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POYNTING HOLDINGS LIMITED - Unaudited Consolidated Results for the six months ended 31 December 2014

Release Date: 05/03/2015 09:00
Code(s): POY     PDF:  
Wrap Text
Unaudited Consolidated Results for the six months ended 31 December 2014

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”)
www.poynting.co.za

Unaudited Consolidated Results for the six months ended 31 December 2014

Group Commentary

Headlines
• DS Revenue increased by 13% to R42 million

• Cash on hand of R75.8m

• Aucom management is optimistic that they will achieve their profit warranty for the full
  year

• Disposal of the loss making businesses has simplified the group and positioned it for growth

• The half year results are impacted by the R25.2 million fair value adjustment of the
  deferred consideration shares issued to the vendors of Aucom. This commentary should be read
  with care as to understand the underlying company performance.

• Headline earnings per share positive, however the adjusted headline earnings per share from
  continuing operations decreased from 10.77 to 5.26 cents per share

Introduction & Company Overview
As announced on 22 December 2014, and as further detailed in the Circular distributed to
shareholders on 20 February 2015, the loss making segments comprising of Commercial cellular
end user antennas (“Commercial”), Cellular Coverage Solutions (“CCS”) and New Business
(“SkunkWorks”), collectively referred to as “Compart”, were disposed of to the former CEO Dr
André Fourie.

The board believes that the sale of the Compart businesses was the best way forward for the
Group. Doubt existed around the feasibility of the Compart businesses and more importantly,
the investment that would be required in order for these businesses to switch over from loss-
leaders to that of significant profit contributors to the group.

The sale results in a much more profitable and focused Group. It is important to note that the
remaining businesses have the DNA and innovation which Poynting is known for and in which we
have built a track record of innovating profitably. The group is now positioned around what we
are good at.

The simplified Group consists of:

Defence and Specialised (“DS”)
DS designs and manufactures specialised broadband antennas as well as other related radio
frequency products. DS’ products sell in the electronic warfare, frequency spectrum
monitoring, communication, test and measurement, and other specialised markets. Our clients
are located across the globe, mostly outside of South Africa (Americas, Europe and Asia) and
operate mainly in the homeland security market space as well as system integrators and
frequency spectrum regulators.

Digital TV (“Aucom”)
Aucom provides end to end solutions for radio and TV broadcasters. It designs, sells and
implements integrated broadcasting systems and has specific expertise in digital television
distribution, multiscreen as well as over-the-top (OTT) systems. Aucom is well positioned to
assist broadcasters with the migration to digital television and radio services across Africa.
A large increase is also expected in private content providers, private TV companies and
private broadcasters.

Results Overview
Total comprehensive income for the six months for the group was R27.7 million, compared to
R3.8 million in the comparative period, however, the financial results for the half year
include items which are not representative of the performance of the underlying operations:

1. The single largest distortion of the results is the complex accounting treatment of the
   African Union Communications Proprietary Limited (“Aucom”) deferred purchase consideration
   shares, which for this period generated a R25.2 million profit due to the decline of the
   Poynting share price from 290c to 239c.

2. The disposal of the Compart businesses resulted in a profit of R2.4 million. The Compart
   businesses were disposed of for a consideration of R35.8 million which is to be settled by the
   repurchase of 14 million shares at 256c per share. The group net assets disposed of amounted
   to R33.4 million.

3. The disposed Compart operations are classified as discontinued, and are disclosed
   separately. The discontinued operations generated a loss of R6.5 million in the half year
   (2013: loss of R6.1 million).

If we eliminate the impact of these transactions, the group’s performance is as follows
                                                         Unaudited              Audited
                                                     six months ended        Year ended
                                                   31 Dec 14    31 Dec 13     30 Jun 14
Reconciliation of Total Comprehensive Income           R’000        R’000         R’000
Profit after Tax
Defence                                                8,542        10,432       16,214
Digital TV                                               271             -      (3,302)
Corporate and consolidation                          (2,245)         (507)      (3,941)
Profit after tax for continuing operations             6,568         9,925        8,972
1. Fair value adjustments                             25,245             -      (9,404)
2. Profit on sale of disontinued operations            2,395             -            -
3. Losses incurred by discontinued operations        (6,463)       (6,139)     (11,680)
Impairment of goodwill                                     -             -     (95,046)
Total comprehensive income                            27,745         3,786    (107,158)

