SRT Marine Systems (LSE:SRT) — Interim Results

0:02 Good afternoon, ladies and gentlemen. Welcome to the SRT MARINE SYSTEMS PLC interim results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every during the meeting itself. However, the company will review all of the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Simon Tucker. Good afternoon, sir. Good afternoon. Thank you for the introduction. Hello, ladies and gentlemen. Thank you for joining.

0:49 I think some of you will know a little bit about SRT, so I'm sorry if some of this presentation is, perhaps repeating what you already know. But for completeness, I'm gonna I'm gonna go through it. As was just said, please ask as many questions as you like. I will

1:03 answer them all. I won't skip any, of the questions that you ask. If there's anything that I can't reveal that would make inside or breaks any of our confidentiality, given some of our customers, then I'll just advise at the time. So without further ado, I'm gonna crack on. So we're all about solving this problem of global maritime domain awareness. And, actually, in reality, whilst we become used to everybody knowing where everything is on the land, very little is known about seas and the oceans, and there is very little maritime surveillance and tracking. And I think that's probably become pretty evident to us all when we see on the news about we can't even track rubber boats coming across the small bit of water between France and The UK.

1:50 Well, this is prevalent around the world, and there's little bits around, you know, small satellite systems and stuff with websites and things like that. But that's sort of commercial commercial standard stuff. There's there's very little around that is enabling national agencies to gain what is called maritime domain awareness, which is understanding the traffic that is moving around in their marine areas for a variety of reasons and identifying where the problem areas are. And in particularly in places like Southeast Asia, Middle East, Africa, South America, you have hundreds of thousands of vessels, just to give you a feel for that, Vietnam has alone has 62,000 fishing boats. The Philippines has 300,000 fishing boats.

2:39 Europe in total is 42,000 commercial fishing boats. So hundreds of thousands of moats moving around, and they want to understand where the bad guy is so they can actually direct their their operations and thought whatever that might be. We recognize that market some time ago. We recognize that the technologies existed, albeit very disparate, to bring that, to bring maritime domain awareness. And we set out on that path many, many years ago to develop the products and the technologies that enable that to happen and establish ourselves in the market as a leading player. It has taken us a long time to get to where we are today. But today, we are the leader in that world, and we're right at the beginning of that long term multiyear, multi decade market.

3:31 So financial summary, you can see there on the left hand side of your screen, a graph, how we dropped during COVID. We have two businesses in our in our company. The blue one there is our transceivers business, and the orange one is our systems business. The transceivers business is about selling black boxes that enable, digital navigation, safety of navigation, autonomous navigation, and our systems business is about maritime surveillance. During COVID, countries just stopped investing in anything at all other than vaccines and health care as we know. That stopped all revenue of that for two years. It didn't stop us developing, our product, and now we're seeing that, reengaged and catching up, hence that big leap for this year.

4:18 We started the first half of this year very well. We did £18,800,000 worth of revenue, generated a profit after tax of just over £2,000,000, and our transceivers business grew nearly 24%. And overall, we grew our revenues 300% as well as increasing our gross profit margin. So it's a good start to the financial year as I would say, but I think quote Ronnie, you ain't seen nothing yet. So we're an established business, and we're entering our phases of rapid growth. So it's a big market that we're targeting. It's a multibillion dollar market. There are robust demand drivers, which I'll talk about later on, things like security, safety, commercial, so that's efficiency and, obviously, environment monitoring.

5:08 We have the product that fits the market. I'm not sitting here for you today to talk about the products that we need to develop to fit that market. We have them today. Of course, we're continuing to develop them. And on the growth side, we're structured to support that growth. We have over 1,100 in country partners all around the world. We're able to manufacture tens of thousands of units. We have the people in place to and the local partners in place to actually deliver our systems. So we've built up all of those technologies and products and position in the market over those years to be where we are today. So it's you know, for for those of you that have been perhaps a shareholder for some time, it seems to have taken a long time. But what I'm describing here is moats around our business. You If you wanna come and compete with us now because suddenly you recognize that market, you need you have years and years ahead of you to develop that technology, develop that product, develop that position in the market, moats around our business, real protection going forward.

