 Hopefully Plunkett's arrival will bring a bit of focus/discipline to the Board and its grip on SRT's finances.
As to the PB, my understanding is that :
- SRT is required to post a bond for $21.4m (ie 10% of contract value....hmmm, I'm more familiar with 5%...) as surety for its ability to 'perform' (duh!) its contractual obligations ie delivery of specified kit that works as described;
- it's evidence for the client that SRT's bankers believe it'll be around long enough to fulfil its contract obligations, including maintenance. It would be interesting to know the duration of the PB...and how it phases out as the contract progresses/completes).
- SRT's bankers aren't willing to post such a bond without 100% cash margin (make of that what you will), so SRT has got a bridging loan in cash from OI that SRT will in turn place with its bank, which will then issue the [cash collateralized] PB, which is sure to be a Condition Precedent for contract signature.
- with the Contract signed, SRT's bankers will/should release the 100% cash collateral they hold (which SRT will then return to OI) in exchange for an equivalent (substitute)guarantee from OI in favour of the bank.*
* This tells you something about SRT's still parlous state with its banker, even after securing the Contract.
It also pre-supposes OI's own credit-worthiness, of course, and will come at a cost.
- SRT will use the proceeds of the placing + other cash inflows (Indonesia? Kuwaiti / Phillipine/ Saudi invoicing and 'revenue milestones') plus other support (UKEF facility AND £7m proceeds of OI 20m warrants) to convince its bankers to release OI from its guarantee obligations to the bank within 6 months and accept SRT as a stand-alone risk thereafter.
- OI gets 20m shares in SRT at a discount and - if there's any slippage (surely not!)beyond that - the chance to tighten its grip on the Company. Not quite a CLN situation, but maybe rhyming somewhat.
The mid-morning announcement, convoluted nature and 'cash is king' solution speak to the urgency of the situation....and the 31st October deadline.
I'm sure they were burning the lights over the weekend...in MSN and elsewhere!
All AIUI
GLA and ATB |
I don't think thet will get much beyond £1, sad to say after all these years. Dilution, loss of any first mover advantage that they might have had etc will have a large negative effect on the returns I had been hoping for. Becoming the incumbent in some countries is about all I expect and even then that may not be all that valuable, e.g Bakamla if their position weakens or the BFAR and whither that might go. |
Think Tucker us going to have to get his options repriced
Latest batch of shares plus warrants means there will be something like 265m shares. Those £3 options mean market cap has to be around £800m to break even and £1bn to be meaningful.
That’s a big ask. |
As I keep saying, keep following the cash-or lack of.
This is yet another example of missed timelines-yet another.
The 2024 accounts will be horrible and will have a going concern note which is overcome by this latest cash raise
As I said a few weeks ago, David Brent and the good news/bad news trick |
In fact the broker note (8th March 2024) from when they moved the year end says that:
'The company is actively delivering and invoicing on multiple concurrent projects.'
So how come system revenues will be zero for the 15 months? What did they deliver? What did they invoice?
They go on to say:
'The company has multiple sources of debt financing sources to fund working capital requirements and the £14.9m debt components include £8.7m LGB loan note and £6.2m loans (£2m Barclays and supplier loans).
By 15m FY24E to June, we do not expect any further drawdown of debt within the three months to June. Instead, the company is expected to have paid back £1m of the Barclays loan and a portion of the supplier loan.'
So that looks like £4.2 million of supplier loans were outstanding in March, some of which they hoped to repay by end June. |
Normally the performance bond cost is 1-4% of the bond value. As it is, that cost is now intangible as its in share options, but the injection of capital from OI enables the bond.
The capital from OI is to enable the bond that otherwise might have been unavailable given the size of the contract(s) vs SRT’s balance sheet/financial situation.
I’m sure the bond value itself is not any sort of dodgy discount on the contract payments SRT will receive. Nobody would do any contracting if that is or was the case.
In fact, having had client payments delayed years ago in contracting myself, I assume the performance bond is also a kind of insurance for SRT. |
Hatfull
I don't think you factored in the large stock component which has been sitting in England for well over a year. Some has been supplied on supplier loan as the broker said in May, but much must have been paid for. In fact some has been sitting there for two years now, the Saudi stuff, so at least that will not have eaten into the last fundraise, just the one before that. Not impressive use of scarce resources. |
The broker says:
'The financing package is a positive development, indicating well-funded and significant progress towards revenue milestones with initial recognition estimated to begin in the New Year.' So still sitiing on the tarmac at MSN.
but the placing is
'to complete at the earliest opportunity and subject to shareholder approval'.
No AGM for me then |
I'm not sure about that [is quite simply because they have run out of money again] LaValmy.
"In January 2024, we successfully completed an equity cash raise of £10.5m. This placed the Company on a strong cash footing intended to enable us to withstand the variances that come with our strategy of becoming a large global maritime systems business. In addition, we retain our secured loan note programme where we have existing undrawn capacity of £16.7m. Thus we are in a positive position to weather the project delays"
My calculations show they had a cash runway (excluding the undrawn facility) until April 2025 as they had a "relatively fixed cast base"
More to give OI a bigger slice of the pie.
