REG - Global Invacom Group - H1 and Q2 2018 Results
Global Invacom Group Limited
("Global Invacom", the "Company" or the "Group")
Results for the six months ended 30 June 2018
("1H FY2018")
Global Invacom (SGX: QS9) (AIM: GINV), the global provider of satellite communications equipment, is pleased to announce its financial results for the six months ended 30 June 2018 ("1H FY2018") and three months ended 30 June 2018 ("Q2 FY2018").
Key financial highlights:
· The Company announced sixth consecutive quarter of profitability in Q2 FY2018
· Revenue remained stable at US$55.4m (1H FY2017: US$57.4m)
· Gross profit margin improved 0.6% point to 21.2% (1H FY2017: 20.6%)
· Gross profit constant at US$11.8m (1H FY2017: US$11.8m)
· Cash and cash equivalents of US$13.4m (31 December 2017: US$7.2m)
Key operational highlights:
· Continued progress and sales momentum from increased adoption of Digital Channel Stacking Switch ("DCSS") products
· Group continues to leverage and grow its existing position in the sizeable and expanding Very Small Apertune Terminal ("VSAT") market for data/internet by satellite
· Focused on further product deployment and diversification to expand the Group's product offering and geographical reach
· Appointment of Malcolm John Burrell as Chief Technology Officer, to drive new technology development in global satellite communications sector
The Group's sales reflected continued demand across the global footprint, with notable sales growth in Europe, particularly for VSAT and DCSS products.
The global market for satellite communications equipment remains robust, amidst a period of major industry-wide change. The transition of technology to DCSS products presents Global Invacom with a number of opportunities, in particular for ground equipment for Direct-to-Home ("DTH") televison viewing via satellite, and the increased global demand for data/internet everywhere through its VSAT equipment.
The Group expects to roll out more advanced satellite broadcasting products in the US and Europe to meet growing demand for DCSS products as broadcasters continue to migrate to the new technology. The Group remains confident of its ability to capitalise on the opportunity through leveraging its customer relationships as the adoption of DCSS continues apace.
The Group also notes that despite a slowdown in the US, there is still a global increase in demand for DTH satellite broadcast services, and therefore demand from broadcasters for the associated equipment required to deliver services. The Group notes however that the US still has a sizeable target market with over 169 million pay TV subscribers1 who are still transitioning to DCSS technology.
Demand for data/internet continues to grow globally, with VSAT technology key in delivering connectivity in many territories and geographies. In 1H FY2018, 38.7% of revenues for the Group were generated from sales of VSAT products around the world, and we continue to see demand increasing for these products across the Group's global footprint.
As one of only seven companies capable of delivering fully integrated satellite communications design, manufacture and innovation services, Global Invacom is well positioned in both markets to capitalise on the opportunity.
In the second half of 2018, the Group will continue to build on the manufacturing improvements made in 2017 and the first half of the year, and research and development will remain a key priority. In June 2018, Global Invacom announced the appointment of Malcolm John Burrell as Chief Technology Officer who will oversee the continued innovation to provide best in class solutions to broadcasters, developers and mobile systems integrators. Technological improvements such as the new slimline products will allow the Group to continue to improve margins and Global Invacom will continue to develop efficient and cost-effective products.
The first half of the year has also seen the successful roll out of the Group's Iridium In-hanger GPS solution through its wholly owned subsidiary Foxcom. Initially aimed at the aerospace sector, this product has broad applications and demonstrates the Group's ability to diversify into new markets.
Tony Taylor, Executive Chairman of Global Invacom, commented:
"The satellite ground equipment sector is undergoing a once-in-a-decade technological shift, and the Company is very well placed to benefit. The innovative products that we are developing such as new slimline products, low-cost LNBs and new satellite antennas are in continual demand.
In the VSAT market, the Group is observing rising demand driven by developing countries and rural communities demanding enhanced connectivity where cable or fibre is not a viable solution, proving satellites can be an attractive option compared to other communication technologies.
