SRT Marine Systems plc

Good morning, everybody. I'm Simon Tucker from SRT Marine Systems, and this is one of our live unscripted webcasts. I'm saying that because a number of you will be new to this and give you a bit of background. So the rules of the game are there's quite a lot of confidentiality around that I need to be cognizant of. So I apologize if that's a little bit frustrating, but we are dealing with... bits of national security of our customers and also some commercial confidence. So excuse me if I don't fully answer questions that you have. So let's talk about our business. You're now starting to see, as you've seen this morning when we've announced our results, which should be of no surprise because we indicated that immediately after the end of the actual year within a few days, a big increase in our revenues and profit. And that is a result of a number of contracts in our systems business being delivered in parallel. Our business model and our objective was always that, and so now you're starting to see that come through, and we expect that to carry on into the future, as we've said in the statement. I don't intend to linger and drone through the financials. You can read those. I don't think you need me to read those back to you. So the purpose of the webcast is to provide you with some insight into the operations of the business and give you an opportunity to ask some questions, which I encourage you all to do, and that's anonymous. So let's start with what was our transceivers business, which we're now calling our navigation safety business. And the navigation safety business is all about providing devices that improve navigation safety. That starts with AIS, which is our heritage for the last 15, 20 years, where we lead the world in providing black box AIS transponders. But we're now moving into new areas. And those areas are voice, where you have VHF communications in the marine world, which marry with AIS. And we're also now looking to leverage our 5000 dealers that we have around the world to expand that product portfolio into other areas. Because basically we see in navigation safety, the world is going digital. You're fusing all your data onto your supercomputer in your hand, which is your computer. mobile phone or it might be your tablet and you want all that information available to you and you also want boats to communicate directly in real time so particularly in commercial settings like ports and waterways the boats can communicate with each other autonomously and automatically and therefore navigate more safely. So down to the specifics of that, if we start with one of the big product developments that we've had going, which is Nexus, this is something that is a real innovation in our world. And Nexus is a product that combines AIS and VHF radio communications into a single box. That in itself is technically very challenging, but is not a sort of... a shocking innovation. But what is a real innovation is to be able to use your mobile phone as the communicator anywhere on the boat and to connect lots of mobile phones onto those and watches and use that as your communication tool. So you're not sort of fixed to the helm, if you can imagine when you're driving your boat. And so it actually enables your mobile devices to become a communication network on your boat, whether that's communicating to your crew, because you can't see on the bow what's going on when you're when you're parking it, maybe you're on the bow, but the port authority is trying to communicate with you. Perhaps you're ordering a cup of coffee when you're up on the bridge, a whole manner of stuff, because boating is never a sensible financial decision. It's about convenience and it's about safety. And so NEXT has been a massive project for us. It has taken a lot longer than we thought to do because we want it to be a superlative product. The smoothing of functionality such that not just that the radio works, but actually that the functionality works on your cell phone and on your watch is something that just has taken a long time to get right. But I am pleased to say that this baby here Which is Nexus will ship to all our dealers from January. This is now ready to go. We're doing our final final bit of testing. It's all type approved, ready to go. And it has taken a long time, as I said. I mean, we've spent hours down to the talk on the on the knobs here, the channel and the volume knobs. How do the buttons feel? all of those things to bring a superlative product to market so from january uh the back orders that we have from our dealers will be filled and then we will then continue to then fill demand we will go slow initially it's a new product coming to the market and so what we want to do is to get the feedback how are people using the mobile applications and devices and things um Are they indeed perfect or are there some little gremlins that we need to fix? This product will probably have a life of 10 to 15 years. So it's not like a consumer product that it comes out, we produce it for six months and then something else. So we're really excited about that. That then moves our development teams away from that and then onto other stuff. And we see a plethora of opportunity. So we're looking at more transceivers for our systems business, particularly around artisanal fishing. We see opportunities in the specialist aviation segment where you need very high performance and certification and prices are commensurately high. So an AIS transponder that goes onto a helicopter, for example, is very