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Sarantel Group PLC (UKOG)

Sarantel Group PLC

Final Results
RNS Number : 4421V
Sarantel Group PLC
14 January 2013
 



14 January 2013

 

 

Sarantel Group PLC

("Sarantel" or "the Group")

 

Audited results for the year ended 30 September 2012

 

Sarantel (AIM: SLG), a leading manufacturer of high-performance, miniature antennas for mobile and wireless devices, announces its audited results for the year ended 30 September 2012.

 

Chairman's Statement

 

2012 began positively for Sarantel with the Group's largest order to date from a major military customer. After a relatively slow first half, the second half of the year saw a 105% increase in production revenues compared to the same period in the previous year. Overall, revenues for the year grew by 35% to £3.0m (2011: £2.2m) reducing operating loss before depreciation and amortisation by 11% to £2.0m (2011: £2.3m).

 

Net cash outflow before financing was unchanged at £2.3m (2011: £2.3m). 

 

During the year, Sarantel agreed a £2m secured loan facility with HSBC Bank plc in order to provide sufficient working capital to service the large order, received in February 2012, from a leading military radio manufacturer, which formed part of a multi-year supply contract.

 

Progress was also made in improving the efficiency of the Group's assembly process and in September, new SL1250 and SL1350 GeoHelix GPS antennas were also launched.

 

Despite the advances made in its military markets, the Group believes that it will take a number of years before Sarantel is able to generate sufficient revenues to reach cash break-even from the military market alone. Whilst the Board believes there are attractive prospects in the consumer market for Sarantel's technology, the Group's weak balance sheet and limited financial resources are such that the Group does not have sufficient working capital to exploit these opportunities and requires further funding.

 

The Board has considered the options for raising additional funding for the Group and has concluded that given the challenging stock-market conditions for smaller companies such as Sarantel, that shareholder value would be best preserved by a disposal of the operating business to a third party that has the scale and funds to invest in developing the market opportunities. Accordingly, Sarantel has had a number of discussions with third parties who have expressed an interest in acquiring the Group's operating subsidiary. The Group has now entered into exclusive discussions with a potential purchaser of the operating subsidiary, but there can be no certainty that this will be completed.  A further update will be provided in due course.

 

 

Enquiries

 

Sarantel Group PLC

  +44 (0)1933 670 560

David Wither, Chief Executive Officer


Nicola Malyon, Chief Financial Officer

 


Beaumont Cornish Ltd (Nominated Adviser)

+44 (0)20 7628 3396

Roland Cornish/Michael Cornish

 


XCAP Securities PLC (Corporate Broker)

 

+44 (0)20 7101 7070

Jon Belliss/Halimah Hussain

 


 

 

About Sarantel www.sarantel.com

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

 

 

Chief Executive's Statement

 

Financial Review

 

The results for 2012 reflect the improvements made by the Group through increased revenues, improved margins and increased delivery performance.

 

The increase in production to supply one of Sarantel's major customers was financed using a £2m secured loan facility with HSBC Bank plc. The loan is an interest only facility at 3% above the Bank's Sterling Base Rate and must be settled in full on or before March 2014. The loan was secured, by a major customer, against certain assets of Sarantel Ltd.

 

Overall, revenues for the year grew by 35% to £3.0m (2011: £2.2m) reducing operating loss before depreciation and amortisation by 11% to £2.0m (2011: £2.3m).

 

Delivery precision (a measure of our delivery performance compared to customer request) was 91% (2011: 76%). There were some minor delivery delays but overall the Group has seen a significant improvement in delivery performance.

 

Total operating costs increased by 8% due to loan refinancing and debt servicing costs. Research and development costs increased by 3% as new antennas and production methods continue to be developed. Sales and distribution costs fell by 10% due to the additional cost incurred in 2011 to recruit a Japanese sales person.

 

The operating loss before depreciation and amortisation decreased to £2.0m (2011: £2.3m), as revenues grew and gross margins improved.

 

The Group's loss per share reduced to 0.3p (2011: 0.6p) as a result of the average number of shares in issue during the year.

 

Cash Utilisation

Net cash outflow from operating activities remained constant at £1.9m (2011: £1.9m) due to improved gross margins and product mix, offset with increases in inventory levels and trade receivables.

 

Sarantel sales are in US dollars whilst most of the costs are in Sterling. The dollar fluctuated little during the year and resulted in an overall net currency loss of £0.008m to the Group.

 

Review of Operations and Markets

 

The broader GPS market remains very dynamic and continues to grow at a rapid pace as GPS technology is incorporated into an increasing number of applications. During the year Sarantel sold or sampled its GPS antenna products to more than 260 new customers.

 

In September 2012, Sarantel launched two new GPS antennas which are targeted at consumer and industrial markets.  However, incremental revenue opportunities in these markets will take time to develop and are restricted by the lack of direct sales resource which limits Sarantel's ability to convert more sales leads, generated by its distribution network, into revenues.

 

Military Market

 

This market is a key focus for Sarantel and the Group's ability to develop a blue-chip customer base within the US defence community is testament to the quality of its products. During the year the Group saw significant growth in this market, and military customers now make up more than 60% of Sarantel's revenues. Based on current design wins and new programs which are in the pipeline the Group expect revenues from this market to continue to be a major part of the business.

 

Sarantel was able to improve volume production of a number of new military antenna designs including the first antenna to use its new assembly process. This process promises to transform the way Sarantel produces antennas and the levels of miniaturisation and integration it can achieve.

 

Consumer GPS

 

Sarantel continues to believe there is a strong opportunity for its technology in a number of high volume consumer markets. In October 2012, the Group announced a design win with Leica Camera AG. The Leica camera product is a high end device which is not expected to produce significant revenues, but does demonstrate the market interest in Sarantel's products and its ability to secure business in this important space.

 

The Group has continued to invest sales resources into the Japanese camera market. Although this is a very exciting and potentially very high growth market it has become clear that additional sales resources and a strong balance sheet will be needed to gain traction.

 

Research and Development

 

Sarantel continued to develop its antenna technology by investing in research and development. During the year, spending increased by 3% and a number of new patents were filed. The Group's decision to maintain its core manufacturing process development team after outsourcing its assembly process has enabled it to develop its new, low cost assembly process whilst also improving its internal manufacturing process. This has helped to address a number of historical shortcomings including cost, ease of integration and mechanical robustness. This new assembly process promises to transform Sarantel's product portfolio and open new markets in the future because it is much more efficient and the end product is easier for Sarantel's customers to use.

 

Summary and Outlook

 

Sarantel's momentum in the military market remains encouraging.  Sales of military products have increased and momentum is building momentum with new customers. 

 

However, the Group's lack of direct sales resource limits its ability to convert sales leads into revenue. The Group's weak balance sheet and limited financial resources are not only preventing the Group from exploiting new opportunities but is also becoming a concern for its major customers.

 

Therefore Sarantel continues its exclusive discussions with a third party for the sale of its operating subsidiary. 

