GINV.L Regulatory News (GINV)

Global Invacom Group Limited

SGX and U.K. AIM Listed Global Invacom Announces 1H FY2015 Results

Singapore Exchange Mainboard and U.K. AIM Market listed satellite communications ("Sat Comms") equipment specialist Global Invacom Group Limited ("Global Invacom" or "the Group") announced today its financial results for the six months ended 30 June 2015 ("1H FY2015").

The Group has experienced a challenging first half of the year. This is largely attributable to delayed sales to three of the Group's major customers through destocking or changes in procurement procedures. As the majority of delayed orders have now resumed, 2H FY2015 should show an improvement and management expects that the Group will return to operational profitability for 2H FY2015.

Revenue declined 22.7% to US$54.0 million in 1H FY2015 from US$69.8 million in 1H FY2014, with the four regions, America, Europe, Asia and Rest of the World, decreasing by US$10.0 million (-25.4%), US$1.6 million (-8.7%), US$4.0 million (-39.7%) and US$0.3 million (-12.4%), respectively.

During the period under review, the Group is pleased to recognise six months' revenue contribution of US$1.7 million from OnePath Networks Limited (trading as "Foxcom") in Israel, whose acquisition was completed in November 2014.

As a consequence of lower sales, gross profit decreased by US$6.2 million or 35.9% to US$11.2 million in 1H FY2015 from US$17.4 million in 1H FY2014.

Gross profit margin fell to 20.7% from 24.9%, a decline of 4.2% over the comparative periods, due to the reclassification of products in relation to import duty taxes to the U.S. that the Group is contesting, the weakening of the Malaysian Ringgit against the U.S. dollar and the extended lead times of semi-conductor devices which delayed production and raised logistics costs.

Administrative expenses increased by 7.8% or US$1.0 million to US$13.6 million in 1H FY2015 from US$12.6 million in 1H FY2014 mainly due to the recognition of six months' of manpower and expenses costs for Foxcom in 1H FY2015. These expenses also included the cost of an ongoing legal dispute with a supplier of its U.K. subsidiary that the Group is strongly defending, restructuring costs of a U.K. site and manufacturing improvements at the Shanghai facility.

The Group continues to invest in research and development to enhance its competitive position to drive sustainable growth in the long run. It is currently completing the development of four new customers' Low Noise Blocks ("LNB") for satellite reception, as well as three new switches.

In line with the Group's performance guidance announced on 29 July 2015, the Group recorded a net loss of US$2.8 million in 1H FY2015 as compared to a net profit of US$3.7 million in 1H FY2014.

Mr. Tony Taylor, Executive Chairman of Global Invacom, said, "Most of the delayed orders by major U.S., U.K. and Asian customers have since resumed and will contribute to our financial performance in 2H FY2015. We have also completed restructuring in our U.K. and Shanghai facilities which should reduce our costs in 2H FY2015 and we will continue to implement further operational efficiencies through automation and cost reduction."

"The Group is also vigorously contesting the reclassification of products in relation to import taxes in the U.S. - which has led to unscheduled freight and duty price increases for certain products. This has eroded gross margin in 1H FY2015. Together, with the completion of destocking of inventory in 1H FY2015, the Group is reasonably confident that its gross profit margin will recover in 2H FY2015."

Mr. Tony Taylor continued, "We remain resolute in our goal to position ourselves as the global leader in Sat Comms equipment and remain optimistic of our operating performance for the second half."

"Notwithstanding the hullabaloo surrounding Internet Protocol television (IPTV) and the like, the Sat Comms industry continues to offer exciting growth both in established regions and in newly developing regions which do not possess established fixed infrastructure but are seeking to quickly provide telecoms, media and internet to their inhabitants. Our track record of strategic acquisitions and ability to deliver world-class equipment to our customers position us as global leaders in the industry. We remain committed to extending our leadership at a time when demand for internet connectivity and higher bandwidth continues to grow." he added.

Loss per share on a fully diluted basis was 1.09 US cents in 1H FY015 while net asset value per share stood at 20.18 US cents as at 30 June 2015 from 22.33 US cents as at 31 December 2014.

Cash and cash equivalents stood at US$19.4 million as at 30 June 2015 compared to US$21.2 million as at 31 Dec 2014, including gross proceeds of US$15.0 million raised from its AIM Market listing, which has been, and will be, used for business expansion and general corporate working capital purposes.

The Group announced on 2 June 2015 its proposed acquisition of Skyware Global, a leading U.S. manufacturer of satellite terminals, for up to US$11.6 million - its largest-ever acquisition. Shareholders will vote to approve the transaction at an Extraordinary General Meeting in Singapore on 19 August 2015.

Following the acquisition, Global Invacom will be the world's only full-service outdoor unit supplier, providing an extensive portfolio of products from antennas and electronics to accessories with manufacturing facilities in U.S., Asia and Europe.

In view of the above factors, the Group is reasonably confident, barring unforeseen circumstances, of an improvement in performance for 2H FY2015.

