Uk Oil & Gas Regulatory News (UKOG)

31 Mar 2008 13:46

Sarantel Group PLC31 March 2008 31 March 2008 Sarantel Group PLC ("Sarantel" or "the Group") Preliminary results for the year ended 30 September 2007 Sarantel Group PLC (AIM: SLG.L), the leading manufacturer of revolutionaryfiltering antennas for mobile and wireless devices, today announces itspreliminary results for the year ended 30 September 2007 and Placing of101,167,400 New Ordinary Shares at a placing price of 3 pence per share raisingapproximately £3 million (gross of expenses). The net proceeds of the Placingof £2.7 million will be used to continue to develop the customer pipeline forboth its second and third generation GPS antennas and provide working capitalgenerally. Highlights are as follows: • Turnover of £2m (2006: £4m). Recovery in sales apparent by year end • Loss before tax of £5.8m (2006: £7m (including exceptional items of £0.8m)) • Prompt action taken to re-align the business in 2007 • Significant design win with Garmin • Considerable progress in developing the GPS customer pipeline • Diversification strategy on track • Major cost breakthrough in manufacturing processes • Cash balances of £2.4m at year end (of which £0.7m is in a blocked account) (2006: £5.1m (of which £1.3m was in a blocked account)) • Placing of 101,167,400 New ordinary Shares at a placing price of 3p per share raising £3m (gross) Geoff Shingles, Chairman, commented: "During the financial year ended 30 September 2007, the Board took prompt actionto re-align the business in the light of the more difficult trading conditions.We reshaped the Company but continued to make good progress with ourdiversification programme and design wins, especially with Garmin. I remain very excited in my belief that the Company's product offering has aunique position in the developing GPS market. As more GPS devices demandaccurate hand held performance, we expect the special capabilities of ourantenna technology to become more and more in demand. I am also very pleased that investors have agreed to invest £3m (gross) toprovide the financial resources to achieve our growth plans. " For further information please contact: Sarantel Group PLC 01933 670560 Geoff Shingles, Chairman www.sarantel.comDavid Wither, CEO John East and Partners Limited 020 7628 2200 Simon ClementsVirginia Bull College Hill 020 7457 2020 Adrian Duffield/Ben Way Notes to Editors: Sarantel (www.sarantel.com) Sarantel is a leader in the design of high-performance miniature antennas forportable wireless applications including hand-held navigation, satellite radioand laptop computers. Sarantel's revolutionary ceramic filtering antennas offer dramatically improvedperformance over existing antenna designs, resulting in a clearer signal, betterrange and a 90 per cent reduction in the amount of signal radiation absorbed bythe body. Because of their smaller size and higher capabilities, Sarantel's antennasenable manufacturers to create innovative high-volume consumer productsincorporating technologies such as GPS, Wi-Fi, WiMax, 3G, GPRS, Satellite Radioand Bluetooth. Chairman's statement I am pleased to report on my first full financial year as Chairman of Sarantel. The Company has raised approximately £3 million before expenses by way of aplacing by our new nominated adviser and broker John East & Partners Limited.These funds will be used to continue the development of the customer pipeline asSarantel's antenna technology gains greater traction with key customers and toprovide working capital generally. A circular is being posted to shareholdersgiving notice of the General Meeting of the Company to be held on 24th April2008 to approve, inter alia, the allotment of the placing shares and to disapplystatutory pre-emption rights in connection with the placing. During 2007, we continued to manage the effects of the considerable challengesin the portable satellite radio market and also the delayed take up of our 2ndgeneration Global Positioning System ("GPS") antenna. However, we did makeconsiderable progress in developing the GPS customer pipeline as well asimplementing our diversification strategy. Sales fell to £2m (2006: £4m) but the operating loss reduced by 18 per cent. to£5.9m (2006: £7.2m). Our net cash outflow (before financing) similarly reducedby 52 per cent. to £4.1m (2006: £8.6m). Good progress has been manifested in our core GPS market, with the verysignificant adoption of our antenna technology by Garmin, the top tier GPScompany. We also announced other design successes including two golfrangefinders and seven personal tracking devices. We are confident that ourantenna technology has an increasing relevance in these developing GPS markets,as the international trend to hand-held devices continues. We are also making good progress in our diversified markets, especially inmilitary and satellite phones applications. These markets traditionally have alonger lead time to achieve design wins and the Board is pleased with theprogress made to date. Diversification into these markets provides a more stableenvironment for the Company's future progress. During the financial year ended 30 September 2007, the Board took prompt actionto re-align the business in the light of the more difficult trading conditions,which resulted in a restructuring of both the Board and the Company. We welcomed Philip David and Colin Tucker as Non Executive Directors in October2006 whilst Matt Taylor and David Ward, stepped down in December 2006. Thelatter was replaced by Ernie Richardson (a director of MTI Partners Ltd, one ofthe Company's largest shareholders). Finally, in June 2007, Philip David, BillTaylor and Colin Tucker stepped down from the Board. I would like to thank allthe directors for their very valuable contribution during a highly dynamicperiod. A number of members of staff also left Sarantel during the year as we reducedour headcount to 47 by the end of the financial year. I would like to express mythanks to everyone who made a contribution to the Company during the year underreview. In 2007, we reshaped the Company but we continued to make good progress with ourdiversification programme and design wins, especially with Garmin. We do nowbelieve that we have an organisation in place which, because of manufacturingprocess improvements and other methods of going to market, will be in a positionto successfully implement our strategic plan. We continue to work hard to realise Sarantel's potential and I wish to thank myfellow board members and our staff who as always, apply maximum effort toachieve that objective. I remain very excited in my belief that the Company'sproduct offering has a unique position in the developing GPS market. As more GPSdevices demand accurate hand held performance, we expect the specialcapabilities of our antenna technology to become more and more in demand. Chief Executive's statement Sales of £2m for the year were disappointing as highlighted in the Group'sinterim results and announced in our recent trading update. However, during theyear a great deal of focus was placed on developing our customer pipeline in ourcore GPS business and a number of new sectors which we are addressing as part ofour diversification strategy. As a result of these focused efforts we have seen a number of very encouragingdevelopments which we believe validate the importance of our technology.Additionally, the Company took aggressive action to rationalise the business andbring costs in line with the current level of trading activity. Financial Review Sales reduced to £2m (2006: £4m) due to the considerable challenges in theportable satellite radio market and also the delayed take up of our 2ndgeneration GPS antenna. The US Dollar weakened during the year thereby reducing our reported sales by4.3 per cent. equating to approximately £0.1m of sales as the majority of ourcustomers are invoiced in US Dollars. During the year, we shipped our entire stock of satellite radio antennas to XMsatellite radio at a discounted price. This one-off sale, together with theexpected lower yields experienced as we began initial production of our 2ndgeneration GPS antenna reduced our material margin for the year to 6 per cent.