I am delighted with the progress made by SRT this year as we have started to capitalise on the strategic decisions and investments we have made in maritime surveillance and management over many years. This has resulted in major contracts being won and excellent progress being made in advancing our pipeline of contract opportunities. With a significant pipeline of near and medium-term opportunities in active negotiation, existing ongoing systems contracts, all of which is underpinned by our steadily growing transceivers business I believe this year's performance sets a clear financial direction for the future. Group revenues increased significantly year on year from £5.3 million to £20.6 million, generating a gross profit margin of 45% (2018: 43%) and a profit before tax of £3.2 million (2018: loss before tax and exceptional items of £4.2 million). Our transceivers business generated revenues of £6.0 million which is a 19% year on year increase, with the balance of £14.6 million coming from our systems business. During the year we successfully raised £7.0 million of new equity to invest in the acceleration of system product development and the expansion of our systems delivery team and, as at year end, our gross cash balance was £3.9 million (2018: £1.4 million). During the year we fully repaid our outstanding bank loan, leaving outstanding three-year term loans of £5 million with a further £5 million of optional borrowing head room on our £10 million loan note programme facility. Our receivables balance increased significantly to £18.0 million (2018: £4.4 million) primarily due to major project milestone completions towards the end of the year, and subsequent to the year-end we have received over £4 million of cash payments as per agreed project payment schedules. As our systems business ramps up, due to the very high invoice value of project payment milestones, we expect to see a normalised situation of much greater value movements in our cash balances, debtors and creditors commensurate with the increasing scale of our business. Our raw cash overheads, exclusive of adjustments such as exchange rate adjustments, depreciation, amortisation and development capitalisation were £6.6 million for the year compared to £6.1 million for the previous year. This reflects our increased activities, particularly across systems development and project delivery support. Following required accounting adjustments, the reported administrative expenses for the year amounted to £5.9 million (2018: £6.5 million), which is a 10% decrease year on year, the reduction being due to a profit in respect of foreign exchange gains rather than a loss reported in the previous year. Given the scale of SRT's business operations, we have and continue to maintain, a tight control on overheads. This has included us focusing our resources on the most beneficial and surest opportunities and where appropriate deciding to terminate smaller contracts such as a small contract in Ecuador so as to ensure that our limited resources are always focussed where we can obtain the maximum financial return. However, with such growth in prospects, we expect a gradual growth in the year ahead to support and enable expected new business. This will include the expansion of our Product Management Team to accelerate the creation of new and innovative product functionality and linked to this growth in our Product Development Teams to accelerate functionality implementation. Furthermore, we are expanding our Delivery Team so we can simultaneously manage multiple system projects across the globe as well as investing in additional resources in sales and marketing as we seek to deliver against the increasing number of opportunities. Our transceivers business which sells maritime communication devices based on AIS achieved year on year growth of 19% to £6.0 million. The OEM & Module division contributed £3.7 million after annual growth of 12% and our em-trak division £2.3 million after annual growth of 34%. This growth is a result of a combination of factors including continued voluntary adoption of AIS by leisure and commercial vessel owners, increased sales distribution, and market recognition of the quality and performance of our product range. In the year ahead, through the continued execution of our long-term strategy, we see a variety of new growth opportunities. These include the general growth in adoption of AIS, expansion of our distribution network, new products, marketing initiatives and special projects with partners such as sales deriving from the supply of blue-force encrypted AIS devices to a large government agency in North America, a contract that was signed earlier in the year, and the supply of larger batch quantities of specialist products such as our fishing buoy tracker device. Our systems business which provides integrated maritime surveillance and management systems to coastguards, fishery and other maritime agencies was the main driver of growth this year. Each of our systems vary in exact configuration and scale, but are based on our core SRT-MDA system platform which continues to evolve with new functionality being added every few months. Every system supplied comprises of multiple different components operating together as a single system and will comprise SRT hardware and GeoVS software as well as third party sourced components such as radars, surveillance cameras and satellite data. We believe that in the future, the supply of data derived from satellite systems to our customers will develop