Trading Update

RNS Number : 4070N

Strat Aero PLC

18 May 2015

 



Strat Aero plc / Index: AIM / TIDM: AERO / Sector: Support Services

18 May 2015

Strat Aero plc ("Strat Aero", the "Company" or the "Group")

Trading Update

Strat Aero plc, an international aerospace services company focused on the provision of training solutions, management systems and consultancy services to the global aviation market, is pleased to provide an update on its trading and operations across its three divisions: Unmanned Aerial Systems ('UAS') Pilot Training and Services; Aviation Management and Consultancy Services ('AMCS'); and Aviation Software, Products and Services. 

·     2014 full year revenues forecast to exceed market expectations

·     Progress across all divisions of business

·     New commercial and military opportunities opening up in multiple jurisdictions

Trading

The Board anticipates revenues for the financial year ended 31 December 2014, which are subject to external audit, to be above market expectations at approximately US$630,000.

With United States Air Force ('USAF') pilot training operations at Roswell expected to start generating revenue during the second half of the financial year, and the expected delivery of several other significant revenue generating opportunities during the second half, the Directors consider the Company remains on course to meet or exceed revenue forecasts for the year ended 31 December 2015 ('FY 2015').  Due to delays in certain revenue streams this is likely to be more heavily weighted towards the second half of the financial year than initially expected. 

UAS Pilot Training and Services

ENMUR

The curriculum for training UAV operators in the commercial and educational sectors including Eastern New Mexico University - Roswell ('ENMUR'), has now been finalised and training courses are expected to commence in H2 FY 2015.  Strat Aero will provide flight training for all students in the classes.   In line with this, the Company has recently secured its FAA Certificate of Authorization (COA), which establishes Strat Aero as just one of a handful of US based training operators authorised to operate UAVs within US airspace.

UAS Training Centre in Roswell, New Mexico

Initial training of USAF instructors at the UAS Training Centre in Roswell, New Mexico, was completed during the first half of April 2015.  Optimisation of the training programme following this initial testing phase is now underway in conjunction with the USAF.  The roll-out of USAF pilot training under the agreement with a leading US defence contractor is expected to follow once this process has been completed.  The Board looks forward to providing further updates as the optimised programme is reviewed and key commercial terms and the speed of roll out are agreed by the AFRL (Air Force Research Laboratory).  Initial throughput of pilots is expected to be 8 pilots per month with growth in numbers subject to ongoing review. At full capacity, 32 USAF pilots are expected to be trained each month at Roswell which would be expected to generate revenues of approximately US$12,000 revenue per pilot.

European Pilot and training services

Negotiations are ongoing with the Government of the Netherlands and the Innovation Quarter to establish a multi-rotor and fixed wing UAV training centre for both civilian and military training at a former Air Base in The Hague.  Strat Aero, under the terms of the letter of intent announced on 12 January 2015, is working to provide assistance with top level military training, which when operational would be Northern Europe's first UAV training centre.  Discussions are also taking place at a senior level with a number of other European Air Forces in connection with their existing and future UAV training requirements, including the Royal Air Force in the UK. 

Army Research Laboratory ('ARL')

Negotiations are on-going to secure a multi-year contract with ARL, a US Department which specialises in developing commercial applications from military hardware

A direct contract with ARL would be independent of the agreement signed with 4D Tech Solutions, Inc ('4D'), an established software provider to ARL, for the provision of services under an existing budget of up to US$4m over the next 12 months.  The first contract has been secured via the agreement with 4D Tech Solutions.  Although the initial contract is small it has now opened up a funding channel via 4D to the ARL to access significant larger contracts.

Wind farm inspection services

A programme is currently underway to test UAV turbine and blade inspection services across the respective wind farm sites of a number of major wind farm operators in the US, one of which operates 3,000 turbines.  To better capitalise on the significant commercial opportunities this offers, Strat Aero has signed an exclusive agreement with Vantage Point Aerospace ('Vantage Point'), a company that has developed a remote analytics platform and supporting software. The combination of using UAVs and the proprietary Vantage Point software to inspect turbines and blades offers substantial safety, time and cost saving benefits to operators and Strat Aero is uniquely positioned to deliver these benefits.  Potential wind farm customers are being sourced through New Amsterdam Global Solutions LLC ('New Amsterdam') with whom Strat Aero International Inc. has a marketing and sales agreement as well as a six month option to acquire a 70% interest.  In addition to this ongoing test programme, Strat Aero and New Amsterdam are actively marketing Strat Aero's UAV turbine and inspection services to the wind turbine and transmission lines industry in the UK, Europe, the Middle East and Africa.   

Law Enforcement

Strat Aero is establishing a UK UAV training and services base in response to an approach by certain UK law enforcement agencies.  Outside the UK, the Company has successfully demonstrated shared UAV multi-rotor services to local law enforcement agencies and first responders in the US.  Follow-up discussions are continuing with regards to securing potential contracts.

Aviation Software, Products and Services

Contracts are at an advanced stage with a number of potential customers for the Company's proprietary advanced aerospace management system which provides cloud-based, enterprise wide management solutions for the aerospace sector and potentially other sectors.  While negotiations have taken longer than originally anticipated, they remain positive and the Company will provide further updates as appropriate.

