Srt Marine Systems Share Discussion Threads

[astralvision] 22/3/2018 10:13

What happened to the Bahrain follow up project for radars and everything?
Seems to have got marooned, like a few other projects!

Countryman5's figures look way way too optimistic, don't forget these projects are over several years, which is a good thing in terms of spreading out revenue. But t/o in the region of £30m to £50m in the year about to start in a few weks time strikes me as just not do-able, esp as there are no current project signed and those sort of figures would indicate something like four to five projects, all in their mature phase + the core business of £5m or £6m.

I would agree with eagle eye who suggests £20m would be some achievement.

I would be interested to know what Countryman has penciled in for the first 6 months of the f/y starting next month. £15m-£25m, half his forecast? That sort of figure looks fantasyland to me, is it all going to be back end loaded again? I await his comments with genuine interest.

The various different brokers over the years have all come out with what where thought to be 'conservative' forecasts and quite a few of those have proved to be not conservative enough!

[lavalmy] 22/3/2018 09:22

ftt

If you read my post 6582 above, you get a better understanding of what happened in Indonesia. They didn't get paid as stipulated in the contract, so they didn't start work. Stock allocated to the project and shipped to Indonesia was reallocated.

I think that each project will have different payment terms, but we can generalise that Middle East customers will be late payers and therefore absorb working capital. Possibly suppliers of radar etc will have to share the burden. Other projects, as can be ascertained by reading the Philo 2 tender will be much more prompt and will become cash generative a couple of months after two or three 'deliverables'.

[eagle eye] 22/3/2018 08:59

Countryman5,
That looks like the spreadsheet I had 3 years ago, except overheads were then £4m vs the current £6m.
Unfortunately, SRT has a track record of figures continually being moved to the right.
A couple of years ago it was anticipated that overheads could be met by core turnover alone, but this hasn't happened as yet.
There is a hard working professional team at SRT, but the real weakness is the lumpy/unpredictable business model.
I wish you well with your figures. I would suggest £20m turnover would be a significant achievement, considering £11m is the previous best.

[fft] 22/3/2018 08:51

C5,. If my memory is correct, their was ni funding for Indonesia, and as a result SRT had to write down a couple of million. SRT had funded all the work.Why will future contracts be different ?

[yump] 22/3/2018 08:50

Who mentioned £30-50mln ? Certainly not after the Indonesia debacle.

Curious disappearance of several doomster posters at once. Makes you wonder now the share price is 'cheap'. Smaller stock holders can easily be panicked into selling when stocks are falling, but not when they're rising, making the falls much more dramatic.

imo there's been a sell-out by certain parties higher up and a repurchase down here.

[countryman5] 22/3/2018 08:43

LAV.
Correct. It will require 12 million of T/O to cover 6 million of overheads.
FFT. My understanding is that ODA funding allows for the majority of payment upon delivery with the balance payable upon completion. The company has access to all the funding it needs but because of the strong cash flow provided by projects at 50% margin the company will be awash with cash. I believe it was LAV who wanted share buy backs rather than dividends. I guess that this will soon be the topic of discussion on this board

[fft] 22/3/2018 08:18

C5,. Would be nice, but these sort of numbers you have quoted have been mentioned by optimists for a few years now.And, given the back end loading of contracts, it is very unlikely to be reached in y/e 2019 even if a couple of orders did come in.And, with working capital required to deliver the order, it will be a tight squeeze. Indeed, a few big orders would probably lead to a cash call to be able to fulfil them.

[lavalmy] 22/3/2018 08:06

Steady C5. I think you mean £6 million overheads?

[countryman5] 22/3/2018 08:01

Stock markets look forward. I am focusing on y/e March 2019. I am assuming overheads of GBP 12 million and 50% gross profit. I believe that T/O will be in the range of 30 to 50 million GBP. I expect the NOMAD to issue a conservative forecast at the end of April and this will be upgraded as the year progresses. (prophets of doom will have long vanished as SRT becomes a stock market darling)

If T/0 is 30 million GBP, less 12 million overheads, leaves PBT of 9 million GBP.
If T/O is 40 million GBP, less 12 million overheads, leaves PBT of 14 million GBP.
If T/O is 50 million GBP, less 12 million overheads, leaves PBT of 19 million GBP.

I would expect a P/E in the late 20's, as a minimum for such a unique company

[amt] 22/3/2018 07:41

Ok if they meet the 15m sales and 1.3m profit then pe of about 18 sounds about right for current value.

[lavalmy] 21/3/2018 13:46

I had another listen to Paul Scott's interview - well worth a refresh, here



It seems that they were expecting to shift the bulk of the stock after all, but that might have changed somewhat if Ecuador has replaced Vietnam on the to do list.

[philburt] 21/3/2018 13:43

Well, I'm letting the money talk and buying a few more! When I say money, I really mean 'back of the sofa' change, but it shows support nevertheless.... :)

[astralvision] 21/3/2018 10:55

Yes, then we are agreed, there has to be a better way of doing this, current way is very unsatisfactory.

[lavalmy] 21/3/2018 10:53

Don't think it fills anyone with confidence.

It seems a throwback to when they were just a box shifter, as opposed to more a systems company with projects spread over several periods. It would make sense to adjust their policy at some stage, maybe before the final accounts?