(2006: 47 per cent.). In line with the lower level of activity, the Company reduced headcount levelswhich resulted in a 31 per cent. reduction in staff costs when compared to 2006.We ended the year on a monthly expenses run rate of £0.3m which was 39 per cent.lower compared to the beginning of the year. As a result, we were able to reduce our operating loss, before depreciation andamortisation, to £4.3m (2006: £4.8m) despite a lower turnover. Non-financial KPI We make use of delivery precision percentage as a measure of our deliveryperformance to our customer request. During 2007 we achieved 100 per cent.delivery precision (2006: 90 per cent.) as we were able to deliver antennas frominventory. Taxation The Group estimates that it is entitled to a refund for research and developmenttax credit amounting to approximately £0.2m for 2007. Loss per share The loss per share in the year reduced to 9.6p compared to 12.5p for 2006. Cash outflow During the year under review, we raised £2.1m (before costs) through a placing.Our annual cash outflow before this funding exercise was £4.1m, a reduction of52 per cent. compared with 2006. In addition to the reduced operating lossbefore depreciation and amortisation, the Company also reduced stock levels by£1m and capital expenditure by £2.1m as the capacity expansion programme wascompleted. IFRS As reported last year, the Group has prepared a transition plan to implementInternational Financial Reporting Standards (IFRS) for the year ended 30September 2008, including comparatives for the year ended 30 September 2007. TheGroup will report under IFRS for the first time in the Group's interim resultsfor the six months ended 31 March 2008, with comparatives for the six monthsended 31 March 2007. Based on the work completed so far, the Directors expect that the main areapotentially affected is the treatment of Research and Development expenditure. Operational Review Turnover in 2007 was impacted by the slower than expected development in thehandheld GPS market, which affected the take up of the Group's 2nd generationGPS antenna. Additionally, sales of satellite radios into North America werealso very disappointing. However, the Company made very significant progress indeveloping the customer pipeline in its core GPS markets and is engaged with anumber of different major potential customers under the diversificationstrategy. Design win with Garmin In January 2008 we announced a significant breakthrough order from Garmin, a toptier GPS device supplier, for the Colorado series of hand portable outdoor GPSnavigation devices, which were launched in early 2008. This development isparticularly important because it validates the Company's ability to break-in toa top-tier GPS supplier and validates the relevance of the Company's antennatechnology in performance oriented, hand portable GPS devices. The GPS market isforecast to grow to over 500 million units by 2010. Personal Tracking devices During 2007 we announced seven new designs for our antenna in the personaltracking market, bringing the total to over 20 personal tracking devices thatuse our antenna in this market segment. We believe that this segment isparticularly interesting because these devices are essentially small, batteryoperated, hand-held or body worn GSM phones with embedded GPS capability.Additionally, in a personal tracker, GPS accuracy and reliability are ofparamount importance because they are often used in safety criticalapplications. We believe the same characteristics of reliable and accurate GPSfunctionality will become increasingly important in the mobile handset as thelocation based services market matures. Golf range finder We also announced that our GPS antenna had been designed into two recentlylaunched versions of the SkyGolf range finder. The customer chose our antennanot only because of its small size, robust hand-held performance but also forits ability to provide unmatched positional accuracy in an easy to use, compacthand portable device. Diversification As announced at our interim results, the Board stated that it planned todiversify the Group's product portfolio to ensure Sarantel generated short-termrevenues whilst the performance oriented, high-volume hand portable GPS businessdeveloped towards mass adoption. Customers in these market segments tend to bevery conservative, focused on performance and have a long design lead time.However I am pleased to report that we are making very good progress in both themilitary and satellite phone segments. This was highlighted in our recentlyannounced development contract win with a major US military radio supplier. Satellite Radio Despite disappointing sales of antennas into the portable satellite radiosector, our antenna remains a key component for XM Satellite radio. We remainengaged with them and are discussing options for the fully funded development ofan antenna for their next generation of portable satellite radio devices. 3rd generation GPS antenna - the world's smallest GPS antenna On 13 February 2008, we announced that we had begun prototype deliveries of our3rd generation GPS antenna, the world's smallest stand-alone GPS antenna. Thisproduct is a dramatic step forward in technology and is a compelling solutionfor a broader range of mobile devices where consumers require embedded GPScapabilities. Although 2007 has been disappointing, we remain very encouraged by thedevelopments in our GPS business and with the range and stature of customers whoare now evaluating the Sarantel antenna solutions. Market development The GPS market, which is forecast to grow to over 500 million units by 2010, hasseen a large number of high value M&A activities in the past 12 months, of whichthe $8bn acquisition of Navteq by Nokia was the most high profile. This is avery exciting development for Sarantel, because large players are nowimplementing strategies to develop the location-based-services market andpedestrian navigation. We believe that the most exciting location-basedservices, especially pedestrian navigation, will require more accurate andreliable GPS to be embedded into small, hand-portable