Specialist GPS antenna maker Sarantel Group (LON:SLG) today said that recent orders will have a material impact on second half revenues and beyond.

In a trading update, for the six months to March 31, it revealed first half revenues of £0.9 million (H1 2011: £1 million). And it said it had a cash balance of £0.2 million at the end of the period, though an additional £165,000 tax credit was received this month.

Sarantel says production revenues increase 9 per cent helped by ‘significant’ growth in the military market. But development revenues had decreased at the same time.

Its performance in the military market continues to build momentum, as demonstrated by a ‘substantial’ order from a military radio manufacturer in February this year. This is part of a multi-year deal which, along with other recent orders, is expected to have a material impact on revenues going forward.

Sarantel also added that with the support of a major customer it has secured a £2 million loan from HSBC Bank, which will help revenue growth.

"The military contracts we have secured underscore Sarantel's position as a supplier of leading antenna technology,” said chief executive David Wither.

“With our recently agreed loan in place, and a firm order book of just over £2m compared to £400k this time last year, we look forward to strong growth in revenues for the second half of the financial year."

On AIM Sarantel shares gained around 3.5 per cent following this morning’s update to trade at 0.59p a share.

XCap analyst Tim Freeborn was also buoyed by the statement. And he says Sarantel is on track for much better days.

“The growing order book is the key here,” Freeborn said in a note to clients. 

“This has let Sarantel obtain debt finance from HSBC which means it should reach profitability without having to tap shareholders again.

“Yes, we are the house broker, but we took on the company because we believe the £40m+ it has swallowed is about to start showing a return. Progress in the consumer mass market will send the numbers through the roof.”

Antenna technology specialist Sarantel (LON:SLG) will move close to profitability in 2013 as orders build from the military, according to broker Xcap.

The broker has also upgraded its forecast for 2012 from an underlying loss of £1.2 million to a £1 million deficit after the latest full year figures.

Xcap said the numbers were bang in line with its forecast, with the broker also raising its sales forecast by £0.3m to £3.5 million.

Its estimate for the year to September 2013 is for sales to rise to £5.3 million with Sarantel breaking even at the EPS level.

“These figures take no account of potential game-changing orders for consumer electronics appliances,” added Xcap.

“The earliest volume consumer application is likely to be a combined GPS/wifi unit for 35mm cameras. An initial order for, say 1m units, would add £0.9m to sales and £0.3m to profits.” 

Sarantel’s antennas are also accurate to within a metre, making it highly attractive on the battlefield.

Xcap says that in the past military orders have been lumpy and prone to unexpected slippage, but as the company wins more design-ins its revenues are becoming easier to predict.

On 7 February it announced a largest-yet order from a military radio supplier. 

The recent £2m loan facility at only 3% over libor also meaning Sarantel can fund itself to profitability, removing the threat of a further placing.

The broker added that Sarantel has reduced the size and cost of its antennas but a  volume price of $1.40 per unit still gives a 30% gross margin.

“Even without the consumer breakthrough, the company is on a clear path to healthy profits. We suspect our numbers will turn out to be very cautious. Meantime we remain comfortable with the 1.7p price target,” Xcap said.

Miniature antenna maker Sarantel (LON:SLG) said today sales had picked up in the second half following order delays earlier in the year.

Revenues for the year to September overall dropped from £2.9 million to £2.2 million but Sarantel said the sales fall all occurred in the first half and was due to "very specific customer related issues".

Revenues in the second half rose to £1.2 million from £1 million.

Losses for the year were flat at £3 million, with lower operating profits offset by reduced admin costs.

Sarantel added that despite the problems, its antenna technology continued to build momentum in the military market with a number of major new contracts.

Customer funded product development revenues, an indication of future revenues, increased by 141 per cent.

In February, the group received its largest ever order from a military radio manufacturer, which it said will have a substantial impact on the group's revenues and cashflow for 2012 and beyond.

David Wither, Sarantel’s chief executive, said that the group’s technology has gained significant traction in the military market place and is confident it can maintain the momentum.

“There are also a large number of encouraging new opportunities in the broader GPS market and, having secured the £2m secured loan facility to provide additional working capital with support from a major customer and the group's bank, the outlook for Sarantel's technology remains very positive,” he added.

Sarantel has already held field trials with an unnamed, but major, Japanese manufacturer over the use of its GPS antennas in cameras to record the geographical location of a photograph.

