SIM.L Regulatory News (SIM)

15 September 2014

SimiGon Ltd

("SimiGon" or "the Company")

Interim Results for the six months ended 30 June 2014 

Continued growth in revenues and net profit

SimiGon Ltd, a global leader in providing simulation solutions, announces its interim results for the six months ended 30 June 2014.

Financial Highlights

· Revenues increased by 5% to $4.37 million (H1 2013: $4.16 million)

· Net profit increased by 205% to $0.67 million (H1 2013: $0.22 million)

· Gross margin of 73% (H1 2013: 65%)

· Gross cash up at $9.71 million (31 December 2013: $8.61 million, 30 June 2013: $8.12 million) and the Company has no outstanding bank debt

· Basic and diluted EPS of $0.014 (H1 2013: $0.005)

· Paid maiden dividend in May 2014 and intends to maintain annual dividend payment

Operational Highlights

· Delivering on project milestones on $6.7 million contract awarded in June 2013

· Entered civil aviation market with first contract in China, initially worth $0.75 million

· Secured additional licences and maintenance support agreements as part of its partnership to support Lockheed Martin's F-35 Lightning II Joint Strike Fighter ("JSF") training program

· Continues to meet project milestones for long term contracts including the UK Military Flying Training System ("UKMFTS") and Check-6, the Company's first major contract outside the aerospace and defence industry

Post period-end events

· Awarded additional three year maintenance and support contract worth $0.8 million for major existing European customer

· Signed new license agreement with Corporacion de Alta Tecnologia para la Defensa (Codaltec), a leading Latin American high technology corporation

Ami Vizer, Chief Executive Officer of SimiGon, said: "We are pleased to report that SimiGon continues to deliver strong growth in revenue and profitability as a result of achieving milestones set out in our growth strategy. We have cemented our position as a prime contractor for major, long term simulation training programmes, expanded into new territories and diversified our offer. We are pleased with the good performance in the first half which reflected sales from the successful delivery of key projects and our expansion into the civil aviation market in China.

"Looking ahead, SimiGon has excellent revenue visibility based on our long term contracts and a strong order book in place. As a result the board enters the second half with increasing confidence of delivering continued year-on-year growth for full year 2014."

Enquiries:

Overview

SimiGon is pleased to report its seventh consecutive period of revenue growth and increased profitability. The first half of 2014 has seen revenues increase by 5% to $4.37 million (H1 2013: $4.16 million) with increase in the net profit of 205% to $0.67 million as compared to $0.22 million in H1 2013.

This continued success in the first half of 2014 has come from expansion in to new territories, long-term contracts, that continue to progress well, and a successful transition to become prime contractor. Continued growth across markets and verticals, and ongoing determination to deliver precisely on schedule and to clients' specifications, serves to further enhance SimiGon's reputation and cement its position as a leading supplier of training and simulation technologies for the world's largest military flight training programmes.

The Company has continued to concentrate on its ability to secure further contracts in the role of prime contractor. Being a prime contractor enabled SimiGon to target and win significantly larger and more lucrative contracts than was previously possible. It has also given the Company a direct relationship with the end customer, a greater share of project revenues and profit, and greater potential for further deals with the same customer.

The combined effect of the above is that the Company is confident in its continuing ability to secure new revenue projects and its business development prospects remain strong. To facilitate the Company's growth and expansion, while also ensuring the high quality and delivery targets demanded by customers are maintained, SimiGon will invest in increasing the number and talent within its workforce.

The Board remains confident that its strategy will provide continuing growth in both the short term and longer term.

Operational Review

SimiGon continues to deliver on all its major contracts, a key focus for the Company in the first half of 2014. This success has further cemented the Company's leading position as a proven provider of simulation training solutions. In addition the first half saw SimiGon expand its geographic footprint, enter the large and potentially very lucrative civil aviation market, and expand its customer base.

Delivery of major contract as prime contractor

SimiGon announced in June 2013 that it had signed a contract valued at $6.7 million of a major training program. This contract opened up a new geographical region and was a milestone contract for the Company both in terms of the value of the order and the scope of its requirements.

SimiGon is successfully delivering its training systems and meeting its contracted key milestones. The Company expects that its good performance will put SimiGon in a good position to be selected for potential subsequent phases of the programme.

Expansion into Chinese civil aviation market 

In February, SimiGon revealed that it had expanded on its core growth strategy and entered the Chinese civil aviation market in a joint venture (JV) agreement with a leading aviation services company based in China.

The agreement, which is initially valued at $0.75 million, involves the creation of a new entity dedicated to develop its own training solutions using SimiGon's SIMbox licenses.

