Sarantel Group to see growth from defence market after robust second half

Specialist antenna manufacturer Sarantel Group (LON:SLG) expects to benefit from more orders from defence customers in the current year after the firm increased its revenues by 30 per cent during its second half amid challenging trading conditions in the company’s core consumer GPS market.

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.

Speaking to Proactive Investors Sarantel’s chief executive officer, David Wither, said that the new financial year had seen some improvement in orders from these two customers. “In one case, the customer’s orders have begun to accelerate in the first half of this year,” he said.

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 developing of 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. Wither made the point that although the defence sector in general is facing cutbacks due to budgetary constraints, the market for communications kit is still strong. “In this particular segment of the defence market many people are predicting continuing growth,” he said.

Indeed, Wither said that he expects defence orders to form more than 50 per cent of revenues over the next year, compared with just 40 per cent last year.

Sarantel shipped products to more than 450 customers during the year, having added more than 250 news customers in the period. Wither believes this expansion will help to dampen the effect of delayed orders from any one customer in the future. “Diversification should enable us to avoid the kind of revenue shocks we’ve had over the past couple of years,” he said.

The firm 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.

Trials of the company’s technology in Tokyo had impressed manufacturers, said Wither. Data from these trials show Sarantel’s antennas have a superior performance to rival chip and patch antennas in terms of being able to successfully connect to the Global Positioning System as well as the shortness of time required to make a successful connection. 

Last year, Sarantel successfully raised £3.5 million through two placings. At the end of September it had a net cash balance of £1.2 million.