Half-yearly Report

SOFTWARE RADIO TECHNOLOGY PLC ("SRT" or the "Group") 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 Chairman Enquiries Software Radio Technology plc 01761 409500 Simon Tucker simon.tucker@softwarerad.com Westhouse Securities Limited 020 76016100 Tim Feather Matthew Johnson Cenkos Securities plc 020 73978900 Andy Roberts Leander PR 07795 168 157 Christian Taylor-Wilkinson CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011 Six months Six months Year ended ended ended 30 Sep 2011 30 Sep 2010 31 Mar 2011 Unaudited Unaudited Audited £ £ Revenue 4,659,714 4,424,497 9,154,708 Cost of sales (2,100,848) (2,301,267) (4,724,980) Gross profit 2,558,866 2,123,230 4,429,728 Administrative expenses (1,324,882) (968,213) (2,397,082) Operating profit before share 1,233,984 1,155,017 2,032,646 based payments Share based payments charge (44,893) (55,125) (102,521) Operating profit after share 1,189,091 1,099,892 1,930,125 based payments Investment revenues 12,783 112 7,626 Profit before income tax 1,201,874 1,100,004 1,937,751 Income tax credit - 232,030 232,029 Profit for the period 1,201,874 1,332,034 2,169,780 Total comprehensive profit for 1,201,874 1,332,034 2,169,780 the period Earnings per share: 1.14p 1.36p 2.2p Basic 1.10p 1.30p 2.1p Diluted CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2011 As at As at As at 30 Sep 30 Sep 31 Mar 2011 2010 2011 Unaudited Unaudited Audited Notes £ £ £ Assets Non-current assets Intangible assets 2,713,081 1,705,389 1,899,472 Property, plant and equipment 165,492 159,283 159,617 Total non-current assets 2,878,573 1,864,672 2,059,089 Current assets Inventories 1,256,515 692,996 1,910,818 Trade and other receivables 2,680,884 1,120,953 1,738,826 Cash and cash equivalents 2,886,647 1,386,610 3,025,448 Total current assets 6,824,046 3,200,559 6,675,092 Liabilities Current liabilities Trade and other payables (1,261,055) (1,190,111) (1,542,984) Net current assets 5,562,991 2,010,448 5,132,108 Net assets 8,441,564 3,875,120 7,191,197 Shareholders' equity Ordinary shares 4 105,924 98,209 105,864 Share premium 17,823,312 15,396,492 17,819,772 Other reserves 6 5,490,596 5,490,596 5,490,596 Retained earnings (14,978,268) (17,110,177) (16,225,035) Total shareholders' equity 8,441,564 3,875,120 7,191,197 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011 Share Share Retained Other Total Earnings Reserves Capital Premium £ £ £ £ £ Balance at 31 March 2010 97,818 15,387,084 (18,497,336) 5,490,596 2,478,162 Profit for the period - - 1,332,034 - 1,332,034 Other comprehensive - - - - - income Share options to be - - 55,125 - 55,125 exercised Share options exercised 391 9,408 - - 9,799 Balance at 30 September 98,209 15,396,492 (17,110,177) 5,490,596 3,875,120 2010 Profit for the period - - 837,746 - 837,746 Other comprehensive - - - - - income Issue of equity share 6,250 2,493,750 - - 2,500,000 capital Cost of issue of equity - (104,189) - - (104,189) share capital Share options exercised 1,405 33,719 - - 35,124 Share options to be - 47,396 - 47,396 exercised Balance at March 31 2011 105,864 17,819,772 (16,225,035) 5,490,596 7,191,197 Profit for the period - - 1,201,874 - 1,201,874 Other comprehensive - - - - - income Share options exercised 60 3,540 - - 3,600 Share options to be - - 44,893 - 44,893 exercised Balance at September 30 105,924 17,823,312 (14,978,268) 5,490,596 8,441,564 2011 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011 Six months Six months Year ended ended ended 30 Sep 2011 30 Sep 31 Mar 2011 2010 Unaudited Unaudited Audited Notes £ £ £ Net cash from operating 5 870,893 652,207 405,982 activities Corporation tax received - 232,030 232,029 Net cash from operating 870,893 884,237 638,011 activities Investing activities Expenditure on product (979,662) (401,368) (906,745) development Purchase of property, plant (46,415) (56,955) (105,163) and equipment Interest received 12,783 112 7,626 Net cash used in investing (1,013,294) (458,211) (1,004,282) activities Cash inflow / (outflow) (142,401) 462,026 (366,271) before financing Financing activities