different to the one that goes onto a boat. But the price is about 20 times higher. And for us, that's a pretty easy leap to make and enter into that market segment, which is pretty significant, in fact, worldwide. So we see a lot of opportunity there. Similarly, in our DAS division, which is in our navigation safety business, where we're talking about digital ATONs, we're expanding that. We now have a dedicated salesperson there pushing that forward. We're looking at integration of multiple sensors, improved what's called GNSS, common word GPS, but positioning technology that will go into those to improve the the accuracy of the location of the buoy that is being transmitted. If you can imagine, GPS is plus or minus five meters. If you have the ship at plus or minus five meters and the buoy plus or minus five meters, you have a 10-meter variance, which is no good for very narrow channel navigation. We see a huge amount of work and opportunity coming up in our navigation safety business. Moving on to our systems business, This is something that we entered 10 years ago with a vision that the world would want to know what's going on in the marine domain. It's a pretty obvious thing to us. And we have been fortunate to have the support to get to where we are today, where we have the world's only real national scale integrated surveillance and maritime management system that enables a national marine authority, if that's a Coast Guard, or Ministry of Interior or National Maritime Authority to integrate all data sources into a single platform and share that with multiple user groups. And those multiple user groups then have functionality that they can use to narrow down into their particular interest. So if you're talking about a fisheries department, they only need one system to monitor everything from far-flung commercial vessels to artisanal vessels. If you're talking about a Coast Guard, they have one system that can help them with SOS or detection of smuggling. And all of this is about, when we are talking to our customers, a thing called intelligence-led operations. So in the old days in the marine world, you would go out on patrol and hope expect to come across something something happening but actually what you want to want is the system to be analyzing targets detecting targets analyzing the characteristics of those targets to determine whether they're doing something what they're doing in fact and whether that's of interest to you and then deploy your appropriate response to them and in fact the system now can actually start to predict where those things might happen so you can strategically place assets, either to create a deterrence or to intercept. This is a much more efficient and effective way of operating. And so we have pioneered that at a national scale and gives a country a complete independent sovereign system that they can take forward and grow incrementally. It becomes, as they get bigger, extremely cost effective for the customer to grow that. So Our focus has been around developing that system. We have a proven solution today, which is in operation around the world. But it's a never-ending path of development of improving functionality in lots of different what we call functionality pillars. So a functionality pillar could be system security. Functionality pillar could be AI. I chuckled earlier, I was looking at ADFN and somebody said AI hot air. I tend to believe that a lot of AI is hot air. But what's interesting for us is the AI that we're using is being used to solve real problems. We're not on the hunt for problems to solve. It's not a case of AI first, problem second. The problems were first. And now we're using AI and other techniques to provide insight to the customer within their system and helping them make the right decision and deploy the right asset. And I think that we're one of the rare companies around that really has real problems to solve where AI is applicable within a suite of other functionalities such as visualization, such as mission management, such as reporting, et cetera. And so that development work continues. We've grown our team pretty substantially. We're going to continue to grow in certain strategic areas, particularly around edge computing, which is basically doing your data processing right at where you accumulate the sensor information, and also around analytics and visualization. And the combination of those three areas Pillars give you what's called insight, gives the customer insight and a suggestion of how they can then operate all within this ILO doctrine. So if I look back over the last five, six years, five years ago, I was talking about what we call a validated sales pipeline, which we put, I think, the value of about 500 million pounds. Well, in that short, relatively short period, which has felt like a long time at times, we have taken that 500 million and we've converted 330 of that into contracts. At the same time, that validated sales pipeline has grown. As well as having 330 removed from it, more has come into the top of the bucket, and today we're at about 1.8 billion. Some of that sits... with existing customers and some of that is with new customers. Today we have five sovereign customers and we call them sovereign partnerships. Those customers have committed themselves, not to us necessarily, they've committed to building up a maritime domain awareness digital system and an integrated national platform. And they have selected us Therefore, we see a range of contracts coming up over the next decades where they're building