AGM Statement

RNS Number : 7308C

Strat Aero PLC

30 June 2016

 

Strat Aero plc / Index: AIM / TIDM: AERO / Sector: Support Services

30 June 2016

Strat Aero plc ("Strat Aero", the "Company" or the "Group")

Annual General Meeting Statement

Strat Aero plc, an international aerospace company focused on the rapidly emerging Unmanned Aerial Vehicle ("UAV") sector, is holding its Annual General Meeting ('AGM') later today.  At the meeting, Executive Chairman Graham Peck will make the following statement:

"In the past Strat Aero looked to grow through a series of acquisitions and partnerships.   This strategy has produced mixed results with the positive additions of Geocurve and I-Coach offsetting the disappointment of the Aero Kinetics acquisition.  However, with limited resources both in terms of capital and personnel, the strategy of pursuing new acquisitions and markets is not sustainable for a company of our size, at least not until a solid cash generative foundation has been established.  It is clear we need to have a robust strategy which translates into an executable business plan with identifiable targets, measures, planning, financial processes and clear lines of accountability.  This is precisely what our new CEO, Iain McLure, who has a strong operational and management back-ground, is looking to deliver. 

"The breadth of the opportunity presented by Unmanned Aerial Services ('UAS') is widely acknowledged to be substantial.  However, there is always the risk that in looking to enter multiple new markets concurrently, resources can be spread too thinly.  With this in mind, the Board recognised that a renewed focus on our core strengths and capabilities offered the optimal route, in terms of risk and costs, to build recurring annualised revenue streams without having to commit considerable sums of capital.  Iain has therefore spent the first few weeks of his tenure as CEO evaluating the business to identify those areas where we believe Strat Aero has the potential to become a world class provider of UAV based services and solutions. 

"Encouragingly, there is no shortage of sub-sectors within the UAS space where we believe we can become a leading UAV services and solutions provider.  These sectors include: Commercial UAS Training & Education; Survey & Inspection Services; Security; Data Analytics; and Consultancy.  The Strat Aero team has extensive experience and contacts in all these fields.  We therefore have an ex-cellent platform in place upon which we can build profitable businesses without having to invest significant amounts of capital.

Commercial UAV Training & Education

"With UAVs increasingly taking to the skies, the need for pilots to be professionally trained and accredited is more important than ever.  The Strat Aero team has practical aviation experience, including direct classroom based teaching as well as developing and managing digital-based training platforms. In the last year we have invested in developing commercial training applications and we intend to capitalise on this.  Our vision is to create a professional UAV career path and association for UAV pilots.  By developing an educational "ecosystem" not only will we lock Start Aero into repeatable revenue opportunities, but we will also have access to a resource pool of pilots trained and accredited by Strat Aero. This resource pool along with the training programmes will allow us to create and leverage excellent purchasing and partnership arrangements with UAV manufacturers.  

"The Master Franchise Agreement we signed with Hong Kong based I-Coach in January 2016 provides an example of the capital-light opportunity we have to position Strat Aero as a world leader in UAV pilot training and accreditation.  The Master Agreement involves the roll-out of Strat Aero's proprietary UAV Training Programme to capitalise on the rapidly growing base of UAV operators in Hong Kong, The People's Republic of China, the Taiwanese Republic of China and Macao.   We secured the Master Agreement thanks to the first rate training pedigree of our team of aviation specialists.  We are looking to replicate the Master Agreement with other partners as we focus on positioning Strat Aero as a world class provider of UAV pilot training and accreditation.

Survey & Inspection Services

"One area where UAVs are today transforming traditional business practices is the field of surveying and inspection services.  We know this is the case as our Geocurve subsidiary, which is a specialist in the provision of UAV operated topographical surveys and inspection services to a blue chip customer base, including the UK's Environment Agency, EDF Energy, Carillion, and the RSPB, is already playing a leading role in the UK.  Geocurve was one of the first companies to be authorised by the Civil Aviation Authority to fly UAVs in congested urban areas and conduct surveys, inspections and various other projects in previously prohibited areas; and it has successfully completed a pioneering survey over the Norfolk Broads National Park using UAVs.

"Geocurve has a proven track record both in the field and in analysis and reporting delivered by a highly competent team of professionals.  Geocurve provides us with the capability to target other sub-sectors without having to invest significant amounts of capital.  Targeted areas include civil engineering; land surveys and inspection services for quarries and boundaries; flood defences; buildings; tunnels; energy assets including oil and gas, water, solar, wind turbines, water towers; wildlife habitat monitoring; insurance services; and cell towers.  All of these fit well with Geocurve's established surveying and inspection services and we therefore believe they represent a natural development for the business.

"Geocurve customer contracts have to date tended to be short term in nature and in the revised strategy the company will continue to focus on longer term annualised customer relationships and broadening the customer base.

Security

"Importantly, we have identified a number of other large sectors outside of inspection and surveys which are well suited to Strat Aero's skillsets and offerings which can be targeted at minimal expense.  For example, security. A UAV based security service can be offered to undertake border and perimeter patrols, cover public events, play a role in emergency disaster / search & rescue operations and detection. 

