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Unaudited condensed consolidated Interim results for the six months ended 31 December 2013
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 2013
HIGHLIGHTS:
· Earnings per share increased by 68.4% from 2.44 cents to 4.11
cents.
· Revenue increased by 27.4% from R41.9 million to R53.5 million.
· Exports contribution increased from 51.7% to 68.3% of Group
revenues.
· Tangible Net Asset Value per share increased by 76.9% from 35.3
cents to 62.5 cents.
· Bank and cash balances increased by 224.7% from R11.4 million to
R36.9 million as at 31 December 2013.
· PSG Private Equity Proprietary Limited (“PSG Private Equity”)
commits to R100 million investment. R25 million was paid to Poynting
Holdings Limited (“Poynting”) for the issue of 16 million Poynting
shares, R23.7 million was paid to existing shareholders and R51
million is subject to the Preference Share Subscription Agreement on
4 March 2014 in terms of which PSG Private Equity will subscribe for,
and Poynting agreed to issue, 20 400 000 redeemable, convertible
preference shares of no par value, at a subscription price of R2.50
per Preference Share (Refer Subsequent Events).
· Poynting acquired 100% of the entire issued share capital of
African Union Communications (Pty) Limited (“Aucom”). Aucom had an
unaudited and unconsolidated turnover of R52.4 million and profit
after tax of approximately R8.4 million for the interim period up to
31 December 2013 (Refer Subsequent Events).
INTRODUCTION
Poynting has two main operating entities: Poynting Antennas
(Proprietary) Ltd (“Poynting Antennas”) and African Union
Communications (Proprietary) Limited (“Aucom”).
Poynting Antennas 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 Antennas export markets
primarily incorporate Europe, the United States of America (“USA”),
the Middle East and Asia. Poynting Antennas operates as four
divisions, namely Commercial, Defence, Cellular Coverage Solutions
(“CCS”) as well as Aucom.
The Defence Division is focused on the Electronic Warfare (“EW”)
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 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 know-how in mass
producing 3G broadband antennas, together with Radiant Antennas
existing mechanical and electrical designs place Poynting in an almost
unique position to capitalise on supplying the Defence Communication
market.
Subsequent to period end Aucom provides Digital TV (DTV) transmission
infrastructure to African customers. Their business, simply stated, is
to design, supply and install equipment which delivers DTV signals to
consumer television. The input for their equipment is video signal
“content” generated by broadcasters which needs to be digitised,
compressed, combined, distributed and transmitted either using
terrestrial transmitters or satellites. Aucom is a market leader in
this area in Africa with decades of experience in the TV broadcasting
industry and long term relationships with leading suppliers of DTV
broadcasting manufacturers in Europe, USA and Asia.
Aucom generates about 50% of its business in South Africa and 50% in
the rest of Africa although this ratio can vary year-by-year due to
the large size of their typical projects. Their business growth is
strongly fuelled by the “African Digital Migration” which is an
International Telecommunications Union (“ITO”) driven initiative to
transform all analogue TV transmission to DTV by 2015. This migration
is mandated by international treaties agreed to by all member states
since DTV transmission technology does not work well unless all
neighbouring countries convert to DTV together. DTV uses TV spectrum
(frequencies) much more efficiently than analogue TV and 20 DTV
channels “TV stations” can be transmitted in a single traditional
analogue TV channel. DTV hence has potential to provide a huge
increase in TV channels and potential for private and local
broadcasters to easily provide content to media starved consumers in
Africa. Another strong driver for the Digital Migration is that this
more efficient use of TV spectrum means that large chunks of
traditional TV channels will be reallocated to 4G/LTE operators which
again will boost cellular data delivery in Africa. This is known as
the “Digital Dividend” and is key to enable Africa to cross the so
called “Digital Divide” which refers to the divide between people in
the world with access to internet and those who do not have such
access.
Poynting Antennas 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.
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 has 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.
RESULTS OVERVIEW
Shareholders are advised that the financial results of Aucom for the
six months ended 31 December 2013 have not been included in Poynting’s
interim financial results.
