SRT Interim Results

28 November 2011
SRT Interim Results

Software Radio Technology announces its unaudited interim results for the six months ended 30 September 2011

SRT, the AIM-quoted developer and supplier of maritime identification and tracking technologies, announces its unaudited interim results for the six months ended 30 September 2011.

  • Revenues up by 5.3% to £4.66 million
  • Profit before tax up by 9.3% to £1.20 million
  • Gross profit margin increased from 48.0% to 54.9%
  • Cash of £2.89million and no borrowings

During the first six months, revenues increased by 5.3% to £4.66 million compared to the same period last year (6 months ended 30 September 2010: £4.42 million), with an improvement in gross margin to 54.9% (6 months ended 30 September 2010: 48.0%) and a profit before tax of £1.20 million (6 months ended 30 September 2010: profit £1.10 million). Administrative expenses increased by £357,000 (36.8%) against the same period last year, primarily due to our previously announced reorganisation to support our future growth which saw an increase in staff from 26 to 33 people. The Group remains free of borrowing and with cash balances of £2.89 million as at 30 September 2011.

We set ourselves two primary objectives this year; firstly to accelerate our next generation product development programme and secondly to migrate our customers to this new range of products as they come on stream. This will significantly update and broaden the product portfolio each of our customers is able to offer their target markets. I am pleased to report that we have made
excellent progress with these two objectives. In respect of the first objective we have commenced volume production of our new Class B, Receiver and Antenna splitter products and are aggressively pushing forward with our dual mode satellite/AIS Class B, Identifier, SART and AtoN product developments which we expect to start shipping within the next six months. Looking further out, we will also launch a new range of Class A and B products towards the end of 2012, incorporating touch screen colour displays as well as our innovative Man Overboard System.

The development of these new products coupled with the work required to migrate multiple customers from their old product range to a broader new product range is a significant task requiring considerable investment on the part of both SRT and its customers. This work is expected to continue at the current pace for the next twelve months. However, given the continued rapid growth in future market opportunities we believe that this is a necessary strategic investment for SRT to secure and consolidate our global market position in order to maximise future revenue streams from all market segments.

During the first half of the financial year, SRT has made its first investment into applications. The objective of this first small investment is to improve our understanding of the potential market opportunity and refine our business plan before further development and rollout in 2012. In this regard we are now embarking on the development of an initial series of targeted vessel tracking
applications which we expect to produce our first recurring revenue in the second half of 2012.

During the last financial year, we undertook a reorganisation of the business, which included the hiring of additional people and investment in an integrated business management system, to ensure that we would be able to manage and control this growth. As a result of this investment we have been able to successfully accelerate our product development activities whilst simultaneously supporting more active customers addressing multiple markets with a relatively small increase in our core overheads. As our business grows we expect to expand our workforce incrementally in the next 12 months, primarily on the supply chain and customer support side.

During the first half of the financial year, some of our key customers announced that they would be launching a new range of products and started the migration from old to new which, as expected, caused some short term demand delay as end users await the arrival of the new products. We now expect demand for these products to normalise during the second half. Over the next twelve months we expect to see the second surge in demand from the EU inland waterway market as the remainder of the market seek to be compliant with the rules by the middle of 2012. Additionally we expect to see mandates which have already been formally announced, such as in India, Russia, China and the EU fishing market, to generate material and sustained demand.

We are actively working with our customers to address a wide range of markets ranging from China and India to the EU, Middle East, South and Central America, Africa, USA and Russia. Excluding the leisure market, and pending mandates yet to be formally announced, we estimate the current aggregate active opportunity being addressed by SRT and our customers to be worth up to £400 million over the next four years. This is a significant opportunity which we expect to grow further in the future and for which SRT is now very well positioned in respect of product portfolio and customer network.

Each mandate and project has its own specific dynamics in terms of quantum, timescales and, ultimately, demand pattern over their specific implementation phase. This fact makes it difficult to accurately forecast short and medium term demand. As such, our expectation for this financial year is to report revenue of between £10 million and £16 million with a profit before tax of between £2 million and £5 million. Over the next year as more of the mandates coming into effect establish their specific demand patterns, we expect our ability to provide more accurate financial forecasts between reporting deadlines to improve.

I am also pleased to report that we are undertaking a capital reorganisation to enable SRT to pay a dividend in the future when appropriate. This requires Court approval and we expect this process to be complete by the end of this financial year.

In summary we have worked hard to completely update and broaden our product range and commence its introduction to the market through our customer networks. In turn our customers are now addressing an increasing range of opportunities around the world varying in size from a single vessel to multiple hundreds of thousands of vessels. In addition, some of our new products such as the Identifier and AtoN will open new and significant market segments. The Board is delighted with progress and believe these results demonstrate the solid foundations upon which the SRT business is being built and which create the potential to deliver exceptional future growth.

Simon Rogers

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