Morning Note – 19 November 2020

SRT Marine Systems - A solid H1 platform for Systems delivery in H2

The Interims are as announced in the October update; H1 2021 was better than expected considering the lockdown and leaves SRT well positioned to benefit from meeting Systems delivery milestones, receiving major cash payments and signing new contracts in H2. As last year, H1 revenues are just from Transceivers, with no Systems milestones booked in the period. Last year, that was a quirk of timing in project deliveries, but this year Systems deployments were paused due to the pandemic. Despite global lockdowns, the Transceiver business is growing impressively on the back of new products and channels. Meanwhile, Systems recommenced delivery of the Philippines BFAR system and awaits news on three major contracts in the Middle East, expected to be signed and started this H2. Importantly, the group cash position is strong; £8.5m of Systems payments and the £5.3m April refinancing left gross cash of £5.0m at September; vital for working capital to deliver the Philippines project, which continues to make solid progress. Otherwise, investors await the anticipated new Systems contracts currently in negotiation. The fundamental demand drivers for Maritime Domain Awareness (MDA) systems remain undiminished and the validated sales pipeline remains firm at 17 new contract opportunities totalling £550m.

Morning Note – 8 October 2020

Intercede (IGP): Corp Interim trading update | SRT Marine Systems (SRT): Corp SRT remains in a strong position for H2 deliveries

SRT Marine Systems - FY 2020 results in line with April update

Today’s results for YE March 2020, are somewhat historic having been flagged by the trading update back in April. However, they do reflect the impact that COVID-19 has had on international business, as well as actions SRT has taken to secure its future. Lockdowns put a hold on existing and new system projects, causing a delay in both revenues and expected contract signings during the final months of FY 2020 through H1 2021. Also, we highlight that SRT has prudently impaired an existing long-standing contract for a monitoring system in the Middle East to clear the decks for a new larger contract that includes both monitoring system and transceivers. Existing Systems contracts are again under way, with £8.5m received on deliveries, and negotiations have restarted on the expected new contracts. Meanwhile, the Transceivers business grew by 24% in the FY 2020, and surprisingly, is reported to be trading marginally ahead of last year in FY 2021 to date despite COVID restrictions.

Morning Note – 7 September 2020

Avacta (AVCT): Corp | Belvoir Group (BLV): Corp | Byotrol (BYOT): Corp | Chariot Oil & Gas (CHAR): Corp | Destiny Pharma (DEST): Corp | Omega Diagnostics (ODX): Corp | SRT Marine Systems (SRT): Corp | Telit (TCM): Corp

Morning Note – 10 July 2020

Belvoir Group (BLV): Corp Moving the strategy forward | genedrive (GDR): Corp Trading and COVID-19 Test Update | InnovaDerma (IDP): Corp FY trading update | SRT Marine Systems (SRT): Corp Projects business recommences after lockdown

Morning Note – 17 April 2020

ANGLE (AGL): Corp Utility in Head & Neck Cancer – peer reviewed paper | Circassia Pharmaceuticals (CIR): Corp Strategic shift | KRM22 (KRM): Corp Consolidation of Irisium | SRT Marine Systems (SRT): Corp Bank backs recent raise with a further £2.5m of cash

Morning Note – 8 April 2020

Avacta (AVCT): Corp | D4T4 Solutions (D4T4): Corp | Real Good Food (RGD): Corp | SRT Marine Systems (SRT): Corp

SRT Marine Systems - Balance sheet strengthened to deal with COVID delays

FY Mar 2020 results appear to be ahead of expectations with revenue of £18.8m against our £17.5m forecast (as revised last month); we adjust our expectations accordingly. COVID-19 restrictions are of course imposing delays on both existing projects and the imminent signing of the new contracts due in the Middle East. To deal with this, SRT has implemented an operating plan to reduce costs and has significantly strengthened its cash position, raising between £2.8m and £7.3m. This is being done through a £1.8m equity raise; a £1.0m issue under the existing Secured Medium Term Note Programme; and an application to its main bankers for a facility of up to £4.5m under the Coronavirus Business Interruption Loan Scheme. The funding will enable SRT to maintain the required levels of development and deployment through the current period of restrictions. We are withdrawing our FY Mar 2021 forecasts pending greater visibility.

