Srt Marine Sys. Regulatory News (SRT)

15 Jun 2006 07:00

Embargoed until 7am 15 June 2006 SOFTWARE RADIO TECHNOLOGY PLC ("SRT" or the "Company") PRELIMINARY RESULTS FOR THE 12 MONTHS ENDED 31 MARCH 2006 SRT, the AIM-quoted developer and licensor of digital wireless technologyreference designs that facilitate and fast-track the manufacture ofsophisticated digital communications and tracking/surveillance products withinthe professional homeland security market, today announces its maidenpreliminary results for the year ended 31 March 2006. The Company was admittedto AIM in November 2005.HIGHLIGHTS * Turnover increased 122% to ‚£3.13m (2005: ‚£1.41m) * Gross profit up 126% to ‚£1.56m (2005: ‚£0.69m) * Loss before tax (before exceptional item) slightly better than forecast at ‚£0.82m (2005: ‚£1.02m) * Successful flotation on AIM in November 2005, raising ‚£4m (before expenses) * Strong business development with TETRA licence contracts with HYT in China, Unimo/Mercury in South Korea and EMMT in Taiwan * The successful launch of SRT's low cost marine Automatic Identification System (AIS) Class B device at the London Boat Show in January 2006 * A further placing of ‚£4.25m to be completed on 20 June 2006, subject to shareholder approval, specifically to provide funding to address the significant market opportunity which the Directors believe is available in the AIS Class B market. Shamus Kelly, CEO of SRT commented, "The period since April 2005 has seen theachievement of a number of significant milestones in the development of SRT.The Company had a successful flotation on AIM and has received strong interestfrom institutional investors, particularly in the recent placing. Operationallywe have progressed our existing and new TETRA development contracts, which areall moving towards production, and therefore royalties for SRT, in thisfinancial year. The opportunity available to us in the AIS Class B market isdeveloping rapidly and we are seeing substantial interest in our product fromcompanies around the world."For further information:Software Radio Technology plc 01761 409500 Shamus Kelly shamus.kelly@softwarerad.com Westhouse Securities LLP 0161 838 9140 Tim Feather tim.feather@westhousesecurities.com Tavistock Communications 020 7920 3166 Christian Taylor-Wilkinson ctaylor-wilkinson@tavistock.co.ukCHAIRMAN'S STATEMENTOverviewSRT designs and develops complex wireless technology products, known as"reference designs" which combine hardware and software to create a completecore technology platform. The blue-print designs conform to internationalstandards and provide clients with a fully compliant design on the basis ofwhich a final product can be built.SRT licenses its designs to major electronics companies and charges itscustomers an initial fee for the technology transfer and design developmentcosts, then an ongoing royalty for its single source ASIC chip component,without which the device would not work.The Company has focused its energies on two distinct business opportunities -TETRA and AIS. TETRA is the secure, digital professional mobile radio standard,used predominantly by security forces, which is currently being rolled out inover 75 countries. AIS is a marine identification system which allows sea-goingvessels to be recognised by radar systems. SRT has developed a low-cost Class Bsystem, suitable for smaller vessels, such as fishing boats and leisure craft.Further information about each business division can be found below.Financial ReviewRevenues for the 12 months were ‚£3.13m (2005: ‚£1.41m), up 122% from 2005, dueprimarily to the recognition of initial fees on new TETRA contracts signedduring the period, as well as development and exclusivity fees payable onexisting TETRA contracts. Gross profit increased 126% to ‚£1.56m (2005: ‚£0.69m)in line with the growth in turnover.The increase in administrative expenses reflected the growth in the scale ofactivity as well as the addition of PLC costs from November onwards.Loss before tax (and before exceptional item) of ‚£0.82m (2005: ‚£1.02m) wasslightly better than market forecasts published prior to the Company'sadmission to AIM.As at 31 March 2006, cash resources were ‚£1.23m (2005: ‚£1.07m). This will besupplemented by the proceeds of the recent placing, further details of whichare set out below.PlacingThe Company has raised ‚£4.25 million, subject to shareholder approval at anextraordinary general meeting on 19 June 2006, through a placing of 9,042,552ordinary shares at 47p per share. The funds will be used to take advantage ofthe significant opportunity which has developed in the AIS Class B market.Exceptional itemAn exceptional, non-cash accounting charge to the profit and loss account of ‚£675,820 has been made in the year ended 31 March 2006 as a result of theimplementation of UITF 17 in respect of the grant of share options at the timeof admission to AIM.OperationsTETRA (Professional Mobile Radio)The key objectives within SRT's TETRA business have been, firstly, to providethe necessary support to our existing customers in order for their handsets toreach volume production as soon as possible and, secondly, to gain additionalcustomers.SRT now has TETRA handset development