devices. As a result, webelieve that potential customers will become increasingly attracted to ourantenna technology because we have the ability to demonstrate that we cansuccessfully overcome these challenges. The number of design wins announced forour antenna technology in the past six months would support this view. Manufacturing Process developments During the year, we maintained our efforts to improve our manufacturingprocesses continuously to increase yields and reduce operating and manufacturingcosts. I am pleased that we were able to achieve a number of significantbreakthroughs, which enabled us to reduce the number of components required andintroduce industry-standard manufacturing processes, and have the potential togenerate significant cost reductions. We believe that these process improvementsare essential in positioning our technology for high volume production andoutsource manufacturing. Our diversification strategy requires the Company to react to new antennarequirements from a broad range of customers and applications. During the yearwe were able to fully test our product development capability and exercise ourrapid prototyping processes by meeting the challenges of designing anddelivering prototype antennas to a number of different sectors with a very shortlead time. The Company now has a mature platform for developing new antennas andduring the year we successfully demonstrated that our antenna technology isapplicable to a number of applications beyond GPS and satellite radio. Patented Technology We continued to extend our technology and we applied for six new patents during2007. At the same time, we continued to receive grants for a number of countriesfor our patents filed in previous years. Summary During 2007, we focussed our efforts on developing key customer relationshipsand adding depth to our customer pipeline. The recent design win announcementsin the GPS sector are very encouraging. Additionally, we have made significantprogress with customers in the military and satellite phone sectors, but theserelationships take a longer time to develop. Our efforts to improve ourmanufacturing processes have led to significant breakthroughs and we havefurther reduced our cost base during the year. Overall, we believe that theCompany is well positioned for future growth. We are very pleased to have successfully raised £3m before expenses, which willprovide the Company with the financial resources to achieve the growth targets. Outlook With the GPS market developing well and encouraging progress being made with ourdiversification strategy, we expect 2008 will be a year during which thebusiness will be repositioned for strong growth. Principal Accounting Policies Basis of Accounting The financial statements have been prepared under the historical costconvention, and in accordance with applicable United Kingdom accountingstandards. The principal accounting policies of the Group have remained unchanged fromthose used in the previous year with the exception of the adoption on 1stOctober 2006 of Financial Reporting Standard 20 'Share-based payment'. Theeffect of this on the year and in respect of the prior year is disclosed in note7. Basis of Preparation These financial statements have been prepared on a going concern basis. Aftermaking due enquiries, the directors have a reasonable expectation at the time ofapproving the financial statements that the group has adequate financialresources to continue to operate for the foreseeable future and, consequently,continue to use the going concern basis for preparing the financial statementswhich follow. Basis of Consolidation The consolidated financial statements incorporate the financial statements ofthe Company and all Group undertakings (see note 12). Turnover Income is recognised on despatch of goods. The turnover shown in the profit andloss account represents amounts receivable for goods supplied during the year,exclusive of Value Added Tax. Research and Development Research and development expenditure is written off in the year in which it isincurred. Intangible Fixed Assets Patents are included at cost, representing third party costs of registering. Purchased goodwill representing the excess of the fair value of theconsideration given over the fair value of the identifiable net assets acquired,is capitalised and was fully amortised at 30 September 2004. Amortisation Amortisation is calculated on a straight line basis so as to write off the costof an asset, less its estimated residual value, over the useful economic life ofthat asset as follows: Patents - ten years from year following acquisition. Depreciation Depreciation is calculated on a straight line basis so as to write off the costof an asset, less its estimated residual value, over the useful economic life ofthat asset as follows: Leasehold improvements 10%Plant and machinery 20% - 33% from date asset is put into use Stocks Stocks are valued on a FIFO basis at the lower of cost and net realisable value,after making due allowance for obsolete and slow moving items. Cost includesmaterial, direct labour and an appropriate proportion of manufacturing overheadsbased on normal levels of activity. Net realisable value represents theestimated selling price less all estimated costs of completion, marketing,selling and distribution. Leasing and Hire Purchase Commitments Assets held under finance leases, which are leases where substantially all therisks and rewards of ownership of the asset have passed to the Group, and hirepurchase contracts, are capitalised in the balance sheet and are depreciatedover their useful lives. The capital elements of future obligations under theleases and hire purchase contracts are included as liabilities in the balancesheet. The interest elements of the rental obligations are charged in the profit andloss account over the periods of the leases and hire purchase contracts andrepresent a constant proportion of the balance of capital repaymentsoutstanding. Rentals payable under operating leases are charged in the profit and lossaccount on a straight line basis over the lease term. Deferred Taxation Deferred tax is recognised on all timing differences where the transactions orevents that give the Group an obligation to pay more tax in the future, or aright to pay less tax in the future, have occurred by the balance sheet date.Deferred tax assets are recognised when it is more likely than not that theywill be recovered. Deferred tax is measured on an undiscounted basis at the tax rates that areexpected to apply in the periods in which timing differences reverse, based ontax rates and laws enacted or substantially enacted at the balance sheet date. Foreign Currencies Assets and liabilities in foreign currencies are translated into sterling at therates of exchange ruling at the balance sheet date. Transactions in foreigncurrencies are translated into sterling at the rate of exchange ruling at thedate of the transaction. Exchange differences are taken into account in arrivingat the operating loss. Pensions The Group operates a Group personal pension plan (a money purchase arrangement)for the benefit of certain Directors and employees. Pension costs are charged tothe profit and loss account in the period to which they relate. Financial Instruments Financial assets are recognised in the balance sheet at the lower of cost andnet realisable value. Interest receivable and payable is accrued and charged or credited to the profitand loss account in the period to which it relates. Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the entityafter deducting all of its financial liabilities. Where the contractual obligations of financial instruments (including sharecapital) are equivalent to a similar debt instrument, those financialinstruments are classed as financial liabilities. Financial liabilities arepresented as such in the balance sheet. Finance costs and gains or lossesrelating to financial liabilities are included in the profit and loss account.Finance costs are calculated so as to produce a constant rate of return on theoutstanding liability. Where the contractual terms of share capital do not have any terms meeting thedefinition of a financial liability then this is classed as an equityinstrument. Dividends and distributions relating to equity instruments aredebited direct to equity. Share-based payments The Group operates a group share option scheme under which certain employees anddirectors of the company have been granted options to subscribe for shares inSarantel Group PLC. The Group has adopted Financial Reporting Standard 20 'Share-based payment' witheffect from 1 October 2006. In accordance with the transitional provisions, FRS20 has been applied to all grants of equity instruments after 7 November 2002that were unvested at 1 October 2006. Equity-settled share-based payments are measured at fair value (excluding theeffect of non market-based vesting conditions) at the date of grant. The fairvalue determined at the grant date of the equity-settled share-based payments isexpensed on a straight-line basis over the vesting period, based on the Group'sestimate of shares that will eventually vest and adjusted for the effect of nonmarket-based vesting conditions. Fair value is measured by use of the Cox Rubenstein binomial model. The expectedlife used in the model has been adjusted, based on management's best estimate,for the effects of non-transferability, exercise restrictions and behaviouralconsiderations. Consolidated Profit and Loss Account for the year ended 30 September 2007 2007 2006 Note £ £ as restated --------------------------------- ------ --------- ---------Turnover 1 2,016,462 4,021,532 Operating costs:Change in stocks of finished goods and workin progress 828,627 (1,452,526)Raw materials and consumables 1,062,441 3,004,319Other external charges 65,102 527,650Staff costs 4/7 2,851,805 4,139,185Depreciation and other amounts written offtangible and intangible assets 10/11 1,608,586 2,391,627Other operating charges 1,512,311 2,630,495--------------------------------- ------ --------- --------- 7,928,872 11,240,750 --------------------------------- ------ --------- ---------Operating loss (5,912,410) (7,219,218)--------------------------------- ------ --------- --------- Operating loss before depreciation,amortisation and exceptional items (4,303,824) (4,827,591)Exceptional non-recurring costs 3 - (770,134)Depreciation and other amounts written offtangible and intangible assets (1,608,586) (1,621,493)--------------------------------- ------ --------- ---------Net interest 5 97,340 237,551--------------------------------- ------ --------- ---------Loss on ordinary activities before taxation (5,815,070) (6,981,667)Tax on loss on ordinary activities 6 184,192 168,920--------------------------------- ------ --------- ---------Loss for the financial year 22 (5,630,878) (6,812,747)--------------------------------- ------ --------- --------- Basic loss per share 9 (9.6)p (12.5)p--------------------------------- ------ --------- --------- There were no recognised gains or losses other than the loss for the financialyear. All the activities of the Group are classed as continuing. The comparative figure for staff costs has been revised to reflect the adoptionof FRS 20 "Share-based payments". The accompanying accounting policies and notes form an integral part of thesefinancial statements. Consolidated Balance Sheet as at 30 September 2007 2007 2006 Note £ £ as restated -------------------------- -------- ---------- ---------Fixed assets Intangible assets 10 1,094,664 861,408Tangible assets 11 3,539,771 4,743,006-------------------------- -------- ---------- ---------- 4,634,435 5,604,414Current assets Stocks 13 741,280 1,709,683Debtors 14 705,466 795,918Cash at bank and in hand 27 2,430,071 5,050,123-------------------------- -------- ---------- ---------- 3,876,817 7,555,724Creditors: amounts falling due within one 15 1,355,880 1,969,910year -------- ---------- ------------------------------------ Net current assets 2,520,937 5,585,814-------------------------- -------- ---------- ----------Total assets less current liabilities 7,155,372 11,190,228Creditors: amounts falling due after morethan one 16 112,666 618,844year -------------------------- -------- ---------- ---------- 7,042,706 10,571,384 -------------------------- -------- ---------- ---------- Capital and reservesCalled-up equity share capital 21 7,643,553 5,494,039Share premium account 22 14,252,078 14,424,857Other reserves 22 13,593,001 13,467,536Profit and loss account 22 (28,445,926) (22,815,048)-------------------------- -------- ---------- ---------Shareholders' funds 7,042,706 10,571,384-------------------------- -------- ---------- --------- The comparative figure for other reserves and the profit and loss account havebeen revised to reflect the adoption of FRS 20 "Share-based payments". Company Balance Sheet as at 30 September 2007 2007 2006 Note £ £ as restated ---------------------------- ------ ---------- --------Fixed assets Investments 12 3,283,813 3,158,348---------------------------- ------ ---------- ---------Current assets Debtors 14 17,779,647 14,034,770Cash at bank and in hand 1,559,464 3,286,240---------------------------- ------ ---------- --------- 19,339,111 17,321,010Creditors: amounts falling due within one 15 - 28,187year ------ ---------- ------------------------------------- Net current assets 19,339,111 17,292,823---------------------------- ------ ---------- ---------Total assets less current liabilities 22,622,924 20,451,171---------------------------- ------ ---------- --------- Capital and reserves Called-up equity share capital 21 7,643,553 5,494,039Share premium account 22 14,252,078 14,424,857Other reserves 22 203,465 78,000Profit and loss account 22 523,828 454,275---------------------------- ------ ---------- ---------Shareholders' funds 22,622,924 20,451,171---------------------------- ------ ---------- --------- The comparative figure for other reserves and investments has been revised toreflect the adoption of FRS 20 "Share-based payments". Consolidated Cash Flow Statement for the year ended 30 September 2007 2007 2006 Note £ £ as restated ----------------------------- ----- --------- --------Net cash outflow from operating activities 24 (3,760,139) (6,244,447) Returns