SRT Marine Systems PLC Final Results for the year ended 31 March 2017 (3456H)

TIDMSRT

RNS Number : 3456H

SRT Marine Systems PLC

07 June 2017

SRT MARINE SYSTEMS PLC

(AIM: SRT)

("SRT" or the "Company")

FINAL RESULTS FOR THE YEARED 31 MARCH 2017

SRT, the AIM-quoted provider of maritime domain awareness technologies, products and solutions, announces its results for the year ended 31 March 2017.

FINANCIAL SUMMARY

   --      Profit before tax of GBP1.2 million (2016: Profit of GBP0.3 million) 
   --      Growing revenues 
   --      65.7% gross profit margin 
   --      GBP77 million contracted future order book 
   --      Growing validated sales opportunity pipeline of GBP270 million 

OPERATIONAL HIGHLIGHTS

   --      Repositioned company as a marine systems provider 
   --      New project contracts signed 
   --      Significant progress with pending pipeline sales opportunities 
   --      Launch of new integrated vessel transceiver products 
   --      Significant functionality enhancements to GeoVS 

Commenting on today's results, Simon Tucker, CEO of SRT said:

" SRT Marine Systems now sits at the centre of the growing global market for maritime domain awareness technologies, products and systems. We end the year having increased our profits over three times and start the new year with a GBP77 million contract order book to deliver over the next three years and a validated pipeline of new sales opportunities worth up to GBP270 million."

 
  Contacts: 
   SRT Marine Systems plc                         www.srt-marine.com 
                                                       + 44 (0) 1761 
                                                              409500 
   Simon Tucker (CEO)                    [e-mail] 
   Louise Coates (Marketing Manager)    [e-mail] 
   finnCap Ltd 
   Jonny Franklin-Adams / Simon                      [phone] 
    Hicks (Corporate Finance)                                   0500 
   Emily Morris / Camille Gochez 
    (Corporate Broking) 
 
 
   About SRT: 
 
   SRT develops, manufactures and supplies maritime 
   tracking technology and turn-key system solutions 
   to marine stakeholders across the globe with 
   a particular expertise in AIS. The Company's 
   products and solutions are used by individual 
   vessel owners, port authorities, maritime infrastructure 
   owners, coast guards and national security agencies 
   to enhance their maritime domain awareness. 
   Applications include the tracking of commercial 
   and leisure vessels; sustainable fishery; anti-collision; 
   search and rescue; waterway management, port 
   and coast security; pollution management; and 
   environmental management. 
 
   The information communicated in this announcement 
   contains inside information for the purposes 
   of Article 7 of the Market Abuse Regulation 
   (EU) No. 596/2014. 
 

CHAIRMAN'S STATEMENT

 
 During the year, SRT completed its transformation 
  into a leading global maritime domain awareness 
  systems business, which is now starting to 
  be reflected in our finances. I am pleased 
  to report that for the third year running 
  we have achieved our financial and most of 
  our operational targets and are reporting 
  a profit before tax of GBP1.2 million which 
  is a significant increase on the prior year. 
  Most importantly we have made significant 
  progress with a number of high value project 
  sales opportunities within our validated sales 
  opportunity pipeline. 
 
  Group revenue increased year-on-year by 3% 
  to GBP11.0 million with a profit before tax 
  of GBP1.2 million compared to GBP10.7 million 
  and a profit before tax of GBP0.3 million 
  respectively in the previous financial year. 
  The gross profit margin was 65% which is significantly 
  ahead of our long-term target average of 50%. 
  Gross cash stood at GBP1.8 million with saleable 
  stock valued at a cost of GBP3.3 million at 
  the year end. 
 
  Our em-trak business that sells AIS transceivers 
  for leisure and commercial vessels via a global 
  network of distributors and dealers delivered 
  GBP1.5 million in revenues which was a 46% 
  year on year increase. During the year we 
  commenced a program to accelerate revenue 
  growth that is targeting the doubling of our 
  dealer network over the next two years, more 
  products available in each dealer and substantially 
  improved point of sale merchandising designed 
  to increase per dealer sales. 
 
