SMS strengthens growth case as avionics delivers and CVM advances

Structural Monitoring Systems (ASX:SMN) has a stronger story to tell than a single certification milestone. Record annual revenue, a growing proprietary avionics business and the capacity to fund its own product development are giving the aerospace group a substantial operating base — with progress on CVM adding another dimension to its growth prospects.

The September-quarter update and investor presentation underline the opportunity: wholly owned Canadian subsidiary Anodyne Electronics Manufacturing (AEM) is generating earnings and cash today, while reinvesting in products designed to expand its addressable markets. Investors need not look solely to CVM to see the substance of the business.

Avionics puts earnings behind the growth story

SMS delivered record FY26 revenue of A$32.5 million, up 16%, and adjusted EBITDA of A$6.3 million. Avionics revenue increased 40% to A$22.2 million, representing 68% of group revenue compared with 56% a year earlier.

Behind those results is an expanding proprietary product business. FY26 radio sales rose 29%, while audio-system sales increased 94%, according to the October investor presentation. AEM’s customer footprint spans emergency services, police, defence and specialist aviation operators across North America and Europe — evidence that its technology is finding markets well beyond its Canadian home.

That operating platform continued to deliver in the September quarter. Unaudited group revenue was A$7.0 million, adjusted EBITDA was A$1.8 million and net profit after tax was A$0.7 million. Positive free cash flow of A$0.7 million accompanied an increase in cash at bank to A$5.2 million from A$4.8 million at June-end.

The comparison with the prior year was softer: revenue declined from A$8.1 million and adjusted EBITDA from A$2.1 million. However, the earlier quarter included A$1.4 million of revenue carried over because of a customs delay, while a weaker Canadian dollar also affected Australian-dollar reporting. Extended critical-mission deployments delayed some aircraft maintenance and upgrades, influencing avionics demand.

Funding the next wave of growth from within

AEM invested A$0.8 million in product development during the quarter, compared with A$0.3 million a year earlier. Both new avionics development programs remained on schedule, targeting opportunities across rotorcraft and fixed-wing markets.

The ability to fund that work internally is central to the investment case. Having repaid its bank borrowings, SMS is generating positive free cash flow while investing in the next generation of products. It is a tangible combination of current earnings and future opportunity, rather than a business waiting on a single regulatory outcome.

Contract manufacturing remains another part of the business, contributing A$3.1 million in September-quarter revenue. AEM is pursuing work suited to its high-quality, low-volume manufacturing capability, with margins and operational utilisation remaining priorities.

CVM adds another avenue for growth

Separately, the US Federal Aviation Administration approved the Boeing B737NG Certification Plan on 29 October 2026, relating to SMS’s Comparative Vacuum Monitoring technology for the aircraft’s aft pressure bulkhead application.

That is progress in the certification process, not final approval of the CVM application or approval of the B737NG Service Bulletin. The timing of the FAA’s Service Bulletin review remains unconfirmed, and SMS is not providing a revised completion date as it continues to engage with Boeing.

SMS chairman Neville Bassett AM said:

“Approval of the Certification Plan is a positive step in progressing CVM for the Boeing 737NG application. Further approvals remain outstanding, and we continue to work with Boeing through the certification process.”

For investors, the attraction is the combination: an established avionics business with demonstrated demand, cash to support reinvestment and a separate structural-monitoring opportunity progressing through its approval pathway. CVM commercialisation remains dependent on further regulatory and customer processes, but it is not the group’s only source of growth potential.

AEM chief executive Rick Freeman’s upcoming Australian investor briefings in Sydney and Melbourne, alongside the Perth AGM, offer a timely opportunity to examine that broader story: growing avionics sales, self-funded innovation and CVM progress, underpinned by a business already producing earnings and cash.