on investments and servicing offinanceInterest received 147,226 321,270Interest paid (257) (121)Finance lease interest paid (49,629) (83,598)----------------------------- ----- --------- ---------Net cash inflow from returns on investmentsand servicing of finance 97,340 237,551----------------------------- ----- --------- --------- Taxation received 197,792 149,821Capital expenditurePayments to acquire tangible fixed assets (303,807) (2,395,345)Payments to acquire intangible fixed assets (335,858) (353,047)Proceeds of sale of equipment 525 ------------------------------ ----- --------- ---------Net cash outflow from capital expenditure (639,140) (2,748,392)----------------------------- ----- --------- --------- Cash outflow before financing (4,104,147) (8,605,467)FinancingIssue of shares 2,149,515 221,098Expenses paid in connection with issue ofshares (172,779) -Net cash movement in respect of capitalelement of finance lease rentals 25 (492,641) 300,080----------------------------- ----- --------- ---------Net cash inflow from financing 1,484,095 521,178----------------------------- ----- --------- --------- Decrease in cash 25 (2,620,052) (8,084,289)----------------------------- ----- --------- --------- The accompanying accounting policies and notes form an integral part of thesefinancial statements Notes to the Financial Statements 1 Turnover An analysis of turnover by geographical market or segmental information has notbeen disclosed as, in the opinion of the Directors, it would be seriouslyprejudicial to the Group. 2 Operating Loss Operating loss is stated after charging: 2007 2006 £ £ ----------------------------------- -------- --------Amortisation of intangible fixed assets 102,602 68,258Depreciation of owned tangible fixed assets 1,063,086 872,723Impairment of owned tangible fixed assets - 770,134Depreciation of assets held under finance leases andhire 442,898 680,512purchase agreements -------- ------------------------------------------- 2007 2006 £ £ ----------------------------------- -------- -------Audit services:Audit of parent company accounts 1,000 1,000Audit of parent company and consolidated accounts 11,500 12,500 Non-audit services:Audit of subsidiaries 14,000 14,000Tax compliance 5,665 5,850Tax advisory - 4,200Interim review 6,700 6,500IFRS conversion - 6,500Other services - 700----------------------------------- -------- ------- 2007 2006 £ £ ----------------------------------- -------- --------Research and development costs: 647,552 704,165----------------------------------- -------- -------- 2007 2006 £ £Operating lease costs:----------------------------------- -------- --------Land and buildings 135,000 128,004----------------------------------- -------- -------- 3 Exceptional Non-Recurring Items Charged in Arriving at Operating Loss 2007 2006 £ £ ----------------------------------- -------- --------Impairment of tangible fixed assets - 770,134----------------------------------- -------- -------- Impairment of Tangible Fixed Assets: During the prior year, continuing process improvements caused certain items ofplant to become obsolete. The carrying value of this plant was therefore writtendown to nil. 4 Directors and Employees The average number of staff employed by the Group during the financial yearamounted to: 2007 2006 Number Number ---------------------------------- --------- -------Management 1 3Technical 12 14Finance and administration 5 6Sales and marketing 4 6Operations 55 86---------------------------------- --------- -------- 77 115 ---------------------------------- --------- -------- The aggregate payroll costs (including Directors' emoluments) were: 2007 2006 £ £ as restated ---------------------------------- --------- --------Wages and salaries 2,402,911 3,632,304Social security costs 258,636 349,621Pension costs 64,793 79,260Share based payments 125,465 78,000---------------------------------- --------- -------- 2,851,805 4,139,185 ---------------------------------- --------- -------- Remuneration in respect of Directors was as follows: 2007 2006 £ £ ---------------------------------- --------- --------Emoluments 448,363 655,691Pension contributions to money purchase pension scheme 24,882 23,350Payment to third parties for Directors' services 48,716 42,709---------------------------------- --------- -------- 521,961 721,750 ---------------------------------- --------- -------- The amounts set out above include remuneration in respect of the highest paidDirector as follows: 2007 2006 £ £ -------------------------------- ----------- --------Emoluments 154,504 182,348Pension contributions to money purchase pension schemes 17,201 15,250-------------------------------- ----------- -------- 171,705 197,598 -------------------------------- ----------- -------- Share options exercised by Directors during the year were: 2007 2006 No No -------------------------------- ----------- -------D Wither - 75,000D Dey - 444,900------------------------------- ----------- -------- Details of the share options granted to Directors in the year, together withfurther details of their remuneration, are shown in the report of theRemuneration Committee. During the year 2 Directors (2006: 2) participated in money purchase pensionschemes. 5 Net Interest 2007 2006 £ £ -------------------------------- ---------- --------Interest receivable and similar income 148,101 379,519Finance charges in respect of finance leases (49,629) (83,598)Other interest payable and similar charges (1,132) (58,370)-------------------------------- ---------- -------- 97,340 237,551 -------------------------------- ---------- -------- 6 Taxation on Ordinary Activities 2007 2006 £ £ -------------------------------- ---------- --------Current tax:UK corporation tax based on the results for the yearat 19% (2006: 19%) (155,400) (169,000)Adjustment in respect of prior year (28,792) 80-------------------------------- ---------- --------Total current tax (184,192) (168,920)-------------------------------- ---------- -------- The taxation credit arises in respect of research and development expenditureand is subject to agreement with HM Revenue & Customs. The standard rate of tax for the year based on the UK standard rate ofcorporation tax is 19% (2006: 19%). The actual tax credit for the year differsfrom the standard rate for the reasons set out in the following reconciliation: 2007 2006 £ £ as restated Loss on ordinary activities before taxation (5,815,070) (6,903,667)Prior year adjustment in respect of share basedpayments - (78,000)------------------------------- ---------- --------Loss on ordinary activities before taxation (5,815,070) (6,981,667)------------------------------- ---------- --------Loss on ordinary activities multiplied by rate oftax (1,104,863) (1,326,517)Effect of:Expenses not deductible for tax purposes 139,194 43,734Depreciation for the period in excess of capitalallowances 277,347 441,185Other timing differences 7,829 4,650Tax losses carried forward 680,493 836,948Research and development tax credit (155,400) (169,000)Prior year over provision (28,792) 80------------------------------- ---------- --------Total current tax (184,192) (168,920)------------------------------- ---------- -------- Tax losses available, subject to agreement with the Inland Revenue, to offsetfuture taxable trading income amount to approximately £18m (2006: £13.8m). A deferred tax asset amounting to approximately £5.0m (2006: £4.1m) arising fromtaxable trading losses has not been recognised on the grounds that at thecurrent time there is insufficient evidence that the asset will be recoverablein the foreseeable future. 