TIDMSRT
RNS Number : 3456H
SRT Marine Systems PLC
07 June 2017
SRT MARINE SYSTEMS PLC
(AIM: SRT)
("SRT" or the "Company")
FINAL RESULTS FOR THE YEARED 31 MARCH 2017
SRT, the AIM-quoted provider of maritime domain awareness
technologies, products and solutions, announces its results for the
year ended 31 March 2017.
FINANCIAL SUMMARY
-- Profit before tax of GBP1.2 million (2016: Profit of GBP0.3 million)
-- Growing revenues
-- 65.7% gross profit margin
-- GBP77 million contracted future order book
-- Growing validated sales opportunity pipeline of GBP270 million
OPERATIONAL HIGHLIGHTS
-- Repositioned company as a marine systems provider
-- New project contracts signed
-- Significant progress with pending pipeline sales opportunities
-- Launch of new integrated vessel transceiver products
-- Significant functionality enhancements to GeoVS
Commenting on today's results, Simon Tucker, CEO of SRT
said:
" SRT Marine Systems now sits at the centre of the growing
global market for maritime domain awareness technologies, products
and systems. We end the year having increased our profits over
three times and start the new year with a GBP77 million contract
order book to deliver over the next three years and a validated
pipeline of new sales opportunities worth up to GBP270
million."
Contacts:
SRT Marine Systems plc www.srt-marine.com
+ 44 (0) 1761
409500
Simon Tucker (CEO) simon.tucker@srt-marine.com
Louise Coates (Marketing Manager) louise.coates@srt-marine.com
finnCap Ltd
Jonny Franklin-Adams / Simon +44 (0) 20 7220
Hicks (Corporate Finance) 0500
Emily Morris / Camille Gochez
(Corporate Broking)
About SRT:
SRT develops, manufactures and supplies maritime
tracking technology and turn-key system solutions
to marine stakeholders across the globe with
a particular expertise in AIS. The Company's
products and solutions are used by individual
vessel owners, port authorities, maritime infrastructure
owners, coast guards and national security agencies
to enhance their maritime domain awareness.
Applications include the tracking of commercial
and leisure vessels; sustainable fishery; anti-collision;
search and rescue; waterway management, port
and coast security; pollution management; and
environmental management.
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
During the year, SRT completed its transformation
into a leading global maritime domain awareness
systems business, which is now starting to
be reflected in our finances. I am pleased
to report that for the third year running
we have achieved our financial and most of
our operational targets and are reporting
a profit before tax of GBP1.2 million which
is a significant increase on the prior year.
Most importantly we have made significant
progress with a number of high value project
sales opportunities within our validated sales
opportunity pipeline.
Group revenue increased year-on-year by 3%
to GBP11.0 million with a profit before tax
of GBP1.2 million compared to GBP10.7 million
and a profit before tax of GBP0.3 million
respectively in the previous financial year.
The gross profit margin was 65% which is significantly
ahead of our long-term target average of 50%.
Gross cash stood at GBP1.8 million with saleable
stock valued at a cost of GBP3.3 million at
the year end.
Our em-trak business that sells AIS transceivers
for leisure and commercial vessels via a global
network of distributors and dealers delivered
GBP1.5 million in revenues which was a 46%
year on year increase. During the year we
commenced a program to accelerate revenue
growth that is targeting the doubling of our
dealer network over the next two years, more
products available in each dealer and substantially
improved point of sale merchandising designed
to increase per dealer sales.
Our OEM & Module business that supplies AIS
own branded product and embedded technology
module solutions to a broad range of customers
from mainline marine electronics brands to
entities targeting more specialist application
areas such as UAVs, delivered GBP4.1 million
in revenues which was a 12% year on year increase.
During the year, we introduced new products
with innovative utilities and performance
characteristics to these customers which will
appear as new product lines towards the end
of 2017.
Adoption of AIS in the non-mandated commercial
and leisure vessel markets is primarily focused
in Europe and the USA and remains at a very
early stage with penetration into the addressable
boat park that we estimate at under 1%; this
compares with radar which we estimate at approximately
25%. A number of regulations all affecting
commercial vessels (mandates) are now in effect
that require certain types of vessels to fit
an AIS transceiver - these include a USCG
regulation affecting most commercial vessels,
EU Inland waterway vessels and European Fishing
vessels over 15 meters. Each of these regulations
creates demand for AIS transceivers that our
em-trak dealers and OEM & module customers
meet. However, the demand profile of each
is normally highly variable as it depends
on authority enforcement once the mandate
fit deadline has passed which in many cases
can be very relaxed in the initial years.