6:10 So the segments of that market that we target specifically are as follows. Fisheries. Fisheries is engaged 4,000,000 of the world's 26,000,000 old boats are engaged in commercial fishing. Overfishing is a massive problem. It's called IUU, illegal unregulated unlicensed fishing. Our systems help countries prevent that. Coast guards, security, there is a picture of the Bahrain coast guard where they apprehended of that little boat coming across from Iran to attack them with, loads of cash and costs and things detected by our system that they bought from us, six, seven years ago. They have a very wide remit to not only, you know, people smuggling, drug smuggling, protection of infrastructure.

6:56 Digital navigation, we saw earlier this year or the sorry, last year, the year after, year before when a single containership of the 150,000 that go around the world got stuck in the Suez Canal and the effect that that had. So we're now looking at autonomous navigation, digital navigation, and this all comes down to the deployment of digital, technology, a thing called AIS, which we are the leader in. Excuse me. And, of course, the environment. You know, it supports a lot of tourism. And, also, it supports, you know, what everybody's talking about down in Bali at the moment, saving our environment and protecting the oceans and things from fishermen losing their gear to making sure that boats don't go where they're supposed to go. I mean, I always look at the business that we've gone into as a as a parallel with air traffic control.

7:47 In the sixties, this was all done by the military. And then somebody said, well, actually, most of the aircraft in the world in that we're monitoring now are civil aviation. So, really, we should have a civil aviation, a civil defense, a civil system monitoring and controlling our air traffic control. And today, we have NATs in The UK. And this has happened worldwide. You can't imagine we would want to fly on an aircraft without having, air traffic control. And there are 30,000 commercial aircraft worldwide, and that has given birth to a $9,000,000,000 a year market. Today, there are 26,000,000 boats, of which 8,000,000 are commercial, and there is minimal maritime domain awareness systems. And so that is the market and those are the segments that we are pursuing.

8:37 So we've got the products as we've just said. On the left hand side there are our digital AIS transceivers, all designed and developed in The UK. We contract out our manufacturing to, Flextronics, which is based in Southern Ireland, which is world's second largest electronics manufacturer. To date, we've manufactured, I mean, that figure now is out of date, over 360,000, transceivers, representing about 90% so far of the deployed, market. And on the right hand side, you see our integrated MDA system. That is a image of a command center that we will deliver as one of our systems in The Middle East. And, essentially, that's what the the the customer is buying. They're buying the software that sits on all of those fancy screens and desks, which link into sensors, which give them maritime domain awareness.

9:28 And today, we have £70,000,000 worth of existing contracts that we're part the way through and a pipeline, a validated pipeline of contracts worth about 600,000,000, of which 230,000,000 we hope to be signing in the the next in in this this half now with further opportunities going on after that. Each time we sign an account, you know, systems are built up with a succession of contracts. So the first contract is always just the start. We have both repeat and recurring revenues. So what do we mean by repeat? Repeat revenues is where we have a customer, let's say, Philippines Fisheries. They've given us their first contract, £32,000,000, to build the start of their fisheries monitoring system.

10:17 There will be a next contract after that as they expand that to further coverage. The first contract covered 5,000 of their largest fishing boats. They have between 250,300 fishing boats. The next contract that we see coming further down the line in about a year's time will be a multitude times bigger than that, and we'll address more of those, those fishing boats, and there'll be a one after that. So it's a repeat because we have that as an account, and we we expect to see contracts going forward years and years and years ahead with increasingly larger. Within that repeat revenue, we're selling them a system and that is made up of sale of our software as well as sale of hardware, that might be PCs or radar, as well as support services such as warranty and support.

11:06 We then have recurring revenues, which is where we have data sales. So with our systems, also rely on buying data from satellite systems. Everyone and their dog is putting up satellites. Satellite data is coming down in price because there's so much choice. We buy in that raw data, which is food for specific functionality in our in our systems. So as those customers then complete their systems, we carry on with long term agreements of which, you know, we're probably a year away from really starting to see meaningful revenues from that on data sales.

11:42 So our business has two divisions, transceivers and systems. So our transceivers division is all about the digitization of navigation, and that's driven by safety, traffic control, navigation safety, and efficiency, environment monitoring. We have specialist transceivers that sit on buoys that help with, real time monitoring of the environment, So water quality, emissions, all those sorts of things. And autonomous shipping, which is a big thing. I mean, just as an as a as an interesting point here, Europe has 52,000 kilometers of navigable canals over which most of the energy, gas, and oil and stuff go on what are called inland waterway vessels.