Net proceeds from issue of 3,600 8,099 2,439,234 ordinary share capital Net increase / (decrease) in (138,801) 434,125 2,072,963 cash and cash equivalents Cash and cash equivalents at 3,025,448 952,485 952,485 beginning of period Cash and cash equivalents at 2,886,647 1,386,610 3,025,448 end of period NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. Accounting Policies Basis of preparation The interim financial information in this report has been prepared using accounting policies consistent with IFRS as adopted by the European Union. IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) and there is an ongoing process of review and endorsement by the European Commission. The financial information has been prepared on the basis of IFRS that the Directors expect to be adopted by the European Union and applicable as at 31 March 2012. Non-statutory accounts Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ("the Act"). The statutory accounts for the year ended 31 March 2011 have been filed with the Registrar of Companies. The report of the auditors on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act. The financial information for the 6 months ended 30 September 2011 and 30 September 2010 is unaudited. The interim financial statements will be available to download on the Company's website www.softwarerad.com. 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 Six months Year ended ended ended 30 Sep 2011 30 Sep 2010 31 Mar 2011 Unaudited Unaudited Audited £ £ £ Share options - profit and 44,893 55,125 102,521 loss charge 3. Earnings per share The basic earnings per share have been calculated using the profit for the period of £1,201,874 (six months ended 30 September, 2010 - £1,332,034; year ended 31 March, 2011 £2,169,780) divided by the weighted average number of ordinary shares in issue of 105,878,479 (six months ended 30 September, 2010 98,204,085 and year ended March 31, 2011 - 100,863,487). The diluted earnings per share for the period have been calculated using weighted diluted shares of 109,516,311 (six months ended 30 September 30 -102,607,525, year ended 31 March 2011 105,433,091). NOTES TO THE INTERIM FINANCIAL STATEMENTS - continued 4. Called up share capital 30 Sep 2010 30 Sep 2010 31 Mar 2010 Unaudited Unaudited Audited £ £ £ Allotted: (Ordinary shares of 105,924 98,209 105,864 0.1p each): Share capital reconciliation: Number Shares outstanding at 30th 98,209,107 September 2010 Placing November 2010 6,250,000 Exercise of options December 850,000 2010 Other exercise of options 555,000 Shares outstanding at 31st 105,864,107 March 2011 Other exercise of options 60,000 Shares outstanding at 30th 105,924,107 September 2011 a. The placing in November 2010 took place at 40p per share raising gross proceeds of £2,500,000 before costs of £104,189 b. The option exercise in December 2010 related to N Peniket (700,000) and R Hurd (150,000). The exercise price was 2.5p per share c. The other exercise of options were by employees of the group at various dates. The exercise prices ranged from 2.5p to 6p. 5. Cash from operations Six months Six months Year ended ended ended 30 Sep 2010 30 Sep 2010 31 Mar 2010 Unaudited Unaudited Audited £ £ £ Operating profit 1,189,091 1,099,892 1,930,125 Depreciation of property, 40,540 21,431 69,305 plant and equipment Amortisation of intangible 166,053 266,408 577,702 fixed assets Share-based payment charge 44,893 55,125 102,521 Decrease / (increase) in 654,303 201,396 (1,016,426) inventories (Increase) in trade and other (942,058) (800,491) (1,418,564) receivables (Decrease) / increase in trade (281,929) (191,554) 161,319 and other liabilities Net cash generated from 870,893 652,207 405,982 operations NOTES TO THE INTERIM FINANCIAL STATEMENTS - continued 6. Statement of movement in shareholders' equity Other reserves consist of: Capital Redemption Reserve £2,857 (2010: £2,857), Warrants Reserve £62,400 (2010: £62,400) and Merger Reserve £5,425,339 (2010: £ 5,425,339). There were no movements during the period.

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