into a profitable recurring revenue stream. This data will be purchased by SRT from the increasing number of competing satellite system operators and aggregated into a single satellite data solution tailored for a specific customer's requirements. This will allow them to fuse this data with data obtained from their terrestrial sensor systems and use the analytic functionality in GeoVS to identify situations of interest at longer ranges. In addition to this, we expect each customer to become a source of further contracts in the future as they continue to expand and evolve their systems once the initial baseline is installed. Following an extended international tender process, in December 2018 we signed a contract worth £32 million (at current exchange rates) with the Philippine government to deliver the SRT-VMS system configured and architected to their specific requirements. The SRT-VMS system is our standard SRT-MDA system configured for fisheries monitoring and management. The contract is over four years with the monitoring system infrastructure expected to be delivered and commissioned within the first twelve to eighteen months, and thereafter the continued provision of satellite surveillance data into the system for use by the integrated analytics. During the year we made good progress with the project, completing a number of delivery milestones and expect the system to gradually come on-line over the next nine months to become the world's largest single fisheries and marine environment monitoring system. The system, which is architected to be scalable in the future, will provide an impressive array of sophisticated functionality such as electronic fish catch reporting and IUU detection analytics that will enable the customer to significantly enhance the control and management of their fisheries and marine environment. Our validated pipeline of new system sales opportunities has continued to grow and comprises of multiple opportunities varying in size from under £1 million to over £100 million, providing SRT with a clear future direction. Each is at a different phase and status in the sales process with some expected to be some years from contracting and others in their final contract phase. These are typically government projects of significant size and complexity requiring extensive planning and preparation by the end customer. As such they usual take considerable time to reach the point of contracting and forecasting exact dates is impossible. However, this lengthy process is also an important and valuable part in the sales process as it allows a relationship to develop between SRT, the end customer and the necessary network of local installation partners. Of particular note, within our sales opportunity pipeline are six pending system contracts in the Middle East and SE Asia which we expect to be contracted in the relatively near future. Upon contracting these six have an aggregate value of over £220 million over an expected delivery timeframe of one to three years depending on the specific project scale and customer requirements. These projects are a combination of Coast Guards and Fisheries and include both existing and new customers where we have developed close working relationships over many years. We therefore see considerable and growing opportunities across the globe for sophisticated largescale fisheries monitoring and management systems (VMS) and integrated coast guard surveillance command and control systems (MDM). We have also identified new opportunities in areas such as environment monitoring and plan to develop a dedicated sales division to address this and will again use our core SRT-MDA system with customised configuration to deliver a robust and innovative solution. Our considerable and sustained investments over many years have endowed SRT with a unique combination of proven technology, know-how and market presence in these markets which we believe are only just starting and offer a long term sustained opportunity. The biggest challenge for SRT in the coming period is the practical day to day management of this rate of growth. System contracts take a long time to mature yet once contracts are signed, our customers expect prompt action, quick implementation, continued support as well as engagement for follow-on contracts. Your Board recognises this fact and has worked with management to structure the business accordingly and increase resources prudently in key areas such as Systems Delivery and Product Development. As the business progresses, this process will continue to ensure that we remain a reliable and trusted supplier. Looking to the year ahead and beyond, our target market of maritime domain awareness presents SRT with numerous opportunities and appears to be at the beginning of a new technology adoption cycle that started only a few years ago and we expect to significantly expand in the years to come. Our transceivers business has established a solid pattern of annual growth which we expect to continue. Our systems business has existing contracts to complete and a backlog of opportunities, some of which we expect to contract in the coming months. I therefore believe that our company will continue along the growth path established this year. Finally, I would like to thank everyone at SRT and our shareholders for their long term and exceptional support for the company, without which we would not in this exciting position. Kevin Finn Chairman Date: 17 July 2019 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2019 |