12:29 And all of those are flying down going down canals. They need to know when locks are open, when they're closed. Is there enough gap between the water them and the bridge or is the tide in? All of those things now are being done by putting what are called AIS transponders, which transmit the information in real time to the vessel as well as to the control centers, and then they could be the and into the autopilot on the vessel. And so then you have this continuous real time exchange of information. And in the marine domain, it has to be direct. It can't go via a network, and that is crucial difference between land and the sea. And it's all being done on this technology called AIS, which we first got into about fifteen years ago, and they're now number one.

13:15 So today, have the current product range on the left hand side there, mature products, different transponders for different types of boats. Just a matter of note, the one with the sort of chart screen on the left hand side is goes on vessels that are over 300 tons. Some of the smaller black boxes go on smaller leisure and commercial vessels, be it a Sunseeker or a RIB. The orange one in the back, the sort of tube, is what's called a search and rescue transponder, which you would keep in a grab bag in case you were sinking, and it transmits to everybody around you that you're in trouble. And, basically, what it does is it puts a dot on their chart, and they can see exactly where you are and who you are. As I've explained, we distribute all of that through over 1,100, distributors under our own brand, which is M Track.

14:04 But we also then supply a lot of OEM manufacturers, so existing marine electronics manufacturers who are seeking to get into AIS or need to have AIS as part of their product portfolio. And, you know, most AIS products that you buy or see on the shelf are all derived from little old SRT in Somerset. We, of course, continue to develop our product range, and we have a new product that we've been in which we've been developing for the last ten year last two years called Nexus, which is the one at the bottom. Those are the the Nexus family have two products, the base unit, which is on the right, and then a handheld. And and what this does is take us into a new segment. Instead of just data, it's data and voice. And those of you may know a bit about boats, VHF radio is the thing that's prevalent for communication, with boating and use VHF radio for voice communication. AIS is also VHF. What Nexus does is bring that all together into a single box.

15:05 Now that in itself is not a new thing, but what is new is the level of convenience it delivers to the boater because what it what we have managed to do is to enable it to integrate with your mobile phone, which is the main device now that boaters are using for navigation when they're on the boat. They drive to the boat using their mobile phone, and they want to then just link to all their navigation equipment and use the navigation apps that are on their mobile phone. And so, what Nexus does is enable your mobile phone be to become your, VHF radio. So now you can make normal phone calls as well as boat to boat calls in real time using your mobile phone. You can also use that as a private ink intercom on your boat, also as MOB devices. So it is really a revolution in convenience for maritime communications.

15:52 It's been a big project of ours. We've invested about, £2,500,000 to date, and, it's now into its test phase, and that will start coming to the market in June of next year. So our transceivers business in the first half grew 24% year on year. We expect that to carry on through going forward. We then expect on top of that to see greater growth around our DAS division, which is all about autonomous shipping and Nexus, which will launch next next year. And so we would see that that business should be growing over the next two to five years from where it is today, which is probably $1,112,000,000 pound a year business into a plus £30,000,000 a year business, if not if not more.

16:43 So the systems business. Obviously, the bit that people get super excited about because it comes with big contracts and things. So our two target markets for our systems business are coast guards and national fishing agencies. The real segment that we're looking at is civil defense. It's not military. It's civil defense. And this is an area that's really been overlooked, but, actually, this is where the day to day action takes place. The coast guards are responsible for protecting the coastal areas, all the critical infrastructure, all the EEZs, so which is out to 200 nautical miles. And they have hundreds of thousands of vessel movements the whole time. And their problem is they perhaps have maybe, I can think of one country in the Southeast Asia that we're talking to at the moment. They have nearly 2,000,000 square kilometers of EEZ, eight and a half thousand islands, and 300,000 daily vessel movements.

17:43 And they have a thousand odd patrol boats. They need to know where to send those patrol boats. They therefore need intelligence to tell them where the bad guy is, where the problems are so they know where to patrol. That is the solution that we're that we're selling to them. On the fishing agency, separately to that, they need to monitor and manage their fishing boats. They need to stop overfishing in order to conserve stocks so that the actual fish that's being caught, which is very important for protein, very important for their, economy, is sustainable. And, this is a major demand driver of, of buying these systems. So these are the two agencies where we sell at what we call the SRT MDA system.

