Maritime technology specialist SRT Marine Systems (SRT) said in a trading update that it expects sales this year to be heavily second half weighted as it begins to deploy large orders for its cutting-edge maritime domain awareness (MDA) systems.
It said that although first half revenues of £5.5m would be generated solely from transceivers, it had spent the period preparing delivery of large systems contracts in the second half as it starts to fulfil its £160m order book.
Broker Cavendish reiterated its forecasts of £8.1m adjusted pre-tax profits on sales up 130% to £70.9m, pointing to revenues milestones from SRT’s £40m Middle East coastguard contract and the £140m Southeast Asia coastguard contract that it expects to land in H2.
The broker also noted continued growth in SRT’s transceivers business, which grew revenues 6% in H2 and with sales momentum expected to accelerate in H2 and beyond as it launches new products.
SRT said it had finished H1 with gross cash of £3.9m and net debt of £5.8m after a £4.5m pre-tax loss in the period.
View from Vox
Investors tend to be sceptical when companies point to the need for strong second half trading, but in SRT’s case those concerns may be unfounded given the huge behind-the-scenes progress developing its high-value MDA business and the imminent culmination of lengthy tendering processes.
MDA is a complex area, hence SRT's seemingly slow progress, but offers huge potential to companies like SRT that can deliver the systems needed to manage what the International Maritime Organisation describes as the “security, safety, the economy or the marine environment".
Combined territorial waters and exclusive economic zones (EEZ) are enormous spaces to monitor - for many states, the maritime domain is in fact much larger than their total land area. For instance, the UK's EEZ is the 5th largest in the world at 6,805,586 km2, compared to the UK's land area of 243,610 km2.
MDA aims to help manage this enormous area and reduce various risks at sea, such as sanction evasion and compliance, as well as fishing violations and other illegal activities like drug and weapon smuggling, human trafficking, and terrorism. The main areas of concern are national security, law enforcement, vessel safety, and environmental protection.
The MDA market is still in its early stages of growth, as changes in maritime regulation begin to demand migrations to digital systems. SRT is an early player in the space, with a significant sales pipeline from private and government customers, and much room to grow as the MDA sector and associated technologies mature. Contracts in the MDA space tend to be long, with predictable follow-ons and long-term revenue visibility.