Srt Marine Sys. Regulatory News (SRT)

Contacts:

Software Radio Technology plc

www.softwarerad.com

+ 44 (0) 1761 409500

Simon Tucker (CEO)

simon.tucker@softwarerad.com

Louise Coates (Marketing Manager)

louise.coates@softwarerad.com

WH Ireland Limited

www.wh-ireland.co.uk

Tim Feather / Liam Gribben

+44 (0) 113 394 6600

Bell Pottinger

+44 (0) 20 3772 2500

Anna Legge (PR)

Elly Williamson

Molly Stewart

ALegge@bellpottinger.com

+44 (0) 1761 409500

About SRT:

SRT develops, manufactures and supplies maritime tracking technology and turn-key system solutions to marine stakeholders across the globe. The Company's products and solutions are used by individual vessel owners, port authorities, maritime infrastructure owners, coast guards and national security agencies to enhance their maritime domain awareness. Applications include the tracking of commercial and leisure vessels; sustainable fishery; anti-collision; search and rescue; waterway management, port and coast security; pollution management; and environmental management.

In early 2006, SRT was the first company to develop a low cost technology platform supporting the International Maritime Organisation (IMO) adopted data communications technology, AIS (Automatic Identification System). This technology transmits vessel type, current co-ordinates, course and speed, and the vessel's unique identifier, in real time - air traffic control for boats. As a result of a global IMO sponsored mandate for the use of AIS, today AIS is being adopted and implemented worldwide in marine market as the next generation of radar. SRT's systems are entirely developed in the UK with 95% of revenues derived from exports.

With circa 26 million vessels operational globally and a growing demand from national authorities enforcing vessels operating in their waters to fit AIS as standard, SRT, the leading global provider of AIS technology, is at the forefront of a rapidly developing and evolving multi-billion dollar maritime market.

+44 (0) 20 7220 1666

This year has seen SRT transform into a global maritime system integration company, providing a broad range of maritime domain awareness (MDA) solutions to the leisure, commercial and security market segments. We closed the year having achieved our financial targets with 25% year-on-year revenue growth, a substantial contracted forward order book, and an increasing validated sales opportunity pipeline.

Group revenue increased year-on-year by 25% to £10.7 million with a profit before tax of £0.3 million compared to £8.5 million and a loss of £0.4 million respectively in the previous financial year. The gross profit margin was 48% which is broadly in line with our long term target of 50%. Cash overheads remained tightly controlled at the same level compared to the previous year. Gross cash stood at £1.8 million with saleable stock valued at a cost of £4.3 million.

Revenue growth was primarily driven by our projects business which accounted for approximately 50% of sales, where we provide a customised, turn-key MDA solution to countries in the form of our integrated SRT Maritime Domain Management (MDM) product. During the year we closed and completed a US$5.3 million project in the Middle East, and signed a contract worth up to US$100 million for an MDM system for an Asian country which will be supplied in phases over the next three years, of which US$2.9 million was delivered during the financial year under review. We have a significant and growing pipeline of validated project sale opportunities, most of which have made substantial progress towards contract signing during the year. Coupled with our contracted forward order book, I expect this to be a significant growth driver in the new financial year and further into the future.

Sales from our OEM, module and direct to dealer sales channels which primarily address the global leisure and commercial markets grew 5% year-on-year despite challenging general market conditions. AIS is now a standard technology in the marine industry, sitting alongside radar in terms of importance and utility, and we therefore expect to see steady annual growth for many years across all market segments.

We continued to see demand from the EU Inland Waterway and Fisheries mandates as enforcement action has now started following the fit deadline in early 2015. The USCG AIS transceiver mandate which was announced on 30 January 2015 with a fit deadline of 3 April 2016 has not yet resulted in the expected surge in demand. We believe that this is due to a combination of factors, including a significant percentage of those vessels affected being out of operation due to the poor economic climate and minimal enforcement thus far. It is now our view that this latent demand will show in sales over the next few years as effective enforcement action is applied. We saw additional renewed mandate activity in other markets such as Russia, Mauritius and Colombia which we believe generated some sales for our distribution network during the year and will continue to do so in the future.

We continued to build our market position in the Ports, Waterway & Infrastructure market segment where we offer a range of monitoring solutions leveraging our core GeoVS and AtoN products. Sales during the year were £0.3 million with a high profit margin, but most importantly end customer understanding of these solutions and projects to implement these complex systems have developed significantly over the period which should reflect in increasing contract conversions in the future, generating a highly profitable business segment for SRT.

I am therefore pleased to report that SRT has made significant progress across all MDA geographic and application market segments. The forward visibility of sales opportunities has notably improved during the year primarily due to the progression of our project MDM opportunities and we look forward to continuing our successful delivery of those under contract and adding more to our order book and our pipeline in the future.

Operational Review

We have maintained a significant level of R&D investment, but with a greater proportion focused on our GeoVS display and data management product group to support our MDM system offer. On the transceiver side we have undertaken various software related enhancements to our existing products to include additional functionality. On our GeoVS product we have made significant functionality additions that are focused around enabling users to better harness and understand the large amounts of data generated by these systems. Going forward we shall continue to develop new hardware products to address the evolving international AIS standards and aggressively expand the functionality and capability of our GeoVS VIEWER and GeoVS HUB products.

With the growth in the number of active and soon to be active projects, we have significantly expanded our Customer Support department. We have successfully completed our first phase of this expansion which, in conjunction with our local in-country partners, gives us the resources to simultaneously support several MDM projects.

