FAA Certification Delays Could Test SMS’s Growth Momentum Despite Strong H2
Structural Monitoring Systems Plc (SMS) reported a breakout second half of FY25 with a $3.1 million profit after tax, driven by strong operational leverage and strategic growth in avionics. The company secured over US$1 million in new orders from CAL FIRE and advanced FAA certification for its innovative sensor technology.
- H2FY25 profit after tax jumps to $3.1 million from $0.1 million in H2FY24
- FY25 adjusted EBITDA of $5.0 million aligns with company guidance
- Secured over US$1 million in MTP136D Forest Radio orders from CAL FIRE
- FAA certification for CVM Aft Pressure Bulkhead sensors progressing with Boeing and Delta Air Lines
- Directors made significant on-market share purchases, signaling confidence
Strong Financial Turnaround
Structural Monitoring Systems Plc (ASX, SMN) has delivered a remarkable financial turnaround in the second half of FY25, posting a profit after tax of $3.1 million compared to a mere $0.1 million in the same period last year. This leap reflects the benefits of a corporate restructure completed in Q2, which significantly reduced operating costs and sharpened the company’s sales focus.
For the full year, SMS reported an adjusted EBITDA of $5.0 million, consistent with prior guidance, underscoring the company’s improved operational efficiency. Earnings per share surged to 2.17 cents in H2FY25 from just 0.04 cents a year earlier, while operating cash flow turned positive at $1.5 million in Q4, a stark contrast to the negative cash flow seen in Q4FY24.
Key Contract Wins and Market Expansion
A highlight of the quarter was securing over US$1 million in new orders for the MTP136D Forest Radio from CAL FIRE, the world’s largest aerial firefighting agency. This contract builds on previous sales and positions SMS as a leader in the specialized aerial firefighting communications market. The company’s sales and marketing efforts, including strategic visits to California and participation in international aviation conferences, have laid the groundwork for further growth in North America and Europe.
Meanwhile, the contract manufacturing segment saw a strategic pivot away from lower-margin projects towards higher-margin avionics products, supporting the company’s profitability goals. Despite a 20% revenue decline in contract manufacturing, the focus on higher-value products is expected to enhance margins going forward.
FAA Certification and Technological Advances
SMS is making significant progress towards FAA certification of its CVM™ Aft Pressure Bulkhead (APB) sensors, a critical milestone for commercial adoption. Final documentation has been submitted to Boeing, with 42 of 45 required documents completed. Delta Air Lines has installed the sensors across all eligible 737 aircraft, and discussions with other major US airlines are ongoing. While the certification timeline remains subject to external factors, the company remains optimistic about a positive outcome.
In parallel, SMS is advancing its Gen III software development program and preparing for ISO 9001, 2015 and AS9100D recertification audits, reinforcing its commitment to quality and innovation. The company is also strategically managing supply chains to mitigate tariff risks, with its avionics products currently tariff-free under US trade agreements.
Board Confidence and Financial Position
Two directors, including Chairman and CEO Ross Love, made significant on-market share purchases during the quarter, signaling strong insider confidence in SMS’s growth trajectory and long-term value proposition. The company ended the quarter with $8.8 million in available funding, including $2.1 million in cash and $6.7 million in unused financing facilities, providing a solid platform for ongoing expansion and strategic acquisitions.
Looking ahead, SMS is well-positioned to capitalize on its strengthened financial footing, expanding product lines, and regulatory approvals to drive growth in FY26 and beyond.
Bottom Line?
SMS’s strong H2FY25 performance and strategic wins set the stage for accelerated growth, but FAA certification timing remains a key watchpoint.
Questions in the middle?
- When will FAA certification for the CVM APB sensors be finalized, and how will delays impact revenue?
- What are the prospects and timelines for the two strategic acquisitions under negotiation?
- How will SMS balance contract manufacturing declines with growth in higher-margin avionics products?