up those systems. Perhaps it starts with a Coast Guard in one area and then they expand it to another area. For example, in the Middle East, we have a project at the moment where we started on one coast and now they're expanding that to the next coast. And the next project after that would then be to integrate perhaps with their fisheries department or their marine department so they can share information. Perhaps the next step after that is then to, in this particular case, integrate some new sensors. It's a never ending build up. and renewal of the systems as their aspirations and their coverage grow to fully digitize their marine domain. So each existing sovereign partner we see as a long-term multi-year partnership in the series of contracts coming up. In addition to that, we have new countries that have taken the strategic decision that they want to have a strategic maritime surveillance system. and have come to us to seek that out. And we've recently announced the award of a plus $200 million contract. We're now in the process of completing the contracting process. This could take quite some time. several months, but I'll keep you updated as that progresses. Obviously, there are no guarantees these things end up with a final contract as governments progress, but we expect the pattern you've seen over the last few years to continue going forward. The other benefit that we're now having, and I hope the person I'm going to talk to gets to this point in the webcast when they listen to it, is the accumulation of knowledge and know-how into SRT. And I think it's well to remember that the customers are buying our product. And our product is produced by about 160 people in SRT today. So I publicly want to thank them. You often see my face all the time. But the customer is buying a product and a service that is delivered by a whole team of people that is delivering that to the customer. Equally, we're now getting feedback from the customers who are taking ownership of their system. And there's a particular individual that I'm not gonna name who has been extremely valuable to our business in providing real insight into the way the future of maritime domain awareness should be and to push us forward in the right direction with the right functionality and the right way of operating. He's not an easy chap, but he knows his stuff. He is extremely ambitious. And it is massively beneficial to SRT. It'd be much easier if I could name him, but I'm not going to. So all in all, what you're now starting to see financially is the product of all that investment. Going forward, what we expect to see is that investment being leveraged. The marginal increase in our overhead to ship lots of nexuses and other products, once we've invested in developing this, is negligible. And so now those profits start to come through. We've done the R&D. We've done all the development. Huge investment. We now have this... Capital item here, which we can now manufacture in volume and ship. Similarly, with our systems business, we always set out to have a scalable business model where the marginal increase in cost to deliver another project is relatively small to the gross profit. And therefore, as we get more projects, yes, our overhead increases, but less than the profitability. So therefore that drives the success as well as having these long-term partnerships. So those of you who've known me for some time, I'm always optimistic, but I think now the figures are bearing that out. The delivery performance of our people in development and actually delivering our systems is also bearing that out. And the reaction from our customers that are being amazed by the functionality and the capabilities in the real world is also a testament to that. And that's fundamentally the most important thing when presumably you're looking at a business to be part of, that it has that longevity and people want the product. There was a comment, on one of the ADFN things, again, that, you know, our website's looking a bit dusty and I think the presentation there was two years old. Yes, and it should be more up to date, but we have no shortage of inquiries or anything else. So, you know, in some respects, it's an irrelevance and it demonstrates the demand and the reputation that we have in the market. That's not to say we won't update it. So I think that I've covered everything. I'm going to have a little look at see what questions people have asked me and try and answer them. So there's a few. I'm not going to identify who's asked them. So. The first one here, have USA tariffs affected the company? No. So we learned in COVID that we have a strong brand, particularly for our transceivers going into the United States. And we have just added the value of the tariffs to the price and people keep buying them. So I think if you've got a $500,000 boat and the transponder that you're going to rely on is going to cost $100 extra, I'm not sure that that's going to worry you. The same question has about future contracts. and existing contracts agreed prior to January this year, that's an irrelevance. We don't have business in the United States for our systems business. And each country is independent. So our contract with Kuwait, they're an independent sovereign country with their own massive, massive ambitions. And what America or any other country may or may not do is not relevant to that. So how are all the implementations going? They're going well. And according to plan, the plans change on the day-to-day basis. Are there glitches? Yeah, there is