  Our OEM & Module business that supplies AIS 
  own branded product and embedded technology 
  module solutions to a broad range of customers 
  from mainline marine electronics brands to 
  entities targeting more specialist application 
  areas such as UAVs, delivered GBP4.1 million 
  in revenues which was a 12% year on year increase. 
  During the year, we introduced new products 
  with innovative utilities and performance 
  characteristics to these customers which will 
  appear as new product lines towards the end 
  of 2017. 
 
  Adoption of AIS in the non-mandated commercial 
  and leisure vessel markets is primarily focused 
  in Europe and the USA and remains at a very 
  early stage with penetration into the addressable 
  boat park that we estimate at under 1%; this 
  compares with radar which we estimate at approximately 
  25%. A number of regulations all affecting 
  commercial vessels (mandates) are now in effect 
  that require certain types of vessels to fit 
  an AIS transceiver - these include a USCG 
  regulation affecting most commercial vessels, 
  EU Inland waterway vessels and European Fishing 
  vessels over 15 meters. Each of these regulations 
  creates demand for AIS transceivers that our 
  em-trak dealers and OEM & module customers 
  meet. However, the demand profile of each 
  is normally highly variable as it depends 
  on authority enforcement once the mandate 
  fit deadline has passed which in many cases 
  can be very relaxed in the initial years. 
  Encouragingly this year we have seen increasingly 
  strict enforcement in the EU Inland waterways 
  which is resulting in a new stream of sales 
  from this market following the initial rush 
  in 2010 when the regulation was first introduced. 
 
  In recent years, an AIS transceiver has become 
  a standard specification at the point of new 
  purchase on most large vessels (+40ft), leisure 
  and commercial, and over time we expect this 
  trend to continue to smaller vessels. In addition, 
  we expect to see a gradual increase in the 
  annual rate of adoption by existing vessels 
  (retro-market) as the installed base of AIS 
  increases making the acquisition of a transceiver 
  more relevant along with the continued introduction 
  of AIS based applications and services. Combining 
  these two established trends, we believe that 
  the market for AIS will see a steadily increasing 
  annual growth rate over a ten year period, 
  thus providing a significant long-term opportunity. 
 
  Our projects business generated revenues of 
  GBP5.3 million compared with GBP5.9 million 
  in the previous financial year. This was predominantly 
  driven by the conversion of sales opportunities 
  from our validated sales opportunity pipeline 
  into new contracts during the year and then 
  the completion of milestone deliverables. 
  The high software content of these projects 
  produces a higher gross profit margin than 
  hardware only sales and was the reason behind 
  our exceptional gross margin of 65% for the 
  year. 
 
 
  This business targets the global maritime 
  domain awareness (MDA) market. SRT has developed 
  three core system products, VTS (Ports, waterways 
  & infrastructure), VMS (Fisheries monitoring 
  & management) and MDM (Coastal Surveillance) 
  systems, each of which are customised in scale 
  and functionality for specific customer requirements. 
  These systems are typically purchased by maritime 
  infrastructure owners and national authorities 
  who have an 
  increasing desire to monitor and control maritime 
  activities for security, commercial, safety 
  and environmental reasons. 
 
  Each project includes a similar integrated 
  combination of hardware, software and data, 
  with each project varying in precise quantities 
  and functionality. For many of the projects, 
  once they reach a certain implementation stage, 
  we expect to supply our S-MDA satellite data 
  product, which will provide ongoing recurring 
  revenues, in addition to the expected system 
  upgrades and enhancements. Satellites enable 
  monitoring and surveillance coverage to be 
  extended beyond the coastal and territorial 
  water regions which are covered with much 
  higher resolution real time terrestrial sensor 
  systems. Our innovative S-MDA product sources 
  data from multiple satellite constellations 
  to provide an optimal solution for the specific 
  requirements of the customer. 
 
  During the year, a total of seven new projects 
  of varying size and type were contracted, 
  six of which were completed during the period 
  and one which was signed towards the end of 
  the period with some initial deliveries completed; 
  this leaves SRT with two active projects as 
  at the year end with a total current forward 
  contract value of approximately GBP77 million 
  that we expect to be delivered over the next 
  three years. 
 
