Wrap Text
Unaudited Condensed Consolidated Interim Results For The Six Months Ended 31 December 2012
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”)
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX
MONTHS ENDED 31 DECEMBER 2012
HIGHLIGHTS
Gross profit increased by 12.1% from R25 million to R28 million
Earnings per share increased by 10.9% from 2.20 cents to 2.44
cents per share
Tangible net asset value increased by 25.3% from 28.19 cents to
35.31 cents per share
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2012 2011 2012
R’000 R’000 R’000
Revenue 41 948 38 801 80 970
Cost of sales (13 900) (13 776) (27 489)
Gross profit 28 048 25 025 53 481
Other income/(expenses) 350 (102) 1 342
Operating costs (25 911) (22 157) (46 349)
Operating profit 2 487 2 766 8 474
Investment income 262 240 448
Finance costs (23) (357) (387)
Profit before taxation 2 726 2 649 8 535
Taxation (482) (706) (1 302)
Profit after taxation 2 244 1 943 7 233
Total comprehensive income 2 244 1 943 7 233
Profit attributable to:
Equity holders of parent 2 244 1 944 7 241
Non-controlling interest - (1) (8)
Total comprehensive income 2 244 1 943 7 233
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
31 December 31 December 30 June
2012 2011 2012
R’000 R’000 R’000
ASSETS
Non-current assets 15 275 11 410 12 930
Property, plant and
equipment 3 831 2 384 2 856
Intangible assets 11 444 8 855 9 987
Other financial assets - 171 87
Current assets 36 820 33 653 37 113
Inventories 9 273 6 990 7 638
Trade and other receivables 16 185 14 074 12 077
Bank and cash balances 11 362 12 589 17 398
Total assets 52 095 45 063 50 043
EQUITY AND LIABILITIES
Equity 43 902 33 846 39 044
Equity attributable to
owners of parent 43 902 33 819 39 044
Non-controlling interests - 27 -
Non-current liabilities
Interest-bearing
liabilities 206 1 935 1 562
Current liabilities 7 987 9 282 9 437
Interest-bearing
liabilities 219 86 198
Trade and other payables 7 768 9 196 9 239
Total equity and
liabilities 52 095 45 063 50 043
Number of ordinary shares
in issue 91 911 008 88 554 275 88 554 275
Net asset value per
ordinary share (cents) 47.77 38.19 44.09
Net tangible asset value
per ordinary share (cents) 35.31 28.19 32.81
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
Based Non-
Share Payment Retained controlling
capital Reserve earnings interest Total
R’000 R’000 R’000 R’000 R’000
Balance at 1 July
2011 24 380 221 7 274 28 31 903
Changes in equity
Total
comprehensive
income for the
period - - 1 944 (1) 1 943
Total changes - - 1 944 (1) 1 943
Balance at 31
December 2011 24 380 221 9 218 27 33 846
Changes in equity
Shares forfeited - (71) - - (71)
Dividends - - - (12) (12)
Changes in
ownership interest
– control not
lost, subsidiary
deregistered - - - (7) (7)
Total
comprehensive
income for the
period - - 5 297 (8) 5 289
Total changes - (71) 5 297 (27) 5 199
Balance at 30 June
2012 24 380 150 14 515 - 39 045
Changes in equity
Shares issued for
purchase of
business 2 613 - - - 2 613
Total
comprehensive
income for the
period - - 2 244 - 2 244
Total changes 2 613 - 2 244 - 4 857
Balance at 31
December 2012 26 993 150 16 759 - 43 902
(Amounts less than R 1 000 rounded up)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2012 2011 2012
R’000 R’000 R’000
Cash flow from operating
activities (9 054) 6 591 20 524
Cash flow from investing
activities 87 835 (6 643)
Cash flow from financing
activities 2 638 (371) (1 817)
Net (decrease)/increase in
cash and cash equivalents (6 329) 7 055 12 064
