RNS Number : 5456Y
Sarantel Group PLC
02 March 2012
 



2 March 2012

Sarantel Group PLC

 

Preliminary results for the year to 30 September 2011

 

Sarantel Group PLC, (AIM: SLG, "Sarantel" or "the Group"), a leading manufacturer of high-performance, miniature antennas for mobile and wireless devices, announces preliminary results for the year ended 30 September 2011.

 

Highlights:

 

·     

·     

·     

·     

 

Geoff Shingles

 

"2011 was a challenging year for Sarantel, owing to the impact of issues faced by some of our customers. Nevertheless, we were able to secure a number of significant supply agreements throughout the year and more recently secured our largest ever order which will have a substantial impact on the Group's revenues and cashflow for 2012 and beyond."

 

"The increasing use of location and navigation applications in everyday life means that our market opportunities continue to grow. We remain confident that Sarantel's innovative technology has a brigh

 

"As announced yesterday, Sarantel has agreed a £2m secured loan facility to provide additional working capital with support from a major customer and the Group's Bank, with this now in place the outlook for Sarantel is increasingly positive."  

 

Enquiries

Sarantel Group PLC

01933 670 560

David Wither, Chief Executive Officer

Nicola Malyon, Chief Financial Officer

 


Beaumont Cornish Ltd (Nominated Adviser)

020 7628 3396

Roland Cornish/Michael Cornish

 


XCap Securities PLC (Corporate Broker)

020 7101 7070

John Belliss/Karen Kelly

 


College Hill

020 7457 2020

Kay Larsen/Rozi Morris


 

www.sarantel.com

Chairman's Statement

 

Overall, 2011 was a challenging year for Sarantel, owing to the impact of issues faced by some of the Group's major customers. Nevertheless, the Group was able to secure a number of significant supply agreements throughout the year and these are expected to bear fruit during 2012 and beyond.

 

Sarantel experienced a significant set-back during the first half of the year when its largest customer failed to place orders due to a technical problem unrelated to Sarantel's technology. A major defence customer then delayed production orders for a different custom antenna product. This resulted in a contraction in revenues to £2.2m (2010: £2.9m). At this stage in the Group's development it relies heavily on revenues from a relatively small number of customers which makes it vulnerable to these types of events. Because it is very difficult to predict the exact timing and quantum of future revenues the Group, as a matter of policy, does not currently provide specific market guidance on prospective annual financial results.

 

Despite these set-backs the Group's technology continued to build momentum in the military market with a number of major new contracts. Customer funded product development revenues, an indication of future revenues, increased significantly by 141%.

 

Operating loss before depreciation and amortisation increased by 23% to £2.27m (2010: £1.85m). Net cash outflow before financing was £2.3m (2010: £2.2m). 

 

On 8 February 2012, Sarantel announced the receipt of a very substantial order from a leading military radio manufacturer for a range of different Sarantel antenna products, which forms part of a multi-year supply contract.  This is the largest order received to date and will have a significant impact on the Group's revenues and cashflow for 2012. To enable Sarantel to service this order and give the Group sufficient working capital facilities for the immediate future Sarantel has agreed a £2m secured loan facility with HSBC Bank plc.

 

Sarantel also secured a number of very significant deals in the military market during 2011. Each of these deals is the result of years of effort and they will make a significant contribution to the Group's revenues in 2012 and beyond. Momentum in the military market is continuing to build as the Group develops relationships with an increasing number of customers.

 

During the year the Group received development funding from a major US defence contractor and from the US Government to develop high performance GPS antennas as well as compact, high performance antennas for the Globalstar network. This has helped Sarantel expand the reach of its technology and establish key partnerships which it intends to leverage to increase future sales.

 

Trends in the consumer GPS markets continue to indicate that improved GPS performance will be needed across a wide range of applications that will require a higher degree of reliability and accuracy than is possible with conventional antenna technologies. In consumer products, the GPS antenna is a critical component in determining the device performance and user experience.

 

The backdrop of growing markets, driven by an increasing use of location and navigation in everyday life, is accelerating. These market trends mean that Sarantel's opportunities will continue to increase. The Board remains confident that Sarantel's innovative technology has a bright future as users demand ever-higher performance from navigation and other mobile devices.

 

 

Chief Executive's Statement

 

Financial Review

Whilst 2011 was challenging for Sarantel, the Group secured a number of significant supply contracts throughout the year and recently announced the receipt of its largest ever order from a leading military radio manufacturer. With support from a major customer and the Group's Bank, Sarantel has been able to obtain a low rate, interest only £2m secured loan facility to provide additional working capital.

 

The set-back in sales for 2011 was due to very specific customer related issues and is not indicative of a loss of sales traction in the market. These issues were contained to the first half of the year and during the second half the business recovered.

 

During the year Sarantel also developed a number of new antennas after receiving funding from customers. These developments include a high performance GPS antenna which was funded by the US Military and two different compact, high performance Globalstar antennas, which were funded by major US defence contractors, increasing development revenues by 141%.

