Share Name Share Symbol Market Type Share ISIN Share Description
Srt Marine Systems Plc LSE:SRT London Ordinary Share GB00B0M8KM36 ORD 0.1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  4.00 12.7% 35.50 35.00 36.00 36.20 28.75 29.00 2,928,561 16:23:48
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
General Financial 18.9 -6.9 -3.9 - 58

SRT Marine Systems PLC Half-year Report

19/11/2020 7:00am

UK Regulatory (RNS & others)

Srt Marine Systems (LSE:SRT)
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RNS Number : 7929F

SRT Marine Systems PLC

19 November 2020

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.



SRT, the AIM-quoted developer and supplier of maritime surveillance, analytics and management systems and products announces its unaudited interim results for the six months ended 30 September 2020 (the "Period").

Financial Highlights

   --      7% - year on year H1 period revenue increase to GBP3.8m (H119: GBP3.5m) 
   --      39% - gross profit margin (H119: 38%) 
   --      GBP5.0m - gross cash balances as at end of H1 (H119: GBP1.7m) 
   --      GBP550m -systems division validated sales opportunity pipeline 

Operational Summary

   --      Covid business as usual operating model established and running smoothly 
   --      Good progress with new transceiver product development 
   --      Major new functionalities added to GeoVS maritime surveillance platform 
   --      Significant new system contract sales and implementation planning engagement 

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

"I am extremely pleased with the performance of our transceivers business - a performance that we had not predicted at the start of the Period due to Covid-19. As expected, the progress of existing and pending new system contracts have slowed significantly during the period. However I am pleased to report that none have disappeared and in recent months most have re-engaged on top of us receiving new inquiries and so have a significant active pipeline of validated and as yet unvalidated opportunities each at a different stage in the sales cycle. This reflects the fundamental long term demand drivers that underpin our business and our decision 5 years ago to develop an integrated maritime surveillance and management system. A number of the new contract opportunities in our validated pipeline have taken significant strides during the last couple of months and so, whilst exact timing is tricky to fix, I hope that we will be able to announce some significant progress with regards to new system contracts in the near future."

   SRT Marine Systems plc                             
                                                             + 44 (0) 1761 409500 
   Simon Tucker (CEO)                        
   Louise Coates (Marketing Manager)        
   finnCap Ltd 
   Jonny Franklin-Adams / Teddy Whiley (Corporate 
    Finance)                                                 +44 (0) 20 7220 0500 
   Tim Redfern / Tim Harper (Corporate Broking) 
 About SRT: 
  SRT Marine Systems PLC ("SRT") is a global leader in maritime 
  domain awareness products and systems. Our solutions integrate 
  multiple technologies, advanced analytics, innovative digital 
  display systems, logistics and command and control to provide 
  enhanced maritime surveillance, security, safety and management 
  for national authorities such as coast guards and fishery authorities. 
  Applications include coastal and territorial water surveillance 
  and security, fisheries monitoring, management and IUU detection, 
  search and rescue, waterway management and aquatic environment 
  monitoring as well as individual leisure and commercial boat 
  The information communicated in this announcement contains inside 
  information for the purposes of Article 7 of the Market Abuse 
  Regulation (EU) No. 596/2014. 

Chairman's Statement

Our financial and operational performance during the first half of the financial year was better than we expected given the current macro-economic conditions, setting the stage for a strong recovery and growth in the second half and the years ahead.

Despite global lockdowns, throughout the period revenues were 7% higher than the same period last year at GBP3.8m, with an increased gross profit margin of 39%. This generated a loss before tax of GBP2.7m after administration costs of GBP3.9m and net finance costs of GBP0.3m. Cash balances as at 30 September 2020 were GBP5.0m, with trade and other debtors of GBP7.4m.

