Srt Marine Systems Share Discussion Threads

[pinkfoot2] 07/10/2023 13:59

Correct-we need to get ahead of the curve.We are clearly chasing it just now

[extrader] 07/10/2023 10:59

.."Because of the increased volumes it will be receiving better discount rates and credit terms. Instead of having to pay up front it will be paying at a later date. These better terms will assist cash flow..."

I don't think it works that way, in practice, if anything the reverse : so long as SRT continues to post losses and has to resort to 'payday lenders' to supplement its cashflow, suppliers are likely to limit their credit exposure, maybe even curtail it.

I'd characterize SRT right now as being at more risk of finding itself in a vicious circle than a virtuous one.

SRT need to get ahead of the story, IMO, and is only going to do that if it starts (over)delivering on its promises: it has to narrow - and eliminate!- a credibility gap that risks becoming a serious headwind, as I see it.

ATB

[countryman5] 07/10/2023 08:55

SRT is our company, mine and yours. I identify with it because I like the management and I like the product. Our company is ramping up on several fronts. Contract awards, delivery and finances.
Contract awards.
These increasing awards are growing in size. A £30 million contract was previously a major news story. We now are awaiting sign off on a £145 million contract and there is now potential for a £ 1 billion contract. The company is winning these contracts because of its reputation for quality, the unique offering of Geovs and a growing reputation for delivery.
Delivery. Winning contracts are hard work. Lots of companies would like them. However, delivering is even harder. Some of the locations for towers are in hostile terrain with limited connectivity. Some locations require the in Country partner to have barges and tug boats to deliver kit. SRT needs in Country partners that the host Government has confidence in. I suspect that the payroll is increasing to provide the delivery teams for these contracts.
Finances. UKEF support for the £145 million contract opens many doors. SRT is being noticed in Whitehall. It is an up and coming exporter in a global market. I suspect that Mr T has been invited to meet Ministers. Until now the company has been denied bank finance. We now have a new bank. Part of the recent £5 million fund raise was to support the supply chain for transceivers and Nexus. Sales of these are planned to grow by a large margin. The supply chain also needs to grow..Perhaps it is now being recognised that the majority of these products are for export and bank lending can be supported by UKEF. Incidentally, I suspect that Mr T is having meetings with World leaders as well as UK ministers. SRT is becoming a major buyer for electronic kit, such as military grade CCTV, radars and computer screens. Because of the increased volumes it will be receiving better discount rates and credit terms. Instead of having to pay up front it will be paying at a later date. These better terms will assist cash flow. Timing of milestones is beyond the control of our company.

[pinkfoot2] 07/10/2023 08:10

Cm-what’s your view on the missed 2023 statement about sliding milestones picked up by Lav?

Your note is a very incisive piece of work around the unpredictability and therefore weakness of the sales pattern and pipeline.The jam as some would describe.

[glavey] 07/10/2023 07:19

Would anyone who can reach please be kind enough to pass the jam?

[countryman5] 07/10/2023 04:14

I understand the the recent broker update was just a couple of pages, reiterating the June 23 detailed write up.This highlights what was previously described as the validated sales pipeline (VSP). Cynics refer to this as hot air. These people do not understand how Countries and contracts work. Those who have attended AGM's will have heard Simon explain that a lot of work has to take place in a Country before a system can appear in the VSP. The Nomad will have seen the emails etc between the country and SRT before it is included in the VSP. The June 23 update stated 'SRT is engaged in preliminary discussions on potential new customer contracts with a total aggregate value of £1.4 billion, including the near-term £380 million. I suspect the £1 billion refers to the 10 year Coast Guard contract. I believe that there are numerous contracts waiting to enter the VSP.
LAV is an expert at finding information. Possible new and very large entries include a fisheries contract for the Country where the £145 million contract is pending. I understand that there is a new fisheries Minister who is pushing to make things happen. This contract might already be in the 'blue book' but final decisions will take place after the election.
Kuwait has been talking for many years. It has the oil money and its Coast Guard can now see a new SRT system working with its neighbour.
Vietnam has also been talking for many years and needs to decide which area of gov is going to be in charge of the system.
These three systems could each be between £150 and £500 million each.
The wealthy ME customer which has just completed its first stage has an enormous follow on pipeline. Apart from stages 2 and 3 (Kit awaiting at MSN?) there is the bolt on CCTV and radar. Then there is the new mega city and tourism centre located around 45 islands.

[pinkfoot2] 06/10/2023 22:57

As I said CM, the problem for SRT is cash in the form of working capital-borrowing to fund losses isn’t a vote winner

[extrader] 06/10/2023 21:56

.."I can only hope that they dissemble less to their customers than to shareholders..."

'Wash your mouth out!'

That was what I was told, on another board : 'Remember: we're owners, not shareholders'...

Rings a bit hollow atm.

[countryman5] 06/10/2023 20:27

We are awaiting the RNS confirming the signing of the £145 million Coast Guard contract with a new customer. My understanding is that the Country pays for the installation over 10 years but it is installed in two years with SRT being paid as milestones are completed. The bank lends the money over the 10 years and UKEF underwrites the loan.
If this finance model work well, might it be used on other contracts? There has been mention of a £1billion contract over 10 years with a Coast Guard where there might be a sense of urgency because of China..

[pinkfoot2] 06/10/2023 18:13

That’s what I mean about smoke and mirrors-Yump will have his own view but todays rather curt RNS has raised more questions for me.What does gross cash mean for example-does it mean they have drawn more debt down or are the placing proceeds still largely intact.With only raising c£5m in the Placing, the debt facility is very much in play.

For FY 24 they are forecasting £15m of transceivers revenue and £55m of systems, total £70m or thereabouts.It’;s going to be a stonking second half!