 

Total operating costs reduced by 12% as a result of efficiencies and cost reductions related to the outsourcing of part of the manufacturing process. Research and development costs increased by 0.8% as new antennas are developed for the military markets. Sales and distribution costs rose by 19% as the sales and marketing efforts in Japan were strengthened.

 

The operating loss before depreciation and amortisation increased to £2.27m (2010: £1.85m), due to the fall in revenues and gross margins.

 

The Group's loss per share reduced to 0.6p (2010: 1.0p).

 

Cash utilisation

Net cash outflow from operating activities increased by 8.7% to £1.9m (2010: £1.8m). This number has remained relatively flat despite the contraction in sales, due to the cost reductions achieved by outsourcing a significant part of the production process.

 

Net cash outflow before financing was £2.3m (2010: £2.2m). On 30 December 2010 Sarantel successfully closed a placing to raise £1.375m before expenses and on 1 July 2011 a further placing was closed, raising £2.148m before expenses. The proceeds of both placings were used to fund working capital needs, product design and innovation in line with the increasing pace of activity in the Group's core GPS markets.

 

Sarantel sales are in US dollars whilst most of the costs are in Sterling. The dollar fluctuated favourably during the year and resulted in a net currency gain of £0.008m to Group revenue.

 

Review of operations and markets

The broader GPS market remains very dynamic and continues to grow at a rapid pace as GPS technology is incorporated into an ever increasing number of applications. This broader market trend creates a number of new opportunities for Sarantel as more of these applications require small, high performance antenna solutions. Sarantel, through its distribution partners, continues to track a large number of active sales opportunities across a wide variety of applications. During the year Sarantel sold its GPS antenna products to more than 400 different customers.

 

Military market

Despite headlines about cuts in defence spending, the market for military electronics, which includes communications equipment, is projected to grow. The US Military is beginning a major roll out of new radio technologies to help soldiers communicate more effectively in conflict situations. This trend is also occurring in Europe and across the world.

 

Sarantel's GPS antenna technology has a very significant share of this market with leading military radio manufacturers relying on Sarantel's technology. This is a great endorsement of Sarantel's technology and the series of production orders announced recently and throughout 2011 will have a substantial impact on revenues in 2012 and beyond.

 

During the year, Sarantel developed a number of new antennas for this market. These antennas were funded by customers and will help Sarantel to maintain sales momentum and continue developing the necessary relationships and products to support this exciting market.

 

Mobile Satellite Services ("MSS")

The Mobile Satellite Services market remains an important part of Sarantel's diversification strategy. In satellite telephony or satellite tracking, antenna quality is the key determinant to quality of service and therefore customer satisfaction.

 

During the year, sales of Sarantel's second-generation Iridium antenna to NAL Research Corporation (NAL) accelerated while it added a number of new customers for this innovative product. Additionally, Sarantel received funding from two different US defence contractors for two different variants of a Globalstar antenna. In all cases Sarantel is free to sell these products to the broader market and anticipates that these products will help to further expand its customer base and future revenues.

 

Research and development

Sarantel continues to develop its antenna technology by investing in research and development. During the year, research and development spend increased by 0.8% and a number of new patents were filed. A key focus is on developing multi-band variants of the Group's technology as well as reducing the cost and complexity of the antenna assembly process. These developments will help Sarantel to maintain its market leading advantage.

 

Manufacturing

 


for the year ended 30 September 2011

 


 

 

All the activities of the Group are classed as continuing.

 

 





 

 


 

At 30 September 2011

 

 

 

 

 

1.    Basis of information in this announcement

2.    Going concern

 

The directors have prepared a business plan which forms the basis on which they are satisfied that the Group has adequate financial resources to continue to operate at least for the next twelve months from the date of approval of these financial statements. The business plan assumes a certain level of sales and includes the recently announced order from a leading military radio manufacturer, which the directors believe to be the best estimate of the Group's future activities.  Whilst the achievement of sales has been a key uncertainty as sales to date have been slower than expected, the directors are confident that together with this order performance over the remainder of the financial year will be in line with forecasts. The directors believe their forecasts are prudent and show sufficient headroom for twelve months. However, further funding is required to fulfil this substantial order and the Group has secured a loan facility for this purpose. The directors consider it appropriate that these financial statements should be prepared on a going concern basis.

 

3.    Operating loss

Amortisation of intangible assets

Depreciation of property, plant and equipment

- 



 

 


 

 

The calculation of basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.

 


Loss for the financial year


Weighted average number of shares


Basic and diluted loss per share*


* The effect of options and warrants are anti-dilutive.

 

 

 

 

8.     Cash and cash equivalents



Cash and cash equivalents

 

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. The Directors consider that the carrying amount of these assets approximates to their fair value. There is no collateral on the above amounts.

 

 

Cash, cash equivalents and bank overdrafts include the following for the purposes of the cash flow statement:

 



Cash and cash equivalents


 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR KMGGFNMKGZZM