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)

Ed Frisby / Christopher Raggett (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)

Sheryl Sim, sheryl@wer1.net 

Ian Lau, ianlau@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 six manufacturing plants across China, Israel, Malaysia and the U.K., providing a full range of dish antennas, LNB receivers, transmitters, switches and video distribution components and electronics manufacturing services in satellite communications, TV peripherals, computer peripherals, medical, and consumer electronics industries. Its customers include satellite broadcasters such as BSkyB of the U.K. and Dish Network of the U.S.A..

For more information please refer to http://www.globalinvacom.com.

HALF-YEAR FINANCIAL STATEMENT ANNOUNCEMENT FOR THE HALF-YEAR ENDED 30 JUNE 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 6 months ended 30 June 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 secured loans of US$2,474,000 were secured over a subsidiary's bank deposit of US$400,000.

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 fixed deposits amounting to US$400,000 (1H FY2014: US$400,000) pledged with the banks for facilities and loans granted to the Group. As at 30 June 2015, the Group had utilised US$2,474,000 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 27,957,900 and 5,970,000 treasury shares held by the Company as at 30 June 2015 and 30 June 2014 respectively.

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.

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 period ended 30 June 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 adoption of the new or revised IFRS does not have any financial impact on the Group's financial position or results.

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$15.9 million, or 22.7%, to US$54.0 million in 1H FY2015 from US$69.8 million in 1H FY2014. This was primarily due to delays in sales to major customers in America, Europe, Asia and Rest of the World ("RoW"). Three of the Group's major customers either temporarily destocked or altered their procurement procedures during the period under review. Most of the orders have restarted from July 2015 and are expected to contribute to the financial performance of the Group in the second half of 2015 ("2H FY2015"). The Group also recognised six months' contribution of US$1.7 million revenue in 1H FY2015 from its latest acquisition, OnePath Networks Limited (trading as "Foxcom"), in Israel.

By geography, revenue from all regions declined, with America, Europe, Asia and RoW regions decreased by US$10.0 million (-25.4%), US$1.6 million (-8.7%), US$4.0 million (-39.7%) and US$0.3 million (-12.4%), respectively.

Gross Profit

Gross profit decreased by US$6.2 million or 35.9% to US$11.2 million in 1H FY2015 from US$17.4 million in 1H FY2014. Gross profit margin declined to 20.7% in 1H FY2015 from 24.9% in 1H FY2014 due to the reclassification of products in relation to import duty taxes to the United States ("U.S.") that the Group is contesting, the weakening of the Malaysia Ringgit against the US dollar (which affected the Group's Malaysia operations) and the lack of availability of semi-conductor devices which delayed production and incurred additional logistics costs.

Administrative Expenses

Administrative expenses increased by US$1.0 million or 7.8% to US$13.6 million in 1H FY2015 from US$12.6 million in 1H FY2014, representing 25.2% and 18.1% of revenue, respectively. These expenses included the costs of defending an ongoing legal dispute with a supplier of its United Kingdom ("U.K.") subsidiary that the Group is strongly defending. The Group has restructured one of its U.K. facilities following the completion of several large scale R&D projects and the Shanghai facility has put in place improvements in order to streamline internal efficiencies which the Group anticipates will translate into operational cost improvements in 2H FY2015. In addition, the Group also recognised six months' of Foxcom's manpower and expenses in 1H FY2015.

Other Operating Expenses

Other operating expenses decreased to US$0.1 million in 1H FY2015 mainly attributable to foreign exchange gain from the strengthening of the USD Dollar against Sterling Pounds compared to 1H FY2014.

Profit before Tax

The Group recorded a loss before tax of US$2.6 million in 1H FY2015 from a profit before tax of US$4.3 million in 1H FY2014, with a negative margin of 4.8% compared to a margin of 6.1%, respectively.

Taxation

Income tax reduced by US$0.4 million or 58.1% to US$0.3 million in 1H FY2015 from US$0.6 million in 1H FY2014 mainly due to the reduction of taxable profits in the U.K..

Net Profit

Overall, the Group posted a net loss of US$2.8 million in 1H FY2015, down from a net profit of US$3.7 million in 1H FY2014, with a net loss margin of 5.3% compared to a net profit margin of 5.2%, respectively.

Review of Financial Position

Non-current assets decreased due to the depreciation of property, plant and equipment, offset by the recognition of a deferred tax asset in the U.K..

Net current assets decreased by US$8.2 million to US$32.4 million as at 30 June 2015 from US$40.6 million as at 31 December 2014, mainly due to the decrease in inventories by US$0.7 million to US$26.3 million and trade and other receivables by US$0.6 million to US$17.5 million, offset by the increase in trade and other payables by US$2.8 million to US$27.9 million. Borrowings increased to US$2.5 million while cash and cash equivalents declined by US$1.8 million to US$19.4 million following the sale and subsequent purchase of 12.0 million and 26.6 million treasury shares, respectively. Provision for tax decreased by US$0.2 million to US$0.4 million, with the reduction of taxable profits.

