Interim Results

Sarantel Group PLC 19 June 2007 19 June 2007 Sarantel Group PLC INTERIM REsults FOR THE SIX MONTHS ENDED 31 mARCH 2007 Sarantel Group PLC (AIM: SLG.L), the leading manufacturer of revolutionary filtering antennas for mobile and wireless devices, today announces its unaudited results for the six months ended 31st March 2007. Highlights are as follows: • Turnover of £1.5m (2006: £2.3m) • Loss before tax of £3.2m (2006: £2.7m) • Operating costs reduced by approximately £1.7m following restructuring • Inventories reduced by £0.8m • Three million Sarantel antennas shipped since the company's inception • Cash balances of £2.5m at end March (of which £0.9m is in a blocked account) (2006: £8.4m) • Cash balances of £1.6m at end May (of which £0.8m is in a blocked account) • Conditional placing to raise £2.1m (gross) announced on 6 June 2007. David Wither, Chief Executive Officer, said: 'We secured 15 GPS design wins during the period and negotiated a large shipment of antennas to XM Satellite Radio. We continue to pursue design wins in the high- volume GPS PND market and are receiving very positive feedback from customers or potential customers who are developing hand portable GPS products. We believe that the market trend towards hand portability will favour the unique properties of our antenna. 'We are pleased that our main investors have agreed to invest an additional £2.1m (subject to shareholder approval) in the business as it demonstrates their confidence in Sarantel and its technology. 'In order to ensure that we are well positioned to capitalise on the future high-volume market, the board will diversify the business by seeking other near-term sources of revenue, while taking action to reduce the ongoing cost base. 'We remain convinced that our technology advantage is significant and that the longer-term market trend towards small hand-portable GPS products will provide the company with a sustainable position in the high-volume GPS market.' For further information please contact: Sarantel Group PLC 01933 670560 Geoff Shingles, Chairman www.sarantel.com David Wither, CEO College Hill Associates Ltd 0207 457 2020 Carl Franklin Ben Way Ambrian Partners 0207 776 6400 Tim Goodman Pictures are available for the media to view and download from www.vismedia.co.uk Notes to Editors: About Sarantel Sarantel is a leader in the design of high-performance miniature antennas for portable wireless applications including hand-held navigation, satellite radio and laptop computers. 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 high-volume consumer products incorporating technologies such as GPS, Wi-Fi, WiMax, 3G, GPRS, Satellite Radio and Bluetooth. More information about the company is available at www.sarantel.com Chief Executive's Statement Trading Results Turnover for the six months to 31st March 2007 amounted to £1.5m (2006: £2.3m). Material cost as a percentage of sales was high due to a number of factors. We offered a discount to XM in order to clear the satellite radio inventory, we incurred higher costs in the initial production runs for our new GPS antenna and finally we expensed the attributable overheads of the antennas sold out of inventory during the period. Taking these into account, the profitability of our core GPS sales were in line with management's expectations and the company's longer-term profitability objective. As announced on 5 October 2006, the company undertook a restructuring of its organisation, which was completed by the end of November. Overall, operating charges were reduced by £1.7m (before exceptional costs) compared to the second half of 2006. Staff costs reduced by £0.7m compared to the second half of 2006. As disclosed further under 'Accounting Policies' the adoption of Financial Reporting Standard 20 (FRS 20) share-based payment resulted in an increase in costs of £0.1m. Operating losses were £3.3m (2006: £2.8m) showing a reduction of £0.3m (before exceptional items) compared to the second half of 2006. Loss before tax were £3.2m (2006: £2.7m) representing an improvement of £0.3m (before exceptional items) compared to the second half of 2006. Inventories reduced by 47% to £0.9m mainly as a result of the shipment of XM satellite radio antennas by the half year end. Capital expenditure amounted to £0.5m and consisted of £0.3m of small plant additions and final stage payments for capacity increases in 2006 and £0.2m of IP filing and prosecution costs. Cash balances at the end of March totalled £2.5m (2006: £8.4m) of which approximately £0.9m was held in a blocked account by HSBC as security deposit for lease payments. During the first half-year cash was mainly used to fund the operations and capital expenditure. Operational Review During the first six months, we won a total of 15 new GPS designs. These included 4 new design wins in the GPS tracking segment. The company has more than 25 design wins in this market segment, which we believe is significant because it demands robust GPS performance in small, highly integrated, hand-portable GSM phones. Sarantel has demonstrated repeatedly that our technology overcomes this challenge. We also successfully negotiated a large shipment of antennas to XM Satellite Radio, which substantially reduced our inventory and generated cash. We believe that the Personal Navigation Devices ('PND') market