                                                          Unaudited             Audited
                                                      six months ended       Year ended
                                                     31 Dec 14   31 Dec 13    30 Jun 14
                                                         R’000       R’000        R’000
Headline Earnings per Share
Headline Earnings                                      25,341       3,781      (12,112)
Weighted average number of shares*                124,587,719  92,140,231   105,484,979
Headline Earnings per Share (cents)                     20.34        4.10       (11.48)
Adjusted Headline Earnings per Share -
Continuing Operations
Adjusted Headline Earnings - Continuing                 6,558       9,920         8,972
Operations
Weighted average number of shares*                124,587,719  92,140,231   105,484,979
Adjusted Headline Earnings per Share (cents)             5.26       10.77          8.51
* before the 14 million shares to be bought back following the Compart transaction

The increase in headline earnings per share looks positive, however the adjusted headline
earnings per share from continuing operations decreased from 10.77 cents to 5.26 cents due to
the combination of the impact of the decline in earnings from continuing operations (discussed
below) and the increase in the weighted average number of shares in issue.

Business Overview

Defence & Specialised (“DS”)
The DS business continued to deliver good growth with revenue increasing by 13% to R42.4
million and maintaining gross margins. DS continued to be a leader in product innovation,
adding 36 (2013: 15) new products to its portfolio in the six months to support revenue
growth. By comparison, the discontinued operations added 5 (2013: 9) products in the same
period.

Profit after tax was a healthy R8.5 million, this was 18% (R1.9 million) lower than that
recorded in the same period last year. During the 2013 calendar year DS experienced growth
which necessitated further investment in order to sustain the business. A number of
initiatives were launched during 2013 in order to achieve this. Apart from the growth in
headcount from 77 to 92 (increasing the salary bill by R2.5 million for the period); the
business moved from its old premises in Wynberg into a far more fit for purpose set of
buildings in Centurion; there was investment into a new spray booth facility, and the ERP
system was upgraded. Further cost increases are not anticipated in the second half of this
financial year.

Digital TV (“Aucom”)
Digital TV performance in the half year was impacted by a R50.2 million imminent order (true
to its lumpy nature) that was received only early in January 2015. The business was able to
realise a small profit in the half year and Aucom management is optimistic that they will
achieve their profit warranty for the full year. The market conditions for Digital TV
infrastructure rollout in Africa remain robust.

Corporate and Consolidation
The six month period results contain a number of additional costs which were incurred at the
corporate and consolidation level. This is the first period where the group carried the full
burden of the amortisation of intangibles in respect of the Aucom acquisition amounting to
R1.1 million. A complex year end resulted in additional audit fees of R0.7 million being
incurred, as well as the enhancement of the head office team through the appointment of a
chief operating officer and a new financial director. A number of initiatives are being looked
at to reduce the group overhead costs, however shareholders need to take note that significant
costs will be included in the second half in respect of the ARA transaction.

Discontinued Operations
The Discontinued Operations comprising of the Compart businesses were disposed of on 22
December 2014. Their results were consolidated into the Group up to 31 December 2014.

Despite a revenue growth of 58%, these operations recorded a loss of R6,5 million as a result
of low margins.

Prospects
The Compart Transaction results in reduced complexity for the Group, which better equips the
Group to focus on what it is good at. The focus for the next 6-12 months will be to ensure
growth and improved profitability of the DS and Aucom businesses.

DS
DS has consistently grown turnover and profits since its establishment in 2005. The
operational EBIT has grown with a CAGR (Cumulative Annual Growth Rate) of more than 25% over
the past 8 years. Organic growth is stimulated and achieved through the continuous drive
towards adding of new and innovative products into the product portfolio. Further
opportunities for growth are achieved by adding new system houses, distributors and agents,
diversifying territories and entering into new market segments where our core competencies
find application. Management believes DS still has significant potential for organic growth.
The immediate and biggest opportunity is the US market, which is facilitated through the ARA
acquisition.

DS has invested in its capacity for growth. This should be reflected in future results, with a
large confirmed order book and a pipeline which extends into the next financial year.

Aucom
Aucom secured a big order during January 2015. This together with its pipeline should enable
it to meet its warranted minimum net profit after tax of R12.5 million for this financial
year. The Africa pipeline continues to offer significant potential, but due to the long sales
cycles it is probable that these will not be realised in the next half year. Digital TV
migration remains slow due to long approval processes at state broadcasters but provides good
opportunity for the next 3-5 years. There are also numerous new private operators in Africa
which together with the installation of more complex equipment with more frequent upgrades
allows for more ‘maintenance’ revenue.

The Group
The Group’s performance is dependent on a significant portion of revenue associated with long
sales cycles coupled with that of three to six month delivery cycles. In order to mitigate
this, the group continues to expand its regional and product diversity.

