Strat Aero PLC Corporate Update (0360Q)

TIDMAERO

RNS Number : 0360Q

Strat Aero PLC

24 November 2016

Strat Aero plc / Index: AIM / TIDM: AERO / Sector: Support Services

24 November 2016

Strat Aero plc ("Strat Aero", the "Company" or the "Group")

Corporate Update

Strat Aero plc, an international aerospace company focused on the rapidly emerging Unmanned Aerial Vehicle ("UAV") sector, provides a corporate update covering activity across its divisions including its wholly-owned specialist surveying subsidiary, Geocurve, as well as the securing of a short term loan facility to cover working capital needs. This update is in line with the Company's strategy to focus on Survey & Inspection Services and Commercial UAS Training & Education, two core areas where Strat Aero has the expertise, contacts and technology to become a leading provider of UAV based services and solutions.

   --    Survey & Inspection Services division, Geocurve, continues to trade in line with expectations 

-- Geocurve has been trading profitably since the commencement of its multi-year Environment Agency contract in September 2016 - management is encouraged by progress made to date

-- Geocurve is performing as a standalone business unit and the Board does not expect it to require any additional funding from Strat Aero in the near term

-- First courses of Strat Aero's Advanced Unmanned Technical Qualification ('AUTQ') programme due to be delivered by its franchisees in Asia and by the Company in the UK by the end of Q4 2016 and early 2017

-- Review underway of all of the Company's activities and cost base in the United States in line with strategy to focus primarily on securing additional contracts for its proprietary Digital Data Management ('DDM') system

-- Short term financing loan secured to provide adequate working capital for the Company through to mid Q1 2017

Iain McLure, CEO of Strat Aero plc, said "Our two core divisions, Survey & Inspection Services and Commercial UAS Training & Education, continue to perform in line with our expectations. We are seeing continued profitable growth at our Geocurve subsidiary through the successful delivery of specialised professional surveys within its expanding roster of blue-chip clients and governmental bodies; while the roll-out of our UK CAA approved training courses by our Asian partners are due to commence in Q4 2016 and early Q1 2017. In tandem with our focus on revenue generation, we are closely reviewing our cost base, particularly in the US, so that we retain as much cash flow as possible for reinvestment into growing the business. Today's loan will assist with our working capital requirements during this period of transition, as we work towards establishing Strat Aero as a leading provider of UAV based services and solutions."

Survey & Inspection Services (Geocurve)

Profitable growth continues at Geocurve due to the expansion of client contracts within the professional survey side of the business. Current trading is in line with expectations and the Board does not anticipate any further requirements for additional funding from Strat Aero in the near term.

Work is underway on the multi-year contract to provide aerial inspection and survey services for the Environment Agency's Thames Estuary Asset Management 2100 (TEAM2100) programme (see announcement of 8 September 2016 for further details). Work on the Swanscombe, Canvey Island and Darent sections is ongoing with the flying phase completed, which included successfully passing underneath the Queen Elizabeth II Bridge at the Dartford Crossing. Processing and analysis of the acquired data is currently being carried out by the Strat Aero team and its DDM platform.

The Company has created a new role, Managing Director Geocurve, and is pleased to announce that it has appointed Geocurve co-Founder Gary Nel to this position. Gary will continue to lead the professional survey aspect of the business, as it seeks to win further contracts with new blue-chip clients and governmental bodies. Perran Bonner, who co-founded Geocurve, has resigned from his position at Geocurve in order to concentrate on other business interests outside of Strat Aero.

Commercial UAS Training & Education

Strat Aero's strategy is to roll-out its UK CAA certified Advanced Unmanned Technical Qualification ('AUTQ') training courses around the world by securing partnerships with respected educational establishments. To date the Company has signed master franchise agreements with Limkokwing University of Creative Technology ('LKW'), the international technology university, and Hong Kong based I-Coach.

First courses at both the Company's franchisees in Asia are due to commence by year end and early January 2017. The complete set of training materials has now been delivered by Strat Aero to both LKW and I-Coach, along with examination schemes, instructor manuals and other relevant materials. Marketing programmes have been initiated to fill the initial courses at both franchises. LKW's first course will most likely be at its prestigious Cyberjaya campus outside Kuala Lumpur in Malaysia, before being rolled out to other LKW campuses over the next two years, particularly in Africa. It is intended that following the first course, LKW will offer 15-20 courses per year in 2017 and beyond. I-Coach's first course is expected to take place in Taiwan.

