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POY - Poynting Holdings Limited - Provisional condensed consolidated

Release Date: 29/09/2011 17:33
Code(s): POY
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POY - Poynting Holdings Limited - Provisional condensed consolidated financial statements for the year ended 30 June 2011 POYNTING HOLDINGS LIMITED Incorporated in the Republic of South Africa (Registration number 1997/011142/06) Share code: POY ISIN: ZAE000121299 ("Poynting" or "the company" or "the group") PROVISIONAL CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 HIGHLIGHTS Revenue of R81,5 million up 7% from R76,3 million. If the discontinued operations revenue is removed from both periods, the revenue from continued operations has increased by 22%. 54% increase in profit before taxation from R3,8 million to R5,8 million excluding the loss in discontinued operations. EBITDA from continuing operations increased by 25% from R9,8 million in 2010 to R12,3 million in 2011. CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Reviewed Audited year year
ended ended Note 30 June 30 June 2011 2010 R`000 R`000
Revenue 81 549 76 294 Cost of sales (28 102) (27 405) Gross profit 53 447 48 889 Other income 483 508 Operating expenses (47 628) (44 716) Operating profit 6 302 4 681 Investment income 269 232 Finance costs (730) (1 123) Profit before taxation 5 841 3 790 Taxation (1 077) (888) Profit from continuing operations 4 764 2 902 Discontinued operations Loss from discontinued operations 2 (2 156) (376) Profit for the year 2 608 2 526 Other comprehensive income - - Total comprehensive income 2 608 2 526 Attributable to: Equity holders of parent 1 2 608 2 537 Non-controlling interest - (11)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Reviewed Audited year year ended ended
30 June 30 June 2011 2010 R`000 R`000 ASSETS Non-current assets 12 127 17 538 Property, plant and equipment 2 081 3 206 Intangible assets 9 993 13 139 Deferred tax - 1 020 Other financial assets 53 173 Current assets 32 798 25 464 Inventories 8 418 7 744 Other financial assets 886 - Current tax receivable 13 28 Trade and other receivables 18 629 11 186 Cash and cash equivalents 4 852 6 506 Total assets 44 925 43 002 EQUITY AND LIABILITIES Equity 31 903 29 294 Equity attributable to owners of the 31 875 29 266 parent Non-controlling interest 28 28 Non-current liabilities 1 633 2 223 Interest-bearing liabilities 1 633 2 223
Current liabilities 11 389 11 486 Interest-bearing liabilities 641 3 357 Trade and other payables 10 732 8 104 Bank Overdraft 16 25 Total equity and liabilities 44 925 43 002 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Retain Non- Total capita based ed control R`000 l payment earnin ling R`000 reserve gs interes
R`000 R`000 t R`000 Balance at 1 July 24 - 2 128 39 26 547 2009 380 Changes in equity - - - - - Issue of shares - - - - - Net profit for the - - 2 537 (11) 2 526 period Employees share - - - - - option scheme: Options - 221 - - 221 issued Total changes - 221 2 537 (11) 2 747 Balance at 30 June 24 221 4 665 28 29 294 2010 380 Changes in equity - - - - - Net profit for the - - 2 608 - 2 608 period Amounts less than - - - - 1 R1 000 rounded Total changes - - 2 608 - 2 609 Balance at 30 June 24 221 7 273 28 31 903 2011 380 CONDENSED CONSOLIDATED CASH FLOW STATEMENT Reviewed Audited
year year ended ended 30 June 30 June 2011 2010
R`000 R`000 Cash flow from operating activities 4 626 6 401 Cash flow used in investing activities (2 785) (3 687) Cash flow used in financing activities (3 361) (927) Net increase in cash and cash (1 520) 1 787 equivalents Cash and cash equivalents at the 6 481 5 436 beginning of the period Effect of exchange rate movement on cash (125) (742) held Cash and cash equivalents at the end of 4 836 6 481 the year NOTE 1 - RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS Reviewed Audited year year ended
ended 30 June 30 June 2010 2011 R`000 R`000
Profit for the year 2 608 2 537 Adjustments for: Impairment of intangible assets 299 91 Headline earnings attributable to 2 907 2 628 ordinary shareholders Weighted average number of ordinary 88 554 88 554 275 shares in issue 275 Weighted average number of diluted 90 586 88 684 020 ordinary shares in issue 388
From continuing and discontinued operations Basic earnings per ordinary share 2.95 2.86 (cents) Diluted earnings per ordinary share 2.88 2.86 (cents) Headline earnings per ordinary share 3.28 2.97 (cents) From continuing operations Basic earnings per ordinary share 5.38 3.29 (cents) Diluted earnings per ordinary share 5.26 3.28 (cents) Headline earnings per ordinary share 5.72 3.39 (cents) NOTE 2 - REVIEWED SEGMENTAL ANALYSIS for the period ending 30 June Continued Discontinued operations Commercial Defence Operations Total 2011 Division Division Base Station Total revenues 48,732 37,105 75 85,912 Intersegment revenue (4,363) 0 0 (4,363)
Total external 44,369 37,105 75 81,549 revenue
