Interim Results

RNS Number : 1102F

Software Radio Technology PLC

10 November 2015

 

SOFTWARE RADIO TECHNOLOGY PLC

("SRT" or the "Group")

HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015

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 2015 (the "Period").

Financial Highlights

·      Revenue of £3.6 million

·      Loss before tax of £0.7 million

·      50.7% gross profit margin

·      Order book of £3.6 million at the Period end

·      Cash of £2.4 million at the Period end

Operational Summary

·      Signing and commencement of customer delivery for the first complete Maritime Domain Management (MDM) system, with a total contract value of US$5.3 million

·      Strong progress with further potential MDM system sales

·      ABSEA technology development completed and implemented for Identifier product

·      Multiple customer evaluation and validation of ABSEA service has commenced

·      New Apollo hardware platform completed which will enable new generation of Class A and Class B products

Contacts:
Software Radio Technology plc	www.softwarerad.com + 44 (0) 1761 409 500
Simon Tucker (CEO)	[e-mail]
Louise Coates (Marketing Manager)	[e-mail] [e-mail]
WH Ireland Limited
Tim Feather / Liam Gribben	[phone]

Chairman's Statement

For the six months ended 30 September 2015, revenues were £3.6 million generating a gross profit of £1.8 million (gross margin of 50.7%) and a loss before and after tax of £0.7 million and £0.5 million respectively.  As at 30 September 2015, the Group had cash of £2.4 million, including drawn down borrowings of £1.0 million, stock valued at cost of £5.2 million, a forward order book of £3.6 million and a validated sales opportunity pipeline worth approximately £200 million.   

During the Period, core business generated by our module, OEM and em-trak dealer base grew strongly.  In the second half we expect to see baseline business of a similar level, but with additional contributions driven by market demand created by the new USCG AIS rule which has a compliance deadline of 1 March 2016 and a potential new mandate in Asia.

By far the largest short and medium term opportunity is within the Projects business for the sale of our MDM system to authorities as a solution for tracking, monitoring and managing their national fishing, commercial and, in some cases, leisure boats.  The system comprises a bundled package of vessel transceivers, coast stations, supplementary satellite data and GeoVS database and viewing stations which is scaled and customised for individual customer requirements.  SRT is actively working on 34 such projects, of which 18 are considered sufficiently mature to qualify for our validated sales opportunity pipeline now valued at approximately £200 million.  The first half saw one of these opportunities convert into a contract with a Middle Eastern government worth US$5.3 million for the provision of an MDM system, the delivery of which commenced during the first half, although the majority of revenues will be during the second half.  In addition we saw good progress with other validated opportunities which we expect to yield additional revenues during the second half and the next financial year.

Typically the initial focus for each MDM customer is the implementation of their base monitoring system, including the installation of large numbers of transceivers on vessels.  However, once substantially installed, with extended and often problematic coastlines we expect most MDM customers to require supplementary satellite AIS data feeds into their MDM system to ensure full tracking coverage of all vessels operating within their EEZ.  

This provides SRT with the potential for significant recurring revenues due to our development and implementation of ABSEA technology with our partner, exactEarth, which endows our Class B and Identifier transceivers with the unique ability to track globally from space.    

Our ports, marine infrastructure and waterways business built around our AtoN and GeoVS display products continued to make steady progress.  This is a significant target market segment which is at the very early stages of implementing AIS systems for applications beyond simply tracking vessels and one where our investments in technology, products, customers and marketing is generating considerable interest and building a healthy pipeline of opportunities.  We therefore look forward to this segment considerably increasing its contribution in the future.

Overheads remained tightly controlled at approximately £2.5 million for the Period on a cash accounting basis consistent with the comparable period last year.  The Company continues to innovate and invest in core technology and new products.  During the Period we added a new product variant to our AtoN portfolio, continued the development of the Apollo SOTDMA Class A and B product platform, embarked on an upgrade of our existing Cobalt Class B module, and added significant functionality to our GeovS Viewer and GeoVS HUB products.

Reflecting the increased opportunities across multiple market segments and geographies, we have invested more in sales and marketing, primarily in relation to intensive direct engagement with customers to assist them with the planning of their intended projects and working with new customers who are beginning the planning of their projects.  In the second half we will be expanding our customer support function to ensure that we are in a position to continue to deliver the high level of service the market has come to expect from SRT.

Going forward, we will continue to invest aggressively in the development of new technologies and products, but with an increased bias away from hardware towards our display and data management products and the functionality of our transceiver platforms. In parallel we also anticipate a further shift in overhead from development to customer support and sales and marketing activities as the number of projects we are addressing continues to increase.