· Group earnings before interest, taxes, depreciation and amortisation
(“EBITDA”) for six months increased by 36.6% from R6.4 million in
December 2012 to R8.8 million in December 2013. The EBITDA number is
the most representative indicator of profitability since our final
earnings number includes amortisation and depreciation.
· Tangible Net Asset Value per share increased 76.9% from 35.3 cents
to 62.5 cents between December 2012 and December 2013.
· The investment of PSG Private Equity in Poynting Holdings resulted
in the bank and cash balances increasing by 224.7% from R11.4 million
to R36.9 million as at 31 December 2013.
Performance was mainly driven by Defence Division’s excellent results
with profit after tax contribution of R9.9 million (227% increase)
from revenues of R37.6 million (73% increase). This was offset with a
disappointing loss of R2.1 million in the Commercial Division and a
loss of R3.0 million in the CCS Division as well as losses of R1.0
million associated with business development in the New Business
Division.
OPERATIONAL OVERVIEW
The Defence Division is continuing to become internationally
established as a leader in EW antenna technology. The market
penetration is now rapidly expanding and this is mainly due to the
international large customers increasing and their order book after
the excellent first 6 months has increased substantially compared to
the beginning of the period. Defence Division performance is more
remarkable given a cyclic downturn in the international defence
industry and is certainly not spurious given the simultaneous growth
in the order book and customer numbers.
The 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 but restructuring of its sales channels and
production facilities in China has negatively impacted on
profitability. These disruptions are now largely complete and better
performance is expected in the second half.
CCS Sales have been stagnant but management is engaged at
restructuring to reduce operational costs and improve product sales
and marketing.
New Business expenses relates to some new DTV consumer products such
as the SunPoynt TV and the new DigiAnt DTV antenna. These are
progressing well and we are continuing with these and other new
business endeavours.
SUBSEQUENT EVENTS
ACQUISITION OF AUCOM
Shareholders are advised that the financial results of African Union
Communications Proprietary Limited (“Aucom”) for the six months ended
31 December 2013 have not been included in Poynting’s interim
financial results, following the acquisition of 100% of the issued
share capital of Aucom by Poynting (“Aucom Acquisition”) as detailed
in the circular to shareholders dated 31 January 2014.
This is due to the effective date of Poynting’s control over Aucom
being 28 February 2014 in terms of International Financial Reporting
Standards, as the last of the conditions precedent to the Aucom
Acquisition, being shareholder approval, was obtained at the general
meeting held on 28 February 2014.
Aucom had an unaudited turnover of R52.4 million and profit after tax
of approximately R8.4 million for the interim period up to 31 December
2013. Aucom’s financial results can only be consolidated as from 28
February 2014. The Aucom Acquisition is expected to deliver a better
than expected contribution to Poynting.
SPECIFIC ISSUE OF REDEEMABLE, CONVERTIBLE PREFERENCE SHARES
Shareholders are referred to the announcement released on SENS on 6
March 2014 in which they were advised that the Company and PSG Private
Equity had entered into a Preference Share Subscription Agreement on 4
March 2014 in terms of which PSG Private Equity will subscribe for,
and the Company agreed to issue, 20 400 000 redeemable, convertible
preference shares of no par value, at a subscription price of R2.50
per Preference Share, for a total subscription consideration of R51
000 000 (“the Specific Issue”).
The circular containing, inter alia, full details of the specific
issue will be posted to shareholders in due course and will contain a
notice of the general meeting of shareholders to vote on the Specific
Issue.
RATIONALE FOR SPECIFIC ISSUE
The Company will use the net proceeds of the Specific Issue for the
purpose of the Company’s acquisition strategy and to fund working
capital going forward.
PROSPECTS
Defence Division is poised to continue producing excellent results in
the second half with a larger order book, strong pipeline and well
established customer relationships.
Commercial Divisions second half performance should be better than the
dismal first half results. CCS division is not expected to produce any
fireworks in the second half but costs have been reduced and a better
performance in revenue is expected than the first six months.
