Srt Marine Sys. Regulatory News (SRT)

2 Nov 2005 08:00

SOFTWARE RADIO TECHNOLOGY PLC ADMISSION TO AIM Software Radio Technology plc ("SRT" or the "Company") was today admitted totrading on AIM in conjunction with a placing which raised ‚£4.04 million (beforeexpenses). The market capitalisation of the Company at the placing price of 35pper share is ‚£24.17 million. The ticker for the ordinary shares is "SRT".Westhouse Securities LLP is acting as nominated adviser and broker to SRT.SRT's BusinessSRT uses its existing portfolio of IPR to develop wireless technology referencedesigns which are licensed in the same form to multiple customers in return fora combination of licence and product development support fees and ongoingroyalties. SRT does not manufacture anything.The Group targets niche sectors of the national security market, wheregovernments drive the necessary investment and where the specification ofproducts is defined by internationally agreed and maintained standards.A SRT reference design enables manufacturers to develop proprietary versions ofcomplex digital wireless products more rapidly and cost effectively thanthrough in-house development and without the associated development cost andrisk.SRT has focused on digital communications and marine tracking technologies. TheGroup currently licenses reference designs for a TETRA professional mobileradio handset, a technology which is being adopted by security and emergencyservices around the world, and automatic identification systems (AIS) for useon commercial and leisure vessels. SRT has already developed an AIS Class Atransponder for use on commercial vessels and is nearing completion on its AISClass B transponder for leisure vessels.SRT receives licence and product development support fees. SRT further receivesa significant per unit royalty on every product manufactured. For the TETRAhandset design, the licence and product development support fees have averagedUS$1.35 million per contract, with an average net royalty of approximatelyUS$20 per product manufactured. For AIS, the licence and product developmentsupport fees are up to $300,000, with royalties of$30 to $120 per unit.Royalties are secured through the inclusion of a single source component withinthe hardware design over which SRT either has proprietary control or anagreement in place with the component manufacturer to monitor, track and,wherever possible, control the supply thereof.Royalties are currently being received in respect of the AIS Class A designfrom two customers and the Directors expect royalty income from its TETRAreference design to commence during the first quarter of 2006.MarketsTETRA is used in more countries than any other professional mobile radiostandard: over 70 countries in total. The Directors estimate that global demandfor TETRA handsets will increase from approximately 500,000 units in 2004 toapproximately four million units per annum by 2010, with Europe and Asiatogether accounting for over 90 per cent of the market.The SOLAS Agreement mandated the installation of AIS Class A transponders on150,000 vessels worldwide. Following on from AIS Class A, the creation of asimpler AIS Class B device has created interest from government agencies, suchas the US Coast Guard, in seeking to mandate AIS as standard equipment on allmarine vessels. The Directors estimate that if AIS Class B was mandated in theUS for leisure craft, it would create a market of approximately two millionunits per annum.CustomersSRT has, to date, signed seven licence contracts with leading electronics andtechnology companies in the EU and Asia, in particular, China, of which fourare for the TETRA handset design and three are for AIS. A number of furtherlicence contracts are under negotiation.The Directors believe that there is a preference for government agencies topurchase national security related products from local suppliers. Indeed inChina, government agencies are required wherever commercially viable, to buyproducts from local manufacturers. As a result, the Directors believe that theGroup's Asian TETRA handset customers are well placed to win a substantialshare of their local markets and a share of the international market.Growth StrategyThe next stage in SRT's strategy in respect of its TETRA reference design isthe development of the next generation of the designs, the primary focus ofwhich will be on reducing manufacturing costs and should enable SRT to increaseits royalties. The immediate focus of its AIS development plans is thecompletion of the AIS Class B reference design, for which the first contracthas already been signed.SRT is also investigating the avionics market where the Directors believe thata previous technology design trialled by the Company may give SRT a competitiveadvantage. The Company is also accelerating its exploitation of its IPRportfolio, with the objective of identifying further applications for the useof its patented linearisation technology.Key StatisticsPlacing Price 35p Number of Ordinary Shares in issue following the Placing 69,044,530 Market capitalisation at the Placing Price on Admission ‚£24.17 million Number of Ordinary Shares being placed on behalf of the 11,552,850Company Number of Warrants in issue following the Placing * 11,552,850 Percentage of Enlarged Share Capital being placed pursuant to 16.73 per cent.the Placing Estimated net proceeds of the Placing ‚£3.51 million* The Warrants, which have been admitted to trading on AIM, entitle holders tosubscribe in cash for Ordinary Shares at an exercise price of 40p each at anytime from Admission up to and including the second anniversary of admission orearlier in certain circumstances.Shamus Kelly, Managing Director of SRT, commented:"This is a very exciting time for SRT. Our shareholders have investedsignificant amounts in developing our reference designs enabling us to licensethem to a range of major electronics companies."We felt the time was right to float and raise further funding to advance thedevelopment of the business, both by signing further licence contracts and byhelping our customers to develop their versions of our designs more quickly,thereby generating royalties for SRT."Simon Tucker, Commercial Director of SRT, commented:"Our reference design approach has proved extremely attractive to the market.It enables manufacturers to de-risk and speed up the development of complexwireless products which are in demand in the market."We have already signed seven licence contracts which are generatingsignificant revenues even during the customers' product development phase. Ourfirst two TETRA customers are now nearing the production stage when we expectthe real benefits of our royalty model to start coming through."For further information please contact:Software Radio Technology plc Tel: 01761 409 500 Simon Tucker simon.tucker@softwarerad.com Westhouse Securities LLP Tel: 0161 838 9140 Tim Feather tim.feather@westhousesecurities.com The Communication Group plc Tel: 020 7630 1411 Richard Evans/Elizabeth Skerritt revans@thecommunicationgroup.co.ukNotes to EditorsTETRATETRA (Terrestrial Trunked Radio) is an international mobile radio digitalcommunications standard designed specifically for professional mobile radio(PMR) users. PMR users are characterised as users who rely on mission criticalcommunications to carry out their work, for example the police, military, firedepartments and transport companies. Digital systems offer advantages overanalogue systems, such as greater functionality, high level encryption and callreliability. Being an open standard, TETRA also enables true interoperabilitybetween different manufacturers' equipment, thereby facilitating the use ofhandsets from multiple manufacturers on the same network. In the same way asthe mobile phone market, PMR users, driven by their requirements for greaterfunctionality and performance, are currently migrating from analogue to digitalsystems, creating a rapidly growing market for digital radio systems.Worldwide, there are an estimated 32 million PMR users, approximately 85 percent. of which are still operating on analogue systems. The overall PMR marketis growing annually at approximately 5 per cent. per annum, primarily driven bynational security concerns and the resulting government investment. However,the digital element of the PMR market is growing more rapidly, due to themigration from analogue to digital systems by PMR users.Within the digital PMR market, there are a number of standards. TETRA is usedin more countries than any other standard: over 70 countries in total. The US,where approximately 50 per cent. of the current global PMR market is locatedand where Motorola's APCO 25 standard is prevalent, is the most notableexception to the widespread adoption of TETRA. Outside of the US, this standardis not commonly used.AISAIS, or Automatic Identification System, is an international standard that wasinitially developed to create an intelligent system using VHF and GPStechnologies to prevent large vessels colliding with each other. AIStransponders continuously transmit the vessel's position, course and speed,together with other identification details, whilst being able to receivesimilar information from other AIS transponders within range. Each transponderuses this information to calculate the relative position of other vessels andautomatically provide warnings of impending or potential collisions.When operating in coastal waters, AIS is designed to feed information toauthorities through base stations located onshore or any other strategic point.The information provided by each transponder is comprehensive and allows thevessel to be instantly identified, monitored and tracked. The system alsoprovides a text messaging facility between vessels for private, line of sightcommunications.AIS was initially implemented in full in the form of AIS Class A transpondersin accordance with the IMO SOLAS Agreement. A simpler variant of the AIS ClassA standard is now nearing completion and will be known as AIS Class B. AISClass B uses the same basic principles, but removes functionality which isdeemed not necessary for smaller commercial and leisure vessels to which ClassB has been targeted.ENDSOFTWARE RADIO TECHNOLOGY PLC