Corporate office (838) (632) (1,470) expense Depreciation and (3,909) (2,020) (61) (5,990) amortisation Operating profit (4,102) 10,917 (513) 6,302 Interest revenue 226 43 - 269 Interest expense (400) (323) (7) (730) Profit before (4,276) 10,638 (520) 5,841 taxation Taxation 537 (2,135) 520 (1,077) Profit from (3,739) 8,503 0 4,764 continuing operations Discontinued operations Loss from 0 0 (2,156) (2,156) discontinued operations Profit for the year (3,739) 8,503 (2,156) 2,608 Reportable segments 19,764 25,161 0 44,925 assets Reportable segments (7,749) (5,273) 0 (13,022) liabilities Continued Discontinued operations Commercial Defence Operations Total
2010 Division Division Base Station Total revenues 42,400 30,477 9,482 82,359 Intersegment revenue (6,065) 0 0 (6,065) Total external 36,335 30,477 9,482 76,294 revenue
Corporate office (747) (563) 0 (1,310) expense Depreciation and (3,967) (1,605) (401) (5,973) amortisation Operating profit (3,234) 7,504 411 4,681 Interest revenue 117 114 1 232 Interest expense (565) (408) (151) (1,123) Profit before (3,682) 7,210 261 3,790 taxation Taxation (35) (592) (261) (888) Profit from (3,717) 6,618 0 2,902 continuing operations Discontinued 0 operations Loss from 0 0 (376) (376) discontinued operations Profit for the year (3,717) 6,618 (376) 2,526 Reportable segments 26,452 14,189 2,361 43,002 assets Reportable segments (8,432) (5,277) 0 (13,709) liabilities GROUP COMMENTARY INTRODUCTION Poynting designs, manufactures and sells antenna and telecommunications products to the cellular, wireless data and defence markets. The company operates as three divisions, namely Commercial, Defence, and the discontinued Base Station Equipment. The Base Station Equipment Division was discontinued in September 2010 due to a dramatic downswing in demand for the products of this Division. Poynting`s commercial products are used in cellular and 3G end-user equipment, as well as wireless data networks employing WiFi, iBurst and WiMAX technologies. During the 2010 financial year, the Commercial Division also started providing antenna installation services and has grown in the 2011 financial year. This service offering is focused on the installation of Poynting`s antennas for end-users of the large network service providers. The Defence Division is focused on the electronic warfare market which comprises monitoring, jamming and direction-finding antennas. This division sells to military system integrators and specialised distribution partners. Close partnerships are created with customers and antennas are often custom- designed. The Base Station Equipment Division supplied transmission infrastructure equipment mainly to cellular operators. This equipment includes base station amplifiers and diplexers as well as some in-building signal splitters and antennas for in-building repeaters and base stations. This Division was discontinued early in this financial year as noted above. Poynting retained a very strong Research and Development department ("R&D") of around 20 talented members including PhD and MSc level engineers who design the antennas, develop production methods, develop manufacturing plant (mainly moulds and stamping tools) and produce first prototypes. Both Commercial and Defence perform customer-specific designs to supply products to single customers ("OEM") and generic products which can be sold to various customers. Typically, the Defence sales come from large military OEMs whereas Commercial mainly focuses on mass production products sold through distributors or to corporate customers. RESULTS OVERVIEW The highlights of the financial year end results include: Revenue of R81,5 million, up 7% from R76,3 million. If the discontinued operations revenue is removed from both periods, the revenue from continued operations has increased by 22%. 54% increase in profit before taxation from R3,8 million to R5,8 million excluding the loss in discontinued operations of R2,2 million. EBITDA from continuing operations increased by 25% from R9,8 million in 2010 to R12,3 million in 2011. Results in 2011 were driven by continued excellent performance by the Defence Division. Revenues in Defence increased by 22% from 2010 to 2011 and the profit before taxation was 44% higher at R10,4 million from R7,2 million. The Commercial Division was also 22% higher, but a loss before taxation of R4,3 million versus a previous year loss of R3,7 million was recorded. The larger loss in the Commercial Division was in spite of improved turnover and gross margin in 2011 versus 2010. This was due to increased overheads as a result of the dissolution of the Base Station Equipment Division, a large provision for bad debt, stock write-off and provisions, extraordinary legal costs and provisions and costs associated with corporate activities negotiation earlier this year. Poynting has managed to raise an Industrial Development Corporation order finance facility of R4 million for major projects. This, together with profitable results and improved management of