Srt Marine Systems Share Discussion Threads

[obiterdicta] 06/10/2016 14:09

I took deliverable to mean deliverable under a contract. Therefore reporting to the market when a phased deliverable has been, err, delivered. OD

[alter ego] 06/10/2016 13:56

Like others, I have been puzzling over this obliquely worded update. The fact that it uses words like "material progress" and "significant project deliverables" suggests important monetary value to SRT but stops short of saying so. I interpret that as meaning a deliverable could be an important stepping stone to securing a contract but might not result in immediate revenue.

The statement also mentions several projects, so that must mean at least three. We know a project is something that SRT list as an item in their VSP so work on it can precede a formal contract or order. We also know Indonesia is in progress and stage 1 completion must be close. Bahrain might be another with the anticipated upgrade to a full MDM system which was in the "project evaluation" stage (another deliverable?) at the time of the AGM. Saudi, I think, awaits a formal tender the results of which would be considered a "deliverable". Ecuador has been expected to come to fruition sooner rather than later and was "at final proposal stage" at the AGM. Is that another of these "significant deliverable(s)"? Whether these deliverables will result in significant revenue this year is an unanswered question. If not, then next year must be loaded.

Any or all of these plus a few that I haven't listed could be what SRT are talking about. The confidentiality about naming countries doesn't help investors make sense of it all so we are left with reading between the lines and trusting SRT not to mislead us.

Frustration is understandable but, I can't help thinking that the use of the words "several", "material", "significant", "completion" and "will" are all designed to reassure that the train is still on the tracks. Waiting for it to arrive without a timetable is the problem. Having waited 6 years, I guess I can wait bit longer.

[lavalmy] 06/10/2016 12:54

Thanks TP.

It looks like my double digit EPS for next year and beyond is still on the cards.

As I see it the broker is being a bit naive in thinking that SRT will ever be able to give an accurate forecast, and, more importantly, that serious investors will actually give a hoot about that as long as several projects are on the go. A couple more signed for say $50 million in total will do the job. It gives the rest of the pipeline that much more credibility. And keeps us very happy waiting for the elusive recurring revenues, which, as we know, depend on the volume sales of Identifiers first.

I stick with my prediction of 10+p EPS next year and, as that becomes apparent, a share price of £1-1.50 by the end of the next March, in which range it is likely to stay for a year or two.

I think the stuff about 'deliverables' probably refers more to hubs, radars, CCTV and base stations etc. Only the last is made by SRT.

[the prophet] 06/10/2016 12:40

LaV

no forecasts yet for 17/18, on that subject the note says

'.....the opportunity for SRT remains substantial. Translating that into firm orders and providing guidance on phasing and therefore forecasts for FY18 and beyond will be key to share price appreciation'

[martinthebrave] 06/10/2016 12:13

Bought in here a while ago and with hindsight 6-12 months too early. That said, quite a few wheels will have to fall off this particular vehicle for it not to be trading higher in a years time. I am happy to wait. I would add that this is an above average quality board for ADVFN which always helps. Good look to one and all.

[lavalmy] 06/10/2016 12:06

TP

Have they got a forecast out for 17/18?

[kalkanite] 06/10/2016 12:05

TP

Thanks for the broker update. The RNS this morning was quite honestly poorly written/nonsense hence the confusion.
The brokers I feel were aware of this and have filled the gaps re the confusion, they will have had communication from ST.

Given the update, I think we are where we left off from the AGM but further up the road in time scale. Timing of orders still being the unknown here.

[the prophet] 06/10/2016 11:51

ps
I feel the last paragraph is a slight error from the brokers, and mandated revenue is now included in with 'core' business, so 'core' is now defined as 'core + mandates'

Small point, but would be nice for house broker to get it correct?.....

[the prophet] 06/10/2016 11:49

A few bits from the house broker's note issued this morning

'The statement suggests there has been progress on a number of projects out of
the $200m opportunity pipeline with several expected to reach the deliverables stage
during H2. Until such time as the company announces the scale of these deliverables, we
leave forecasts unchanged but the assertion on H2 gives us confidence in maintaining
our FY17 forecasts of £700k PBT on £12m of revenue. We retain a Speculative
recommendation and, in the absence of new forecasts this morning, a 40p price target.'


'Why are we leaving forecasts unchanged? An obvious question, given that 75%+ of
our full year revenue forecast needs to be achieved in H2. In the absence of any new material information on the rollout of key projects, this represents nothing more than our “best guess” at this stage and we therefore flag a greater-than-usual forecast risk. On the upside, the major €90m Asian agreement announced in March may start to gain substantial traction in H2; on the downside, large projects are typically delivered in phases over a number of years and the exact timing of each phase is difficult to accurately predict.
Simplistically, our £12m FY revenue forecast comprises roughly half “core” business
leaving £6m of project/ mandated revenue'

[the prophet] 06/10/2016 10:50

sorry LaV, I put 'week' instead of 'month', have now amended my post, thank you for pointing it out.
Cheers for your view on the 'completion of significant project deliverables', we've had at least half a dozen views on that one, all different!