 

Any sale would be conditional, inter alia, on shareholder approval. If a sale does proceed, the sale proceeds, after repayment of the Group's liabilities, including the outstanding HSBC loan facility in full, would be broadly in line with the current market value of the Group. While the Directors are confident that the sale will proceed and there is a reasonable likelihood that the sale will be completed, there can be no certainty at this time.

 

In the event that the sale does not proceed as expected, then the Group would have to raise additional funds from third parties before the end of March 2013. In the event that it were unable to do so, Sarantel would not have sufficient working capital to continue trading after that time.

 

 

Independent auditor's report to the members of Sarantel Group PLC

 

We have audited the financial statements of Sarantel Group PLC for the year ended 30 September 2012 which comprise the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement, the notes to the consolidated financial statements, the company balance sheet and the notes to the company financial statements. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

 

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

 

Respective responsibilities of directors and auditors

As explained more fully in the Directors' Responsibilities Statement set out in the Annual Report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

 

 

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm

 

 

Opinion on financial statements

In our opinion:

§  the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 30 September 2012 and of the group's loss for the year  then ended;

§  the group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union;

§  the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

§  the financial statements have been prepared in accordance with the requirements of the Companies Act 2006

 

Emphasis of matter - going concern

In forming our opinion, which is not qualified in this respect, we have considered the adequacy of the disclosures made in note 3 to the financial statements concerning the group's ability to continue as a going concern.

As explained in note 3, the directors need to raise additional finance for the group to remain a going concern and they are in advanced negotiations to sell the group's trading subsidiary to achieve this. At the time of signing these financial statements no final agreement has been reached and it would then be subject to shareholder approval. These factors indicate a material uncertainty which may cast significant doubt on the ability of the group to remain a going concern. The financial statements do not include the adjustments that would result if the group was unable to continue as a going concern.

 

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

 

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

§  adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

§  the parent company financial statements are not in agreement with the accounting records and returns; or

§  certain disclosures of directors' remuneration specified by law are not made; or

§  we have not received all the information and explanations we require for our audit.

 

                       

Jeremy Read

Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP

Statutory Auditor, Chartered Accountants

Central Milton Keynes

 

 

The accompanying accounting policies and notes form an integral part of these financial statements.

 

Consolidated Statement of Comprehensive Income
for the year ended 30 September 2012

 


Note

2012


2011



£'000


£'000






Revenue

7

2,967


2,195






Cost of sales


1,649


1,704






Gross profit


1,318


491






Research and development costs


1,300


1,268






Selling and distribution costs


564


625






Administration costs


1,906


1,592






Total operating costs


3,770


3,485






Operating loss

5

(2,452)


(2,994)






Operating loss before depreciation and amortisation


(2,032)


(2,273)

Depreciation and amortisation

13,14

(420)


(721)






Finance and other income

8

5


5

Finance and other costs

9

(38)


(24)






Loss before tax


(2,485)


(3,013)






Tax

10

199


160






Loss for the year


(2,286)


(2,853)






Other comprehensive income


-


-






Total comprehensive loss for the period


(2,286)


(2,853)






Basic and diluted loss per share

12

(0.3)p


(0.6)p

 

 

All the activities of the Group are classed as continuing.

 

 

Consolidated Balance Sheet

as at 30 September 2012

 


Note

2012


2011



£'000


£'000

Assets





Non-current





Intangible assets

13

1,730


1,623

Property, plant and equipment

14

168


288

Total non-current assets


1,898


1,911






Current





Inventories

16

602


346

Trade and other receivables

17

767


684

Current tax

18

188


154

Cash and cash equivalents

19

111


1,197

Total current assets


1,668


2,381






Total assets


3,566


4,292






Current liabilities





Trade and other payables

20

1,004


832

Amounts due under finance leases and HP agreements

21

-


13

Amounts due under invoice financing facility

22

336


253

Total current liabilities


1,340


1,098






Non-current liabilities





Amounts due under loan agreements

23

1,200


-

Other payables

20

1


3






Total liabilities


2,541


1,101






Equity





Share capital

27

11,318


11,318

Share premium

28

18,969


18,969

Share scheme reserve

28

848


728

Warrant reserve

28

76


76

Merger reserve

28

13,390


13,390

Retained loss

28

(43,576)


(41,290)

Total equity


1,025


3,191






Total liabilities and equity


3,566


4,292

 

 

Consolidated Statement of Changes in Equity

for the year ended 30 September 2012

 


Share capital

Share premium

Warrant reserve

Merger reserve

Retained loss

Total

 equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 October 2010

9,789

17,234

669

76

13,390

(38,437)

2,721

Loss after tax

-

-

-

-

-

(2,853)

(2,853)

Total comprehensive income for year

 

 

-

-

-

-

-

(2,853)

(2,853)









Share based payments

 

-

-

59

-

-

-

59

Shares issued

1,529

1,993

-

-

-

-

3,522

Cost of share issue

-

(258)

-

-

-

-

(258)

Transactions with owners

 

1,529

1,735

59

-

-

-

3,323









At 30 September 2011

11,318

18,969

728

76

13,390

(41,290)

3,191

 

At 1 October 2011

11,318

18,969

728

76

13,390

(41,290)

3,191

Loss after tax

-

-

-

-

-

(2,286)

(2,286)

Total comprehensive income for year

 

 

-

-

-

-

-

(2,286)

(2,286)









Share based payments

 

-

-

120

-

-

-

120

Transactions with owners

 

-

-

120

-

-

-

120









At 30 September 2012

11,318

18,969

848

76

13,390

(43,576)

1,025

 

 

Consolidated Cash Flow Statement

for the year ended 30 September 2012

 


Note

2012


2011



£'000


£'000

Operating activities





Loss before tax


(2,485)


(3,013)

Adjustments for non-cash items:





Depreciation and amortisation


390


644

Depreciation absorbed to cost of sales


30


77

Investment revenue


(5)


(5)

Finance costs


30


32

Share based payment


120


59

Increase in inventories


(256)


(39)

(Increase)/decrease in trade and other receivables


(83)


138

Increase/(decrease) in trade and other payables


172


(2)

Taxation received


165


166






Net cash outflow from operating activities


(1,922)


(1,943)






Investing activities





Interest received and similar income


5


5

Payments to acquire intangible assets


(362)


(253)

Payments to acquire property, plant and equipment


(45)


(101)






Net cash used in investing activities


(402)


(349)






Cash outflow before financing


(2,324)


(2,292)






Financing activities





Interest paid and similar expense


(29)


-

Finance lease interest paid


(1)


(32)

Loans received


1,200


7

Issue of shares


-


3,522

Expenses paid in connection with issue of shares


-


(258)

Capital element of finance lease rentals


(15)


(333)

Net cash inflow from financing activities


1,155


2,906






Net (decrease)/ increase in cash and cash equivalents


(1,169)


614






Cash and cash equivalents at start of period


944


330

 

 





Cash and cash equivalents at end of period

19

(225)


944

 

 

Notes to the Consolidated Financial Statements

AS AT 30 SEPTEMBER 2012

 

1.     General information

Sarantel Group PLC ("the Company") is a public limited company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is Unit 2, Wendel Point, Park Farm South, Wellingborough, Northamptonshire, NN8 6BA, England. The Company's shares are listed on AIM, a market operated by the London Stock Exchange.