Last month, Sarantel also announced its largest ever order, this time from an unnamed US manufacturer of military radios that wants to embed its antennas across its range of products. 

Chief executive David Wither said he was especially pleased with this order as these type of companies are notoriously slow and cautious in choosing their suppliers and also because it is a multi-year contract.

It was also further evidence, he said, that after years of development work Sarantel’s hard labour is starting to bear fruit.

And it has not been an easy ride for the Wellingborough-based company to get to this stage. 

The group first patented its antenna technology in 1994 and has spent almost £50 million since then honing its design and functionality.

But, according to Wither, real momentum is now building on the sales side to follow all of the R&D effort.

Sarantel was always recognised as owning a very smart piece of kit, but the key question was whether it would ever get it to the product stage or even find a market.

The recent upturn in orders has seemingly answered the first question, while the advent of smartphones and the growing use of GPS satellite positioning technology with its need for pin-point accuracy could answer the second in spades.

The clever bit in Sarantel’s antennas is that they are ceramic-based, which means they reduce the amount of the signal that the body absorbs by nearly 90 per cent.

That makes them incredibly precise - to a range of one metre – and this ability to track a signal so closely has not been lost on the military, which have been among the front runners in trialling Sarantel’s technology.

Itronix, a subsidiary of US defence giant General Dynamics that specialises in rugged mobile computing, will use Sarantel’s GPS GeoHelix antennas in its GD300 rugged computer, which is worn on the wrist or chest on a battlefield.

Sarantel has also received production orders from the General Dynamics and Thales for a rugged version of its GeoHelix antenna to be used on its Rifleman military radio.

An unnamed European manufacturer, meanwhile, trialled Sarantel’s antennas in body armour for soldiers last year.

But as the potential uses of smartphones have burgeoned in recent years, so have the potential non-military uses of Sarantel’s antennas.

AutoSeis uses the GeoHelix GPS antenna as part of a precision timing and location system that enables the probe to gather highly-accurate geological survey data for mining and resource companies.

US-based NAL Research Corporation also signed a deal for production orders of a second-generation Iridium antenna for use in a two-way messaging and personal tracking device.

GPS – based distance measurement cameras for golfers are also based on Sarantel’s precision-based antennas.

But it is the potential to embed antennas into smartphones for use in instant consumer marketing that could potentially propel Sarantel into the major leagues.

That was the rationale behind the camera trials in Tokyo last year and broker XCAP believes the near-term opportunity is in giving cameras accurate and fast geo-location. 

“We can see opportunities in smartphones, both for enhanced reality applications and, say, letting retailers offer special deals via text as people pass their doors,” said the broker.

Last year, Wither said the trend for integrating devices was forcing people to come to Sarantel and if anything this integration trend has gathered speed since then.

Wither expects to announce more production order this year across its range, while the order announced this January will have a significant impact on revenues and cashflows in the current year to September, he added.

In the year to September 2011, Sarantel’s revenues were £2.2 million, down 24% on the previous year, but revenues from its new product areas more than doubled. 

The company raised £3.5 million in the previous year, but in January said that it was considering a number of options for both short and medium term financing, including a commercial loan.

Indeed, Sarantel today secured a £2 million loan facility with HSBC.

XCAP suggested that Sarantel was confident about being able to fund itself going forward.

The broker also suggested the latest order would take the company “a long way” towards profitability even before any contribution from camera GPS contracts.

Wither is cautious on predicting too much too soon, but he admits it was a “breakthrough order” and that once other production orders start to kick-in as well it will be a turning point for the company. 

XCAP says if serious volumes do start to come through on the camera GPS side, it may need to raise cash to fund the working capital, but by then the broker added the share price would be “far ahead” of where it is now.

The order is from an unnamed US military radio manufacturer, which will use Sarantel’s GeoHelix GPS antennas across a range of its products.

One use of Sarantel’s GPS antennas is in compact radio systems that are embedded inside a soldier’s body armour.

Sarantel added that the order was part a multi-year supply contract expected to be delivered over the next 12 months.

It is currently considering a number of options for both short and medium term financing, including a commercial loan.

David Wither, chief executive. said: "This is the largest order that we have secured so far and we expect it to have a material impact on our revenues. It is a great endorsement of the importance of our technology to world leading customers."

Broker XCAP said the order was great news for the company and the broker expects eventually to raise its September 2012 sales and operating profit forecasts “materially”.

“Today's order takes Sarantel a long way towards profitability even without any contribution from camera GPS contracts,” it said, while the comments about financing suggest the company believes it can fund itself with bank debt based on the current order book. 