It is never going to mirror cash receipts either. A glance at the Philo 2 payment terms seems to be a mixture of upfront, retentions, on-going once the upfront is used, performance guarantees etc. I do remember Tucker's interview with Paul Scott where he mentions discussions about when an item should be considered as delivered and hence invoiceable, that with regard to the very same Philo 2 project.

[fft] 21/3/2018 10:43

Also, booking revenue and then not saying what the terms of the contract are, wrt when cash is due to be received won't work any more. They did it once, spun things out for a year , then had to admit no cash. In the meantime the share price shot up and the directors exercised loads of zero cost options that no one knew about !! You couldn't make it up !! If they returned the shares it might make me feel better about MGMT.

[astralvision] 21/3/2018 10:34

Not saying it isn't transparent, but it's not a process that fills me with confidence and I would prefer not to always be in the position of waiting for a big contract and booking a big a lump as soon as possible to try to meet a forecast.
This seems to be what is happening and it is my view that they need to take a long hard look at this, as in the long run I don't think it is doing anyone any favours.
All imo.

[lavalmy] 21/3/2018 10:30

astral

I am not sure that it does comply with normal accounting rules, but they have got away with it before. It is fairly transparent though. With the Indonesian order, I understand that they shipped some product, invoiced for that part of the first phase, as was contractually agreed, but never got paid up front, as was also agreed. So the actual product sitting in Indonesia never actually changed hands and has since been reallocated. Sure, there was a lot a 'systems/software' on the invoice as well.

If they are to meet the forecast, I would imagine something similar. They may have already shifted some stock in anticipation, although a lot of the stock at hand is Class A so probably not required for the contracts envisaged.

[astralvision] 21/3/2018 10:30

ps
A few years ago we had the 'will drop into next f/y if we miss, can't help it if a contract falls a few days later'

It gets a bit hazy but my recollection was it never did quite drop into the following f/y and that the following f/y was just a struggle as the previous f/y despite thinking that a big dollop of revenues was going to be coming only a matter of days into the new f/y.

[astralvision] 21/3/2018 10:18

LaValmy
That is tue, fair point. That was a very disappointing year and to guide £6m-£13m so close to the year end and hit right at the bottom of it was not good.

Countryman5 seems to be saying that SRT are waiting on this Philippines contract, which has been received by a 3rd party but SRT are waiting to get their hands on the loot/RNS the contract. Presumably they are then looking to book a decent lump of the contract straight away, perhaps under 'set up costs' or 'software' or whatever.
A couple of years ago SRT did the same with the Indonesian order and managed to make the figures by booking a lump of the Indonesian order straight away.
I'm sure this is all well and good and complies with every accounting rule, but the thought crosses my mind it would be better to spread out the revenue recognition over a longer period of time, even if it meant taking a short term or f/y hit, which would only affect the profit/loss, not the all important cash flow aspect.

[lavalmy] 21/3/2018 10:11

astral

The difference is that in 2014 they had guided down to that range of £6-13 mn in January, and only just got to the £6 mn by including some revenue on a contract signed after the y/e. This time they haven't changed the guidance at all.

I agree the last minute stuff is exasperating, it seems to happen every year.

[astralvision] 21/3/2018 09:52

A decent update from Countryman5, presumably with help from ST.

Re warning, the profit warning 4 years ago came a couple of days after close, 2nd April 2014 to be precise, after previous guidance of £6m-£13m and it came in right at the bottom of that range



If they do make forecasts this year, that's good but irrespective of that I do feel investors (or some investors) have had enough of all this last minute will they won't they stuff and despite all the years, that is still the position SRT find themsleves in, and probably for a few more years yet.

[lavalmy] 21/3/2018 09:36

For Indonesia, the picture is more murky. I am inclined to believe that they are waiting for the corruption investigation regarding the German satellite company and Bakamla to blow over before recommencing the project. SRT and Qnective certainly did a lot of the detailed planning work despite the investigation having started in December 2016. The current head of Bakamla was indeed appointed in March 2016 which is exactly when the project stalled, although, as I said, the detailed planning did start.

As for Qnective, it is not a mega private company at all, but has exemplary connections in Indonesia which are essential to doing business there. I note that the general who signed their original contract for secure military communications in 2013 was appointed in January to the Cabinet. They probably still have his phone number.

[techno20] 21/3/2018 09:36

Been invested here for years. My first purchase was at 21p, sold big chunks at higher levels, so having re-watched the webcast from just a few weeks back, I’ve topped up again this morning. Happy to hold LT. Only time will tell! GLA.

[yump] 21/3/2018 09:27

Is it just the same group of posters that go around from share to share, where there are disappointments and a dropped share price and just churn out the same largely irrelevant rubbish on every share ? Even on the same share they do it over and over again.

I think I know the answer to that.

I know its as unlikely to get an answer that's any better than those on the Sunday morning 'Big Question', but how exactly would being part of a larger business help ?
There's an assumption there, that the issue is to do with the size of SRT.

So how would 'more resources' help and what are they that SRT is missing ?

Not enough brown envelopes given to high-ranking officials to get the contracts signed ?

[lavalmy] 21/3/2018 09:14

Homeboy

You seem to have mixed up Indonesia and Philippines. The Philo contract is the Philippines and the funding was agreed by the French government in 2015. The project has been increased in scope and cost since then and this increase is waiting for final approval from the Philippines.