GINV.L Regulatory News (GINV)

GLOBAL INVACOM GROUP LIMITED

(Incorporated in Singapore)

(Company Registration Number 200202428H)

8 Temasek Boulevard, #20-03 Suntec Tower Three, Singapore 038988

Tel: 68848270 Fax: 68848273 Website: www.globalinvacom.com

Singapore- and London-listed Global Invacom Group Announces FY2015 Results

- Revenue US$129.1M (FY2014: US$134.1M), including four months' contribution from Skyware Global; impacted by main customers destocking in 1H FY2015

- Gross profit US$24.9M (FY2014: US$31.8M)

- Loss before tax US$1.3M (FY2014 Profit before tax: US$5.5M)

- Successfully completed R&D for next-generation of products to position the Group for improved sales

London 25 February 2016 - Global Invacom Group Limited ("Global Invacom" or "the Group"), a satellite communications ("Sat Comms") equipment provider listed on the Singapore Exchange and the U.K. AIM Market, announced today its financial results for the 12 months ended 31 December 2015 ("FY2015").

The Group has experienced a challenging year predominantly due to destocking of three main customers in the first half of the year ("1H FY2015") and one-off expenses related to the purchase and restructuring of Satellite Acquisition Corporation (trading as "Skyware Global"), completed on 24 August 2015. Despite this, the Group is pleased to report that its main customers have resumed orders in the second half of the year ("2H FY2015") and that it has successfully completed a research and development ("R&D") programme for next-generation Low Noise Block ("LNB") technology, putting the Group in a stronger market position in 2016 ("FY2016").

Revenue for FY2015 declined 3.7% to US$129.1 million from US$134.1 million the previous year. This was mainly due to delayed sales in 1H FY2015 to main customers in America, Europe and Asia who either destocked or altered their procurement procedures, with one undertaking a significant technology change which usually occurs about once every eight to ten years. While all orders restarted in 2H FY2015, effects from the technology change will persist into 1H FY2016.

The Group recognised four months' revenue of US$17.5 million, from Skyware Global. Headquartered in North Carolina, Skyware Global is a leading U.S. designer and manufacturer of antennas for Broadband, Satellite and Very Small Aperture Terminals (VSAT) covering C-band, Ku-band and Ka-band frequency platforms.

With the inclusion of Skyware Global, revenue for FY2015 from America and the Rest of the World increased by US$2.9 million (+3.9%) and US$2.3 million (+74.7%), respectively; this was offset by a fall in revenue from Europe and Asia by US$1.9 million (-5.4%) and US$8.3 million (-37.6%), respectively.

With the overall decline in revenue, gross profit for FY2015 decreased 21.7% to US$24.9 million from US$31.8 million in FY2014. Gross profit margin fell to 19.3% from 23.7% due to the reclassification of certain products in relation to import duty taxes in the U.S., the weakening of the Malaysian Ringgit against the U.S. dollar, and a lack of suitable semiconductor devices which delayed production and led to higher logistics costs. Skyware Global also accounted for the drop in the Group's gross profit margin.

Administrative expenses increased 13.6% to US$29.0 million in FY2015 from US$25.5 million in FY2014 mainly due to the recognition of four months' of manpower costs and expenses as well as one-off professional fees of US$2.3 million for the acquisition of Skyware Global. The administrative expenses included the cost of US$1.2 million for an ongoing legal dispute with a supplier of a U.K. subsidiary that the Group is strongly defending, restructuring costs for a U.K. site, and manufacturing improvements at the Group's Shanghai facility.

In line with its performance guidance announced on 10 February 2016, the Group recorded a FY2015 net loss of US$1.1 million compared to a net profit of US$5.1 million in FY2014. Loss per share on a fully diluted basis was 0.43 US cent in FY2015 while net asset value per share was 20.05 US cents as at 31 December 2015.

The Group has completed R&D work on next-generation LNB technology and is currently awaiting qualification. Access to this new technology is expected to improve sales and provide the Group with further product expertise and access to a wider customer base.

