Interim Results

Sarantel Group PLC 24 May 2006 Embargoed until 7:00 24 May 2006 SARANTEL GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2006 Sarantel Group PLC (AIM: SLG.L), the leading manufacturer and supplier of filtering antennas for wireless devices, today announces its unaudited results for the six months ended 31st March 2006. Highlights are as follows: •Turnover more than doubled to £2.3m (2005: £1.0m) •Loss before tax narrowed to £2.7m (2005: £2.8m) •Successful production ramp up of new satellite radio antenna •Quadrupled manufacturing capacity •Roll out of new second generation GPS product on track •Cash balances of £8.4m (2005: £16.7m) David Wither, Chief Executive Officer, said: 'Sarantel continues to experience strong revenue growth and posted a solid performance for the first half. We made demonstrable gains in all areas of the business and are very pleased with the successful production launch of our new satellite radio antenna. We are encouraged by the level of new design activity with XM Satellite Radio and our new GPS antenna. We expect to convert a number of these designs to new business as we expand our customer base in the coming year, although near term order visibility remains limited and it is still too early to determine how much revenue we can expect from satellite radio this year. Regardless of these near term issues, we expect revenue growth to continue and believe that our technology is well positioned to capitalise on market trends towards thinner, more highly integrated portable devices.' An analyst briefing will be held at 9.30am today at the offices of Smithfield, 10 Aldersgate Street, London, EC1A 4HJ. For further information please contact: Sarantel Group PLC 01933 670560 David Wither, CEO/Sitkow Yeung, CFO www.sarantel.com Smithfield 020 7360 4900 Sara Musgrave/Tania Wild Pictures are available for the media to view and download from www.vismedia.co.uk NOTES TO EDITORS: ABOUT SARANTEL Sarantel designs, manufactures and sells patented, ceramic, filtering antennas for use in portable wireless devices. These antennas allow a clearer signal than conventional antennas whilst reducing the amount of energy absorbed by the body by approximately 90 per cent. They also simplify system design, thus allowing design standardisation and reduced time to market and cost for manufacturers. Sarantel's antennas significantly improve the performance of wireless systems by increasing their range and effective bandwidth. The Company supplies antennas to the Global Positioning Satellite (GPS) market and the North American satellite radio market and Sarantel's antennas have been successfully designed into Personal Navigation Devices (PNDs), laptops and Personal Digital Assistants (PDAs). Sarantel's antenna technology is also capable of servicing multiple high volume markets such as Wi-Fi, 3G and Bluetooth. Sarantel is listed on AIM, a market operated by the London Stock Exchange and is included in the IT Hardware sector (93) within the Telecommunications equipment sub-sector (938) and has a RIC code of SLG.L CHIEF EXECUTIVE'S STATEMENT We are pleased to present our interim results for the six months to 31 March 2006. The Company posted a solid performance for the first half and we continue to make demonstrable gains in all areas of our business. Trading Results In the six months to 31st March 2006, revenues more than doubled to £2.3m (2005: £1.0m). Demand for Sarantel's innovative antennas continued to increase and during the first half, approximately 20 per cent. of our revenues came from new product shipments to the North American satellite radio market. Due to the nature of our markets and existing customers we continue to face limited near term visibility of orders. Operating losses reduced to £2.8m (2005: £2.9m) during the period under review. Material costs were lower while operating charges increased as a result of the planned investment in staff, research and development activities as well as the increase in the level of activity. The trend for both material and overhead costs is in line with management's plans. Loss before tax narrowed to £2.7m from £2.8m. As stated in the announcement of the XM Satellite Radio order delay in December, Sarantel focused on producing antennas for stock. This resulted in increased spend on working capital as stock levels increased to £1.0m (2005: £0.2m) while debtors increased in line with the level of shipments. Operating cash outflow during the first six months was £3.4m, of which £1.3m arose from this higher working capital requirement. Capital expenditure amounted to approximately £1.4m, (2004: £1.0m) as we continued to increase production capacity. The Board is confident that the Company will have sufficient installed capacity at the end of this financial year to reach profitability. During the first half year, approximately £0.3m of the Company's capital expenditure was funded through hire purchase or lease agreements. At the end of March, the Company had in place further leasing and hire purchase facilities amounting to approximately £1.8m worth of new equipment. Cash balances at 31 March 2006 were £8.4m. Operational Review Following the delay to the commencement of the XM Satellite Radio order at the start of the financial year, we were pleased to confirm in March that we had successfully commenced volume deliveries of our satellite radio antennas. We have received excellent feedback regarding the performance and form factor of these antennas and the initial product reviews have been very positive. The successful production ramp up of the new satellite radio antenna validated a significant manufacturing process improvement