A couple of major deals significantly boosted Simigon’s revenues in H111. The AIM-listed provider of simulation solutions to military organisations, which is headquartered in the US with R&D facilities in Israel, reported a 131% increase in revenues to $2.43 million. This was due to a “significant contribution” from its contract to support Lockheed Martin’s F-35 Lightning II Joint Strike Fighter (JSF) training programme. The performance was is in stark contrast to its FY10 results when it recorded a 14% decrease in turnover.
However, despite the impressive revenue increase, the company was barely profitable. It just managed to creep into the black at the operating and pre-tax levels with profits of $4k and $11k respectively. More worryingly, there is no indication from management of how it expects to improve on its bottom line. Although operating costs declined in the first six months of the year, there is no talk of a continuing cost reduction programme.
As such, the conclusion must be that Simigon is pinning its hopes on existing programmes ramping up as well as its ability to continue expanding into new geographies. “Optimism” is all very well and good (after all, it’s amazing what a ‘can do’ attitude can achieve). However, with the majority of Simigon’s existing business coming from four major military flight training programmes, it might be better to put a bit more emphasis on the “caution” for now. After all, as Simigon admits, considering the current macro environment “delays to large contracts might postpone associated training programmes”... and that would almost certainly send Simigon back into the ‘red’.
