Half-yearly Report
SOFTWARE RADIO TECHNOLOGY PLC
("SRT" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007
Software Radio Technology plc ("SRT" or the "Group"), the AIM-quoted developer
of digital wireless communications technology, announces its unaudited results
for the six months ended 30 September 2007.
Highlights
Revenue up 127 per cent. at £1.91 million (2006: £0.84 million)
Loss reduced by more than 22 per cent. to £0.99 million (2006: £1.32 million)
SRT Marine traded profitably before depreciation
Asian partners commenced volume production delivery of TETRA handsets
Development of own brand TETRA handset for sale in EU
SRT Chairman Richard Moon said: "The first two licence customers in Asia have
commenced volume production and customer deliveries of TETRA handsets. This is
a significant milestone for the Company as it signifies the start of royalty
income. Other licence customers in Asia are expected to commence production in
the second half of the financial year.
"SRT Marine Technology continues to build its international network of
partners. Orders for our AIS Class B solutions have continued to grow steadily
throughout the first half as more of our partners enter the market with their
products and commence active sales and marketing. Further national mandates
are expected.
"The Board is pleased with the progress that SRT has made during the first half
and is expecting further acceleration during the second half. SRT now has
products being produced, marketed and sold by a global network of partners,
creating the opportunity for significant and sustained revenue growth".
Enquiries:
Software Radio Technology plc 01761 409500
Simon Tucker
Group Managing Director
Hanson Westhouse Limited 020 7601 6100
Tim Feather
CityRoad Communications 020 7248 8010
Paul Quade 07947 186694
Notes for Editors
About Software Radio Technology
SRT has two divisions which are commercialising selected elements of its
portfolio of IPR: SRT PMR Technology Limited ("SRT PMR") and SRT Marine
Technology Limited ("SRT Marine").
SRT PMR focuses on professional digital communications and SRT Marine on
maritime identification and tracking. Our products are designed to meet
established international standards where the core technology must conform to
the same identical set of operating rules, thereby creating a common demand for
the core technology amongst different products.
SRT PMR has initially focused on the ETSI-defined digital PMR standard known as
TETRA. TETRA offers secure and reliable voice and data communications and is
the preferred system in over 80 countries where networks are being rolled out.
Typically TETRA systems are used by homeland security agencies and commercial
users such as police, fire and transport services.
SRT Marine has focused on Automatic Identification Systems (AIS) which was
first mandated by the International Maritime Organisation on all vessels
worldwide over 300GT. AIS's ability to identify and track vessels precisely
has resulted in many countries rolling out coastal networks in preparation for
the wider use of AIS on smaller vessels.
SRT generates income from the licensing of its technologies. Customers pay
initial support fees followed by ongoing per unit royalties which are secured
through the supply of a proprietary component around which the technology has
been designed
Today, SRT has a substantial base of customers located around the world, each
of whom has well established sales and distribution channels.
CHAIRMAN'S STATEMENT
I am pleased to report that SRT continued to make strong progress during the
first half of this financial year. In both our PMR-TETRA and Marine
businesses, products containing our technologies are in the market. As a
result revenues have increased by 127% and operating losses reduced by 22% over
the same period last year.
SRT PMR Technology Limited - TETRA
The first two licence customers in Asia, TCB and Unimo, have commenced volume
production and customer deliveries of their handsets, incorporating our
technology. This is a significant milestone for the Company as it signifies
the start of royalty income. Initial product runs have been relatively small
as expected, however there is now increasing visibility of substantial orders
in the future as these customers leverage their competitive advantages. Other
licence customers in Asia are expected to commence production in the second
half of the financial year.
In March 2007 the Company announced its intention to develop its own TETRA
handset for sale as an OEM product within the European Union. The first stage
of this project has been delivered on time, with first prototypes completed
during October ready for formal type and network interoperability approval
testing. Marketing of the handset to partners has commenced and initial
reactions have been positive. We expect that first shipments will commence
during the first half of the next financial year. If successful, with good
margins and high per unit revenue, this could have a significant effect on the
financial performance of the Group.
SRT has continued to build and evolve its specialist digital radio development
team which is now focused on the development of next generation development
core technology which will yield an improved platform. This is expected to be
completed towards the end of 2008, providing a platform upon which our own OEM
and licence customer product ranges can be expanded.