18:31 So, essentially, what anybody buying our s SRT MDA system is getting is, typically, they'll get a really fancy control room, which we'll go and install in one of their buildings. You know, we supply the desks and the computers and all the rest of it. But the bit that they're paying for is the software, the software that you see on those screens, which is our GeoVis software. And what it's doing is it's constantly scanning all the vessels in their EEZ. It is using very clever analytics that we've developed over many years to look at the behavior of each and every single vessel on its own and in proximity to each other and to generate an alert based on a characterization of its behavior and then to give the operator a suggestion as to what to do. Is it just speeding in an area? So we send the guy a ticket.

19:17 Or, actually, as if you remember, I just spoke about Bahrain. Is this a situation where there's an attack coming and they need to dispatch something too sweet to, to deal with it? So it's narrowing down from, you know, maybe tens, hundreds of thousands of of movements down to a few 100 that can be dealt with by operators and the assets that they've that they've got. So what we're doing here, our system comprises of lots of different components. And what it does is we have coast stations. So along the coastline, in real time, you'll have sensors on towers, and we may be commissioned to build those towers, supply the sensors that will go on on there, which are coast stations. They have patrol vessels, which are going around with drones.

20:04 There are satellites, all sorts of satellites flying around the place with all sorts of data on them. And there's, of course, human intelligence. And what our system does is bring that all together into a single system, a fusion of that data into which we then apply analytics. We also then apply things like visualization techniques because we're visual people, so the operator can visualize what's happening hundreds, if not thousands of miles away in the maritime domain, make an informed suggestion to his boss about what they should do about it, and then instruct that action to go forward. The systems are fully autonomous in country. This is very important to, these countries these days. They're not interested in web delivered platforms for their civil defense systems.

20:50 You know, for example, I'm not criticizing Flight Tracker. It's great business and everything else for what it for what it is, but you wouldn't be very comfortable if Heathrow air traffic control was run from Flight Tracker. You want it run from a professional system. So this is a professional system for coast guards and fisheries and national authorities.

21:09 We've proven to be able to deliver it, so it's all very well having the technology that was hard enough to develop. But actually to to physically go and install that in these countries is tough. So, there are just a few pictures there. It's a picture of me signing with, the minister of interior of Bahrain. And I suppose the relevance to that is these are these are very high profile projects of national importance. I'm not we're not going to sell these customers anything. They come to us for solutions for what they want. There's a command center there, which will be going into The Middle East. There's a picture there on the right, on the top row of one of our transponders on a Philippine fishing boat. Have to that's designed and developed in Somerset, manufactured in Southern Ireland by a contractor, installed by our local partner in The Philippines, and we'll sit and monitor that Philippine fishing boat out into the Western Pacific fisheries where it's catching tuna, which you will ultimately buy in Waitrose and Waitrose know that it was caught legally.

22:12 On the bottom left hand side is some of the equipment that is now just gone to The Middle East for the 40,000,000 contract we signed in January. We buy in all the equipment for the data centers. We build them up in our logistics center in Somerset, put our software on it, configure it, then it gets shipped to, the customer. And the middle picture there is what a data center might look like with one of our systems. It is actually a data center in, one of the countries. It is installed and commissioned. And then on the right is a picture of one of the radar surveillance towers at a strategic point. We'll have that built for us, and then we'll turn up and have radars and sensors put on top of that. So we've got a proven track record now of being able to deliver these things, and that is well known in the industry and is then driving inquiries from lots of different entities.

23:06 So growth opportunities. Well, we have £70,000,000 worth of existing contracts, one that are active, one in, The Philippines where we're building the world the first phase of the world's biggest, and most sophisticated fisheries monitoring system has 32,000,000. We will complete that in June next year, and they're very happy and there will be a follow on contract after that. We also have a Middle Eastern contract with a National Coast Guard, and, we signed that in January. We've completed the first phase. And the second and third phases, we're going to run serially. They will now run parallelly. We then have what we call this validated sales pipeline of opportunities, which is about worth today about £600,000,000.