that was introduced for our new generation of antenna products. This innovation dramatically improves the scaleability of our manufacturing process while reducing unit cost. Prototype production of our second generation GPS antenna has commenced and we are encouraged by the broad market interest in this product, which provides better performance in a smaller package at a better cost. As planned, we have significantly improved our operational capability by achieving a four-fold increase in our capacity at Wellingborough over the past twelve months. The Company continues to investigate potential partners for future outsourced manufacturing capacity. Management and Staff We would like to take this opportunity to thank all of Sarantel's employees for their continued hard work and dedication. Accounting Policies The financial statements have been prepared under the historical cost convention in accordance with applicable United Kingdom accounting standards. The principal accounting policies of the Company have remained unchanged from those set out in the Company's 2005 annual report and financial statements. The Company has prepared an initial IFRS conversion plan and is taking professional advice with regard to the appropriate timing for adopting IFRS, at the latest by the year ending 30th September 2008. Outlook Sarantel has experienced strong revenue growth and we expect this trend to continue. The board decided to build manufacturing capacity in advance of orders to ensure the Company is positioned to capitalise on potential market demand. We are encouraged by the level of new design activity with XM Satellite Radio and GPS and expect to convert a number of these designs to new business. Near term order visibility however remains limited and it is still too early to determine how much revenue we can expect from satellite radio this year. Regardless of these near term issues, we believe our technology is well positioned to capture opportunities presented by market trends towards thinner, more highly integrated portable devices and expect order visibility to improve as we continue the successful expansion of our customer base. David Wither Chief Executive Officer 24th May 2006 Note 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 Unaudited Unaudited Audited Restated £ £ £ Turnover 2,275,093 1,012,677 2,802,454 ------------ ------------ ------------ Operating costs Change in stocks of finished goods and work in progress 405,591 (64,805) (92,319) Raw materials and consumables (1,537,565) (850,542) (1,464,061) ------------ ------------ ------------ Total material cost (1,131,974) (915,347) (1,556,380) ============ ============ ============ Other operating expenses - (115,000) (115,000) Other external charges (354,910) (105,522) (677,930) Staff costs (1,818,917) (1,326,889) (3,034,483) Other operating charges (1,793,536) (1,438,164) (3,308,919) ------------ ------------ ------------ Total operating charges (3,967,363) (2,985,575) (7,136,332) ------------------------------------------------------------------------------- Operating loss before depreciation and exceptional non-recurring costs (2,090,584) (2,055,325) (4,497,310) Depreciation and other amounts written off tangible and intangible assets (733,660) (527,954)* (1,087,982) Exceptional non-recurring costs 2 - (304,966) (304,966) ------------------------------------------------------------------------------- Operating loss (2,824,244) (2,888,245) (5,890,258) Interest receivable and similar income 163,740 73,630 328,447 ------------ ------------ ------------ Loss on ordinary activities before taxation (2,660,504) (2,814,615) (5,561,811) Tax on loss on ordinary activities 3 65,000 40,000 150,215 ------------ ------------ ------------ Loss on ordinary activities after taxation (2,595,504) (2,774,615) (5,411,596) ============ ============ ============ Earnings per share - basic 4 (4.8)p (8.1)p (12.3)p ============ ============ ============ * The comparative figure for depreciation for the 6 months to 31 March 2005 has been restated to reflect the change in estimated useful economic life of certain fixed assets effected in the statutory financial statements for the year ended 30 September 2005. 31 March 2006 31 March 2005 30 September Unaudited Unaudited 2005 Restated Audited £ £ £ Fixed assets 6,255,591 3,639,479* 5,247,650 Current assets Stocks 983,081 227,905 126,281 Debtors 1,370,627 642,038 1,046,655 Cash at bank and in hand 8,375,522 16,722,895 13,134,412 ------------ ------------ ------------ 10,729,230 17,592,838 14,307,348 Creditors: amounts falling due within one year (1,835,623) (1,509,199) (2,009,708) ------------ ------------ ------------ Net current assets 8,893,607 16,083,639 12,297,640 ------------ ------------ ------------ Total assets less current liabilities 15,149,198 19,723,118 17,545,290 Creditors: amounts falling due after one year (540,594) (74,570) (460,257) ------------ ------------ ------------ 14,608,604 19,648,548 17,085,033 ============ ============ ============ Share capital 5,450,380 5,293,796 5,355,891 Share premium 14,366,489 14,330,532 14,341,907 Other reserve 13,389,540 13,389,540 13,389,536 Profit and loss account (18,597,805) (13,365,320) (16,002,301) ------------ ------------ ------------ 14,608,604 19,648,548 17,085,033 ============ ============ ============ * The comparative figure for fixed assets at 31 March 2005 has been restated to reflect the change in estimated useful economic life of certain fixed assets effected in the statutory financial statements for the year ended 30 September 2005. Note 6 months to 6 months to 31 12 months to 30 31 March March 2005 September 2005 2006 Unaudited