Our core focus remains to leverage our position in the market to drive sales, and to continue driving R&D, to develop innovative, market leading products that meet customer demands. We have laid strong foundations in the first half of the year which will allow the Group to build momentum through the second half of FY2018 and beyond."
The full financial statements can be viewed on Global Invacom's website: www.globalinvacom.com
1 - https://www.hollywoodreporter.com/news/directvs-subscriber-slide-drags-at-t-1131159
For further information, please contact:
Global Invacom Group Limited
Matthew Garner, Chief Financial Officer
Tel: +65 6431 0782
Tel: +44 203 053 3523
finnCap Ltd (Nominated Adviser and Joint Broker)
Christopher Raggett / Simon Hicks (Corporate Finance)
Tel: +44 207 220 0500
Mirabaud Securities LLP (Joint Broker)
Peter Krens (Equity Capital Markets)
Tel: +44 207 878 3362
WeR1 Consultants Pte Ltd (Singapore Investor Relations)
Lai Kwok Kin / Roshan Singh
Tel: +65 6737 4844
Vigo Communications (UK Media & Investor Relations)
Jeremy Garcia / Fiona Henson
Tel: +44 207 390 0238
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.
Global Invacom provides a full range of antennas, LNB receivers, fibre distribution equipment, transmitters, switches and video distribution components and electronics manufacturing services in satellite communications as well as manufacturing services in military, medical, and consumer electronics industries. 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 2018
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 2018. These figures have not been audited.
Group
Group
Q2
FY2018
Q2 FY2017
Increase/
(Decrease)
1H
FY2018
1H
FY2017
Increase/
(Decrease)
US$'000
US$'000
%
US$'000
US$'000
%
Revenue
26,471
29,893
(11.4)
55,396
57,424
(3.5)
Cost of sales
(20,788)
(24,089)
(13.7)
(43,625)
(45,595)
(4.3)
Gross profit
5,683
5,804
(2.1)
11,771
11,829
(0.5)
Other income
10
711
(98.6)
31
915
(96.6)
Distribution costs
(81)
(83)
(2.4)
(180)
(229)
(21.4)
Administrative expenses
(5,177)
(5,246)
(1.3)
(10,610)
(10,315)
2.9
Other operating expenses
(55)
-
N.M.
(13)
(106)
(87.7)
Finance income
41
5
720.0
44
10
340.0
Finance costs
(134)
(95)
41.1
(247)
(207)
19.3
Profit before income tax(i)
287
1,096
(73.8)
796
1,897
(58.0)
Income tax expense
(81)
(223)
(63.7)
264)
(419)
(37.0)
Profit after income tax attributable to equity holders of the Company
206
873
(76.4)
532
1,478
(64.0)
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign subsidiaries
70
221
(68.3)
194
108
(79.6)
Other comprehensive income for the period, net of tax
70
221
(68.3)
194
108
(79.6)
Total comprehensive income for the period attributable to equity holders of the Company
276
1,094
(74.8)
726
1,586
(54.2)
N.M.: Not Meaningful
Note:
(i) Profit before income tax was determined after (charging)/crediting the following:
Group
Group
Q2
FY2018
Q2
FY2017
Increase/
(Decrease)
1H
FY2018
1H
FY2017
Increase/
(Decrease)
US$'000
US$'000
%
US$'000
US$'000
%
Interest income
41
5
720.0
44
10
340.0
Interest expense
(134)
(95)
41.1
(247)
(207)
19.3
(Loss)/Gain on foreign exchange
(42)
131
N.M.
20
184
(89.1)
Write-back of payables
-
578
(100.0)
-
578
(100.0)
Loss on disposal of property, plant and equipment
(13)
-
N.M.
(13)
(20)
(35.0)
Impairment of property, plant and equipment
-
-
-
-
(86)
(100.0)
Depreciation of property, plant and equipment
(704)
(629)
11.9
(1,403)
(1,222)
14.8
Amortisation of intangible assets
(176)
(160)
10.0
(351)
(308)
14.0
(Allowance)/Write-back for inventory obsolescence, net
(68)
(126)
(46.0)
(154)
263
N.M.