Encouragingly this year we have seen increasingly
strict enforcement in the EU Inland waterways
which is resulting in a new stream of sales
from this market following the initial rush
in 2010 when the regulation was first introduced.
In recent years, an AIS transceiver has become
a standard specification at the point of new
purchase on most large vessels (+40ft), leisure
and commercial, and over time we expect this
trend to continue to smaller vessels. In addition,
we expect to see a gradual increase in the
annual rate of adoption by existing vessels
(retro-market) as the installed base of AIS
increases making the acquisition of a transceiver
more relevant along with the continued introduction
of AIS based applications and services. Combining
these two established trends, we believe that
the market for AIS will see a steadily increasing
annual growth rate over a ten year period,
thus providing a significant long-term opportunity.
Our projects business generated revenues of
GBP5.3 million compared with GBP5.9 million
in the previous financial year. This was predominantly
driven by the conversion of sales opportunities
from our validated sales opportunity pipeline
into new contracts during the year and then
the completion of milestone deliverables.
The high software content of these projects
produces a higher gross profit margin than
hardware only sales and was the reason behind
our exceptional gross margin of 65% for the
year.
This business targets the global maritime
domain awareness (MDA) market. SRT has developed
three core system products, VTS (Ports, waterways
& infrastructure), VMS (Fisheries monitoring
& management) and MDM (Coastal Surveillance)
systems, each of which are customised in scale
and functionality for specific customer requirements.
These systems are typically purchased by maritime
infrastructure owners and national authorities
who have an
increasing desire to monitor and control maritime
activities for security, commercial, safety
and environmental reasons.
Each project includes a similar integrated
combination of hardware, software and data,
with each project varying in precise quantities
and functionality. For many of the projects,
once they reach a certain implementation stage,
we expect to supply our S-MDA satellite data
product, which will provide ongoing recurring
revenues, in addition to the expected system
upgrades and enhancements. Satellites enable
monitoring and surveillance coverage to be
extended beyond the coastal and territorial
water regions which are covered with much
higher resolution real time terrestrial sensor
systems. Our innovative S-MDA product sources
data from multiple satellite constellations
to provide an optimal solution for the specific
requirements of the customer.
During the year, a total of seven new projects
of varying size and type were contracted,
six of which were completed during the period
and one which was signed towards the end of
the period with some initial deliveries completed;
this leaves SRT with two active projects as
at the year end with a total current forward
contract value of approximately GBP77 million
that we expect to be delivered over the next
three years.
In March 2016, SRT entered a contract to supply
our MDM system to the prime contractor for
a large integrated maritime monitoring system
in Asia. The contract was expected to be worth
up to $100 million to SRT over three years
across three delivery phases. In accordance
with the contract deliveries started immediately
for phase 1, but were subsequently paused
prior to completion as a result of a significant
rescoping and planning by the end customer,
causing a delay in payments and the completion
of remaining phase 1 deliverables. This rescoping
has now been completed and is in the final
stages of sign-off by the end customer, whereupon
a revised contract is expected to be entered,
the current phase 1 will be completed as originally
defined, and the rescoped project and revised
phasing implemented. Whilst the pause and
consequent delay has been frustrating, such
variability with large projects is common
and to be expected. SRT believes that the
rescoping may result in a significant, but
as yet not confirmed or contracted, increase
in the final value of the contract which we
still expect to have to substantially completed
in phases of variable value and content by
2020.
As at year end the estimated total value of
project opportunities qualifying for inclusion
in our validated sales opportunity pipeline
(VSP) stood at approximately GBP270 million,
with significant other potential opportunities
pending future inclusion once sufficiently
mature and validated. The VSP project opportunities
are where SRT is actively engaged in detailed
discussions and there is sufficient confidence
that a contract will be entered into within
a rolling time horizon of three years - with
variable delivery profiles after contracting.
Given the nature of these large and complex
government driven projects, forecasting the
exact contracting date, subsequent delivery
profile and thus revenue is extremely challenging.
