GINV.L Regulatory News (GINV)

Global Invacom Group Limited

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

Results for the six months ended 30 June 2019

("1H FY2019")

Singapore/London, 8 August 2019 - Global Invacom (SGX: QS9) (AIM: GINV), the global provider of satellite communications equipment and electronics, is pleased to announce its financial results for the six months ended 30 June 2019 and three months ended 30 June 2019 ("Q2 FY2019").

Key financial highlights:

·; The Group announced a Q2 FY2019 net profit of US$845k, its tenth consecutive quarter of profitability

·; Revenue for 1H FY2019 increased significantly by 29.9% to US$71.9m (1H FY2018: US$55.4m)

·; Gross Profit for 1H FY2019 increased by 28.1% to US$15.1m (1H FY2018: US$11.8m)

·; Net profit for 1H FY2019 increased by 198.1% to US$1.6m (1H FY2018: US$0.5m)

·; Cash and cash equivalents of US$7.9m (31 December 2018: US$8.4m)

Key operational highlights:

·; The acquisition of Apexsat (June 2019) bolsters capability in Low Earth Orbit ("LEO") and Medium Earth Orbit ("MEO") products

·; Ongoing sales momentum for Direct to Home ("DTH") satellite connectivity equipment, to major US, Malaysian and UK satellite broadcasters

·; Expanded capabilities to deliver integrated antenna and electronics solutions for the fast growing Very Small Apertune Terminal ("VSAT") market for Data over Satellite ("DOS") to customers such as Hughes, Gilat and Viasat

·; Ongoing focus on both product development and diversification remains central to growth strategy

The Group's sales momentum reflects the continued and growing global demand for satellite communications equipment and electronics to satisfy the demand for data and connectivity.

Satellite communications remain an essential component in meeting global demand for data and connectivity, especially where security of transmission is important or in rural areas and less developed regions where physical fibre or cable is not commercially viable.

This strong industry back drop is reflected in our robust financial performance, with the Group reporting another quarter of profit.

Revenue for the quarter ended 30 June 2019 rose 27.1% to US$33.7 million from Q2 FY2018 at US$26.5 million, driven by an increase in order intake from major customers in the United States.

Revenue in the period increased in America, Europe and Rest of the World by US$7.2 million (+40.9%), US$0.1 million (+1.4%) and US$1.0 million (+122.8%), respectively, minorly offset by a weaker performance in Asia, down by US$1.1 million (-73.9%).

With the increase in revenue coupled with product mix and manufacturing improvements, gross profit for Q2 FY2019 increased by 28.8% to US$7.3 million, compared with corresponding quarter in 2018 of US$5.7 million.

Net profit increased significantly by 310.2% to US$0.8 million (Q2 FY2018: US$0.2 million), the Group's tenth consecutive quarter of profitability.

Administrative expenses rose to US$5.9 million in Q2 FY2019 from US$5.2 million in Q2 FY2018, due to the inclusion of salaries and related costs from the acquisition of Skyware Technologies and some small professional fees incurred for the reverse takeover, which were both absent in Q2 FY2018. Excluding these new costs brings administrative costs back in line with FY2018.

Earnings per share on a fully diluted basis rose to 0.31 US cent for Q2 FY2019 (Q2 FY2018: 0.08 US cent). For 1H FY2019, earnings per share increased to 0.58 US cent (1H FY2018: 0.20 US cent). Net asset value per share increased to 21.30 US cents as at 30 June 2019 from 20.84 US cents as at 31 December 2018. The Group's cash and cash equivalents amounted to US$7.9 million as at 30 June 2019.

Through the Group's solutions, Global Invacom has fast established itself as a preferred partner for several blue-chip global media operators. The Group is now the exclusive antenna manufacturer for a leading UK telecommunications company to whom it is also now supplying its electronics, and has built strong relationships with major US customers, including a major broadcaster and the world's largest provider of DOS services.

Underpinning this strong market position is the growing demand for satellite systems. It is estimated that approximately 3,300 satellites will be launched between 2018 and 2027, representing a market of approximately US$284 billion[1]. Increasing demand for data services continues to support this growth, led by the ongoing adoption of smart phone usage, particularly in developing economies, where fibre infrastructure is weak or non-existent. Smart phone data consumption is forecast to increase ten-fold globally between 2016 and 2022, rising to twelve times in Central and Eastern Europe and Middle East and Africa[2], with demand for voice data remaining largely flat.

The Company's focus on DOS and DTH solutions and complementary ancillary products and services continues to exploit global demand. In 1H FY2019, the Company commenced sales of its US-targeted slimline Eastern Arc LNB (low noise block downconverter), following the successful launch of the Western Arc model in late-2018 and was initially the sole source supplier for these DTH products.

