A new direction: Sarantel plc
22 May 2009
Hot footing it around a maze of technical wizardry and robotics, it’s obvious that David Wither, the genial chief executive of telecoms component specialist Sarantel Group plc, is particularly proud of the company’s manufacturing prowess.
Wither heads a company that has spent the last nine years developing and producing high performance antennas. Those antennas incorporate clever GeoHelix technology that boosts the connectivity and accuracy of mobile and GPS devices by letting them “see” more satellites overhead.
But while the technology might be impressive – certainly enough to win over some of the biggest names in the industry (including the US military) – the going has not been easy for Sarantel since it joined AIM in 2004.
Indeed, two years ago it was forced to rethink its entire market strategy after its then manufacturing capabilities were left desperately exposed by the success of its own technology.
Despite that setback, Wither and his board – including founder and technical chief Oliver Lestein, chairman Geoff Shingles and finance director Sitkow Yeung – have got the company back on its feet and revenues are picking up once again.
By coming at the market from a different angle, they now look poised to ride a new industry wave to meet a growing corporate, military and consumer appetite for accurate, reliable communications and positioning technology.
Market rethink
Problems at Sarantel emerged fairly soon after its AIM listing – a move that saw it raise £16.7m with a view to expanding capacity to meet surging demand. With antenna technology that performed the socks off larger mass-market competitors, the company became sucked into trying to service a burgeoning market without having the manufacturing capacity to back it up.
Compounding that problem was the fact that Sarantel’s success was pinned to how well its customers managed to sell mobile GPS devices to consumers – something turned out to rather more sluggish that first hoped.
In an effort to sort out the manufacturing deficiency, Sarantel ploughed cash into a facility that could handle high volume orders. But two years on, the market for antennas in mobile devices had moved on, with cheaper chip components sufficient to please most major manufacturers. For some onlookers, the company had effectively missed the mass-market consumer boat.
Inevitably, its revenues felt the full force of the problem, with sales of £4m in 2006 slashed by half the following year, and further again in 2008. The good news is that its new approach to the market looks to have put the brakes on those sliding revenues.
In the first half of 2009 the figures are expected to be up 60% on the same period in 2008 to £1.6m. According to Wither, the change in fortune is as much to do with the mobile and GPS markets catching up with Sarantel as it is to do with the company’s new market focus and manufacturing readiness.
In 2007, the board acknowledged that its antennas were generally too advanced for standard mass-market mobiles and GPS devices. Instead, it decided to target niche sectors where very accurate GPS positioning and communications are vital.
Now boasting 130 clients, the company supplies antennas for use in anything from golf range-finders and pet tracking to personal navigation and sophisticated satellite phones used by the military.
In the consumer market, Wither reckons that the introduction of online mapping services and location-based applications – such as Google Maps and Flickr – are fuelling consumer demand for more accurate GPS-equipped mobile phones and digital cameras.
Likewise, news in May that Sarantel had finally got the green light for an order to supply antennas to the US Navy not only represented a heavy-hitting new customer, but also growing interest from higher value customers. Indeed, Wither believes that after negotiating and securing the latest military customer there will hopefully be more to come in the future.
After a false dawn two years ago, Wither believes Sarantel is now well positioned to meet an upsurge in demand from its core market niches. With few direct competitors and a GeoHelix filtering antenna that is simple to make and ready to use in a multitude of devices, the tide could well be flowing back in Sarantel’s direction.
Ben Hobson, SmallCapNews.co.uk
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