All revenues during the period were generated entirely by our transceivers business as no system contract invoicing milestones were delivered. However, during the period cash payments amounting to approximately GBP8.5m were received from systems customers for previously completed milestones. Furthermore, our cash balances benefited from the completion of a Covid-19 resilience refinancing during the period which raised GBP5.3m from a combination of loans and equity.

Our administrative expenses during the first half of this financial year were higher than the same period last year, largely as a result of the prior period expenses including the offset of some significant exchange rate gains, together with the planned expansion of our systems development and delivery teams during the second half of last year to support expected new contracts. However, during the first half of this year, as part of our Covid resilience plan, our team growth plans were suspended, but have recently been reactivated due to the re-engaged status of a number of new system contracts which are expected to commence during the second half. Subject to the exact timing of new system contract signings, we expect our team expansion plan to be completed by the middle of next year and result in an overall increase in our overheads of GBP1.5m per annum.

At the start of Covid-19 lockdowns in March this year, we expected to see a significant reduction in our transceivers business revenues as people were instructed to stay at home. However as previously reported, this has not been the case and in fact the business has continued to grow. We believe this demonstrates the long term resilience of leisure and commercial boating where AIS is now well established combined with our established product portfolio and diverse global reseller network. AIS is now an established navigation technology in both commercial and leisure markets, due to a combination of regulation and useful functionality. We expect the long-term demand profile to ultimately fuse with radar as the two technologies are directly complementary, creating a very substantial market with regular demand. Due to recent investments over the past few years we have a full range of AIS transceivers covering all applications and vessel types, all of which are certified around the world and well established in the market. This year we have embarked on a major new development project to create a new and innovative transceiver product which we believe will open a significant new market segment for our transceivers business. This product fuses AIS with other technologies and will deliver a range of maritime voice and data communication functionalities out of a single device whilst also linking to other devices on the boat. We expect this product to launch at the end of 2021 and start shipping during 2022.

Our systems business delivers turn-key coastal and oceanic maritime surveillance and command and control systems for use by Coast Guards and Fishery authorities. The demand for these systems is driven by a growing need to improve safety, security and management across territorial and EEZ sovereign marine territories. Our system offering is built around our GeoVS application which fuses multiple sensor sources into a single data set and uses analytics to automatically detect, track and manage vessels on a mass scale, coupled with integrated command and control functionality. GeoVS is a suite of sophisticated software applications which integrate together into a single system offering to deliver a system solution that can scale from a single port to a national system supporting hundreds of sensor towers and operators. Our development effort in GeoVS is substantial and continues unabated with new functionality and improvements being added continuously. This effort will continue into the future to deliver our road map of system functionalities and continuous performance improvements that reflect the growing market opportunities, both for new and existing follow on contracts. GeoVS is a valuable and growing asset for SRT.

Our existing GBP32m contract with the Philippines Fisheries Department (BFAR) to deliver the SRT-MDA System configured for Fisheries, has continued to make solid progress despite the inevitable installation challenges caused by Covid-19 lockdown restrictions. Monitoring and data centres have been installed and commissioned, installation of the 132 coastal surveillance sensor stations is well underway, vessels are actively being equipped with the VMS-100 fisheries tracking and reporting transceiver and the supply of a range of long range satellite surveillance data that includes AIS, SAR has commenced. This continued progress has been possible due to the scalable modular architecture of the SRT-MDA System, combined with our implementation model whereby we contract all installation to local in country partners with our Delivery Team providing oversight, training and technical expertise either remotely or if appropriate actively in country. We expect that in due course there will be follow on contract opportunities as the system expands from the existing target of 5,000 vessels to the full Philippine fishing fleet which numbers over 200,000 vessels.

The fundamental demand drivers for MDA systems remains undiminished and is growing as a long term macro-trend as countries around the world recognise the need to secure and manage their maritime regions. The availability of new surveillance sensors, both satellite and terrestrial provide the opportunity for highly effective maritime monitoring. I am pleased to report that this is reflected by the steady flow of new inquiries we regularly receive, and the GBP550m value of 17 new system contract opportunities that are sufficiently validated to be in our validated sales pipeline (VSP).