Aviation Management and Consultancy Services ('AMCS')

Strat Aero is pleased to provide an update on both existing and potential contracts it is currently working on within its AMCS division:

Intelligence, Surveillance and Reconnaissance ('ISR')

Humanitarian and security related issues across the world are currently driving an increasing interest in surveillance capability. The Board is currently in discussions with two potential customers for the supply of wide area ISR services.

Strat Aero is also in discussions with a European Government Agency for the provision of UAS systems relating to civil security and safety.  This involves a range of systems with a value ranging from US$1m to US$3.5m subject to final requirement.  Strat Aero holds a Procurement Licence with the relevant Government and is expecting to receive the first of two Tender invitations in coming weeks. The Tender invitation is expected to specify the ISR requirements, which will define the scope of and equipment package that can be offered.  Strat Aero will evaluate options to provide the equipment package via a managed service contract, dry lease or outright purchase contract.

Due to the high value nature of ISR solutions, the ISR projects being progressed by the Group are expected to contribute significantly to current 2015 revenue expectations and the Board will provide further updates in relation to progress in this increasingly important area of the business as appropriate.  

Cyprus Aviation Authority ('CAA')

Contracted work for the CAA with respect to the provision of regulatory guidance and the development of training manuals is proceeding on schedule with a 1 June 2015 completion date.

Low cost Middle East Airline

Work is ongoing with regards to project managing the establishment of a new low cost airline in the Middle East.  Strat Aero and its project partners are currently considering various opportunities to accelerate development and reduce overall costs which has led to a delay in near term project spend.  Strat Aero's fees are based on the level of project spend and this has resulted in delays to expected revenues from this project during the year to date.  

Other

The Company continues to provide consulting services to a number of national aviation authorities in the Middle East and Africa.  A contract to provide EASA compliant Operations Manuals to an established European helicopter operator is nearing completion.  An agreement has also been secured to supply Quality Management and Compliance oversight for oil and gas related helicopter operations in the Mediterranean.

Capt. Russell Peck, CEO of Strat Aero, said:"Since the turn of the year, excellent progress has been made towards achieving our objective of establishing Strat Aero as the go-to provider of UAS solutions to both the public and private sectors.  While revenues have not developed as quickly as originally anticipated, we have made good progress on a number of business areas, including entering into discussions with the Government of the Netherlands and their investment arm Innovation Quarter to develop the first UAV pilot training and research and development centre in Northern Europe; signing an MOU with 4D, an established engineering services provider to the US Government; and securing an option to acquire a 70% interest in New Amsterdam, an independent industrial and energy sales and marketing group, in tandem with a marketing and sales agreement. 

"Despite the progress made we have merely scratched the surface in terms of the enormous emerging commercial and military UAV market.  We have formal relationships with high end participants across the value chain: major customers for pilot training, equipment suppliers including a leading US defence contractor, and research hubs such as the National Renewable Energy Laboratory, a division of the US Department of Energy.  Combined with our UAS Training Facility in Roswell, New Mexico, and our proven expertise in navigating the evolving regulatory landscape, Strat Aero has an established platform in place from which we can roll out our full UAS service offering and capitalise on the multiple opportunities we are seeing.     

"As the list of contracts we are working on in the Consultancy business demonstrates, Strat Aero is not a one division company.  Significant progress is also being made with regards to rolling out our AIMS software and we hope to secure a number of multi-year contracts for our ERP (enterprise resource planning) software for the aviation sector.  With so much activity across all our divisions, I look forward to providing further updates on our progress, as we look to maintain the momentum behind the business, build a growing revenue base, and in the process establish Strat Aero as a leading global aerospace services company."

Enquiries:

Strat Aero plc
Russell Peck (Chief Executive)	Tel: [phone]
Graham Peck (Chairman)	Tel: [phone]
SP Angel Corporate Finance LLP	Tel: [phone]
Nominated Adviser and Joint Broker
Stuart Gledhill Katy Birkin
Beaufort Securities Limited	Tel: [phone]
Joint Broker Jon Levinson
Elliot Hance
St Brides Partners Ltd	Tel: [phone]
Susie Geliher Frank Buhagiar

Notes

Strat Aero plc is a multi-divisional international aerospace services company, focussed primarily on the provision of Unmanned Aerial System ('UAS') training solutions, airline management systems and consultancy services to the international aviation market.  The Company has three existing divisions: UAS Pilot Training and Services which operates from the fully functional and multi-faceted UAS Training Centre in Roswell, New Mexico; Aviation Software, Products and Services which includes the Company's proprietary advanced aerospace management system,  a cloud-based enterprise wide management solution for the aerospace sector and potentially, other sectors; and Aviation Management and Consultancy Services which has multiple contracts in place including project management of the establishment of a new low cost airline in the Middle East. 

The UAV division is looking to capitalise on opportunities resulting from the forecasted strong growth in the airline industry and in particular, the predicted exponential growth in the emerging UAV industry over the coming decade.  Civilian, law enforcement and military applications in UASs are expected to be a dynamic growth sector in the aerospace industry over the next 10 years with the UAS market forecast to grow to more than US$82.1 billion between 2015 and 2025 (AUVSI Economic Report 2013) and the global airborne Intelligence, Surveillance and Reconnaissance ('ISR') market estimated to grow to US$19.23 billion by 2023.  Strat Aero already has major contracts in place with international aviation companies, government bodies and universities including and importantly, an agreement to train military pilots to fly fixed wing UAVs at its Roswell centre.

 

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