In the DOS division, the acquisition of the business of Skyware Technologies, now trading under Global Skyware Limited, in October 2018 bolstered the Group's electronics capabilities, which now positions Global Invacom to offer integrated antenna and electronics solutions for this market. The Group's capabilities in this DOS sector of the market were further enhanced when, in June 2019, the Group completed the acquisition of the assets and technology of Apexsat, which specialises in the design and manufacture of steerable earth station antenna solutions, essential to address the upcoming LEO and MEO satellite communications market. These moveable antennas are capable of tracking satellites that form part of the LEO and MEO constellations in addition to receiving signals from rarely used commercial satellites. The integration of Apexsat is now underway with management keen to explore commercial opportunities as the rollout of LEO and MEO commences.

Meanwhile, in the DTH market, the Group is focussed on second generation data satellite providers, where there is demand for streaming and recording capabilities and is now seeing real global traction within this sector, which the Group believes presents a significant opportunity going forward.

The Group's sales reflected demand across its global footprint with DTH and DOS products now equally represented. The Group remains well positioned to capitalise on further market growth and will continue to leverage its blue-chip customer relationships.

Central to the Group's success is its technical track record, both acquired and created internally. In Q2 FY2019, the Group successfully completed a further trial of its Bx-Wifi technology, with the Italian national public broadcasting company. Bx-Wifi technology enables the simultaneous streaming of uninterrupted audio or video content from multiple sources by narrowing bandwidth usage, eliminating buffering or loss of signal, and enabling thousands of users to stream concurrently.

The Group plans to expand its sales and marketing activities to further broaden its growing customer base geographically, in addition to strengthening existing customer relationships. In light of further recent tariff increases imposed by the USA on products produced in China, it will also continue its strategy in the second half to derisk its manufacturing exposure through reduced activity at its largest site in China.

Tony Taylor, Executive Chairman of Global Invacom, commented:

"We have made a strong start to 2019 buoyed by our recent acquisition of Apexsat and good customer traction across our DOS and DTH satelite solutions. Global Invacom has an enviable customer base, a long track record of innovation and service excellence, and a unique and leading position in the industry."

For further information, please contact:

About Global Invacom Group Limited

Global Invacom is a fully integrated satellite equipment provider with six manufacturing plants across China, Israel, Malaysia, UK and the US. Its customers include satellite broadcasters such as BSkyB 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 antennas, LNB receivers, transceivers, electronics, fibre distribution equipment, transmitters, switches and video distribution components as well as electronics manufacturing services in satellite communications. Following the acquisition in 2015 of Global Skyware, a leading US-based designer and supplier of satellite antennas products and services, the Company became 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 Q2 AND HALF-YEAR ENDED 30 JUNE 2019

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 Q2 and the half-year ended 30 June 2019. These figures have not been audited.

N.M.: Not Meaningful

Note:

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

* US$0.5 million of write-back for inventory obsolescence was offset by materials write-off for the same amount recognised in cost of goods sold.

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$13,650,000 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 30 June 2019 and 30 June 2018 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 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.

Except as disclosed in Note 5 below, 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 2018.

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 2019. Except as disclosed below, the adoption of the new and revised SFRS(I)s and IFRSs has no material financial impact on the Group's financial statements.

SFRS(I) 16 and IFRS 16, Leases sets out a revised framework for the recognition, measurement, presentation and disclosure of leases, and replaces existing lease accounting guidance. SFRS(I) 16 and IFRS 16 requires lessees to recognise right-of-use assets and lease liabilities for all leases with a term of more than 12 months, except where the underlying asset is of low value. The right-of-use asset is depreciated and interest expense is recognised on the lease liability. The accounting requirements for lessors have not been changed substantially and continue to be based on classification as operating and finance leases. Disclosure requirements have been enhanced for both lessors and lessees.

The Group adopted SFRS(I) 16 and IFRS 16 on 1 January 2019 based on a permitted transition approach that does not restate comparative information, but recognised the cumulative effect of initially applying SFRS(I) 16 and IFRS 16 as an adjustment to the opening balance of retained earnings on 1 January 2019. The Group also adopted an expedient offered by SFRS(I) 16 and IFRS 16, exempting the Group from having to reassess whether pre-existing contracts contain a lease.

