Client issues see SimiGon perform below expectations

Simulation training solutions provider SimiGon updated the market on its trading for the year to 31 December on Thursday, ahead of announcing its final results for the period in April.

The AIM-traded company said it has, in the process of preparing its final results and after consultation with its auditors, concluded that it must recognise certain costs of meeting additional client demands outside the original scope of its major $6.7m contract it announced in June 2013.

It said it has not yet received the requisite client confirmations which would enable the company to recognise all the programs revenue.

SimiGon’s board said it has also been disappointed that procedural delays in concluding the signatory processes underlying its contract with the Israeli Air Force - as announced on 20 June 2016 - have not enabled it to recognise any related revenues in the period.

It said it expects that the effect of these delays is that it will report results for the period below market expectations, with revenues of approximately $6m and adjusted net profit before tax will be at least $0.3m.

SimiGon remained optimistic in its outlook, however, saying it is confident in its existing forecasts for the current financial year, with the revenue and profit which could not be recognised in 2016 will be incremental to those existing expectations for the years ending 31 December 2017 and 2018.

The company added that its balance sheet remains strong with more than $8m of liquid cash at year-end.

Given that significant cash balance, SimiGon confirmed its intention to propose a share buyback programme later in the financial year.

“It is disappointing that our financial performance for this year has been affected by circumstances that are outside of our control but we are confident that all of the outstanding issues will be resolved in the coming year,” said president and CEO Ami Vizer.

“This will contribute to the company's great revenue and profit visibility for 2017 and beyond.”

Vizer said SimiGon was continuing to cement its position as a prime contractor for major long term simulation programmes, and during the period it secured a number of significant new contracts, continued to deliver project milestones for long term contracts and successfully executed on delivery and performance of its systems.

“Despite this setback, the company's board of directors looks to the future with optimism.”