However, this is an area which the Board continues
to monitor closely and effort is being made
to give more clarity to shareholders on the
size of contracts in the pipeline. However,
due to the nature of many of the end customers
and projects, certain details about the projects
are strictly confidential and cannot be disclosed.
I am pleased to report that four projects
located in the Middle East and Asia with an
aggregate value of approximately GBP60 million
appear to have made significant progress towards
contract signing during the year, with several
others also making key break throughs.
I therefore believe that our projects business
is very well positioned in a large and growing
global market place which is at the beginning
of a massive upgrade program of old and outdated
systems and we can expect to sign further
new contracts and complete deliveries in the
coming year, as well as complete deliveries
against our existing contracts.
Underpinning our business is our ability to
develop consistently high quality, high performance
products with innovative functionality, providing
a menu of interoperable products we can sell
individually and as systems. I am pleased
to report that during the year we have continued
to execute on this strategy with the launch
of new Class A and Class B products and the
commencement of some new highly innovative
core technologies that will be embedded in
a range of new products scheduled for launch
during 2018. Of particular note, is SRT's
focus on differentiated core AIS performance
through our HF-AIS technology, which delivers
far better target processing, SAT-Trak which
not only enables AIS Class B transmissions
to be detected by AIS equipped satellites,
but also significantly enhances the percentage
that are detected, and VMS-Connect which is
a unique live data collection system embedded
within our systems.
The balance of our technology and product
development investment has evolved such that
we now invest approximately half our resources
on our GeoVS data management and display system
and half on transceivers. We expect this to
continue in the future as GeoVS provides a
range of powerful visualisation, operational
management and data analytic functionality
that enables operators to make use of the
increasing amount of data and our investments
in this product will continue to enhance and
expand these capabilities.
Overall our cash overheads increased from
GBP4.8 million to GBP5.6 million reflecting
our increasing support activities across multiple
project opportunities, but remain relatively
low and tightly controlled for a business
addressing such a large and global market.
In the coming year, we expect to see some
further increases, but these will be directly
linked to project activities and deliverables.
A key aspect to SRT's low overhead business
model is our long- standing network sales
channel partners with whom we continue to
work closely to deliver our products, systems
and services.
Our progress and position within this large
global market would not have been possible
without the loyalty, dedication and talent
of our 55 full time employees working out
of our Cardiff and Somerset offices and I
would like to take this opportunity to thank
them on behalf of the Board.
Our strategy remains to be one of the world's
leading providers of maritime domain awareness
systems through the development and provision
of innovative, high performance, quality product
and system solutions that are reliably delivered
to end customers in co-operation with our
sales channel partners that meet the requirements
of a diverse and fragmented global market.
Our investments and innovation in AIS technology,
and in turn the adoption of AIS as a critical
path technology by the market across the MDA
sector, has endowed SRT with a strategically
advantageous position that we are now leveraging.
Looking to the immediate and long term future
I expect to see our em-trak and OEM & Module
businesses to continue to grow, whilst our
project business with a GBP77 million current
contract order book, and a VSP of projects
worth up to GBP270 million should drive significant
revenue growth in the years ahead.