Sarantel Group PLC and its subsidiaries (together "the Group") design and manufacture high-performance miniature antennas for portable wireless applications including hand-held navigation, GPS tracking, satellite radio, satellite phones and laptop computers.

2.     International Financial Reporting Standards

The Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning 1 October 2011.

 

New standards and interpretations currently in issue but not effective for accounting periods commencing on 1 October 2011 are:

 

·      IFRS 9 Financial Instruments (effective 1 January 2015) *

·      IFRS 10 Consolidated Financial Statements (effective 1 January 2013) *

·      IFRS 11 Joint Arrangements (effective 1 January 2013) *

·      IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2013) *

·      IFRS 13 Fair Value Measurement (effective 1 January 2013)*

·      IAS 19 Employee Benefits (Revised June 2011) (effective 1 January 2013)

·      IAS 27 (Revised), Separate Financial Statements (effective 1 January 2013) *

·      IAS 28 (Revised), Investments in Associates and Joint Ventures (effective 1 January 2013) *

·      Improvements to IFRSs - 2009-2011 (effective 1 January 2013)*

·      Deferred Tax: Recovery of Underlying Assets - Amendments to IAS 12 Income Taxes (effective 1 January 2012) *

·      Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 (effective 1 July 2012)

·     Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7 (effective 1 January 2013)*

·     Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 (effective 1 January 2014)*

·     Government Loans - Amendments to IFRS 1 (effective 1 January 2013)*

·     Transition Guidance - Amendments to IFRS 10, IFRS 11, and IFRS 12 (effective 1 January 2013)*

·     Investment Entities - Amendments to IFRS 10, IFRS 12, and IAS 27 (effective 1 January 2014)*

·     Mandatory Effective Date and Transition Disclosures - Amendments to IFRS 9 and IFRS 7 (effective 1 January 2015)*

 

*As of 30 September 2012, these standards and interpretations are in issue but not yet adopted by the EU.

 

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.

3.     Summary of significant accounting policies

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU. The financial statements are prepared on the historical cost basis except that derivatives are stated at fair value in accordance with IAS 39.

 

 

Going concern

 

While Sarantel has increased sales of military products, the Board believes that it will take a number of years before the Group is able to generate sufficient revenues to reach cash break-even from this market alone. Although the Board believes that there are attractive prospects in the consumer market for Sarantel's technology, the Group's weak balance sheet and limited financial resources are such that the Group does not have sufficient working capital to exploit this opportunity.

 

The Directors have considered the options for raising additional funding for the Group and have concluded that given the challenging stock-market conditions for smaller companies such as Sarantel, that shareholder value would be best preserved by a disposal of the operating business to a third party that has the scale and funds to invest in developing the market opportunities. Accordingly, Sarantel has had a number of discussions with third parties who have expressed an interest in acquiring the Group's operating subsidiary and Sarantel has now entered into exclusive discussions with a potential purchaser of the operating subsidiary.

 

Any disposal would be conditional, inter alia, on shareholder approval. If the disposal were to proceed, the disposal proceeds, net of repayment of the Group's liabilities including the outstanding HSBC loan facility in full, would be broadly in line with the current market value of the Group. While the Directors are confident that the disposal will proceed and there is a reasonable likelihood that the disposal will be completed, there can be no certainty at this time.

 

In the event that the disposal does not proceed as expected, then the Group would have to raise additional funds from third parties before the end of March 2013 and in the event that it were unable to do so, would  not have sufficient working capital to continue trading after that time.

 

The above factors represent a material uncertainty which casts significant doubt as to the ability of the Group to continue as a going concern. However, after considering the uncertainties described above, the directors have a reasonable expectation that the Group has adequate resources to continue for the foreseeable future and so they continue to adopt the going concern basis in preparing these financial statements. These financial statements therefore do not include any adjustments that would result if the going concern basis of preparation was not appropriate.

 

Segmental reporting

 

The Group's activities are neither organised to report separate businesses nor geographical segments. Management of the business is performed by considering the financial and operational performance of the group as a whole.

The Group derives revenues from both the sale of antennas and the sale of services ahead of sale of antennas, such as feasibility studies and prototyping. These services are commonly referred to as Non-Recurring Engineering ("NRE"). An analysis of the revenues between sale of antennas and NRE is shown in Note 7. The costs associated with NRE revenues are included in Research and Development costs and are not analysed separately.

 

Basis of consolidation

 

The consolidated financial statements incorporate the financial statements of the Company and all Group subsidiary undertakings made up to 30 September 2012. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

 

Revenue

 

Revenue is measured by reference to the fair value of consideration received by the Group for goods supplied and services provided, excluding VAT and trade discounts.  Revenue is recognised upon performance of services or transfer of risks to the customer and where the costs incurred or to be incurred for the transaction can be measured reliably.

 

Revenue from the sale of antennas is recognised when the Group has transferred to the buyer the significant risks and rewards of ownership of the goods, which is generally when the goods have been despatched and the collectability of the related receivables is reasonably assured.

 

NRE revenue, comprising customer funded product developments and application engineering services, is recognised on acceptance by the customer and the amount of revenue and associated costs can be reliably measured.

 

Revenue from the sale of consumables, which included the component parts required to assemble the antennas, is recognised when the Group has transferred to the buyer the significant risks and rewards of ownership of the goods, which is generally when the goods have been despatched and the collectability of the related receivables is reasonably assured.

 

 

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the asset's net carrying amount.

 

Intangible assets

 

Expenditure on research is recognised as an expense in the period in which it is incurred.

 

Development costs incurred on specific projects are capitalised when all the following conditions are satisfied:

·      Completion of the intangible asset is technically feasible so that it will be available for use or sale,

·      The Group intends to complete the intangible asset and use or sell it,

·      The Group has the ability to use or sell the intangible asset,

·      The intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the product from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits,

·      There are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and

·      The expenditure attributable to the intangible asset during its development can be measured reliably.

 

Development costs not meeting the criteria for capitalisation are expensed as incurred.

 

The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management.

 

Patents are included at cost, representing third party costs of registering, net of amortisation.

 

Amortisation

 

Amortisation is calculated on a straight line basis so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:

 

Patents

ten years from year following acquisition.

Development costs

Product - two years from the date the product starts shipping to customers

Plant and equipment - in line with the asset of that class from the date the asset is available for use 

 

Property, plant and equipment

 

Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment.

 

Depreciation

 

Depreciation is calculated on a straight line basis so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:

 

Leasehold improvements

10 per cent.

Plant and equipment

20 per cent. - 33 per cent. from date asset is put into use

 

Material residual value estimates are reviewed annually.

 

Impairment testing of intangible assets and property, plant and equipment

 

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

 

Inventories

 

Inventories 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 includes material, direct labour and an appropriate proportion of manufacturing overheads based on normal levels of activity. Net realisable value represents the estimated selling price less all estimated costs of completion, marketing, selling and distribution.

