Miniature antennas manufacturer Sarantel is considering selling its operating subsidiary in light of the group's weak balance sheet and limited financial resources, according to a company announcement issued on Monday morning.
The AIM-listed manufacturer, which published its audited results for the year ending September 30th, disclosed an operating loss before depreciation and amortisation of £2.0m in spite of revenues for the year of £3.0m.
Despite receiving its biggest order to date from a military customer, the group predicted that it would take "a number of years before Sarantel is able to generate sufficient revenues to reach cash break-even from the military market alone".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
During the year, the group stated that it had secured a £2.0m loan facility so as to provide enough working capital to service the large order, which formed part of a multi-year supply contract.
Chairman: Group doesn't have enough capital to exploit opportunitiesChairman Geoff Shingles stated: "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."
He added: "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.
Group in exclusive discussions with potential purchaserAccordingly, 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."
Sarantel's share price was down 40% to 0.15p at 11:04 on Monday morning.
MF
-
Stop inheritance tax perk on pensions, says IFSThe government could raise billions of pounds in revenue by closing inheritance tax loopholes, such as on pensions and AIM shares. Is your pension at risk?
-
Revealed: Best buy-to-let property hotspots in the UKLooking for the best buy-to-let property locations in the UK? We reveal the top 10 postcodes with the strongest rental returns