Skyware Global is expected to account for a bigger portion of the Group's revenue from 2016. Following the acquisition, Global Invacom's customer base now includes a major U.S. broadcaster that intends to launch two new satellites in 2016. The Group is focused on increasing sales and marketing activities in South America, Malaysia, Indonesia, Africa, with a focus on South Africa, and Europe in FY2016. In the meantime, the Group will continue to streamline its operations, including consolidating logistics and warehousing services at the North Carolina site.

As the Group operates in various countries, any sharp movements in foreign exchange rates can affect its financial performance. With this in mind, it intends to take advantage of lower production costs in areas in South East Asia by expanding the scope of its manufacturing operations to these regions.

Mr Tony Taylor, Executive Chairman of Global Invacom, said, "Amidst economic uncertainties, we remain optimistic about the Sat Comms industry given rising demand for digital TV services and communications infrastructure. With advancements in technology, broadcasters are rolling out new features and services, all of which bode well for us. We will continue to pursue our aim of global leadership in the R&D and production of Sat Comms equipment and are committed to developing our expertise to provide better services to new and existing clients across the world."

For media queries, please contact

Matthew Garner

Chief Financial Officer

Global Invacom Group Limited 

On behalf of Global Invacom Group Limited:

finnCap Ltd (Nominated Adviser and Joint Broker)

Christopher Raggett / Simon Hicks (Corporate Finance)

Rhys Williams (Corporate Broking and Sales)

+44 207 220 0500

Mirabaud Securities LLP (Joint Broker)

Peter Krens (Equity Capital Markets)

+44 207 878 3362

Bell Pottinger LLP (UK Financial PR)

David Rydell / David Bass / Lucy Stewart

+44 203 772 2500

WeR1 Consultants Pte Ltd (Singapore Financial PR)

Ian Lau, ianlau@wer1.net 

Lai Kwok Kin, laikkin@wer1.net

+65 6737 4844

About Global Invacom Group Limited 

Global Invacom Group Limited ("Global Invacom") is listed on the Singapore Exchange Securities Trading Limited Mainboard ("SGX-ST") and its shares are admitted to trading on the AIM Market of the London Stock Exchange in the U.K.

Global Invacom is a fully integrated satellite equipment provider with seven manufacturing plants across China, Israel, Malaysia, U.K. and the U.S. Its customers include satellite broadcasters such as BSkyB of the U.K. and Dish Network of the U.S.A.

On 24 August 2015, Global Invacom completed the acquisition of Skyware Global, a leading U.S.-based designer and supplier of satellite antennas products and services for C-band, Ku-band and Ka-band frequency platforms, positioning itself as the world's only full-service outdoor unit supplier.

Global Invacom provides a full range of dish antennas, LNB receivers, transmitters, switches and video distribution components and electronics manufacturing services in satellite communications as well as manufacturing services in TV peripherals, computer peripherals, medical, and consumer electronics industries.

For more information please refer to www.globalinvacom.com

FULL YEAR FINANCIAL STATEMENT ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2015

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 the 12 months ended 31 December 2015. These figures have not been audited.

N.M.: Not Meaningful

Note:

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

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 loans of US$5,348,000 were secured over the subsidiaries' bank deposit of US$400,000, cash collateral of US$1,000,000 and corporate guarantees provided by the Company.

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:

* Restricted cash includes cash collateral amounted to US$1,000,000 (FY2014: Nil), fixed deposits amounted to US$400,000 (FY2014: US$400,000) and bank balance amounted to US$6,000 (FY2014: US$238,000) pledged with the banks for banker's guarantee and loans granted to the Group. As at 31 December 2015, the Group had utilised US$5,348,000 of the facilities and loans granted.

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 and 13,343,000 treasury shares held by the Company as at 31 December 2015 and 31 December 2014 respectively.

* 24,334,179 treasury shares were transferred to the vendor on 19 February 2016 and the remaining 3,623,649 treasury shares will be transferred once the vendor lodges the share transfer form with The Central Depository (Pte) Limited ("CDP").

