SRT Marine Systems PLC Final Results (9806T)

TIDMSRT

RNS Number : 9806T

SRT Marine Systems PLC

28 July 2022

SRT MARINE SYSTEMS PLC

(AIM: SRT)

("SRT" or the "Company")

FINAL RESULTS FOR THE YEARED 31 MARCH 2022

SRT Marine Systems PLC, a provider of maritime surveillance, monitoring and management systems, announces its results for the financial year ending 31 March 2022.

FINANCIAL SUMMARY

   --      Revenues of GBP8.2m, mostly generated by transceivers division. 
   --      GBP5.9m gross cash at year end following successful GBP4.9m equity placing. 
   --      GBP600m systems division validated sales pipeline. 
   --      GBP3.2m transceivers division forward order book. 

OPERATIONAL HIGHLIGHTS

-- Good progress with development of new dual application VHF/AIS transceiver product (NEXUS) scheduled to commence shipping in 2023.

-- Continued development of Digital AtoN System (DAS) product offer for navigation safety and environment monitoring.

   --      Significant new functionalities implemented in the SRT-MDA System. 
   --      Systems delivery model evolved to enable more efficient multi-project implementation. 

Commenting on today's results, Simon Tucker, CEO of SRT said:

"Whilst these results are in line with market expectations, this has been a challenging post-covid recovery year for SRT. I am happy that we have been able to maintain our investments in product and customer development and have started to see strong demand return for our products, both transceivers and systems, which I expect to be reflected in next years financial results."

 
  Contacts: 
   SRT Marine Systems plc                                      www.srt-marine.com 
                                                             + 44 (0) 1761 409500 
   Simon Tucker (CEO)                                 [e-mail] 
   Louise Coates (Marketing Manager)                 [e-mail] 
   finnCap Ltd 
   Jonny Franklin-Adams / Teddy Whiley (Corporate 
    Finance)                                                 [phone] 
   Tim Redfern / Charlotte Sutcliffe (Corporate 
    Broking) 
 
 
   About SRT: 
 
   SRT Marine Systems PLC is a global company which develops and 
   provides integrated maritime surveillance, monitoring, management 
   and safety systems used by coast guards, fishery authorities, 
   infrastructure and vessel owners for the purposes of managing 
   and controlling their maritime domain. Applications include security, 
   safety, search & rescue, law enforcement, fisheries management, 
   illegal fishing detection and environment monitoring. 
 
   The information contained within this announcement is deemed 
   to constitute inside information as stipulated under the Market 
   Abuse Regulation (EU) No. 596/2014 which is part of UK law by 
   virtue of the European Union (Withdrawal) Act 2018. Upon the 
   publication of this announcement, this inside information is 
   now considered to be in the public domain. 
 

CHAIRMAN'S STATEMENT

 
     This year's poor financial performance belies the material 
      progress across both our business divisions towards sustained 
      profitability as the global economy and SRT recover from Covid. 
      Government agencies such as Coast Guards, have returned to 
      their long-term plans to build up sovereign maritime surveillance 
      capabilities and restarted their processes. Whilst our transceivers 
      business is experiencing strong demand as the macro digital-marine 
      trend continues in both commercial and leisure sectors. Both 
      are reflective of the strong fundamentals of our target markets 
      coupled with our long-term strategy and significant cumulative 
      investments over many years in the development of market leading 
      products which we expect to be reflected in future financial 
      performance. 
 
      As reported in our post year end trading update (April 2022), 
      year on year group revenues were flat at GBP8.2m (2021: GBP8.3m) 
      resulting in a loss after tax of GBP5.8m (2021: GBP5.1m) with 
      gross cash as at the year-end of GBP5.9m (2021: GBP5.3m) following 
      a successful GBP4.9m equity placing in March. The systems 
      business did not complete any revenue milestones and thus 
      only generated GBP0.6m of revenues during the period from 
      the ongoing sale of data services to system customers. Cash 
      payments amounting to GBP6.1m were received during the year 
      from existing system customers. The transceivers business 
      thus accounted for GBP7.6m of our revenues (2021: GBP8.2m). 
 