Cash and cash equivalents at
the beginning of the period 17 398 4 836 4 835
Effect of exchange rate
movement on cash held 293 698 498
Cash and cash equivalents at
the end of the period 11 362 12 589 17 398
NOTE 1 – RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE
EARNINGS
Reconciliation of earnings to
headline earnings
Earnings after tax 2 244 1 944 7 241
Adjustments for:
Add: loss on disposal of
property, plant and equipment - - 11
Deduct: tax on loss on
disposal of property, plant
and equipment - - (3)
Headline earnings
attributable to ordinary
shareholders 2 244 1 944 7 249
Weighted average number of
ordinary shares in issue 91 911 008 88 554 275 88 554 275
Diluted weighted average
number of ordinary shares in
issue 90 920 276 90 586 388 90 184 454
Basic earnings per ordinary
share (cents) 2.44 2.20 8.18
Diluted earnings per ordinary
share (cents) 2.47 2.15 8.03
Headline earnings per
ordinary share (cents) 2.44 2.20 8.19
Diluted headline earnings per
ordinary share (cents) 2.47 2.15 8.04
NOTE 2 – UNAUDITED SEGMENTAL ANALYSIS
UNAUDITED SEGMENTAL ANALYSIS FOR THE PERIOD ENDING 31 DECEMBER
2012
Commercial CCS Defence
Division Division Division Total
Total revenue 19 288 2 853 21 742 43 883
Inter-segment revenue (1 897) - (38) (1 935)
Total external revenue 17 391 2 853 21 704 41 948
Corporate office
expense (268) (79) (262) (609)
Depreciation and
amortisation (2 121) (179) (1 648) (3 948)
Operating
profit/(loss) 473 (1 813) 3 827 2 487
Investment income 9 - 253 262
Finance costs (9) - (14) (23)
Profit/(Loss) before
taxation 473 (1 813) 4 066 2 726
Taxation 65 486 (1 033) (482)
Profit/(Loss) for the
period 538 (1 327) 3 033 2 244
UNAUDITED SEGMENTAL ANALYSIS FOR THE PERIOD ENDING 31 DECEMBER
2011
Total revenue 18 989 2 860 17 990 39 839
Inter-segment revenue (1 038) - - (1 038)
Total external revenue 17 951 2 860 17 990 38 801
Corporate office (232) (69) (227) (528)
expense
Depreciation and (1 914) (4) (1 126) (3 044)
amortisation
Operating (1 194) (389) 4 349 2 766
(loss)/profit
Investment income 71 - 169 240
Finance costs (243) - (114) (357)
(Loss)/Profit before (1 366) (389) 4 404 2 649
taxation
Taxation 139 90 (935) (707)
(Loss)/Profit for the (1 227) (299) 3 469 1 943
period
GROUP COMMENTARY
INTRODUCTION
Poynting designs, manufactures and supplies antennas and
telecommunication products to the cellular, wireless data and
defence markets, both within South Africa and internationally
through its subsidiaries and partner companies. Poynting’s export
markets primarily incorporate Europe, the United States of America
(“USA”), the Middle East and Asia. The Group operates as three
divisions, namely Commercial, Defence and the newly formed
Cellular Coverage Solutions (“CCS”).
Poynting’s commercial antennas are used in cellular and 3G end-
user equipment, as well as wireless data networks employing Wi-Fi,
iBurst and WiMAX technologies. These antennas enable and enhance
internet access, and increase throughput while also making data
links reliable.
The Defence Division is focused on the electronic warfare market
which comprises of 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 Defence
Division has also integrated the products of Radiant Antennas
Proprietary Limited (“Radiant Antennas”) which was acquired in
July 2012 and is generating sales from this new product range.
These products have extended the Defence Division to the defence
communication market whereas before we mainly serviced the
Electronic Warfare (“EW”) market.