23:54 Those are opportunities where we're very close to the customer. We've been in discussions with them for some time, taking their idea of a maritime surveillance system and dividing that, creating that

24:03 as a project specification, and then make it and then slicing that into into individual projects that meet their annual budgets because they've got they need to build these things up over time. So that 600,000,000 is just the start of of these entities building up their their projects. This rather complicated diagram, which people either love or hate, is our attempt to try to give you some some sense of timing and granularity on this. We use these anachronism if you look carefully, you know, g one and g two, because we're not really able to name the countries our our customers are extremely sensitive about who else reads this, and, you know, this is a matter of national security. Obviously, g one is our Philippine contract, and that shows you that in the gray area, 2022, '23, that is in our forecast for this year, which is 56,000,000 of revenue and, just over £6,000,000 worth of profit.

25:06 And g two is our Middle Eastern project, which we assumed would go across three financial years, in a in the forecast that is out in the market. But actually, what that's happening per that green arrow is down that it's coming forward. And actually all that revenue will now fall into this financial year and next financial year. We then have pending contract of G3, which is with a southeastern coast guard. It's actually likely to be about £10,000,000, larger than that, and we are hopeful that that will be signed during, the second half. We then have the ones below that of high timing confidence. I'm not gonna go through each individual one. But the one of note there, there's a £130,000,000 coast guard project, which we've said that we hope would be signed towards the beginning of the next financial year.

25:59 That might be a little bit earlier depending on the process of the government and their internal approval processes. But the ones in the gray and the orange there really were a passenger on the on the process of the of the government. There's nothing we can do to speed it up or slow it down or change it. They've made their decision. It's a question now of when. And then further down, you can see how the we try to forecast when those contracts will come in. It's a constant changing feast. I can tell you, for example, G9 there of £20,000,000 following on fisheries project, I'm not gonna name the country. It's probably more like a 100,000,000 now and coming forward a little bit. So what I'm trying to show here is there is a conveyor belt of projects that are coming that will drive our our our revenues.

26:57 This here tries to explain to you how we do our revenue recognition. So we're very straightforward with this in that we don't do percentage completes on projects. What we do is very simply in the contracts, there are a list of deliverables, according to what it is that we have to deliver, and each bit is assigned a value, which is agreed with the customer. Perhaps, maybe that's a data center. And the data center will have two bits to it, which is delivering the component parts of the data center, which is m one, so the hardware and the software. And we'll we'll when we deliver it and they accept it, we will invoice them and they will pay us. We will then go and commission that. And once it's commissioned, they will check that it's commissioned per the contract, and that becomes m two, and we will invoice them, and they will pay us.

27:46 And we go through all the component parts of the of the system, and then you get to the end where it's all come together and complete, which is m three. And they say, yep. The system's all working beautifully. And then we, invoice them for m three. That's typically 10%. So m one is typically anywhere between 4050%, m two between 40 around 40%, and then you have m three, which is 10%. Our customers are very good payers, as governments. I often I remember when we signed our first contract in, in The Middle East, everyone was, oh my gosh. Are they gonna pay and everything else? On the button every time, reliable payers. So it takes a long time to get the contracts and to work with the customer to get the contracts, but they're extremely well run organizations from, The Philippines to Indonesia to across The Middle East, and they pay on the button.

28:41 The drivers, they want these systems. This is not something we've had to try to persuade them to have. The bottom chart there is then trying to explain to you how once we have a customer, the first contract is really just to lead on to the next one to the next one to the next one. They're building up their systems. If you take, you know, a country in Southeast Asia, I don't know, perhaps like Malaysia or something, then they'll start with a with a with a dream of having full coverage for the whole islands and all their maritime domain. And that might, in order to achieve that, require them to invest $500,000,000. But they might not have that today. They might to invest that over ten years, and therefore, what they do is split that aspiration into 10 projects. And so we will get over to our first contract, would be systems contract one for, let's say, $50,000,000.

29:30 We will complete that. They will be applying for the budget for the next contract. We will then get the next contract. It's a long term business, and we're right at the beginning of all these countries that have got a coastline building these building these systems. And each one is like the top each contract is like that top graph there. So the takeaway from that is that these projects require, when we sign them, a little bit investment in equipment, which we marry with our software, which we deliver, which is the monitoring system. We build them for that. They pay us. That is then providing the working capital for the contract. And then you just keep going, keep going, keep going. So the outlook on the transceivers, we expect to see the first half of the year's growth of 24% to carry forward.