is continuing to evolve towards devices that will benefit from our technology. The first generation of dash-mounted PNDs was never intended for hand portable use. As a result, these products are relatively large in size and have access to a power source which enables the GPS chipset to use additional power to mitigate poor antenna performance. We anticipate that PND vendors will integrate more functionality into their devices and will increasingly require these to be hand portable. We believe that this will drive greater adoption of our technology. At the same time, the first generation of mobile phones with integrated GPS is starting to appear on the market but as with other newly introduced features, this first generation GPS will not provide the level of performance that demands our technology. As mobile GPS applications develop and the Location Based Services market matures - in part driven by both commercial and consumer generated content - we expect the need for our technology to increase. Overall we remain confident that the major market opportunities for our antenna technology are still to come. It is, however, very difficult for the company to predict when these opportunities will materialize. Therefore in order to ensure that the company remains well positioned to capitalize on future high volume GPS, we have adjusted the company's immediate strategy. We are working to diversify sources of near term revenue and are currently in discussions with a number of potential customers on the development of new antenna products for satellite phones and other applications. In these segments, customers place a sufficiently high value on the performance benefits our technology provides and may be willing to fund development projects. In parallel, the company is taking steps to further reduce its operational costs. Manufacturing cost reduction is an area of intense focus for Sarantel and the material cost of our second generation GPS antenna was 38% lower than the first generation. We are currently developing our third generation GPS antenna and we expect to achieve a significant break-through in both material cost and improved manufacturing processes. We remain confident that our antenna technology will, with more substantial volume deliveries, be an economically viable alternative to the incumbent technologies. Management and Staff The first half of our financial year 2007 has been challenging and we thank our employees for their continued perseverance and we want to express our sincere appreciation and gratitude to all our staff. In a separate statement released today, we are announcing a streamlining of the board. Outlook It is clear after the first half-year results that our full year sales will not match that achieved in 2006. However, our discussions with major OEMs confirm that our technology is becoming increasingly relevant for the hand-portable GPS market. As this market segment develops we expect to be able to resume sales growth. David Wither Chief Executive Officer 19 June 2007 SARANTEL GROUP PLC CONSOLIDATED SUMMARISED PROFIT AND LOSS ACCOUNT For the six months to 31 March 2007 Note 6 months to 31 6 months to 12 months to March 2007 31 March 2006 30 September 2006 Restated Restated Unaudited Unaudited Audited £ £ £ Turnover 1,541,154 2,275,093 4,021,532 Operating costs Change in stocks of finished goods and work in 267,356 405,591 1,452,526 progress Raw materials and consumables (1,847,017) (1,537,565) (3,004,319) Total material cost (1,579,661) (1,131,974) (1,551,793) Other operating expenses Other external charges (3,547) (354,910) (527,650) Staff costs (1,585,862) (1,829,917) (4,139,185) Other operating charges (1,639,184) (1,793,536) (5,022,122) Total operating charges (4,808,254) (5,110,337) (11,240,750) Operating loss before depreciation (2,468,522) (2,101,584) (4,827,591) Depreciation and other amounts written off tangible and intangible assets (798,578) (733,660) (2,391,627) Operating loss (3,267,100) (2,835,244) (7,219,218) Interest receivable and similar income 28,233 163,740 237,551 Loss on ordinary activities before taxation (3,238,867) (2,671,504) (6,981,667) Tax on loss on ordinary activities 2 40,000 65,000 168,920 Loss on ordinary activities after taxation (3,198,867) (2,606,504) (6,812,747) Earnings per share - basic 3 (5.8)p (4.8)p (12.5p) The comparative figures for staff costs have been restated to reflect the adoption of FRS20. SARANTEL GROUP PLC CONSOLIDATED SUMMARISED BALANCE SHEET As at 31 March 2007 As at 31 As at As at March 2007 31 March 2006 30 September 2006 Restated Restated Unaudited Unaudited Audited £ £ £ Fixed assets 5,257,731 6,255,591 5,604,414 Current assets Stocks 895,415 983,081 1,709,683 Debtors 1,480,057 1,370,627 795,918 Cash at bank and in hand 2,458,621 8,375,522 5,050,123 4,834,093 10,729,230 7,555,724 Creditors: amounts falling due within one year (2,241,066) (1,835,623) (1,969,910) Net current assets 2,593,027 8,893,607 5,585,814 Total assets less current liabilities 7,850,758 15,149,198 11,190,228 Creditors: amounts falling due after one year (369,226) (540,594) (618,844) 7,481,532 14,608,604 10,571,384 Share capital 5,513,039 5,450,380 5,494,039 Share premium 14,424,857 14,366,489 14,424,857 Other reserve 13,557,551 13,400,540 13,467,536 Profit and loss account (26,013,915) (18,608,805) (22,815,048) 7,481,532 