During the first half following a period of significantly slowed activity due to the initial effects of Covid-19 lockdowns, all our VSP opportunities have re-engaged. As of the date of this report of particular note are several new contract opportunities with an aggregate value of up to US$100m where the final procurement and contracting process appears to be nearing completion. I therefore expect we will see the signing and commencement of new system contracts during the second half, the continued development towards contracting of others in the VSP and the addition of new opportunities to the VSP.

In summary, the first half was better than we expected with our transceiver business growing 7% despite the Covid-19 challenges. During the second half we remain cautiously optimistic to replicate the long term annual growth of this business. Our systems business did not complete any milestones during the period but is forecast to do so during the second half, and I expect that we will have entered and commenced new contracts along with gaining increased clarity on other new system contracts in our VSP.

Kevin Finn




                                                Six months          Six months                  Year 
                                                     ended               ended                 ended 
                                                    30 Sep              30 Sep                31 Mar 
                                                      2020                2019                  2020 
                                                 Unaudited           Unaudited               Audited 
                                      Notes            GBP                 GBP                   GBP 
-----------------------------------  ------  -------------  ---  -------------  ---  --------------- 
 Revenue                                         3,790,852           3,541,039            18,908,062 
 Cost of sales                                 (2,308,881)         (2,181,374)          (14,537,092) 
-----------------------------------  ------  -------------  ---  -------------  ---  --------------- 
  Gross profit                                  1,481,971            1,359,665             4,370,970 
 Administrative costs                          (3,919,662)         (2,673,611)           (6,883,261) 
                                             -------------  ---  -------------  ---  --------------- 
 Operating loss before exceptional 
  item                                         (2,437,691)         (1,313,946)           (2,512,291) 
 Impairment charge                      3                -                   -           (3,922,029) 
-----------------------------------  ------  -------------  ---  -------------  ---  --------------- 
  Operating loss after exceptional 
   item                                        (2,437,691)         (1,313,946)           (6,434,320) 
 Finance expenditure                             (282,925)           (231,833)             (464,539) 
 Finance income                                        654                 803                 1,430 
                                                            ---                 ---  --------------- 
  Loss before income tax                       (2,719,962)         (1,544,976)           (6,897,429) 
 Income tax credit                                       -             160,434               818,407 
-----------------------------------  ------  -------------  ---  -------------  ---  --------------- 
  Loss for the period                          (2,719,962)         (1,384,542)           (6,079,022) 
-----------------------------------  ------  -------------  ---  -------------  ---  --------------- 
  Total comprehensive loss for 
   the period                                  (2,719,962)         (1,384,542)           (6,079,022) 
-----------------------------------  ------  -------------  ---  -------------  ---  --------------- 
  Loss per share: 
   Diluted                              2          (1.66)p             (0.90)p               (3.93)p 
                                         2         (1.66)p             (0.90)p               (3.93)p 