[lavalmy] 06/10/2023 17:45

Hi Extrader

That is precisely what I was talking about and is what I mentioned last week. They lied, intentionally, when they issued the profit warning in order to keep the price reasonably high for the capital raise. They now claim that zero systems revenues is what was expected in H1 all along.

I can only hope that they dissemble less to their customers than to shareholders.

[extrader] 06/10/2023 17:09

Hi yump

If I understood Lavalmy correctly, something that was first pushed into the 'early part of the new year' has since morphed into 'as expected...heavily H2 weighted'.

I took part in the recent placing and am glad for the company's sake that I did, but it would be fair to say that I'm not exactly thrilled at this.

ATB and GLA

[pinkfoot2] 06/10/2023 17:03

And Lav is bang on-the warning in March confirmed systems milestones had slipped into the early part of 23/24.That being the case, where is the associated revenue in today’s numbers?The answer is it’s slipped again into the second half.

It simply highlights how challenging these systems are to implement and predict-and why stronger working capital and balance sheet would help.

[pinkfoot2] 06/10/2023 16:47

Well I have run a UK business with global aspirations and I can tell you many customers want ‘local supply’ie manufacturing/supply chains in the locale.India and Taiwan are good examples.Likewise the States where a lot of the supply chain is pushed into Mexico or the new zones set up by Biden.

Beyond that, it’s obvious a global footprint can support a global business, particularly in installation and aftermarket.

I’m sure ST could really go for it with more cash-more marketing, people on the ground, more R&D.

Like it or not, SRT is a relative minnow-potential customers will look at the balance sheet and footprint and question execution and delivery risk.It’s all part of the audit customers will put SRT through as part of procurement.

We can agree to disagree but I’m speaking from personal experience.There will be a moment in time where ST knows it’s time to sell-not yet but I think another couple of major contracts and I would be testing the water.

[yump] 06/10/2023 16:13

So, what would SRT be doing differently if it wasn't 'capital constrained' ?

Plus, what other business is doing what SRT is doing - seeing as you use the phrase 'minnow in a big pond'.

Plus, there isn't afaik any customer that is not ordering because they don't have confidence in SRT.

Its all very well using a wide 'bandwidth' of jargon, but it doesn't necessarily mean anything.

Its a difficult business to manage and there's significant risk and potential reward - why not just leave it there. None of us want to be part of a larger business afaik, I can't imagine what advantage that would give in practice and it certainly wouldn't give any chance of large long term gains.

What would ACTUALLY change in a larger business ?

[pinkfoot2] 06/10/2023 15:46

Indeed Lav-smoke and mirrors and deadlines aren’t SRTs best friend.Of course we need dates to measure performance so sliding things only works for a while

Yump-I think SRT is capital constrained and is a relative minnow in a big pond.The evidence is there-cash calls and ‘exotic’ debt instruments.Having a parent with a big balance sheet and global presence would be invaluable-basically more bandwidth and there is always that nagging doubt as a customer whether a capital constrained company can execute a global vision.

It’s all about timing with SRT and I think the mystique and opportunity is worth more than the actuality though I’m happy to be disproved.

[lavalmy] 06/10/2023 15:25

I still don't know how they can claim that:

'As expected, our revenues this year will be heavily second half weighted due to the scheduled delivery of several substantial revenue milestones in H2 from our £160m forward contract order book of system projects',

whilst the profit warning was quite explicit that 'these results are lower than market expectations for the current year primarily due to material systems business project milestones that had been expected to be completed by the end of the current year being delayed to the early part of the new financial year.'

No wonder fft is a bit miffed.

[yump] 06/10/2023 15:21

Pinkfoot.

I don’t know what you mean by “flourish̶1;. That would imply that a larger business would do what differently exactly ?

[yump] 06/10/2023 15:12

Scrutable
Got some IES - yes I bet that’s on a few traders’ targets as its a fair way from profit. Still guesswork to time buys and sells with contract news though.

Wrt SRT - if contracts start rolling into each other (which seems likely in the next year), then its too late to try and be clever second-guessing when a permanent rerate will happen, if forecasts start to show say 5p+ earnings for the next few years.

In retrospect its easy. Just buy and then sell on the first significant contract news excitement, rinse and repeat but less and less as time passes to avoid missing any rerate.

Can you get enough profit from buying and selling to compensate for having to buy back in when any rerate happens.

Also it might actually be much more relevant to consider the effect of the overall market.

Current market full of doubt, unlike post covid pre Ukraine which looked like a recovery bull market.

[pinkfoot2] 06/10/2023 14:49

I’m beginning to think the mystique of this business carries greater value than hard numbers-maybe try and sell it on the back of another contract win and execution of the current one

[extrader] 06/10/2023 14:28

This business would flourish in a parent with a big balance sheet and a global footprint,

That's probably the end-plan.

But if they carry on like this, it may not be at a time of their choosing, I fear.

AFAICS

[pinkfoot2] 06/10/2023 13:32

‘Growing significantly’ is only if you believe the forecasts which is essentially the key issue-forecasts have either been missed on a regular basis or subsequently impaired.

It’s a very lumpy business so cashflow difficult to predict.We may have ‘gross cash’ but what does that mean in relation to debt?

The business has tooled up for substantial growth-we all recognise that.But until we see regular recurring income at a significant level, it will be under pressure.

This business would flourish in a parent with a big balance sheet and a global footprint

[fft] 06/10/2023 13:23

Problem is that SRT has been here before a few years ago. Hence the jam. But, we have had a lot of 'imminent' stories. Credibility is worn thin. FYI, I have been involved in 2 of the institution/HNW placings over the last 5-6 years including the one this year. Never again :-(.