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

Positive update on the AEM business. SP has been on the increase in anticipation of the Boeing Technical Design Review which we have been told is scheduled for this Thursday August 1.

We have also confirmed a meeting with the Director of the Boeing Airframe Services team at their Seal Beach headquarters on August 9 at which stage we expect to be discussing the next, and final, steps towards submitting the Boeing draft service bulletin to the FAA for approval, as well as their priorities for other applications. 

SMS (“the Group”) recorded a maiden quarterly profit before tax of $0.51m for the quarter ended 30 June aided by the launch of the new MTP136D forest service radio product

The Group recorded EBITDA of $1.21m for the June quarter, an increase of 123% on the prior year. This can be attributed to the continued strong performance of the AEM Avionics and Contract manufacturing businesses

The Group recorded gross revenue for the quarter of $7.97m up 34% on the prior year. Both the AEM Avionics and Contract Manufacturing business segments continue to perform strongly, experiencing growth across all key metrics contributing to achieving this excellent result

SMS Group recorded a positive cashflow from operating activities of $1.01m for the year. 

Potential to expand CVM applications?

CVM's installation and installation training partner, TESTIA, presented a new co-authored paper titled: An Exploration of Leveraging CVM Sensors to Monitor Structures Across Various Industries - Part 1: Mining, Infrastructure and Marine. The paper was co-written by TESTIA's Aswin Haridas and Holger Speckmann, and AEM's Trevor Lynch-Staunton, and Dennis Roach. 

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

All holders still waiting for the FAA approval but some good news on the AEM money making side of the business. New radio product with orders in 24 but no details on revenue expectations.

AEM announced a new modern panel-mount radio for special-role and multi-mission platforms in Kelowna, British Columbia, on November 8 with the U.S. Forest Service and aerial firefighting operators in mind.

The company also announced that it had secured Canadian based Yellowhead Helicopters as its official launch customer, who is committing to updating its entire fleet to the MTP136D starting in early 2024.

“This new radio helps to modernize tactical aerial firefighting communications with the industry’s most technologically advanced and up-to-date panel-mount solution,” Mr Weller said.

The MTP136D boasts a robust design to ensure the highest performance in lengthy and demanding firefighting environments. It’s easily integrated for tactical systems, platform upgrades, and is a plug-and- play replacement for existing legacy radios.

The highly successful launch of the MTP136D is part of AEM’s continued investment in a growing suite of avionics and audio products into the Special Missions Aviation sector and builds on the continued strong performance of its contract manufacturing business.

SP had been pushed lower on concerns about further delays to the APB FAA certification with HC rumours about 3 more AMOCs (Alternative Methods Of Compliance ) being required. An update today from the executive chairman pushed the SP back up 23%.

Latest installation observed by 3 US airlines, Thorough evaluation allowing quicker and cheaper acceptance of future applications. Possible future use in Airbus craft and use in Boeing design and manufacture. Meetings in Japan with ANA, JAL, Subaru and KHI. Left right to the end was the acknowledgment of the additional testing required and suitably loose statement about profitability. “potential for profitable growth “. Volatility likely to remain until the certification is confirmed.

“Last week our team supervised the 23rd installation of the sensor kit on a Delta aircraft – the third “commercial” installation of this kind.

“Delta remains committed to complete the installation program over their entire fleet of 71 737’s for which this application is suitable. Engineers from United, American and Southwest attended this installation – which provides us with a solid indication that we can expect further commercial sales once the certification has been confirmed.

“The final tests requested by Boeing are now almost complete and we expect the certification package to be submitted soon.

“One of the benefits of this very detailed scrutiny, and testing of the sensors under a wide range of often unlikely scenarios, is that we will be able to demonstrate that our solution for crack detection is thoroughly evaluated such that the edge conditions are evaluated allowing faster acceptance of future applications as well as being substantially more efficient in terms of cost and time savings.

“We are also currently in the process of confirming the details of our commercial agreement with Delta for their support for our sales campaign to these and other customers for the APB application.

“I am pleased to report that Airbus has confirmed during recent presentations of our CVM technology in Tokyo that the technology is ready for commercial deployment.

“We are also in discussion with Boeing regarding opportunities to expand the set of 737 applications, with a view to having sufficient operational data in place to consider the possibility of this technology being included in future narrow body aircraft design and manufacture.

Anodyne Electrical Manufacturing’s (AEM) approval by the Japanese Civil Aviation Bureau (JCAB) following the successful development of its Safety Management System (SMS).

