GINV.L Regulatory News (GINV)

Global Invacom Group Limited

("Global Invacom", the "Company" or the "Group")

Final Results for the year ended 31 December 2020

Singapore/London, 1 March 2021 - Global Invacom (SGX: QS9) (AIM: GINV), the fully integrated provider of satellite communications equipment and electronics, announces its financial results for the year ended 31 December 2020 ("FY2020").

Despite the international challenges brought about by the COVID-19 pandemic, the Group is pleased to report a profit for the year.

Key financial highlights:

· Revenue for FY2020 decreased 23.4% to US$103.1 million (FY2019: US$134.5 million)

· Gross profit increased to US$25.7 million (FY2019: US24.1* million)

· Net profit increased to US$2.6 million (FY2019: US$12.3 million net loss**)

· Robust net cash at 31 December 2020 of US$7.4 million

*includes US$4.1 million impairment costs related to the closure of the Group's Shanghai manufacturing facility.

**Includes US$16.3 million costs relating to the closure of the Shanghai manufacturing facility and the impairment loss on goodwill and receivables.

Key operational highlights:

The global COVID-19 pandemic has provided the economic backdrop for 2020 and the Group's performance has been impacted by the associated market and worldwide disruption and uncertainty. The health and safety of our staff, partners, suppliers and customers has been our priority throughout 2020 and into 2021. Global Invacom has always been a people-driven business, with teams across the Group being essential to our ongoing success. The board of directors would like to thank the Group's employees for their outstanding contribution, during what has been an especially challenging period for all.

The impact of the COVID-19-related restrictions, including lockdowns in all countries in which we operate and the much-publicised disruption to global supply chains and international travel was, in part, mitigated by our diversified manufacturing footprint and by our classification as an essential supplier, with the Group seeing continued demand for its equipment from the key communications and healthcare sectors. The Group was also able to safely and effectively transition some of its office and R&D staff to remote working. The Group continues to monitor the pandemic closely and, where it is safe and prudent to do so, is returning staff to work following government guidelines.

The Group's customer base was also negatively affected by the pandemic and order volume fell throughout 2020. However, Global Invacom remained profitable in three out of four quarters of the year and was profitable for the year as a whole. This was aided by a number of strategic cost-saving initiatives implemented by management last year. Most notably, our Shanghai site ceased manufacturing in July 2020, as the Group transitioned to third-party subcontractors, based in the Philippines. In Europe and the United States ("US"), the Group restructured development, sales and marketing teams to focus on emerging DOS products. We expect this transition to deliver meaningful annualised savings in 2021, while also reducing the Group's exposure to increased production costs and trade disputes between the US and China.

The Group continues to see increased demand for DOS technology and services, as consumer appetite for constant connectivity grows. With ever-growing data consumption across all geographies, underpinned by increased levels of remote working, service providers will continue to adopt satellite solutions to meet the significant growth in demand.

The Group remains well-positioned to benefit from the recovery of the global economy and the continued growth of its target, DOS market. As worldwide COVID-19 vaccination programmes have their desired effect and demand begins to normalise, Global Invacom's products will continue to play a significant role in meeting the continued growth in demand for data and connectivity.

Board Composition

Following Basil Chan's decision to step down from the board of directors (the "Board") in June 2020, we were pleased to confirm the appointment of Wayne Porritt in October 2020. Mr Porritt replaced Mr Chan as an Independent Director. Having previously held various directorship and advisory roles in corporate and non-profit organisation, including Standard Chartered Bank, Bank of America, Société Générale and Ernst & Young, Mr Porritt brings a wealth of experience to the Board.

In December 2020, the Company announced that after seven years with the business, Matthew Garner had stepped down as Chief Financial Officer ("CFO") and as a member of the Board in order to pursue other business interests. The Board has no current intention to appoint a new CFO and the Group's joint Financial Controllers, Wendy Isabel Wong and Andrew Martin have jointly assumed the overall responsibility for the Group's financial function.

Tony Taylor, Executive Chairman of Global Invacom, commented:

"2020 was a uniquely challenging year for Global Invacom and on behalf of myself and the board, I would like to thank our teams around the world for not only keeping the business running, but also helping to deliver another profitable year for the Group.

Despite the many headwinds faced during 2020, our strategic direction remains unchanged, and, whilst early in the year, we are well positioned for a constructive 2021, as the global economy recovers and the demand for uninterrupted connectivity and data expands."

