TIDMSRT
RNS Number : 3639V
SRT Marine Systems PLC
23 July 2018
SRT MARINE SYSTEMS PLC
(AIM: SRT)
("SRT" or the "Company")
FINAL RESULTS FOR THE YEARED 31 MARCH 2018
SRT, the AIM-quoted provider of maritime domain awareness
technologies, products and solutions, announces its results for the
year ended 31 March 2018.
FINANCIAL SUMMARY
-- Increase in systems business sales opportunity pipeline
-- Reduction in revenues due to contract timing
-- 43% Gross profit margin
-- 35% increase in product development investment
OPERATIONAL HIGHLIGHTS
-- Expansion of transceiver customer base
-- Progress with system sales opportunities
-- New functionality implemented in GeoVS system
-- Transfer of transceiver production to new facility
Commenting on today's results, Simon Tucker, CEO of SRT
said:
"I am very disappointed with the shortfall in our revenues for
the year, which was caused by an unexpected contract change. This
does not reflect the excellent operational progress the business
has made with regards to product development and sales
opportunities. I recognise that we are measured on the profits that
SRT delivers and to that end expect SRT to measure up to
expectations in the near future. "
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 / Anthony Adams (Corporate
Finance) +44 (0) 20 7220 0500
Tim Redfern / Richard Chambers (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
This year has been financially challenging for SRT, as we
pass through the final stage before a number of significant
system projects commence in earnest. Despite a disappointing
reduction in revenues compared to last year, we end the
year in a satisfactory financial position, with a significantly
increased pipeline of system sales opportunities.
Group revenue decreased year-on-year from GBP11.0 million
to GBP5.3 million, resulting in a loss before tax and exceptional
items of GBP4.3 million (2017: profit GBP 1.2 million).
Our gross profit margin was 43% (2017: 66%) with the year
on year movement reflecting the very high weighting of our
transceiver business in the current year compared to a much
greater weighting of our high margin systems business in
the previous year. We are also recording a one-off exceptional
impairment charge of GBP1.5m in relation to a systems contract
with a European systems integrator who is prime contractor
to a SE Asian coast guard. Although we received written
re-assurances from the customer, including a letter from
the end customer explaining that the delay had arisen due
to a lack of budget availability and would re-commence in
the future, since in this instance, SRT was not the prime
contractor and thus not engaged directly with the end customer,
we decided that given this lack of visibility it was prudent
for us to write down the full value of the project. This
was announced to the market via an RNS on 31 July 2017.
As at the year-end our gross cash balances were GBP1.4 million
(2017: GBP1.8 million). In the light of the historical challenges
with contracts, we have emphasised the future risks around
payment timings from large system customers, specifically
our existing contract in the Middle East and a going concern
risk in the event that these are further extended and or
not closed. Recognising these issues, during the year we
entered into a GBP10 million loan note programme, of which
GBP3.15 million has been drawn-down at the date of this
report with repayment over a three year period. And in June
2018 we completed a successful fundraise of GBP3 million.
This has provided the Group with working capital facilities
to fill working capital gaps which arise from time to time
due to the nature of government contracts.
Administrative costs year on year increased to GBP6.5 million
from GBP6.0 million. This is largely a result of the adverse
foreign exchange impacts on the revaluation of dollar denominated
receivables. The underlying overhead position however remains
tightly controlled and remains relatively low for a business
addressing such a large and global market. As systems projects
convert I expect that our overheads will increase driven
by an increase in field project management and support resource
requirements.
During the year we continued to invest in our core technologies
and products, increasing investment to GBP1.9 million from
GBP1.4 million last year. These programs saw the completion
of a new range of Class B transceivers, implementation of
new system related functionality on other transceivers,
and significant functionality enhancements to our GeoVS
maritime tracking and management application. We expect
to accelerate our R&D activities in the coming year to support
the delivery of systems, through the selective expansion
of our internal development team around critical core technology
areas such as display, data fusion networking, analytics
and transceivers, with other components contracted out.
An important part of our systems business is the provision
of vessel monitoring data via satellites when vessels are
operating beyond the range of terrestrial sensor systems.