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.

* 24,334,179 treasury shares were transferred to the vendor on 19 February 2016 and the remaining 3,623,649 treasury shares will be transferred once the vendor lodges the share transfer form with CDP.

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 qualifications or emphasis of a matter).

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 accounting policies and methods of computation have been applied consistently for the current financial year ended 31 December 2015 as those used in the audited financial statements for the year ended 31 December 2014, except for the adoption of the new or revised International Financial Reporting Standards ("IFRS") applicable for the financial period beginning 1 January 2015.

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 all of the new or revised IFRS that are effective for the financial period beginning 1 January 2015 and are relevant to its operations.

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.

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 decreased by US$5.0 million, or 3.7%, to US$129.1 million in FY2015 from US$134.1 million in FY2014. This was primarily due to delayed sales in 1H FY2015 to main customers in America, Europe and Asia who either destocked or altered their procurement procedures, with one undertaking a significant technology change which usually occurs about once every eight to ten years. This required the customer to reassess its inventory levels. While all orders restarted in the second half of the year ("2H FY2015"), effects from the technology change will persist into 1H FY2016. The Group also recognised approximately four months' contribution of US$17.5 million revenue in 2H FY2015 from its latest acquisition, Satellite Acquisition Corporation ("Skyware Global"), headquartered in North Carolina, United States ("U.S.").

By geography, with the inclusion of Skyware Global, revenue for FY2015 from America and the Rest of the World increased by US$2.9 million (+3.9%) and US$2.3 million (+74.7%), respectively; this was offset by a fall in revenue from Europe and Asia by US$1.9 million (-5.4%) and US$8.3 million (-37.6%), respectively.

Gross Profit

Gross profit decreased by US$6.9 million or 21.7% to US$24.9 million in FY2015 from US$31.8 million in FY2014. Gross profit margin fell to 19.3% in FY2015 from 23.7% in FY2014. This decrease was largely due to the reclassification of certain products in relation to import duty taxes for certain products shipped into the U.S. that the Group is contesting; the weakening of the Malaysian Ringgit against the U.S. dollar affecting the Group's Malaysian operations; and a lack of suitable semiconductor devices, which delayed production and led to higher logistics costs. The margin percentage was also affected by the inclusion of Skyware Global. With the exclusion of Skyware Global, gross profit margin dropped 2.9% to 20.8% in FY2015 from 23.7% in FY2014.

Other Income

Pursuant to the terms of the sale and purchase agreement entered into with the vendor of Skyware Global, an amount equal to approximately 0.5554 times of any revenue in excess of US$52,284,000 earned by Skyware Global during the period commencing on 1 June 2015 and ending on 31 May 2016 is payable to the vendor, subject to a maximum cash earn-out of US$5,000,000. As at 31 December 2015, the Company has assessed the fair value of the contingent consideration against the original assessment made at the time of the acquisition. The potential contract behind the contingent payment has not materialised and negotiations have stalled since acquisition; we expect revenues to 31 May 2016 to fall short of the lower trigger point. In accordance with IAS 39, the change in fair value has thus been recognised in the profit and loss as Other Income.

Administrative Expenses

Administrative expenses increased by US$3.5 million or 13.6% to US$29.0 million in FY2015 from US$25.5 million in FY2014, representing 22.5% and 19.0% of revenue, respectively. These expenses included a cost of US$1.2 million for an ongoing legal dispute with a supplier of its United Kingdom ("U.K.") subsidiary which the Group is strongly defending. The Group restructured one of its U.K. facilities following the completion of several large-scale R&D projects, and the Shanghai facility put in place improvements in order to streamline internal efficiencies, which the Group translated into operational cost improvements in 2H FY2015. In addition, the Group also incurred professional fees of US$2.3 million in relation to the acquisition of Skyware Global and recognised approximately four months' of Skyware Global's manpower and expenses in 2H FY2015.