Assuming successful conclusion of the ARA acquisition, the group will have reached a long time
goal to secure a USA footprint to support the DS product range and distribution potential. The
current focus is to bed down the acquisition whilst ensuring the profitable organic growth of
our DS and Aucom businesses. Although not an immediate priority, we will remain on the lookout
to secure a footprint into Europe and further identify companies which fit our market profile
and provide synergies to the Group.

Condensed Consolidated Statement Of Profit Or Loss And Other Comprehensive Income
                                                     Unaudited          Restated#
                                                 six months ended      Year ended
                                                    31 December           30 June
                                                    2014          2013       2014
R’000                                                        Restated#
Continuing Operations
Revenue                                           75 437        37 566     95 862
Cost of sales                                   (33 983)       (9 122)   (47 378)
Gross profit                                      41 454        28 444     48 484
Operating expenses                              (32 850)      (15 161)   (37 993)
Trading Operating profit ##                        8 604        13 283     10 491
Investment income                                  1 605           124        797
Fair value adjustments                            25 245             -    (9 404)
Impairment of goodwill                                  -            -   (95 046)
Finance costs                                    (1 565)          (22)       (66)
Profit /(loss) before taxation                    33 889        13 385   (93 228)
Taxation                                         (2 077)       (3 460)    (2 250)
Profit /(loss) from continuing operations         31 812         9 925   (95 478)
Discontinued Operations ###
Revenue                                           25 189        15 889     36 264
Cost of sales                                   (15 477)       (6 678)   (14 611)
Gross profit                                       9 712         9 211     21 653
Operating expenses                              (15 875)      (18 292)   (39 079)
Trading Operating (loss) / profit                (6 163)      ((9 105)   (17 426)
Investment income                                     38            32        217
Profit on disposal of discontinued
operations                                         2 395             -          -
Finance costs                                    (1 279)          (57)       (96)
(Loss) / profit before taxation                  (5 009)       (9 106)   (17 305)
Taxation                                             942         2 967      5 625
(Loss) / profit from discontinued
operations                                       (4 067)       (6 139)   (11 680)
Other comprehensive income                            -             -          -
Total comprehensive income                        27 745        3 786   (107 158)
Weighted average number of ordinary shares
in issue                                     124 587 719   92 140 231 105 484 979
Weighted average number of diluted
ordinary shares in issue                     197 004 274   94 824 085 113 742 087
Basic earnings per ordinary share (cents)          22,27         4,11    (101,59)
Diluted basic earnings per ordinary share
(cents)                                             1,27         3,99     (85,94)
Headline earnings per ordinary share
(cents)                                            20,34         4,10     (11,48)
Diluted headline earnings per ordinary
share (cents)                                       0,05         3,99      (2,38)

# Refer note 4.1
## Trading operating profit/(loss) comprises sale of goods, rendering of services and directly
   attributable costs, but excludes investment income, fair value adjustments, impairment of
   goodwill and finance costs.
### Refer notes 3 and 4.1

Condensed Consolidated Statement Of Financial Position
                                                         Unaudited              Audited
                                                     six months ended        Year ended
                                                        31 December             30 June
                                                       2014           2013         2014
R’000                                                            Restated#
Assets
Non-Current Assets
Plant and equipment                                       5 463     5 116        6 778
Goodwill                                                 55 457     2 207       55 457
Intangible assets                                        13 900    10 918       24 707
Investment in joint venture                                   -         -        2 964
Deferred tax assets                                           -     1 120          280
                                                         74 820    19 361       90 186
Current Assets
Inventories                                              12 056    17 682       23 641
Other financial assets                                    3 500         -        5 630
Current tax receivable                                    3 236         -        3 191
Trade and other receivables                              85 843    20 864       30 994
Cash and cash equivalents                                75 843    36 892       85 871
                                                        180 478    75 438      149 327
Total Assets                                            255 298    94 799      239 513
Equity and Liabilities
Equity
Equity attributable to owners of the Company
Share capital & share premium                        231 159       52 299      231 159
Preference share equity                                  889            -          889
Share-based payment reserve                              123          123          123
Acquisition reserve-contingent consideration       (134 145)            -    (134 145)
(Accumulated loss) / Retained earnings              (57 938)       25 261     (85 683)
Total equity                                          40 088       77 683       12 343
Liabilities
Non-Current Liabilities
Loans and borrowings                                     157          426          114
Preference share liability                            50 111            -       50 111
Liability for contingent consideration               118 305            -      143 550
Other financial liabilities                                -        4 000            -
Deferred tax liabilities                               3 852          682        1 957
                                                     172 425        5 108      195 732
Current Liabilities
Bank overdraft                                             -            -           50
Loans and borrowings                                       -            -        1 908
Trade and other payables                              40 953        8 745       27 168
Current tax payable                                        -        1 217            9
Provisions                                             1 832        2 046        2 303
                                                      42 785       12 008       31 438
Total Liabilities                                    215 210       17 116      227 170
Total Equity and Liabilities                         255 298       94 799      239 513
Number of ordinary shares legally in issue,
less treasury shares                             174 087 719  107 921 053  174 087 719
Net asset value per ordinary share (cents)            100,08        71,98        84,15
Net tangible asset value per ordinary share
(cents)                                                60,24        59,82        38,10

