Structural Monitoring Systems backs growth ambitions with avionics profits

Structural Monitoring Systems Plc (ASX:SMN) is taking a stronger operating business to Australian investors, with rapid avionics growth and A$6.0 million in annual free cash flow supporting its next phase of expansion. 

The company's Australian Investor Briefings presentation, released to the ASX on 10 November, outlines the progress of Canadian subsidiary Anodyne Electronics Manufacturing (AEM) as it builds its branded avionics business and invests in new products. 

AEM Chief Executive Officer Rick Freeman joins SMS Director and Company Secretary Sam Wright and Chief Financial Officer Gary Elwell to kick off the investor briefings in Sydney today, Tuesday, 10 November.

The program continues in Melbourne on Wednesday, 11 November, followed by the company's AGM and investor presentation in Perth on Thursday, 12 November. 

Freeman said in the company's earlier announcement: 

"These in-person sessions are designed to encourage open conversation, networking and discussion about the business and our strategic priorities. They provide an opportunity to engage directly with our shareholder community, answer questions and reinforce the strategic foundations underpinning our growth. I look forward to meeting existing shareholders and prospective investors in Sydney, Melbourne and Perth." 

Alongside that operating progress, the FAA's approval of the Boeing 737NG Certification Plan marks another step for Comparative Vacuum Monitoring (CVM). Final approval of that application remains pending, with no estimated completion date. 

For investors, the attraction is a company with demonstrated earnings and cash generation, an expanding product portfolio and further commercial opportunities to pursue. 

Avionics leads the growth 

AEM's avionics business generated A$22.2 million in FY26 revenue, up 40%, and A$7.5 million in segment adjusted EBITDA. 

Avionics accounted for 68% of group revenue, compared with 56% in FY25, showing how substantially the business mix has shifted towards its own products. 

Radio unit sales increased 29%, with more than 320 units sold during FY26. Digital audio systems also gained traction, with more than 102 systems sold, compared with 49 in the previous year. 

The presentation's FY26 audio-system customer list includes the California Highway Patrol, New York City Police Department and Austrian Ministry of Interior Police. It also identifies the Austrian Air Force via CLS and the Danish Home Guard via Airborne Technologies, illustrating AEM's reach across North America and Europe. 

Those sales give AEM a growing base from which to develop additional products and pursue international opportunities. Management says its progress in critical-mission aftermarket avionics is attracting interest from major aircraft manufacturers and creating opportunities for future contracts. Those opportunities still need to convert into business. 

Cash generation supports expansion 

The growth is translating into stronger group results. 

FY26 revenue reached A$32.5 million, up 16%, while adjusted EBITDA rose 36% to A$6.3 million. Net profit after tax increased to A$1.3 million from A$0.2 million. 

Operating cash flow of A$8.2 million covered A$2.2 million in investing outflows, leaving A$6.0 million in free cash flow before financing activities. That compares with an A$0.6 million free cash outflow in FY25. 

SMS also repaid A$1.0 million in bank debt during the year and finished June with A$4.8 million in cash and no bank debt. 

This matters for the growth strategy. AEM's avionics development programs remain self-funded, giving the business a way to invest in future products from its operating performance. FY26 included A$1.9 million in capitalised development expenditure. 

Contract manufacturing continues to contribute scale and help absorb overheads. Management's emphasis is on selective, value-added work that meets its margin objectives while supporting investment in proprietary avionics. 

New products receive more investment 

The company increased product development investment to A$0.8 million in the September quarter, compared with A$0.3 million a year earlier. 

Two self-funded avionics programs remain on schedule, according to the presentation. Both draw on customer reviews and target opportunities across rotorcraft and fixed-wing aircraft, with potential civil and military applications. 

AEM has also brought its design approval organisation in-house to help expedite Supplemental Type Certificate and Technical Standard Order approvals. 

The commercial opportunity is to broaden the product range available to existing customers while reaching new critical-mission markets. Development, certification and customer adoption will determine how much of that opportunity becomes revenue. 

Profits continue into FY27 

The September quarter delivered unaudited revenue of A$7.0 million, adjusted EBITDA of A$1.8 million and net profit after tax of A$0.7 million. Cash increased to A$5.2 million at 30 September. 

Revenue was 14% below the prior corresponding quarter. That comparison included an A$1.4 million CAL FIRE order completed in June 2025 but recognised in July following a customs delay. The average Canadian-dollar-to-Australian-dollar exchange rate also declined 8.8% year on year. 

The quarter therefore shows continuing profitability and investment, alongside a softer reported revenue result. 

A larger revenue ambition 

SMS has more than doubled group revenue from A$15.7 million in FY22 to A$32.5 million in FY26. Its presentation now sets out an organic growth pathway targeting A$37 million in FY27 and A$90 million by FY32. 

These figures are strategic targets, not forecasts or guarantees. The FY27-FY32 targets are derived from Canadian-dollar figures using an assumed exchange rate of A$1.00 per C$1.00. Outcomes depend on product development, market demand, regulatory approvals and execution, and actual results may differ materially. 

The strategy combines a larger installed base of radios and digital audio systems with new products, selective contract manufacturing and the development of CVM commercial opportunities following the necessary approvals. 

CVM takes another step 

The FAA approved the Boeing B737NG Certification Plan on 29 October 2026 for the aft pressure bulkhead application. 

That approval advances the certification pathway. Review of the Service Bulletin remains outstanding, final application approval is still pending and competing certification priorities continue to affect timing. SMS says it cannot provide a revised completion date because the process is controlled by the FAA. 

The company continues its certification engagement and assessment of additional OEM-supported applications. CVM provides a further potential source of growth, with commercial timing still dependent on regulatory and customer processes. 

MarketOpen take 

The strongest part of the SMS story is the progress already visible in its accounts. Avionics revenue grew 40% in FY26, the group generated A$6.0 million in free cash flow and the business is funding new product development while remaining profitable. 

That gives management a firmer platform for its growth ambitions. AEM's expanding product base offers a route to further sales, while CVM adds potential upside as application-specific approvals and commercial adoption progress. 

The opportunity for SMS is to turn that combination into sustained growth. Its latest presentation gives investors concrete operating results against which to judge the next stage. 

Financial note: All amounts are Australian dollars unless stated. Adjusted EBITDA is a non-IFRS measure. Free cash flow is operating cash flow plus investing cash flow, before financing cash flows. September-quarter figures are unaudited.