 

Leased assets

 

Property, plant and equipment assets which are the subject of finance leases are dealt with in the financial statements as property, plant and equipment and equivalent liabilities at what would otherwise have been the cost of outright purchase.

Rentals are apportioned between reductions of the respective liabilities and finance charges calculated by reference to the rates of interest implicit in the leases. The finance charges are dealt with under interest payable in the Statement of Comprehensive Income.

Leased assets are depreciated in accordance with the depreciation accounting policy applying to that category of asset.

Rentals payable under operating leases are charged in the profit and loss account on a straight line basis over the lease term.

The cost of operating leases in respect of land and buildings and other assets is expensed on a straight line basis.

 

Taxation

 

Current tax is the tax currently recoverable based on taxable loss for the year.

 

Deferred income taxes are calculated using the liability method on temporary differences.  Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.  Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the group and it is probable that reversal will not occur in the foreseeable future.  In addition, tax losses available to be carried forward as well as other income tax credits to the group are assessed for recognition as deferred tax assets.

 

Deferred tax liabilities are provided in full, with no discounting.  Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income.  Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

 

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Statement of Comprehensive Income, except where they relate to items that are charged or credited directly to other comprehensive income or equity in which case the related deferred tax is also charged or credited directly to other comprehensive income or equity.

 

Foreign currencies

 

Monetary assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences arising on the settlement of transactions or retranslation at the balance sheet date are recognised in the statement of comprehensive income.

 

Employee benefits

 

Defined contribution pension scheme

The Group operates a Group personal pension plan (a money purchase arrangement) for the benefit of certain Directors and employees. Pension costs are charged to the statement of comprehensive income in the period to which they relate.

 

Share-based payments

 

The Group operates a Group share option scheme and a Long Term Incentive Plan under which certain employees and Directors of the Company and its subsidiaries have been granted options to subscribe for shares in Sarantel Group PLC.

 

The Company has also issued warrants to subscribe for A Ordinary Shares in Sarantel Group PLC which are valid for an agreed term.

 

In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 October 2006.

 

Where employees are rewarded using share based payments, the fair value of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant.  The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. This policy also applies to warrants that give the right to subscribe for shares at an agreed price, which have been granted in return for services rendered or to be rendered by third parties.

 

Fair value is measured by use of the Black Scholes model.  The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

 

All equity share based payments are ultimately recognised as an expense in the statement of comprehensive income with a corresponding credit to "share scheme reserve" or "warrant reserve".

 

Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital and, where appropriate, share premium.

 

Where modifications to the terms and conditions on which equity instruments were granted lead to an increase in the fair value of the unvested share-based payment arrangement, the difference in the fair value immediately before the modification and immediately after the modification are charged to the statement of comprehensive income over the remaining vesting period.

 

Financial liabilities and equity instruments

 

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

 

Financial assets

 

Management have determined that the only financial assets held by the Group are loans and receivables.

 

Financial assets are recognised when the Group becomes a part to the contractual provisions of the instrument. A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for de-recognition.

 

A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for de-recognition if the Group transfers substantially all the risks and rewards of ownership of the asset, or if the Group neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.

 

The Group's loans and receivables are as follows:

 

Trade receivables

 

Trade receivables are initially recognised at fair value, and subsequently at amortised cost.

Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows. An assessment for impairment is undertaken at least at each balance sheet date.

 

Cash and cash equivalents

 

Cash and cash equivalents comprise cash on hand, demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value.

 

Financial liabilities

 

Financial liabilities are obligations to pay cash or other financial assets. All financial liabilities are recorded initially at fair value, net of direct issue costs.

 

Financial liabilities are divided into the following categories: borrowings and other payables at amortised cost and liabilities held at fair value through the statement of comprehensive income.

 

The group's financial liabilities include trade payables, a bank loan, invoice financing facility and other creditors. These are classified as financial liabilities measured at amortised cost.

 

Financial liabilities measured at amortised cost are recognised initially at fair values net of direct issue costs. Finance charges are charged to the statement of comprehensive income, where applicable, on an accruals basis using the effective method and are added to the carrying amount of the instrument to the extent they are not settled in the period in which they arose.

 

A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

 

Equity instruments

 

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. The costs of raising equity are written off against the share premium account where permitted by Companies Legislation.

 

Equity

 

Equity comprises the following:

"Share capital" represents the nominal value of equity shares;

"Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue;

"Share scheme reserve" represents the fair value of the employee equity settled share option scheme as accrued at balance sheet date;

"Merger reserve" results from the application of merger accounting on the acquisition of Sarantel Limited on 23 February 2005;

"Warrant reserve" represents the fair value of equity settled warrants as accrued at the balance sheet date.

 

4.   Critical accounting estimates and judgements

 

Critical judgements in applying the group's accounting policies

 

There were no critical judgments required apart from those involving estimations (which are dealt with separately below), that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in these financial statements.

 

Key sources of estimation uncertainty

 

·      Impairment of patents, property, plant and equipment

In the review of impairment of patents, property, plant and equipment, the Directors made estimates of future demand for the Company's products in order to assess the recoverability of the investment in production capacity and in patents.  The Directors believe these estimates to be reasonable but there is the risk that future demand may be lower than estimated, giving rise to further impairment to the carrying value of the patents, property, plant and equipment. A reduction in the future demand for 2013 by 10% would result in no impairment in the patents, property, plant and equipment.

 

·      Going concern

These financial statements have been prepared under the going concern basis. Note 3 to these financial statements contains an explanation of why the directors consider it appropriate to adopt this basis.

 

5.   Operating loss

Operating loss is stated after charging:


2012


2011


£'000


£'000

Amortisation of intangible assets

255


231

Depreciation of property, plant and equipment

165


490

of which, depreciation included in cost of sales

30


77





Auditors' remuneration




Fees payable to the Company's auditor for the audit of these financial statements

14


21





Fees payable to the Company's auditor and its associates for other services




Audit of the financial statements of subsidiaries pursuant to legislation

15


15

Taxation compliance services

7


5

All other assurance services

7


7


43


48





Operating lease rentals - land and buildings

105


105

 

6.   Directors and employees

Average number of persons employed (including Directors):




Group






2012


2011

Average no of people employed:





No.


No.

Non-executive directors





2


2

Management





1


1

Technical





10


9

Finance and administration





4


4

Sales and marketing





4


3

Operations





22


23

Total





43


42

 

Staff costs (including Directors):




Group






2012


2011

Staff costs (including directors)





£'000


£'000

Wages and salaries





1,725


1,701

Social security costs





160


154

Pension costs





42


38

Share based payments





120


59






2,047


1,952

 

Remuneration in respect of Directors, who are the key management personnel, was as follows:

 




Group






2012


2011






£'000


£'000

Short-term employee benefits





439


390

Other long-term benefits





28


22

Share based payments





93


40

Payment to third parties for directors' services


30


31






590


483

 

The amounts set out above include remuneration in respect of the highest paid Director as follows:

 


2012


2011


£'000


£'000

Emoluments

177


181

Pension contributions to money purchase pension scheme

17


17

Share based payments

51


25


245


223

 

During the year no Director (2011: nil) exercised any share options and 4 Directors (2011: 4) were entitled to receive share options.