7 Prior Year Adjustments The group has adopted Financial Reporting Standard 20 "Share-based payment" asdisclosed in the Principal Accounting Policies. As a result of adopting this Financial Reporting Standard the group hasrecognised additional costs of £78,000 in the year ended 30 September 2006within Staff Costs: share based payments. Additionally, at 30 September 2006 thegroup recognised the resulting Employee Share Scheme Reserve of £78,000. Therehas been no net effect on Shareholders Funds as at 30 September 2006. The share options were granted to employees of a subsidiary and therefore in theparent company's own financial statements, as at 30 September 2006, £78,000 wasadded to the cost of investment in that subsidiary with a corresponding entry tothe Employee Share Scheme Reserve. 8 Result for the Financial Year The parent company has taken advantage of Section 230 of the Companies Act 1985and has not included its own profit and loss account in these financialstatements. The parent company's profit for the year was £69,553 (2006 asrestated: £32,570). 9 Loss Per Share The calculation of basic loss per share is based on the loss attributable toordinary shareholders divided by the weighted average number of shares in issueduring the year. 2007 2006 £ £ as restated ------------------------------- ---------- --------Loss for the financial year (5,630,878) (6,812,747)Weighted average number of shares 58,806,617 54,331,745------------------------------- ---------- ---------Per share amount in pence (9.6)p (12.5)p------------------------------- ---------- --------- The issue of additional shares on the exercise of options would decrease thebasic loss per share and there is, therefore, no dilutive effect of shareoptions. 10 Intangible Fixed Assets The Group Goodwill Patents Total £ £ £ ------------------------ ---------- --------- ---------CostAt 1 October 2006 760,632 1,158,096 1,918,728Additions - 335,858 335,858------------------------ ---------- --------- ---------At 30 September 2007 760,632 1,493,954 2,254,586------------------------ ---------- --------- --------- AmortisationAt 1 October 2006 760,632 296,688 1,057,320Charge for the year - 102,602 102,602------------------------ ---------- --------- ---------At 30 September 2007 760,632 399,290 1,159,922------------------------ ---------- --------- --------- Net book valueAt 30 September 2007 - 1,094,664 1,094,664------------------------ ---------- --------- --------- At 30 September 2006 - 861,408 861,408------------------------ ---------- --------- --------- 11 Tangible Fixed Assets The Group Leasehold Plant and improvements machinery Total £ £ £ ------------------------ ----------- --------- ---------CostAt 1 October 2006 196,646 8,827,145 9,023,791Additions - 303,807 303,807Disposals - (4,435) (4,435)------------------------ ----------- --------- ---------At 30 September 2007 196,646 9,126,517 9,323,163------------------------ ----------- --------- ---------DepreciationAt 1 October 2006 88,282 4,192,503 4,280,785Charge for the year 19,437 1,486,547 1,505,984Eliminated on disposal - (3,377) (3,377)------------------------ ----------- --------- ---------At 30 September 2007 107,719 5,675,673 5,783,392------------------------ ----------- --------- ---------Net book valueAt 30 September 2007 88,926 3,450,845 3,539,771------------------------ ----------- --------- ---------At 30 September 2006 108,364 4,634,642 4,743,006------------------------ ----------- --------- --------- Fixtures and fittings and computer equipment are not significant and so areincluded in plant and machinery. Included within the net book value of £3,539,771 is £1,327,901 (2006:£1,843,537) relating to assets held under finance leases and hire purchaseagreements. The depreciation charged to the financial statements in the year inrespect of such assets amounted to £442,898 (2006: £680,512). 12 Investments The Group At 30 September 2007, the Group held more than 20% of a class of the allottedshare capital of the following: Country of Class of share Proportion held Nature of ------------- incorporation held -------- business ----------- --------- ------------SarantelLimited England and Ordinary shares 100% Design and Wales manufacture of antennasSarantel USAInc* USA Ordinary shares 100% Marketing support servicesSarantel AsiaPacific Pte.Ltd* Singapore Ordinary shares 100% Marketing--------- ------------ ---------- -------- support services --------------- * Owned by Sarantel Limited The Company 2007 2006 Shares in subsidiary undertakings £ £ as restated ------------------------------------ --------- ---------Cost and net book amountAt 1 October 2006 3,158,348 3,080,348Additions 125,465 78,000------------------------------------ --------- ---------At 30 September 2007 3,283,813 3,158,348------------------------------------ --------- --------- 13 Stocks The Group The Company 2007 2006 2007 2006 £ £ £ £ --------------------------- ------- ------- --- -------- -------Raw materials 99,041 238,816 - -Work in progress 138,243 69,298 - -Finished goods 503,996 1,401,569 - ---------------------------- ------- ------- --- -------- ------- 741,280 1,709,683 - - --------------------------- ------- ------- --- -------- ------- 14 Debtors The Group The Company 2007 2006 2007 2006 £ £ £ £ --------------------------- ------- ------- --- -------- --------Trade debtors 216,373 363,783 - -VAT recoverable 11,540 54,703 - -Amounts owed by Groupundertakings - - 17,779,647 14,034,770Corporation tax recoverable 155,400 169,000 - -Other debtors 83,568 91,708 - -Prepayments and accruedincome 238,585 116,724 - ---------------------------- ------- ------- --- -------- -------- 705,466 795,918 17,779,647 14,034,770 --------------------------- ------- ------- --- -------- -------- Amounts due from group undertakings will not be repayable until they are tradingsatisfactorily. The debtors above include the following amounts falling due after more than oneyear: The Group The Company 2007 2006 2007 2006 £ £ £ £ -------------------------- ------- -------- --- -------- -------Other debtors 66,938 66,938 - --------------------------- ------- -------- --- -------- ------- 15 Creditors: Amounts Falling Due Within One Year The Group The Company 2007 2006 2007 2006 £ £ £ £ -------------------------- ------- ------- --- -------- -------Trade creditors 294,484 603,083 - -Other taxation and social 196,541 105,589 - 8,874securityAmounts due under finance leasesand 506,178 492,641 - -hire purchase agreementsOther creditors 32,277 108,822 - 1,186Accruals and deferred income 326,400 659,775 - 18,127-------------------------- ------- ------- --- -------- ------- 1,355,880 1,969,910 - 28,187 -------------------------- ------- ------- --- -------- ------- 