GINV.L Regulatory News (GINV)

Global Invacom Group Limited

H1 and Q2 2016 Results

Singapore and U.K. AIM-Listed Global Invacom Group Reverses To Profit In Q2 FY2016

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, today reports a net profit after tax of US$0.2 million for the three months ended 30 June 2016 ("Q2 FY2016"). This compares favourably with a net loss of US$1.9 million in Q2 FY2015.

The turnaround was achieved on the back of a 24.4% period-on-period rise in revenue to US$33.5 million in Q2 FY2016, including contributions from Satellite Acquisition Corporation (trading as "Skyware Global") which became a Group subsidiary on 24 August 2015.

Revenue from the Group's operations in America rose 64.0%, compared to declines in Europe (-6.2%), Asia (-46.9%) and the Rest of the World (-38.0%).

Global Invacom's gross profit increased by US$2.0 million, or 37.6%, to US$7.3 million in Q2 FY2016 from US$5.3 million in Q2 FY2015. Gross profit margin improved to 21.8% from 19.7% due partly to a favourable product mix.

Total administrative expenses for the Group decreased marginally to US$6.5 million in Q2 FY2016 from US$6.6 million in Q2 FY2015, despite the inclusion of expenses from Skyware Global.

The reduction in administrative costs was due to improvements in internal efficiencies, reduction in legal costs, and the benefits resulting from the two restructuring and rationalisation exercises for its U.K. operations in FY2015 and in 1H FY2016.

Earnings per share amounted to 0.08 US cent in Q2 FY2016 compared to a loss per share of 0.74 cent in Q2 FY2015, while net asset value per share stood at 20.13 U.S. cents as at 30 June 2016 compared to 20.05 U.S. cents as at 31 December 2015.

For the six months ended 30 June 2016 ("1H FY2016") revenue rose 19.1% to S$64.3 million from US$54.0 million in 1H FY2015, while the net loss narrowed to US$0.4 million from a net loss of US$2.8 million a year earlier.

In Q2 FY2016, the Group secured two new VSAT orders from telecommunications providers and suppliers in the U.S. and Indonesia, as well as a U.S. broadcaster that intends to launch two satellites later in the year.

The Group is completing research on next-generation Low Noise Block ("LNB") technology, which it expects to boost sales and enlarge its customer base. It is awaiting qualification for its LNB products from a major customer and will subsequently supply similar products to other customers.

Mr Tony Taylor, Executive Chairman of Global Invacom, said: 

"The improved performance reflects the integration of enhanced internal efficiencies after a major acquisition. We are confident of extending our global leadership in the Sat Comms business with our enlarged manufacturing footprint and range of products."

"We are continuing our effort to increase our market presence, particularly in Asia and the Americas. At the same time we will continue to improve internal efficiencies while enhancing our product range through further R&D," he added.

**End of Press Release**

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 / Lucy Stewart

+44 203 772 2491

WeR1 Consultants Pte Ltd (Singapore Financial PR)

Grace Yew, graceyew@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 antenna 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

HALF-YEAR FINANCIAL STATEMENT ANNOUNCEMENT FOR THE HALF-YEAR ENDED 30 JUNE 2016

Consolidated Statement of Comprehensive Income for the six months period ended 30 June 2016. These figures have not been audited.

N.M.: Not Meaningful

Note:

Amount repayable in one year or less, or on demand

Amount repayable after one year

Details of any collateral

The loans of US$5,599,000 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.

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 (1H FY2015: Nil) and fixed deposits amounted to US$400,000 (1H FY2015: US$400,000) pledged with the banks for facilities and loans granted to the Group. As at 30 June 2016, the Group had utilised US$5,599,000 of the facilities and loans granted.

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 27,957,900 treasury shares held by the Company as at 30 June 2016 and 30 June 2015 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 2016 as those used in the audited financial statements for the year ended 31 December 2015, except for the adoption of the new or revised International Financial Reporting Standards ("IFRS") applicable for the financial period beginning 1 January 2016.

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 2016 and are relevant to its operations. The adoption of these IFRS does not have 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:

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:

Review of Financial Performance

Revenue

The Group's revenue increased by US$6.6 million, or 24.4%, to US$33.5 million in Q2 FY2016 from US$26.9 million in Q2 FY2015. The Group recognised three months' revenue contribution of US$11.3 million in Q2 FY2016 from its latest acquisition, Satellite Acquisition Corporation ("Skyware Global"), headquartered in North Carolina, United States ("US"). The impact of the technology changes experienced during FY2015 continued to affect the Group's largest customer in America, with revenues reduced by US$3.5 million in Q2 FY2016, bringing the total reduction in 1H FY2016 to US$8.6 million against 1H FY2015. The Group also saw a US$2.7 million reduction in its Contract Manufacturing segment against Q2 FY2015.

By geography, with the inclusion of Skyware Global, revenue for Q2 FY2016 from America increased by US$9.1 million (+64.0%); offset by a fall in revenue from Europe, Asia and the Rest of the World by US$0.5 million (-6.2%), US$1.5 million (-46.9%) and US$0.6 million (-38.0%), respectively, against Q2 FY2015.

Gross Profit

Gross profit increased by US$2.0 million or 37.6% to US$7.3 million in Q2 FY2016 from US$5.3 million in Q2 FY2015. Gross profit margin improved to 21.8% in Q2 FY2016 from 19.7% in Q2 FY2015. With the exclusion of Skyware Global, gross profit margin would have risen by 8.7% against Q2 FY2015 to 28.4% in Q2 FY2016. The increased gross profit margin, excluding Skyware Global products, resulted from a favourable product mix variation and the reduced volume of products going to the Group's largest customer. The inclusion of Skyware Global products reduced the percentage as they typically attract a lower gross profit margin than other Group products.