 

During the year 3 Directors (2011: 2) participated in money purchase pension schemes.

 

Details of individual director's remuneration are given in the Report of the Remuneration and Nominations Committee.

 

The Group makes payments into a Group personal pension scheme for certain Directors and employees. The assets of the scheme are administered by trustees in a fund independent from those of the Group.

 

7.     Revenue

 


2012


2011


£'000


£'000

Sales of antennas

2,814


1,702

Sales of consumables

124


107

Sale of Non-Recurring Engineering services (NRE)

29


386

Total revenue

2,967


2,195

 

All revenue originates from the UK.

 

The Group had 3 customers during the year (2011: 1) with sales of more than 10% of revenues. Revenue for those 3 customers, by type, is as follows:

 


2012


2011


£'000


£'000

Sales of antennas

1,502


-

Sales of antennas

346


430

Sales of antennas

338


-

 

8.   Finance and other income

 


2012


2011


£'000


£'000

Investment Revenue




     Interest receivable

5


5

Total finance and other income

5


5

 

9.   Finance and other costs

 


2012


2011


£'000


£'000

Finance costs




Interest paid and similar expense

29


-

Finance lease and hire purchase interest

1


32

Foreign exchange losses/(gain)

8


(8)

Total finance costs

38


24

 

10. Tax

 


2012


2011


£'000


£'000

UK corporation tax based on the results for the year at 20% (2011: 20%)

188


154

Adjustment in respect of prior year

11


6

Total tax credit

199


160

 

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

 

The standard rate of tax for the year based on the UK standard rate of corporation tax is 20% (2011: 20%). The actual tax credit for the year differs from the standard rate for the reasons set out in the following reconciliation:

 


2012


2011


£'000


£'000

Loss before tax

(2,485)


(3,013)

Rate of tax

20%


20%

Loss multiplied by rate of tax

(497)


(603)





           




Expenses not deductible for tax

179


152

Depreciation in excess of capital allowances

31


96

Other temporary differences

2


(15)

Tax losses carried forward

285


370

R&D tax credit

(188)


(154)

Adjustment in respect of prior year

(11)


(6)





Total tax

(199)


(160)

 

Tax losses available, subject to agreement with HM Revenue and Customs, to offset future taxable trading income amount to approximately £25.5m (2011: £24.1m).

 

A deferred tax asset, calculated using a tax rate of 24% (2011: 26%), amounting to approximately £8.1m (2011: £8.3m) arising from taxable trading losses has not been recognised on the grounds that at the current time there is insufficient evidence that the asset will be recoverable in the foreseeable future.

 

11. Loss of parent company

The Parent Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its own profit and loss account in these financial statements. The Parent Company's loss for the year was £16,070k (2011 loss: £3,013k).

 

12. Loss per share

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

 


2012


2011


£'000


£'000

Loss for the financial year

(2,286)


(2,853)





Weighted average number of shares

830,476,331


483,558,852





Basic and diluted loss per share*

(0.3)p


(0.6)p





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

13. Intangible assets

 

The Group

 

Patents


Development costs


Total


£'000


£'000


£'000

Cost






At 1 October 2010

2,505


21


2,526

Additions

253


-


253

At 1 October 2011

2,758


21


2,779

Additions

362


-


362

At 30 September 2012

3,120


21


3,141







Amortisation






At 1 October 2010

904


21


925

Charge for the year

231


-


231

At 1 October 2011

1,135


21


1,156

Charge for the year

255


-


255

At 30 September 2012

1,390


21


1,411







Carrying amount






At 30 September 2012

1,730


-


1,730







At 30 September 2011

1,623


-


1,623

 

The amortisation charge for both Patents and Development costs for the year has been included in Research and development costs in the statement of comprehensive income.

 

The Group carried out an impairment review of intangible assets in conjunction with that of property, plant and equipment as described in Note 14.  It was determined that no impairment of intangible assets was required.

 

 

14. Property, plant and equipment

The Group


Leasehold improvements

£'000


Plant and equipment

£'000


Total

£'000

Cost






At 1 October 2010

197


9,762


9,959

Additions

-


101


101

Disposals

-


(6)


(6)

At 1 October 2011

197


9,857


10,054

Additions

-


45


45

Disposals

-


(6)


(6)

At 30 September 2012

197


9,896


10,093







Depreciation






At 1 October 2010

165


9,117


9,282

Charge for the year

20


470


490

Disposals

-


(6)


(6)

At 1 October 2011

185


9,581


9,766

Charge for the year

12


153


165

Disposals

-


(6)


(6)

At 30 September 2012

197


9,728


9,925







Carrying amount






At 30 September 2012

-


168


168







At 30 September 2011

12


276


288

 

The Group carried out an impairment review of property, plant and equipment as at the end of the year, as part of the annual review cycle and in view of the deteriorating economic conditions, it was determined that no impairment of property, plant and equipment was required (2011: Nil).

 

Plant and equipment with a net book value of £nil (2011: £94k) are held under finance leases and hire purchase agreements.

 

 Capital commitments


2012


2011


£'000


£'000

Amounts contracted for but not provided in the financial statements

4


43

 

15. Investments

 

At 30 September 2012, the Company held more than 20% of a class of the allotted share capital of the following:

 


Country of incorporation

Class of share held

Proportion held

 

Nature of business

Sarantel Limited

England and Wales

Ordinary shares

100%

Design and manufacture of antennas

Sarantel USA Inc*

USA

Ordinary shares

100%

Marketing support services

Sarantel Asia Pacific Pte. Ltd*

Singapore

Ordinary shares

100%

Marketing support services

* Owned by Sarantel Limited

 

16. Inventories

 


2012


2011


£'000


£'000

Raw materials

315


205

Work in progress

13


23

Finished goods

274


118


602


346

 

The cost of inventories recognised as an expense and included in 'cost of sales' amounted to £1,289k (2011: £850k). The write-down of inventories recognised as an expense during the year amounted to £26k (2011: £11k). There was no reversal of any write-down recognised as a reduction in the amount of inventories recognised as an expense.

 

17. Trade and other receivables

 


2012


2011


£'000


£'000

Trade receivables

488


442

Other receivables

151


114

Prepayments and accrued income

128


128


767


684

 

The Directors consider that the carrying value of trade and other receivables approximates to their fair values. There remains for the year a provision of £10k for impairment of receivables (2011: £41k). The maximum credit exposure at the balance sheet date equates to the carrying value of trade receivables.

 

 

Reconciliation of bad debt provision

2012


2011


£'000


£'000

Opening provision

41


90

Provision made in year

-


29

Release of provision

(31)


(78)

Closing provision

10


41

 

Trade receivables that are less than three months old are not considered impaired. As at 30 September 2012, trade receivables of £nil were past due but not considered impaired (2011: £29k). The ageing of these past due but not impaired receivables was more than 3 months but less than 6 months.

 

The average credit period during the year was 48 days (2011: 59 days). The Group does not hold any collateral over these balances.