While in Japan, our group also held dedicated meetings at the JAL and ANA facilities where the CVM technology was introduced in detail and demonstrations were completed.

“Overall, the technology was well received, and the parties are actively engaged in following along with the certification process and learning more about potential applications for their operated airframes.

“Meetings were also held at with KHI and Subaru to introduce the Company’s CVM technology and to discuss ongoing and future projects for AEM’s special mission communication products.

“I am pleased to report that interest levels were also high at these organizations for both civil and military platforms.

“All meetings were well supported by AEM’s partner in Japan, Aero Facility.

“Whilst in Japan, AEM also signed a Memorandum Of Understanding (MOU) with Aero Facility, extending the existing agreement to provide support for CVM-related activities in Japan.

While I appreciate the ongoing frustration from shareholders regarding the commissioning of additional testing by the FAA as we move towards certification, this is a necessary part of the comprehensive certification process and once complete will pave the way for further, streamlined application processes.

“Thank you once again for your ongoing support (and patience.) I remain very confident in the near-term potential for profitable growth which will drive significant value for all shareholders.”

Held in SM and RL

Not many of my holdings with good news but SMN actually made money this quarter ($766K) thanks to record sales from AEM.

FAA approval did not happen in April now likely June/July?

Highlights

March 2023 Appendix 4C and Quarterly Update

• Wholly owned subsidiary Anodyne Electronics Manufacturing Corp. (AEM) recorded an exceptional financial performance for the reporting period with gross revenue for the March quarter of $5.86million versus $5.36million the previous quarter up 9% and 35% higher than the March quarter the year prior

• AEM recorded the highest March sales figures in the Company’s history and is on track to achieve the highest annual sales in its history as a company

• Gross revenue for the year to date is $16.27million versus $11.05million in the year prior up 47%

• Forward orders for the June quarter are currently sitting at $4.81million indicating solid continued

growth in the months ahead

• Normalised EBITDA for the year to date is $2.67million versus $2.03million up 32% on the year to date prior

• AEM recorded positive operating cashflow for the quarter of $1.67million ($1.05million for the Group)

• AEM received approval from the Japanese Civil Aviation Bureau (JCAB) following the development of its Safety Management System (SMS) which formalizes the acceptance of the delivery and installation of repairs products into the Japanese market

A short test that will take 3-5 weeks is proposed to satisfy what should be the last of the concerns for Boeing’s certification team before submitting to the FAA for approval,” Mr Lynch-Staunton said. That test is currently scheduled to start at the beginning of May.

SMS expects to provide a further update on the expected timing of FAA approval following the completion of this short test period.

Good to have a couple of positive announcements with definite dates. Expecting FAA approval for 737 Aft pressure bulkhead application by late April and new bank finance arranged. Disc: Held

An update on the Company’s APB Certification Program and compression testing.

Delta Airlines continues to support SMS throughout this certification program, this effort is expected to result in a significant commercial revenue generation for the Company moving forward.

“This is another confirmation of the real-world performance of the Company’s ground breaking, patented Comparative Vacuum Monitoring (CVMTM) technology and provides a basis to support future applications.

The APB Certification Program continues to remain on track for Q2 approval by the Federal Aviation Administration (FAA). “Recent supportive testing has been successfully concluded at a Boeing laboratory, further solidifying the confidence in CVMTM technology. “The Compliance Report is currently being written and is expected to be completed before the end of February. “The next major program milestone is scheduled for early March, an APB installation on another Delta aircraft. “This installation will be supervised by Boeing to finalize changes to the Service Bulletin. “Invitations to observe this installation have been extended to the FAA as well as another major airline operator. “We then expect FAA Approval of Deliverables by 15 April 2023 and the Service Bulletin Release from the FAA by 21 April 2023.”

Canadian based subsidiary, Anodyne Electronics Manufacturing Corp (“AEM”), is pleased to announce that new banking and credit facilities have now been secured with the Royal Bank of Canada (RBC). The agreed facilities will ensure that AEM has suitable financing options in place to meet the ongoing growth objectives of the Company. 

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

After all the chaos of recent times it is good to see a positive announcement of a strong appointment to the board.

EXPERIENCED GLOBAL AEROSPACE EXECUTIVE APPOINTED TO SMS BOARD

Rick has more than 23 years of experience in management and sales in the global aerospace industry and is currently SVP & Chief Commercial Officer for Pratt & Whitney. In this role he is responsible for leading and directing all Sales, Marketing and Customer Support worldwide for Pratt & Whitney Commercial Engines and International Aero Engines (IAE).