As the effective owner of the system contract to the end
customer, there is a significant future recurring revenue
opportunity for SRT from each system for the supply of such
data. We announced our intent to launch our own satellite
system, Oceanscan, and have commenced the technical and
commercial evaluation of such an investment. This work continues
such that we can weigh up the rapidly changing commercial
landscape with regards to satellite data sources due to
the expected large increase in the number of satellite systems
with AIS and other vessel detection capabilities which is
causing a decrease in the cost of data coupled with an increase
in the data quality. This may mean that it is more profitable
for SRT to act as a data aggregator rather than to make
the investment ourselves, resulting in our data sales being
more profitable with less risk across the business.
CHAIRMAN'S STATEMENT - continued
Our transceiver business which sells AIS transceivers via
a network of marine electronics brands, dealers as well
as directly to end users saw revenues decrease year on year
by 12%. This was caused primarily due to the introduction
of our new range of Class B transceivers which resulted
in stock shortages during the second half. I am pleased
to report all these products are now in volume production.
Going forward we expect to see this business continue its
previous growth as the adoption of AIS in the EU and USA
leisure and commercial marine markets grows.
Our systems business which provides turn-key maritime surveillance
and management system solutions to coast guards, ports and
fishing authorities, delivered revenues of only GBP0.3 million
(2017: GBP5.3 million). The decline relates to the fact
that minimal system project deliverables were completed
during the year, and the delay to the timing of the expected
new system contract. However, I am pleased to report that
there has been significant progress with a number of specific
large system sales opportunities towards contract signing.
In all cases SRT is directly engaged with the end customer
and going forward we are confident that several of these
will convert into contract with installations and payments
completed in the new financial year ahead.
During the year, SRT was awarded a EUR28.5 million contract
to supply its VMS system to a SE Asian government customer.
In accordance with the contract and customer operational
imperatives, deliveries of equipment commenced during the
last quarter of the financial year in preparation for commencement
of installation in the following months. However, due to
a decision by the customer to change the funding source
for the project, it has become necessary for the contract
to be cancelled in July and thus the deliverables and related
invoices being taken back by SRT. At the time of this report
we expect that a revised contract that specifies the new
funding source will be in place within a few months.
Looking forward, whilst I understand that these results
are disappointing, during the year the Group has made very
significant operational progress, in particular with its
system sales discussions. These are very significant sales
opportunities which our teams have been working on for several
years in a consultative fashion to enable the end customer
to convert a general vision or intent into a detailed system
specification, implementation plan and supporting legislation.
The potential value of these contracts to SRT of these over
the next few years is in excess of GBP400 million, plus
ongoing satellite data sales which are locked into these
contracts. The procurement imperative for the end customers
are strong and clear and range from national security to
international regulations such as the EU Commission fishing
catch certification program. As these customers are governments
the accurate forecasting of contract dates and delivery
schedules is and will always remain challenging and, to
some degree, out of our control. However, we are confident
that due to the capabilities of our technologies and systems
and our references that these will convert. And given their
size this will be transformational for the financial performance
of SRT and will reward the patience and support of our shareholders
and employees.