contracts with five customers, all ofwhom are anticipating volume end-user orders and volume production of handsets,thereby generating royalties for SRT, during the Company's current financialyear ending 31 March 2007.There are an estimated 32 million professional mobile radio (PMR) usersworldwide including TETRA, approximately 85% of which are still operating onanalogue systems. The overall PMR market is growing by approximately 5% perannum, primarily driven by national security concerns and the resultinggovernment investment. However, the digital element of the PMR market, in whichSRT operates, is growing more rapidly, due to the migration from analogue todigital systems. The Directors of SRT estimate that global demand will increasefrom around 500,000 units in 2004 to four million users per annum by 2010.SRT continues to work closely with its customers to advance the development oftheir handsets. The delivery team has grown to 15 people, all of whom have thespecialist skills to support our customers. In addition, we have made furtherinvestments to enhance the TETRA reference design, making it easier for ourcustomers to implement. This has included the provision of a frameworkman-machine interface ("MMI") and additional support to enable the deploymentof the full encryption capability of the TETRA international standard.A key development this year was the award of a contract for the supply of TETRAhandsets by a major agency of the Chinese Government to Tianjin Communication &Broadcasting Group ("TCB"), one of SRT's customers. TCB has already placed anorder with SRT for a small quantity of ASIC chips to enable a pre-productionrun of TETRA handsets. The Directors anticipate that TCB will commence volumeproduction within the next five months.Shenzhen HYT Science & Technology Co. Ltd, another TETRA customer, has alsoplaced an order of ASIC chips for pre-production manufacturing.The Company's contract with Hisense Co. Ltd has not progressed as quickly asanticipated. SRT has agreed to devote further resources to support thecustomer, thereby minimising the delay and ensuring the customer enters fullproduction by the end of the year.AIS (Automatic Identification System for ships and boats)The Directors have been particularly encouraged by the developments in the AISClass B market. The launch of SRT's low cost AIS Class B product in January2006 has stimulated much greater market interest than anticipated and a rangeof customer negotiations are underway, the largest of which involve nationalAIS systems.National AIS projects are currently being implemented in a number of countries,including the USA, Mexico, Saudi Arabia, South Korea, China and the UK andother European Union countries. The Directors estimate that the potentialglobal market for AIS Class B is 26,950,000 vessels, of which the vast majorityare leisure vessels.The marine business is now a separately defined business within SRT with aspecialist team seeking to maximise the emerging AIS opportunity.SRT has adopted a dual strategy in addressing the AIS Class B market. As withSRT's TETRA business, the Company offers customers a reference design model,under which SRT's design is licensed to manufacturers in return for licence andproduct development fees and ongoing royalties. In the case of AIS Class B,however, SRT is also marketing the Class B design as a complete product, whichis manufactured on the Company's behalf by a major electronics company inChina.Work has already commenced on the next generation of SRT's AIS Class B product,which will be smaller and cheaper to manufacture, increasing SRT's net marginper unit. We will also seek to develop an AtoN (aid to navigation) product,which is suitable for use on buoys and other off-board navigational tools.OutlookThe Directors believe that the Company is extremely well placed to benefit fromthe current and forecast growth in investment in homeland security around theworld.Our reference designs for both TETRA and AIS Class B product will be movinginto production phases and, supported by customer orders, product royaltypayments will result.Having raised additional funds, we are now in a strong position to continue thedevelopment of the existing products. Work is underway to reduce the costs ofboth our TETRA and AIS designs substantially to our customers, ensuring thatour designs are cost competitive and provide a rapid route to market for ourcustomers.Richard MoonChairman15 June 2006CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 MARCH 2006 31 Mar 31 Mar 31 Mar 2006 31 Mar 2006 2006 Total 2005 Exceptional audited Total ‚£ ‚£ Turnover 3,125,270 - 3,125,270 1,408,786 Cost of sales (1,569,125) - (1,569,125) (714,504) Gross profit 1,556,145 - 1,556,145 694,282 Administrative (2,389,906) (675,820) (3,065,726) (1,650,686)expenses Loss on ordinary (833,761) (675,820) (1,509,581) (956,404)activities before interest Other interest 35,243 - 35,243 1,014receivable and similar income Interest payable and (18,616) - (18,616) (62,079)similar charges Loss on ordinary (817,134) (675,820) (1,492,954) (1,017,469)activities before taxation Tax on loss on 191,435 - 191,435 366,328ordinary activities Loss on ordinary (625,699) (675,820) (1,301,519) (651,141)activities