Net asset value is calculated by dividing equity less acquisition reserves, by the number of
ordinary shares in issue, being number of shares in issue less treasury shares.

Net tangible asset value is calculated by dividing equity less acquisition reserve less
goodwill & intangible assets, by the number of ordinary shares in issue.

# Refer note 4.2

Condensed Consolidated Statement of Cash Flows
                                                     Unaudited            Restated#
                                                 six months ended        Year ended
                                                    31 December             30 June
                                                     2014         2013         2014
R’000                                                        Restated#
Continuing Operations
Cash flows from operating activities               20 573       3 634        19 870
Cash flows used in investing activities          (20 649)       1 713       (3 585)
Cash flows from financing activities              (7 365)      17 015        49 844
Total cash and cash equivalents movement for
the period                                        (7 441)      22 362        66 129
Discontinued Operations ##
Cash flows from operating activities              (8 179)     (6 613)      (11 948)
Cash flows used in investing activities           (3 069)     (1 713)      (12 769)
Cash flows from financing activities                5 500       8 106        25 960
Total cash and cash equivalents movement for
the period                                        (5 748)       (220)         1 243
Cash (disposed) / acquired as part of business
combination                                         2 332           -         6 626
Cash and cash equivalents at the beginning of
the period                                         85 821      13 585        13 585
Effect of exchange rate movement on cash
balances                                              879       1 165       (1 762)
Total cash and cash equivalents at end of the
year                                               75 843      36 892        85 821

# Refer note 4.1
## Refer notes 3 and 4.1

NOTE 1 - Reconciliation of Profit / (Loss) to
Headline Earnings
(Loss) / profit from total operations for the
period                                             27 745       3 786     (107 158)
Impairment of goodwill                                  -           -        95 046
Profit on disposal of discontinued operations      (2 395)          -             -
Disposal of plant and equipment                        (9)         (4)            -
Tax                                                     -           -             -
Headline earnings / (loss) attributable 
to ordinary shareholders                             25 341        3 782     (12 112)
NOTE 2 - Reconciliation of Adjusted Headline
Earnings for Continuing Operations
Profit/(loss) from Continuing Operations for
the period                                           31 812        9 925     (95 046)
Impairment of goodwill                                    -            -       95 046
Fair value adjustment of contingent
consideration shares                               (25 245)            -        9 404
Disposal of plant and equipment after tax               (9)          (4)            -
Adjusted Headline earnings for Continuing
Operations                                            6 558        9 921        8 972

Earnings per share from continuing Operations
Basic earnings per ordinary share (cents)             25,53        10,77      (90,51)
Diluted basic earnings per ordinary share
(cents)                                                3,33        10,47      (75,67)
Headline earnings per ordinary share (cents)          25,53        10,77       (0,41)
Diluted headline earnings per ordinary share
(cents)                                                3,33        10,46         7,89
Adjusted Headline earnings per ordinary share
(cents) -
Continuing Operations                                  5,26        10,77         8,51

Adjusted Headline earnings is calculated by adjusting profit for the fair value adjustment of
the contingent consideration

Adjusted Headline Earnings per share is calculated by dividing adjusted headline earnings by
the weighted average number of ordinary shares in issue.