14,608,604 10,571,384 The comparative figures for other reserve and profit and loss account have been restated to reflect the adoption of FRS20. SARANTEL GROUP PLC CONSOLIDATED SUMMARISED CASH FLOW STATEMENT For the six months to 31 March 2007 Note 6 months to 6 months to 31 12 months to 30 31 March March 2006 September 2006 2007 Unaudited Unaudited Audited £ £ £ Net cash outflow from operating activities 4 (1,936,875) (3,414,064) (6,244,443) Returns on investments and servicing of finance 28,233 163,740 237,551 Corporation tax received - - 149,821 Capital expenditure and financial investment (451,895) (1,423,575) (2,748,392) Net cash outflow before financing (2,360,537) (4,673,899) (8,605,463) Financing (230,964) (84,991) 521,174 Decrease in cash 5 (2,591,501) (4,758,890) (8,084,289) SARANTEL GROUP PLC OTHER PRIMARY STATEMENTS For the six months to 31 March 2007 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 6 months to 6 months to 12 months to 30 31 March 2007 31 March 2006 September 2006 Unaudited Unaudited Audited £ £ £ Loss for the period as originally stated (2,595,504) (6,734,747) Prior year adjustment (11,000) (78,000) Loss for the period (3,198,867) (2,606,504) (6,812,747) Issue of shares net of expenses 19,000 119,075 221,098 Share option expense transferred to reserves 90,015 11,000 78,000 Net decrease in shareholders' funds (3,089,852) (2,476,429) (6,513,649) Opening shareholders' funds 10,571,384 17,085,033 17,085,033 Closing shareholders' funds 7,481,532 14,608,604 10,571,384 SARANTEL GROUP PLC NOTES TO THE INTERIM REPORT FOR THE SIX MONTHS TO 31 MARCH 2007 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 accounting policies have remained the same as the prior year except for the adoption of Financial Reporting Standard 20 (FRS 20), Share-Based Payments. In accordance with the transitional provisions, FRS 20 has been applied to all grants of equity instruments after 7 November 2002 that were not vested at 1 October 2006. The Group operates a share option scheme to allow certain employees to acquire shares in the parent company Sarantel Group PLC. The fair value of options granted is recognised as an employee expense, with a corresponding increase in equity, and spread over the period during which the employees become unconditionally entitled to the options. The fair values are calculated using an appropriate option pricing model. The profit and loss charge is then adjusted to reflect expected and actual levels of vesting based on non market performance related criteria. The impact of the adoption of FRS 20 on the results for the 6 months to 31 March 2007 was a charge of £90,015 with a corresponding increase in equity in shareholders' funds. The impact on the prior period figures, which have been re-stated accordingly, was £11,000 for the 6 months to 31 March 2006 and £78,000 for the year to 30 September 2006. The interim financial information in this report has neither been audited nor reviewed by the Company's auditors. 2 TAX ON LOSS ON ORDINARY ACTIVITIES 6 months to 6 months to 12 months to 30 31 March 2007 31 March 2006 September 2006 Unaudited Unaudited Audited £ £ £ Current tax UK corporation tax based on the results for 6 months to 40,000 65,000 168,920 31 March 2007 The taxation credit arises in respect of research and development expenditure and is subject to agreement with the Inland Revenue. 3 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 6 Months to 31 12 Months to 31 March 2007 March 2006 30 Sept 2006 Restated Restated Unaudited Unaudited Audited £ £ £ Earnings (3,198,867) (2,606,504) (6,812,747) Weighted average number of shares 55,019,152 53,856,628 54,331,745 Per share amount pence (5.8)p (4.8)p (12.5)p 4 NET CASH OUTFLOW FROM OPERATING ACTIVITIES 6 months to 6 months to 12 months to 30 31 March 2007 31 March 2006 September 2006 Restated Restated Unaudited Unaudited Audited £ £ £ Operating loss (3,267,100) (2,835,244) (7,219,218) Depreciation 798,578 733,660 2,391,627 Share option expense 90,015 11,000 78,000 Decrease/(increase) in stock 814,268 (856,800) (1,583,402) (Increase)/decrease in debtors (644,139) (323,972) 269,837 Increase/(decrease) in creditors 271,503 (142,708) (181,288) Net cash outflow from operating activities (1,936,875) (3,414,064) (6,244,443) 5 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 6 months to 6 months to 12 months to 30 31 March 31 March 2006 September 2006 2007 Restated Restated Unaudited Unaudited Audited £ £ £ Decrease in cash in the period (2,591,501) (4,758,890) (8,084,289) Cash outflow in respect of finance leases and HP 249,964 204,066 484,757 New finance leases and HP - (318,026) (784,834) Change in net funds resulting from cash flows (2,341,537) (4,872,850) (8,384,366) Net funds at beginning of period 3,938,638 12,323,004 12,323,004 Net funds at end of period 1,597,101 7,450,154 3,938,638 6 ANALYSIS OF CHANGES IN NET FUNDS At 1 Oct 2006 Cash Flows At 31 March 2007 Net cash: £ £ £ Cash in hand and at bank 5,050,123 (2,591,501) 2,458,622 Debt: Finance leases and hire purchase agreements (1,111,485) 249,964 (861,521) Net funds 3,938,638 (2,341,537) 1,597,101 7 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 2006, subject to adjustments resulting from the adoption of FRS20, 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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