after taxation Loss per share (2.25p) (1.47p)(basic and diluted) The profit and loss account has been prepared on the basis that all operationsare continuing operations.There are no other recognised gains or losses other than those passing throughthe profit and loss account.CONSOLIDATED BALANCE SHEETAS AT 31 MARCH 2006 31 Mar 2006 31 Mar 2005 audited ‚£ ‚£ Fixed Assets Intangible assets 2,860,875 1,551,743 Tangible assets 324,199 162,503 3,185,074 1,714,246 Current Assets Stocks 290,091 134,737 Debtors 1,903,977 635,866 Cash at bank and in hand 1,233,431 1,067,650 3,427,499 1,838,253 Creditors: amounts falling due (890,347) (789,583)within one year Net current assets 2,537,152 1,048,670 Total assets less current 5,722,226 2,762,916 liabilities Creditors: amounts falling due - (439,743)after more than one year, including convertible debt 5,722,226 2,323,173 Capital and reserves Called up share capital 69,045 12,475 Share premium account 3,659,873 - Other reserves 5,724,512 5,416,203 Profit and loss account (3,731,204) (3,105,505) 5,722,226 2,323,173 CONSOLIDATED CASHFLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2006 31 Mar 2006 31 Mar 2005 audited ‚£ ‚£ Operating activities Cash outflow from operating (1,878,024) (1,411,510)activities Returns on investment and servicing of finance Interest paid (18,616) (62,079) Interest received 35,243 1,014 (1,861,397) (1,472,575) Taxation 191,435 366,328 Capital expenditure Payments to acquire intangible fixed (1,455,418) (813,403)assets Receipts from sales of tangible 198fixed assets Payments to acquire tangible fixed (293,850) (86,543)assets (3,419,230) (2,005,995) Financing Loans introduced 10,000 524,995 Issue cost of loans introduced - (85,252) Issue of ordinary shares 4,093,497 2,544,856 Issue cost of ordinary shares issued (518,486) (36,537) Increase in cash in the year 165,781 942,067 Net funds at 1 April 2005 1,067,650 125,583 Net funds at 31 March 2006 1,233,431 1,067,650 Reconciliation of operating loss to net cash outflow from operating activitiesOperating loss (1,509,581) (956,404) Exceptional item 675,820 - Depreciation 132,154 129,045 Amortisation 146,286 87,044 Loss on sale of tangible fixed asset - 997 (Increase) in stocks (155,354) (130,047) Increase)/ decrease in debtors (1,268,113) 46,858 Increase / (decrease) in creditors 100,764 (589,003) Net cash outflow from operating (1,878,024) (1,411,510)activities Notes 1. The financial information set out above does not constitute the Group's statutory accounts as defined in section 240 of the Companies Act 1985. The comparative financial information is based on the statutory accounts of Software Radio Technology (UK) Limited for the financial year ended 31 March 2005. Those accounts, which did not contain a statement under section 237 (2) or (3) of the Companies Act 1985 and upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 March 2006 will be finalised onthe basis of financial information presented by the directors in thispreliminary announcement and will be delivered to the Registrar of Companiesfollowing the Company's annual general meeting. 2. The results have been prepared on the basis of the accounting policies adopted in the statutory accounts for the year ended 31 March 2005, except as detailed below. Accounting standards introduced since that date have no impact on the accounting treatment adopted. On 19 October 2005, the company acquired the entire issued share capital ofSoftware Radio Technology (UK) Limited by means of a share for share exchange.This group reconstruction has been accounted for under merger accountingprinciples. The substance of the transaction was not the acquisition of abusiness but a group reconstruction under which a new holding company has beenestablished with all the former shareholders having the same proportionateinterest in the new holding company.The adoption of merger accounting presents Software Radio Technology plc as ifit had always been the parent undertaking of the group. As Software RadioTechnology plc did not trade in the year ended 31 March 200 5, the comparativeresults shown for the year ended 31 March 2005 and the financial position atthat year end are those presented previously as the audited consolidatedresults of Software Radio Technology (UK) Limited except that the share premiumaccount and capital redemption reserve of Software Radio Technology (UK)Limited have been classified as other reserves. 3. The Board is not recommending the payment of a final dividend. 4. Earnings per Ordinary Share - The calculation of basic earnings per ordinary share is based on losses of ‚£1,301,519 (2005 - loss ‚£651,141) and on 57,786,194 (2005 44,393,295) ordinary shares, being the weighted average number of shares in issue during the year. The warrants and share options issued and granted during the year are notconsidered dilutive of earnings because they would increase the loss per share.Similarly, share options granted post year-end are not considered dilutive ofearnings. As at 31 March 2005, there were no warrants or share options inissue. 5. The 2006 Annual Report will be posted to shareholders on or around 30 June 2006. -ends- ENDSOFTWARE RADIO TECHNOLOGY PLC