Financial Review

Revenue for the 12 months ended 31 December 2020 ("FY2020") decreased 23.4% to US$103.1 million from US$134.5 million the previous year ("FY2019"). Revenue of US$50.3 million for the second half year ended 31 December 2020 ("2H FY2020") was 19.6% lower than the corresponding period in 2019 ("2H FY2019").

Geographically, Group revenue for FY2020 decreased in America and Europe by US$24.4 million (-26.1%) and US$7.3 million (-23.4%), respectively, offset by an increase in Rest of the World ("RoW") by US$0.2 million (+3.7%). Revenue for Asia remained constant in the comparative period. Revenue for 2H FY2020 decreased in America, Europe and Asia by US$8.1 million (-19.5%), US$4.3 million (-26.8%) and US$0.8 million (-26.2%), respectively, offset by an increase in RoW by US$0.9 million (+43.8%) compared to the prior year.

The decrease in revenue, offset by a more profitable product mix, manufacturing efficiencies and cost reduction programs, resulted in a 6.8% increase in gross profit for FY2020 to US$25.7 million compared with FY2019 of US$24.1 million.

Administrative expenses decreased to US$23.0 million in FY2020 from US$27.4 million in FY2019, due to reduction in travelling, marketing and trade shows during this pandemic period. Excluding the one-off compensation and restructuring costs for the closure of the Shanghai manufacturing facility and restructuring process in the UK based facilities in both FY2020 and FY2019, the administrative expenses would be US$22.5 million and US$23.2 million, respectively.

In the year ended 31 December 2020, the Group recorded a net profit of US$2.6 million (FY2019: US$12.3 million net loss). Reversing the one-off costs for the Shanghai planned closure, impairment of goodwill and receivables, would give the Group a net profit of US$4.0 million in FY2019.

The Group recorded a net increase in cash and cash equivalents amounting to US$2.3 million in FY2020 bringing cash and cash equivalents per the consolidated statement of cash flows to US$11.3 million as at 31 December 2020. Overall net cash in the Group, combining cash and cash equivalents against borrowings, improved by US$7.4 million in FY2020.

For further information, please contact:

About Global Invacom Group Limited

Global Invacom is a fully integrated satellite equipment provider with sites across Singapore, China, Indonesia, Philippines, Malaysia, Israel, UK and the US. Its customers include satellite broadcasters such as Sky Group of the UK and Dish Network of the USA and Data over Satellite providers including Hughes Network Systems, Viasat and Gilat Satellite Networks.

Global Invacom provides a full range of satellite ground equipment including antennas, LNB receivers, transceivers, fibre distribution equipment, transmitters, switches, and video distribution components, as well as manufacturing services for the defence and healthcare sectors. The Group is the world's only full‐service outdoor unit supplier.

Global Invacom is listed on the Mainboard of the Singapore Exchange Securities Trading Limited and its shares are admitted to trading on the AIM Market of the London Stock Exchange.

For more information, please refer to www.globalinvacom.com.

FINANCIAL STATEMENT ANNOUNCEMENT FOR 2H AND YEAR ENDED 31 DECEMBER 2020

PART I - INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR RESULTS

1(a) A statement of comprehensive income (for the group) together with a comparative statement for the corresponding period of the immediately preceding financial year.

Consolidated Statement of Comprehensive Income for 2H and the year ended 31 December 2020. These figures have not been audited.

N.M.: Not Meaningful

Note:

(i) Profit/(Loss) before income tax was determined after (charging)/crediting the following:

(ii)

1(b)(i) A statement of financial position (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year.

1(b)(ii) Aggregate amount of group's borrowings and debt securities.

Amount repayable in one year or less, or on demand

Amount repayable after one year

Details of any collateral

The revolving credit loans of US$3,883,000 were secured over the assets of the subsidiaries and corporate guarantees provided by the Company and the subsidiaries.

1(c) A statement of cash flows (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year.

Note:

(i) For the purpose of presentation in the consolidated statement of cash flows, the consolidated cash and cash equivalents comprise the following:

1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii) changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year.

1(d)(ii) Details of any changes in the company's share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on.

State also the number of shares that may be issued on conversion of all the outstanding convertibles, as well as the number of shares held as treasury shares, if any, against the total number of issued shares excluding treasury shares of the issuer, as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year.

There were 10,740,072 treasury shares held by the Company as at 31 December 2020 and 31 December 2019 and there was no subsidiary holdings.