In addition, the Company intends to run an initial course in the UK to provide training to both its franchise partners and other paying students. The course is expected to commence on 5 December 2016.

US operations

In line with the Company's overall strategy to focus on its core areas of expertise, a thorough review of all of Strat Aero's activities in the United States is underway. The objective of the review is to scale costs back to a level which will allow existing contracts to be delivered, provide headroom to pursue focussed customer acquisition activities and maintain the Company's Data Analytics capability, which is primarily delivered by Strat Aero's proprietary Digital Data Management ('DDM') system. As well as providing the foundation of data capture, processing and reporting back to customers across all the Company's main divisions, DDM's core functionality in aviation management software has the potential to be rolled out in general aviation in North America, and management intends to pursue these opportunities.

The Company continues to actively market DDM as a customised enterprise resource planning ('ERP') offering to the wider aviation industry. To date, Strat Aero has secured a contract worth an estimated US$378,000 over a five year period for DDM with ReadyJet, a leading service provider to the aviation sector (announced in March 2016). Strat Aero has customised DDM to meet ReadyJet's requirements, which include tracking employees' time, calculating payroll, hosting and tracking required training that has been developed by ReadyJet. DDM will also track schedules, documents, employee titles and positions. With DDM generating high gross margins of over 80%+, management is looking to secure additional contracts with other potential customers operating outside the UAV sector.

The Company has three existing contracts in the US. In addition to Readyjet it has a US Wind Turbine Inspection Contract and a US$200,000 Proprietary Software Contract with Millionair, a leading service provider to the general aviation sector.

Short Term Loan Facility

Strat Aero has executed a GBP300,000 six month loan facility with a secured fixed and floating charge with Farina Investments (UK) Ltd at an interest rate of 25% over the six month term. The short term loan will be used to provide adequate working capital for the Company through to mid Q1 2017 which will enable management to focus on continuing to grow the business in line with its stated strategy. The Board intends to consider options to refinance this facility and with this in mind will be calling a general meeting in the near term to increase available headroom to issue ordinary shares which will provide flexibility with regards to both repaying the loan and providing for future working capital needs. Further announcements will be made in due course as appropriate.

Issue of Equity and Total Voting Rights

The Company is also making an application for 3,428,571 Ordinary Shares to be admitted to trading on AIM. These Ordinary Shares are being issued in respect of consulting fees accrued amounting to GBP12,000. It is expected that admission will occur, and dealings in the Consulting Shares will begin, at 8.00 a.m. on 28 November 2016 ("Admission"). These shares will rank pari passu in all respects with the Company's existing Ordinary Shares.

Following Admission, in accordance with the Financial Conduct Authority's Disclosure and Transparency Rules, the Company will have 384,285,280 ordinary shares of 1p each in issue, none of which are held in treasury. Therefore, the total number of voting rights in the Company is 384,285,280.

The above figure of 384,285,280 may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA's Disclosure and Transparency Rules.

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

-S -

For further information please visit www.strat-aero.com or contact:

 
 Strat Aero plc                   Tel: [phone] 
 Graham Peck (Chairman) 
 SP Angel Corporate Finance LLP   Tel: [phone] 
                                   0470 
 Nominated Adviser and Joint 
  Broker 
 Stuart Gledhill 
  Jeff Keating 
 Beaufort Securities Limited      Tel: [phone] 
                                   8300 
 Joint Broker 
 Elliot Hance 
 Cornhill Capital Ltd 
 Joint Broker 
 Colin Rowbury                    Tel: [phone] 
                                   9610 
 St Brides Partners Ltd           Tel: [phone] 
                                   1177 
 Financial PR 
  Frank Buhagiar 
  Susie Geliher 
 

Notes

Strat Aero plc is a multi-divisional international aerospace services company, focussed primarily on the provision of complete client solutions in the Unmanned Aerial System ('UAS' market), which is predicted to show exponential growth over the coming decade. Commercial and military applications in UASs are expected to be a dynamic growth sector in the aerospace industry over the next 10 years with the UAS market forecast to grow to more than US$82.1 billion between 2015 and 2025 (AUVSI Economic Report 2013) and the global airborne Intelligence, Surveillance and Reconnaissance ('ISR') market estimated to grow to US$19.23 billion by 2023.

This information is provided by RNS

The company news service from the London Stock Exchange

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November 24, 2016 03:15 ET (08:15 GMT)