TIDMSRT
RNS Number : 1438Y
SRT Marine Systems PLC
07 September 2020
SRT MARINE SYSTEMS PLC
(AIM: SRT)
("SRT" or the "Company")
FINAL RESULTS FOR THE YEARED 31 MARCH 2020
SRT Marine Systems PLC, a provider of maritime surveillance,
monitoring and management systems, is pleased to announce its
results for the year ended 31 March 2020, a year that reflects the
significant operational progress made by the Company.
FINANCIAL SUMMARY
-- 8% reduction in group revenue due to Covid-19 delayed system projects
-- 24% increase in revenues from transceiver business
-- GBP550m systems division validated sales opportunity pipeline
-- GBP0.9m cash as at year end. Covid 19 resilience refinancing
completed April 2020 raising GBP5.3m
-- Loss before tax and exceptional item of GBP3.0m (excluding
one-off impairment charge on Middle Eastern project of GBP3.9m)
OPERATIONAL HIGHLIGHTS
-- GeoVS systems application functionality significantly enhanced
-- Strengthening of systems delivery team to support expected new projects
-- Commencement of major new transceiver development
-- Good progress with IMEMS Fisheries Systems project
-- Three new systems contracts remain in latter stages of negotiation
Commenting on today's results, Simon Tucker, CEO of SRT
said:
"Having made so much progress with both product and sales
development it is very disappointing to have this year and the
first half of our new year disrupted due to Covid-19. Although
short-term, the financial impact has been significant due to the
delays and changes caused to our systems business. However, due to
a combination of cash raising and significant payments from
existing system customers, coupled with refinements to our business
that enable continued operations, we are in a good position to move
forward. The transceivers business has maintained its trading
level, and during the first half of the new year we have seen a
resumption in our negotiations with new system contracts. I
therefore expect a much better year ahead."
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 / 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
owners.
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
This year did not end as we had expected due to the global
Covid-19 pandemic which has caused significant disruption
to global business. This has had a significant short-term
financial impact on our business, primarily the delay of expected
new system contracts and associated revenues. I expect it
likely that this will continue to have a material effect on
SRT until the second half of the new financial year. Following
which I expect a strong recovery lead by our systems business
along with continued solid performance by our transceivers
business.
We took early action to implement a Covid-19 resilience plan
designed to ensure continued operations in the new environment
and for SRT to have sufficient cash to weather sustained disruption.
This plan has included a smooth transition to home working
for most of our staff, continued production and shipping of
transceivers, and the development of a refined delivery model
for our systems business whereby system components are pre-built
and configured prior to shipping to local installation partners
who are provided with installation and commissioning training
by our delivery team remotely. On the cash side, we raised
GBP5.3m of new cash in a combination of loan and equity, which
was further added to by the receipt of GBP8.5m of systems
payments during the first half of the new year as well as
regular contribution from our transceivers business. The result
is that whilst the financial accounting impact of Covid-19
has been significant, we are in a robust position with our
recovery already well underway as of publication of this report
in September 2020.
It is important to emphasise that demand for our products
is based upon long term fundamental market demand drivers
for a new generation of maritime domain awareness that has
become possible due to new technology innovations, such as
AIS and the application of advanced data analytics and digital
display technology such as Dynamic-3D. Through sustained market
and technology investments, SRT has positioned itself at the
forefront of this significant global marine market trend and
therefore whilst the delays we have encountered this year
are very frustrating, the combination of our differentiated
and proven product offers, fundamental market demand and market
position mean that I am very positive about our short and
long term future.
Therefore, as a direct result of delayed new and existing
system contracts due to Covid-19 lockdowns combined with the
inherent timing uncertainties in our systems business, group
revenue decreased year on year from GBP20.6m to GBP18.9m,
resulting in a loss before tax and exceptional item tax of
GBP3.0m (2019: profit of GBP3.2m). This excludes a one-off
non-cash exceptional impairment charge of an existing contract
in the Middle East of GBP3.9m, which we anticipate will be
replaced with a new larger contract of approximately GBP11m.
