SIM.L Regulatory News (SIM)

4 April 2012

SimiGon Ltd

Preliminary Results for the year ended 31 December 2011

SimiGon Ltd (the Company, together with its subsidiaries, "SimiGon" or "the Company"), a global leader in providing simulation solutions, announces its preliminary results for the year ended 31 December 2011.

Financial Highlights

·; Revenues increased by 5% to $5.48 million (2010: $5.21 million)

·; Net profit improved by $1.03 million to $0.35 million (2010: Loss of $0.68 million)

·; Total operating expenses decreased by 12% to $4.35 million, (2010: $4.95 million)

·; Gross margin of 85% (2010: 85%)

·; Generated positive cash flow from operations of $2.3 million

·; Significant increase in cash and cash equivalents and short term bank deposits at the year end at $4.74 million (31 December 2010: $2.62 million)

Operational Highlights

·; Awarded a $5.6 million, five-year contract from Check-6, SimiGon's first major contract outside the aerospace and defence industry

·; Moved up the supply chain when selected as prime contractor by the U.S. Air Force Air Education Training Command (AETC) in $2.6 million contract

·; Entered the fourth year of supporting Lockheed Martin's F-35 Lightning II Joint Strike Fighter ("JSF") training program. This project made a significant contribution to revenues in 2011 and is expected to continue to do so over the lifespan of the JSF programme

·; SimiGon has been successfully meeting project milestones over the past three years for the UK Military Flying Training System ("UKMFTS")

·; SimiGon is in the third year of a long-term contract to provide training simulations for a strategic European aircraft manufacturer

·; Continued to deliver a complete Live, Virtual and Constructive training solution for Unmanned Aerial Vehicle training program, a leading provider in the small tactical unmanned aircraft systems

·; The Company's training and simulation platform, SIMbox, was selected for its in-base driving training system by the U.S Air Force

·; Significant improvement of the Company's distribution network as number of strategic partners tripled in 2011 from the number in 2010

Ami Vizer, Chief Executive Officer of SimiGon, stated: "We are pleased to announce a return to revenue growth and profit in a year of significant progress as we successfully implemented our strategic growth plan. We were able to foresee the potential market challenges, plan for it and improve our positioning and market reach.

"As a result, SimiGon has cemented its market leading position in the aerospace and defence industry while also achieving its growth plans to expand into lucrative new markets and move up the supply chain to become a prime contractor for training programmes.

"With a larger and more diverse customer base, major new contracts secured and the expected ramp up in sales of our long term defence training programmes, the Board looks forward to 2012 and beyond with confidence."

Enquiries:

Overview

SimiGon is pleased to report a return to revenue growth and profit in 2011. Revenues increased 5% to $5.48 million (2010: $5.21 million) with a $0.35 million profit from a loss of $0.68 million in 2010.

The positive results in 2011 are the result of a patient strategy implemented by management to position SimiGon with strategically valuable partners and build a foundation for long term growth. SimiGon's software is now the preferred supplier of training and simulation technologies for four of the world's largest military flight training programmes including the JSF and UKMFTS, which is a reflection of SimiGon's leading position in the market of PC-based training and simulation solutions. 

Operational Review

SimiGon entered 2011 with a set of strategic goals to build a foundation for long term growth. These were: to expand into new markets outside the aerospace and defence industry; to increase the number of strategic partners; and to move up the supply chain and be a direct supplier of training programmes. It is pleasing to report that all of the above targets were achieved.

Major contract wins

In October 2011, SimiGon was awarded a $5.6 million contract from Check-6 in a five-year agreement, the Company's first major contract outside the aerospace and defence industry and the first step in the Company's growth strategy to diversify its product offering and increase its addressable market. SimiGon will bring the type of training and skill development required for survival by fighter pilots and astronauts, to oil and gas workers, preserving lives and protecting profits. Check-6 has worldwide operations and its clients include industry leaders such as Chevron, Diamond Offshore, BP, Hess and others.

This development diversifies SimiGon's customer base and leaves the Company less reliant on the defence sector. Non military sales accounted for 23% of revenues in 2011 as opposed to 16% in 2010.