                                                 As at           As at          As at 
                                                30 Sep          30 Sep         31 Mar 
                                                  2020            2019           2020 
                                             Unaudited       Unaudited        Audited 
                                  Notes            GBP             GBP            GBP 
-------------------------------  ------  -------------  --------------  ------------- 
 Non-current assets 
 Intangible assets                           8,252,007       7,314,999      7,776,882 
 Property, plant and equipment               1,643,557       1,681,063      1,782,048 
 Deferred Tax                                  670,778         214,731        670,778 
-------------------------------  ------  -------------  --------------  ------------- 
  Total non-current assets                  10,566,342       9,210,793     10,229,708 
 Current assets 
 Inventories                                 2,878,417       4,304,690      1,928,730 
 Trade and other receivables                 7,441,661      14,329,314     15,958,534 
 Cash and cash equivalents                   4,996,949       1,747,439        918,808 
-------------------------------  ------  -------------  --------------  ------------- 
  Total current assets                      15,317,027      20,381,443     18,806,072 
 Current liabilities 
 Trade and other payables                  (3,208,505)     (4,855,621)    (9,044,454) 
 Financial liabilities              4      (8,490,000)               -    (4,990,000) 
 Lease liabilities                           (205,223)       (214,473)      (202,445) 
 Total current liabilities                (11,903,728)     (5,070,094)   (14,236,899) 
 Net current assets                          3,413,299      15,311,349      4,569,173 
 Total assets less current 
  liabilities                               13,979,641      24,522,142     14,798,881 
 Long term liabilities 
 Financial liabilities              4                -     (4,990,000)              - 
 Lease liabilities                           (978,422)     (1,019,050)    (1,067,741) 
 Total long term liabilities                 (978,422)     (6,009,050)    (1,067,741) 
  Net assets                                13,001,219      18,513,092     13,731,140 
-------------------------------  ------  -------------  --------------  ------------- 
 Shareholders' equity 
 Share capital                      5          164,252         154,794        154,844 
 Share premium account                      13,431,735      11,543,989     11,543,989 
 Other reserves                     7        5,490,596       5,490,596      5,490,596 
 Retained (loss) / earnings                (6,085,364)       1,323,713    (3,458,289) 
  Total shareholders' equity                13,001,219      18,513,092     13,731,140 
-------------------------------  ------  -------------  --------------  ------------- 



                                                Six months     Six months     Year ended 
                                                     ended          ended 
                                                    30 Sep         30 Sep         31 Mar 
                                                      2020           2019           2020 
                                                 Unaudited      Unaudited        Audited 
                                      Notes            GBP            GBP            GBP 
 ------------------------------------------  -------------  -------------  ------------- 
  Cash generated from / (used 
   in) operating activities               6        653,548      (335,916)        857,765 
 Corporation tax received                                -              -        201,926 
-------------------------------------  ----  -------------  -------------  ------------- 
  Net cash generated from 
  / (used in) operating activities                 653,548      (335,916)      1,059,691 
-------------------------------------  ----  -------------  -------------  ------------- 
 Investing activities 
 Expenditure on product 
  development                                  (1,506,194)    (1,359,127)    (2,970,033) 
 Purchase of property, plant 
  and equipment                                   (83,303)      (238,873)      (523,530) 
 Interest received                                     534            803          1,430 
-------------------------------------  ----  -------------  -------------  ------------- 
  Net cash used in investing 
   activities                                  (1,588,963)    (1,597,197)    (3,492,133) 
-------------------------------------  ----  -------------  -------------  ------------- 
 Financing activities 
 Gross proceeds on issue 
  of shares                                      2,000,005         34,787         34,837 
 Costs of issue of shares                        (102,851)              -              - 
 New loans issued                                3,500,000              -              - 
 Lease repayments                                (131,848)       (64,569)      (225,149) 
 Loan interest paid                              (251,750)      (231,833)      (400,605) 
-------------------------------------  ----  -------------  -------------  ------------- 
  Net cash generated from 
  / (used in) financing activities               5,013,556      (261,615)      (590,917) 
-------------------------------------  ----  -------------  -------------  ------------- 
  Net increase / (decrease) 
   in cash and cash equivalents                  4,078,141    (2,194,728)    (3,023,359) 
-------------------------------------  ----  -------------  -------------  ------------- 
   Net cash and cash equivalents 
   at beginning of period                          918,808      3,942,167      3,942,167 
-------------------------------------  ----  -------------  -------------  ------------- 
  Net cash and cash equivalents 
   at end of period                              4,996,949      1,747,439        918,808 
-------------------------------------  ----  -------------  -------------  ------------- 