Whilst the blended gross margin from our transceivers division
remained at expected levels, our overall margin was significantly
reduced due to the specific of the milestones delivered by
our systems business during the period which were lower margin
equipment only deliverables as opposed to higher margin software
related milestones.
The exceptional impairment charge of GBP3.9m relates to an
existing contract worth a total of GBP5.6m which commenced
in 2017 to supply a national vessel tracking system for a
Middle East Coast Guard. Following a prolonged process to
enter a second contract for a large number of vessel transponders
which had reached pre-contract signing stage during the last
quarter, we have recently been advised that our customer may
prefer for the existing contract to be terminated and be replaced
with a single contract that includes both the monitoring system
and transceivers. Given this risk we feel it prudent to make
this impairment charge to enable accommodation of both contracting
routes as determined by the customer.
As at year end, we had cash of GBP0.9m (2019: GBP3.9m) and
our total debt remained at GBP5.0m. Cash was generated from
our operating activities of GBP1.1m as project cash payments
were received whilst we invested GBP3.0m in development of
our products and systems. Subsequent to year end our cash
position has significantly improved due to the completion
of Covid-19 resilience financing of GBP5.3m in April 2020
in a mixture of loans and equity, increasing our total debt
from GBP5.0m to GBP8.5m, and the receipt of system cash payments
amounting to GBP8.5m, along with the regular gross profit
contribution from our transceivers business, thus placing
us in a comfortable cash position.
During the year, our administrative costs and expenditure
on development increased due to our continued expansion of
our systems business resources. This has been focused on three
areas; development, product management and delivery. The GeoVS
platform which sits at the heart of our systems offer is now
a highly sophisticated maritime data & network management,
surveillance and management system and the scale and capabilities
of our development and product management teams reflect this
fact and in turn have enabled us to develop such a system
and continue to add new and innovative functionalities and
capabilities. In our delivery team, we have added a small
number of heads to enable us to simultaneously deliver multiple
system projects in different parts of the world. Recognising
that our technology is a major differentiator, going forward,
subject to progress with new system contracts, we will continue
to enhance our core technology development teams in both our
systems and transceivers divisions.
However, following the outbreak of Covid-19 at the end of
the financial year, as part of our Covid-19 resilience plan
we implemented an immediate cost minimisation plan. This involved
an immediate pause to our team growth plans, stopping any
non-critical capital expenditure, as well as natural reductions
caused by minimal delivery and sales travel. The plan ensured
that we were able to continuously operate, supplying customers
with transceivers and making progress, albeit much slower
than planned, with existing system contracts and new prospects.
Due to recent IT investments and the inherent technology development
weighting of our business model, we were able to seamlessly
move to a largely homebased operating model, with physical
production continuing with our contract manufacturer in Ireland
alongside shipping to customers and partners around the world
from our logistics centre in Somerset. In fact, this exercise
has enabled us to improve development productivity and therefore
we will most likely continue in this fashion in the future,
realising benefits for SRT and our staff.
Our transceivers business which sells maritime communication
devices based on AIS, performed strongly, achieving year on
year growth of 24% to GBP8.1m with a gross profit margin of
42%. During the year our em-trak division launched a new full
transactional web site, dealer marketing initiatives and a
new range of AIS transceivers which are focused on providing
the best quality AIS information and connectivity so customers
can seamlessly use that information on all and any of their
chosen display and navigation devices; including all mobile
phones, tablets and PCs which are increasingly the navigation
device of choice for mariners.
