Saietta Group plc (LON:SED) has announced an operational & trading update.
In August 2022, Saietta Group plc was successful in raising funds to support a €20 million major joint development programme with Consolidated Metco, Inc. (“ConMet”) of the US to bring to market a patented range of in-wheel eDrive and generator products for the global truck and bus market. In addition, funds were allocated to expand the Company’s enhancement from a standalone eMotor producer to a full eDrive solutions provider. The full eDrive solutions include axles, gearboxes and software components, the core advantage to this evolution is to both significantly increase the value and margin of the Company’s products and also to enable a swifter integration to OEM (Original Equipment Manufacturers) vehicle platforms.
Saietta is very pleased to report that both of these efforts have resulted in very significant positive momentum which continues to confirm and validate the Company’s strategy to become a global eDrive solutions leader.
Update on Joint Commercialisation and Development Agreement with ConMet
The work with ConMet is progressing at speed, on plan and budget with concept designs now complete and now less than 6 months from the start of the project prototype, parts are currently being ordered for trials. The product concepts have been shared with several US and European truck OEM’s and have received enthusiastic responses. Together with launch partners the Company plans to start the first road trials in 2023 to demonstrate that the ConMet powered by Saietta eDrive solutions work and allow truck and trailer OEM’s to order initial production series. Significantly, Saietta has been asked to add another variant to the programme, which could result in an increased revenue stream from the programme early in the lifecycle of the product range, which as previously announced is targeted for production starting in late 2023.
Expansion of Indian Light Duty opportunity
Following a continued effort from across the business, Saietta has also achieved very rapid and positive progress in establishing its target Light Duty market in India via its joint venture company Saietta VNA located in Gurugram, Haryana.
At the time of fundraising in August 2022 the Company was able to show concepts for two products in the lightweight vehicle segment. The Company is very pleased to report that it is at the product concept approval phase with an OEM which has one of the largest market shares of this segment in the region. Management expect to be confirmed as the sole eDrive partner for the delivery programme which has expanded to 3 products with potential projected life cycle volumes in the region of 500,000 over the period 2023-2029. Saietta is especially pleased to report that both its patented AFT motor (which underpinned the Company’s IPO) and the RFT motor that the Company subsequently developed are both featured in the product range for India. The Company is focused on agreeing a formal supply contract in the first half of 2023 that would allow for the commencement of initial production of these eDrive solutions later in that calendar year.
The effect of these developments since the fundraise in August is to significantly increase the potential scale of the Saietta business model based on direct feedback from the global OEM and their material public commitments to deliver new electric vehicle models to the market.
Strategy to deliver material supply agreements for OEM customers
Importantly Saietta’s strategy, to partner with proven in-region companies with strong 1st tier OEM supplier relationships and manufacturing and well-established supply chain networks is enabling the company to rapidly gain OEM endorsement and commitments to its products. Several factors also powerfully mitigate the future working capital requirements associated with the provision of larger and more complex systems than standalone motors, these include:
· Two committed joint funding partner companies.
· Outsourcing key components to 2nd tier suppliers thereby avoiding up-front capex costs. Saietta focusses on eDrive design, eMotor production and software development while outsourcing the production of inverters and gearboxes to reputable and proven mass volume 2nd tier suppliers.
· Building in the UK on the successful UK “SuRV” grant award, and in addition attracting the significant and relevant production setup/grant assistance schemes that are available within the Company’s key markets, EU, US, UK and India – in particular from the Indian government through their “Made in India” policy.
Against some ramp-up challenges in order to satisfy material market demand for the award winning S1 outboard motor the Group’s marine motor subsidiary Propel has commenced progress towards an outsourced supply chain. Consequently, the Company is now targeting material commercial sales in the next financial year through an identified group of substantial distributors across Europe.
Manufacturing activity Sunderland Factory
Motor coil and stator production has already commenced at the recently acquired Sunderland Factory and the workstreams towards mass production continue to meet or exceed the Company’s original business plan goals.
Inevitably, as a relatively young Company the rate of growth of number of employees (from 28 on Admission to AIM to over 200 today) is a key factor when determining the allocation of staff towards specific opportunities. As a reaction to the unexpectedly positive response from substantial customers with more significant longer term contract potential, the Board has decided to divert resource away from pursuing near term lower volume standalone motor sales in order to secure far larger contracts for higher value product systems. Accordingly, revenue expectation for the financial year to March 2023 is being adjusted, although it is anticipated to be at least 250% of the previous year, with the substantial majority falling in the second half, and will be followed by a projected step change into high volume production in several markets during the following financial year.
In summary the strategic vision of Saietta has continued to expand significantly which has created the opportunity to increase shareholder value by concentrating on working with some of the world’s largest OEM’s and achieve 1st mover advantage in multiple sectors and regions.
As at 30 September 2022 the Company had cash of approximately £23 million. The Company will provide any further updates in its Interim Accounts which will be released in December.
Tony Gott, Executive Chairman, commented
“As is hopefully clear from this update the progress with both ConMet and the Indian Light Duty market has been significant and exceeded our expectations at the time of the August capital raise. The Board has taken the decision, that it is in shareholders’ best long-term interest, to apply more resources to these highly material commercial opportunities rather than pursue small short-term sales contracts that are available to the Company today. The traction we have with global OEMs is significant and the Board is confident this will start translating into material revenues commencing in the next financial year. We look forward to keeping our shareholders updated on our progress.”