The Group and the Company have entered into several leasing arrangements with lessors for factory buildings and office premises. Prior to the adoption of SFRS(I) 16 and IFRS 16, the Group and the Company recognised these arrangement as operating leases and payments made under operating leases are recognised in the income statement on a straight-line basis over the period of the lease. Upon adoption of SFRS(I) 16 and IFRS 16, the Group and the Company recognised the right-of-use assets and lease liabilities. The nature of expenses related to those leases will change as SFRS(I) 16 and IFRS 16 replaces the straight-line operating lease expense with depreciation charge for right-of-use assets and interest expenses on lease liabilities. The Group does not restate the comparative information for the effect of adopting SFRS(I) 16 and IFRS 16 due to the exemption in SFRS(I) 16 and IFRS 16 but has instead recognised the effect in retained earnings and other reserves as at 1 January 2019.

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 for Q2 FY2019 and 1H FY2019 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 six months ended 30 June 2019 ("1H FY2019") increased by US$16.5 million to US$71.9 million from US$55.4 million in the prior year ("1H FY2018"). Revenue for the quarter ended ("Q2 FY2019") amounted to US$33.7 million against US$26.5 million in the prior year quarter ("Q2 FY2018"). The increases were driven by its introduction of new and improved products to its key customers.

Geographically, Group revenue for 1H FY2019 increased in America, Europe and Rest of the World ("RoW") by US$14.8 million (+39.7%), US$1.4 million (+10.4%) and US$2.2 million (+164.4%), respectively, offset by reductions in Asia by US$1.9 million (-61.7%). Similarly, revenue for Q2 FY2019 increased in America, Europe and RoW by US$7.2 million (+40.9%), US$0.1 million (+1.4%) and US$1.0 million (+122.8%), respectively but declined in Asia by US$1.1 million (-73.9%) compared to the prior year.

Gross Profit

The increase in revenue has resulted in a 28.1% increase in gross profit from US$11.8 million in 1H FY2018 to US$15.1 million in 1H FY2019. Gross profit margin decreased slightly by 0.2 percentage points from 21.2% to 21.0%. For Q2 FY2019, gross profit margin improved by 0.3 percentage points from 21.5% to 21.8%, due to product mix and manufacturing improvements with gross profit at US$7.3 million against US$5.7 million for Q2 FY2018.

Other Income

Other income in Q2 FY2019 relates to write-back of payables and government subsidy in China.

Administrative Expenses

Administrative expenses for 1H FY2019 increased 15.0% to US$12.2 million compared to US$10.6 million in 1H FY2018, representing 17.0% and 19.2% of revenue respectively, primarily due to the inclusion of salaries and related costs from the acquisition of business from Skyware Technologies and professional fees incurred for the reverse takeover, which were both absent in 1H FY2018. If these costs were excluded, administrative expenses would be US$11.0 million compared to US$10.6 million for 1H FY2018, a 3.9% increase.

Administrative expenses for Q2 FY2019 increased to US$5.9 million from US$5.2 million compared to the previous year. Again, excluding the new element of the business in FY2019, administrative expenses for Q2 FY2019 would be US$5.6 million compared to US$5.2 million in the prior year period.

Other Operating Expenses

Other operating expenses in Q2 FY2019 were derived from foreign exchange losses, loss on disposal of equipment and the write-off of bad debts.

Profit Before Tax & Net Profit

The Group posted a profit before tax of US$2.1 million in 1H FY2019, compared to US$0.8 million the prior year, representing margins of 3.0% and 1.4%, respectively. For Q2 FY2019, the Group recorded US$1.1 million profit before tax compared to US$0.3 million in the prior year quarter, representing margins of 3.4% and 1.1%, respectively.

Overall, the Group posted a net profit of US$1.6 million in 1H FY2019, compared to US$0.5 million in 1H FY2018, representing net margins of 2.2% and 1.0%, respectively. The Group recorded a net profit of US$0.8 million in Q2 FY2019 compared to US$0.2 million the prior year quarter, representing net margins of 2.5% and 0.8%, respectively.

Review of Financial Position

Non-current assets increased by US$3.7 million to US$31.0 million as at 30 June 2019, primarily due to the adoption of SFRS(I) 16 on leases, addition of property, plant and equipment as well as the interest accrued on the convertible loans subscribed in Tactilis Sdn Bhd.

Net current assets decreased by US$0.5 million to US$29.3 million as at 30 June 2019 compared to US$29.8 million as at 31 December 2018. Trade and other receivables and trade and other payables decreased by US$2.4 million and US$5.2 million respectively, with faster collection and continuing payment to suppliers, offset by an increase in inventories of US$0.4 million. Borrowings increased by US$1.7 million to US$13.7 million, offset by a decrease in cash and cash equivalents of US$0.5 million to US$7.9 million as at 30 June 2019 compared to US$8.4 million as at 31 December 2018. Provision for income tax increased by US$0.2 million, in line with the increase in profits. The adoption of SFRS(I) 16 on leases increased the current portion of lease liabilities by US$1.3 million.

Similarly, the non-current portion of the lease liabilities increased to US$2.0 million.