The defence communication market is fundamentally much larger than
the more specialised EW market and promises good growth
opportunities. Strategically this expansion makes sense since the
EW market demanded very broad bandwidth antennas and our EW
antennas as well as the Commercial 3G antennas has provided
Poynting with leading technology and knowhow to design and
manufacture these broad bandwidth antennas. Technological advances
in Defence Communications similarly demands increasingly broader
bandwidth antennas in large quantities. The combination of
broadband antenna technology and knowhow in mass producing 3G
broadband antennas, together with Radiant Antenna’s existing
mechanical and electrical designs place Poynting in an almost
unique position to capitalise on supplying the Defence
Communication market.
Poynting is currently investing in entering the cellular micro
base station market and has established the CCS division for this
purpose. CCS is fundamentally different from the Commercial
Division which also supplies cellular voice and data solutions for
end user equipment, while CCS products are aimed at the base
station market and are developed to provide coverage to cellular
network operators.
Poynting retained a very strong Research and Development (“R&D”)
department 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, Defence and
CCS Divisions 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 are generated
from large military OEMs, whereas Commercial mainly focuses on
mass produced products sold through distributors or to corporate
customers. CCS mainly services cellular operators and their
customers.
RESULTS OVERVIEW
Group earnings before interest, taxes, depreciation and
amortisation (“EBITDA”) for six months increased by 10.8% from
R5.81 million in December 2011 to R6.44 million in December 2012.
The EBITDA number is the most representative indicator of
profitability since our final earnings number includes
amortisation and depreciation of about R3.95 million which mainly
relates to depreciation of intangible assets. Group revenues
increased by 8.11% and the Group profit after taxation increased
by 15.53%.
Commercial Division revenues decreased by 3.12%. Most
significantly, the Commercial Division EBITDA contribution
increased by 260% from R0.70 million to R2.6 million.
Our Defence Division’s growth in revenue continued during this
period. Defence revenues increased by 20.64% and EBITDA remained
at R5.48 million compared to the previous comparative period.
The tangible net asset value per share increased by 25.26% from
28.19 cents to 35.31 cents between December 2011 and December
2012.
The CCS division made an EBITDA loss of R1.63 million. CCS
expenditure relates to investment in product development, new
technology and marketing while actual income is limited to trial
installation and prototypes for network approval and customer
acceptance. We expect increases in these types of orders in the
second half of the year, which is expected to reduce the losses
that have been incurred. Real profitability is only expected in
the 2014 financial year. Current product development is done in
close collaboration with large operators including multi-national
cellular companies who are leaders in this area. Our new 3rd
generation LTE billboard micro base station is generating
considerable interest and evaluation and sample units have been
delivered. While cooperating with potential customers Poynting has
funded and retained full IP ownership of these products. A number
of patents and registered designs have also been filed to protect
this IP.
OPERATIONAL OVERVIEW
The Defence Division is continuing to become internationally
established as a leader in EW antenna technology. This is best
illustrated by analysing the spread of customers. The top 3
customers for the first half of the current financial year
comprise about 49% of Defence Division’s turnover of R21.7
million. Two years ago the top client comprised more than 57% of
the Defence Division’s turnover of R16.3 million compared to the
previous corresponding period. The top 10 customers comprise 8
multinational defence companies which are listed outside South
Africa.
Defence Division’s engineering, sales and operational functions
are operating with established management teams and proven systems
for each function. These are straining under the growth but are
functioning effectively and are expanding to meet increased demand
for the remainder of the financial year and thereafter.
Commercial Division operations are showing the benefits of mass
production in China. Smaller quantities and more specialised
antennas are still manufactured at Samrand and this manufacturing
flexibility is beneficial to the Company. Manufacturing, quality
and logistic systems and cross cultural relationships has become a
tangible strength for Poynting. The benefits to profitability are
clearly shown by the financial results where a marginal reduction
in turnover still produced increased profitability for this
division. More importantly this structural change provides
massive scalability. Increased sales of 3G antennas to Europe
illustrates the benefits of outsourced manufacture: the majority
of products are shipped to Europe directly from China, resulting
in logistical and other cost advantages.
A separate manufacturing facility adjacent to Samrand office has
been rented to support small scale CCS manufacturing. CCS Division
still operates in close conjunction with Commercial and Poynting
Direct at the Samrand offices.