Non-current liabilities increased by US$0.3 million due to the recognition of deferred tax liabilities in the U.K..

The Group's net asset value stood at US$51.3 million as at 30 June 2015 compared to US$60.1 million as at 31 December 2014.

Review of Cash Flows

Net cash generated from operating activities during the period was US$2.4 million, comprising cash flow from operating cash activities before working capital changes of US$1.1 million, net working capital inflow of US$4.0 million and payment of interest and income tax expense of US$0.5 million.

Net cash used in investing activities was US$0.5 million, which comprised the purchase of machinery and equipment and increase in capitalised development cost.

Net cash used in financing activities was US$6.2 million, arising from payment of dividends of US$1.1 million, sale and purchase of 12.0 million and 26.6 million treasury shares of US$4.8 million, increase in restricted cash of US$2.8 million, offset by the net proceeds from borrowings of US$2.5 million.

Overall, the Group recorded a net decrease in cash and cash equivalents of US$4.3 million in 1H FY2015 bringing cash and cash equivalents per the consolidated statement of cash flows to US$16.0 million as at 30 June 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 29 July 2015 that the Group expects to report a net loss between US$2.5 million and US$3.0 million for 1H FY2015, the Group's 1H FY2015 results have shown a net loss of US$2.8 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.

The market for Satellite Communications ("Sat Comms") equipment continues to expand amidst growing global demand for data and connectivity. Developing markets such as Latin America and the Middle East have yet to be saturated with terrestrial networks, leaving them open to new satellite services. In addition, more governments are turning to commercial satellites to increase connectivity and spur economic growth. The global satellite manufacturing and launch market is expected to grow at a CAGR of 5.14% between 2014 and 2019.

(Links: http://globenewswire.com/news-release/2015/07/15/752345/10141822/en/New-Applications-Drive-60-Billion-Communications-Satellite-Market.html; http://www.researchandmarkets.com/research/8kfnp8/global_satellite)

Even as demand for Internet connectivity and higher bandwidth (for rich content) continues to grow, the Group is extending its global leadership in the Sat Comms market. Since achieving listed status in 2012, it has initiated a series of corporate actions and acquisitions to pursue this goal. The latest, announced on 2 June 2015, relates to the proposed acquisition of Skyware Global, a leading U.S. manufacturer of satellite terminals, for up to US$11.6 million. The consideration will be satisfied through the issuance of approximately US$6.6 million in treasury shares, as well as entry into a cash earn-out model to pay Skyware up to a maximum of US$5.0 million. The acquisition is subject to shareholders' approval at an extraordinary general meeting to be convened on 19 August 2015.

The acquisition of Skyware will provide the Group with a U.S. presence in the global manufacturing business, adding to its existing footprint in Asia and Europe. It will also provide access to new customers, including a major U.S. broadcaster that is launching two new satellites in 2016 - a development expected to increase demand for the Group's VSAT terminals. The acquisition offers a number of synergies and cost savings for Global Invacom, including the integration of the North Carolina plant into the enlarged procurement and supply chain process, as well as the introduction of Skyware's VSAT technology for the Ka-band to Asian markets. Post-acquisition, Global Invacom will also seek to improve Skyware's internal efficiencies. The Group is confident of returning Skyware to profitability through the synergies and cost savings created, as well as enhanced efficiencies and cross selling.

The resumption since July 2015 of most of the delayed orders by major customers in the U.S., U.K. and Asia is expected to contribute to the Group's financial performance in 2H FY2015. The Group will continue to invest in research and development to enhance its competitive position to drive long term sustainable growth.

The Group operates with multiple currencies and will continue to be affected by exchange rate volatility.

In view of the above factors, the Group is reasonably confident, barring unforeseen circumstances, of an improvement in performance for 2H FY2015.

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.

No dividend has been declared or recommended for the six months ended 30 June 2015.

13. 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 six months ended 30 June 2015.

14. 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 30 June 2015, the net proceeds has been utilised as follows:

(a) the net proceeds of US$3.5 million to pay for the cash consideration less the retention in relation to the acquisition of Foxcom.

The above utilisation of the net proceeds is in accordance with the stated use and in accordance with the amount and percentage allocated to such utilisation in the admission document dated 27 June 2014.

CONFIRMATION BY THE BOARD OF DIRECTORS (THE "BOARD") PURSUANT TO RULE 705(5) OF THE LISTING MANUAL

We do hereby confirm, for and on behalf of the Board of Global Invacom Group Limited (the "Company"), that to the best of our knowledge, nothing has come to the attention of the Board of the Company which may render the financial results for the six months ended 30 June 2015 to be false or misleading in any material aspect.

On behalf of the Board

Anthony Brian Taylor Matthew Jonathan Garner

Director Director

BY ORDER OF THE BOARD

Anthony Brian Taylor

Chairman

14 August 2015