16 Creditors: Amounts Falling Due After More Than One Year The Group The Company 2007 2006 2007 2006 £ £ £ £ --------------------------- ------- ------- --- -------- -------Amounts due under finance leases andhire 112,666 618,844 - -purchase agreements ------- ------- --- -------- ---------------------------------- 17 Borrowings Borrowings are repayable as follows: The Group The Company 2007 2006 2007 2006 £ £ £ £ -------------------------- ------- -------- --- -------- -------Within one year:Finance leases and hire purchase 506,178 492,641 - -agreementsAfter one year and within twoyears:Finance leases and hire purchase 112,666 506,178 - -agreementsAfter two years and within fiveyearsFinance leases and hire purchase - 112,666 - -agreements ------- -------- --- -------- --------------------------------- 618,844 1,111,485 - - -------------------------- ------- -------- --- -------- ------- 18 Financial Instruments The Group uses financial instruments comprising borrowings, cash, liquidresources and various items such as trade debtors, trade creditors, etc. thatarise directly from its operations. The Group uses derivatives which are limitedto those described under currency exchange risk below. The main purpose of thesefinancial instruments is to raise finance for, and manage risks of, the Group'soperations. Short-term debtors and creditors Short-term debtors and creditors have been excluded from the followingdisclosures, other than currency risk disclosures. Interest rate risk The Group finances its operations through share capital and leasing. The Groupmixes the duration of its deposits to reduce the impact of interest ratefluctuations. Liquidity risk The Group seeks to manage financial risk by ensuring that sufficient financialliquidity is available to meet foreseeable needs and to invest cash assetssafely and profitably. Currency exchange risk The Group's sales are predominantly made in US$ and are subject to currencyrisks on translation. The Group has options to sell currency at certain definedrates, and these option contracts are reviewed quarterly. There were no materialoption contracts in place at the year end. Borrowings The Group has purchased some fixed assets through finance leasing and hirepurchase agreements at fixed interest rates. Financial assets The Group's cash deposits of £2.43m (2006: £5.05m) are spread between threebanks. The Directors have given serious consideration and have reached the conclusionthat there is no significant difference between the book and the fair value ofassets and liabilities of the Group at the balance sheet date. 19 Leasing Commitments At 30 September 2007 the Company had aggregate annual commitments undernon-cancellable operating leases as set out below. Land and buildings 2007 2006 £ £ ------------------------------------- ------ ------Operating leases which expire:After more than five years 105,000 135,000------------------------------------- ------ ------ 20 Related Party Transactions Under an agreement dated 24 February 2005 between the Company and MTI PartnersLimited ("MTI"), MTI provides an authorised representative to serve as anon-executive Director of the Company for a fee of £20,000 per annum payablequarterly. From 8 May 2007, MTI agreed to waive their fee until such time as thecompany is trading satisfactorily. MTI controls 22.5% of the share capital ofthe Company. At 30 September 2007, the amount outstanding to MTI was £198 (2006:£nil). Under an agreement dated 28th February 2006 between the Company and ForesightVenture Partners ("VCF"), VCF provides an authorised representative to serve asa non-executive director of the Company for a fee of £20,000 per annum payablequarterly. This agreement was terminated on 11th December 2006. VCF controls29.5% of the share capital of the Company. At 30 September 2007 the amountoutstanding to VCF was £nil (2006: nil). The Chairman, Geoff Shingles invoices his fees through Geoff ShinglesPartnership ("GSP"). From 8 May 2007, GSP agreed to waive their fee until suchtime as the company is trading satisfactorily At 30 September 2007 the amountoutstanding to GSP was £6,324 (2006: £13,750). 21 Share Capital Authorised share capital: 2007 2006 No £ No £ ----------------------- -------- -------- -------- -------A ordinary shares of£0.10 118,000,000 11,800,000 63,000,000 6,300,000each B ordinary shares of£0.10 2,000,000 200,000 2,000,000 200,000each --------- -------- -------- ------------------------------ 120,000,000 12,000,000 65,000,000 6,500,000 ---------------------- --------- -------- -------- -------- Allotted, called-up and fully paid: 2007 2006 No £ No £ ------------------------ -------- -------- -------- -------A ordinary shares of £0.10each 75,399,191 7,539,919 53,904,045 5,390,405 B ordinary shares of £0.10each 1,036,340 103,634 1,036,340 103,634----------------------- -------- -------- -------- -------- 76,435,531 7,643,553 54,940,385 5,494,039 ----------------------- -------- -------- -------- -------- Allotments during the year The Company made the following allotments in the period: A ordinary £ ---------------------------------- shares of £0.10 -------- ---------Options exercised during the year 195,146 19,514Shares issued during the year 21,300,000 2,130,000Total share premium - ----------------------------------- --------- --------Total consideration 21,495,146 2,149,514---------------------------------- --------- -------- Equity-settled share option scheme The company has a share option scheme for all employees for the Group. Optionsare exercisable at a price equal to the average quoted market price of theCompany's shares on the date of grant. The vesting conditions of these grantswere 3 years service. Options are forfeited if the employee leaves the Groupbefore the options vest. The Company operates a SAYE scheme, whereby employees are allowed to subscribeto a monthly savings amounts for a period of 3 years. At the end of thatperiod, the employee is allowed to either receive their saved amount plusinterest and a bonus or purchase shares in the Company at a price based on theaverage share price on the three days prior to the contract invitation date.This scheme is open to all employees subject to Inland Revenue approved limitson total investment. Exercise of Options During the year employees of the group exercised share options as follows: 2007 2006Number of shares exercised 195,146 1,210,751 ------------------------------------ ------- --------Value of shares exercised £ £------------------------------------ ------- --------Nominal value 19,514 121,075Share premium - 58,023------------------------------------ ------- --------Total consideration 19,514 179,098------------------------------------ ------- -------- Share Options Details of the share options outstanding during the year are as follows: 2007 2006 ----------------------- -------------- -------------- As restated ----------------------- -------------- -------------- Number of share Weighted Number of share Weighted options average options average exercise price exercise price (in £) (in £)Number ofShare Optionsat thebeginning ofthe year 7,643,935 0.212 7,102,081 0.332SAYE