always glitches when you're implementing something. If you're implementing a $200 million project with massive complexity of civil engineering and electrical engineering, there are glitches on an hourly basis. But we have very good in-country teams that handle that. We're extremely open with our customer about how that is handled. But there's nothing that's fundamental to prevent us from delivering any of these projects. And everything is going well. If anything, we find that the customers want stuff much faster than we have planned to deliver it. Once they start to experience the technology, and actually can see its benefit immediately. Right, can I have the full system now? But actually, if you have to build a tower and order the steel and do the foundations and all that sort of stuff before you can put the radars on, that takes a little bit of time. What about exchange rates? Well, they are a bit in flux, but we had anticipated that in our costings, so I don't see any effect there. Have we considered pros and cons of a dual listing elsewhere? Yes, is the answer to that question, to be honest. Obviously, part of our role is to maximize shareholder value. through corporate activity as well as just running the show. And so it's not lost on me that valuations are probably twice that on the other side of the Atlantic, but I don't think it's the case if we just sort of go over to New York and suddenly we're valued at three times. I think there's a pathway perhaps to do that, but I wouldn't necessarily write off Europe. and London so I think that as an international business I can tell you that we're certainly getting attention across Europe from European investors and also I think from American investors so it's something that's in our minds but I wouldn't say that we're we have a sort of plan mapped out and if and when we do obviously we'd have to come and ask our owners you guys and When do we intend to pay a dividend? That's probably on the horizon for the first time ever, but no decision's been made. We're in a very comfortable position. We have good cash position, but we have also a lot of contracts, new stuff coming up, and we want to keep our foot in the gas for our hungry customers. So I think we'll just go steady with that. Oh, okay. AIS stands for Automatic Identification System, and that is a communication standard. I'm not going to bore everybody with that. We're going to have a look at it. It's like Wi-Fi, like 3G, like GSM. It's a communication standard. We didn't invent it, but we produced a solution for it. Okay. I thought I was specific. January 2026. Nexus will start to be shipped, and it will go to the back orders that we have, which we have quite a substantial number, and fill that. So January 2026, this here will be shipped. There's a comment here about material uncertainty in the audit report. I think any of you that are running a business today will know that auditors are extremely cautious. And basically, we run a series of stressed cash flows when you go through an audit. And if when we're scaling so quickly, if there is a risk that if a customer payment is mismatched with a supplier payment, that we would dip into a negative cash position in the middle of next year. But it also points out that we have ample financing capability to bridge that gap and have done so for the last 15 years. So I wouldn't say it's a concern. Are there any opportunities to join up existing or new solutions across an extending geography? I'm not sure I understand that question, but I think strategically what we're realizing now, and maybe this is the answer to your question, is that we're in the business of border and territory monitoring on a large scale. And today it's the marine world. We already have customers that are asking us now to move into the land area and integrate that together. And that's a pretty easy leap. Some of our product managers would probably go white with me saying that's easy. But we can see if you look forward five years, that that is a natural progression that if you think about a country wanting to protect its borders, you know, not every country is an island. There are countries that have land and marine borders, and it makes sense to integrate that together. So we already see that as an opportunity coming up. And we have the core system. If you can imagine, our system identifies a target. Well, you can easily tag that as a land target or a marine target. The analytics will be different because the behavior of a car will be different to a boat when it's smuggling. And that's the area that we would need to develop. apart from the $200 million project that we, award that we have announced, are there other near-term projects in view? Yes, that is the VSP. And within that VSP, well, within that VSP is that $200 million award. And there are several others that are within view as well, but I'm not gonna, we have enough on our plate. Remember, we've got 330 million that we're actually delivering against. We have one that we've had an award for, which we're now in the process of, and we have some more that are coming, but there's no shortage of business. Next is communication. What was the final number for the time lapse between mobile and core system? So I think what you're referring to there is the latency between pushing a functionality on the app on the cell phone and actually the radio responding. I couldn't tell you the exact number, but you don't notice the delay. It's not a delay that a human notices, milliseconds. I don't understand that one. If you're expert team