Condensed Consolidated Statement of Changes In Equity

                                                                     Share based
                                                Share        Share       payment   Acquisition
R’000                                         capital      premium       reserve       reserve
Six months ended 31 December 2014
Balance at 01 July 2014                             9      231 150           123     (134 145)
Profit for the period
Balance at 31 December 2014                         9      231 150           123     (134 145)
Year ended 30 June 2014
Balance at 01 July 2013 - restated #                5       27 014           123               -
Profit for the year
Issue of shares for cash                            1       25 279             -             -
Issue of shares - business combination              3      178 857             -     (134 145)
Issue of preference shares *                        -            -             -             -
Balance at 30 June 2014 - audited                   9      231 150           123     (134 145)
Six months ended 31 December 2013
Balance at 01 July 2013 - restated #                5       27 014           123               -
Profit for the period
Issue of shares for cash                            1       25 279             -               -
Balance at 31 December 2013                         6       52 293           123               -

                                                       (Accumulated
                                                            loss) /
                                                           Retained    Preference        Total
R’000                                                      earnings        shares
Six months ended 31 December 2014
Balance at 01 July 2014                                    (85 683)           889       12 343
Profit for the period                                        27 745                     27 745
Balance at 31 December 2014                                (57 938)           889       40 088
Year ended 30 June 2014
Balance at 01 July 2013 - restated #                         21 475             -       48 617
Profit for the year                                       (107 158)                  (107 158)
Issue of shares for cash                                          -             -       25 280
Issue of shares - business combination                            -             -       44 715
Issue of preference shares *                                      -           889          889
Balance at 30 June 2014 - audited                          (85 683)           889       12 343
Six months ended 31 December 2013
Balance at 01 July 2013 - restated #                         21 475             -       48 617
Profit for the period                                         3 786                      3 786
Issue of shares for cash                                          -             -       25 280
Balance at 31 December 2013                                  25 261             -       77 683

* Issue of 20.4m preference shares at R51 million, of which R0.9 million is classified as
  equity. The shares have the option to convert at R2.50 in June 2017

# Refer note 4.2

Segmental Analysis for The Period Ending
                                                            Unaudited        Restated #
                                                        six months ended     Year ended
                                                           31 December          30 June
                                                           2014         2013       2014
R’000                                                             Restated #
Continuing Operations
Segmental Revenue ##
Defence                                                 42 380       37 566      76 653
Digital TV *                                            33 057            -      19 209
Group                                                   75 437       37 566      95 862
Operating Earnings before Interest, Tax, Depreciation
and Amortisation**
Defence                                                  12 298      15 618      23 624
Digital TV*                                                 784           -     (4 997)
Corporate & consolidation                               (2 432)       (508)     (3 439)
Group                                                    10 650      15 110      15 188
Profit / (Loss) for the period
Defence                                                  8 542       10 432      16 214
Digital TV*                                                271            -     (3 302)
Corporate & consolidation ***                           22 999        (508)   (108 392)
Group                                                   31 812        9 924    (95 480)
Discontinued Operations #
Segmental Revenue ##
Commercial                                              19 835       13 822      32 426
CCS                                                        847        2 025       3 796
New Business                                             4 507           42          42
Total Compart                                           25 189       15 889      36 264
Operating Earnings before Interest, Tax, Depreciation
and Amortisation **
Commercial                                                 527        (484)      (2 732)
CCS                                                     (1 479)     (4 290)      (5 270)
New Business                                            (3 328)     (1 545)      (3 633)
Total Compart                                           (4 280)     (6 319)     (11 635)
Profit / (Loss) for the period
Commercial                                                 428      (2 068)      (4 595)
CCS                                                     (1 984)     (3 027)      (4 034)
New Business                                            (2 511)     (1 044)      (3 051)
Total Compart                                           (4 067)     (6 139)     (11 680)

* consolidated from March 2014
** Operating EBITDA is EBITDA excluding fair value gains and losses
*** includes fair value adjustment of deferred purchase consideration
# Refer note 4.1
## Intersegment revenue is not disclosed as it is not material
 
                                                                   Unaudited       Restated
                                                                        as at          as at
                                                             31 December 2014   30 June 2014
Segment Assets
Defence                                                                76,149         54,879
Digital TV                                                             39,756         39,775
Discontinued operations                                                     -         40,876
Corporate & consolidation                                             139,393        103,981
Group                                                                 255,298        239,511
Segment Liabilities
Defence                                                              (26,064)       (14,285)
Digital TV                                                           (17,778)       (18,068)
Discontinued operations                                                     -       (12,075)
Corporate & consolidation                                           (171,368)      (182,742)
Group                                                               (215,210)      (227,170)

3. DISPOSAL OF LOSS MAKING SUBSIDIARIES (DISCONTINUED OPERATONS)
As announced on SENS on 22 December 2014 the Company has entered into an implementation
agreement (“Implementation Agreement”) with, inter alia, its former Chief Executive Officer,
Dr Andries Petrus Cronje Fourie (“Dr Fourie”) and the trustees for the time being of the
Andries Petrus Cronje Fourie Trust (“the Trust”), whereby the Company disposed of its
interests in Poynting Antennas Proprietary Limited (“Poynting Antennas”) (excluding the
profitable Poynting DS and Poynting SS divisions) as well as Poynting Direct Proprietary
Limited (“Poynting Direct”), Poynting Hong Kong Limited (“Poynting HK”) and a minority
interest in CrunchYard Holdings Proprietary Limited (“CrunchYard”) (“the Composite Sale”) to
an entity controlled by Dr Fourie (“NewCo”)(the “Composite Transaction”).

