Establishment of EV Motor Production Facility UK
Monday 4 April 2022
Saietta Group plc
("Saietta" or "the Company")
Establishment of EV Motor Production Facility in UK
Saietta Group plc (AIM SED), the international electric drivetrain group, announces that it has taken on a manufacturing facility in Sunderland, UK (the "Sunderland Factory") through a number of agreements with ZF Automotive UK Limited ("ZF").
The agreements will enable Saietta to meet its stated objective of establishing a UK pilot production facility, with capacity to produce 100,000 units per annum, significantly ahead of its target and budget at the time of IPO.
The Sunderland Factory is a specialised automotive electric motor manufacturing facility of 86,000 square feet with a history of manufacturing over 20 million electric motors for a range of automotive applications.
In addition, Saietta has purchased a total of 4 motor production lines and an electronic circuit board production line for a consideration of £1.1 million, a considerable amount of this equipment can be re-purposed to meet the needs of Saietta's customers going forward, potentially representing a meaningful cost saving.
Thirty-nine former ZF personnel with a range of critical skills including fabrication, engineering, IT, quality control, finance and process management will join Saietta. This team's ability to deliver efficient and timely fabrication and certification of electric motors for automotive applications is extremely valuable and scalable - as is the Sunderland Factory's established supply and logistics chain.
Saietta intends to use the Sunderland Factory to manufacture its heavy commercial vehicle drivetrains (which were previously manufactured in China) as well as scale up the production of its AFT motors for its European marine subsidiary "Propel" and other customers.
Strategic Rationale & Benefits
This move accelerates Saietta into the next phase of its evolution in line with its published business strategy.
At the time of its IPO in July 2021, Saietta guided that approximately £10 million of the proceeds raised were to be used for the development of a greenfield UK pilot production facility, with a capacity of approximately 100,000 units per year, within three years from completion of the IPO.
The agreements announced today enable the Company to achieve this IPO objective of having a facility in place, after modifications and additions of further equipment, more than two years in advance, and, the Directors believe, at an overall cost significantly lower than that envisaged by the Company's original IPO proceeds for a greenfield site.
Having an on-site manufacturing capacity will be crucial in ensuring that Saietta maintains its product skill and knowledge from concept to production and, the Directors believe, should help to secure material contracts both in the near future and longer-term.
Initially, the Sunderland Factory will be used to produce Saietta's electric marine motors, marketed under the Propel brand, and the e-Axle product line that was acquired as part of the e-Traction acquisition in November 2021, which gave the Company access to the heavy goods vehicle and commercial vehicle markets.
Overview of the Material Agreements with ZF
· Saietta to take over ZF's lease of an 86,000 square feet electric motor manufacturing facility in Sunderland with immediate effect
o Annual rent of £440k increasing to £615k from 1 January 2023
· Saietta to acquire all of the machinery and IT equipment remaining at site from ZF for a consideration of £1.1 million
o With modification and further additions, the equipment will allow Saietta to operate its own business shortly after completion, expected later today
i) Lease Assignment
Saietta, with the consent of the Landlord - The Council of the City of Sunderland - will take on the lease of the 86,000 square feet Sunderland Factory on the Rainton Bridge Industrial Estate from ZF (the "Lease"). The Lease runs until September 2040 and a break clause is available from September 2025.
Saietta will pay an annual rent of £440,000 which will increase to £615,000 on 1 January 2023 and is subject to rent reviews in 2025, 2030 and 2035.
The Lease will be accounted for by Saietta as a Right-of-use Asset on its balance sheet in accordance with accounting standard IFRS16. The Company believes the initial carrying value, subject to audit, will therefore be approximately £4m. There are no profits attributable to the Lease.
ii) Asset Acquisition Agreement
The Sunderland Factory has been producing electric motors for 23 years having established an effective and reliable automotive production line.
ZF will be ceasing operations at the Sunderland Factory and, alongside the assignment of the Lease to Saietta, the Company has reached agreement to acquire the majority of the remaining assets contained in the Sunderland Factory, such as machinery and IT equipment. With modification and additional equipment this will enable Saietta to use the assets to operate its own business at the Sunderland Factory.
Saietta has agreed to purchase the assets for a sum of £1.1 million, with £1 million payable within five days of completion and, subject to certain conditions £100,000 paid within two weeks.
The equipment has been subject to an independent valuation which concluded an in-situ market value of £1.64 million.
As the Asset Acquisition Agreement sets out the purchase solely of physical production assets and IT equipment, with no transfer of personnel, trade, or other business, there are no profits attributable to the assets. The Company has entered into a separate agreement with ZF to supply ZF with certain de minimis run-off services which are expected to be concluded within a couple of weeks.
Direct re-employment of workforce
Separate to any arrangements with ZF, the Company has offered employment contracts directly to 39 personnel who, until recently, were employed at the Sunderland Factory. The new service contracts expected to be entered into will amount to a total wage bill of approximately £1.2 million per annum to the Company.
Further to today's announcement, the Company expects to be announcing a financial year-end trading update during April.
Wicher (Vic) Kist, Chief Executive of Saietta, commented:
"This is a landmark achievement for Saietta providing us with a UK pilot production facility more than two years ahead of schedule and considerably within the originally anticipated budget. In addition to the lease on the large factory in Sunderland, we are acquiring an automotive production line which has demonstrated over 20 years of operations producing electric motors. We will also be able to re-employ a proven, skilled workforce, preserving valuable jobs for the region.
"I want to thank Sunderland Council for their support and to welcome our new employees in the North East, I look forward to working with you all to make this facility a key foundation in Saietta's continued success."
Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information as defined in Article 7 of the Market Abuse Regulation EU No. 596/2014, as retained and applicable in the UK pursuant to the European Union (Withdrawal) Act 2018 (as amended). With the publication of this announcement, this information is now considered to be in the public domain
For any further enquiries, please contact:
Wicher (Vic) Kist, Group Chief Executive Officer
Steven Harrison, Group Chief Financial Officer
Canaccord Genuity (Nomad and Broker)
0207 523 8000
FTI Consulting (Financial PR advisor)
Tel: +44 (0) 20 3727 1000
Saietta is an AIM-quoted, multi-national business which designs, engineers and manufactures complete powertrains for electric vehicles on land from scooters to buses and on sea.
Saietta has engineered breakthrough electric motor technology including proprietary AFT (Axial Flux Technology) and RFT (Radial Flux Technology) which is mated to in-house controllers and transmissions. The design is unique and modular, delivering both high and low voltage electric drive solutions.
Saietta's difference lies in its ability to conceive powertrain solutions tailored to deliver competitive advantage and its turnkey engineering services designed to fast-track electric vehicle manufacturers from concept to start of production.