SimiGon Ltd (LSE: SIM), a global leader in providing simulation and training solutions, announces its interim results for the six months ended 30 June 2020 (the “Period”).
Financial Highlights
· Revenues decreased by 50% to $1.35 million (H1 2019: $2.68 million) reflecting slower progress in delivering against project milestones due to COVID-19 restrictions and limitations on securing expected new business wins
· Pipeline for H2 and beyond gives confidence in longer-term prospects
· Consequential impact on gross margin of 49% (H1 2019: 66%)
· Operating expenses decreased by 15% to $1.88 million (H1 2019: $2.20 million)
· Operating loss of $1.22 million (H1 2019: $0.44 million)
· Net loss increased by 193% to $1.27 million (H1 2019: $0.43 million)
· Basic and diluted loss per share of $0.02 (H1 2019: loss per share $0.01)
· Cash, cash equivalent, short term investment and deposits of $6.30 million as at 30 June 2020 (30 June 2019: $6.15 million)
· Trade receivables decreased by 73% to $0.61 million (30 June 2019: $2.30 million)
Operational Highlights
· Establishment of a Mergers & Acquisitions (M&A) team, seeking strategic acquisition opportunities for the Company to increase SimiGon’s near term revenues as well as improve long term growth prospects.
· Secured additional software and hardware warranties and support services for the United States Air Force T-6A Level 5 FAA Compliant Flight Training Device, valued at up to $0.7 million over the course of 6 months starting in May 2020, with options to extend the service period for an additional 12 months.
· Continued to support major military flight training programs including:
Ø The USAF Air Education and Training Command Undergraduate Remotely Piloted Aircraft Training (“URT”);
Ø Support for Lockheed Martin’s UK Military Flight Training System (“UKMFTS”); and
Ø Providing software and services as part of long-term relationship with a strategic European customer.
· Successfully delivered milestones for the United States Air Force (“USAF”) phase one contract to provide twelve (12) SIMbox-based F-15E Mixed Reality (“MR”) training devices for USAF Air Combat Command (“ACC”).
· Completed multiple delivery milestones for the $2 million Israeli Air Force (“IAF”) F-16 Maintenance Trainer Program (“IAF F16 Maintenance Trainer”) contract announced in June 2016 and for the T6A Simulation Based Trainers to the IAF Flight Academy contract (“IAF T6A”) announced in September 2018.
· Successful milestones deliveries for the $1.8 million contract from a large international defense electronics company to design, develop and implement a C-130 virtual maintenance training solution.
· During the Period, SimiGon has continued its ongoing R&D efforts to enhance simulation-based training and position the Company to capitalize on new high growth market opportunities mainly in maintenance training technologies.
· Promoted the Chief Operating Officer, Mr. Jack Sarnicki, to President of SimiGon Inc., the main trading subsidiary of the Company.
Ami Vizer, SimiGon’s Chief Executive Officer and Executive Chairman, commented: “SimiGon’s core business supporting military aircrew training through direct Government contract and subcontracts has been adversely affected by the coronavirus (COVID-19). Despite numerous contracts delays, we have continued to work through the challenges, making our programme deliveries and support while receiving a contract extension from the USAF for RPA training. The ongoing R&D efforts in XR and maintenance training are creating significant future growth potential. This has made SimiGon a more cohesive, focused and ready-made company for the challenges to come.
We are continually reassessing our prospects given the dynamic environment and restrictions imposed across our international business, but have concluded that performance for the financial year will be behind that of 2019. This is unfortunate but understandable in the circumstances, and given that existing long-term relationships have remained strong, our contracts remain in place if delayed, and, with a resilient financial position, we are confident in the longer term prospects for the business.”
Legal actions:
On January 13, 2020 D.D Goldstein Real Estates and Investment Ltd., which to the Company’s knowledge acquired 1,500,000 shares in the Company during 2019, has filed two legal actions in the Tel Aviv District Court – a petition for leave to file a monetary claim concerning salaries on behalf of the Company and an action for prerogative relief concerning resolutions approved at the Company’s annual general meeting held on December 30, 2019 (the “AGM”) regarding the appointment of directors and the determination of their compensation. The legal actions allege certain flaws in the election of Mr. Simon Bentley, Mr. Ran Pappo, Mrs. Ronit Schwartz and Mrs. Deborah Bitman as directors (the “Plaintiff”). The Company has notified its insurers with respect to allegations against directors.
Coronavirus (COVID-19)
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. COVID-19 threatens to be a disruptor to companies, supply chains and the world economy. As of the date of approval of the interim consolidated financial statements, there has been a significant impact on the Company’s operations resulting from the COVID-19 outbreak. Though the Company had not received any cancelation notices from its customers in respect of active purchase orders as a result of COVID-19, the restrictions imposed in response to the pandemic have slowed the ability of the Company to deliver during the Period, and whilst this business has been delayed rather than lost, it is clear that the rate of winning new business opportunities has been negatively impacted. In light of the uncertainty as to the severity and duration of the pandemic, the overall impact of COVID-19 on the Company’s future revenues, profitability, liquidity and financial position is difficult to assess at this time. The Company expects a moderate improvement in performance in H2 but the performance for the full financial year will be below that of the previous financial year.
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