In terms of the Implementation Agreement, the Composite Sale purchase consideration will be
settled through the specific repurchase of 14 000 000 Poynting Holdings shares (“the Specific
Repurchase”).

In terms of the Composite Sale, NewCo acquired all the shares in and loan claims in Poynting
Antennas, Poynting Direct, Poynting HK and CrunchYard from the Company for a purchase
consideration of R35 840 000 (which is equal to the 30 day volume weighted average trading
price per share of the Company, on 1 December 2014, being R2.56, multiplied by 14 000 000)
(“Purchase Consideration”) which Purchase Consideration will remain outstanding on loan
account (“NewCo Loan”).

NewCo has pledged to the Company 14 000 000 ordinary shares which it holds in the Company, as
security for NewCo’s obligations pursuant to the NewCo Loan.

Subject to the receipt of applicable regulatory and shareholder approval, the Purchase
Consideration will be settled through the Specific Repurchase by the Company, on loan account,
of 14 000 000 shares held by NewCo in the Company (“Poynting Holdings Loan”), whereafter such
shares shall be cancelled; and the NewCo Loan and the Poynting Holdings Loan will then be set-
off.

Identifiable net assets and liabilities disposed                       31 December 2014
                                                                                  R'000
Plant and equipment                                                               2 472
Intangible Assets                                                                 8 640
Investments                                                                       3 459
Inventories                                                                      11 981
Trade and other receivables                                                       7 946
Cash and cash equivalents                                                       (2 332)
Deferred tax assets                                                                 943
Current tax assets                                                                1 509
Other financial liabilities                                                        (37)
Trade and other payables                                                        (1 136)
Total identifiable net assets disposed                                           33 445
Profit on disposal                                                                2 395
Total Consideration                                                              35 840

4. RESTATEMENT OF COMPARATIVES
4.1 Due to the disposal of the loss making operations and classification of these as
discontinued, the statement of profit or loss, statement of cash flows and segmental analysis
comparative figures have been restated

4.2 During 2013, Poynting Antennas Pty Ltd received R4 million from African Union
Communications Pty Ltd (“Aucom”) relating to the development of a new product. In return,
Aucom secured the rights to commissions for each product sold. The R4 million was incorrectly
recognised as revenue for the year ended 30 June 2013. The fair value (plus any directly
attributable transaction costs) should have been recognised as a financial liability, as there
is a contractual obligation to Aucom which is dependent on the occurrence of future sales of
the product. The transaction is eliminated as a pre-existing relationship on consolidation of
Aucom in the current financial period.

5. CONTINGENT CONSIDERATION IN RESPECT OF AUCOM ACQUISITION
Contingent Consideration
Of the 66 million shares issued, 49.5 million shares were held as guarantee, to be released to
the sellers as profit warranties are met for the years ending 30 June 2014, 30 June 2015 and
30 June 2016, or clawed back if warranties are not met. The fair value of this portion of the
contingent consideration, which is represented by shares already in issue, amounted to R143.5
million at 30 June 2014, and is presented by an acquisition reserve in equity.The shares were
revalued at 31 December 2014, and the contingent consideration decreased by R25.2 million as
consequence of the decrease in the Poynting share price from 290 cents per share to 239 cents
per share.

Financial instruments carried at fair value
The fair value of a financial instrument is the price that would be received for the sale of
an asset or paid for the transfer of a liability in an orderly transaction between market
participants at the measurement date.

The existence of published price quotations in an active market is the best evidence of fair
value and, where they exist, they are used to measure the financial asset or financial
liability. A market is considered to be active if transactions occur with sufficient volume
and frequency to provide pricing information on an ongoing basis. Financial instruments fair
valued using quoted prices would generally be classified as level 1 in terms of the fair-value
hierarchy.

Where a quoted price does not represent fair value at the measurement date or where the market
for a financial instrument is not active, the group establishes fair value by using a
valuation technique.