A move into the civil aviation market has been a long term strategic goal for SimiGon and with China's position as the fastest growing aviation marker in the world, the JV provided an ideal platform for SimiGon to enter this attractive growth sector and region.

New contract wins

As announced in September 2014, SimiGon signed a new license agreement with Corporacion de Alta Tecnologia para la Defensa (Codaltec), a leading Latin American high-technology corporation.

Codaltec was formed in August 2012 by the Colombian Government to meet the defense sector's needs, including training and simulation for their armed forces. As a result of the successful delivery and performance of SimiGon's systems, Codaltec has agreed to extend the agreement and purchase additional SimiGon software licenses to support its numerous training programs.

The partnership demonstrates how companies can adopt SimiGon's technology to enhance their offering by rapidly delivering a higher quality training and simulation solution for their customers. It is a major endorsement for SimiGon and a milestone in the Company's relationship with Codaltec that the scope of the initial agreement has been expanded.

SimiGon have been working with a major existing European customer since September 2009 and continued to strengthen this relationship in August 2014 when it announced a three year agreement valued at $0.8 million to provide additional maintenance and support services for the customer's simulation training centers.

Long term contracts

The Company has a large number of long term partnerships that it continues to develop and deliver, providing good revenue visibility going forward. Many of its long term projects are expected to expand with clients purchasing further licenses throughout 2014 and 2015.

Highlighting the longevity of SimiGon's partnerships, the Company is now in its seventh year supporting Lockheed Martin's JSF training program and agreed additional licenses and ongoing maintenance support agreements as part of its ongoing long term partnership.

SimiGon is also in its sixth year supporting Lockheed Martin's UKMFTS and continues to work with AETC, a relationship which began in late 2011, to support and maintain all of the T-6A Modular Training Devices used in the training of all Remote Piloted Aircraft students.

SimiGon continues to successfully deliver on its exclusive contract with Check-6 Inc., one of the leading providers of training solutions to the energy and mining industries. Throughout this contract SimiGon has exceeded customer expectations in both the execution and performance of its systems. As a result, the Company remains confident that following successful delivery the possibility remains to extend the partnership with additional agreements.

Financial Performance 

Revenues for the six months ended 30 June 2014 were $4.37 million as compared to $4.16 million for the six months ended 30 June 2013, reflecting an increase of 5%. Gross profit for the six months ended 30 June 2014 was $3.21 million, as compared to $2.7 million for the six months ended 30 June 2013. Accordingly, gross margins increase to 73% for the six months ended 30 June 2014 as compared to 65% for the six months ended 30 June 2013.

Net profit for the six months ended 30 June 2014 improved by 205% to $0.67 million as compared to $0.22 million for the six months ended 30 June 2013.

Total operating expenses for the six months ended 30 June 2014 increased by 4% to $2.53 million (H1 2013: $2.43 million). Research and development expenses for the six months ended 30 June 2014 were $1.13 million as compared to $1.12 million for the six months ended 30 June 2013. Marketing expenses for the six months ended 30 June 2014 decreased by 2% to $0.83 million as compared to $0.85 million for the six months ended 30 June 2013 and general and administration expenses for the six months ended 30 June 2014 were $0.58 million as compared to $0.45 million the six months ended 30 June 2013.

Operating income for the six months ended 30 June 2014 amounted to $0.67 million, significantly improving upon performance for the six months ended 30 June 2013. This resulted in a net basic and diluted earnings per share of $0.014 (H1 2013: Basic and diluted earnings per share of $0.005).

The net financial expenses and income for the six months ended 30 June 2014 decrease to $0.003 as compared to financial expenses of $0.051 million for the six months ended 30 June 2013 mainly due income from interest and currency exchange rate movements.

The Company's cash and equivalent balances, including restricted cash recorded, to insure future project performance, increased by 18% to a total of $10.09 million as at 30 June 2014 as compared to $8.52 million as at 30 June 2013 and by 12% as compared to $9.02 million as at 31 December 2013: with no outstanding bank debt.

In light of the strong cash position and its confidence in continued strong cash generation the Board decided to commence the payment of annual dividends at the Company's full year results. As a result, a maiden dividend was paid to shareholders in May 2014 at a value of 0.543 cents per share.

Outlook

SimiGon continues to deliver strong growth in revenue and profitability as a result of achieving milestones set out in our growth strategy. The Company has cemented its position as a prime contractor for major, long term simulation training programmes, expanded into new territories and diversified its offer.

SimiGon has excellent revenue visibility based on our long term contracts and a strong forward order book greater than $10 million to be recognised in future accounting periods. As a result the board enters the second half with increasing confidence of delivering continued year-on-year growth for full year 2014.

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*) Represents an amount lower than $ 1 thousand.