30:29 We have ended the half with a solid order book for h two. Those of you who are interested, we're exhibiting at Metz in Amsterdam. We started today, and we've been awash with new demand from dealers and and what have you because of the quality of our product and then and its known known performance. Everybody from US Coast Guard to RNLI, Trinity House, Panama Canal, SYSTEMS SeekOut and buy from SRT, our transceivers. On our systems business, we have existing contracts that we're executing on and we've got about GBP $230,000,000 worth of contracts, which we believe have a high likelihood of converting and coming under contract during h two. There's no guarantees with any of those any of those things because we are a passenger on their process, but that is looking that is looking good.

31:25 Then we start to deliver those. It would probably take between, a year and two years to then deliver those projects, physically go and install them and set them up and commission them and and what have you. And in the meantime, over that two years, there's gonna be more contracts that are in the pipeline than than coming in. So I think that gives you a, hopefully, a very good summary of our business. And I won't sort of drone on about the summary there because it's just repeating what I've already said. And, hopefully, you've, you've understood what I've said. What I will do is talk a little bit about management. So it's myself as CEO. I'm really a salesperson and somebody that's been able to spot markets a long time ahead. That's a bit of luck. Richard Hood is our CFO.

32:17 We have very tightly controlled, finances. He has a lot of experience both on the audit side and on the commercial side. Neil Penekett, looks after product. So that's the development of the product and the delivery manufacturing, delivery of the product. He's a, chartered electronics engineer, started life as an actual hardware engineer, developing hardware, truly understands that, went into project management, and manufacturing large volume products in China and all over the place. So very experienced as of the rest of the team underneath him. Jean Francois Bonin, he was used to be in the French Navy quite high up.

33:02 He was then a sales director of a fisheries company, has intimate knowledge of our domain and was a relatively recent arrival to us. We then have our non exec directors, Kevin, who has a lot of international business, particularly in the automotive industry, which might sound a bit weird. So you're in the main business, you need to understand boats, nonsense. It's all about logistics. And if you wanna look for slick logistics, go to the automotive industry, and he helps us with that. Simon Brill, he's a he's an FCA, not an FAC, so that's wrong. So we need to change that. Huge breadth of experience. Man of as with Simon Rogers, independent wealth. And what that means is, you know, is is is making sure that we're not making short term decisions, etcetera, making the right decision for our shareholders.

33:58 Simon Rogers, extremely successful entrepreneur, very insightful, very dispassionate about making us making the right decisions for the business. He was one of the original supporters of the company when nobody was supporting it whatsoever. And so we have a very well functioning, very open board, and any investor is welcome to come and talk to me or any of these guys. And indeed, come down and see us in Somerset and kick the tires. So I'm now going to have a look at some of the questions and try and answer as many of these as I can, which which is a lot. Simon, if if I may just jump back in there and thank you very much indeed for your presentation. I'll just give you a moment to have a look at some of the questions that have made their way through. But in the meantime, ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen. But just while Simon takes a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

35:09 Simon, as you can see, we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions. Simon, if I could just hand back to you to address those where it's appropriate to do so, and then I'll pick up from you at the end. Thank you. Okay. Thank you very much for the questions a lot. So excuse my brevity. I'm not gonna say names or anything, but I will read them out, so that,

35:35 can I can I ask? Can everyone see those questions or just me? Only you, Simon. So Okay. So I'll read Mac. Thank you. I'm gonna read Mac. So would the land first one, would the landing of any of the major contracts you're anticipating create cash flow problems for SRT? And if so, how might you expect to address them? So if we landed £600,000,000 for the contracts tomorrow, yes. Because we then need to go and buy the equipment, some of the equipment. You don't go and buy the whole or all in one go because it's phased over a period of time. You need to buy stuff the way our our contracts are structured to be able to deliver it to invoice them and stuff. We have working capital arrangements in place with, there's a group called LGB that gives us loan notes, temporary loan notes, which we can easily dip in. That's basically syndicated loans with high net worth individuals.