      Our systems business continued to execute on our project with 
      BFAR-Philippines, with a number of operational milestones 
      achieved, including the full commissioning of the core fisheries 
      monitoring and management centre which is now in full daily 
      operation. We expect this project to complete within the next 
      12 months, and for further follow-on data sustainability and 
      system expansion contracts to follow. A contract for the first 
      phase of a new GBP40m three-phase project for an SRT-MDA System 
      with a new national coast guard agency customer was signed 
      in January 2022. I am pleased to report that following customer 
      inspection and factory acceptance at SRT in March, first equipment 
      shipments were completed in April, and as of publication of 
      this report installation is well underway. This project is 
      currently scheduled to be implemented over 2 years, although 
      the customer has now requested a faster implementation timescale. 
      We consider this new customer to be of considerable long-term 
      value to SRT and likely to generate further contracts as they 
      build up their maritime surveillance capabilities. 
 
      The SRT-MDA System is a complex combination of systems networking 
      and integrated functionality built around our core GeoVS technology. 
      GeoVS has been developed entirely inhouse over many years 
      to realise our starting vision of a being able to provide 
      a national scale integrated system solution that delivers 
      a full range of sophisticated maritime surveillance, command, 
      control and management functionality. The development of the 
      SRT-MDA System has continued during the year, with new functionalities 
      and capabilities implemented. Notably we have innovated in 
      the areas of marine activity analytics, enabling much greater 
      insight and detection of suspicious and illegal events and 
      vessels, and further enhanced our ability to integrate multiple 
      sensor systems located on different platform types such as 
      coastal installations, drones, patrol vessels and satellites. 
      These are substantial uplifts in system capability which we 
      believe further extend the unique offer of the SRT-MDA System 
      and meet the maritime surveillance aspirations of our customers. 
      SRT has built up a formidable development systems capability 
      of which we are very proud and is in itself a very valuable 
      asset and will enable us to continue this process and thus 
      ensure the SRT-MDA System remains a market leader. 
 
      Our transceivers business has performed solidly, with demand 
      exceeding our current ability to supply, resulting in a growing 
      order book backlog of GBP3.2m as at year end. This reflects 
      the ongoing issues in global electronics component supply 
      which has constrained our production. This continues to be 
      problematic with component order lead times being highly variable 
      at best and our product costs increasing substantially as 
      we seek to fill supply chain gaps through grey-market premium 
      component buying to maximise production. Over the years we 
      have built a global reputation as the leading supplier of 
      marine transceivers with customers expecting both the best 
      products and reliable consistent supply. We have therefore 
      actively engaged with our customers to explain the issues 
      and why supply is constrained and thus why we have had to 
      increase prices to cover these additional costs. I am pleased 
      to report that this approach has been well understood and 
      we have not experienced a drop in demand following the necessary 
      price increases. Unfortunately, market indicators suggest 
      that this issue will remain until the end of 2023, but we 
      are increasingly confident of our capability to gradually 
      increase production capacity through strategic component purchasing. 
 
      Our new NEXUS transceiver product development has made substantial 
      progress during the year. NEXUS is a VHF voice and AIS data 
      radio combined transceiver with a range of very innovative 
      functionalities that deliver a new level of convenience for 
      the mariner - commercial and leisure. This product will significantly 
      expand our target market from data only into marine voice 
      communications. We have developed NEXUS from scratch, enabling 
      us to deploy the full capabilities of our experienced transceiver 
      team who are working alongside selected external contractors 
      to deliver this exceptional product. This has enabled the 
      development of an all-new optimal core technology platform 
      unconstrained from historical architectures. As of this report, 
      we have undertaken a soft teaser market awareness campaign, 
      and the product is at early prototype and type approval testing 
      stage. As is typical for an SRT product, NEXUS will undergo 
      very extensive testing to ensure exceptional performance of 
      both the core radio transceiver and user functionality before 
      shipping commences. We have commenced the component purchasing 
      process and expect that the first units will start shipping 
      towards the middle of 2023. 
 
