Half Yearly Report

RNS Number : 1389F

Sarantel Group PLC

12 June 2012

 



12 June 2012

Sarantel Group PLC

Interim results for the six months to 31 March 2012 

Sarantel Group PLC, (AIM: SLG, "Sarantel" or the Group), a leading manufacturer of high-performance, miniature antennas for mobile and wireless devices, announces unaudited interim results for the six month period ended 31 March 2012.

Highlights:

·      Revenues of £0.9m (H1 2011: £1.0m)

·      Production revenues increased by 9%, with significant growth in military market

·      Several large military development projects successfully completed

·      Cash balance of £0.3m with an additional £0.16m tax credit received after half-year end

·      £2.0m secured loan facility from HSBC announced 1 March 2012

Geoff Shingles, Chairman, said:

"We are beginning to see the fruits of our labour as orders from the large military contracts we announced last year are starting to flow. The largest order in Sarantel's history was announced in February and this will have a material impact on the Group's second half revenues.

"The importance of Sarantel's antenna technology to a number of major US defence contractors validates our technological approach and provides a strong endorsement, helping the Group to build momentum in this very important market."

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
Jon Belliss/Karen Kelly
College Hill	020 7457 2020
Kay Larsen/Rozi Morris

About Sarantel www.sarantel.com

Sarantel is a leader in the design of high-performance miniature antennas for portable wireless applications. Sarantel's revolutionary ceramic filtering antennas offer dramatically improved performance over existing antenna designs, resulting in a clearer signal, better range and a 90 per cent reduction in the amount of signal radiation absorbed by the body. Because of their smaller size and higher capabilities, Sarantel's antennas enable manufacturers to create innovative wireless products for the GPS, Satellite Radio and Satellite phone markets.

Interim Results

In the six months to 31 March 2012, Group revenues were £0.89m (H1 2011: £1.03m). Production revenues increased by 9% with significant growth in the military market. Development revenues in the first-half reduced by £0.18m as the Group successfully completed several large military development projects with production revenues expected to start in the second half.

Gross margins of 28% (H1 2011: 30%) reflects the increase in product sales and a decrease in development revenues. Gross margins from product sales improved and the trend remains favourable.   

The Group continues to maintain tight cost controls, with operating costs of £1.99m (H1 2011: £1.97m). 

The Group's loss before depreciation, interest and tax was £1.51m (H1 2011: £1.26m).

Operating cash outflow was £1.27m (H1 2011: £0.85m), as the Group commits resources to the raw materials required to fulfil the large order announced in February.

The Group's cash balance of £0.3m is further supported by the £2.0m HSBC Loan Facility, of which £0.7m has been utilised to date.

Review of operations and markets

Product revenues increased by 9% in the first half due to a favourable shift in product mix. This had a positive impact on product gross margins and the Group expects this trend to continue into the second half. Pricing for Sarantel's products remain stable and the Group is working on a number of cost reduction initiatives that should enable continued margin expansion. The Group received the largest order in its history in early February. This order represents the culmination of many years of effort with one large US based defence contractor. Sarantel expects additional contracts, which have already been announced, to begin production later in this financial year or early next year. 

Military market

Sarantel's sales momentum in the military communications equipment market grew in the first half. The Group is now selling its ruggedised antenna products to most of the world's leading military radio suppliers. The integration of GPS into tactical radio equipment is still at a relatively early stage and the Group expects the trend to upgrade existing communications equipment with a new generation containing GPS to continue for many years.

During the first half of the year, Sarantel successfully completed the development of an important antenna for this market and volume production has already begun. This development has expanded the Group's technical capabilities in a number of new areas and it will be the first antenna to use Sarantel's new assembly process.

Mobile Satellite Services ("MSS")

In November 2011, Sarantel announced that its Iridium antenna technology was being used on a compact, portable communications device from NAL called the SHOUT nano TS. This device will be sold to a number of different US Government agencies and should contribute more than one million US dollars in revenues over the next few years. The Group believes this market offers strong potential and will continue to provide opportunities for sales growth for many years to come.

Consumer GPS

In October 2011, Sarantel announced that it had completed successful field trials with a major Japanese consumer electronics customer in Tokyo. While progress in this market has been slower than hoped, the Group is actively engaged in discussions with a number of potential customers and partners in this market. Sarantel is also developing a number of products which it believes will be very attractive to major camera OEMs.

Sarantel continues to identify an enormous opportunity for its technology in a number of high volume consumer markets and will continue to apply the resources available to gain traction in these very high growth markets.

Research and development

Sarantel continues to develop its antenna technology by investing in research and development. During the first half the Group began to ship a product that uses a new, lower cost assembly process. Sarantel is currently developing a series of new products based on this assembly process, including the Group's first dual band antenna product, which it has already started sampling to customers.

Manufacturing

During the period Eolane, a French electronics manufacturing services company, completed its acquisition of Elcoteq in Tallinn. Production has continued as normal through the entire transition period.

