AUKUS: Australia’s crucial defence projects are losing out as submarine pact eats into security budget

The founder of Sydney based tech company DroneShield, whose share price plunged 30 percent this week, has warned much of Australia’s military budget is being consumed by AUKUS, meaning other crucial defence projects are missing out.

On Thursday DroneShield defended an extraordinary $70 million share selloff by management and directors which stunned investors, and ended a dream run for the local defence sector market darling.

Late on Wednesday the company revealed to the Australian Securities Exchange that chief executive Oleg Vornik had divested his entire shareholding in the company for $49.5 million between November 6 and November 12.

A statement signed by Mr Vornik released to the ASX on Thursday insisted the “change of directors’ interest notices are unrelated to the growth trajectory of the company, which remains strong”.

“Directors have retained a stake in the company through vested options as they have done in the past when disposing of shares acquired on exercise of options. The board and executives remain fully committed to the success of the company.”

In an interview conducted before Thursday’s share market turmoil unfolded, the 44-year-old Russian entrepreneur, who founded his counter-drone business a decade ago, insisted the company was still seeing “a lot of demand from Europe”.

“Historically, the US has been about 70 per cent of our revenue, where a number of Department of War, intelligence, law enforcement, water security type customers have been deploying our equipment,” Mr Vornik told The Nightly.

“But now, of course, the largest contract of the year for us has been in Europe - the $62 million contract that we received at the end of June, and there is an up to $800 million contract in our pipeline for Europe”.

DroneShield boasts it specialises in technology to counter unmanned aerial systems (UAVs) harnessing artificial intelligence platforms and its shares had jumped more than 200 per cent over the year.

Despite enjoying a boom in international military sales since Russia launched its invasion of Ukraine in 2022, DroneShield is yet to secure major defence contracts in Australia, although it has managed to sell its counter-drone products to civilian clients.

“(The) reality is that as amazing as the AUKUS submarine program is for Australia, it does suck up a lot of funding,” Mr Vornik said when asked to give an assessment of this country’s preparedness with counter-drone technology.

“So, it always seems like if you are in defence, you want to almost now run two separate defence budgets - one for the submarines and one for everything else – and so the submarines basically don’t pull the money away from the rest of defence.”

Two months ago the Albanese government announced US owned defence company Leidos Australia had been selected for the initial systems integration work on a $1.3 billion contract to acquire counter-drone capabilities for the defence force.

Under the decade-long project known as Land 156, DroneShield is among several local companies competing to provide drone-killing products to help protect ADF assets and personnel.

“I think we’re pretty optimistic about Land 156, I think there’s going to be meaningful amount of counter drone equipment procured through it as soon as 2026, which will deploy into base protection here and overseas bases.”

Privately, DroneShield’s local industry rivals have cast doubt on whether the tech company will be able to secure any work under Land 156, given this week’s controversy over share dealings.

On Friday shares in DroneShield recovered slightly to finish at 2.33, up from their previous close of 2.25, but still significantly down on its record high price of 6.60 recorded last month.