1(d)(iii) To show the total number of issued shares excluding treasury shares as at the end of the current financial period and as at the end of the immediately preceding year.

1(d)(iv) A statement showing all sales, transfers, disposal, cancellation and/or use of treasury shares as at the end of the current financial period reported on.

1(d)(v) A statement showing all sales, transfers, cancellation and/or use of subsidiary holdings as at the end of the current financial period reported on.

2. Whether the figures have been audited or reviewed and in accordance with which auditing standard or practice.

These figures have not been audited or reviewed.

3. Where the figures have been audited or reviewed, the auditors' report (including any modifications or emphasis of a matter).

Not applicable.

3A. Where the latest financial statements are subject to an adverse opinion, qualified opinion or disclaimer of opinion: -

(a) Updates on the efforts taken to resolve each outstanding audit issues.

(b) Confirmation from the Board that the impact of all outstanding audit issues on the financial statements have been adequately disclosed.

Not applicable.

4. Whether the same accounting policies and methods of computation as in the issuer's most recently audited annual financial statements have been applied.

The Group has applied the same accounting policies and methods of computation consistent with those used in the most recent audited financial statements for the year ended 31 December 2019.

5. If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change.

The Group has adopted various new and revised SFRS(I)s and IFRSs that are relevant to its operations and effective for the period beginning 1 January 2020. The adoption of the new and revised SFRS(I)s and IFRSs has no material financial impact on the Group's financial statements.

6. Earnings per ordinary share of the group for the current financial period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends.

* Diluted earnings per share are the same as the basic earnings per share because the potential ordinary shares to be converted are anti-dilutive as the effect of the share conversion would be to increase the earnings per share.

7. Net asset value (for the issuer and group) per ordinary share based on the total number of issued shares excluding treasury shares of the issuer at the end of the:

(a) current financial period reported on; and

(b) immediately preceding financial year.

8. A review of the performance of the group, to the extent necessary for a reasonable understanding of the group's business. It must include a discussion of the following:

(a) any significant factors that affected the turnover, costs, and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors; and

(b) any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on.

Review of Financial Performance

Revenue

The Group's revenue for the year ended 31 December 2020 ("FY2020") decreased by US$31.5 million to US$103.1 million from US$134.5 million in the prior year ("FY2019"). Revenue for the second half year ended 31 December 2020 ("2H FY2020") was US$50.3 million against US$62.6 million in the prior year ("2H FY2019"). Given the Group's global footprint, the on-going COVID-19 pandemic and its impact on different countries, has impacted the ability of the Group's end customers to rollout the communications services and networks that were originally planned for 2020. This, together with component shortages, disrupted design resources and the lack of consistent availability of logistics has resulted in reduced shipments to our customers. The efficiency of our production facilities was also negatively impacted as they adapted to social distancing and other international COVID-19 best practices.

Geographically, Group revenue for FY2020 decreased in America and Europe by US$24.4 million (-26.1%) and US$7.3 million (-23.4%), respectively, and increased in Rest of the World ("RoW") by US$0.2 million (+3.7%). Revenue for Asia remained constant in the comparative period. Revenue for 2H FY2020 decreased in America, Europe and Asia by US$8.1 million (-19.5%), US$4.3 million (-26.8%) and US$0.8 million (-26.2%), respectively, offset by an increase in RoW by US$0.9 million (+43.8%) compared to the prior year.

Gross Profit

Gross profit increased by US$1.6 million from US$24.1 million in FY2019 to US$25.7 million in FY2020; gross profit margin increased from 17.9% to 24.9%. In FY2019, the Group recognised impairment costs in the Shanghai manufacturing facility following the relocation of its operations to third-party contract manufacturers. Excluding these, gross profit in FY2019 would have been US$28.2 million, with a gross profit margin of 20.9%, which would result in a gross profit margin increase of 4.0% in FY2020, primarily due to a more profitable product mix, manufacturing efficiencies and cost reduction programs.

Similarly, gross profit margin for 2H FY2020 increased from 14.4% to 26.6%, with gross profit at US$13.4 million against US$9.0 million for 2H FY2019. Excluding the impairment costs, gross profit in 2H FY2019 would have been US$13.1 million, with a gross profit margin of 20.9%, an increase of 5.7 percentage points in FY2020.