36:20 That's a £20,000,000 facility in place. And, also, there's a lot of UKEF and banking, temporary banking arrangements that are that are available. So export credit guarantees, there's a particular program called GEF, the general export and credit facility that's available as well that enables us to finance all of that. So actually getting to that first point of cash positivity is, I wouldn't say, is easy, but it's easily bridgeable and financeable. And we thought that through carefully, but that's an astute question. Can I can you give an update on your cash needs going forward? Hopefully, I think I've just answered that as well as within the in the in the presentation. I don't believe that we need further fundraisings on cash, but then we always keep that under under advice.

37:11 So it depends on the how aggressively all these projects, come in. You can imagine that all these entities, they don't sort of think, oh, well, okay. My neighboring country is signed with SRT, so I'll wait a little bit. They actually sort of tend to cluster and start to move together together, so we will just be you know, we're cautious on that. And I think the other thing I would say to that is it's in our gift to manage each of the project's working capital requirements. They very quickly became become cash positive because the software is what gets delivered first, and that's where we've already done eight years development. And so we actually get that that build and in first very quickly. As an example, could you describe the accounting treatment for revenue of, say, a £10,000,000 contract signed in April 2023 and the cash flow resulting from that? Okay. So if I say a £10,000,000 one year contract, so or £10,000,000 contract for a for a system, let's say the monitoring system part is £5,000,000 and the sensors are £5,000,000.

38:16 So immediately, what we would do would be order the sensors. Well, they typically take six months to arrive, and we don't pay for those until after they've arrived. So we place

38:24 the order for that stuff. Then we've got to deliver the monitoring stuff. Typically, on the monitoring system side, the actual margin is about 90%. So we would probably have to spend about £500,000 in order to buy the Dell and server equipment on which we put the software to then go and deliver that £5,000,000 worth of, of monitoring system. And if you remember, we break that down into m one and m two. So the first bit would be we take that we deliver that equipment and software, and we build 2,500,000. And that would be done within six weeks. And so we would deliver that. The equipment arrives. It's it's inspected by incepted by the customer. We invoice the customer £2,500,000.

39:09 They pay us thirty days later, and that's for £500,000 worth of equipment. So now that is now cash generated nearly £2,000,000. We then go and commission that equipment a few a few weeks later, perhaps, probably a couple of months later by the time you've commissioned it and test it and what have you, and you build the next £2,500,000, which is now mostly profit except for your installation costs. So you're now six months into that project and now the sensors have arrived, which we will probably have paid 2,500,000 We would probably cost us about 50% of what we're selling them for, £2,500,000, but we've now got that cash from the from the from the initial bit. We will now go and deliver that equipment. We will invoice the customer £2,500,000, which is 50% of the 5. We'll then go and install that once it's installed in commission, we then build the rest. Hopefully, that gives you a a feel for how that would how that would, progress.

40:03 I'm sorry I'm going so quickly. There's a lot of questions. You may have seen or heard the question that came up on Stokopedia yesterday. No. I haven't. But about your debt situation in the interim report, £20,000,000 facility with a £6,000,000 headroom implying £14,000,000 drawn down, but only 6,000,000, yes, shown in the other loans. Can you clarify the situation? Yes. So we have a loan note program. And so when we take out so and which has a we've agreed a £20,000,000 set of loan notes. And so once you agree that, you have your set of set of loan notes. We have issued over a period of time £14,000,000 of those £20,000,000 of loan notes, but we've repaid £8,000,000 of them. And so we have £6,000,000 residual sitting on the balance sheet.

40:56 And because we've used £14,000,000 of them, we have 6,000,000 left. So hopefully that clarifies. I can see how then people think, well, you know, you've used £14,000,000. So where, you know, where is that on your balance sheet? You know, that is that is that is just once you have a loan note and you repay it, it's canceled. It's gone. And that's through LGB. And if you have other investees, I would tell them to beta beta a path to LGB. This syndicated loan process is fantastic, and it's given us very flexible working capital, almost limitless for when we need it, which means we don't have to come back with dilutive equity. Given the small bird crossing issue between France and UK, do your products have suitable offering for UK French government?