Aucom has healthy orders and opportunities and indications are that
their second half performance will also be equal to or better than the
first half.
Poynting historically has had a stronger second half performance and
this year market indications and the strong order books are all an
indication that we should improve on the 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.
The Growth Plan of Poynting is continuing with the main focus being
acquisitions to improve international sales channels and add on
acquisitions to current Defence, Telecommunication and DTV business
areas. Poynting is trying to position itself as a leading player in
the “Triple” play future market where it is widely believed that TV,
Voice and Internet communications will converge since all are
inherently digital. We are actively engaged in this growth plan with a
pipeline of opportunities which are being actively pursued.
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 2013. These
unaudited condensed consolidated interim results as set out in this
report have been prepared in accordance with International Financial
Reporting Standards (“IFRS”), IAS 34 – Interim Financial Reporting,
the Companies Act, 2008 (Act 71 of 2008), as amended, the SAICA
Financial Reporting Guidelines as issued by the Accounting Practises
Committee, the Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Council 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
Coen Bester*^ (Chairman)
Andre Fourie (Chief Executive Officer)
Juergen Dresel (Managing Director) (German)
Johan Ebersohn (Financial Director)
Zuko Kubukeli*^
Andries Mellet^
* Independent ^ Non-executive
Changes to the Board
A Mellet Non-executive director Appointed 20 December 2013
R C Willis Non-executive director Resigned 05 March 2014
C Douglas Non-executive director Resigned 05 March 2014
(Alternative to RC Willis)
By order of the board
Andre Fourie Johan Ebersohn
Chief Executive Officer Financial Director
31 March 2014
Johannesburg
Registered Office: 33 Thora Crescent, Wynberg 2090
PO Box 76579, Wendywood 2144
Designated Adviser: Merchantec Capital
Company secretary: Merchantec Capital
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
31 December 31 December 30 June
2013 2012 2013
R’000 R’000 R’000
ASSETS
Non-current assets 18 241 15 275 18 950
Property, plant and equipment 5 116 3 831 4 976
Goodwill 2 207 - 2 207
Intangible assets 10 918 11 444 11 767
Current assets 75 438 36 820 45 554
Inventories 17 682 9 273 12 427
Other financial assets - - 171
Current tax receivable - - 413
Trade and other receivables 20 864 16 185 18 141
Bank and cash balances 36 892 11 362 14 402
Total assets 93 679 52 095 64 504
EQUITY AND LIABILITIES
Equity 80 563 43 902 51 497
Equity attributable to
owners of parent 80 563 43 902 51 497
Non-current liabilities
Interest-bearing liabilities 284 206 300
Current liabilities 12 832 7 987 12 707
Interest-bearing liabilities 142 219 284
Trade and other payables 12 690 7 768 12 423
Total equity and liabilities 93 679 52 095 64 504
Number of ordinary shares
in issue 107 921 053 91 911 008 93 921 053
Net asset value per
ordinary share (cents) 74.65 47.77 54.83
Net tangible asset value
per ordinary share (cents) 62.49 35.31 39.95
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
as at as at as at
31 December 31 December 30 June
2013 2012 2013
R’000 R’000 R’000
Revenue 53 455 41 948 93 743
Cost of sales (15 800) (13 900) (30 010)
Gross profit 37 655 28 048 63 733
Other income 216 350 2 487
Operating costs (33 669) (25 911) (55 413)
Operating profit 4 202 2 487 10 807
Investment income 156 262 488
Finance costs (80) (23) (58)
Profit before taxation 4 279 2 726 11 237
Taxation (493) (482) (1 397)
Profit after taxation 3 786 2 244 9 840
Total comprehensive income 3 786 2 244 9 840
