REG - Saietta Group PLC - Commercial Update re ConMet JCDA

SaiettaAnnouncement

01/08/2023 07:00

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RNS Number : 8134H  Saietta Group PLC  01 August 2023

This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 which forms part of UK law by virtue of the
European Union (Withdrawal) Act 2018 ("MAR").

 

1 August 2023

 

Saietta Group plc

("Saietta", "the Company" or "the Group")

 

Commercial Update re ConMet JCDA

 

Restructured arrangements result in net payment to Saietta of approximately
€3.3 million plus potential licensing payments

 

Enables Saietta to focus on near-term revenue opportunities in the lightweight
EV sector

 

Saietta Group Plc (AIM: SED), the multi-national business which designs,
engineers and manufactures complete electric drive (eDrive) systems for
electric vehicles, announces the signing of a suite of contracts to replace
the Joint Commercialisation and Development Agreement ("JCDA") with
Consolidated Metco Inc ("ConMet"), a major global manufacturer and supplier of
commercial automotive components.

 

This will enable Saietta to narrow its near-term focus on immediate revenue
generating opportunities in the rapidly expanding global lightweight electric
vehicle ("LEV") sector and especially in Asia, whilst retaining longer-term
revenue potential from the US heavy duty sector.

 

Under the JCDA, announced on 3 August 2022, the parties agreed to cooperate to
bring two new products, an in-wheel generator ("IWG") and an in-wheel motor
("IWM"), to commercial production. The development costs and potential profits
were to be split 50:50 between both parties and Saietta would also benefit
from a royalty payment from pre-existing intellectual property.

 

Saietta announced on 7 March 2023 a strategy to reduce costs, review all key
relationships and focus on the delivery of major near-term revenue streams
from the LEV sector.  Although the JCDA has progressed well, the parties have
agreed to replace it with asset purchase and licence agreements which fully
reflects this strategy.

 

Benefits of the new ConMet contracts for Saietta

 

·      ConMet and its affiliates will pay Saietta approximately €3.3
million comprised of:

o  An upfront cash fee of approximately €2.7 million as consideration for
the assignment of jointly developed intellectual property ("IP")

o  A further sum of €0.6 million for an agreed list of machinery and
equipment being transferred by Saietta

·      Thereafter Saietta will incur no further costs associated with
the development and production of the IWG and the IWM which will be 100% borne
by ConMet and its affiliates, who will also benefit from 100% of the resulting
revenue and profit

·      The parties have entered into a licence agreement under which
Saietta has granted exclusive and non-exclusive licences over its existing IP
in consideration for the payment of 2.5% of an agreed uplift to the product
cost of future IWG and IWM sales incorporating Saietta's licensed IP, capped
at €20 million

·      All 27 Saietta employees at its Netherlands office who are
engaged exclusively on the JCDA project will transfer to ConMet's affiliate,
and facilities related to motor development and testing will be leased by
ConMet's affiliate, thereby reducing Saietta's annual costs by approximately
€2 million

 

The €3.3 million outlined above will be reallocated to Saietta's Light Duty
eDrive operations. Saietta's Heavy-Duty eDrive function will move from the
Netherlands to its Global Technical Centre in Silverstone, UK. Importantly,
Saietta remains free to develop any eDrive products for trucks and buses apart
from IWG and IWM for truck hubs.

 

Outlook

 

Of the €2.7 million cash inflow described above, over half represents
non-capitalised project costs that meet the criteria of engineering design
services and thereby constitute revenue for 2022/23. This has already been
factored into market guidance and, accordingly, the Company's current guidance
for FY 2022/23 remains unchanged.

 

The new arrangements with ConMet and its affiliates mean that approximately
£1 million of UK Government grant funding relating to the JCDA project will
not be available to Saietta. However, this is fully offset in the first year
by the €2 million annual cost savings outlined above and the Company's
ability to accelerate its activities in the global LEV market.

 

Separately, the Company expects to publish its audited financial statements
for FY 2022/23 in mid September

 

Tony Gott, Executive Chairman & Interim CEO of Saietta, commented:

 

"To fully exploit the significant and immediate revenue opportunities from
selling Saietta's electric drive technology to manufacturers of lightweight
electric vehicles globally, it is vital that we focus our time and resources
in that area.

 

"As such, we have reached a pragmatic solution to restructure the ConMet
arrangement given commencement of revenue generation from the JCDA does no
longer meet our short-term revenue strategy.  This will enable us to benefit
from an immediate cash payment and accelerate our activities in the LEV sector
where there is greater near-term revenue potential.

 

"This development is fully aligned with our stated strategy of driving Saietta
into positive EBITDA as soon as possible, with a target of early 2024."

 

As the JCDA was only created in August 2022, there are no historic reported
revenues or profits associated with the agreement.

 

 

For any further enquiries, please contact:

 

 Saietta Group                                  via FTI

 Tony Gott, Executive Chair & Interim CEO

 Steven Harrison, Chief Financial Officer
 Canaccord Genuity (Nomad and Broker)           0207 523 8000

 Henry Fitzgerald-O'Connor / Harry Pardoe
 FTI Consulting (Financial PR advisor)          Tel: +44 (0) 20 3727 1000

 Ben Brewerton / Dhruv Soni                     saietta@fticonsulting.com

( )

About Saietta:

Listed on the London Stock Exchange's AIM, Saietta is a multi-national
business which designs, engineers and manufactures complete electric drive
(eDrive) solutions for use in lightweight vehicles including scooters,
motorbikes, rickshaws and urban delivery vehicles.

Saietta's breakthrough electric motor technologies include proprietary AFT
(Axial Flux Technology) and RFT (Radial Flux Technology) which can be combined
with in-house power electronics, powertrain controls, mechanical axles, and
transmissions.

Developing tailored electric powertrain solutions to deliver competitive
advantage, Saietta's turnkey engineering services are designed to fast-track
electric vehicle development from concept to start of production. For more
information, visit https://www.saietta.com/ (https://www.saietta.com/)

 

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