 

18.   Current tax


2012


2011


£'000


£'000

Corporation tax recoverable

188


154

 

19.   Cash and cash equivalents




Group






2012


2011






£'000


£'000

Cash and cash equivalents





111


1,197

 

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

 

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

 




Group






2012


2011






£'000


£'000

Cash and cash equivalents





111


1,197

Amounts due under invoice financing facility (see Note 22)





(336)


(253)






(225)


944

 

20.   Trade and other payables




Group






2012


2011

Current liabilities





£'000


£'000

Trade payables





670


406

Other payables





10


15

Other taxation and social security





55


46

Accruals and deferred income





269


365






1,004


832

 

The average creditors period during the year was 61 days (2011: 61 days). Current liabilities fall due within one year. The Directors consider that the carrying amount of trade payables approximates to their fair value.

 

At the balance sheet date, the Group has at its disposal £64k (2011: £147k) of an undrawn invoice financing facility.  The Group's assets are pledged as security for this facility.

 




Group






2012


2011

Non-current liabilities





£'000


£'000

Other payables





1


3

 

Included within other payables is an interest free loan from the Carbon Trust of £3k (2011: £5k).  This is divided £2k due within one year and £1k due in more than one year.

 

21.   Amounts due under finance leases and hire purchase agreements

 

Amounts are repayable as follows:

 


2012


2011


£'000


£'000

Within one year:

-


13

After one year and within two years:

-


-

After two years and within five years:

-


-


-


13

 

Finance lease liabilities:

 

Finance lease liabilities

Minimum lease payments


Present value of minimum lease payments


2012

2011


2012


2011


£'000


£'000


£'000


£'000

Within one year:

-

14


-


13

After one year and within two years:

-

-


-


-

After two years and within five years::

-


-


-


-


-


14


-


13




















2012


2011

Reconciliation





£'000


£'000

Total Minimum lease payments





-


14

Less: future finance charges





-


(1)

Present Value of minimum lease payments




-


13

 

 

22.   Amounts due under invoice financing facility

 


Group


Company


2012


2011


2012


2011


£'000


£'000


£'000


£'000

Total

336


253


-


-

 

The Group has in place a revolving invoice financing facility of up to £400k. Amounts outstanding under this facility are secured by a fixed and floating charge over the book debts of the Group.

 

 

 23.  Amounts due under loan agreement

 


Group


Company


2012


2011


2012


2011


£'000


£'000


£'000


£'000

Total

1,200


-


-


-

 

A £2m secured loan facility, over a 2 year term, with HSBC Bank plc to provide additional working capital was approved by the board on 29 February 2012.  As at 30 September 2012, £1.2m had been drawn down under this facility.

 

Interest is payable quarterly at a rate of 3% per annum over the Bank's Sterling Base Rate.

 

As a result of this loan facility, a new registered charge has been made over the tangible and intangible assets of Sarantel Ltd by a major customer, who are acting as guarantors for the loan facility.

24.   Operating lease commitments

 

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

 

Land and buildings

2012


2011


£'000


£'000

Within one year

105


105

After one year and within five years

158


263


263


368

 

The operating lease commitments relate to rents payable under a rent agreement for the office and factory premises in Wellingborough. The term of the lease is 15 years commencing March 2000 and the agreement contains a break clause at year 10, which was not exercised.  A final rent review on an Open Market Rent basis was undertaken in 2010 with no adjustment made.

 

25.   Financial instruments

 

Categories of financial instruments:

 

2012


2011


£'000


£'000

Financial assets




Loans and receivables:




Trade and other receivables

555


507

Cash and cash equivalents

111


1,197


666


1,704

 


2012


2011


£'000


£'000

Financial liabilities




Borrowings and other financial liabilities at amortised cost:



Trade and other payables

685


423

Accruals

269


365

Amounts due under loan agreements

1,200


-

Amounts due under invoice financing facility

336


253


2,490


1,041

 

The non financial assets and non financial liabilities are not within the scope of IAS 39.

 

Capital risk management

 

The Group manages its cash and cash equivalents to ensure that entities in the Group will be able to continue as a going concern as it pursues its business objectives. Where possible, given its size and financial strength, the Group seeks to add debt instruments to augment its financial resources and balance its debt/equity ratio.

 

Externally imposed capital requirement

 

The Group is not exposed to externally imposed capital requirements.

 

 

Financial risk management

 

The Group's finance function provides services to the business, monitors and manages the financial risks relating to the operations of the Group. These risks include market risk (including currency risk), credit risk, and liquidity risk and are reported on a regular basis to the Group's board.

 

Currency risk

 

The Group's activities expose it primarily to the financial risks of changes in the US dollar exchange rate as the majority of sales are denominated in that currency, whilst the majority of costs are denominated in its functional currency, the UK sterling.

 

It is estimated that a general increase of ten percentage points in the value of US dollars against other currencies would have improved the Group's loss before tax by approximately £300k for year ended 30 September 2012 (2011: £400k).

 

A summary of foreign currency financial assets at the year end with a sensitivity analysis showing the effect of a 10% change in rate with UK sterling is shown below. There were no material financial liabilities denominated in foreign currency at the end of the year (2011: nil).

 

 

 

2012


2011


£'000


£'000

Trade receivables and cash and cash equivalents denominated in US Dollars

850


656

Sensitivity analysis: +10% improvement in US$ exchange rate

94


73

Sensitivity analysis: -10% deterioration in US$ exchange rate

(77)


(60)

 

Credit risk

The Group's exposure to credit risk is limited to the carrying value of financial asset at the balance sheet date, summarised as follows:


2012


2011


£'000


£'000

Trade receivables (net of provisions)

488


442

Cash and cash equivalents

111


1,197

 

The credit risk associated with the cash is limited as the counterparties have high credit ratings assigned by international credit-rating agencies. The principal credit risk arises therefore from trade receivables.

The Group manages the credit risk associated with trade receivables by ensuring that limits on credit accounts are set based on payment history and credit references where possible.

The maturity of overdue debts is set out in Note 17.

 

Liquidity risk

Responsibility for liquidity risk management rests with the Board of Directors, which regularly monitors the Group's short, medium and long-term funding and liquidity management requirements. The Group seeks to ensure financial liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group has access to a £2m secured loan facility together with a £0.4m invoice financing facility to provide short term flexibility.

The Group's financial liabilities consist of trade and other payables and finance lease liabilities as shown in the balance sheet. Except for the Group's finance lease liabilities, which are disclosed in Note 21 all the trade and other payables do not attract interest and all amounts are due within 3 months.

 

Going concern

The liquidity risk relating to going concern is explained in more detail in Note 3.

 

Fair value of financial instruments

Carrying amounts of financial instruments are a reasonable approximation of the fair values of those instruments.

 

26.   Related party transactions

The Chairman, Geoff Shingles, invoices his fees through Geoff Shingles Partnership ("GSP"). From 8 May 2007, GSP agreed to reduce their fee until such time as the company is trading satisfactorily. During the year, the total amount payable to GSP was £30k (2011: £30k) and the amount outstanding at 30 September 2012 was £9k (2011: £6k).

