SRT Marine Systems PLC Half-year Report (1405P)

TIDMSRT

RNS Number : 1405P

SRT Marine Systems PLC

15 November 2016

SRT MARINE SYSTEMS PLC ("SRT" or the "Group")

HALF YEARLY REPORT FOR THE SIX MONTHSED 30 SEPTEMBER 2016

SRT, the AIM-quoted developer and supplier of maritime identification and tracking technologies, announces its unaudited interim results for the six months ended 30 September 2016 (the "Period").

Financial Highlights

   --      Revenue of GBP2.7 million (2015: GBP3.6 million) 
   --      45% gross profit margin (2015: 51%) 
   --      Overheads GBP2.4 million (2015: GBP2.6 million) 
   --      Loss before tax of GBP1.2 million (2015: loss before tax of GBP0.7 million) 
   --      Cash of GBP1.8 million at the Period end (2015: GBP2.4 million) 
   --      Inventories of GBP4.4 million at the Period end (2015: GBP5.2 million) 

Operational Summary

   --      Continued evolution of GeoVS maritime display and management system 
   --      Launch of new Apollo AIS Class A and Class B transceivers 
   --      Em-trak dealer acquisition and merchandising programme 
   --      Significant progress with multiple project opportunities 

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

 
 Contacts: 
 
 SRT Marine Systems plc               www.softwarerad.com 
                                    + 44 (0) 1761 409 500 
 Simon Tucker (CEO)          [e-mail] 
 Louise Coates (Marketing           [e-mail] 
  Manager) 
 
 WH Ireland Limited                  www.whirelandplc.com 
 Tim Feather 
  Ed Allsopp                         [phone] 
 

Chairman's Statement

Revenues for the first half were GBP2.7 million (2015: GBP3.6 million), resulting in a loss before tax of GBP1.2 million (2015: GBP0.7 million) and a cash balance of GBP1.8 million (2015: GBP2.4 million) as at 30 September 2016. First half revenues were lower this year due to there not being any significant project deliverables completed during the Period. Gross profit margin for the Period was 45% (2015: 51%), which is below our long term average target of 50% reflecting the revenue weighting of our lower margin OEM business. Overheads were slightly lower than the same period last year, consistent with our tight controls and strategy of out sourcing non-core and low value add activities such as manufacturing and in-country project installation work. Saleable stock, valued at cost, stood at GBP4.4 million and comprised a mixture of standard AIS transceivers which are configured at the point of dispatch for the relevant customer and project.

During the first half, sales of our individual AIS transceiver products into the EU and US commercial and leisure markets via our OEM and em-trak sales channels were consistent with those of the previous year and accounted for the majority of revenues. Sales via these channels are determined either by voluntary purchases by leisure and commercial vessel owners driven by their own perception and understanding of the benefits of AIS, or demand driven by a regulation/mandate each of which has their own demand pattern determined by the terms and conditions of each specific regulation and underpinning enforcement.

There are now several AIS regulations/mandates active around the world: EU Fisheries, EU Commercial Inland Waterways, Russia, China, Singapore, Mauritius and USA. Rigorous enforcement of such regulations on affected vessels is key to the creation of demand for our transceivers through our OEM and em-trak dealer networks. In our experience enforcement is usually variable and patchy, and in some instances such as USA and EU Fisheries results in demand spread over several years in a random pattern.

The USCG AIS regulation, which requires a significant number of large commercial vessels in the USA to fit an AIS transceiver, came into effect in March 2015. However due to a lack of strict enforcement action by the relevant authorities, demand from this market has been minimal to date and is now considered likely to take a number of years to come through as enforcement is undertaken. We continue to work closely with our OEM partners to ensure they have a compelling AIS product offering in their marine electronics portfolio and aggressively grow our own em-trak dealer network and per-dealer sales throughput by the introduction of enhanced point of sale merchandising which highlights the features and benefits of AIS to non-regulated leisure and commercial vessel owners.

Our systems business provides turn-key maritime monitoring solutions for national maritime security, safety, fisheries monitoring, ports and waterways. We have developed three core offers which target specific maritime domain awareness market segments. Our MDM system offer provides national scale integrated functionality for coast guards, our VMS system provides a comprehensive national fisheries monitoring solution and our VTS system provides functionality that is optimised for port and infrastructure applications. This business is driven by a general global trend to significantly increase the monitoring of maritime activity and the prevalence of AIS as a critical path technology in maritime monitoring. Typically these are complex, large government projects and thus involve extensive pre-implementation and regulatory evaluation and planning work prior to contract signing. Once contracts are signed and work commences, the completion and therefore invoicing of project milestone deliverables can take many months due to component lead times, shipping and customs, and finally installation and commissioning.