grantedduring theprior year - - 1,157,672 0.242SAYEeliminatedduring theyear (694,047) 0.242 - -Optionsgranted duringthe year 671,750 0.134 1,069,750 0.371Number ofOptions lapsedand eliminated (357,154) 0.232 (474,817) 0.393Number ofOptionsexercisedduring theyear (195,146) 0.100 (1,210,751) 0.361----------------------- -------- -------- -------- --------Balance at endof the year 7,069,338 0.201 7,643,935 0.212----------------------- -------- -------- -------- -------- The number of share options and weighted average exercise price for 2006 hasbeen restated to include the SAYE scheme. The weighted average fair value per option for options granted during the yearwas £0.096 (2006 £0.28). The weighted average share price at the date of exercise for share optionsexercised during the period was £0.163 (2006 £0.361) The options outstanding at 30 September 2007 had a weighted average remainingcontractual life of 7.2 years (2006 8 years). Share options at 30 September 2007 are exercisable as follows:Date of grant Number of Exercise price Last date for------------- shares (pence) exercise ------------- ------------- ------------26/02/2003 128,841 10 25/02/201326/02/2003 431,082 25 25/02/201304/08/2004 2,584,904 10 03/08/201404/08/2004 220,050 25 03/08/201405/08/2004 787,090 25 04/08/201417/02/2005 934,000 27.5 16/02/201517/01/2006 82,499 35.8 16/01/201607/02/2006 75,000 31.8 06/02/201601/03/2006 834,997 38 28/02/201628/11/2006 149,750 20 17/11/201611/07/2006 463,625 24.2 10/07/201630/07/2007 377,500 10 29/07/2017 Details of the share options granted to the Directors are shown in the report ofthe Remuneration Committee. The inputs into the Cox Rubenstein binomial model are as follows: 2007 2006Weighted average share price £0.117 £0.371Weighted average exercise price £0.134 £0.371Expected volatility 75% 107%Expected life 10 years 10 yearsRisk free rate 4% 4.91%Expected dividend yield 0% 0% ======== ======== Expected volatility was determined by calculating the historical volatility ofthe Group's share price over the previous 180 days. The expected life used inthe model has been adjusted, based on management's best estimate, for theeffects of non-transferability, exercise restrictions, and behaviouralconsiderations. The Group recognised total expenses of £125,465 and £78,000 related toequity-settled share-based payment transactions in 2006 and 2007 respectively. 22 Reserves The Group Share scheme Other reserves Total other Share premium Profit and loss reserve reserves account account £ £ £ £ £At 1 October2006 aspreviouslyreported - 13,389,536 13,389,536 14,424,857 (22,737,048)Prior yearadjustment(see note 7) 78,000 - 78,000 - (78,000)----------------- --------- -------- -------- -------- ---------At 1 October2006 restated 78,000 13.389,536 13,467,536 14,424,857 (22,815,048)Loss for theyear - - - - (5,630,878)Expensesincurred reshares issued - - - (172,779) -Increase inemployee sharescheme reserve 125,465 - 125,465 - ------------------ --------- -------- -------- -------- ---------At 30September 2007 203,465 13,389,536 13,593,001 14,252,078 (28,445,926)----------------- --------- -------- -------- -------- --------- Other reserves result from the application of merger accounting on theacquisition of Sarantel Ltd on 23 February 2005. The Company Share premium Share scheme Profit and loss account reserve account £ £ £At 1 October2006 aspreviouslyreported 14,424,857 - 454,275Prior yearadjustment(see note 7) - 78,000 ----------------------------- -------- --------- ---------At 1 October2006 restated 14,424,857 78,000 454,275---------------------------- -------- --------- ---------Profit for theyear - - 69,553Expensesincurred reshares issued (172,779) - -Increase inemployee sharescheme reserve - 125,465 ----------------------------- -------- --------- ---------At 30September 2007 14,252,078 203,465 523,828---------------------------- -------- --------- --------- 23 Reconciliation of Movements in Shareholders' Funds Equity shareholders' funds 2007 2006 £ £ as restated ---------------------------------- ---------- ---------Loss for the financial year (5,630,878) (6,812,747)Issue of new shares (net of issue expenses) 1,976,735 221,098Employee share scheme reserve 125,465 78,000---------------------------------- ---------- ---------Decrease in shareholders' funds in the year (3,528,678) (6,513,649)Opening shareholders' equity funds 10,571,384 17,085,033---------------------------------- ---------- ---------Closing shareholders' equity funds 7,042,706 10,571,384---------------------------------- ---------- --------- 24 Reconciliation of Operating Loss to Net Cash Outflow From OperatingActivities 2007 2006 £ £ As restated ---------------------------------- ---------- ---------Operating loss (5,912,410) (7,219,218)Depreciation and amortisation 1,608,586 2,391,627Loss on sale of equipment 532 -Employee share scheme charge 125,465 78,000Decrease/(Increase) in stocks 968,403 (1,583,402)Decrease in debtors 76,851 269,837Decrease in creditors (627,566) (181,291)---------------------------------- ---------- ---------Net cash outflow from operating activities (3,760,139) (6,244,447)---------------------------------- ---------- --------- 25 Reconciliation of Net Cash Flow to Movement in Net Funds 2007 2006 £ £ ---------------------------------- ---------- ---------Decrease in cash in the period (2,620,052) (8,084,289)Cash outflow in respect of finance leases and hirepurchase 492,641 484,757New finance leases and hire purchase agreements - (784,834)---------------------------------- ---------- ---------Change in net funds resulting from cash flows (2,127,411) (8,384,366)Net funds at start of the year 3,938,638 12,323,004---------------------------------- ---------- ---------Net funds at end of the year 1,811,227 3,938,638---------------------------------- ---------- --------- 26 Analysis of Changes in Net Funds At 1 October Cash flows At 30 September 2006 2007 £ £ £ ----------------------------- --------- -------- ---------Net cash:Cash in hand and atbank 5,050,123 (2,620,052) 2,430,071Debt:Finance leases andhire purchaseagreements (1,111,485) 492,641 (618,844)----------------------------- --------- -------- ---------Net funds 3,938,638 (2,127,411) 1,811,227----------------------------- --------- -------- --------- 27 Cash at Bank Cash balances of £2,430,071 (2006: £5,050,123) at the end of the year include anamount of £715,700 (2006: £1,350,000) on an interest bearing deposit accountwith a financial institution which can only be repaid when the amounts owed toit under hire purchase agreements are settled in full. At the year end, theamount owed was £614,497 (2006: £1,161,823). 28 Capital Commitments 2007 2006 £ £ -------------------------------- --------- ---------Amounts contracted for but not provided in the financialstatements 98,541 827,310-------------------------------- --------- --------- 29 Pensions The Group makes payments into a Group personal pension scheme for certainemployees and Directors. The assets of the scheme are administered by trusteesin a fund independent from those of the Group. This information is provided by RNS The company news service from the London Stock Exchange