Poynting Direct has consolidated the Johannesburg and Pretoria
branches at the Samrand offices while the Cape Town branch has
been retained. Poynting Direct sales are showing good growth and
combined with decent margins, this subsidiary contributes to
Commercial Division profitability.
SUBSEQUENT EVENTS
The board of directors of Poynting (“the Board”) is not aware of
any material events that have occurred between the end of the
December 2012 interim period and the date of this report.
PROSPECTS
The Defence Division’s second half performance looks promising.
The Defence Division’s order book mid February 2013 is higher than
ever in the history of this division with good order intake from a
variety of mainly international, but also local customers. Second
half performance will be limited by ability to execute orders
which has exceeded expectations. The Radiant Antenna product range
is also making a positive impact on order intake.
CCS Division has moved to 3rd generation LTE micro base station
technology. This 3rd generation novel base station was the result
of requirements and consultation between Poynting and one of the
largest multi-national cellular companies. This billboard sized
device encompasses a number of patented technologies and potential
demand for these base stations will be millions of units per year
over the next 5 years. Poynting hopes to secure a niche position
in this rapidly expanding market.
Digital Television: South Africa and Africa are required to
convert from current analogue to digital television by 2015. This
requires decoders, antennas and installation of antennas to around
10 million South African households. The South African government
has also committed to supply 5 million low income households with
subsidised antennas and equipment to allow them to continue
watching public television broadcasts. Poynting previously avoided
the television antenna and accessories market, but via partners in
this area and incentives by the South African Department of
Communication’s digital migration project, Poynting has made
several breakthrough inventions in terms of set top boxes,
installation of DTV systems and DTV antennas and antenna
manufacturing. These offer advantages on existing technology and
a large market exist for this technology both locally, in Africa
and elsewhere. Poynting has filed various patents and designs and
have developed some new software and systems to enable successful
rollout of DTV to consumers. This IP has the potential to deliver
significant future returns and we have started a new business unit
to develop and exploit this IP and market opportunities. No
trading has yet taken place in this area with activities mainly in
R&D, product development and marketing. Management is encouraged
about the potential value offered by applying Poynting IP and
knowhow to this new DTV market.
Poynting has undertaken a growth initiative involving
acquisitions, business expansion and organic growth aimed at
significantly increasing turnover in the next 3-5 years. First
fruits of this growth programme are the nascent CCS Division, the
new DTV business expansion and the acquisition of Radiant Antennas
accompanied by expansion into the military communications market.
The Board is placing a high focus on this growth initiative and
further successes will be communicated to shareholders as and when
these happen.
Poynting historically has had a stronger second half performance
and this year indications, market and strong order books are all
indication that we should improve on first half performance.
Overall performance is never certain due to dependence on a
significant portion of turnover associated with shorter term sales
cycles and normal business risks.
BASIS OF PREPARATION
The accounting policies applied in the preparation of these
unaudited condensed consolidated interim results, which are based
on reasonable judgments and estimates, are consistent with those
applied in the annual financial statements for the year ended 30
June 2012. These unaudited condensed consolidated interim results
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.
The unaudited condensed consolidated interim results have not been
reviewed or audited by the Company’s auditors, and have been
prepared under the supervision of Johan Ebersohn, the financial
director of the Group.
DIRECTORATE
There have been no changes to the Board up to and including the
date of this report.
By order of the board
Andre Fourie Johan Ebersohn
Chief Executive Officer Financial Director
8 March 2013
Johannesburg
Directors
Coen Bester*^ (Chairman), Andre Fourie (Chief Executive Officer),
Juergen Dresel (Managing Director) (German), Johan Ebersohn
(Financial Director), Zuko Kubukeli*^, Richard Willis*^
*Independent ^Non-executives
Registered office
33 Thora Crescent, Wynberg, 2090
(PO Box 76579, Wendywood, 2144)
Designated Adviser
Merchantec Capital
Company Secretary
Merchantec Capital
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