During the first half we received high profile orders for our VTS systems from the Panama Canal, Trinity House and a second large port in Malaysia. These are important references for the market and are now proving to be valuable for SRT in building up our relatively new ports and infrastructure business. In addition, I am pleased to report that during the Period we saw significant progress in a number of large VMS and MDM projects that we expect will result in the completion of significant deliverables during the second half as well as other projects moving towards contract phase from our validated sales opportunity pipeline. The nature of these projects is that they are very lumpy with extended periods between deliverables and often change unexpectedly in terms of timing and scale. However, we expect that SRT will soon have multiple projects underway which we hope will provide a natural hedge in regards to revenue timings across our reporting periods. Most of our projects are considered to be of national strategic importance and thus SRT is subject to strict confidentiality which places significant restrictions on the details we can provide shareholders on the status of these projects.

Operationally, we continued to invest in new core technologies, derivative products and the development of new functionality for existing products. Approximately half our R&D effort is focused on AIS transceiver equipment and half on the evolution of our GeoVS network management, display and analytics software which forms an important component in our MDM, VTS and VMS system offers. Notable milestones during the Period include the launch of the world's first SOTDMA 5W Class B which targets small commercial and larger off-shore leisure vessels, our new Class A which is being marketed as a premium product to Navies and Coast Guards and new releases with added functionality of our GeoVS data network management, display and analytics system for our respective MDM, VMS and VTS system offers.

In August we successfully negotiated a revised agreement with exactEarth such that it was non-exclusive to enable us the freedom to maximise future recurring revenue satellite data opportunities in relation to our projects. Our transceivers and systems can now be configured and optimised to different satellite constellations and data feeds according to customer requirements, providing both SRT and our customers with great flexibility and opportunities.

Looking to the future, SRT's strategy has placed it as the global leader in AIS technology, products and systems and our ongoing R&D investments are realising real and notable innovations. Our recent successful completion of a national maritime monitoring system in Bahrain in under nine months and the supply of VTS systems to the Panama Canal and leading ports in Malaysia has further helped establish SRT and its partners as the go-to company in this field for authorities. The development of projects in our sales opportunity pipeline and the emergence of new opportunities are driven by AIS having become established as a critical path technology in virtually every maritime domain awareness initiative. As such we continue to look to the future with great optimism and will update the market with further announcements and guidance as project deliverables are completed and new projects commence.

Simon Rogers

Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHSED 30 SEPTEMBER 2016

 
                                        Six months           Six months                  Year 
                                             ended                ended                 ended 
                                            30 Sep               30 Sep                31 Mar 
                                              2016                 2015                  2016 
                                         Unaudited            Unaudited               Audited 
 
                                               GBP                  GBP                   GBP 
----------------------------  ----  --------------  ---  --------------      ---------------- 
 
 Revenue                                 2,658,748            3,635,090            10,683,639 
 Cost of sales                         (1,454,393)          (1,792,936)           (5,515,775) 
----------------------------  ----  --------------  ---  --------------      ---------------- 
  Gross profit                           1,204,355            1,842,154             5,167,864 
 
 Administrative expenses               (2,382,172)          (2,562,323)           (4,847,591) 
 
  Operating (loss) / profit            (1,177,817)            (720,169)               320,273 
 Finance expenditure                      (23,298)             (24,590)              (45,549) 
 Finance income                                153                  285                   645 
  (Loss) / profit before 
   income tax                          (1,200,962)            (744,474)           275,369 
 Income tax credit              3          244,931              228,874               158,305 
----------------------------  ----  --------------  ---  --------------      ---------------- 
  (Loss) / profit for 
   the period                            (956,031)            (515,600)               433,674 
----------------------------  ----  --------------  ---  --------------      ---------------- 
  Total comprehensive 
   (loss) / income for 
   the period                            (956,031)            (515,600)               433,674 
----------------------------  ----  --------------  ---  --------------      ---------------- 
  (Loss) / earnings per 
   share: 
   Basic 
   Diluted                      2          (0.75)p              (0.40)p                 0.34p 
                                 2         (0.75)p              (0.40)p                 0.33p 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2016

 
                                                 As at         As at          As at 
                                                30 Sep        30 Sep         31 Mar 
                                                  2016          2015           2016 
                                             Unaudited     Unaudited        Audited 
 
                                 Notes             GBP           GBP            GBP 
------------------------------  ------  --------------  ------------  ------------- 
 
 Assets 
 Non-current assets 
 Intangible assets                           6,057,548     5,975,813      6,076,204 
 Property, plant and 
  equipment                                    134,228       115,265        139,269 
------------------------------  ------  --------------  ------------  ------------- 
  Total non-current 
   assets                                    6,191,776     6,091,078      6,215,473 
 