Morning Note – 10 March 2020

Amino Technologies (AMO): Corp | SRT Marine Systems (SRT): Corp

SRT Marine Systems - Coronavirus delays Middle East contracts to H1 2021

The virus outbreak has led to delays in key new Middle East contracts that had been expected to be signed – with c.£14m revenue booked – during H2. The virus issue is understandably taking priority with governments and border forces, and the contracts worth an aggregate £65m should now be signed post YE. Although the Philippines contract delivery remains on track, delay to the new contracts cuts FY 2020 guidance significantly; revenue falling from £30.4m to £17.5m and Adj. PBT of £3.7m swinging to an Adj. LBT of £3.8m. We now expect YE net debt to be c.£4m. The cashflow will be supported by drawing on the £10m secured loan note programme until some major milestone payments (c.£10m) are received from the Philippines in H1. This is a matter of timing, with management confident (underpinned by written assurance after three years of work) that the contracts will indeed be signed later this year as the crisis eases. Further guidance will be given on FY 2021 but we feel these contracts could see revenue exceed £50m with Adj. PBT in double figures. The long-term strategy and delivery remains in place. These contracts are not going away; just a short-term delay due to a global issue.

Bigblu Broadband - Quickline partners with CityFibre in adjacent urban areas

Quickline has today announced that it has joined CityFibre’s full fibre networks so that it can provide ultrafast broadband to homes in Doncaster, Leeds, Huddersfield, and Batley & Dewsbury in 2021. These urban areas are all adjacent to where Quickline will have its own fibre-backed wireless infrastructure, and to provide a retail broadband service to subscribers, Quickline will wholesale access to CityFibre’s network. This will see Quickline manage its marketing and customer relationships in these areas, and Quickline will pay CityFibre an installation charge and monthly fee for each subscriber that Quickline signs up to CityFibre’s network. The expansion in Quickline’s reach will enable Quickline to draw upon its strong foundations in Northern England, further develop its reputation for delivering subscribers high-speed broadband, and organically grow its subscriber base with minimal upfront cost. This highlights that Quickline’s momentum is continuing to accelerate, after it won four tenders in September-December 2020 to provide fibre-backed network coverage to 32k premises in the next two years. It also means that momentum is continuing to build strongly for the Bigblu Broadband investment case, and we look forward to hearing more about BBB’s progress at its FY20 results in March.

Telit - Bid talks end leaving Telit free to build value

Following the formal end of takeover discussions, we are able to recommence our coverage of Telit. Today’s trading update reveals Telit has performed very well through a year overshadowed firstly by the restrictions of the COVID pandemic and then by the distractions of potential bids. When the pandemic began in early 2020, Telit was able to act quickly and decisively, moving some 850 employees to home working within a few weeks. Although customer demand naturally slowed, operations have continued uninterrupted throughout the period and the business has displayed great resilience. We take this opportunity to reissue forecasts for FY20 and FY21 and set a near-term target price of 345p based on 14x EV/EBITDA, in line with the current average on the finnCap tech indices.

Maintel - Interims

Interims are in line with the guideline full-year performance we quantified at the time of the June prelims –£5m of EBITDA and £5.3m of free cash flow derived from £53m revenue, with guidance of consistent performance in 2H20. We reintroduce forecasts for FY20, £9.5m EBITDA from £105m revenue, as 3Q sees the re-invigoration of projects postponed through COVID-19 and the opportunity for recovery into 2H20 and FY21, on top of £3m annualised cost savings. Cloud & software grew to 25% of group revenue; recurring revenue is at 74%; and new CEO Ioan MacRae’s measures to deliver efficiency and growth will increasingly bear fruit in 2H20 and FY21. Even if you think our 600p (11.5x a depressed level of EBITDA) target is wrong, the current share price is more so, with a current FY20 P/E of 6.0x and EV/EBITDA of 5.6x, and 1H proof of credible FY forecasts.