developers. So I think people are our most important asset. That's a bit of a cliche, but that's reality. We're going through transition where we are having to or wanting to up our game in how we deliver services. We're constantly self-critical internally. How can we deliver better and more quickly? And so we want talented individuals who want to add talent to our talent, and we want to grow our talent. It's not just a case of, okay, well, you're not talented enough, out you go, and here's some people from Silicon Valley. We want to grow our team's talent and ambition, but at the same time, add to that. And that is a tough job, I have to say. Not everybody wants to live at 80 miles an hour, and therefore there's a natural churn. And as we become successful, what we're finding is people want to come and join our group. And so where does the talent come from? Globally. The beautiful thing for us is the core of our system is software and that can be developed anywhere. So we hire people from Eastern Europe. We fire people from the United States or from Bristol. We don't care where they come from. What we want is raw intelligence and raw talent and ambition and a work ethic that is commensurate with what we are seeking to do. And we're constantly or I'm constantly seeking to drive that growth. But it is hard to find, I think any business will tell you, it is hard to find the right people who will do that and be happy doing that because we want people to be happy. But our 160 people today, 161 in fact, which we will see growing probably over the next six months to over 200, is the most important thing for us alongside the product. How's our relationship with Ocean Infinity? Great. They've done a grand job in delivering some US fees into Kuwait for us. And we expect to be progressing that US fee partnership in other markets. So we're very happy with that professional bunch and have delivered a very challenging program for us. how is it easy to protect your technology? Well, nothing's easy. I think there's always a concept that someone's going to sort of reverse engineer your system and steal your technology. Those days are gone. I think we're in the days of cyber attacks, which is locking down systems and preventing the use of those systems, as we know from JLR and the co-op and Marks and Spencers and things. But in terms of stealing the technology, that's not really a risk, frankly. The system that we deliver is so complex that It is an architecture of specific architecture of hardware and then multiple GeoVis software modules that all have to be implemented on those bits of hardware and then configured to all talk to each other in the particular architecture that's been installed in that particular country with the functionality settings that that particular customer wants in order to deliver what appears to be super easy seamless functionality. It's an extremely hard thing to do and does require a posse of people in order to do that. It's not a case of, well, I just come and stick a USB in, like in the movies, take the bit of technology, download it and run off down the road. This is not an issue. That said, we are careful about... how we control the technology here. We are extremely careful about protecting confidentiality, which people are often frustrated about. And there's a question here, frustrated about why I can't talk specifically about customers, because our customers are sovereign and it's their technology and their system. And so we're very careful with that bit of it. Other customers are seeking USVs and UAVs, not particularly one variety. A customer doesn't come and say, I want a UAV. A customer comes to us and says, I want a maritime surveillance system like that customer. I've seen that. The physical thing, I want a particular brand of radar, I want a particular brand of USV, I want a particular thing, is a sort of thing of years gone by. Actually, now people are seeing the end product, which is the service, the functionality that's served up by the screen. Of course, it's super exciting to see the physical thing, but it's the functionality that delivers into a system. So undoubtedly... Our USVs in Kuwait have super cool things, you know, a new class of USV and stuff have grabbed the attention. And that's fantastic. And that was the intent. And I expect we will see, you know, fleets of those around the world in the coming years, as well as other varieties of that and drones and subsea and land based things as well. So the physical thing is, yes, is important in grabbing the attention. But actually, the decision makers are particularly the wise ones look past that and see the functionality that is being delivered. So that is the last question. So thank you everybody for the support and the ride to where we've got to today. And if you've got any further questions, please email me or any of the other directors, happy to answer them. We have our AGM and Investor Open Day coming up on Thursday, the 4th of December. Please do come. It's open to anybody, whether you have a share or not. You don't have to register. You don't have to tell us. Just turn up from nine o'clock here in Midsomer Norton and we will have cakes and tea and coffee and what have you. You can meet. all the people other than me that are actually making this happen. And then you're also welcome to attend the AGM as you like as well, which is just up the road, about 500 meters away at the Centurion Hotel, and after which there's a buffet lunch. So thank you very much and speak to you all soon. Thank you. Bye-bye.