Structural Monitoring Systems Powers Ahead with Third Straight Profit and New US Defense Contract

Strong Financial Turnaround

Structural Monitoring Systems Plc (ASX, SMN) has delivered a compelling financial performance in the September quarter of FY26, marking its third consecutive profitable quarter. The company reported a net profit after tax of $1.2 million, a significant turnaround from a net loss of $0.3 million in the prior year. This streak of profitability now totals $3.7 million over three quarters, underscoring the success of its strategic transformation efforts.

Revenue rose 23% year-on-year to $8.1 million, fueled primarily by the rapid expansion of its AEM Avionics segment. This division’s revenue more than doubled, growing 111% to $5.1 million and now representing 63% of total company revenue, up from 37% a year ago. The shift towards higher-margin proprietary avionics products is clearly paying dividends.

Key Contract Wins and Market Expansion

Structural Monitoring Systems strengthened its foothold in the North American Special Mission communications market with the successful delivery of $1.4 million worth of CAL FIRE radios. Moreover, the company secured a significant new contract through Canada’s government contracting agency (CCC) with the United States Department of War. This deal involves supplying magnetic amplifiers for the internal communication systems of V-22 Osprey aircraft operated by the U.S. Navy, opening access to a vast $175 billion annual procurement budget.

The company also achieved a Supplemental Type Certificate approval for its MTP136D Forest Service radio, facilitating sales to Bell Helicopter operators across the US and Canada. This regulatory milestone is expected to unlock sales opportunities for up to 450 aircraft, further cementing AEM’s position in the aerial firefighting and multi-mission sectors.

Product Development and Certification Progress

On the innovation front, Structural Monitoring Systems continues to advance its CVM™ Smart Sensor Solutions, with FAA certification anticipated in FY26. The CVM™ Aft Pressure Bulkhead certification program is nearing completion, with only a few Boeing documents pending sign-off. Already, 64 Delta Air Lines aircraft and two from another major US airline have been fitted with CVM™ sensor kits, positioning the company for revenue growth once certification is finalized.

Additionally, AEM has launched a new avionics R&D project aimed at expanding its Special Mission product suite to address emerging high-value markets globally, targeting product readiness by the end of FY27. This strategic investment highlights the company’s commitment to long-term growth and innovation.

Operational and Leadership Strength

While the contract manufacturing segment saw a 29% revenue decline to $3.0 million, this was in line with expectations as the company prioritizes its higher-margin avionics business. The segment remains a vital operational base, supporting manufacturing capabilities and cash flow stability.

Leadership enhancements include the appointment of Rick Freeman as interim CEO of AEM Avionics and Anthony Faillace as a Non-Executive Director, bringing seasoned expertise to support the company’s growth trajectory. The Board continues to emphasize capital discipline, maintaining $9.6 million in total available funding, including $3.1 million in cash and $6.5 million in unused finance facilities.

Outlook

With momentum firmly established, Structural Monitoring Systems is well positioned for continued growth in FY26. The company’s focus on expanding its proprietary IP product offerings and penetrating global Special Mission markets is expected to drive further revenue and profitability gains. Investors will be watching closely for FAA certification milestones and the execution of new contracts, particularly those linked to the US defense sector.