The Board is confident that SRT PMR Technology is now in a strong position to
derive sustained and growing revenues from licence customers in Asia and OEM
partners in the EU.
SRT Marine Technology Limited - AIS
SRT continues to build its international network of partners and to work with
them as their long term AIS technology solution provider, offering a selection
of technology licence, module and OEM solutions to fit their needs.
Orders for our AIS Class B solutions have continued to grow steadily throughout
the first half as more of our partners enter the market with their products and
commence active sales and marketing. Average order size per partner has
increased as market demand from a variety of commercial and leisure users
increases. The first formal national mandate, covering 15,000 vessels, to fit
an AIS transceiver was announced by Turkey in July. Further national mandates
are expected. We are still awaiting news on US FCC approval which would enable
AIS Class B products to be sold into the world's largest marine market. This
is expected during the second half of the current financial year.
In line with our corporate strategy the Company continues to evolve its AIS
technologies and is now focused on the development of the next generation AIS
platform.
Results and Trading
The results, which have been prepared in accordance with International
Financial Reporting Standards for the first time, show revenues for the six
months of £1,910,852 (2006: £842,579), an increase of 127% on the same period
last year with a retained loss of £992,184 (2006 £1,322,685). SRT Marine
Technology traded profitably (before depreciation) during the first half with
gross margins of 40% and has increased visibility of forward orders for the
second half. SRT PMR Technology traded at a loss due to expected royalty
revenue, with an anticipated gross margin of 80%, falling into the second half
of this year.
Overheads, excluding depreciation and non-recurring items, for the period were
22% higher than for the same period last year at £1,491,667 primarily due to an
increase in head count to support the Group's expanding activities.
Financing
In April 2007 SRT completed a placing of 9,523,810 shares at 42p, raising £4
million (before costs) to support additional investment in both the TETRA and
Marine businesses.
As at 30 September 2007 the Group had net cash balances of £2.02 million (2006
£2.68 million). In addition, since 30 September 2007 the Company has received
applications to convert 8,722,882 warrants into ordinary shares at an exercise
price of 40p per share, raising additional funding of £3.49 million. The final
date for the conversion of warrants was 2 November 2007 and unexercised
warrants have now lapsed.
Management
The existing management team of the Group was further strengthened by the
joining of Dr. George Kyprios to lead SRT's PMR business in September 2007.
Dr. Kyprios, who has now been formally appointed as managing director of the
PMR subsidiary, has a wealth of international business experience gained in
"blue chip" multinationals such as Pirelli Cables & Systems and GEC/Marconi and
has expertise of implementing change programmes to increase operational
efficiency and competitive advantage.
Outlook
The Board is pleased with the progress that SRT has made during the first half
and is expecting further acceleration during the second half. This has already
become apparent through the announcement on 24 October of a TETRA order by
Unimo which will generate US$3 million of royalties for SRT, of which
approximately US$2 million is expected in revenue in the Group's current
financial year.
In summary, SRT now has products being produced, marketed and sold by a global
network of partners, creating the opportunity for significant and sustained
revenue growth. In addition strategic initiatives such as the launch of our
own TETRA handset targeting the European market also provide the basis for
further growth during the next financial year and beyond.