  In March 2016, SRT entered a contract to supply 
  our MDM system to the prime contractor for 
  a large integrated maritime monitoring system 
  in Asia. The contract was expected to be worth 
  up to $100 million to SRT over three years 
  across three delivery phases. In accordance 
  with the contract deliveries started immediately 
  for phase 1, but were subsequently paused 
  prior to completion as a result of a significant 
  rescoping and planning by the end customer, 
  causing a delay in payments and the completion 
  of remaining phase 1 deliverables. This rescoping 
  has now been completed and is in the final 
  stages of sign-off by the end customer, whereupon 
  a revised contract is expected to be entered, 
  the current phase 1 will be completed as originally 

  defined, and the rescoped project and revised 
  phasing implemented. Whilst the pause and 
  consequent delay has been frustrating, such 
  variability with large projects is common 
  and to be expected. SRT believes that the 
  rescoping may result in a significant, but 
  as yet not confirmed or contracted, increase 
  in the final value of the contract which we 
  still expect to have to substantially completed 
  in phases of variable value and content by 
  2020. 
 
  As at year end the estimated total value of 
  project opportunities qualifying for inclusion 
  in our validated sales opportunity pipeline 
  (VSP) stood at approximately GBP270 million, 
  with significant other potential opportunities 
  pending future inclusion once sufficiently 
  mature and validated. The VSP project opportunities 
  are where SRT is actively engaged in detailed 
  discussions and there is sufficient confidence 
  that a contract will be entered into within 
  a rolling time horizon of three years - with 
  variable delivery profiles after contracting. 
  Given the nature of these large and complex 
  government driven projects, forecasting the 
  exact contracting date, subsequent delivery 
  profile and thus revenue is extremely challenging. 
  However, this is an area which the Board continues 
  to monitor closely and effort is being made 
  to give more clarity to shareholders on the 
  size of contracts in the pipeline. However, 
  due to the nature of many of the end customers 
  and projects, certain details about the projects 
  are strictly confidential and cannot be disclosed. 
  I am pleased to report that four projects 
  located in the Middle East and Asia with an 
  aggregate value of approximately GBP60 million 
  appear to have made significant progress towards 
  contract signing during the year, with several 
  others also making key break throughs. 
 
  I therefore believe that our projects business 
  is very well positioned in a large and growing 
  global market place which is at the beginning 
  of a massive upgrade program of old and outdated 
  systems and we can expect to sign further 
  new contracts and complete deliveries in the 
  coming year, as well as complete deliveries 
  against our existing contracts. 
 
  Underpinning our business is our ability to 
  develop consistently high quality, high performance 
  products with innovative functionality, providing 
  a menu of interoperable products we can sell 
  individually and as systems. I am pleased 
  to report that during the year we have continued 
  to execute on this strategy with the launch 
  of new Class A and Class B products and the 
  commencement of some new highly innovative 
  core technologies that will be embedded in 
  a range of new products scheduled for launch 
  during 2018. Of particular note, is SRT's 
  focus on differentiated core AIS performance 
  through our HF-AIS technology, which delivers 
  far better target processing, SAT-Trak which 
  not only enables AIS Class B transmissions 
  to be detected by AIS equipped satellites, 
  but also significantly enhances the percentage 
  that are detected, and VMS-Connect which is 
  a unique live data collection system embedded 
  within our systems. 
 
  The balance of our technology and product 
  development investment has evolved such that 
  we now invest approximately half our resources 
  on our GeoVS data management and display system 
  and half on transceivers. We expect this to 
  continue in the future as GeoVS provides a 
  range of powerful visualisation, operational 
  management and data analytic functionality 
  that enables operators to make use of the 
  increasing amount of data and our investments 
  in this product will continue to enhance and 
  expand these capabilities. 
 
  Overall our cash overheads increased from 
  GBP4.8 million to GBP5.6 million reflecting 
  our increasing support activities across multiple 
  project opportunities, but remain relatively 
  low and tightly controlled for a business 
  addressing such a large and global market. 
  In the coming year, we expect to see some 
  further increases, but these will be directly 
  linked to project activities and deliverables. 
  A key aspect to SRT's low overhead business 
  model is our long- standing network sales 
  channel partners with whom we continue to 
  work closely to deliver our products, systems 
  and services. 
 