                                  Share         Share       Retained   Other Reserves         Total 
                                Capital       Premium       Earnings 
                                    GBP           GBP            GBP              GBP           GBP 
  At 31 March 2019              153,223    11,510,773      2,715,218        5,490,596    19,869,810 
 Total comprehensive loss 
  for the period                      -             -    (1,384,542)                -   (1,384,542) 
 Share based payment credit           -             -        (6,963)                -       (6,963) 
 Issue of equity share 
  capital                         1,571        33,216              -                -        34,787 
  At 30 September 2019          154,794    11,543,989     1,323,713         5,490,596    18,513,092 
 Adjustment on initial 
  application of IFRS 16              -             -       (93,360)                -      (93,360) 
 Total comprehensive loss 
  for the period                      -             -    (4,694,480)                -   (4,694,480) 
 Share based payment charge           -             -          5,838                -         5,838 
 Issue of equity share 
  capital                            50             -              -                -            50 
  At 31 March 2020              154,844    11,543,989    (3,458,289)        5,490,596    13,731,140 
 Total comprehensive loss 
  for the period                      -             -    (2,719,962)                -   (2,719,962) 
 Share based payment charge           -             -         92,887                -        92,887 
 Issue of equity share 
  capital                         9,408     1,990,597              -                -     2,000,005 
 Costs of issue of equity 
  share capital                       -     (102,851)              -                -     (102,851) 
  At 30 September 2020          164,252    13,431,735    (6,085,364)        5,490,596    13,001,219 


   1.      Accounting Policies 

Basis of preparation

The interim financial information in this report has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted by the European Union. IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee and there is an ongoing process of review and endorsement by the European Commission. The financial information has been prepared on the basis of IFRS that the Directors expect to be adopted by the European Union and applicable as at 31 March 2021.

Non-statutory accounts

Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ("the Act"). The statutory accounts for the year ended 31 March 2020 have been filed with the Registrar of Companies. 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 report drew attention by way of emphasis to a material uncertainty relating to going concern.

The financial information for the six months ended 30 September 2020 and 30 September 2019 is unaudited. The interim financial statements will be available to download on the Company's website from 19 November 2020.

Accounting policies

The accounting policies as applied by the Group are the same as those applied by the Group in the consolidated financial statements for the year ended 31 March 2020.

   2.      Loss per share 

The basic loss per share has been calculated using the loss for the period of GBP2,719,962 (six months ended 30 September 2019 - loss of GBP1,384,542; year ended 31 March 2019 - loss of GBP6,079,022) divided by the weighted average number of ordinary shares in issue of 163,435,470 (six months ended 30 September 2019 - 154,660,183 and year ended 31 March 2020 - 154,742,293).

During the six months ended 30 September 2020 and 2019 and the year ended 31 March 2020, the Group has incurred losses for the periods and therefore there is no impact of the share options granted on diluted earnings per share.

   3.      Impairment charge 

During the year ended 31 March 2020, the Group incurred an exceptional impairment charge of GBP3,922,029 in respect of a contract signed in 2017 to supply a national vessel tracking system for a Middle East Coast Guard.

   4.      Financial liabilities 
                             30 Sep       30 Sep       31 Mar 
                               2020         2019         2020 
                          Unaudited    Unaudited      Audited 
                                GBP          GBP          GBP 
---------------------   -----------  -----------  ----------- 
 Less than one year: 
 Bank loan                2,500,000            -            - 
 Other loan               5,990,000            -    4,990,000 
  Total                   8,490,000            -    4,990,000 
----------------------  -----------  -----------  ----------- 
 More than one year: 
 Bank loan                        -            -            - 
 Other loan                       -    4,990,000            - 
  Total                           -    4,990,000            - 
----------------------  -----------  -----------  ----------- 

The bank loan of GBP2,500,000 was provided under the UK government Coronavirus Business Interruption Loan Scheme (CBILS) as part of the Group's COVID-19 resilience financing and is repayable within one year.