XCAP said if Sarantel does make a breakthrough into consumer products, it may need to riase money to cover the ramp-up, but in that situation the share price “would be far above current levels”.

Today’s order follows on from an award last November from US-based NAL Research Corporation for its second-generation Iridium antenna for a low-power, two-way satellite messaging and personal tracking device. That deal could generate revenues of US$1 million.

Now could be “a great time to buy” shares in specialist antenna manufacturer Sarantel Group (LON:SLG) said XCAP Securities today. The small cap broker said that the firm looks good value since it is on the verge of becoming self funding and may also land volume orders from camera makers within the next six months.

XCAP noted that during the past year the company has won some high-margin orders for military applications; its patented ceramic antennas give accuracy to within a metre and obtain a fix more quickly than less-advanced systems. However, it is the opportunity among camera manufacturers that could be a “game changer” for Sarantel, said the broker.

In mid-October Sarantel reported that it had successfully completed field trials with a major Japanese camera manufacturer. GPS antennas installed in cameras can be used to record the geographical location of a photograph and Sarantel said that the small size and high performance of its GeoHelix GPS technology make it particularly well suited to this application. Trials of the company’s technology in Tokyo had impressed the unnamed camera manufacturer, Sartantel CEO David Wither told Proactive Investors at the time.

The near-term opportunity, according to XCAP, is in giving cameras accurate and fast geolocation, which would give the company exposure to the high-volume consumer electronics market. “We can see opportunities in smartphones, both for enhanced reality applications and, say, letting retailers offer special deals via text as people pass their doors,” said the broker. “Sarantel’s core patents were granted in 1994, but it has built up a strong portfolio since then which offers scope for royalties.”

Although Sarantel remains loss making for the moment, XCAP said that it believes the company will deliver sustained and growing profits in the coming years.

However, the broker described its 2012 forecasts as “extremely cautious”. This is for sales of £3.2 million, with operating profit on the EBITDA level being a loss of £1.2 million. The pre-tax loss is expected to come in at £1.5 million, which translates to a loss per share of 0.16 pence.

But applying a 2014 price-to-earnings rating, based on respected electronics peers, to XCAP’s “best guess” for Sarantel’s 2014 earnings led the broker to come up with a seven pence per share expected price.  Despite this, the broker applied a discount to reach its current target price of 1.7 pence per share.

Sarantel’s share price in mid-afternoon trading today was up 16.3 per cent at 0.81 pence.

Specialist antenna firm Sarantel (LON:SLG) has confirmed today that the volume production orders for its GeoHelix GPS filtering antenna announced in mid-May were for the AutoSeis HDR1C – an autonomous, high-definition recording unit (otherwise known as a ‘node’).

The AutoSeis HDR1C is supplied by AutoSeis Incorporated, a global geophysical services company. According to Sarantel, the HDRC1C seismic node “promises to revolutionise the natural resource exploration process”.

The node uses Sarantel’s GeoHelix GPS antenna as part of a precision timing and location system that enables the probe to gather highly-accurate geological survey data.

The GeoHelix GPS antenna was selected for the application because it offers an omni-directional gain pattern that provides the customer with stable and reliable GPS performance across a wide range of installation environments. 

The wireless capability of the HDRC1C means that many of these nodes can easily be deployed over a large geographical area, replacing expensive and time-consuming wired survey systems. This means, as Sarantel said back in May, that the deal should “have a material impact on revenues” over the next year.

“Selection of our technology by AutoSeis underscores the progress we are making in delivering leading edge solutions,” said David Wither, Sarantel’s chief executive officer. “GPS is used as a precision timing source for a broad range of applications and the HDR1C autonomous seismic node is a great example of how our technology is enabling the development of a raft of game changing devices.”

Shares in Sarantel were higher by 3.7 per cent at 0.7 pence each soon after the market opened this morning.

In a mixed trading update, the firm said that unit sales had increased by 21 per cent during the six months to the end September but that total revenues for the entire year are expected to be down 24 per cent on the previous financial year at £2.2 million. This, said the firm, is largely due to delayed orders announced at the half-year stage from two of the group’s largest customers.

However, revenues from the development of new products increased by 143 per cent during the year as the firm’s investment in research and development “continues to bear fruit”.

Sarantel said that it made significant progress in developing its sales and distribution network, which has helped it add more than 250 new customers during the year.

