SimiGon revenue increase dampened by order book reduction

SimiGon on Monday posted a double-digit increase in annual revenue, though the company saw $6m wiped off of its backlog order book due to a dispute with a customer.

The simulation and training solutions specialist's revenue for 2018 came in at $5.0m, up 16% compared to the year before, leading to an 18% improvement in loss before tax at $0.8m.

The AIM traded company said a key contributor to the loss was the recording of a doubtful debt provision for a total of $0.45m related to a delay in payment from a customer in the civilian training market, which has led to legal action being initiated.

SimiGon has also had to remove expected future revenues from this customer, thus revising its backlog order book down from $20m to $14m, which the company expects to recognise over the next ten years.

The impact of the revenue improvement was also blunted by a 12% increase in research and development costs of $2.3m due to salary expenses and a 38% increase to general and administrative expenses to $1.5m on the heels of a provision for doubtful debts recorded in year 2018 of $0.5m.

Ami Vizer, chief executive of SimiGon, said: "Though 2018 was one of our strongest product delivery years, the on-going transition to a SaaS model impacted our financial performance as license revenue is now spread over 5-12 years. As mentioned on the company's previous trading update, the impact of this migration to a SaaS model can be demonstrated by the fact that license revenue is reduced by 85% which in turn impact short term yet, I expect, will improve the long-term financial performance of the company."

The company's plan to focus on long-term, high value, stable SaaS license contracts is intended to provide better revenue and profit visibility as a result of distributing revenues over the period in which they are provided rather than on single lump sum license sales.

"Our growing footprint in the training and simulation industry is propelled by leading, game-changing technologies, diverse global partners, and the need for advanced training systems and positions the company well to deliver improved financial performance in 2019 and beyond," said Vizer.

SimiGon's shares were up 2.95% at 11.32p at 1557 BST.