Valuation techniques applied by the group would result in financial instruments being
classified as level 2 or level 3 in terms of the fair value hierarchy. The determination of
whether a financial instrument is classified as level 2 or level 3 is dependent on the
significance of observable inputs versus unobservable inputs in relation to the fair value of
the financial instrument.
The valuation technique applied to specific financial instruments depend on the nature of the
financial instrument and the most appropriate valuation technique is determined on that basis.
The carrying values of other financial assets & liabilities, trade & other receivables &
payables and loans & borrowings approximate their fair value.
Fair value hierarchy
Fair value measurements are categorised into different levels in the fair value hierarchy
based on inputs to valuation techniques used. The different levels are defined as follows:

. Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the
  asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

. Level 3: Inputs for the asset or liability that are not based on observable market data
  (unobservable inputs).

Valuation of the liability for acquisition to be settled by shares already in issue
In terms of IFRS 13.24, fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction in the principal (or most advantageous)
market at the measurement date under current market conditions (i.e. an exit price) regardless
of whether that price is directly observable or estimated using another valuation technique.
The market in Poynting shares does not have sufficient frequency and volume to provide pricing
information on an ongoing basis in respect of the 49.5 million deferred purchase consideration
shares already in issue that are deemed under IFRS3 Business Combinations to be deferred
consideration.

Uncertainty exists whether Poynting could have entered into a transaction to place shares at a
price of 240 cents per share at close of business in the market on 31 December 2014, and
management therefore have determined that under IFRS 13.78 this could not be a level 1 input.
Management have therefore considered a number of other indicators to determine the fair value
of the deferred consideration shares. This included the 30 day Volume Weighted Average Price
up to 31 December 2014 of 238 cents per share, and the price within the bid-ask spread that is
most representative of fair value, which is to be used to measure fair value regardless of
where the input is categorised within the fair value hierarchy.

Management also considered the bid price available on 31 December 2014 by reference to the
opening share price on 2 January 2015 (being 240 cents per share) and the average traded price
on 5 January 2015 (being 233 cents per share) and has valued the liability in respect of the
deferred consideration shares already in issue at 239 cents per share.

                                                    31 December     31 December      30 June
R’000                                                      2014            2013         2014
Deferred Purchase Consideration (being a Level 3
fair value adjustment)
Balance at the beginning of the year                  (143 549)               -            -
Liability for contingent consideration                        -               -    (134 145)
Revaluation in profit and loss                           25 245               -      (9 404)
Balance at the end of the year                        (118 304)               -    (143 549)

A change of 10% in the fair value of investment and liability at the reporting date would have
increased/(decreased) equity and profit or loss by the amount shown below. This analysis
assumes that all other variables remain constant.
                                                    31 December      31 December     30 June
Effect on profit/(loss) and equity                         2014             2013        2014
10% increase in share price                               2 524                -     (14 355)
10% decrease in share price                              (2 524)               -      14 355

6. STATEMENT OF COMPLIANCE
Poynting Holdings Limited (“Poynting” or the “Company”) is a South African registered company.
These condensed consolidated interim financial statements comprise the Company and its
subsidiaries (together referred to as the “Group”) and the Group’s interest in joint ventures.

The condensed consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standards, IAS 34 Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by the Financial Reporting Standards Council and the requirements of
the Companies Act of South Africa. These condensed interim financial statements have not been
reviewed or audited by the Group’s auditors.

7. BASIS OF PREPARATION
The condensed consolidated interim financial statements have been presented on the historical
cost basis, except for the liability for contingent consideration, which is fair valued. These
results are presented in Rands, rounded to the nearest thousand, which is the functional
currency of Poynting and the Group’s presentation currency. These condensed consolidated
interim financial statements incorporate the financial statements of the Company, its
subsidiaries and companies that, in substance, are controlled by the Group and the Group’s
interest in joint ventures. Results of subsidiaries and joint ventures are included from the
effective date of acquisition up to the effective date of disposal. All significant
transactions and balances between Group enterprises are eliminated on consolidation.

The accounting policies applied in the preparation of the condensed consolidated interim
financial statements are in terms of IFRS and are consistent with those applied in the
previous consolidated annual financial statements, except for the standards and amendments to
standards that became effective for the first time in the financial year commencing 1 July
2014 disclosed below:

· IFRS 10 – Consolidated Financial Statements;
· IFRS 11 – Joint Arrangements;
. IFRS 12 – Disclosure of Interests in Other Entities
· IFRS 13 – Fair Value Measurement;
· IAS 19 (2011) – Employee Benefits;
· IAS 28 (2011) – Investments in Associates and Joint Ventures;
· Amendments to IFRS 7 – Financial Instruments: Disclosures: Offsetting Financial Assets and
  Financial Liabilities;
· Amendment to IAS 32 – Financial Instruments Presentation: Tax effect of distribution to
  holders of equity instruments; and
· IAS 34 – Interim Financial Reporting: Segment information for segment assets.