Other Operating Expenses

The increase in other operating expenses were mainly attributable to the impairment of intangible assets in one of its U.K. subsidiaries, impairment of trade receivables and the loss on disposal of property, plant and equipment.

Profit before Tax

The Group recorded a loss before tax of US$1.3 million in FY2015 from a profit before tax of US$5.5 million in FY2014, with a negative margin of 1.0% compared to a margin of 4.1%, respectively.

Taxation

Income tax reduced mainly due to the reduction of taxable profits from all the subsidiaries, overprovision of tax charges in the U.K. and utilisation of unrecognised tax assets in the U.K.

Net Profit

Overall, the Group posted a net loss of US$1.1 million in FY2015, down from a net profit of US$5.1 million in FY2014, with a net loss margin of 0.9% compared to a net profit margin of 3.8%, respectively.

Review of Financial Position

Non-current assets increased due to the recognition of US$5.2 million goodwill and the addition of property, plant and equipment in relation to the acquisition of Skyware Global, offset by the impairment of capitalised development costs in one of its subsidiaries in the U.K.

Net current assets decreased by US$11.7 million to US$28.9 million as at 31 December 2015 from US$40.6 million as at 31 December 2014. Inventories increased by US$0.8 million to US$27.9 million while trade and other receivables increased by US$7.2 million to US$25.3 million. This was offset by the increase in trade and other payables by US$2.8 million to US$27.9 million. Borrowings increased to US$5.3 million. Cash and cash equivalents declined by US$12.3 million to US$8.9 million following the acquisition of Skyware Global, as well as the sale and subsequent purchase of 12.0 million and 37.4 million treasury shares, respectively. Provision for tax decreased by US$0.3 million to US$0.3 million and tax receivables was US$0.4 million as at 31 December 2015.

Non-current liabilities increased by US$0.5 million due to a US$0.9 million deposit from a customer in Skyware Global, offset by a reduction of deferred tax liabilities of US$0.4 million in the U.K.

The Group's net asset value stood at US$54.5 million as at 31 December 2015 compared to US$60.1 million as at 31 December 2014.

Review of Cash Flows

Net cash used in operating activities was US$0.5 million, comprising cash outflow from operating cash activities before working capital changes of US$1.3 million, net working capital inflow of US$2.0 million and payment of interest and income tax expense of US$1.2 million.

Net cash used in investing activities was US$6.8 million, comprising the purchase of machinery and equipment of US$0.7 million; increase in capitalised development cost of US$0.3 million; cash consideration paid for the reverse acquisition of US$5.5 million; and increase in restricted cash of US$0.8 million, offset by the cash received from the acquisition of Skyware Global.

Net cash used in financing activities was US$4.8 million, arising from the payment of dividends of US$1.1 million, sale and purchase of 12.0 million and 37.4 million treasury shares of US$6.5 million, offset by the borrowings from shareholders of US$2.9 million.

Overall, the Group recorded a net decrease in cash and cash equivalents of US$12.0 million in FY2015, bringing cash and cash equivalents per the consolidated statement of cash flows to US$7.4 million as at 31 December 2015.

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

In line with the earlier performance guidance made by the Company on 10 February 2016 that the Group expects to report a net loss between US$1.0 million and US$2.0 million for FY2015, the Group's FY2015 results have shown a net loss of US$1.1 million.

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.

Despite economic uncertainties, the global Satellite Communications ("Sat Comms") market, which grew 4% in 2014*, is expected to continue growing on rising demand for digital TV services and communications infrastructure together with the release of technical advancements allowing Broadcasters to provide new and additional features.

The Group has completed its research and development work on the next-generation Low Noise Block ("LNB") technology and is currently awaiting qualification from one of its main customers. The Group also intends to supply similar technology LNBs to other customers.

While it expects to benefit from these developments, the Group sees some headwinds in 2016 as customers continue to undergo significant technology changes which usually occur about once every eight to ten years. The customers are expected to continue to manage their inventory carefully and change their procurement patterns during the replacement cycle that will take place in this period.