      Our standard vessel transceivers continue to be recognised 

      as the leading quality product in the market, with customers 
      seeking SRT based products from our OEM partners and our own 
      em-trak brand. We are working on further enhancements to these 
      products as part of continuous improvement. Our Digital Aids 
      to Navigation System (DAS) offer is being further developed 
      to enable us to offer ready to install kits directly to ports 
      and waterway authorities who, following a Covid induced lull, 
      have re-engaged with their plans to digitise navigation. The 
      first DAS products have been launched with further to come. 
 
      Looking to the new financial year, we expect to see a material 
      recovery in our financial results driven by existing and new 
      contracts in our systems division and moderate, production 
      constrained, growth, in our transceivers business. 
 
      In the first half we expect to show the first signs of that 
      growth from the completion of revenue milestones from existing 
      contracts, and during the second half from some substantial 
      new system contracts that have been pending for some time 
      and form part of the GBP600m worth of new contract opportunities 
      on which our sales team are focused. We recognise and share 
      the frustration at the time these are taking to convert into 
      signed contracts, however in the last year, as reported we 
      have seen vigorous re-engagement from these customers who 
      have in many cases had to restart their approval processes 
      due to internal time-out rules. We have close engagement with 
      these customers, and several are now in the late-sales stage 
      administrative process that leads to contract awards. Whilst 
      these late-stage processes are defined by the customer's respective 
      legal procurement processes and thus entirely out of our control, 
      we do have good visibility of their status and this underpins 
      our confidence of new system contracts. An example of this 
      is our January GBP40m project award where we had a high degree 
      of certainty of the contract award well before the actual 
      contract was signed and announced. I therefore expect a succession 
      of substantial new contracts during the second half of the 
      new financial year which will drive revenues in the new year 
      and subsequent years. And thereafter further contracts driven 
      by the long-term trend of countries wanting to build up sovereign 
      maritime surveillance capability. 
 
      Our transceivers business will continue to benefit from increasing 
      demand for AIS in both commercial and leisure markets, underpinned 
      by existing and new legislation and general trend of digitising 
      marine navigation. We also expect to see good results from 
      our ongoing DAS strategy, that targets environment monitoring 
      and navigation safety, where we have a market leading portfolio 
      of products. Whilst we expect the component supply issue to 
      remain until the end of 2023, we are confident that we can 
      expand production to meet demand at the higher pricing and 
      will continue to work closely with our valued customer base 
      to that end. NEXUS will start to make a contribution in the 
      next financial year (2023/24) and based upon initial market 
      feedback we expect this growth to be substantial. 
 
      SRT's fundamental business model remains the same in that 
      we focus on developing advanced core technologies and that 
      deliver products with innovative functionalities for the marine 
      market. These are delivered to customers through a global 
      network of over 1,000 established partners, that range from 
      marine electronic dealers, OEM marine electronic brands and 
      system integrators. This enables us to focus our investment 
      and resources primarily on product development and maintain 
      low overheads whilst targeting a significant global market 
      and multiple substantial projects. This means that we are 
      structured to deliver substantial growth without commensurate 
      growth in our cost base. However, it also means that we must 
      have and maintain the very best core technology and product 
      development capability as we have done in the past financial 
      year, something that our management team has carefully built 
      over many years and continues to evolve. Our transformation 
      to a flexible hybrid work location model is enabling us to 
      harness global talent and this process has accelerated during 
      the past year and will continue going forward, enabling SRT 
      to extend its product lead. In that regard I want to thank 
      our team for their hard and intelligent work that enables 
      us to have the products that are the foundation of our business 
      and future. 
 
      In final summary, the year was one of operational and market 
      recovery and we expect this to be reflected in our financial 
      performance in the new financial year and years ahead - as 
      such we as a board look forward to the future with confidence. 
      I would like to thank both our staff and shareholders for 
      their continued support that has enabled SRT maintain its 
      business through this difficult period. 
 