Summary and outlook

Sarantel's technology is now a critical component in a number of high visibility military radio programs and the Group is confident that it will maintain its momentum in this rapidly growing market. There are a large number of encouraging new opportunities in the broader GPS market and with a £2.0m secured loan facility, the outlook for Sarantel's technology remains positive.

Unaudited Consolidated statement OF COMPREHENSIVE INCOME

for the six months ended 31 March 2012

	Note	Six months to 31 March  2012	Six months to 31 March  2011	12 months to 30 September 2011
		£'000	£'000	£'000
Revenue	2	888	1,030	2,195
Cost of sales		635	721	1,704
Gross profit		253	309	491
Research and development costs		665	603	1,268
Selling and distribution costs		283	288	625
Administration costs		1,042	1,082	1,592
Total operating costs		1,990	1,973	3,485
Operating loss		(1,737)	(1,664)	(2,994)
Operating loss before depreciation and  amortisation		(1,513)	(1,259)	(2,273)
Depreciation and amortisation		(224)	(405)	(721)
Finance and other income		5	4	5
Finance and other costs		(6)	(31)	(24)
Loss before tax		(1,738)	(1,691)	(3,013)
Tax	3	125	66	160
Loss for the period		(1,613)	(1,625)	(2,853)
Other comprehensive income		-	-	-
Total comprehensive loss for the period		(1,613)	(1,625)	(2,853)
Basic and diluted loss per share	4	(0.2)p	(0.4)p	(0.6)p

All of the activities of the Group are classed as continuing.

Unaudited Consolidated balance sheet

as at 31 March 2012

	Note	As at 31 March  2012	As at 31 March  2011	As at 30 September 2011
		£'000	£'000	£'000
Assets
Non-current assets
Intangible assets		1,684	1,617	1,623
Property, plant and equipment		209	480	288
Total non-current assets		1,893	2,097	1,911
Current assets
Inventories		545	269	346
Trade and other receivables		580	703	684
Current tax		279	226	154
Cash and cash equivalents		262	431	1,197
Total current assets		1,666	1,629	2,381
Total assets		3,559	3,726	4,292
Current liabilities
Trade and other payables		1,124	1,055	832
Amounts due under finance leases and HP agreements		-	126	13
Amounts due under invoice financing facility		108	156	253
Total current liabilities		1,232	1,337	1,098
Non-current liabilities
Other payables		702	-	3
Total liabilities		1,934	1,337	1,101
Equity
Share capital	5,6	11,318	10,889	11,318
Share premium		18,969	17,388	18,969
Share scheme reserve		775	708	728
Warrant reserve		76	76	76
Merger reserve		13,390	13,390	13,390
Retained loss		(42,903)	(40,062)	(41,290)
Total equity		1,625	2,389	3,191
Total liabilities and equity		3,559	3,726	4,292

unaudited CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months to 31 March 2012

	Share capital	Share premium	Share scheme reserve	Warrant reserve	Merger reserve	Retained earnings	Total  equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
For the six months to 31 March 2012
At 1 October 2011	11,318	18,969	728	76	13,390	(41,290)	3,191
Loss after tax	-	-	-	-	-	(1,613)	(1,613)
Total comprehensive income for the period	-	-	-	-	-	(1,613)	(1,613)
Share based payments	-	-	47	-	-	-	47
Transactions with owners	-	-	47	-	-	-	47
At 31 March 2012	11,318	18,969	775	76	13,390	(42,903)	1,625
For the six months to 31 March 2011
At 1 October 2010	9,789	17,234	669	76	13,390	(38,437)	2,721
Loss after tax	-	-	-	-	-	(1,625)	(1,625)
Total comprehensive income for the period	-	-	-	-	-	(1,625)	(1,625)
Shares issued	1,100	275	-	-	-	-	1,375
Cost of share issue	-	(121)	-	-	-	-	(121)
Share based payments	-	-	39	-	-	-	39
Transactions with owners	1,100	154	39	-	-	-	1,293
At 31 March 2011	10,889	17,388	708	76	13,390	(40,062)	2,389
For the 12 months to 30 September 2011
At 1 October 2010	9,789	17,234	669	76	13,390	(38,437)	2,721
Loss after tax	-	-	-	-	-	(2,853)	(2,853)
Total comprehensive income for year	-	-	-	-	-	(2,853)	(2,853)
Shares issued	1,529	1,993	-	-	-	-	3,522
Cost of share issue	-	(258)	-	-	-	-	(258)
Share based payments	-	-	59	-	-	-	59
Transactions with owners	1,529	1,735	59	-	-	-	3,323
At 30 September 2011	11,318	18,969	728	76	13,390	(41,290)	3,191