41:42 Yes. They do. It's a question with anybody who would get their act together and do something about it. I think the real problem, actually, in understanding the marine domain here is the the the distance between France and The UK is so short. So by the time, you know, everybody rushes onto the beach with a rubber boat and gets going, you know, they're already out of French territorial waters into UK waters. Even if you had detected them, you need to have a boat there to stop them. So I certainly think, you know, our systems should be used for, you know, greater detection. Do I think that the UK government would organize itself enough to sort that out? No. Sorry to say. Given the pace at which technology changes, do think your policy around the capitalization, amortization, development cost is reasonable? Yes. I do because the technology you're talking about that's evolving at the sensor systems.

42:32 Our focus on our technology is around first of it's not consumer technology. It's around the analytics and the visualization. It's around the system technology. And in the commercial world, it doesn't move anything alike as rapidly as you might think. And actually, core technology doesn't. I mean, the mobile phone technology that we're using today in our fancy iPhones that's produced by Qualcomm and the like is pretty much the same as it's been, you know, ten ten years ago. There's not actually much that's changed. It's more about the GUI and things like that around it. So, I think our capitalization and amortization is extremely conservative, actually. You know, if I talk about most of our transponders, we would expect to be making for ten to fifteen years in the same, in the same same format without without any updates.

43:21 Has SRT been making use of government research and development tax relief scheme? Yes. We have done and do when we're when we're allowed to. It is a big growth forecast. Will you need additional shareholder funding? I think I have already asked that. We recognize that, you know, we are, you know, signing a lot more contracts, much bigger contracts, and we've got more sophisticated about sourcing this funding using, UKEF proper banking, whereas in the past, we've just done it ourselves. And so we've got a lot more sophisticated about that. We're not perfect. We're learning about it, but we're very alive to that, to that issue. And we because of the demand for our systems, we can negotiate how those projects are implemented to make sure that they are, cash balanced.

44:10 How do you use your unique position in the market to change from being a passenger on government's programs to offering them a slot on your delivery pro program? I don't know is the answer to that question. I don't think governments work like that. You know, governments have processes, anticorruption, all that sort of stuff. And, frankly, I wouldn't want that to change because it's product led. So it's just process, and that's just that's just one of those things. I I actually sort of see it now, although I do get frustrated why it takes so long sometimes. It protects us because we understand those those processes. Know, there is no magic to that. So, yeah, I don't I don't think there's any magic bullet to that one, I'm afraid.

44:59 On the contract forecast slide, what do the red arrows mean? And they do they mean that the that the timing has slipped? Yes. It does mean that the timing has slipped from when from when when we had expected that. Yes. And the green ones mean they've come forward. It has been reported that the Rhine has had very low water levels this year. Has SRT been involved in helping vessels navigate the river? Yes. So every single one of those vessels have one of our transponders on them. It's mandated, one of our our class a transponder, and they're increasing now deploying DAS, so atoms, which enable them to to level the to monitor the level of the waters because, I mean, it's very clear when you see the canal bed is dry, well, the boat can't go there. But, actually, the danger is when, you know, the clearance underneath the the vessel, which is typically probably only a couple of feet suddenly becomes six inches and then lower, you know, they don't want to they want to make sure that if so long as there's there's an inch, they'll keep going. But if it's less than that, obviously, things come to a halt. And so these systems enable that to dynamically monitor it because these these, these levels are, are going up and down the whole time.

46:13 And, equally, when the when the water's too high, because then the vessel can't fit underneath the bridge, because then the water's come too high, so they're called the air bridge gap. And all of that is all about this autonomous digital shipping that, that is that is coming down the track. So I think I've asked I've answered everybody's question. So I'm gonna pass back to you guys. I'm sorry if that was a rush, but I don't wanna bore everybody. Absolutely. Simon, thank you very much indeed for addressing all of those questions that came in from investors this afternoon. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended for you to review and then add any additional responses where it's appropriate to do so. Simon, perhaps before redirecting those on the call to provide you their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great.

47:05 So I think SRT is a great combination of British brains and British capital. It's taken us a long time to get here, and that means good technology, good products established. We're in a very defensible competitive position in a market that's just begun. We're not without risk. We're not without challenge going forward, but, do a little bit of research on us. Come and see us. Come and talk to some other people other than me, and then make your investment decision. Simon, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations?

47:54 This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of SRT MARINE SYSTEMS PLC, we would like to thank you for attending today's presentation. That now concludes today's session, so good evening to you all. Thank you, everyone.