In the second half we will deliver our £3.6 million order book, plus additional orders that we expect to receive and ship derived from day to day core business including the USCG and Asia mandates, continuing growth in our ports, infrastructure and waterway business, and the conversion of additional projects from our validated sales opportunity pipeline.

SRT has evolved into an established international company.  As a result of many years of accumulated investment in technology, products, customers and markets, SRT has become the dominant player in the global market for all things AIS.  AIS has become globally adopted by authorities as an integral element of their maritime domain awareness strategies, plans and projects.  This position has taken considerable time, investment and strategic decision making to attain, but as can be seen from this report, with a £3.6 million order book, plus multiple additional validated future revenue opportunities, we can look forward positively and optimistically to the second half of this financial year and the years ahead.  

Simon Rogers

Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015

		Six months ended		Six months ended		Year ended
		30 Sep 2015		30 Sep 2014		31 Mar  2015
		Unaudited		Unaudited		Audited
		£		£		£
Revenue		3,635,090		5,410,060		8,522,134
Cost of sales		(1,792,936)		(2,430,584)		(4,168,698)
Gross profit		1,842,154		2,979,476		4,353,436
Administrative expenses		(2,562,323)		(2,439,656)		(4,687,282)
Operating (loss) / profit		(720,169)		539,820		(333,846)
Finance expenditure		(24,590)		(22,860)		(45,587)
Finance income		285		162		319
(Loss) / profit before income tax		(744,474)		517,122		(379,114)
Income tax credit	3	228,874		425,469		425,469
(Loss) / profit for the period		(515,600)		942,591		46,355
Total comprehensive (loss) / income for the period		(515,600)		942,591		46,355
(Loss) / earnings per share: Basic Diluted	2 2	(0.40)p (0.40)p		0.77p 0.75p		0.0p 0.0p

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2015

		As at		As at		As at
		30 Sep		30 Sep		31 Mar
		2015		2014		2015
		Unaudited		Unaudited		Audited
	Notes	£		£		£
Assets
Non-current assets
Intangible assets		5,975,813		5,847,995		6,055,165
Property, plant and equipment		115,265		142,963		110,543
Total non-current assets		6,091,078		5,990,958		6,165,708
Current assets
Inventories		5,182,750		4,990,882		4,960,959
Trade and other receivables		1,140,981		2,824,440		1,604,422
Cash and cash equivalents		2,367,002		2,651,359		2,151,232
Total current assets		8,690,733		10,466,681		8,716,613
Liabilities
Current liabilities
Trade and other payables		(1,583,923)		(2,117,881)		(1,425,846)
Financial liabilities		(1,000,000)		(1,000,000)		(1,000,000)
Total current liabilities		(2,583,923)		(3,117,881)		(2,425,846)
Net current assets		6,106,810		7,348,800		6,290,767
Provision for liabilities
Deferred tax		(222,593)		-		-
Net assets		11,975,295		13,339,758		12,456,475
Shareholders' equity
Ordinary shares	4	127,513		127,453		127,453
Share premium		4,855,729		4,844,989		4,844,989
Other reserves	6	5,490,596		5,490,596		5,490,596
Retained earnings		1,501,457		2,876,720		1,993,437
Total shareholders' equity		11,975,295		13,339,758		12,456,475

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015

			Six months ended		Six months ended		Year ended
			30 Sep 2015		30 Sep  2014		31 Mar 2015
			Unaudited		Unaudited		Audited
	Notes		£		£		£
Cash generated from operating activities		5	451,917		514,201		1,033,847
Corporation tax received			461,794		425,469		425,469
Net cash  generated from operating activities			913,711		939,670		1,459,316
Investing activities
Expenditure on product development			(639,601)		(999,892)		(1,932,321)
Purchase of patent			-		-		(54,160)
Purchase of property, plant and equipment			(44,835)		(9,161)		(19,775)
Interest paid			(24,590)		(22,860)		(45,587)
Interest received			285		162		319
Net cash used in investing activities			(708,741)		(1,031,751)		(2,051,524)
Cash inflow / (outflow) before financing			204,970		(92,081)		(592,208)
Financing activities
Net proceeds from issue of ordinary share capital			10,800		1,452,901		1,452,901
Net cash generated from financing activities			10,800		1,452,901		1,452,901
Net increase in cash and cash equivalents			215,770		1,360,820		860,693
Cash and cash equivalents at beginning of period			2,151,232		1,290,539		1,290,539
Cash and cash equivalents at end of period			2,367,002		2,651,359		2,151,232

