Just when you thought that things were starting to go well for SMN with the SP staging a bit of a recovery the Sh*%tshow continues.! 

The good - the AEM side of the business is generating cash, seems to have avoided the tariff issues for Canadian manufactured goods and growing nicely. 

Net profit after tax (NPAT): $1.2 million (vs prior year net loss after tax of $0.3 million) 

Third consecutive quarterly profit: NPAT exceeding $1.0 million per quarter, totalling $3.7 million over three consecutive quarters 

Revenue: $8.1 million, up 23% year-on-year 

Adjusted EBITDA: $2.1 million, up 250% year-on-year 

Operating cashflow: $1.9 million (vs prior year negative $0.7 million) 

$1.4 million CAL FIRE radios: order successfully delivered 

AEM also launched a new avionics research and development project to expand its Special Mission product offering to meet the increasing needs of additional high-value growth markets around the world. The goal is to have this product ready by the end of FY27. 

Post quarter end, Canada’s government to government contracting agency (CCC) announced that it was awarded a contract by the United States Department of War (U.S. DOW) for magnetic amplifiers made by AEM. The amplifiers will support the internal communication system of V-22 Osprey aircraft operated by the U.S. Navy. This is a significant sale as it’s the first for AEM through the CCC program, which is designed to enables companies like ours deliver made-in-Canada solutions to the U.S. Navy and other entities of U.S. DOW, and gain access to nearly $175 billion in annual spending the U.S. Navy has been allocated for procurement of shipbuilding, aircraft acquisition, and modernization efforts.

The bad - CVM certification for the APB keeps moving in to the distance.

AEM Chief Technical Officer Trevor Lynch-Staunton said that Boeing has three remaining documents awaiting sign off within Boeing, these consist of two Compliance Summary Reports, and one Stress Check Notes. Completion date for those documents is scheduled for November 2025. 

Then came the ugly - the CEO gets fired and sues under whistleblowing protection! What now?

Structural Monitoring Systems advises that proceedings have been commenced in the Federal Court of Australia by Mr Ross Love (CEO and Executive Chair) and Turton House Group Pty Ltd (“Applicants”) against the Company and certain subsidiaries and individuals. The Applicants are seeking, among other things, injunctive relief restraining the termination of their engagement with the Company, compensation and penalties. 

The proceedings include allegations that the Applicants have been subjected to adverse action in contravention of the Fair Work Act 2009 (Cth) and victimisation under the whistleblower provisions of the Corporations Act 2001 (Cth). 

Prior to the commencement of the proceedings the Company engaged an independent third party with expertise in Canadian employment law to conduct a workplace investigation and prepare a report. 

The Company is currently prohibited from publishing or disseminating the investigation report or any of its findings. The Company denies the allegations made by the Applicants and will vigorously defend the proceedings. The matter will be listed for an interlocutory and final hearing before the Federal Court of Australia in due course.

Mr Anthony Faillace appointed as Non-Executive Director 

Mr Rick Freeman appointed as AEM Interim CEO

The long wait for the potential inflection point of SMN continues. Held in SM and RL.

A good 4C for SMN even if we are still waiting for FAA approval for CVM. At least the company is an ongoing concern with the AEM arm being cash flow positive. Still holding for a re-rate once CVM revenues occur. SP has already moved up from the sub 40c lows.

Boeing has completed 42 of 45 required documents for the package that is to be submitted to the FAA. Once the remaining three are approved, the next milestone will be when they are routed to the Engineering Unit Members for recommended approval which we are expecting to occur in the coming weeks.

Highlights

Breakout H2FY25 performance, delivering Profit After Tax of $3.1 million, compared to $0.1 million in H2FY24, reflecting strong operating leverage post Q2 restructure

FY25 Adjusted EBITDA of $5.0 million, in line with guidance; $4.9 million generated in H2FY25 (vs H2FY24: $1.7 million)

Earnings per Share of 2.17 cents for H2FY25 (vs 0.04 cents H2FY24)

Positive Q4FY25 operating cash flow of $1.5 million, versus negative $0.1 million in Q4FY24 • $8.8 million in available funding as at 30 June 2025, supporting ongoing growth and strategic expansion

AEM secured over US$1 million in new orders for the MTP136D Forest Radio from CAL FIRE, the world’s largest aerial firefighting agency

FAA certification of CVM™ Aft Pressure Bulkhead (APB) sensors progressing, with final documentation submitted to Boeing; timing remains subject to external parties however the Company continues to work closely with Airbus and operators to advance commercial adoption.

