SRT Marine upbeat on confidence in coming contracts

SRT Marine Systems said in an update on Thursday that it was expecting revenues of £30m for the year ending 31 March, making for a 265% increase year-on-year.

The AIM-traded company said it was also expecting to generate anm EBITDA profit of £2.5m, and a loss before tax of £1.0m.

It said its systems business was anticipated to generate revenues of around £18.0m, up from £0.6m a year earlier.

Meanwhile, its transceivers business was set to generate revenues of £12.0m, up from £7.6m.

However, the results would be lower than market expectations due to the delay of material systems business project milestones that had been expected to complete by the end of the current year, but were delayed to the early part of the new financial year.

SRT announced that it had signed a formal letter of intent for a new coastguard project worth £145m.

The project would be for the delivery of a turn-key maritime surveillance system that would enable enhanced maritime safety, security, and protection of large areas of environmentally sensitive marine areas.

It said the customer was financing the project by way of a loan organised and supported by the UK government overseas UKEF agency.

Once the loan arrangement process between the two governments was concluded in the coming months, the project would proceed, with SRT expecting to generate “significant” revenues in the coming financial year alongside its existing system projects.

SRT added that it was continuing to grow a pipeline of prospective new future project opportunities with existing and new customers.

The pipeline currently contained identified specific projects with an estimated total value of around £1.4bn.

Its validated sales pipeline contained £260m of new follow-on projects from existing customers who were now looking to move on with the next phase of their long-term maritime surveillance strategies, and £275m of new projects from new customers, including the new £145m coastguard contract.

In addition to the pending conversion of the letter of intent contract, there had been recent material events that had significantly improved timing confidence of two other potential projects.

Firstly, a series of meetings “at the highest level” for another prospective new coastguard customer that wanted to build up a significant national-scale system over the next 10 years in a series of incremental annual projects, with an indicated annual project budget in the region of £50m, looked set to start from 2024.

Secondly, an existing customer that had secured funding of up to £150m to undertake a significant expansion of its existing SRT-supplied system would also begin from 2024.

SRT said its transceivers business grew year-on-year by an estimated 58%, with the coming year set to see a focus to significantly expand distribution in the North American market, and the launch of new products that would expand its addressable market opportunity.

“The £145m letter of intent signed earlier this week is a major milestone for SRT,” said chief executive officer Simon Tucker.

“Not only because it is a significant project in itself, but because it adds another coastguard customer who has an active long-term strategy to move to an intelligence lead operational model and therefore have an active plan to build up their independent maritime surveillance and intelligence capabilities; and therefore future follow-on contracts.

“Whilst I will be surprised if our transceivers division can maintain its exceptional 58% year on year growth, the adoption of digital systems like AIS in the marine world is at its early stages, our products are the market leaders in all categories, we have significant new products coming and established and motivated distribution, and therefore the ingredients are there for continued excellent performance.”

Tucker said that notwithstanding the deferral of some revenue to the next financial year, the firm’s prospects looked “extremely promising” for both business divisions.

“There will of course be significant challenges to manage scaling, however we have made investments in product and people and learnt many lessons and so SRT is in a very favourable position.”

At 1410 GMT, shares in SRT Marine Systems were up 11.18% at 42.25p.

Reporting by Josh White for Sharecast.com.