The Group's net asset value stood at US$57.9 million as at 30 June 2019, compared to US$56.6 million as at 31 December 2018.

Review of Cash Flows

In Q2 FY2019, net cash generated from operating activities amounted to US$3.5 million, comprising US$2.7 million cash inflow from operating activities (before working capital changes), US$1.1 million net working capital inflow and US$0.3 million payment of interest and income tax.

In 1H FY2019, net cash generated from operating activities amounted to US$1.9 million, comprising US$5.2 million cash inflow from operating activities (before working capital changes), US$2.9 million net working capital outflow and US$0.4 million payment of interest and income tax.

Net cash used in investing activities in Q2 FY2019 and 1H FY2019 amounted to US$1.0 million and US$2.6 million, respectively, relating predominately to purchase of machinery and equipment, investment in convertible notes in Tactilis Sdn Bhd and payment for Apexsat Pte Ltd.

Net cash used in financing activities amounted to US$2.4 million in Q2 FY2019 and generated from financing activities amounted to US$0.2 million in 1H FY2019, attributable to the net proceeds of borrowings and repayment of lease liabilities.

Overall, the Group recorded a net increase in cash and cash equivalents amounting to US$0.1 million in Q2 FY2019 and a net decrease in cash and cash equivalents amounting to US$0.5 million in 1H FY2019, bringing cash and cash equivalents per the consolidated statement of cash flows to US$7.9 million as at 30 June 2019.

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 Group continues to see revenue growth resulting from its introduction of new and improved products to its key customers which the Group will strive to maintain. The Group is confident that its investment in R&D for electronics and antennas in both the Direct-to-Home ("DTH") and VSAT/Data over Satellite ("DOS") markets will place it in a strong position compared to their competitors.

According to a recent research report by MarketsandMarkets[3], the satellite communications market is estimated to exceed US$30 billion by 2022, driven by demand for data and connectivity across multiple territories, including North America, Europe, Asia Pacific, Middle East and Africa as well as Latin America. Satellite communications are increasingly seen as an essential component in addressing the infrastructure necessary to deliver connectivity to all, particularly amid evolving trends such as 5G and connected devices. The Group continues to monitor the ongoing development of 5G throughout the world, and the potential for satellite and satellite ground equipment in particular, to play its part in this evolving infrastructure.

Furthermore, there are an increasing number of operators seeking to capitalise on the opportunity to launch low latency satellite constellations in lower earth orbit ("LEO") and medium earth orbit ("MEO"), seeking to provide large scale coverage and deliver connectivity at a lower price. Global Invacom recently announced the acquisition of the assets and intellectual property of Apexsat Pte Ltd with steerable antenna that directly address this market, and the challenge of producing cost effective antenna to receive data from non-geostationary ("non-GEO") satellites. Northern Sky Research recently published a report which forecasts that the cumulative revenue opportunity for LEO/MEO capacity and service will total US$43.6 billion between 2018 and 2028[4].

Whilst a small proportion of customers are continuing to end their traditional cable and satellite TV subscriptions - known as cord cutting - a recent report from Leichtman Research Group reports there are an estimated 87.7 million pay TV subscribers in the United States[5]. Consumers today have access to a wider choice of services, with over the top ("OTT") services such as Hulu, Netflix and Amazon offering high quality television however there is a growing consensus in the industry that these OTT services will co-exist with traditional pay TV.

The Group is also mindful of the further recent tariff increases imposed by the United States of America ("USA") on products manufactured in the People's Republic of China ("China") and has been working on its internal processes and externally with affected end customers to limit the exposure to these increases. This has included moving high running, USA bound product from its facility in China to another location that is not affected by tariffs. It will also continue its strategy in the second half to derisk its manufacturing exposure through reduced activity at its largest site in China.

DOS remains a vital contributor to the Group's business. Shipments of its new 90cm satellite antenna continue on a non-exclusive basis to the lead provider of DOS services based in USA during FY2019. In addition, following the acquisition of the assets and intellectual property of Skyware Technologies in Q3 FY2018, orders for DOS transceiver electronics from another major global DOS integrator have led to overall DOS shipments in 1H FY2019 exceeding that of the corresponding period in FY2018.

Shipment of the Group's Western and Eastern Arc Slimline Low Noise Block ("LNB") to a major USA customer led to higher revenue in both Q1 and Q2 FY2019. In addition, the Group has secured two contracts worth US$6 million to supply DTH Satellite Outdoor Units to a major Asian Satellite Service Provider.

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.

Due to the operating conditions faced by the Group, no dividend has been declared or recommended for the six months ended 30 June 2019.

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 2019.

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 ended 30 June 2019 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

Executive Chairman

8 August 2019

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.