[the prophet] 06/10/2016 10:45

Looking at the figures a little closer:

£2.7m revs, assuming 50% margins, means £1.35m gross profit, so overheads were around £2.5m in the first half.
I expect that overhead figure to nudge up as SRT are and have been taking on additional project suport staff.

let's say overheads are c £5.5m this year.That requires £11m of sales (at 50% margin) to cover overheads and break-even.
It is pretty clear that core/mandate aren't going to provide much more than a useful £5m a year. On that basis SRT need a £6m project every year to break-even. To look interesting, I guess SRT need to be doing more like £20m+ a year, which would provide pbt of around £4m, more in keeping with a company that is currently valued at just over £50m.
With an order book of £70m and a VSP of £200m, £20m and much more should be very achievable.

[the prophet] 06/10/2016 10:12

Papy02, that's a very good point, perhaps SRT will be recognising a decent lump of the next phase of the Indonesian contract and thus they are not waiting for a new contract to be signed as such, as it relates to a deal already underway.

[lavalmy] 06/10/2016 10:10

TP

What interim results next week? 15th November, it says.

I read it pretty much as saying that they will be delivering significant goods in H2, though, of course, that doesn't have to be large in relation to the £2.7 million in H1. It looks like they are expecting to give us several updates in H2, as well as signing several contracts for projects.

It would help me a bit if they don't get news in til Xmas or so.

[yump] 06/10/2016 10:07

Agree with goodapple though; 'significant project deliverables' isn't as good as 'significant invoices'...

[hjb1] 06/10/2016 10:07

it's supposedly been going to "happen" for years and years..as I said, fewer "words" and more meaningful figures..

[papy02] 06/10/2016 10:06

To me "completion of ... project deliverables" speaks to revenue recognition of work ongoing on existing contracts, not new deals closed

[the prophet] 06/10/2016 10:05

I guess it explains why ST why ST wouldn't give any indication of trading at the AGM, which was unusual.
As Owenski points out, the core/mandate business is not a sustainable business model in its own right, and without projects the company would struggle to survive. Question is when are we going to see multiple overlapping projects to give a degree of security of increasing revenues and profits? It sounds like it is going to happen this half.
hjb, I would agree with you, it is time for the meaningful figures to start, but perhaps we may have to wait for next year's interims to see them, although there should be ample news and info well before then to support that.

[countryman5] 06/10/2016 10:03

. During the period there was material progress with several projects which will result in the completion of significant project deliverables in the second half. Upon completion the Company will make further announcements.

The NOMAD would not have allowed the word 'WILL' unless it is going to happen. SRT would have had to justify that word.

[yump] 06/10/2016 10:02

The Prophet

As long as the collective deliverables have a definite value that will really have a big effect on revenues, timing of payments not too much of a worry imo.

Its the waiting for the significant deliverables that's been the issue.

[hjb1] 06/10/2016 09:59

words matter not a jot, and it makes me cringe when all there is to hang onto is the word "will" in a statement,jeeez!
Time for the words to stop and the meaningful figures to start imo!

[yump] 06/10/2016 09:58

I see we've picked up a handful of first-time posters, presumably taking time off from ambulance chasing.

[the prophet] 06/10/2016 09:55

Some good points already made on this thread, thank you to everyone.

Well, the good news is that, yet again, SRT are very quick out the block in giving a TU just a few days past period end, with the interim results next month. All indicative of a well run company.

And yes, the 'will' word being used is indicative of confidence of good news to follow in this period. It needs to!

I am not sure of the excact meaning of this phrase:

"During the period there was material progress with several projects which will result in the completion of significant project deliverables in the second half".

To me it reads that these deals will be tied up in this half, that they are significant deals, but the phrase 'completion of significant project deliverables' indicates to me that we might not necessarily see revenues from these in the second half. Not that would be a problem if we had set ourselves out for a stonking 2017/2018 with a very strong order book resulting from these 'project deliverables'. I believe this is the scenario LaV fancies, so , if I am correct, LaV will be happy?
But it could leave SRT somewhat short of the forecast numbers, as pointed out by EE. Whilst that may not be a disaster, esp with news of new projects, it would then become something of a habit to miss forecasts.

Anyway, be pleased to hear anyone else's take on that phrase and what other folks interpretation of it is.
Thanks.

[hjb1] 06/10/2016 09:54

wow!! clutching at straws eh chaps?? I expect Tucker is too embarrassed to do a webcast after all the big talk and big numbers and he returns a pathetic £2.7m...