SRT is fortunate to have an experienced and talented specialist
radio communications development team and we are leveraging
this capability with some significant and market disruptive
new product developments now in progress that will have mass
market appeal across both commercial and leisure segments
which we expect to launch during 2021 and 2022. Looking forward,
the fundamental interest and growing demand for AIS across
the marine segment remains undiminished with adoption and
applications increasing. Beyond generally growing demand,
we see a number of new significant sales opportunities ahead
that include the renewal of approximately 15,000 Class A transceivers
on EU Inland waterway vessels originally mandated to carry
AIS in 2010, as well as other mandate and tender opportunities
in Southern Europe and USA including the use of our products
by professional organisations such as coastguards and Navies.
Therefore, given our leadership position in this segment,
coupled with the recently launched and scheduled new products
in the future we expect to see continued growth.
Our systems business has pioneered the development of fully
integrated maritime surveillance and monitoring systems. The
SRT-MDA system is built around our GeoVS platform and provides
entities such as Coast Guards, Border Agencies and Fishery
Authorities with a complete turn-key solution that significant
enhances maritime security, safety and management. Covid-19
has caused significant disruption to this business. Existing
projects have been delayed due to slower implementation, and
new opportunities delayed as customers attention have been
focused on immediate Covid related activities rather than
new projects, however during first half of the new year we
have seen customers re-engaging, some with renewed vigour
and clarity of requirement.
We are currently implementing our SRT-MDA system contract
for The Philippines Fisheries Department (BFAR) as the first
phase of a national fisheries monitoring and management system.
During the year we have made excellent progress against our
project KPI's with all equipment now in country and the system
building and installation phase well underway. This has included
the installation and commissioning of monitoring centres,
coast stations, vessel transceivers and the commencement of
satellite data feeds. Progress was temporarily halted during
the first half of the new financial year but has restarted
from September 2020. Once fully commissioned during 2021,
this will be the world's largest and most sophisticated national
fisheries monitoring and management system and provide the
Philippines with a single robust monitoring platform on which
they can further expand to efficiently and cost effectively
manage the activities of every fishing boat from the largest
commercial to the smallest artisanal fishing boat.
Over the course of the year there has been a notable increase
in interest and engagement with prospective customers for
our SRT-MDA system solution. This is partially reflected in
the increase in the validated sales
opportunity pipeline (VSP) for our systems business which
includes 17 new system opportunities with an aggregate value
of approximately GBP550 million as of 3(rd) September 2020.
Each is at a different phase and status in the sales process.
These include opportunities with entirely new customers as
well as new contracts with existing customers. To qualify
for inclusion in our VSP, opportunities must meet a range
of criteria which include active engagement with our sales
team around a defined proposal, confirmation that the customer
has taken a formal decision to implement such a project and
budget is available, that necessary supporting local laws
and regulations such as requirement to fit transceivers is
either in place or underway and finally that discussions are
making regular progress within some form of timescale which
expects commencement within a 3 year time horizon. However,
the nature of large projects and government procurement processes
means that it is impossible to accurately forecast exact timescales.
In this context our VSP is reviewed and updated on a quarterly
basis using the criteria mentioned earlier and is therefore
a good reflection of the fundamental market demand trend for
our products and where we are focusing our resources.
Due to the nature of the customers and scale of the projects,
the sales process for our systems business is typically long
and complex, involving extensive consultation with the customer
to enable them to realise their ideas into a detailed system
specification and implementation plan, followed by a usually
highly regulated procurement and contracting process. Our
VSP has opportunities which are spread across this process
with some at the beginning and some at the end.
Of particular note are three new contracts with customers
in The Middle East which have an aggregate value of GBP62m
realisable over an expected two year implementation period.
These were proceeding to contract during the last quarter,
however due to Covid-19 lockdown, activity was suspended.
In the last few months the customers have re-engaged and these
are now progressing towards contract.
One of the three is for the additional transceivers that the
customer wanted to contract alongside our existing monitoring
system contract. As described earlier this will now take the
form of a new contract that will include both the monitoring
system and transceivers and is expected to be concluded in
the new financial year. The second is for an expansion of
a previously supplied vessel tracking system to our new generation
of GeoVS which enables the fusion of multiple sensor systems
such as radar, surveillance cameras, and command and control.