The impact of adopting the above standards has had no material effect on the condensed
consolidated interim financial statements. The remaining standards, amendments and
interpretations, which became effective in the interim period ended 31 December 2014 were
assessed for applicability to the Group and management concluded that they were not applicable
to the business of the Group and consequently will have no impact.

8. SUBSEQUENT EVENTS
Shareholders are referred to the SENS announcement dated 19 February 2015 regarding the
proposed acquisition of 100% of the issued share capital of Antenna Research Associates Inc.
(“the Acquisition”). The total purchase consideration is comprised of USD 5 million in cash,
payable upon closing of the Acquisition and 75 577 634 Poynting shares to be issued at the
closing price on the date of closing of the Acquisition.

The Acquisition is classified as a Category 1 transaction in terms of the JSE Listings
Requirements and requires shareholder approval. Accordingly, a circular containing full
details of the Acquisition and a notice to convene a general meeting of Poynting shareholders
in order to consider and if deemed fit, to pass with or without modification, the resolutions
necessary to approve and implement, inter alia, the Acquisition, will be posted to Poynting
shareholders in due course.

Furthermore, shareholders are referred to the Circular distributed to shareholders as
announced on SENS on 20 February 2015 which includes a notice of general meeting of
shareholders to be held on Monday 23 March 2015 to consider and, if deemed fit, passing with
or without modification, resolutions in respect of the Specific Repurchase, adoption of the
Share Incentive Scheme, and the proposed change of name.

9. PREPARATION OF FINANCIAL STATEMENTS
The condensed consolidated financial statements were prepared by of the Group Financial
Director, John von Gottberg BScEng(Aero) BCom(Acc) PGDA CA(SA).

10. DIRECTORATE
During the period under review, up to and including the date of this report, the following
changes to the Board took place.

.   Mr   Johan Ebersohn resigned as Financial Director on 10 September 2014.
.   Mr   John von Gottberg was appointed as Financial Director on 10 September 2014.
.   Mr   Andries Mellet resigned on 24 October 2014.
.   Mr   Nico de Waal was appointed as Non-Executive Director on 24 October 2014.
.   Dr   André Fourie resigned as Chief Executive Office and Director on 19 December 2014.
.   Mr   Richard Willis was appointed as Independent Non-Executive Director on 1 February 2015.

By order of the board

Juergen Dresel                        John von Gottberg
Chief Executive Officer               Financial Director

5 March 2015
Johannesburg

Directors
Coen Bester*^ (Chairman), Nico de Waal^, Jürgen Dresel # (CEO), Villiers Joubert, Zuko
Kubukeli*^, John von Gottberg (Financial Director), Richard Willis*^
*Independent ^Non-executives #German

Business address and registered office
1 Travertine Avenue, N1 Business Park, Old Johannesburg Road, Centurion, 0157
(Private Bag X4, The Reeds, Pretoria, 0166)

Designated Adviser
Merchantec Proprietary Limited
Registration Number 2008/027362/07
2nd Floor, North Block, Hyde Park Office Tower, Corner 6th Rd and Jan Smuts Ave, Hyde Park,
2196
(PO Box 41480, Craighall, 2024)

Company Secretary
Merchantec Proprietary Limited

Transfer Secretaries
Computershare Investor Services Proprietary Limited
Registration Number 2004/003647/07
Ground Floor, 70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)

Auditors
KPMG Inc.

Bankers
ABSA Bank
Standard Bank

PRINCIPAL SUBSIDIARIES
Alaris Antennas Proprietary Limited (formerly Poynting Inventions Proprietary Limited)
Registration Number 2013/048197/07
Defence & Specialised Antennas Division
Managing Director: Jürgen Dresel
1 Travertine Avenue, N1 Business Park, Old Johannesburg Road, Centurion, 0157
Tel +27 (0)10 007 2020

African Union Communications Proprietary Limited
Registration Number 1999/000409/07
Digital TV Division
Managing Director: Villiers Joubert
394 Cliff Avenue, Waterkloof Ridge X2, Pretoria
Tel +27 (0)12 001 8670

Date: 05/03/2015 09:00:00 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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