Unaudited CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 31 March 2012

	Six months to 31 March  2012	Six months to 31 March  2011	12 months to 30 September  2011
	£'000	£'000	£'000
Operating activities
Loss before tax	(1,738)	(1,691)	(3,013)
Adjustments for non-cash items:
Depreciation and amortisation	199	382	644
Depreciation absorbed to cost of sales	25	23	77
Investment revenue	(5)	(2)	(5)
Finance lease interest	6	19	32
Share based payment	47	39	59
(Increase)/decrease in inventories	(199)	39	(39)
Decrease in trade and other receivables	104	118	138
Increase/(decrease) in trade and other payables	292	224	(2)
Taxation received	-	-	166
Net cash outflow from operating activities	(1,269)	(849)	(1,943)
Investing activities
Interest received and similar income	5	2	5
Payments to acquire intangible assets	(179)	(129)	(253)
Payments to acquire property, plant and equipment	(27)	(95)	(101)
Net cash used in investing activities	(201)	(222)	(349)
Cash outflow before financing	(1,470)	(1,071)	(2,292)
Financing activities
Finance lease interest paid	(6)	(19)	(32)
Loans received	700	-	7
Issue of shares	-	1,375	3,522
Expenses paid in connection with issue of shares	-	(121)	(258)
Capital element of finance lease rentals	(14)	(219)	(333)
Net cash inflow from financing activities	680	1,016	2,906
Net (decrease)/increase in cash and cash equivalents	(790)	(55)	614
Cash and cash equivalents at start of period	944	330	330
Cash and cash equivalents at end of period	154	275	944

 

Analysis

Cash and cash equivalents	262	431	1,197
Amounts due under invoice financing facility	(108)	(156)	(253)
Net cash and cash equivalents	154	275	944

notes to the Unaudited interim FINANCIAL STATEMENTS

for the six months ended 31 March 2012

1          Basis of preparation

These unaudited condensed consolidated interim financial statements of Sarantel Group PLC are for the six months ended 31 March 2012. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2011.  The financial information for the year ended 30 September 2011 set out in these interim consolidated financial statements does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The Group's statutory financial statements for the year ended 30 September 2011 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

These interim consolidated financial statements have been prepared on the basis of the Group's accounting policies.  These are set out in its Annual Report and Accounts for the year ended 30 September 2011 which is available on the Group's website (www.sarantel.com). 

2          Revenue

	Six months to 31 March 2012	Six months to 31 March 2011	12 months to 30 September 2011
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Sales of antennas	781	719	1,702
Sale of Non-Recurring Engineering services (NRE)	21	206	386
Sales of consumables	86	105	107
Total revenue	888	1,030	2,195

All revenue originates from the UK.

3          Tax

	Six months to 31 March  2012	Six months to 31 March  2011	12 months to 30 September  2011
	£'000	£'000	£'000
UK corporation tax based on the results for six months to 31 March 2012	(113)	(66)	(160)
Adjustment in respect of prior year	(12)	-	-
Total tax credit	(125)	(66)	(160)

The taxation credit arises in respect of research and development expenditure and is subject to agreement with H M Revenue and Customs.

A deferred tax asset, calculated using a tax rate of 24%, amounting to approximately £7.7m arising from taxable trading losses has not been recognised on the grounds that, at the current time, there is insufficient evidence that the asset will be recoverable in the foreseeable future.

4          Loss per share

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 period. 

	Six Months to 31 March  2012	Six Months to 31 March  2011	12 Months to 30 September  2011
	£'000	£'000	£'000
Loss for the period	(1,613)	(1,625)	(2,853)
Weighted average number of shares (thousands)	830,476	362,859	483,559
Basic and diluted loss per share*	(0.2)p	(0.4)p	(0.6)p

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

5          Share capital

	As at  31 March 2012	As at  31 March 2012	As at  31 March 2011	As at  31 March 2011	As at  30 September 2011	As at  30 September 2011
	Number	£'000	Number	£'000	Number	£'000
Allotted, called-up and fully paid:
A ordinary shares of £0.001 each (31 March 2011 £0.01 each)	829,439,991	829	399,899,991	3,999	829,439,991	829
B ordinary shares of £0.001 each (31 March 2011 £0.01 each)	1,036,340	1	1,036,340	11	1,036,340	1
Deferred shares of  £0.001 each (31 March 2011 £0.09 each)	10,487,624,769	10,488	76,435,531	6,879	10,487,624,769	10,488
	11,318,101,100	11,318	477,371,862	10,889	11,318,101,100	11,318

6          Share options

	As at 31 March 2012	As at 31 March 2012	As at 31 March 2011	As at 31 March 2011	As at 30 September 2011	As at 30 September 2011
	Number	Weighted average exercise price (p)	Number	Weighted average exercise price (p)	Number	Weighted average exercise price (p)
Number of share options at beginning of period	85,715,130	0.8	36,650,744	2.4	36,650,744	2.2
Options granted during the period	-	-	15,867,968	2.5	73,420,084	0.7
Options lapsed and surrendered	-	-	(9,638,815)	1.1	(24,355,698)	2.6
Balance at end of the period	85,715,130	0.8	42,879,897	1.7	85,715,130	0.8

A copy of this announcement is available from the Group's website, www.sarantel.com

 

END

 

 

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