Market Review

Marine domain awareness is a significant global market. The market covers a wide range of applications from port security, port efficiency, maritime border security, fishery monitoring, search and rescue, environment monitoring and general waterway management. AIS has evolved to become a critical technology in all of these applications due to its proven and flexible functionality which in turn has placed SRT in a strategic position within the MDA market.

AIS is used within the general leisure and commercial markets to improve general maritime security and as more commercial boats comply with expanding rules and regulations requiring its use, we expect to see more non-mandated vessels to elect to acquire an AIS transceiver. With many millions of leisure and commercial boats in the EU and US, we believe that this offers SRT and its OEM and module customers a significant long term market opportunity which will grow gradually. SRT's full range of AIS product solutions and established sales channels into these market segments places SRT in a good position to benefit from this developing market demand.

In recent years, the importance of maritime exclusive economic zones (EEZ) for reasons of security and economics has been recognised by many countries, resulting in new initiatives to implement policies and systems which enhance their protection. The starting point for this is to identify and track marine activity in these zones and through data analysis, identify potential threats and or illegal activities. These are significant national projects which involve the provision of physical infrastructure, intelligent data management and display systems and AIS-based vessel identification transceivers. These national scale projects present a significant opportunity to SRT and one which we have started to crystallise following many years of working with governments and authorities around the world to plan these large national scale projects. Today we have visibility of a significant number of potential projects of which a subset worth over £200 million are sufficiently progressed to qualify for our validated sales opportunity pipeline and thus have the potential to convert within a three year time horizon.

Employees

SRT now has 45 full time employees, operating out of two offices: one in Cardiff and the head office in Somerset. We benefit from a rare capability of being able to develop our own sophisticated products entirely in-house to a standard which we believe is unmatched in our market. Our reputation for high quality, innovative products backed up by robust technical and sales support, is directly attributable to the skills and commitment of the SRT team. I would like to thank all our employees for another year of dedication and hard work towards delivering SRT's objectives.

Outlook and Strategy

SRT's strategy is to maintain our position as the world's leading developer and provider of AIS technologies, products and systems and to provide a range of derivative maritime domain awareness solutions for mariners, infrastructure owners and maritime security agencies such as Coast Guards and Navies with customised turn-key solutions with AIS functionality at their core. The worldwide adoption of AIS as a technology and our proven position in that market, puts SRT in an advantageous position to become one of the world's leading providers of not only black box and module AIS product solutions, but also of sophisticated turn-key maritime security and monitoring system solutions for ports, infrastructure and national maritime borders.

We expect to see the continuing conversion of projects into contracts from our validated sales opportunity pipeline as well as more projects qualifying for inclusion before converting into contracts, thereby generating substantial and sustainable growth in the future. Whilst such growth will not be without challenges, SRT has proven its expertise and capability to successfully design and deliver such systems and has taken steps to ensure that, working in conjunction with its partners, it is well able to handle the implementation of multiple projects simultaneously.

I therefore look forward to a particularly exciting year for SRT and would like to take this opportunity to thank our customers, partners, employees and shareholders for their work and support.

Simon Rogers, Chairman

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2016

Note

2016

2015

£

£

Revenue

10,683,639

8,522,134

Cost of sales

(5,515,775)

(4,168,698)

Gross profit

5,167,864

4,353,436

Administrative costs

(4,847,591)

(4,687,282)

Operating profit / (loss)

320,273

(333,846)

Finance expenditure

(45,549)

(45,587)

Finance income

645

319

Profit / (loss) before tax

275,369

(379,114)

Income tax credit

158,305

425,469

Profit for the year after tax

433,674

46,355

Total comprehensive income for the year

433,674

46,355

Earnings per share:

Basic

4

0.34p

0.04p

Diluted

0.33p

0.04p

2016

2015

£

£

Assets

Non-current assets

Intangible assets

6,076,204

6,055,165

Property, plant and equipment

139,269

110,543

Total non-current assets

6,215,473

6,165,708

Current assets

Inventories

4,258,556

4,960,959

Trade and other receivables

4,726,522

1,604,422

Cash and cash equivalents

1,862,048

2,151,232

Total current assets

10,847,126

8,716,613

Liabilities

Current liabilities

Trade and other payables

(2,849,583)

(1,425,846)

Financial liabilities

-

(1,000,000)

Total current liabilities

(2,849,583)

(2,425,846)

Net current assets

7,997,543

6,290,767

Total assets less current liabilities

14,213,016

12,456,475

Long term liabilities

Financial liabilities

(1,000,000)

-

Deferred tax

(293,163)

-

Total long term liabilities

(1,293,163)

-

Net assets

12,919,853

12,456,475

Shareholders' equity

Share capital

127,453

127,453

Share premium account

4,855,729

4,844,989

Retained earnings

2,446,015

1,993,437

Other reserves

5,490,596

5,490,596

Total shareholders' equity

12,919,853

12,456,475

2016

2015

£

£

Cash generated from operating activities

853,394

1,033,847

Corporation tax received

451,468

425,469

Net cash generated from operating activities

1,304,862

1,459,316

Investing activities

Expenditure on product development

(1,453,370)

(1,932,321)

Purchase of patent

Purchase of property, plant and equipment

Interest received

-

(106,572)

645

(54,160)

(19,775)

319

Net cash used in investing activities

(1,559,297)

(2,005,937)

Financing activities

Net proceeds on issue of shares

Interest paid

10,800

(45,549)

1,452,901

(45,587)

Net cash (used in) /generated from financing activities

Net (decrease) / increase in cash and cash equivalents

(34,749)

(289,184)

1,407,314

860,693

Net cash and cash equivalents at beginning of year

2,151,232

1,290,539

Net cash and cash equivalents at end of year

1,862,048

2,151,232