There's a £45m milestone payment on signing the Indonesia contract |
Hi AE
It is in two bits which I don't think should be confused. The performance bond injection is a loan/bank guarantee which is to be replaced by SRT's own money (what's that?) and a UKEF performance bond. If that UKEF bond comes through, SRT are effectively giving options at 35p on 20,000,000 shares to OI for three years, increasing by 20% each month after 6 months. That is quite a cost for a 6 month loan. Of course, SRT hasn't got $21.3 million and never has had, but if they think they can replace it in six months why not factor that into the contract with Kuwait?
The other part, the £7.5 million, is quite simply because they have run out of money again, mostly because it is tied up in stock. It is a shame that the AGM isn't going to be in early December as I would have tried to make it (and vote most vociferously against quite a few things) but it sounds like they won't be able to pay the electricity bill if they don't get an injection before the end of November.
I suppose they will have to issue some sort of forecast with the offering document which will give some sort of clue as to the most recent expectations of timings on these other contracts. And the much awaited 'annual' accounts which will show that they had a dire year and had a need for funding regardless of this Kuwait contract. |
Can I suggest that people look up performance bonds, as it seems there is some misunderstanding, particularly on who is liable for payments in the event of a claim.
Its just insurance, but you can’t get it if your financials don’t stack up and if they do, the cost of the bond will depend on how good they are. The value of the bond is not a liabilty for the contractor, just as you don’t have to pay for a new car if you crash yours.
There may be complications in negotiating the ins and outs of what has been completed on the project in the event of claims. |
On the announcement of the Kuwait contract the RNS said
"The award is subject only to completion of the formal contract and associated performance bond which are now underway and expected to be completed prior to the end of next month, with implementation commencing immediately thereafter."
It seems pretty clear to me that this funds raise is to satisfy that requirement and not for any other purpose. Of course the project has to deliver what has been specified or the bond will be subject to forfeit. |
YumYum
No I don't think I misunderstood. I think he meant that performance bonds were always called on by the purchaser on some pretext or other, meaning that the contract should be valued net of the performance bond money. i.e. a delayed discount. He did also say that it was back in the day and things might have changed since. |
LaValmy, you might have misunderstood extrader, but anyway in this case it looks like a more normal performance bond rather than dressed up financing. |
Am I right in thinking that there will be 262m shares in existence plus any extras if UKEF don't deliver in 8 months ? That's a lot more than when SRT was going to conquer the inland waterways. And why is UKEF taking so long ? Wasnt that a next month thing ?Share price 40p. mkt cap 100m plus. Have to pay back the OI loans, plus the Cayman island loans. And also assume cost over runs by the local contractors in the countries involved. Do the contracts also include a maintenance aspect over x years ? If so, that is good for the long term but needs to be deducted from short term contract value.Wonder how much profit, free cash flow and EPS are expected over the next few years. Everything will be lumpy, and will probably require a different level of mgmt so perhaps the best thing is a takeover once the 4 contracts have actually been started. Crystalize the gains. |
YumYum
It might indeed be good news about Kuwait starting, but I have my worries about this performance guarantee. As was pointed out by Extrader, it can be merely a postponed discount. SRT have been hopelessly naive about a lot of things over the years. I think they got in an expensive muddle with Saudi VAT for example. We can but hope that they have gone into Kuwait with their eyes open. |
I wonder if next quarter really means Jan-Mar 2025 or actually this quarter.
The very good news is the expected signing and start of Kuwait contract in only 3 days' time. |
It's fantastic news (if it holds true), If the $210m contract is signed on 31/10 then we'll fly, the funding will be done and we'll have the first major contract in the bag.
That proves to the market that the product is real and the market is huge |
At a glance, there are a couple of things not to like. OI is getting to a 25% holding (give or take with the expanded capital) at the low price of 35p. That clearly gives them the power to block certain things, which may or may not be good. That they will have someone on the board I regard as a good thing. He might stop some of the nonsense that has gone on.
The other point is 'proceeding of three other contracts worth an additional $210m during the next quarter' which I take to mean that none will start this current quarter rather than $210 million recognised next quarter. That is very disappointing and we can only hope that OI has done very thorough due diligence on these. |
In one way it is pretty horrible for SRT but on the other hand it does provide very much needed cash and a sort of clarity going forward. Kuwait contract start is an absolute plus. I think overall it is very reassuring. I am glad I did not buy more whilst wondering about placing, but I will try and buy in the placing in November. I might buy today as well. Chewing on that. 7.5m shares in the open offer is not very many. |
Looks good 🤞 |
SRT Marine Systems plc ('SRT'), a global provider of maritime domain awareness systems and technologies for security, safety and environmental protection is pleased to announce that it has agreed a substantial investment and short-term finance bridge support package from existing shareholder Ocean Infinity (OI), together worth approximately £31 million.
RNS just out |
Getting old :¬( |
Hmmm. I don’t like interesting weeks. |
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