  Our progress and position within this large 
  global market would not have been possible 
  without the loyalty, dedication and talent 
  of our 55 full time employees working out 
  of our Cardiff and Somerset offices and I 
  would like to take this opportunity to thank 
  them on behalf of the Board. 
 
  Our strategy remains to be one of the world's 
  leading providers of maritime domain awareness 
  systems through the development and provision 
  of innovative, high performance, quality product 
  and system solutions that are reliably delivered 
  to end customers in co-operation with our 
  sales channel partners that meet the requirements 
  of a diverse and fragmented global market. 
  Our investments and innovation in AIS technology, 
  and in turn the adoption of AIS as a critical 
  path technology by the market across the MDA 
  sector, has endowed SRT with a strategically 
  advantageous position that we are now leveraging. 
 
  Looking to the immediate and long term future 
  I expect to see our em-trak and OEM & Module 
  businesses to continue to grow, whilst our 
  project business with a GBP77 million current 
  contract order book, and a VSP of projects 
  worth up to GBP270 million should drive significant 
  revenue growth in the years ahead. 
 
  Simon Rogers, Chairman 
 
 
 
 
  CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND 
  OTHER COMPREHENSIVE INCOME FOR THE YEARED 
  31 MARCH 2017 
 
 
 
                                   Note           2017           2016 
                                                   GBP            GBP 
 
 
   Revenue                                  11,025,730     10,683,639 
 
 Cost of sales                             (3,786,176)    (5,515,775) 
 
 
 Gross profit                                7,239,554      5,167,864 
 
 Administrative costs                      (5,961,393)    (4,847,591) 
 
 
   Operating profit                          1,278,161        320,273 
 Finance expenditure                          (43,980)       (45,549) 
 
 Finance income                                    220            645 
 
 
 Profit before tax                           1,234,401        275,369 
 
 
   Income tax credit                           216,327        158,305 
 
 
   Profit for the year after 
   tax                                       1,450,728        433,674 
 
 
 
   Total comprehensive income 
   for the year                              1,450,728        433,674 
 
 Earnings per share: 
 
  Basic                            4             1.14p          0.34p 
 Diluted                                         1.09p          0.33p 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2017

 
 
                                        2017          2016 
                                         GBP           GBP 
 
 Assets 
  Non-current assets 
 Intangible assets                 5,810,954     6,076,204 
 Property, plant and 
  equipment                          184,854       139,269 
 
 
 Total non-current assets          5,995,808     6,215,473 
 
 Current assets 
 Inventories                       3,281,521     4,258,556 
 Trade and other receivables       7,926,686     4,726,522 
 Cash and cash equivalents         1,760,861     1,862,048 
 
 
 Total current assets             12,969,068    10,847,126 
 
 Liabilities 
  Current liabilities 
  Trade and other payables       (3,055,819)   (2,849,583) 
 Financial liabilities             (500,000)             - 
 
 
 Total current liabilities       (3,555,819)   (2,849,583) 
 
 Net current assets                9,413,249     7,997,543 
 
 
 Total assets less current 
  liabilities                     15,409,057    14,213,016 
 
 Long term liabilities 
 Financial liabilities             (500,000)   (1,000,000) 
 Deferred tax                      (279,178)     (293,163) 
                                ------------  ------------ 
 
 Total long term liabilities       (779,178)   (1,293,163) 
 
 
 Net assets                       14,629,879    12,919,853 
 
 
 Shareholders' equity 
 Share capital                       127,613       127,513 
 Share premium account             4,872,779     4,855,729 
 Retained earnings                 4,138,891     2,446,015 
 Other reserves                    5,490,596     5,490,596 
 
 
 Total shareholders' 
  equity                          14,629,879    12,919,853 
 
 

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARED 31 MARCH 2017

 
 
 
                                                  2017                2016 
                                                   GBP                 GBP 
 
 Cash generated from 
  operating activities                       1,235,380             853,394 
 
 Corporation tax received                      202,342             451,468 
                                        --------------      -------------- 
 
 
   Net cash generated from 
   operating activities                      1,437,722           1,304,862 
                                        --------------      -------------- 
 