 

27.   Share capital

Allotted, called-up and fully paid:

 


2012


2011


Number


£'000


Number


£'000

A ordinary shares of £0.001 each

829,439,991


829


829,439,991


829

B ordinary shares of £0.001 each

1,036,340


1


1,036,340


1

Deferred shares of £0.001 each

10,487,624,769


10,488


10,487,624,769


10,488


11,318,101,100


11,318


11,318,101,100


11,318

 

The Company has two classes of ordinary shares and one class of deferred shares, none of which carry any right to fixed income. There are no restrictions on distribution of dividends or repayment of capital on the ordinary shares.

 

The A ordinary shares and B ordinary shares rank pari passu in all respects except that the holders of B ordinary shares are only entitled to receive 10 clear days notice from the directors requiring payment of any moneys unpaid on their shares, whereas the holder of A ordinary shares are entitled to 14 clear days' notice. On the first transfer, assignment or other disposal, a B ordinary share is automatically re-designated and becomes an A ordinary share and ranks pari passu in all respects with the existing A ordinary shares in the share capital of the company.

Deferred shares

The deferred shares have:

 

·       No voting rights

·       No entitlement to attend general meetings of the Company

·       Not been admitted to AIM or any other market

·       Only a priority right to participate in any return of capital to the extent of £1 in aggregate over the class

·       Only a priority to participate in any dividend or other distribution to the extent of £1 in aggregate over the class

Warrants

On 14 June 2011,  warrants to subscribe for 5,000,000 A Ordinary Shares were granted to Darwin Strategic Ltd in consideration of an Equity Financing facility.  These warrants are exercisable at a subscription price of 1 pence at any time up to three years from date of grant.

 

On 28 April 2008, warrants to subscribe for 1,776,029 A Ordinary Shares were granted to John East and Partners as part payment for services rendered. These warrants are exercisable at a subscription price of 3 pence at any time up to five years from the date of grant.

 

Equity-settled share option scheme

The Company operates the following option schemes for all employees of the Group:

 

Share option scheme:

 

Options are exercisable at a price at least equal to the average quoted market price of the Company's shares on the date of grant.  The vesting conditions of these grants are 3 years service.  Options are forfeited if the employee leaves the Group before the options vest.

 

Long-Term Incentive Plan:

 

Options are exercisable at a price equal to the par value of the shares. The vesting conditions of these grants are 3 years service and options are forfeited if the employee leaves the Group before the options vest.

 

Exercise of options

 

There were no share options exercised during the year (2011: nil).

 

Share options

 

Details of the share options outstanding during the year are as follows:

 



2012


2011



No of share options

Weighted average exercise price (p)


No of share options

Weighted average exercise price (p)

Number of share options at beginning of year


85,715,130

0.8


36,650,744

2.2

Options granted during the year


-

-


73,420,084

0.7

Options lapsed and surrendered


(2,745,085)

1.0


(24,355,698)

2.6

Balance at end of the year


82,970,045

0.6


85,715,130

0.8

 

The weighted average fair value per option for options granted during the year was nil pence (2011: 0.006p).

 

The options outstanding at 30 September 2012 had a weighted average remaining contractual life of 8.1       years (2011: 9.2 years).

 

The number of fully vested, exercisable options at 30 September 2012 was nil (2011: nil), with a weighted average exercise price of nil pence each (2011: nil pence).

 

Share options at 30 September 2012 are exercisable as follows:

Date of grant


No of share options

Exercise

price (p)


Last date for exercise

11/12/2008


4,950,000

1.00


10/12/2018

08/12/2009


5,295,851

1.00


07/12/2019

29/03/2011


11,625,968

1.10


29/03/2021

29/03/2011


4,000,000

1.00


29/03/2021

06/07/2011


53,948,226

0.55


06/07/2021

25/08/2011


3,150,000

0.53


25/08/2021



82,970,045




 

Details of the share options granted to the Directors are shown in the report of the Remuneration Committee.

 

Expected volatility was determined by calculating the historical volatility of the Group's share price since floatation against the historical volatility of the AIM - Technology Index.  The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

 

The Group recognised total expenses of £120k (2011: £59k) related to equity settled share based payment transactions.

 

28.   Reserves

Group


Share scheme reserve

 

Warrant reserve

 

Merger reserve

 

Total other reserves

Share premium account

 

Retained loss


£'000

£'000

£'000

£'000

£'000

£'000

At 1 October 2011

728

76

13,390

14,193

18,969

(41,290)

Loss for the year

-

-

-

-

-

(2,286)

Issue of new shares

-

-

-

-

-

-

Cost of share issue

-

-

-

-

-

-

Increase in employee share scheme reserve

120

-

-

120

-

-

At 30 September 2012

848

76

13,390

14,313

18,969

(43,576)

 

The share scheme reserve represents the value of the employee equity settled share option scheme as accrued at the balance sheet date.

The warrant reserve represents the value of equity settled warrants as accrued at the balance sheet date.

The merger reserve results from the application of merger accounting on the acquisition of Sarantel Limited on 23 February 2005.

 

 

Company Balance Sheet

AS AT 30 SEPTEMBER 2012

 


Note

2012


2011



£'000


£'000

Assets










Investment in subsidiary undertaking

3

2,076


3,809






Current assets





Debtors - due after more than one year

4

-


13,708

Cash at bank


-


506

Total current assets


-


14,214






Current liabilities





Creditors

5

(7)


(4)

Net current assets


(7)


14,210






Net assets


2,069


18,019











Capital and reserves





Share capital

6

11,318


11,318

Share premium

7

18,969


18,969

Share scheme reserve

7

848


728

Warrant reserve

7

76


76

Retained losses

7

(29,142)


(13,072)

Equity shareholders' funds

8

2,069


18,019

 

 

Company Registration No 05299925

 

Notes to the Company Financial Statements

FOR THE YEAR ENDED 30 SEPTEMBER 2012

 

1.     Parent company accounting policies

 

The parent company financial statements present information about the Company as a separate entity and not about the Group. The financial statements have been prepared in accordance with applicable UK Accounting Standards and under the historical accounting rules. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements.

 

Basis of preparation

 

The parent company financial statements have been prepared on a going concern basis.

 

Under Section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account.  The Company made a loss for the year of £16,070k (2011 loss: £3,013k).

 

Investments

 

Investments are included at cost less amounts written off.

 

Share based payments

 

As the Company grants options over its own shares to the employees of its subsidiaries it recognises an increase in the cost of investment in its subsidiaries equivalent to the equity settled share based payment charge recognised in its subsidiary's financial statement with the corresponding credit being recognised directly in equity.

 

The Company has also issued warrants to subscribe for A Ordinary Shares in Sarantel Group PLC which are valid for an agreed term.

 

Deferred taxation

 

Deferred tax is recognised on all timing differences where the transactions or events that give the Company an obligation to pay more tax in the future, or a right 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 they will be recovered.

 

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantially enacted at the balance sheet date.

