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Strat Aero Plc

Strat Aero PLC Final Results

Strat Aero PLC (LON:AERO), the AIM quoted international aerospace company focused on the Unmanned Aerial Vehicle (“UAV”) sector, is pleased to present its audited final results for the year ended 31 December 2016.

 The Annual Report & Accounts for the year ended 31 December 2016 (“Annual Report”) will be sent to shareholders today together with a notice convening a General Meeting (“GM”).  The Annual Report and the notice of GM are available on the Company’s website at www.strat-aero.com.

 The GM will be held at the offices of Hill Dickinson, 8th Floor, The Broadgate Tower, 20 Primrose Street, London EC2A 2EW on 28 July 2017 at 11:00 a.m.

OVERVIEW

·     Strategy to focus on core business divisions – Training & Education and Survey & Inspection, beginning to yield results for the Group

·     99% increase in full year revenue to US$862,988 (2015: US$433,001) primarily due to the full year impact of the acquisition of Geocurve, a specialist in the provision of UAV operated surveys and inspection services to a blue-chip customer base

·     72% increase in gross profit to US$593,079 (2015: US$345,747)

·     41% reduction in loss after taxation to US$3,524,476 (2015: US$5,931,933)

·     US$1.58 million raised pre-expenses in share placings post period end to strengthen balance sheet

 

Iain McLure, CEO of Strat Aero plc, commented, “Following my appointment as CEO part-way through the financial year, Strat Aero implemented a revised strategy for the Company designed to maximise our key strengths, skills and revenue opportunities whilst simultaneously diverting from non-core activities and reducing Strat Aero’s overall cost base.  Progress has been made in this regard over the course of 2016, however this strategy is expected to have maximum impact for the Group in 2017 and in line with this, operations and performance in recent months have been encouraging.  I view this as testament to the professionalism and quality of our people, a successful turnaround strategy and also a line under the disappointing performance of the previous two years during which Strat Aero was subject to an acquisition policy which overstretched the Company’s balance sheet and management resources.

 

“I am confident that by focussing on Strat Aero’s two highly complementary business divisions: Training & Education and Survey & Inspection, we have a robust business model capable of providing investors with exposure to the exceptional growth potential of UAVs and the ability to deliver meaningful shareholder value.  I look forward to providing further updates throughout the year as we continue to deliver on this strategy.”

 

CHAIRMAN’S STATEMENT

 Looking back on 2016, it seems that the papers were peppered with news relating to ‘drones’, or as they are more widely referred to in the business, ‘Unmanned Aerial Vehicles (“UAVs”)’.  Aside from the obvious military uses, UAVs are increasingly becoming part of our everyday lives, most famously illustrated by Amazon and the launch of its widely publicised ‘Amazon Prime Air’ service in December 2016.   We note that most recently, UAVs have been used to deliver defibrillators to people suffering cardiac arrest – where every minute which passes between onset of attack and defibrillation reduces survival rates by 10%.  The need for an immediate response therefore, which UAVs can provide, is clearly evident. 

 

However, the uptake in UAV use has also created some unique challenges – for instance, in 2016 it was reported that there were over 70 near-misses between UAVs and passenger aircraft near Heathrow alone.  These reports clearly highlight the critical requirement for more widely-adopted regulations, permitting, understanding and most significantly professional training when it comes to UAV usage, as it is a common belief that UAVs will increasingly become part of the fabric of day to day life across the globe.

 

So where does Strat Aero fit in to this mix?  Between Amazon and recreational UAV users, there are a whole host of commercial applications for UAVs and this is the market we are targeting.  We have a dual approach for maximising market penetration which is as follows:

 

1.    Training & Education

As UAV technology matures and devices become both more cost-effective and more capable, individual users and organisations are looking for training solutions that enable them to operate UAVs in a broad range of settings.  Recognised by the UK’s Civil Aviation Authority as a National Qualified Entity for UAV training design and delivery, we have developed a range of professional training solutions for both commercial and public-sector clients.

 

2.    Survey & Inspection

Strat Aero, through its wholly owned subsidiary Geocurve, is a specialist in providing survey and inspection services using UAVs, as well as using ground- and water-based survey equipment.  Our goal is to deliver exactly the analysis that our clients require to maximise the productivity of their teams and minimise asset downtime.

 

Looking specifically at the progress made in the two areas highlighted above in 2016 and in recent months, the key development in the Training & Education business was the formal grant of National Qualified Entity (‘NQE’) status by the UK’s Civil Aviation Authority (‘CAA’).  This was a pivotal development in the commercialisation of our training programmes as in order to apply for a UAV pilot’s licence, individuals need to show that they trained at an NQE certified centre.  We saw this recognition of our services by the CAA as an endorsement of our training programmes and independent confirmation of the quality of our suite of commercial teaching courseware.

 

The grant of NQE status coincided with the launch of several new training initiatives including the Applied Unmanned Technology Qualification (‘AUTQ’), a course for professional trainers and pilots. It is unique in its comprehensive focus on safety, industrial applications and real flying skills.  Unlike many training organisations, Strat Aero flies its own commercial UAV fleet to deliver inspection and survey services to clients – which means that real-world learnings can be embedded directly into our training materials.  The driving factor behind the development of Strat Aero’s AUTQ programme has been the need for high level training for operators providing professional services to commercial clients. Strat Aero’s training has an emphasis on hands-on flight training and a unique focus on training operators for their chosen commercial application.

 

Having already developed our proprietary commercial UAV training application, we are busy rolling-out our offering via a capital light strategy, centred on adopting a franchise model with suitable partners.  We have now demonstrated the success of this model through our agreement with Hong Kong based I-Coach to roll-out our training programmes in Hong Kong, and the Taiwanese Republic of China.  Our parallel agreement with the Lim Kok Wing University of Creative Technology is running slower than planned and we anticipate running the first “train the trainer” course in Kuala Lumpur in July 2017.  Whilst disappointing, this delay is not expected to have an impact on full year 2017 projections.  

 

Post period end, our first formal AUTQ course in Taiwan was successfully completed.  The course ran for two weeks and was managed and taught by Mark Wharry, our Director of Training, who is a leading instructor in the UAV industry.  In association with the Taiwanese Unmanned Aerial Systems Development Association, Mark successfully trained 24 candidates in a ‘train the trainer’ style course.  These candidates have since graduated at a formal ceremony in Taipei, attended by many local businesses and government dignitaries.  We are proud to be able to bring our skills and expertise to Taiwan, to work with the TWUAS Development Association and be at the forefront of creating a new and exciting industry in the country.

 

Looking now to our Survey & Inspection services offering, this is conducted through our subsidiary Geocurve.  Growth on this side of the business continues to develop organically through existing contracts with major blue-chip companies and government agencies.  The most significant recent contract win was the CH2M contract to work on the Thames 2100 Flood Defence Project on behalf of the Environment Agency.  The contract was awarded in September 2016 after a rigorous competitive tender process and followed the successful completion of the Isle of Grain survey project where Geocurve combined multiple UAV flights, land-based surveys and bathymetric surveys to deliver a suite of video, orthomosaic photo, 3D model and survey products.

 

This is an ambitious project to be involved with – and one with enormous benefits for a large number of people as Thames 2100 Flood Defence Project is aiming to reduce the risk of tidal flooding for 1.25 million people and £200 billion worth of property by replacing and refurbishing the tidal flood defences.  TEAM2100 is an integrated and co-located team comprising the Environment Agency, global engineering company CH2M, and key supply chain partners and Strat Aero is delighted to be involved with such highly esteemed partners on this project.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.