      Kevin Finn, Chairman, Date: 27 July 2022 
 
 
 
      CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE 
      INCOME FOR THE YEARED 31 MARCH 2022 
 
 
                                            Note              2022             2021 
                                                               GBP              GBP 
 
   Revenue                                               8,172,900        8,275,022 
 
 Cost of sales                                         (5,500,942)      (5,097,419) 
 
 
 Gross profit                                            2,671,958        3,177,603 
 
 
   Administrative costs                                (8,721,560)      (8,048,640) 
 Foreign exchange losses                                 (147,754)        (486,675) 
---------------------------------------  --------  ---------------  --------------- 
 
 Total administrative costs and 
  foreign exchange losses                              (8,869,314)      (8,535,315) 
 
 
   Operating loss                                      (6,197,356)      (5,357,712) 
 Finance expenditure                                     (615,648)        (574,248) 
 
 Finance income                                                421            1,057 
 
 
 
 Loss before tax                                       (6,812,583)      (5,930,903) 
 
 Income tax credit                                         974,578          797,060 
 
 
   Loss for the year after tax                         (5,838,005)      (5,133,843) 
 
 
 
   Total comprehensive expense for 
   the year                                            (5,838,005)      (5,133,843) 
 
 Loss per share: 
 
  Basic                                      4             (3.53)p        (3.13)p 
 Diluted                                                   (3.53)p       (3.13)p 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2022

 
 
                                                    2022           2021 
                                    Note             GBP            GBP 
 Assets 
  Non-current assets 
 Intangible assets                             9,368,069      8,274,170 
 Property, plant and equipment                 1,328,842      1,688,512 
 Tax asset                                             -        793,602 
 
 
 Total non-current assets                     10,696,911     10,756,284 
 
 Current assets 
 Inventories                                   2,359,922      2,368,283 
 Trade and other receivables                   3,847,735      3,600,187 
 Current tax recoverable                         978,963              - 
 Cash                                          5,924,601      5,286,432 
 Restricted cash                                 906,245              - 
 
 
 Total current assets                         14,017,466     11,254,902 
 
 Liabilities 
  Current liabilities 
  Trade and other payables                   (6,459,635)    (1,648,983) 
 Borrowings                          5       (7,245,000)    (8,515,000) 
 Lease liabilities                             (201,402)      (262,011) 
 
 
 Total current liabilities                  (13,906,037)   (10,425,994) 
 
 Net current assets                              111,429        828,908 
 
 
 Total assets less current 
  liabilities                                 10,808,340     11,585,192 
 
 Non-current liabilities 
 Borrowings                                    (312,500)              - 
 Lease liabilities                             (703,317)      (861,409) 
                                          --------------  ------------- 
 
   Total non-current liabilities             (1,015,817)      (861,409) 
 
 
 Net assets                                    9,792,523     10,723,783 
 
 
 Shareholders' equity 
 Share capital                                   180,677        164,252 
 Share premium account                        18,067,612     13,431,735 
 Retained loss                              (13,946,362)    (8,362,800) 
 Other reserves                                5,490,596      5,490,596 
 
 
 Total shareholders' equity                    9,792,523     10,723,783 
 
 

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2022

 
 
 
                                                 2022            2021 
                                                  GBP             GBP 
 
 Cash generated from operating 
  activities                                1,405,136       2,164,982 
 
 Corporation tax received                     789,217         674,236 
                                       --------------  -------------- 
 
 Net cash generated from operating 
  activities                                2,194,353       2,839,218 
                                       --------------  -------------- 
 
 Investing activities 
 
 Expenditure on product development       (3,327,011)     (2,770,455) 
 Purchase of property, plant 
  and equipment                             (183,802)       (341,875) 
 Interest received                                421           1,057 
 
   Net cash used in investing 
   activities                             (3,510,392)     (3,111,273) 
                                       --------------  -------------- 
 
   Financing activities 
 
   Gross proceeds on issue of 
   shares                                   4,919,130       2,000,005 
   Costs of issue of shares                 (266,828)       (102,851) 
   New loans issued                         1,000,000       3,525,000 
   Loan repayments                        (1,957,500)               - 
   Lease repayments                         (267,458)       (267,749) 
   Loan interest paid                       (566,891)       (514,726) 
 