Richard Moon
Chairman
SOFTWARE RADIO TECHNOLOGY PLC
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007
Six months ended Six months ended Year ended
30 Sep 2007 30 Sep 2006 31 Mar 2007
Unaudited Unaudited Unaudited
£ £ £
Revenue 1,910,852 842,579 1,817,588
Cost of sales (1,082,571) (601,855) (1,645,610)
Gross profit 828,281 240,724 171,978
Administrative expenses (1,883,453) (1,610,349) (3,170,198)
Operating loss (1,055,172) (1,369,625) (2,998,220)
Finance income 62,988 46,940 85,791
Loss before income tax (992,184) (1,322,685) (2,912,429)
Taxation - - -
Loss for the period (992,184) (1,322,685) (2,912,429)
Loss per share (basic and (1.15)p (1.80)p (3.76)p
diluted)
CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2007
As at As at As at
30 Sep 30 Sep 31 Mar
2007 2006 2007
Unaudited Unaudited Unaudited
£ £ £
Assets
Non-current assets
Intangible assets 5,608,422 3,975,438 4,953,395
Tangible assets 431,320 510,854 520,154
Total non-current assets 6,039,742 4,486,292 5,473,549
Current assets
Inventories 114,008 240,807 161,938
Trade and other receivables 3,330,388 2,284,865 2,971,612
Cash and cash equivalents 2,024,884 2,682,088 317,005
Total current assets 5,469,280 5,207,760 3,450,555
Total assets 11,509,022 9,694,052 8,924,104
Liabilities
Current liabilities
Trade and other liabilities (1,255,754) (1,080,884) (1,646,566)
Total current liabilities (1,255,754) (1,080,884) (1,646,566)
Total liabilities (1,255,754) (1,080,884) (1,646,566)
Net assets 10,253,268 8,613,168 7,277,538
Shareholders' equity
Ordinary shares 89,102 78,088 78,288
Share premium 11,645,291 7,702,858 7,787,787
Other reserves 5,719,384 5,724,512 5,719,383
Retained earnings (7,200,509) (4,892,290) (6,307,920)
Total equity 10,253,268 8,613,168 7,277,538
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007
Six months ended Six months ended Year ended
30 Sep 2007 30 Sep 2006 31 Mar 2007
Unaudited Unaudited Unaudited
£ £ £
Cash flows used in
operating activities
Cash used in operations (1,364,253) (1,217,969) (2,503,430)
Interest received 62,988 46,940 85,791
Net cash used in (1,301,265) (1,171,029) (2,417,639)
operating activities
Cash flows from investing
activities
Purchase of intangible (818,036) (1,154,059) (2,219,784)
fixed assets
Purchase of tangible (41,139) (278,281) (411,031)
fixed assets
Net cash used in (859,175) (1,432,340) (2,630,815)
investing activities
Cash flows from financing
activities
Net proceeds from the
issue of ordinary share 3,868,319 4,052,026 4,132,028
capital
Net cash from financing 3,868,319 4,052,026 4,132,028
activities
Net increase/(reduction)
in cash and cash 1,707,879 1,448,657 (916,426)
equivalents
Cash and cash equivalents 1,233,431
at beginning of period 317,005 1,233,431
Cash and cash equivalents 2,024,884 2,682,088 317,005
at end of period
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These unaudited interim financial statements have been prepared under the
historical cost convention and on a basis consistent with the UK Companies Act
1985 and International Financial Reporting Standards and IFRIC interpretations
as endorsed by the European Union and interpretations expected to be in issue
at 31 March 2008. The interim financial statements were approved by the Board
of Directors and the Audit Committee on 2 November 2007 The interim financial
statements do not constitute statutory financial statements within the meaning
of the Companies Act 1985 and have not been audited. Comparative figures in the
financial statements for the year ended 31 March 2007 have been taken from the
Group's audited UK GAAP statutory financial statements on which the Company's
auditors, Nexia Smith & Williamson, expressed an unqualified opinion and
amended by adjustments required by IFRS. All periods presented are unaudited.
In anticipation of changes required under IFRS, the Group published an IFRS
transition statement on 31 October 2007. This statement set out the effect of
adopting IFRS for the Group, the basis of preparation, the accounting policies,
and details of significant adjustments in respect of the opening balance sheet
at 1 April 2006, the results for the year ended 31 March 2007 and the balance
sheet at 31 March 2007. These interim financial statements have been prepared
in accordance with the accounting policies outlined in the statement. This
statement is available on the Company's website.
The interim financial statements will be sent to shareholders on or around 9
November 2007 and will be available from today on the Company's website and for
a period of one month from the Company's registered office, Wireless House,
Westfield Industrial Estate, Midsomer Norton, Bath BA3 4BS.
2. Share-based payment
In line with the requirements of IFRS 2, the Group has recognised the following
profit and loss charges in respect of issued share options:
Six months ended Six months ended Year
ended
30 Sep 2007 30 Sep 2006 31 Mar
2007
Unaudited Unaudited Unaudited
£ £ £
Share options - profit and 99,595 201,916 376,030
loss charge
3. Earnings per share
The basis earnings per share has been calculated using the loss for the period
of £992,184 (2006 - loss of £1,322,685) divided by the weighted average number
of ordinary shares in issue of 86,653,590 (2006 - 73,565,805). The weighted
average number of shares in issue has been adjusted to reflect the placing in
April 2007.