Other Income

Other income in 2H FY2020 and FY2020 relates primarily to a loan waiver from the US government of US$1.5 million, gain on disposal of equipment of US$0.4 million and subsidy support received from various government bodies across the Group due to COVID-19 pandemic.

Administrative Expenses

Administrative expenses for FY2020 decreased 16.2% to US$23.0 million compared to US$27.4 million in FY2019, representing 22.3% and 20.4% of revenue, respectively. In FY2019, the Group included compensation to be made to the employees in the Shanghai manufacturing facility and costs related to restructuring process in the UK entities. The restructuring process continued in 2020 in the UK entities. After excluding the compensation and restructuring costs in both FY2020 and FY2019, administrative expenses were US$22.5 million and US$23.2 million, representing 21.8% and 17.3% of revenue, respectively. Reduction in travelling, marketing and trade shows during this period has also contributed to lower administrative expenses.

Administrative expenses for 2H FY2020 decreased 21.5% to US$12.0 million compared to US$15.2 million in the previous year, representing 23.8% and 24.3% of revenue respectively. After excluding the compensation and restructuring costs in both 2H FY2020 and 2H FY2019, administrative expenses were US$11.4 million and US$11.0 million, representing 22.8% and 17.8%, respectively.

Other Operating Expenses and Impairments

Other operating expenses in FY2020 relates primarily to the impairment loss on trade receivables of US$0.3 million, reinstatement cost of the Shanghai manufacturing facility of US$0.3 million as well as the loss on foreign exchange of US$0.3 million. Other operating expenses in FY2019 relates primarily to the impairment loss on goodwill of US$3.3 million, other receivables of US$2.5 million, equipment of US$2.2 million and loss on foreign exchange of US$0.2 million.

Profit Before Tax & Net Profit

The Group posted a profit before tax of US$3.1 million in FY2020, compared to a loss before tax of US$12.5 million the prior year, representing a margin of 3.0% and a negative margin of 9.3%, respectively. For 2H FY2020, the Group recorded US$2.6 million profit before tax compared to a loss before tax of US$14.7 million in the prior year, representing a margin of 5.1% and a negative margin of 23.5%, respectively. After excluding the one-off cost as described above, the Group's approximated profit before tax of US$3.7 million and US$1.5 million for FY2019 and 2H FY2019, representing a margin of 2.8% and 2.4%, respectively.

The Group posted a net profit of US$2.6 million in FY2020, compared to a net loss of US$12.3 million the prior year, representing a margin of 2.5% and a negative margin of 9.1%, respectively. For 2H FY2020, the Group recorded a net profit of US$2.3 million compared to a net loss of US$13.9 million in the prior year, representing a margin of 4.5% and a negative margin of 22.2%, respectively. Excluding the one-off costs as described above, the Group would have posted a net profit of US$4.0 million and US$2.3 million for FY2019 and 2H FY2019, representing a margin of 3.0% and 3.7%, respectively.

Review of Financial Position

Non-current assets decreased by US$2.5 million to US$25.6 million as at 31 December 2020, primarily due to the depreciation of property, plant and equipment and right-of-use assets, amortisation of intangible assets offset by the increase in deferred tax assets.

Net current assets increased by US$4.4 million to US$27.0 million as at 31 December 2020 compared to US$22.5 million as at 31 December 2019. Inventories increased by US$1.0 million offset by decrease in trade and other receivables and trade and other payables by US$9.0 million and US$5.0 million respectively, with faster collection and continuing payment to suppliers and compensation made in the Shanghai facility. Repayment of loans reduced the borrowings by US$5.0 million to US$3.9 million and cash and cash equivalents increased by US$2.4 million to US$11.3 million as at 31 December 2020 compared to US$8.9 million as at 31 December 2019.

Continuing repayment of the leases reduced the non-current portion of the lease liabilities by US$1.1 million to US$4.8 million.

The Group's net asset value stood at US$46.9 million as at 31 December 2020, compared to US$44.1 million as at 31 December 2019.

Review of Cash Flows

In 2H FY2020, net cash generated from operating activities was US$10.3 million, comprising US$3.6 million cash inflow from operating activities (before working capital changes), US$7.5 million net working capital inflow and US$0.8 million payment of interest and income tax.

In FY2020, net cash generated from operating activities was US$9.6 million, comprising US$7.7 million cash inflow from operating activities (before working capital changes), US$2.7 million net working capital inflow and US$0.8 million payment of interest and income tax.