 

Related parties

 

The Company has a related party relationship with its subsidiaries and with its Board of Directors (see the Remuneration and Nominations Committee Report).

 

2.     Employees

 

The Company employs the services of 2 non-executive Directors (2011: 2).

 

Details of Directors' remuneration are set out in Note 6 (Directors and employees) of the consolidated financial statements.

 

3.     Investments

 

At 30 September 2012, the Company held more than 20% of a class of the allotted share capital of the following:

 


Country of incorporation

Class of share held

Proportion held

 

Nature of business

Sarantel Limited

England and Wales

Ordinary shares

100%

Design and manufacture of antennas

Sarantel USA Inc*

USA

Ordinary shares

100%

Marketing support services

Sarantel Asia Pacific Pte. Ltd*

Singapore

Ordinary shares

100%

Marketing support services

* Owned by Sarantel Limited

 

Shares in subsidiary undertakings





2012


2011


£'000


£'000

Cost and net book amount




At 1 October 2011

3,809


3,750

Increase in share scheme reserve

120


59

Impairment

(1,853)


-

At 30 September 2012

2,076


3,809

 

The Company carried out an impairment review of its investment in the shares of its subsidiary undertaking, Sarantel Ltd, as part of the annual review cycle and in view of the deteriorating economic conditions. As a result, the Company has reviewed the carrying value of these shares in line with the current market value of the Company as at the date of this report.  Consequently, the carrying value of £1,853k has been treated as impaired.

4.     Debtors

 

 


2012


2011



£'000


£'000

Amounts owed by group undertakings


11,732


13,708

 

Amounts due from Group undertakings will not be repayable until they are cash generating.

 

The Directors consider the recoverability of amounts owed by group undertakings as uncertain and have made a provision of £11,732k (2011: £nil) for impairment of debtors.

 

Reconciliation of bad debt provision

2012


2011


£'000


£'000

Opening provision

-


-

Provision made in year

11,732


-

Closing provision

11,732


-

 

5.     Creditors

 

Creditors represent other taxation and social security.

 

6.     Share capital

 

Allotted, called-up and fully paid:

 


2012


2011


Number


£'000


Number


£'000

A ordinary shares of £0.001 each

829,439,991


829


829,439,991


829

B ordinary shares of £0.001 each

1,036,340


1


1,036,340


1

Deferred shares of £0.001 each

10,487,624,769


10,488


10,487,624,769


10,488


11,318,101,100


11,318


11,318,101,100


11,318

 

The Company has two classes of ordinary shares and one class of deferred shares, none of which carry any right to fixed income. There are no restrictions on distribution of dividends or repayment of capital on the ordinary shares.

 

The A ordinary shares and B ordinary shares rank pari passu in all respects except that the holders of B ordinary shares are only entitled to receive 10 clear days notice from the directors requiring payment of any moneys unpaid on their shares, whereas the holder of A ordinary shares are entitled to 14 clear days' notice. On the first transfer, assignment or other disposal, a B ordinary share is automatically re-designated and becomes an A ordinary share and ranks pari passu in all respects with the existing A ordinary shares in the share capital of the company.

Deferred shares

The deferred shares have:

 

·       No voting rights

·       No entitlement to attend general meetings of the Company

·       Not been admitted to AIM or any other market

·       Only a priority right to participate in any return of capital to the extent of £1 in aggregate over the class

·       Only a priority to participate in any dividend or other distribution to the extent of £1 in aggregate over the class

 

Warrants

On 14 June 2011, warrants to subscribe for 5,000,000 A Ordinary Shares were granted to Darwin Strategic Ltd in consideration of an Equity Financing facility.  These warrants are exercisable at a subscription price of 1 pence at any time up to three years from date of grant.

 

On 28 April 2008, warrants to subscribe for 1,776,029 Ordinary Shares were granted to John East and Partners as part payment for services rendered. These warrants are exercisable at a subscription price of 3 pence at any time up to five years from the date of grant.

Equity-settled share option scheme

The Company operates the following option schemes for all employees of the Group:

 

Share option scheme:

Options are exercisable at a price at least equal to the average quoted market price of the Company's shares on the date of grant.  The vesting conditions of these grants are 3 years service.  Options are forfeited if the employee leaves the Group before the options vest.

 

Long-term incentive plan:

Options are exercisable at a price equal to the par value of the shares. The vesting conditions of these grants are 3 years service and options are forfeited if the employee leaves the Group before the options vest.

Exercise of options

There were no share options exercised during the year (2011: nil).

Share options

Details of the share options outstanding during the year are as follows:



2012


2011



No of share options

Weighted average exercise price (p)


No of share options

Weighted average exercise price (p)

Number of share options at beginning of year


85,715,130

0.8


36,650,744

2.2

Options granted during the year


-

-


73,420,084

0.7

Options lapsed and surrendered


(2,745,085)

1.0


(24,355,698)

2.6

Balance at end of the year


82,970,045

0.6


85,715,130

0.8

 

The weighted average fair value per option for options granted during the year was nil pence (2011: 0.006p).

 

The options outstanding at 30 September 2012 had a weighted average remaining contractual life of 8.1 years (2011: 9.2 years).

 

The number of fully vested, exercisable options at 30 September 2012 was nil (2011: nil), with a weighted average exercise price of nil pence each (2011: nil pence).

 

Share options at 30 September 2012 are exercisable as follows:

 

Date of grant


No of share options

Exercise

price p


Last date for exercise

11/12/2008


4,950,000

1.00


10/12/2018

08/12/2009


5,295,851

1.00


07/12/2019

29/03/2011


11,625,968

1.10


29/03/2021

29/03/2011


4,000,000

1.00


29/03/2021

06/07/2011


53,948,226

0.55


06/07/2021

25/08/2011


3,150,000

0.53


25/08/2021



82,970,045




 

Details of the share options granted to the Directors are shown in the report of the Remuneration Committee.

 

Expected volatility was determined by calculating the historical volatility of the Group's share price since floatation against the historical volatility of the AIM - Technology Index.  The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

 

The Company recognised total expenses of £120k (2011: £59k) related to equity settled share based payment transactions.

 

7.     Reserves

 



 

Warrant reserve


Share scheme reserve


Share premium account


 

Retained loss



£'000


£'000


£'000


£'000

At 1 October 2011


76


728


18,969


(13,072)

Loss for the year


-


-


-


(13,615)

Write off of inter-company loss in Ltd


-


-


-


(2,455)

Increase in employee share scheme reserve


-


120


-


-

At 30 September 2012


76


848


18,969


(29,142)

 

8.     Reconciliation of movements in equity shareholders' funds

 


2012


2011


£'000


£'000

Loss for the year

(16,070)


(3,013)

Issue of new shares net of expenses

-


3,264

Employee share scheme reserve

120


59

Increase/(decrease) in shareholders' funds

(15,950)


310

Opening shareholders' equity funds

18,019


17,709

Closing shareholders' equity funds

2,069


18,019

 

9.     Related party transactions

 

The Company is exempt from the requirements of FRS 8 to disclose transactions with its wholly owned subsidiaries.

 

 

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

 


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