 Investing activities 
 
 Expenditure on product 
  development                              (1,389,371)         (1,453,370) 
 Purchase of property, 
  plant and equipment                        (122,928)           (106,572) 
 Interest received                                 220                 645 
 
 
   Net cash used in investing 
   activities                              (1,512,079)         (1,559,297) 
                                        --------------      -------------- 
 
   Financing activities 
 
  Net proceeds on issue 
   of shares                                    17,150              10,800 

   Interest paid                              (43,980)            (45,549) 
                                        --------------      -------------- 
 
 Net cash used in financing 
  activities                                  (26,830)            (34,749) 
 
 
  Net decrease in cash 
  and cash equivalents                       (101,187)           (289,184) 
                                        --------------      -------------- 
 
   Net cash and cash equivalents 
   at beginning of year                      1,862,048           2,151,232 
                                        --------------      -------------- 
 
   Net cash and cash equivalents 
   at end of year                            1,760,861           1,862,048 
                                        ==============      ============== 
 

Notes

   1.         Status of financial information 

SRT is a public limited company incorporated in England and Wales whose ordinary shares of 0.1p each are traded on the AIM Market of the London Stock Exchange. The Company's registered office is Wireless House, Westfield Industrial Estate, Midsomer Norton, Bath BA3 4BS.

The Board of Directors approved this preliminary announcement on 6 June 2017. Whilst the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union, this announcement does not itself contain sufficient information to comply with all the disclosure requirements of IFRS and does not constitute statutory accounts of the Company for the years ended 31 March 2017 or 31 March 2016.

The financial information has been extracted from the statutory accounts of the Company for the years ended 31 March 2017 and 31 March 2016. The auditors reported on those accounts; their reports were unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006. The auditors, in forming their opinion on the financial statements, which is not modified have included in their report an emphasis of matter on the recoverability of trade receivables of GBP2.166m, which have been outstanding for fourteen months and remain unpaid. Due to the length of time that has passed, there is a potential risk to the recoverability. Based upon information provided by SRT's customer, the directors are confident that this balance will be paid in full, however the exact timing is uncertain due to the end customers internal project deliverable sign off processes. The financial statements do not reflect any additional provision that may be required, if the GBP2.166m is not recoverable.

The statutory accounts for the year ended 31 March 2016 have been delivered to the Registrar of Companies, whereas those for the year ended 31 March 2017 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

   2.         Basis of preparation 

This financial information has been prepared in accordance with the principles of International Financial Reporting Standards ("IFRS") as adopted by the European Union and International Financial Reporting Interpretations Committee ("IFRIC") recommendations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. For the purposes of the preparation of the consolidated financial information, the Group has applied all standards and interpretations that are effective for accounting periods beginning on or after 1 April 2016. There have been no changes in accounting policies during the year. The financial information has been prepared under the historical cost convention unless otherwise stated.

   3.         Dividends 

The Board is not recommending the payment of a final dividend.

   4.         Earnings per Ordinary Share 

The basic earnings per share has been calculated on the profit on ordinary activities after taxation of GBP1,450,728 (2016: GBP433,674) divided by the weighted number of ordinary shares in issue of 127,583,214 (2016: 127,485,789).

During the year, the calculation of diluted earnings per share has also been calculated on profit on ordinary activities after taxation of GBP1,450,728 (2016: GBP433,674). It assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. A calculation is performed to determine the number of shares that could have been acquired at fair value, based upon the monetary value of subscription rights to outstanding share options. The number of dilutive shares under options was 5,775,672 (2016: 2,938,446) and the weighted average number of ordinary shares for the purposes of dilutive earnings per share was 133,358,885 (2016: 130,424,235).

   5.     Annual Report and AGM 

The Annual Report will be available from the Company's website, www.srt-marine.com from 7 June 2017. To locate the report, click "Investors" and then scroll down the page to "Reports and Presentations". The Annual Report and Notice of AGM will be posted to shareholders on 9 June 2017. The AGM will take place at the Centurion Hotel, Charlton Lane, Midsomer Norton, Radstock BA3 4BD at 11.00 a.m. on 12 July 2017.

This information is provided by RNS

The company news service from the London Stock Exchange

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June 07, 2017 02:00 ET (06:00 GMT)