Meanwhile, the firm said it continues to make strong progress in military and other high-value markets, receiving customer funding to develop a number of rugged GPS and satellite communications antennas that are now being sold as part of a growing portfolio of high-value products.

The firm added that it shipped products to more than 450 customers during the year and it also announced today that it has successfully completed field trials with a major Japanese camera manufacturer. GPS antennas installed in cameras allow the recording of the geographical location of a photograph, and Sarantel said that the small size and high performance of its GeoHelix GPS technology make it particularly well suited to this application.

Sarantel added that at the end of September it had a net cash balance of £1.2 million.

Itronix – a subsidiary of US defence giant General Dynamics that specialises in rugged mobile computing – will use GeoHelix in its GD300 rugged wearable computer. According to Sarantel, this wrist or chest worn computer combines the best-in-class commercially available GPS technology with battlefield-rugged computing for “an ultra-thin, lightweight and cost effective computing and situational awareness platform”. 

The device operates like an ultra-sensitive commercial GPS (Global Positional System) unit, or interfaces with tactical radios, for secure network access. 

“Sarantel’s antenna technology is uniquely suited for precision, body-worn applications that have to operate in the most challenging environments,” said David Wither, Sarantel’s chief executive officer. “We are very pleased that General Dynamics Itronix has selected our technology for the GD300 Rugged Wearable Computer. This highlights our growing traction in military applications where precision, reliability and small size are critically important." 

Sarantel is a specialist in the design of high-performance miniature antennas for portable wireless applications. These ceramic filtering antennas are designed to deliver improved performance over existing antenna designs, resulting in a clear signal, better range and 90-per cent reduction in the amount of signal radiation that is absorbed by the human body.

This latest news of orders comes after the firm received production orders from a leading European electronics company at the start of September for its SL1206 GPS antenna. The SL1206 GPS antenna will form part of a compact radio system that is embedded inside body armour that has been designed for soldiers.

Sarantel Group (LON:SLG) is set for a US$287,000 cash boost after it agreed a new tie-up with a US defence contractor.

The company said it will use the funds to develop two compact, high-performance antenna designs for defence and security applications. It has already received some of the cash and the rest is expected to follow in the coming months.

“This is a tremendous endorsement for our technology and a vindication of our focus on the military sector; which is delivering tangible results,” chief executive David Wither said.

“Our antenna technology is clearly gaining momentum in this high-value market that demands high performance in a very small and robust package.”

This positive development is likely to give welcome relief to the shares that fell around 30 percent on Friday.

Last week Sarantel told investors that sales have been slower than expected in the first half of 2011 so far. It put the slower sales performance down to two unexpected, and completely unrelated, internal technical development issues experienced by two major customers. 

One of these customers is from the consumer side of Sarantel’s business, while the other hold-up is with a customer in the defence technology area.

Analysts described the share price decline as a ‘knee-jerk’ reaction.

Meanwhile speaking with Proactive Investors Sarantel boss David Wither stressed that the delays were not related to Sarantel’s technology, and the underlying trends in the business are positive.

Wither told Proactive: “The trends in the business look positive. Over the past two years we have done a lot of work on technology, on our sales and distribution channels, we are really working on getting our technology in the hands of more customers.

“It really looks like it's finally starting to happen because in the last two years we’ve put our technology in the hands of 800 new customers. Within this customer base I am sure we are going to see the next big customer for Sarantel.”

“There are a lot of different applications and a lot of different markets we’re involved with.”

Indeed this new and significant defence deal, which is understood to be from a different contractor, demonstrates the depth of Sarantel’s pipeline.

In this morning’s statement Wither added: “this order provides the board with further confidence that near term monthly sales for the remainder of the financial year will improve with contributions from these funding revenues. 

“In addition as a result of this funded development programme, we will significantly expand our product portfolio which will benefit customers in other markets professional GPS applications and machine to machine communication via satellite.”  

Sarantel produces tiny but incredibly potent antennas used in GPS devices. Its specialist antenna - a copper coated, centimetre-high capsule - negates the effect of the human body which absorbs radiation and distorts the signal. The high-performance antennas are superior, but understandably more expensive, than the ‘run-of-the-mill’ components used in most GPS devices. 

Importantly they can offer device manufacturers greater accuracy, and therefore broader applications.

Sarantel stressed that these new antennas will need to meet strict size, performance and weight requirements so they can be deployed in a wide range of devices. The defence contractor will manage the development programme, on behalf of a branch of the US military.