Simon Rogers, Chairman
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME FOR THE YEARED
31 MARCH 2017
Note 2017 2016
GBP GBP
Revenue 11,025,730 10,683,639
Cost of sales (3,786,176) (5,515,775)
Gross profit 7,239,554 5,167,864
Administrative costs (5,961,393) (4,847,591)
Operating profit 1,278,161 320,273
Finance expenditure (43,980) (45,549)
Finance income 220 645
Profit before tax 1,234,401 275,369
Income tax credit 216,327 158,305
Profit for the year after
tax 1,450,728 433,674
Total comprehensive income
for the year 1,450,728 433,674
Earnings per share:
Basic 4 1.14p 0.34p
Diluted 1.09p 0.33p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH
2017
2017 2016
GBP GBP
Assets
Non-current assets
Intangible assets 5,810,954 6,076,204
Property, plant and
equipment 184,854 139,269
Total non-current assets 5,995,808 6,215,473
Current assets
Inventories 3,281,521 4,258,556
Trade and other receivables 7,926,686 4,726,522
Cash and cash equivalents 1,760,861 1,862,048
Total current assets 12,969,068 10,847,126
Liabilities
Current liabilities
Trade and other payables (3,055,819) (2,849,583)
Financial liabilities (500,000) -
Total current liabilities (3,555,819) (2,849,583)
Net current assets 9,413,249 7,997,543
Total assets less current
liabilities 15,409,057 14,213,016
Long term liabilities
Financial liabilities (500,000) (1,000,000)
Deferred tax (279,178) (293,163)
------------ ------------
Total long term liabilities (779,178) (1,293,163)
Net assets 14,629,879 12,919,853
Shareholders' equity
Share capital 127,613 127,513
Share premium account 4,872,779 4,855,729
Retained earnings 4,138,891 2,446,015
Other reserves 5,490,596 5,490,596
Total shareholders'
equity 14,629,879 12,919,853
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARED 31 MARCH
2017
2017 2016
GBP GBP
Cash generated from
operating activities 1,235,380 853,394
Corporation tax received 202,342 451,468
-------------- --------------
Net cash generated from
operating activities 1,437,722 1,304,862
-------------- --------------
Investing activities
Expenditure on product
development (1,389,371) (1,453,370)
Purchase of property,
plant and equipment (122,928) (106,572)
Interest received 220 645
Net cash used in investing
activities (1,512,079) (1,559,297)
-------------- --------------
Financing activities
Net proceeds on issue
of shares 17,150 10,800
Interest paid (43,980) (45,549)
-------------- --------------
Net cash used in financing
activities (26,830) (34,749)
Net decrease in cash
and cash equivalents (101,187) (289,184)
-------------- --------------
Net cash and cash equivalents
at beginning of year 1,862,048 2,151,232
-------------- --------------
Net cash and cash equivalents
at end of year 1,760,861 1,862,048
============== ==============
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
6 June 2017. Whilst the financial information included in this
preliminary announcement has been prepared in accordance with
International Financial Reporting Standards ("IFRS") as endorsed by
the European Union, 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 2017 or 31 March 2016.
The financial information has been extracted from the statutory
accounts of the Company for the years ended 31 March 2017 and 31
March 2016. The auditors reported on those accounts; their reports
were unqualified and did not contain a statement under either
Section 498 (2) or Section 498 (3) of the Companies Act 2006. The
auditors, in forming their opinion on the financial statements,
which is not modified have included in their report an emphasis of
matter on the recoverability of trade receivables of GBP2.166m,
which have been outstanding for fourteen months and remain unpaid.
Due to the length of time that has passed, there is a potential
risk to the recoverability. Based upon information provided by
SRT's customer, the directors are confident that this balance will
be paid in full, however the exact timing is uncertain due to the
end customers internal project deliverable sign off processes. The
financial statements do not reflect any additional provision that
may be required, if the GBP2.166m is not recoverable.
The statutory accounts for the year ended 31 March 2016 have
been delivered to the Registrar of Companies, whereas those for the
year ended 31 March 2017 will be delivered to the Registrar of
Companies following the Company's Annual General Meeting.
2. Basis of preparation
This financial information has been prepared in accordance with
the principles of International Financial Reporting Standards
("IFRS") as adopted by the European Union and International
Financial Reporting Interpretations Committee ("IFRIC")
recommendations and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS. 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
2016. There have been no changes in accounting policies during the
year. 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. Earnings per Ordinary Share
The basic earnings per share has been calculated on the profit
on ordinary activities after taxation of GBP1,450,728 (2016:
GBP433,674) divided by the weighted number of ordinary shares in
issue of 127,583,214 (2016: 127,485,789).
During the year, the calculation of diluted earnings per share
has also been calculated on profit on ordinary activities after
taxation of GBP1,450,728 (2016: GBP433,674). It assumes conversion
of all potentially dilutive ordinary shares, all of which arise
from share options. A calculation is performed to determine the
number of shares that could have been acquired at fair value, based
upon the monetary value of subscription rights to outstanding share
options. The number of dilutive shares under options was 5,775,672
(2016: 2,938,446) and the weighted average number of ordinary
shares for the purposes of dilutive earnings per share was
133,358,885 (2016: 130,424,235).
5. Annual Report and AGM
The Annual Report will be available from the Company's website,
www.srt-marine.com from 7 June 2017. 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 9 June 2017. The AGM will take place at the
Centurion Hotel, Charlton Lane, Midsomer Norton, Radstock BA3 4BD
at 11.00 a.m. on 12 July 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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