And the third is a new contract with a new customer for a
large national vessel tracking system. In all cases the Covid-19
shutdown has caused a delay of approximately 6 months and
has necessitated us and our customer to repeat some of the
procurement processes as per their local regulations.
Of course, the ongoing Covid-19 situation creates uncertainty
and challenges for both SRT and our customer with regards
to pre and post contract engagement. The extent of this challenge
varies between customers depending on how developed the opportunity.
In general, the more developed the opportunity the less the
challenge to move forward as relationships and project form
are well established and remote discussions suffice to progress.
In regards to installation, our business model whereby we
work with local partners who undertake all installation and
commissioning, enables us to continue to progress projects
and we have redoubled our efforts to improve our ability to
remotely train local partners and deliver system components
pre-built and configured for easier installation and commissioning
by the local partner thus enabling our delivery support to
be provided remotely.
There is no question that this year has been financially very
disappointing. However, I believe we have taken the right
decisions and actions across the board to adapt quickly and
as such the business has made excellent progress with its
products and customer engagement across both transceivers
and systems divisions. Our transceivers business continues
to perform well and system customers have resurfaced and activities
on existing and new system contracts are ramping up. As new
contracts are signed and we have multiple system contracts
underway, it is our intention to recommence forward market
guidance. However, this will be done on an extremely conservative
basis, and therefore based solely on signed contracts with
no inclusion of prospective new business until this is realised,
whereupon market forecasts will be revised. I expect this
to start during the second half of the new year.
I would like to thank everyone at SRT who have continued to
work throughout Covid-19, some even using brief travel windows
to fly around the world to visit customers, and to and our
shareholders for their long term and exceptional support for
the company.
Kevin Finn
Chairman
Date: 4 September 2020
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME FOR THE YEARED 31 MARCH 2020
Note 2020 2019
GBP GBP
Revenue 18,908,062 20,559,699
Cost of sales (14,537,092) (11,229,754)
Gross profit 4,370,970 9,329,945
Administrative costs (6,883,261) (5,877,445)
Operating (loss) / profit before
exceptional item (2,512,291) 3,425,500
Impairment charge 4 (3,922,029) -
Operating (loss) / profit after
exceptional item (6,434,320) 3,425,500
Finance expenditure (464,539) (275,195)
Finance income 1,430 363
(Loss) / profit before tax (6,897,429) 3,177,668
Income tax credit 818,407 230,703
(Loss) / profit for the year after
tax (6,079,022) 3,408,371
Total comprehensive (expense) /
income for the year (6,079,022) 3,408,371
(Loss) / earnings per share:
Basic 5 (3.93)p 2.43p
Diluted (3.93)p 2.36p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH
2020
2020 2019
Note GBP GBP
Assets
Non-current assets
Intangible assets 7,776,882 6,625,203
Property, plant and equipment 1,782,048 355,509
Deferred tax 670,778 54,297
Total non-current assets 10,229,708 7,035,009
Current assets
Inventories 1,928,730 2,234,378
Trade and other receivables 15,958,534 18,012,279
Cash and cash equivalents 918,808 3,942,167
Total current assets 18,806,072 24,188,824
Liabilities
Current liabilities
Trade and other payables (9,044,454) (6,318,987)
Financial liabilities 6 (4,990,000) -
Lease liabilities 7 (202,445) (18,055)
Total current liabilities (14,236,899) (6,337,042)
Net current assets 4,569,173 17,851,782
Total assets less current liabilities 14,798,881 24,886,791
Long term liabilities
Financial liabilities 6 - (4,990,000)
Lease liabilities 7 (1,067,741) (26,981)
------------- ------------
Total long term liabilities (1,067,741) (5,016,981)
Net assets 13,731,140 19,869,810
Shareholders' equity
Share capital 154,844 153,223
Share premium account 11,543,989 11,510,773
Retained earnings / (loss) (3,458,289) 2,715,218
Other reserves 5,490,596 5,490,596
Total shareholders' equity 13,731,140 19,869,810
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARED 31 MARCH
2020
2020 2019
GBP GBP
Cash generated from / (used