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015

	Share Capital	Share Premium	Retained Earnings	Other Reserves	Total
	£	£	£	£	£
Balance at 31 March 2014	119,003	3,400,538	1,919,143	5,490,596	10,929,280
Issue of equity share capital	8,450	1,512,550	-	-	1,521,000
Costs of issue of equity share capital	-	(68,099)	-	-	(68,099)
Comprehensive income for the period	-	-	942,591	-	942,591
Share based payment expense	-	-	14,986	-	14,986
Balance at 30 September 2014	127,453	4,844,989	2,876,720	5,490,596	13,339,758
Comprehensive loss for the period	-	-	(896,236)	-	(896,236)
Share based payment expense	-	-	12,953	-	12,953

Balance at 31 March 2015

127,453

4,844,989

1,993,437

5,490,596

12,456,475

Comprehensive loss for the period	-	-	(515,600)	-	(515,600)
Share based payment expense	-	-	23,620	-	23,620
Issue of equity share capital	60	10,740	-	-	10,800

Balance at 30 September 2015

127,513

4,855,729

1,501,457

5,490,596

11,975,295

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 International Financial Reporting Standards (IFRS) as adopted by the European Union.  IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee 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 2016.

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 2015 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 six months ended 30 September 2015 and 30 September 2014 is unaudited. The interim financial statements will be available to download on the Company's website www.softwarerad.com from 10 November 2015.

Accounting policies

The accounting policies as applied by the Group are the same as those applied by the Group in the consolidated financial statements for the year ended 31 March 2015, which are the same policies expected to apply for the year ended 31 March 2016.

2.      Earnings per share

The basic (loss) / earnings per share have been calculated using the loss for the period of £515,600 (six months ended 30 September 2014 - profit of £942,591; year ended 31 March 2015 - profit of £46,355) divided by the weighted average number of ordinary shares in issue of 127,459,304 (six months ended 30 September 2014, 123,111,982 and year ended 31 March, 2015 125,253,104).

During the six months ended 30 September 2015 the Group has incurred losses for the period and therefore there is no impact of the share options granted on diluted earnings per share.  During the six months ended 30 September 2014, the diluted earnings per share have been calculated using weighted diluted shares of 125,919,549 and during the year ended 31 March 2015 the number of weighted diluted shares was 128,259,031.

3.      Income tax credit

         During the period, the Group received income tax credits of £461,794 (six months ended 30 September 2014 and year ended 31 March 2015 £425,469) in respect of its Research and Development activities.  A deferred tax liability of £222,593 in relation to timing differences on capitalised development costs and an historical tax charge for a subsidiary of £10,327 are offset against this income tax credit resulting in a net balance of £228,874.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected annual earnings.

4.      Called up share capital

		30 Sep  2015		30 Sep 2014		31 Mar 2015
		Unaudited		Unaudited		Audited
		£		£		£
Allotted: (Ordinary shares of 0.1p each):		127,513		127,453		127,453
Share capital reconciliation:		Number of shares

Shares outstanding at 31 March 2014                  119,002,419

Placing July 2014                                                        8,450,000

Shares outstanding at 30 September 2014           

and 31 March 2015                                                127,452,419

Exercise of employee share options                                  60,000

Shares outstanding at 30 September 2015            127,512,419

a)       The placing in July 2014 took place at 18p per share raising gross proceeds of £1,521,000 before costs of £68,099.

b)      The exercise of employee share options took place in September 2015 at an exercise price of 18p.

5.      Cash from operations

		Six months ended		Six months ended		Year ended
		30 Sep 2015		30 Sep 2014		31 Mar 2015
		Unaudited		Unaudited		Audited
		£		£		£
Operating (loss) / profit		(720,169)		539,820		(333,846)
Depreciation of property, plant and equipment		40,113		51,595		94,629
Amortisation of intangible fixed assets		718,953		837,198		1,616,618
Share-based payment charge		23,620		14,986		27,939
Increase in inventories		(221,791)		(820,156)		(790,233)
Decrease / (increase) in trade and other receivables		463,441		(203,615)		1,016,402
Increase / (decrease) in trade and other liabilities		147,750		94,373		(597,662)
Net cash generated from operations		451,917		514,201		1,033,847

6.      Statement of movement in shareholders' equity

Other reserves consist of: Capital Redemption Reserve £2,857 (31 March 2015: £2,857), Warrants Reserve £62,400 (31 March 2015: £62,400) and Merger Reserve £5,425,339 (31 March 2015: £5,425,339). There were no movements during the period.

 

END

 

 

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