The Group remains upbeat about the Sat Comms market and continues to pursue its aim of global leadership in the research and production of Sat Comms equipment.

On 24 August 2015, the Group completed the acquisition of Skyware Global in North Carolina, U.S., a leading designer and manufacturer of antennas for Broadband, Satellite and Very Small Aperture Terminals ("VSAT") covering C-band, Ku-band and Ka-band frequency platforms. The acquisition has enlarged the Group's customer base, which now includes a major U.S. broadcaster that intends to launch two new satellites in 2016. This is expected to underpin demand for VSAT terminals from the Group. Skyware Global is expected to account for a bigger portion of the Group's revenue from 2016. The Group will also streamline operations, including the consolidation of its U.S. logistics and warehousing services at its North Carolina facility, so as to drive greater operational efficiencies and cost savings for its U.S. markets.

With an enlarged global sales network following the acquisition, the Group is focused on increasing sales and marketing activities in South America, Malaysia, Indonesia, Africa, with a focus on South Africa, and Europe in FY2016.

As the Group operates in various countries, any sharp movements in foreign exchange rates can affect its financial performance. With this in mind, the Group intends to take advantage of lower production costs in areas in South East Asia by expanding the scope of its manufacturing operations to these regions.

*Source: The Satellite Industry Association's 2015 State of the Satellite Industry Report

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?

Yes.

(c) Date payable

Not applicable.

(d) Books closure date

Not applicable.

12. If no dividend has been declared/recommended, a statement to that effect.

No dividend has been declared or recommended for the year ended 31 December 2015.

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.

13(b) Geographical Information

Revenue and non-current assets information based on the geographical location of customers and assets respectively are as follows:

14. In the review of performance, the factors leading to any material changes in contributions to turnover and earnings by the business or geographical segments.

Please refer to Note 8.

15. A breakdown of sales.

16. A breakdown of the total annual dividend (in dollar value) for the issuer's latest full year and its previous full year.

17. If the Group has obtained a general mandate from shareholders for Interested Person Transactions ("IPTs"), the aggregate value of such transactions as required under Rule 920(1)(a)(ii). If no IPTs mandate has been obtained, a statement to that effect.

The Company does not have a shareholders' mandate for IPTs and there were no IPTs for the year ended 31 December 2015.

18. Confirmation that the Company has procured undertaking from all its directors and executive officers pursuant to Rule 720(1).

The Company confirms that it has procured undertakings from all its directors and executive officers under Rule 720(1) of the Listing Manual of the Singapore Exchange Securities Trading Limited.

19. Disclosure of person occupying a managerial position in the issuer or any of its principal subsidiaries who is a relative of a director or chief executive officer or substantial shareholder of the issuer pursuant to Rule 704(10) in the format below. If there are no such persons, the issuer must make an appropriate negative statement.

Neither Global Invacom Group Limited nor any of its principal subsidiaries have any person occupying a managerial position who is related to a director, chief executive officer or substantial shareholder.

20. Status on the use of proceeds raised from IPO and any offerings pursuant to Chapter 8 and whether the use of proceeds is in accordance with stated use.

The Company completed the listing of the Company's shares on the AIM market of the London Stock Exchange on 2 July 2014 which raised net proceeds of US$12.9 million. As at 31 December 2015, the net proceeds have been fully utilised in the following manner:

(a) US$3.5 million was used to pay for the cash consideration less the retention in relation to the acquisition of OnePath Networks Limited;

(b) approximately US$7.8 million was used for the buyback of 27,957,828 shares for purposes of the acquisition of Skyware Global; and

(c) approximately US$1.6 million was used for general corporate and working capital of the Company.

The above utilisations are in accordance with the stated use and in accordance with the amount and percentage allocated to such utilisations in the Company's admission document dated 27 June 2014.

BY ORDER OF THE BOARD

Anthony Brian Taylor

Chairman

25 February 2016