Kevin Finn
Chairman
Date: 20 July 2018
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME FOR THE YEARED 31 MARCH 2018
Note 2018 2017
GBP GBP
Revenue 5,331,559 11,025,730
Cost of sales (3,026,374) (3,786,176)
Gross profit 2,305,185 7,239,554
Administrative costs (6,469,102) (5,961,393)
Operating (loss) / profit before
exceptional items (4,163,917) 1,278,161
Impairment charge 4 (1,490,315) -
Operating (loss) / profit after
exceptional items (5,654,232) 1,278,161
Finance expenditure (125,426) (43,980)
Finance income 224 220
(Loss) / profit before tax and
exceptional items (5,779,434) 1,234,401
Income tax credit 551,866 216,327
(Loss) / profit for the year after
tax (5,227,568) 1,450,728
Total comprehensive (expense) /
income for the year (5,227,568) 1,450,728
(Loss) / Earnings per share:
Basic 5 (4.09)p 1.14p
Diluted (4.09)p 1.09p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH
2018
2018 2017
GBP GBP
Assets
Non-current assets
Intangible assets 6,222,819 5,810,954
Property, plant and equipment 177,479 184,854
Deferred tax 272,688 -
Total non-current assets 6,672,986 5,995,808
Current assets
Inventories 3,443,685 3,281,521
Trade and other receivables 4,433,000 7,926,686
Cash and cash equivalents 1,364,437 1,760,861
Total current assets 9,241,122 12,969,068
Liabilities
Current liabilities
Trade and other payables (2,529,630) (3,055,819)
Financial liabilities (1,650,000) (500,000)
Total current liabilities (4,179,630) (3,555,819)
Net current assets 5,061,492 9,413,249
Total assets less current liabilities 11,734,478 15,409,057
Long term liabilities
Financial liabilities (2,000,000) (500,000)
Deferred tax - (279,178)
------------ ------------
Total long term liabilities (2,000,000) (779,178)
Net assets 9,734,478 14,629,879
Shareholders' equity
Share capital 127,743 127,613
Share premium account 4,905,549 4,872,779
Retained (loss) / earnings (789,410) 4,138,891
Other reserves 5,490,596 5,490,596
Total shareholders' equity 9,734,478 14,629,879
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARED 31 MARCH
2018
2018 2017
GBP GBP
Cash (used in) / generated
from operating activities (993,536) 1,235,380
Corporation tax received - 202,342
-------------- --------------
Net cash (used in) / generated
from operating activities (993,536) 1,437,722
-------------- --------------
Investing activities
Expenditure on product development (1,876,920) (1,389,371)
Purchase of property, plant
and equipment (83,666) (122,928)
Interest received 224 220
Net cash used in investing
activities (1,960,362) (1,512,079)
-------------- --------------
Financing activities
Net proceeds on issue of shares 32,900 17,150
Repayments on loan (500,000) -
New loans issued 3,150,000 -
Interest paid (125,426) (43,980)
-------------- --------------
Net cash generated from / (used
in) financing activities 2,557,474 (26,830)
Net decrease in cash and cash
equivalents (396,424) (101,187)
-------------- --------------
Net cash and cash equivalents
at beginning of year 1,760,861 1,862,048
-------------- --------------
Net cash and cash equivalents
at end of year 1,364,437 1,760,861
============== ==============
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
20 July 2018. 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 2018 or 31 March 2017.
The financial information has been extracted from the statutory
accounts of the Company for the years ended 31 March 2018 and 31
March 2017. 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 receivables of GBP3.5m as disclosed
in note 14 of the financial statements. The auditors also
considered the adequacy of the disclosure made in note 1 of the
financial statements concerning the Group's ability to continue as
a going concern. Their opinion is not modified in respect of this
matter.
The statutory accounts for the year ended 31 March 2017 have
been delivered to the Registrar of Companies, whereas those for the
year ended 31 March 2018 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
2017. 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. Impairment charge
During the year, the Company was advised by its customer that
the contract to supply an MDM system in SE Asia had been postponed
due to an internal project review and budget issues in the current
year. The Board has therefore considered the project indefinitely
suspended from an accounting point of view and has incurred an
impairment charge of GBP1,490,315 during the year. The trade
receivables balance was fully provided against.
5. Earnings per Ordinary Share
The basic earnings per share has been calculated on the loss on
ordinary activities after taxation of GBP5,227,568 (2017: profit
GBP1,450,728) divided by the weighted number of ordinary shares in
issue of 127,701,597 (2017: 127,583,214).
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 year ended 31 March 2017 the calculation of diluted
earnings per share has been calculated on profit on ordinary
activities after taxation of GBP1,450,728. 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
and the weighted average number of ordinary shares for the purposes
of dilutive earnings per share was 133,358,885.
6. Annual Report and AGM
The Annual Report will be available from the Company's website,
www.srt-marine.com from 23 July 2018. 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 1 August 2018. The AGM will take place at the
Centurion Hotel, Charlton Lane, Midsomer Norton, Radstock BA3 4BD
at 11.00 a.m. on 5 September 2018.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LLFFRDVIIFIT
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