Delta Air Lines completed APB sensor installation across all eligible 737 aircraft with discussions with other major US airlines progressing

USFS and DOI approvals granted for MTP136D radio, enabling use across all federally regulated firefighting aircraft, with strong sales growth expected to continue into FY26 and beyond

AEM avionics products confirmed tariff-free under current US import rules

Significant on market share purchases made by two directors during the quarter highlighting confidence in the Company’s capacity to deliver increased shareholder value

Disc: held in SM and RL

Well 9 months after my last straw on SMN and they are still waiting for the FAA approval. I bought more in Nov 24 expecting the approval to come through end of year, then Jan, March and now an update suggesting that airlines will have to do CVM sensor use alongside, instead of replacing, the usual inspections which reduces the cost benefit. SP has fallen significantly despite the AEM business becoming cash flow positive.

Although most of the Delta 737 fleet is now installed the revenue will not be forthcoming until FAA approval.

Positive that installations are starting with another airline and discussion ongoing with Airbus.

Highlights •

Q3 Profit before tax $1.5m up 850% on Q3FY24.

Adj EBITDA of $2.2m up 251% on Q3FY24 reflecting 18% revenue growth and benefits from the corporate restructure executed in Q2

Q3 Positive operating cash flow of $0.3m up 185% on Q3FY24 driven by Q2 cost restructuring and strong Forest Radio sales

Revised FY25 forecast anticipates strong growth in H2 FY25

Forecast FY25 Adjusted EBITDA of $5.0m representing a 105% increase on FY24

Q3 Revenue of $7.9m up 18% on Q3FY24 driven by a successful targeted sales campaign

$8.2m in available funding at quarter end, providing a strong platform for continued growth

AEM receives full USFS and DOI approvals for its MTP136D Panel-Mount Forest Service Radio, authorising use in all federally regulated aerial firefighting aircraft - expected to drive substantial growth in FY2025

Launched two major products during the quarter – the P139-HD Compact Digital Audio System and the LHS41 Loudspeaker System

AEM avionics products confirmed tariff free. Orders placed prior to April 2 remain unaffected

Two potential acquisitions in avionics and structural health monitoring and new product investment in high growth markets as we continue to consolidate strong relationships with high value market customers across the globe.

CVM Technology Update

AEM has now installed the Aft Pressure Bulkhead CVM solution on 64 aircraft on Delta Air Lines’ 737 fleet

It is expected that 68 of 71 aircraft will be completed in total

Boeing’s efforts internally to compile, approve, and release the 45 documents required for the APB Service Bulletin are progressing as planned.

AEM has now completed and submitted all the documents they are required to author for the program.

Mr. Lynch-Staunton, Dr. Dennis Roach, and Boeing engineers met with the FAA (policy and certification divisions), EASA, and other operators, the FAA certification division requested to include the traditional low frequency eddy current inspections every 2400 cycles along with the CVM inspections.

AEM continued the escalation and progress of a trial deployment of the 737 APB solution onto two aircraft with a second major US airline. Installation on the first aircraft is expected by the end of June 2025.

The FAA has also engaged AEM to collaborate on a study focused on CVM and condition-based maintenance establishing further data to support the monitoring of cracks on aircraft.

The allowance of flying with damage smaller than current allowable limits would provide operators flexibility in fleet maintenance scheduling.

The Company continues to evaluate potential CVM applications with Airbus. SMS consultant Dr. Dennis Roach is continuing to work closely with Airbus and operators to advance commercial adoption.

Held in SM and RL

Advice was received from Boeing on August 2 that their Technical Design Review (TDR) meeting has closed off all outstanding technical design issues.

So Boeing has finally accepted all the tests are completed. 6 weeks to FAA submission. Decision by early CY25? Previous estimates for initial revenue were around the $6-7 million mark for the Delta installations. Not quite there yet but getting close.

From an announcement in 8/2017 (yes this product has been decades in the making!)

Delta permitted to purchase CVM™ sensors, hardware and related peripheral equipment at a discount to the SMS global catalogue list prices paid by Delta competitors - Through the purchase of an initial threshold level of CVM™ equipment, Delta will earn the right to receive commissions on all SMS sales of CVM™ equipment, and technology license agreements, transacted with global airline operators. The approximate revenue value associated with these initial threshold sales of CVM™ equipment to Delta is expected to be in the vicinity of $US6-7 million

"It significantly increases the confidence with which we can continue our engagement with important potential customers -along with our currently contracted customer Delta Air Lines - for our Aft Pressure Bulkhead application and our confidence to pursue new applications, many of which we are already progressing."

"We have no reason to believe that these additional steps won't be completed successfully, but at the same time we cannot guarantee that they will, nor when they will"

“I look forward to providing further updates as the remaining milestones are met, as well as on the implications for our current budget and forecasts as we complete that assessment in the coming weeks."