Profit attributable to:
Equity holders of parent 3 786 2 244 9 840
Non-controlling interest - - -
Total comprehensive income 3 786 2 244 9 840
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share-
Share based Retained
capital payment earnings Total
R’000 R’000 R’000 R’000
Balance at 1 July 2012 24 379 150 14 515 39 044
Changes in equity 2 640 - - 2 640
Total comprehensive income
for the period - - 2 244 2 244
Total changes 2 640 - 2 244 4 884
Balance at 31 December 2012 27 019 150 16 759 43 928
Changes in equity
Share options forfeited - (26) - (26)
Share options exercised - (1) - (1)
Total comprehensive income
for the period - - 7 596 7 596
Total changes - (27) 7 596 7 569
Balance at 30 June 2013 27 019 123 24 355 51 497
Changes in equity 25 280 - - 25 280
Net profit for the period - - 3 786 3 786
Total changes 25 280 - 3 786 29 066
Balance at 31 December 2013 52 299 123 28 141 80 563
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
as at as at as at
31 December 31 December 30 June
2013 2012 2013
R’000 R’000 R’000
Cash flow from operating
activities (2 979) (9 054) 6 451
Cash flow from investing
activities - 87 (14 321)
Cash flow from financing
activities 25 122 2 638 2 823
Net increase / (decrease)
in cash and cash
equivalents 22 142 (6 329) (5 047)
Cash and cash equivalents
at beginning of the period 13 585 17 398 17 398
Effect of exchange rate
movement on cash held 1 165 293 1 234
Cash and cash equivalents
at end of the period 36 892 11 362 13 585
NOTE 1 - RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS
Unaudited Unaudited Audited
as at as at as at
31 December 31 December 30 June
2013 2012 2013
R’000 R’000 R’000
Reconciliation of earnings
to headline earnings
Earnings after tax 3 786 2 244 9 840
Deduct: profit on disposal
of property,
plant and equipment (6) - -
Add: tax on profit on
disposal of property,
plant and equipment 2 - -
Headline earnings attributable
to ordinary shareholders 3 781 2 244 9 840
Weighted average number of
ordinary shares in issue 92 140 231 91 911 008 93 921 053
Weighted average number of
diluted ordinary
shares in issue 94 824 085 90 920 276 94 711 843
Basic earnings per ordinary
share (cents) 4.11 2.44 10.48
Diluted earnings per
ordinary share (cents) 3.99 2.47 10.39
Headline earnings per
ordinary share (cents) 4.10 2.44 10.48
Diluted headline earnings
per ordinary share (cents) 3.99 2.47 10.39
UNAUDITED SEGMENTAL ANALYSIS FOR THE PERIOD ENDING 31 DECEMBER 2013
Commercial CCS New Defense Total
Division Division Business Division
Division
R’000 R’000 R’000 R’000 R’000
Total revenue 20 432 2 025 42 37 578 60 077
Inter-segment
revenue (6 610) - - (12) (6 622)
Total external
revenue 13 822 2 025 42 37 566 53 455
Corporate office
expense (484) (118) (71) (508) (1 180)
Depreciation and
amortisation (2 263) (335) (164) (1 827) (4 588)
Operating profit (2 748) (4 624) (1 709) 13 283 4 202
Investment income 4 1 29 124 156
Finance costs (57) - - (22) (80)
(Loss)/Profit
before taxation (2 801) (4 624) (1 680) 13 385 4 279
Taxation 733 1 597 637 (3 460) (493)
(Loss)/Profit for
the period (2 068) (3 027) (1 044) 9 925 3 786
Operating profit (2 748) (4 624) (1 709) 13 283 4 202
Depreciation
and Amortisation 2 263 335 164 1 827 4 588
EBITDA (484) (4 290) (1 545) 15 110 8 790
UNAUDITED SEGMENTAL ANALYSIS FOR THE PERIOD ENDING 31 DECEMBER 2012
Commercial CCS New Defense Total
Division Division Business Division
Division
R’000 R’000 R’000 R’000 R’000
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 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
Operating profit 473 (1 813) - 3 827 2 487
Depreciation and
amortisation 2 121 179 - 1 648 3 948
EBITDA 2 594 (1 634) - 5 475 6 435
Date: 31/03/2014 09:12:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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