Audited Unaudited Restated £ £ £ Net cash outflow from operating activities 5 (3,414,064) (1,598,510) (3,950,835) Returns on investments and servicing of finance 163,740 73,630 328,447 Corporation tax received - 125,000 165,215 Capital expenditure and financial investment (1,423,575) (1,024,096) (2,248,525) ------------ ------------ ------------ Net cash outflow before financing (4,673,899) (2,423,976) (5,705,698) Financing (84,991) 17,077,825 16,771,064 ------------ ------------ ------------ (Decrease)/Increase in cash 6 (4,758,890) 14,653,849 11,065,366 ============ ============ ============ RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 6 months to 31 6 months to 12 months to 30 March 2006 31 March September 2005 2005 Unaudited Unaudited Audited Restated £ £ £ Loss for the period (2,595,504) (2,774,615) (5,411,596) Issue of shares net of expenses 119,075 17,077,825 16,617,450 Issue of share in subsidiary prior to reconstruction 533,841 ------------ ------------ ------------ Net increase/(decrease) in shareholders' funds (2,476,429) 14,303,210 11,739,695 Opening shareholders' funds 17,085,033 5,345,338 5,345,338 ------------ ------------ ------------ Closing shareholders' funds 14,608,604 19,648,548 17,085,033 ============ ============ ============ 1 BASIS OF PREPARATION The interim financial statements have been prepared in accordance with applicable accounting standards and under the historical cost convention. Accounting Policies The principal accounting policies of the group have remained unchanged from those set out in the group's 2005 annual report and financial statements. In those financial statements the useful estimated economic life of certain fixed assets was shortened and therefore the comparative figure for depreciation for the 6 months to 31 March 2005 has been restated to reflect that change. The impact on the results for that period is to increase the loss and reduce net assets by £156,954. The interim financial information in this report has neither been audited nor reviewed by the Company's auditors. 2 EXCEPTIONAL NON-RECURRING COSTS 6 months to 31 6 months to 12 months to 30 March 2006 31 March 2005 September 2005 Unaudited Unaudited Audited £ £ £ Stock write-off - (109,198) (109,198) Variation of Share Exchange Agreement - (115,000) (115,000) Non-recurring professional charges - (80,768) (80,768) ------------ ------------ ------------ Total exceptional non-recurring costs - (304,966) (304,966) ============ ============ ============ 3 TAX ON LOSS ON ORDINARY ACTIVITIES 6 months to 31 6 months to 12 months to 30 March 2006 31 March 2005 September 2005 Unaudited Unaudited Audited £ £ £ Current tax UK corporation tax based on the results for 6 months to 31 March 2006 65,000 40,000 150,215 ============ ============ ============ The taxation credit arises in respect of research and development expenditure and is subject to agreement with the Inland Revenue. 4 EARNINGS PER SHARE The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. Shares held in employee share trusts are treated as cancelled for the purposes of this calculation. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. Basic earnings per share 6 Months to 31 6 Months to 31 12 Months to 30 March 2006 March 2005 Sept 2005 Unaudited Unaudited Audited Restated £ £ £ Earnings (2,595,504) (2,774,615) (5,411,596) Weighted average number of shares 53,856,628 34,438,823 43,867,040 Per share amount pence (4.8)p (8.1)p (12.3)p 5 NET CASH OUTFLOW FROM OPERATING ACTIVITIES 6 months to 31 6 months to 12 months to 30 March 2006 31 March 2005 September 2005 Unaudited Unaudited Audited Restated £ £ £ Operating loss (2,824,244) (2,888,245) (5,890,258) Depreciation 733,660 527,954 1,087,982 (Increase)/decrease in stock (856,800) 26,713 237,534 (Increase)/decrease in debtors (323,972) (90,244) (448,303) (Decrease)/increase in creditors (142,708) 601,114 947,210 Non-cash exceptional non-recurring costs - 224,198 115,000 ------------ ------------ ------------ Net cash outflow from operating activities (3,414,064) (1,598,510) (3,950,835) ============ ============ ============ 6 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 6 months to 31 6 months to 12 months to 30 March 2006 31 March 2005 September 2005 Unaudited Unaudited Audited Restated £ £ £ (Decrease)/increase in cash in the period (4,758,890) 14,653,849 11,065,366 Cash outflow in respect of finance leases and HP 204,066 - 191,586 New finance leases and HP (318,026) - (949,842) ------------ ------------ ------------ Change in net funds resulting from cash flows (4,872,850) 14,653,849 10,307,110 Net funds at beginning of period 12,323,004 2,069,046 2,015,894 ------------ ------------ ------------ Net funds at end of period 7,450,154 16,722,895 12,323,004 ============ ============ ============ 7 ANALYSIS OF CHANGES IN NET FUNDS At 1 Oct 2005 Cash Flows At 31 March 2006 Net cash: £ £ £ Cash in hand and at bank 13,134,412 (4,758,890) 8,375,522 Debt: Finance leases and hire purchase agreements (811,408) (113,960) (925,368) ------------ ------------ ------------ Net funds 12,323,004 (4,872,850) 7,450,154 ------------ ------------ ------------ 8 PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information set out in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The figures for the year ended 30 September 2005 have been extracted from the statutory financial statements which have been filed with the Registrar of Companies. The auditors' report on those financial statements was unqualified and did not contain a statement under Section 237(2) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange

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