Distribution Costs

Distribution costs increased in line with the rise in sales and marketing activities following the acquisition of Skyware Global.

Administrative Expenses

Administrative expenses decreased marginally to US$6.5 million in Q2 FY2016 from US$6.6 million in Q2 FY2015, representing 19.4% and 24.5% of revenue, respectively; although the former included US$1.2 million in manpower and expenses for Skyware Global in Q2 FY2016, which was not present in Q2 FY2015. A reduction in legal costs, the 2015 restructuring and rationalisation exercise at the Group's UK operations, and its programme of streamlining internal efficiencies following Skyware Global's acquisition have translated into operational cost savings in Q2 FY2016 against Q2 FY2015. One of the UK operations completed a further restructuring and rationalisation exercise in Q2 FY2016 at a cost of US$0.4 million which is expected to bring cost savings in the following quarters.

Other Operating Expenses

Other operating expenses decreased by US$0.2 million or 47.5% to US$0.3 million in Q2 FY2016 from US$0.5 million in Q2 FY2015, mainly attributable to foreign exchange gains from the strengthening of the US Dollar against the British Pound.

Finance Costs

The increase in finance costs was mainly attributable to borrowings in Q2 FY2016 relating to Skyware Global and interest payable on shareholders' loans which were not present in Q2 FY2015.

Profit before Tax & Net Profit

The Group recorded a profit before tax of US$0.3 million in Q2 FY2016 from a loss before tax of US$1.8 million in Q2 FY2015, with a margin of 0.9% compared to a negative margin of 6.5%, respectively. On an organic basis, excluding the loss from Skyware Global, the Group would have posted a profit before tax in the quarter of US$0.7 million.

Overall, the Group posted a net profit of US$0.2 million in Q2 FY2016 compared to a net loss of US$1.9 million in Q2 FY2015, with a margin of 0.7% compared to a negative margin of 7.1%, respectively. On an organic basis, excluding Skyware Global, the Group would have posted a net profit of US$0.6 million.

Review of Financial Position

Non-current assets increased mainly attributable to the addition of property, plant and equipment.

Net current assets decreased by US$0.3 million to US$28.6 million as at 30 June 2016 compared to US$28.9 million as at 31 December 2015. Better internal control and improved collections resulted in inventories, trade and other receivables, and trade and other payables decreasing by US$1.1 million, US$5.3 million and US$2.4 million, respectively. Borrowings increased by US$0.3 million to US$5.6 million. Cash and cash equivalents improved by US$3.6 million to US$12.5 million, and net tax receivables increased by US$0.4 million to US$0.5 million as at 30 June 2016.

Non-current liabilities decreased by US$0.4 million due to the release of a provision for litigation that the Group settled with a former supplier.

The Group's net asset value stood at US$54.7 million as at 30 June 2016, compared to US$54.5 million as at 31 December 2015.

Review of Cash Flows

Net cash generated from operating activities was US$3.9 million, comprising cash inflow from operating cash activities before working capital changes of US$1.3 million, net working capital inflow of US$2.8 million and payment of interest and income tax expense of US$0.2 million.

Net cash used in investing activities was US$0.4 million, mainly comprising the purchase of machinery and equipment.

Net cash used in financing activities was US$1.3 million, arising from the repayment of borrowings.

Overall, the Group recorded a net increase in cash and cash equivalents of US$2.2 million in Q2 FY2016, bringing cash and cash equivalents per the consolidated statement of cash flows to US$11.1 million as at 30 June 2016.

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

No forecast or prospect statement was made by the Company in the previous announcement made on 12 May 2016.

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 global concerns about Britain's economic prospects following its decision in June to leave the European Union ("Brexit"), the Group remains upbeat about its Satellite Communications ("Sat Comms") business around the world.

Following the initial depreciation of the British Pound against major currencies in the wake of Brexit, the Group anticipates a possible short-term, foreign exchange benefit against its UK-based costs, which predominately consist of research and development. It does not anticipate a significant adverse impact on revenue from sales of the Group's Sat Comms, which are predominately transacted in US Dollars, as well as the majority of its raw material spend.

The global satellite manufacturing and launch market is expected to grow at a CAGR of 5.14% between 2014 and 2019.* Notably, developing markets in Latin America, the Middle East and Southeast Asia offer plenty of potential for the adoption of new satellite services.

Since the acquisition of Skyware Global on 24 August 2015, the Group has progressed in its plans to fully consolidate its US supply chain, introduced new quality-control measures for production, strengthened its management team, and increased sales and marketing activities in South America, Asia, Africa and Europe. Multi-channel initiatives to drive sales have been rolled out with sales teams actively promoting all of the Group's products across all geographical markets.

The Group has secured new VSAT orders from major telecommunications service providers and suppliers in the US and Indonesia, as well as a leading US broadcaster that intends to launch two satellites later in the year. The Group will recognise Skyware Global's first full-year revenue contributions in FY2016.

Meanwhile, the satellite ground equipment industry is undergoing a significant technology change with the introduction of digital channel stacking ("DCS"), which allows up to 32 continuous video streams from a single Low Noise Block ("LNB"). This impacted the Group's FY2015 performance as major customers had to destock. This is expected to persist in 2H FY2016.

The Group is in the process of completing research on next-generation LNBs that support DCS, positioning it for improved sales pending qualification from a main customer. Following this, the Group will supply similar LNBs to other customers.  

*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?

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 period ended 30 June 2016.

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 period ended 30 June 2016.

14. 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.

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 period ended 30 June 2016 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

4 August 2016