As the Group is currently loss-making, the warrants and share options in issue
are not considered dilutive.
4. STATEMENT OF MOVEMENT IN SHAREHOLDERS' EQUITY
Six months ended Six months ended Year ended
30 Sep 2007 30 Sep 2006 31 Mar 2007
Unaudited Unaudited Unaudited
£ £ £
Loss for the period (992,184) (1,322,685) (2,912,429)
Share issue proceeds 4,001,140 4,250,000 4,250,000
Share issue costs (192,821) (197,972) (197,972)
Share warrant proceeds 60,000 - 80,000
Share-based payment 99,595 201,916 376,030
credit
Movement in shareholders' 2,975,730 2,931,259 1,595,629
equity
Opening shareholders' 7,277,538 5,681,909 5,681,909
equity
Closing shareholders' 10,253,268 8,613,168 7,277,538
equity
5. CASH USED IN OPERATIONS
Six months ended Six months ended Year ended
30 Sep 2007 30 Sep 2006 31 Mar 2007
Unaudited Unaudited Unaudited
£ £ £
Operating loss (1,055,172) (1,369,625) (2,998,220)
Depreciation of tangible 132,304 91,626 214,365
fixed assets
Amortisation of 160,678 39,494 127,975
intangible fixed assets
Share-based payment 99,595 201,916 376,030
charge
Decrease in inventories 47,930 49,284 128,153
Increase in trade and (358,781) (380,884) (1,067,635)
other receivables
(Decrease)/increase in 715,902
trade and other (390,807) 150,220
liabilities
Cash used in operations (1,364,253) (1,217,969) (2,503,430)
6. RECONCILIATION OF OPERATING PROFIT UNDER UK GAAP TO IFRS EQUIVALENT
Six months ended Six months ended Year ended
30 Sep 2007 30 Sep 2006 31 Mar 2007
Unaudited Unaudited Unaudited
£ £ £
Operating loss - UK GAAP (1,089,612) (1,395,304) (3,048,437)
Reversal of goodwill 33,648 33,648 67,296
amortisation
Recognition of vacation 792 (7,969) (17,079)
pay accrual
Operating loss - IFRS (1,055,172) (1,369,625) (2,998,220)
The adjustments above reflect non-amortisation of goodwill and the recognition
of a liability for employees' unused entitlement to annual leave as set out in
the IFRS transition release.
7. RECONCILIATION OF SHAREHOLDERS' EQUITY AT 30 SEPTEMBER 2006 UNDER UK
GAAP TO IFRS
IAS 38 IFRS 3 IAS 19
Intangible Business Employee
UK GAAP assets combinations benefits IFRS
£ £ £ £ £
Assets
Non-current assets
Intangible assets 3,941,790 33,648 3,975,438
Tangible assets 510,854 510,854
Total non-current assets 4,452,644 33,648 4,486,292
Current assets
Inventories 240,807 240,807
Trade and other receivables 2,284,865 2,284,865
Cash and cash equivalents 2,682,088 2,682,088
Total current assets 5,207,760 5,207,760
Liabilities
Current liabilities
Trade and other liabilities (1,032,598) (48,286) (1,080,884)
Total current liabilities (1,032,598) (48,286) (1,080,884)
Net assets 8,627,806 33,648 (48,286) 8,613,168
Shareholders equity
Ordinary shares 78,088 78,088
Share premium 7,702,858 7,702,858
Other reserves 5,724,512 5,724,512
Retained earnings (4,877,652) 33,648 (48,286) (4,892,290)
Total equity 8,627,806 33,648 (48,286) 8,613,168
8. OTHER IFRS RECONCILIATIONS
As set out in Note 1 above, the Group published an IFRS transition statement on
31 October 2007. This statement included a reconciliation of shareholders'
equity at 1 April 2006 and 31 March 2007.
The transition to IFRS has not significantly impacted the presentation of the
consolidated cash flow statement.
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