 Current assets 
 Inventories                                 4,372,392     5,182,750      4,258,556 
 Trade and other receivables                 4,109,957     1,140,981      4,726,522 
 Cash and cash equivalents                   1,817,786     2,367,002      1,862,048 
------------------------------  ------  --------------  ------------  ------------- 
  Total current assets                      10,300,135     8,690,733     10,847,126 
 
 Liabilities 
 Current liabilities 
 Trade and other payables                  (3,160,835)   (1,583,923)    (2,849,583) 
 Financial liabilities                       (250,000)   (1,000,000)              - 
------------------------------  ------  --------------  ------------  ------------- 
 
 Total current liabilities                 (3,410,835)   (2,583,923)    (2,849,583) 
 
 Net current assets                          6,889,300     6,106,810      7,997,543 
 
 Long term liabilities 
 Financial liabilities                       (750,000)             -    (1,000,000) 
 Deferred tax                                (250,573)     (222,593)      (293,163) 
------------------------------  ------  --------------  ------------  ------------- 
  Total long term liabilities              (1,000,573)     (222,593)    (1,293,163) 
------------------------------  ------  --------------  ------------  ------------- 
  Net assets                                12,080,503    11,975,295     12,919,853 
------------------------------  ------  --------------  ------------  ------------- 
 
 
 Shareholders' equity 
 Ordinary shares                   4           127,593       127,513        127,513 
 Share premium                               4,867,599     4,855,729      4,855,729 
 Other reserves                    6         5,490,596     5,490,596      5,490,596 
 Retained earnings                           1,594,715     1,501,457      2,446,015 
  Total shareholders' 
   equity                                   12,080,503    11,975,295     12,919,853 
------------------------------  ------  --------------  ------------  ------------- 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHSED 30 SEPTEMBER 2016

 
                                        Six months    Six months           Year 
                                             ended         ended          ended 
                                            30 Sep        30 Sep         31 Mar 
                                              2016          2015           2016 
                                         Unaudited     Unaudited        Audited 
 
                               Notes           GBP           GBP            GBP 
 -----------------------------------  ------------  ------------  ------------- 
 
 
 Cash generated from 
  operating activities             5       434,278       451,917        853,394 
 Corporation tax received                  202,342       461,794        451,468 
------------------------------  ----  ------------  ------------  ------------- 
  Net cash generated 
  from operating activities                636,620       913,711      1,304,862 
------------------------------  ----  ------------  ------------  ------------- 
 
 Investing activities 
 Expenditure on product 
  development                            (636,389)     (639,601)    (1,453,370) 
 Purchase of property, 
  plant and equipment                     (33,298)      (44,835)      (106,572) 
 Interest received                             153           285            645 
------------------------------  ----  ------------  ------------  ------------- 
  Net cash used in 
   investing activities                  (669,534)     (684,151)    (1,559,297) 
------------------------------  ----  ------------  ------------  ------------- 
  Cash (outflow) / 
   inflow before financing                (32,914)       229,560      (254,435) 
------------------------------  ----  ------------  ------------  ------------- 
 
 Financing activities 
 Net proceeds from 
  issue of ordinary 
  share capital                             11,950        10,800         10,800 
 Interest paid                            (23,298)      (24,590)       (45,549) 
------------------------------  ----  ------------  ------------  ------------- 
  Net cash outflow 
  from financing activities               (11,348)      (13,790)       (34,749) 
  Net (decrease) / 
   increase in cash 
   and cash equivalents                   (44,262)       215,770      (289,184) 
------------------------------  ----  ------------  ------------  ------------- 
 
  Cash and cash equivalents 
  at beginning of period                 1,862,048     2,151,232      2,151,232 
------------------------------  ----  ------------  ------------  ------------- 
  Cash and cash equivalents 
   at end of period                      1,817,786     2,367,002      1,862,048 
------------------------------  ----  ------------  ------------  ------------- 
 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHSED 30 SEPTEMBER 2016

 
      Share      Share    Retained       Other   Total 
    Capital    Premium    Earnings    Reserves 
 
        GBP        GBP         GBP         GBP     GBP 
 
 
 
 
 Balance at 31 March 
  2015                  127,453   4,844,989   1,993,437   5,490,596   12,456,475 
 
 
 Comprehensive loss 
  for the period         -        -   (515,600)   -   (515,600) 
 Share based payment 
  expense                -        -      23,620   -      23,620 
 Issue of equity 
  share capital         60   10,740           -   -      10,800 
 
 
 
 Balance at 30 September 
  2015                        127,513    4,855,729    1,501,457    5,490,596   11,975,295 
 
 Comprehensive profit 
  for the period                    -            -      949,274            -       949,274 
 Share based payment 
  expense                           -            -      (4,716)            -       (4,716) 
 
  Balance at 31 March 
   2016                       127,513    4,855,729    2,446,015    5,490,596    12,919,853 
 
 Comprehensive loss 
  for the period                    -            -    (956,031)            -     (956,031) 
 Share based payment 
  expense                           -            -      104,731            -       104,731 
 Issue of equity 
  share capital                    80       11,870            -            -        11,950 
 
  Balance at 30 September 
   2016                       127,593    4,867,599    1,594,715    5,490,596    12,080,503 
 
 
 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

   1.      Accounting Policies 

Basis of preparation

The interim financial information in this report has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted by the European Union. IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee and there is an ongoing process of review and endorsement by the European Commission. The financial information has been prepared on the basis of IFRS that the Directors expect to be adopted by the European Union and applicable as at 31 March 2017.