SimiGon achieved a further significant milestone when selected as prime contractor for AETC for the delivery of SIMbox based T-6A Modular Training Devices (MTD). The SIMbox MTD simulators will be used to train undergraduate, Remotely Piloted Aircraft (RPA) students for Pilot Instrument Qualification training. With this agreement SimiGon moved up the supply chain and to become a direct supplier to AETC. This agreement positions SimiGon for similar opportunities globally as the T-6A is also used as a basic trainer by the Canadian Forces, the Luftwaffe of Germany, the Greek Air Force, the Israeli Air Force, and others.

In addition, the Company's training and simulation platform, SIMbox, was selected for its in-base driving training system by the U.S Air Force. This agreement opens another door for SimiGon and could lead to further new business opportunities in the future.

Increased partnerships

As part of the Company's long term strategy, SimiGon constantly surveys the potential to increase its number of strategic partners and penetrate additional commercial markets, offering other industries learning and training simulations using its advanced technological infrastructure.

In 2011 the number of strategic partners tripled from the number in 2010. New partners secured in 2011 include Check-6, AETC and TAISR Group to add to SimiGon's established, long term partnerships with the likes of Lockheed Martin, BAE and Boeing. As a result, SimiGon is not as dependent on a single client or country for its sales and now has a more diverse and global presence.

Update on long-term contracts

The Company entered the third year of supporting Lockheed Martin's F-35 Lightning II Joint Strike Fighter ("JSF") training program. The company expects increased license delivery as the JSF program enters its regular production and delivery phase.

SimiGon has been successfully meeting project milestones over the past three years for the UK Military Flying Training System ("UKMFTS"). This substantiates SimiGon's product capabilities allowing the company to showcase its product capabilities and increase probability of future sales.

SimiGon is in the third year of a long-term contract to provide training simulations for a strategic European aircraft manufacturer. This partnership was further strengthened in 2011 as agreement was reached for additional licenses as part of future projects expected to be delivered in 2012 and 2013.

The Company continued to deliver a complete Live, Virtual and Constructive training solution for Unmanned Aerial Vehicle training program for a leading provider in the small tactical unmanned aircraft systems. The first training center was launched in 2011 with additional systems expected to be delivered to US and international clients in 2012.

Financial Performance

Revenue for the year ended 31 December 2011 was $5.48 million, compared to $5.21 million in 2010, reflecting increase of 5%. In terms of regional breakdown, 71% of SimiGon's revenues came from North America (2010: 67%), 27% from Europe and the Middle East (2010: 27%) and 2% from the Far East (2010: 6%).

Net profit for the fiscal year improved by $1.03 million to $0.35 million (2010: loss of $0.68 million).

Total operating expenses for the year decreased by 12% to $4.35 million (2010: $4.95 million), the research and development expenses decreased to $1.68 million (2010: $1.76 million) mainly due to salary expenses and cost management. Sales and marketing expenses were $1.70 million (2010: $1.71 million). General and administration expenses decreased to $0.98 million (2010: $1.48 million) mainly due to doubtful debt provision recorded in year 2010, share-based compensation and reduced professional fees.

The operating profit therefore is $0.31 million (2010: operating loss $0.55 million) and the net profit is $0.35 million in 2011 compared to net loss of $0.68 million in 2010. This resulted in a net basic and diluted earnings per share of $0.01 (2010: Basic and diluted loss per share of $0.02).

SimiGon generated positive cash flow from operations of $2.3 million in 2011. As at 31 December 2011, SimiGon had cash, cash equivalent and deposits in the amount of $4.74 million (31 December 2010: $2.62 million).

Outlook

SimiGon has made a solid start to 2012 with revenue visibility improving as sales to the Company's long-term partners and recent contract wins continue to ramp up.

With a strong order book in place and new markets now opening up alongside the Company's established leading position in the aerospace and defence industry, the Board expects year-on-year sales growth and looks forward to the future with confidence. 

*) Represents an amount lower than $ 1 thousand.

*) Represents an amount lower than $ 1 thousand.