Net cash used in investing activities in 2H FY2020 and FY2020 amounted to US$0.5 million and US$1.5 million, respectively, relating predominately to purchase of machinery and equipment, offset against proceeds from disposal of property, plant and equipment.

Net cash used in financing activities in 2H FY2020 and FY2020 was US$6.0 million and US$5.8 million, respectively, attributable to the net proceeds of borrowings and repayment of lease liabilities.

The Group recorded a net increase in cash and cash equivalents amounting to US$3.7 million and US$2.3 million in 2H FY2020 and FY2020, respectively, bringing cash and cash equivalents per the consolidated statement of cash flows to US$11.3 million as at 31 December 2020.

Overall net cash in the Group, combining cash and cash equivalents against borrowings, improved by US$7.4 million in FY2020.

9. Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results.

No prospect statement was made.

10. A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months.

The global COVID-19 pandemic has provided the economic backdrop for 2020 and the Group's performance has been impacted by the associated market and worldwide disruption and uncertainty. The health and safety of our staff, partners, suppliers and customers has been our priority throughout 2020 and into 2021. Global Invacom has always been a people-driven business, with teams across the Group being essential to our ongoing success.

The impact of the COVID-19-related restrictions, including lockdowns in all countries in which we operate and the much-publicised disruption to global supply chains and international travel was, in part, mitigated by our diversified manufacturing footprint and by our classification as an essential supplier, with the Group seeing continued demand for its equipment from the key communications and healthcare sectors. The Group was also able to safely and effectively transition some of its office and R&D staff to remote working. The Group continues to monitor the pandemic closely and, where it is safe and prudent to do so, is returning staff to work following government guidelines.

The Group's customer base was also negatively affected by the pandemic and order volume fell throughout 2020. However, Global Invacom remained profitable in three out of four quarters of the year and was profitable for the year as a whole. This was aided by a number of strategic cost-saving initiatives implemented by management last year. Most notably, our Shanghai site ceased manufacturing in July 2020, as the Group transitioned to third-party subcontractors, based in the Philippines. In Europe and the United States ("US"), the Group restructured development, sales and marketing teams to focus on emerging Data over Satellite ("DOS") products. We expect this transition to deliver meaningful annualised savings in 2021, while also reducing the Group's exposure to increased production costs and trade disputes between the US and China.

The Group continues to see increased demand for DOS technology and services, as consumer appetite for constant connectivity grows. With ever-growing data consumption across all geographies, underpinned by increased levels of remote working, service providers will continue to adopt satellite solutions to meet the significant growth in demand.

The Group remains well-positioned to benefit from the recovery of the global economy and the continued growth of its target, DOS market. As worldwide COVID-19 vaccination programmes have their desired effect and demand begins to normalise, Global Invacom's products will continue to play a significant role in meeting the continued growth in demand for data and connectivity.

11. Dividend

(a) Current Financial Period Reported On 

Any dividend declared for the current financial period reported on?

None.

(b) Corresponding Period of the Immediately Preceding Financial Year

Any dividend declared for the corresponding period of the immediately preceding financial year?

None.

(c) Date payable

Not applicable.

(d) Books closure date

Not applicable.

12. If no dividend has been declared/recommended, a statement to that effect and the reason(s) for the decision.

Due to the operating conditions faced by the Group, no dividend has been declared or recommended for the year ended 31 December 2020.

PART II - ADDITIONAL INFORMATION REQUIRED FOR FULL YEAR ANNOUNCEMENT

(This part is not applicable to Q1, Q2, Q3 or Half Year Results)

13. Segmented revenue and results for business or geographical segments (of the group) in the form presented in the issuer's most recently audited annual financial statements, with comparative information for the immediately preceding year.

13(a) Reportable Operating Segments

The business of the Group is organised into the following product segments:

· Satellite Communications ("Sat Comms")

· Contract Manufacturing ("CM")

For management purposes, the Group is organised into business segments based on their products as the Group's risks and rates of return are affected predominantly by differences in the products produced. Each product segment represents a strategic business unit and management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.

Segment results represent the profit earned by each segment without allocation of finance income/costs and taxation. Segment assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprised mainly corporate assets and liabilities, borrowings and income taxes. Segment revenue includes transfers between operating segments. Such transfers are accounted for at competitive market prices charged to unaffiliated customers for similar goods. The transfers are eliminated on consolidation. No operating segments have been aggregated to form the following reportable operating segments.