owner William Didden, who, according to an earlier statement by PBS, is a Czech citizen living in Switzerland?
Yes, as part of these screenings, the US government looks at the technological level, the ability to deliver the project, the financial stability, as well as the ownership structure. It is indeed a very demanding and thorough process. Our entire group is also subject to security clearances by the Czech authorities, including the NSA, and the NSA also looks at the ownership structure. We are transparent about this, just as we were during the cyber-attacks that hit our company a few weeks ago. Or about misinformation that is intended to harm us. We expect more to come as our strategic importance grows even faster than our revenues. There aren't many companies in Europe that can produce similar engines and have their own development. I am in regular contact with our owner and we are discussing strategy and the development of the company. He is very much in the loop and, as I said before, he does not want to sell the company. On the contrary, he wants to develop it and possibly contribute financially to its further development.
What investments is PBS planning?
Next year we will invest 300 million crowns in production technologies and capacities in the Czech Republic, and over 100 million crowns will be invested in our own development of new applications. In addition, we are prepared to invest $20 million (about 480 million crowns) in the first phase of localisation of production in the USA.
As written by Petr Zenkner for Hospodářské noviny. Published on December 4, 2024. Available at: https://hn.cz/.