working capital, has improved the company`s liquidity position. Intangible assets have reduced over a three-year period while tangible net asset value per ordinary share has increased from 14 cents per share (2009) to 25 cents per share (2011) over the period. The current net asset value per ordinary share of 36 cents per share includes an intangible asset of 11 cents per share which the board believes is a conservative value and mainly represents value of product-related Intellectual Property (IP). SUBSEQUENT EVENTS The board of directors is not aware of any material matters or circumstances arising since the year-end and up to the date of this report. PROSPECTS The Defence Division is expected to show continued revenue growth and profits in 2012. This Division currently has a stronger order book than at the same point last year and has a healthy number of proposals and opportunities in the pipeline. International acceptance and demand for our Defence products is showing growth and we are developing a broader customer and product base. The Commercial Division is starting to re-invest in product development again after some severe reduction on spending in this area for the past two years. Good opportunities are becoming apparent in the area of cellular coverage driven by the high growth in cellular data products both locally and internationally. We envisage increased growth in cellular product sales. Our drive to combine cellular products with installations in South Africa is proving popular. The Commercial Division is also forming a close relationship with a BEE partner to start providing innovative coverage solutions to cellular service providers. This offering has been well received and we hope to expand this business in future. We have also had discussions with an international company regarding a possible acquisition by the Commercial Division during the last financial year. Even though this proved unsuccessful we shall continue to look for further opportunities to increase our operational scale and international footprint. We are also on the lookout for similar opportunities for corporate activity to strengthen our international footprint for the Defence Division. These are not profit forecasts and are not reviewed. BASIS OF PREPARATION The accounting policies applied in the preparation of these condensed consolidated financial statements, which are based on reasonable judgments and estimates, are consistent with those applied in the annual financial statements for the year ended 30 June 2010. These summarised financial statements as set out in this report have been prepared in terms of the recognition and measurement requirements of the International Financial Reporting Standards ("IFRS"), presentation and disclosure requirements of IAS 34 - Interim Financial Reporting, the Companies Act, 2008 (Act 71 of 2008), the AC500 standards as issued by the APB and the Listings Requirements of JSE Limited. AUDITOR`S REPORT The condensed consolidated financial statements for the year ended 30 June 2011 have been reviewed by the group`s auditors, KPMG Inc. Their review report is available for inspection at the company`s registered office which contained an unmodified conclusion on the condensed consolidated financial statements. This report included a report on other legal and regulatory requirements due to a reportable irregularity which has been identified and reported as discussed below. REPORTABLE IRREGULARITY In accordance with the auditor`s responsibilities in terms of the Auditing Profession Act, the company`s auditor has reported the following matter to the Independent Regulatory Board for Auditors. The operation of a subsidiary without the required Development, Manufacturing and Services Permit in terms of the Armaments Development and Production Act, 1968 (Act No. 57 of 1968, as amended) for the period 19 November 2010 to 6 July 2011. This permit was subsequently issued on 7 July 2011. Management does not expect any material loss to the entity or to any partner, member, shareholder, creditor or investor of the entity in respect of his or her or its dealings with the entity as a result of this issue. DIRECTORATE There were no current or post year-end changes to the board prior to the date of this report. By order of the board Andre Fourie Johan Ebersohn Chief Executive Officer Financial Director and the financial statement preparer 29 September 2011 Johannesburg Directors: Coen Bester* (Chairman), Andre Fourie (Chief Executive Officer), Juergen Dresel (Managing Director) (German) Johan Ebersohn (Financial Director), Zuko Kubukeli*, Richard Willis, Jones Kalunga (Sales Director) *Independent Non-executives Registered Office: 33 Thora Crescent, Wynberg, 2090. (PO Box 76579, Wendywood, 2144) Designated Adviser: Merchantec Capital Company Secretary: Merchantec Capital Auditors: KPMG Inc. Date: 29/09/2011 17:33:05 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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