Held in SM and RL

Everything pushed back again. Now CY25 for FAA approval of CVM for APB. All reliant on Boeing getting it done!

Updated CVM anticipated timeline

May 2024 – Circulation of draft copy of proposed new service bulletin to the four largest US carriers (South West, United, Delta, American) COMPLETED

June 2024 - Completion of Low-Stress Coord Sheet Test Requirements CONFIRMED

July 17 2024 –Cert Plan resubmitted to FAA (& send to EASA)

Aug 1 2024 - Boeing Structures Technical Design Review Meeting

Aug 15 2024 – FAA acceptance of Cert Plan (may get impacted by delayed submission -was Jul 31) Aug 30 2024 –Cert Plan Deliverables completed (was Jul 31)

Sep 3 2024 –CVM deliverables to routed to Boeing ODA for approval / recommend approval (was Aug 1)

TBD – Submit CVM deliverables to FAA (Service Bulletins & Compliance Report) (was Sep 30)

TBD – FAA Approval of Deliverables (was Dec 2)

TBD – SB Release with AMOC (was Dec 20)

We note that Boeing have declined to confirm expected dates for the last three steps, which we accept as preferable to continuing to revise and then delay these dates. 

 We are actively engaged with Delta, United, Southwest and American who are the largest potential customers for this application. We are also progressing two further potential applications 

Boeing have agreed to my request for a meeting in the coming weeks to align on our expectations for a conclusion, and a to discuss their next priorities for our technology. A date for that meeting has yet to be confirmed, but I expect it to be within the next three weeks..

SMN SP up 20% (off v.low base) after a positive update. CVM FAA approval still projected for end of 24 CY but the AEM business growing strongly. MC of $46M with forecast EBITDA of $3.4M and revenue of $28M before CVM sales and a 28% growth forecast for 2025. Confident of growth without further investment but hinting at much higher growth with further investment.

Structural Monitoring Systems forecasts maiden quarterly profit

Highlights:

Forecast FY2024 annual revenue of $28.38m, representing year on year growth of 27% building on revenue growth of 43% in FY2023.

Forecast FY2024 Group EBITDA of $3.38m v FY2023 Group LEBITDA of $0.27m Avionics with a figure of 28% revenue growth budgeted for in FY2025. 

Increased avionics sales expected to see the Group record a quarterly profit for the first time in the June quarter (before any audit adjustments).

Stronger than anticipated results bolstered by the strong performance of the Group’s Contract Manufacturing segment.

Forest Radio added as an approved Cooperator Agencies radio for USFS contracts for the States of Washington, Oregon, California, Colorado.

First Supplement Type Certificate (STC) for installation of the MTP136D on the AS350 helicopter type expected to be completed by the end of June 2024. CVMTM

Boeing confirms circulation of draft copy of proposed new service bulletin to the four largest US carriers.

Boeing undergoing evaluations of final testing completed in May, expected to be completed by the end of June.

Boeing expected to submit the final documentation for the proposed service bulletin to the FAA by Sep 30, 2024.

“We are confident we can grow the business profitably next year by as much as 20% (and by over 50% in five years) without further investment – and with conservative assumptions on CVMTM segment sales. “With further investment we believe we can generate significantly more growth (at least double the base case) over the five-year forecast period. "

Held in RL and SM

What a #@$tshow! Rick Deurloo (the only aerospace experienced board member) resigns after protesting the use of his name and signature by the board without his agreement.

He backs the EGM resolutions and slams the board in an open letter to shareholders copied to the ASX and Drake. Backs their board appointments.

Company goes in to a trading halt pending an announcement which is a purchase order from Delta (the airline that SMN have been working with all along) for 4 sensor sets with some undisclosed cash payment deemed not material. Touted as a milestone for the company and projecting Aft pressure bulkhead FAA approval in H1 23. Convenient pre EGM /AGM announcement to try and satisfy shareholders. This whole debacle has been one big sorry mess. I hope that Drake get over the line, clean house and the company can get some stability to make progress. More CR to come.

Disc: held in SM and RL both at a loss

SMS Group Update - Further Material Progress to Pivotal STC

Highlights:

 ~ SMS received the Statement of Conformity Certification from the FAA.

As part of the previously announced requirements to achieve STC approval, SMS has now received the Statement of Conformity Certification from the FAA after completing the CVM™ kit installation in Victorville, CA on a Delta B737-800 aircraft. This is a major milestone achieved on the well defined path toward the first STC approval. The next and final milestone is the submission of the combined laboratory test data from Sandia and Delta Engineering to the FAA. Although the FAA could request additional data from the laboratory reports, we are expecting these would have minimal impact to the overall certification timing.