Non-statutory accounts

Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ("the Act"). The statutory accounts for the year ended 31 March 2016 have been filed with the Registrar of Companies. The report of the auditors on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.

The financial information for the six months ended 30 September 2016 and 30 September 2015 is unaudited. The interim financial statements will be available to download on the Company's website www.softwarerad.com from 15 November 2016.

Accounting policies

The accounting policies as applied by the group are the same as those applied by the Group in the consolidated financial statements for the year ended 31 March 2016, which are the same policies expected to apply for the year ended 31 March 2017.

   2.      Earnings per share 

The basic (loss) / earnings per share have been calculated using the loss for the period of GBP956,031 (six months ended 30 September 2015 - loss of GBP515,600; year ended 31 March 2015 - profit of GBP433,674) divided by the weighted average number of ordinary shares in issue of 127,560,179 (six months ended 30 September 2015, 127,459,304 and year ended 31 March, 2016 127,485,789).

During the six months ended 30 September 2016 and 2015 the group has incurred losses for the periods and therefore there is no impact of the share options granted on diluted earnings per share. During the year ended 31 March 2016, the diluted earnings per share have been calculated using weighted diluted shares of 130,424,235.

   3.      Income tax credit 

During the period, the Group received income tax credits of GBP202,342 (six months ended 30 September 2015 GBP461,794 and year ended 31 March 2015 GBP451,465) in respect of its Research and Development activities. A further credit in relation to a decrease of GBP42,589 in the deferred tax liability has resulted in a total tax credit for the period of GBP244,931.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected annual earnings.

   4.      Called up share capital 
 
                                       30 Sep      30 Sep      31 Mar 
                                         2016        2015        2016 
                                    Unaudited   Unaudited     Audited 
                                          GBP         GBP         GBP 
-------------------------------   -----------  ----------  ---------- 
 
   Allotted: (Ordinary 
   shares of 0.1p each):              127,593     127,513     127,513 
--------------------------------  -----------  ----------  ---------- 
 
 Share capital reconciliation:         Number 
                                    of shares 
 
   Shares outstanding at 31 March 2015                   127,452,419 
   a)     Exercise of employee share options                          60,000 

Shares outstanding at 30 September 2015

   and 31 March 2016                                                127,512,419 
   b)     Exercise of employee share options                          80,000 
   Shares outstanding at 30 September 2016            127,592,419 

a) The exercise of employee share options took place in September 2015 at an exercise price of 18p.

b) The exercises of share options took place in April 2016 at an exercise price of 18p and July 2016 at exercise prices of 2.5p and 29p.

   5.      Cash from operations 
 
                                 Six months   Six months            Year 
                                      ended        ended           ended 
                                     30 Sep       30 Sep          31 Mar 
                                       2016         2015            2015 
                                  Unaudited    Unaudited         Audited 
 
                                        GBP          GBP             GBP 
----------------------------   ------------  -----------  -------------- 
 
 Operating (loss) / 
  profit                        (1,177,817)    (720,169)         320,273 
 Depreciation of property, 
  plant and equipment                38,338       40,113          77,846 
 Amortisation of intangible 
  fixed assets                      655,045      718,953       1,432,331 
 Share-based payment 
  charge                            104,731       23,620          18,904 
 (Increase)/ decrease 
  in inventories                  (113,836)    (221,791)         702,403 
 Decrease / (increase) 
  in trade and other 
  receivables                       616,565      463,441     (3,122,100) 
 
   Increase in trade 
   and other liabilities            311,252      147,750       1,423,737 
  Net cash generated 
   from operations                  434,278      451,917         853,394 
-----------------------------  ------------  -----------  -------------- 
 
   6.      Statement of movement in shareholders' equity 

Other reserves consist of: Capital Redemption Reserve GBP2,857 (31 March 2016: GBP2,857), Warrants Reserve GBP62,400 (31 March 2016: GBP62,400) and Merger Reserve GBP5,425,339 (31 March 2016: GBP5,425,339). There were no movements during the period.

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR LLFVRLTLSLIR

(END) Dow Jones Newswires

November 15, 2016 02:00 ET (07:00 GMT)