 Net cash generated from financing 
  activities                                2,860,453       4,639,679 
 
 
  Net increase in cash and cash 
  equivalents                               1,544,414       4,367,624 
                                       --------------  -------------- 
 
   Net cash and cash equivalents 
   at beginning of year                     5,286,432         918,808 
                                       --------------  -------------- 
 
   Net cash and cash equivalents 
   at end of year                           6,830,846       5,286,432 
                                       ==============  ============== 
 

Notes

   1.        Status of financial information 

SRT is a public limited company incorporated in England and Wales whose ordinary shares of 0.1p each are traded on the AIM Market of the London Stock Exchange. The Company's registered office is Wireless House, Westfield Industrial Estate, Midsomer Norton, Bath BA3 4BS.

The Board of Directors approved this preliminary announcement on 27 July 2022. This announcement does not itself contain sufficient information to comply with all the disclosure requirements of IFRS and does not constitute statutory accounts of the Company for the years ended 31 March 2022 or 31 March 2021.

The financial information has been extracted from the statutory accounts of the Company for the years ended 31 March 2022 and 31 March 2021. The report of the auditors on those statutory accounts was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The audit reports for the years ended 31 March 2021 and 2022 drew attention by way of emphasis to a material uncertainty relating to going concern and recoverability of certain assets.

The statutory accounts for the year ended 31 March 2021 have been delivered to the Registrar of Companies, whereas those for the year ended 31 March 2022 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

   2.        Basis of preparation 

The financial statements have been prepared in accordance with UK-adopted international accounting standards. For the purposes of the preparation of the consolidated financial information, the Group has applied all standards and interpretations that are effective for accounting periods beginning on or after 1 April 2021. The financial information has been prepared under the historical cost convention unless otherwise stated.

   3.        Dividends 

The Board is not recommending the payment of a final dividend.

   4.         Loss per ordinary Share 

The basic loss per share has been calculated on the loss after taxation of GBP5,838,005 (2021: loss GBP5,133,843) divided by the weighted number of ordinary shares in issue of 165,167,407 (2021: 163,728,344).

During the current and previous years, the Group incurred a loss after taxation and therefore there is no dilution of the impact of the share options granted.

   5.         Borrowings 

Bank loan

The bank loan (amount owed at 31 March 2022: GBP1,562,500) was drawn down in April 2020 as a GBP2,500,000 one year loan provided under the UK government Coronavirus Business Interruption Loan Scheme (CBILS) at an interest rate of 0%. During the year, the renewal of this facility has been agreed with quarterly repayments commencing in July 2021 through to April 2023 at an interest rate of 2.59% above base rate.

Other loans

As of 31 March 2022, the total of other loans outstanding is GBP5,995,000. These all relate to drawdowns on a GBP20 million secured note programme which has been arranged by LGB Capital Markets and which is secured by a floating charge over the Group's assets. In total, the group has outstanding headroom of GBP6,345,000 on the available GBP20 million. The loans have terms of up to 3 years and an interest rate of 8%-10%.

During the year ended 31 March 2022 the covenant in relation to debt service cover was breached and a waiver from loan note holders was obtained subsequent to the year end on May 4(th) 2022. Due to the waiver not being received prior to the year end and the covenants being re-tested at 30 September 2022, IAS 1 requires that the loans are all classified as being repayable in less than one year, despite their maturity dates of up to 3 years. The gearing covenant was not breached as at 31 March 2022.

   6.         Annual Report and AGM 

The Annual Report will be available from the Company's website, www.srt-marine.com once it is published. To locate the report, click "Investors" and then scroll down the page to "Reports and Presentations". The Annual Report and Notice of AGM will be posted to shareholders on 19 August 2022.

The AGM will be held at the Centurion Hotel, Charlton Lane, Radstock BA3 4BD at 11.00am on September 21, 2022. Prior to the commencement of the formal AGM there will be an Open Morning at SRT's offices, commencing at 9.00am.

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July 28, 2022 02:00 ET (06:00 GMT)