Data Analytics

"We believe the combination of UAVs and software to gather data and generate 3D models and analysis on its own is not enough to build and retain value.  Commercially available software is able to capture the large quantities of information gathered by UAVs however the end product is typically full of 'noise', difficult to interpret and therefore does not always add value to end customers.  To make sense of it, Strat Aero applies a human touch and intelligence to the process: experienced data managers and analysts, a number of whom are qualified civil engineers, apply education and experience to clean up the data and produce results that can be easily interpreted and add real value to the end user.  Being able to offer a superior value adding product is something that sets Strat Aero apart from its competitors and presents us with an opportunity we are keen to capitalise on through our Data Analytics capability.  In keeping with our capital-light growth strategy, we already have the technology through our in-house developed Digital Data Management ('DDM') system which we use as the foundation of data capture, processing and reporting back to customers.  In addition, DDM has core functionality in aviation management software which is used in general aviation in North America.  Finally, DDM is the core software behind our computer-based training application, again used in North America.   

Consultancy

"Our breadth of experience in a range of relevant disciplines and activities such as training and regulation, data gathering and modelling can also be put to profitable use on a consultancy basis by offering bespoke services to individual customers on both a regular and ad hoc basis.  Strat Aero's active influence and involvement in the industry, via professional trade associations and participation in the legislative process and lobbying, uniquely positions us to offer consultancy services.  As well as generating revenues, consultancy services also provide scope for cross selling opportunities across all our divisions which can lead to repeat, regular business.

Aero Kinetics

"Following the acquisition of Aero Kinetics in December 2015, the Company filed a legal action on 1 April 2016 in Texas, USA against Mr W. Hulsey Smith ('Mr. Smith'), the vendor of Aero Kinetics on counts of fraud and breach of contract arising from misrepresentations made by Mr. Smith upon which the Company relied and were material in the Company's decision to acquire Aero Kinetics.  Strat Aero also terminated the services of Mr. Smith.

"On 6 April 2016, the Company and its directors received a defence and counterclaim from Mr. Smith.  The Company continues to believe and has been advised that it has a strong claim and a robust defence against Mr. Smith.  The Company intends to continue to vigorously pursue its claims against Mr. Smith and believe his counterclaims and purported defence to be without merit.  There are a number of potential resolutions available to the Company in relation to the legal action including a settlement, rescission of the purchase of Aero Kinetics as well as actual and consequential damages. Unless settled, the court has set a date of October 2016 for the case to be heard.

Outlook

"The UAV industry is undeniably a dynamic and rapidly growing space to operate in but, as with all new technologies, translating this opportunity into a profitable business is a lengthy process.   Before government departments and large companies adopt UAV technologies, they typically require proof of concept trials to demonstrate the benefits and robustness of UAS before contracts are signed. It is also essential to focus on areas where we can add real value to customers, using our professional experience and expertise. With these challenges in mind, the Board is working to establish a new corporate structure, integrating the whole business to exploit our assets sharing resources, skills and experience. It is also important to make a clear statement of intent on what we are aiming to achieve.    As well as building a solid foundation based on revenue growth, it is critical that we continue to closely manage and control costs as well as developing cross selling opportunities, as we look to drive revenues and profitability going forward.  

"We believe Strat Aero is well positioned in the new and emerging UAS market place.  We have the people, skills and experience along with the technology to become a world class provider of UAV services. We are now focused on creating a revised integrated structure which will allow us to effectively mobilise our core strengths, maximise our potential, and in the process generate value for our shareholders, customers and employees.

"We expect a full update will be published later today including the full year accounts but on behalf of the Board, I would like to extend our thanks to our business partners, customers, associates and valued shareholders for their continued support throughout the course of the year.  We also wish to thank our management and staff for their continued hard work and we look forward to working with you all in the forthcoming year."

- ENDS -

For further information please visit www.strat-aero.com or contact:

Strat Aero plc	Tel: [phone]
Graham Peck (Chairman)
SP Angel Corporate Finance LLP	Tel: [phone]
Nominated Adviser and Joint Broker
Stuart Gledhill Jeff Keating
Beaufort Securities Limited	Tel: [phone]
Joint Broker
Elliot Hance
Cornhill Capital Ltd
Joint Broker
Colin Rowbury	Tel: [phone]
St Brides Partners Ltd	Tel: [phone]
Financial PR Frank Buhagiar Susie Geliher

Notes

Strat Aero plc is a multi-divisional international aerospace services company, focussed primarily on the provision of complete client solutions in the Unmanned Aerial System ('UAS' market), which is predicted to show exponential growth over the coming decade.  Commercial and military applications in UASs are expected to be a dynamic growth sector in the aerospace industry over the next 10 years with the UAS market forecast to grow to more than US$82.1 billion between 2015 and 2025 (AUVSI Economic Report 2013) and the global airborne Intelligence, Surveillance and Reconnaissance ('ISR') market estimated to grow to US$19.23 billion by 2023. 

 

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