in) operating activities 857,765 (3,636,473)
Corporation tax received 201,926 449,094
-------------- --------------
Net cash generated from / (used)
in operating activities 1,059,691 (3,187,379)
-------------- --------------
Investing activities
Expenditure on product development (2,970,033) (1,690,516)
Purchase of property, plant
and equipment (523,530) (240,247)
Interest received 1,430 363
Net cash used in investing
activities (3,492,133) (1,930,400)
-------------- --------------
Financing activities
Gross proceeds on issue of
shares 34,837 7,031,530
Costs of issue of shares - (400,826)
Repayments on loan - (500,000)
New loans issued - 1,840,000
Lease repayments (225,149) -
Loan interest paid (400,605) (275,195)
-------------- --------------
Net cash (used in) / generated (590,917) 7,695,509
from financing activities
Net (decrease) / increase in
cash and cash equivalents (3,023,359) 2,577,730
-------------- --------------
Net cash and cash equivalents
at beginning of year 3,942,167 1,364,437
-------------- --------------
Net cash and cash equivalents
at end of year 918,808 3,942,167
============== ==============
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
4 September 2020. 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 2020 or 31 March 2019.
The financial information has been extracted from the statutory
accounts of the Company for the years ended 31 March 2020 and 31
March 2019. The auditor has reported on those accounts; their
reports were (i) unqualified, (ii) did include a reference to which
the auditor drew attention by way of emphasis without qualifying
their report in respect of going concern and (iii) did not contain
a statement under section 498 (2) or (3) of the Companies Act
2006.
The statutory accounts for the year ended 31 March 2019 have
been delivered to the Registrar of Companies, whereas those for the
year ended 31 March 2020 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
2019. 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. Impairment charge
During the year, the Group has 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.
The impairment charge relates to the receivables balance which
has now been fully provided against.
5. Earnings per Ordinary Share
The basic (loss) / earnings per share has been calculated on the
loss on ordinary activities after taxation of GBP6,079,022 (2019:
profit GBP3,408,371) divided by the weighted number of ordinary
shares in issue of 154,742,293 (2019: 140,059,460).
During the year, the Group incurred a loss on ordinary
activities after taxation and therefore there is no dilution of the
impact of the share options granted.
During the previous year, the calculation of diluted earnings
per share has been calculated on profit on ordinary activities
after taxation of GBP3,408,371. 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 option was 4,237,894 and the
weighted average number of ordinary shares for the purposes of
dilutive earnings per share was 144,297,354.
6. Financial liabilities
During the year ended 31 March 2020 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 April 3, 2020. Due to
the waiver not being received prior to the year end, IAS 1 requires
that the loans are all classified as being repayable in less than
one year, despite GBP2,990,000 of loans having maturity dates in
excess of one year.
The gearing covenant was not breached as at 31 March 2020.
7. Lease liabilities
During the year, the Group has adopted IFRS 16 which eliminates
the classification of leases as operating leases or finance leases
and treats all leases in a similar way to finance leases . The
transition to this accounting standard resulted in the recognition
of lease liabilities amounting to GBP1,209,028 as at 1 April
2019.
8. 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 17 September 2020.
The AGM will take place at Wireless House, Westfield Industrial
Estate, Midsomer Norton, Bath BA3 4BS on 15 October 2020. In light
of the current UK Government measures around COVID-19 and the
Company's desire to protect the health and safety of our directors
and officers, shareholders and employees, our shareholders will not
be permitted to attend the AGM in person. The results of the AGM
will be broadcast live via an on line viewing portal and following
this there will be an interactive on-line presentation by Simon
Tucker, CEO.
An investor open day will be arranged at a later date.
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