Other loans all relate to drawdowns on a GBP10 million secured loan note programme which has been arranged by LGB Corporate Finance and which is secured by a floating charge over the Group's assets. The loans have terms of up to 3 years and interest rates of 8-10%. During the period a further GBP1,000,000 was drawn-down as part of a COVID-19 resilience financing.

During the period, a covenant in relation to debt service cover was breached and a waiver from loan note holders was obtained subsequent to the period end on 7 October, 2020. Due to the waiver not being received prior to the period end, IAS 1 requires that the loans are classified as being repayable in less than one year, despite their maturity dates as set out below:

------------------   ------------- 
   Maturity date: 
 December 2020           2,000,000 
 June 2021               1,150,000 
 October 2021            1,000,000 
 March 2022              1,840,000 
  Total                  5,990,000 
-------------------  ------------- 
   5.      Share capital 
                                       30 Sep      30 Sep      31 Mar 
                                         2020        2019        2020 
                                    Unaudited   Unaudited     Audited 
                                          GBP         GBP         GBP 
--------------------------------   ----------  ----------  ---------- 
   Ordinary shares of 0.1p each       164,252     154,794     154,844 
---------------------------------  ----------  ----------  ---------- 
 Reconciliation of movement         Number of 
  in share capital                     shares 
   Shares outstanding at 31 March 2019                     153,222,419 
   Exercise of share options            (a)                               1,571,500 
   Shares outstanding at 30 September 2019             154,793,919 
   Exercise of share options (b)                                                50,000 
   Shares outstanding at 31 March 2020                     154,843,919 
   Share placing April 2020 (c)                                            7,208,020 
   Exercise of share options (d)                                          2,200,000 
   Shares outstanding at 30 September 2020             164,251,939 


a) 35,000 share options were exercised at a price of 0.1p in April 2019, followed by 1,375,000 at a price of 2.5p in April 2019, 152,500 at a price of 0.1p in June 2019 and 9,000 at a price of 2.5p in July 2019.

b) 30,000 share options were exercised at a price of 0.1p in October 2019 and a further 20,000 at the same price in December 2019.

c) The placing in April 2020 took place at 25p per share raising gross proceeds of GBP1,802,005 before costs of GBP102,851.

   d)      2,200,000 share options were exercised at a price of 9p in May 2020. 
   6.      Cash used in operating activities 
                                          Six months      Six months      Year ended 
                                               ended           ended 
                                              30 Sep          30 Sep          31 Mar 
                                                2020            2019            2020 
                                           Unaudited       Unaudited         Audited 
                                                 GBP             GBP             GBP 
-----------------------------------   --------------  --------------  -------------- 
 Operating loss before exceptional 
  item                                   (2,437,691)     (1,313,946)     (2,512,291) 
 Depreciation of property, 
  plant and equipment                        236,046         166,376         389,997 
 Amortisation of intangible 
  fixed assets                             1,031,069         669,330       1,818,352 
 Share-based payment charge 
  / (credit)                                  92,887         (6,963)         (1,125) 
 (Increase) / decrease in 
  inventories                              (949,687)     (2,070,312)         305,648 
 Decrease / (increase) in 
  trade and other receivables              8,516,873       3,682,965     (1,868,283) 
 (Decrease) / increase in 
  trade and other liabilities            (5,835,949)     (1,463,366)       2,725,467 
  Net cash generated from / 
   (used in) operating activities            653,548       (335,916)         857,765 
------------------------------------  --------------  --------------  -------------- 
   7.      Other reserves 

Other reserves consist of a capital redemption reserve of GBP2,857 (six months ended 30 September 2019 - GBP2,857 and year ended 31 March 2020 - GBP2,857), a warrant reserve of GBP62,400 (six month ended 30 September 2019 - GBP62,400 and year ended 31 March 2020 - GBP62,400) and a merger reserve of GBP5,425,339 (six months ended 30 September 2019 - GBP5,425,339 and year ended 31 March 2020 - GBP5,425,339). There were no movements in these reserves during the period.

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