Operating lease expense
(1,008)
(795)
26.8
(1,717)
(1,611)
6.6
Research and development expense
(727)
(413)
76.0
(1,313)
(803)
63.5
1(b)(i) A statement of financial position (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year.
Group
Company
30 Jun 2018
31 Dec 2017
30 Jun 2018
31 Dec 2017
US$'000
US$'000
US$'000
US$'000
ASSETS
Non-current Assets
Property, plant and equipment
11,645
12,393
103
7
Investments in subsidiaries
-
-
44,885
44,874
Goodwill
9,352
9,352
-
-
Intangible assets
1,872
2,172
-
-
Available-for-sale financial assets
8
8
-
-
Deferred tax assets
198
198
-
-
Other receivables and prepayments
54
55
9,371
9,154
23,129
24,178
54,359
54,035
Current Assets
Due from subsidiaries
-
-
1,250
1,895
Inventories
28,532
29,022
-
-
Trade receivables
16,769
19,268
-
-
Other receivables and prepayments
1,714
3,361
5,361
5,263
Tax receivables
-
11
-
-
Cash and cash equivalents
13,386
7,152
213
733
60,401
58,814
6,824
7,891
Total assets
83,530
82,992
61,183
61,926
EQUITY AND LIABILITIES
Equity
Share capital
60,423
60,423
74,240
74,240
Treasury shares
(1,656)
(1,656)
(1,656)
(1,656)
Reserves
(2,561)
(3,297)
(13,783)
(13,320)
Total equity
56,206
55,470
58,801
59,264
Non-current Liabilities
Other payables
103
111
-
-
Deferred tax liabilities
489
489
-
-
592
600
-
-
Current Liabilities
Due to subsidiaries
-
-
2,121
2,140
Trade payables
14,128
12,206
-
-
Other payables
3,869
6,528
193
454
Borrowings
8,595
8,025
-
-
Provision for income tax
140
163
68
68
26,732
26,922
2,382
2,662
Total liabilities
27,324
27,522
2,382
2,662
Total equity and liabilities
83,530
82,992
61,183
61,926
1(b)(ii) Aggregate amount of group's borrowings and debt securities.
Amount repayable in one year or less, or on demand
As at 30 Jun 2018
As at 31 Dec 2017
Secured
Unsecured
Secured
Unsecured
US$'000
US$'000
US$'000
US$'000
8,595
-
8,025
-
Amount repayable after one year
As at 30 Jun 2018
As at 31 Dec 2017
Secured
Unsecured
Secured
Unsecured
US$'000
US$'000
US$'000
US$'000
-
-
-
-
Details of any collateral
The revolving credit loans of US$8,595,000 were secured over the assets of the subsidiaries and corporate guarantees provided by the Company and the subsidiaries.
1(c) A statement of cash flows (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year.
Group
Group
Q2
FY2018
Q2 FY2017
1H
FY20181H
FY2017
US$'000
US$'000
US$'000
US$'000
Cash Flows from Operating Activities
Profit before income tax
287
1,096
796
1,897
Adjustments for:
Depreciation of property, plant and equipment
704
629
1,403
1,222
Amortisation of intangible assets
176
160
351
308
Loss on disposal of property, plant and equipment
13
-
13
20
Impairment of property, plant and equipment
-
-
-
86
Allowance/(Write-back) for inventory obsolescence, net
68
126
154
(263)
Unrealised exchange loss
312
235
210
17
Interest income
(41)
(5)
(44)
(10)
Interest expense
134
95
247
207
Share-based payments
3
35
11
75
Write-back of payables
-
(578)
-
(578)
Operating cash flow before working capital changes
1,656
1,793
3,141
2,981
Changes in working capital:
Inventories
(1,394)
108
336
(730)
Trade receivables
1,585
(2,015)
2,508
(28)
Other receivables and prepayments
92
2,700
1,640
2,124
Trade and other payables
253
(1,292)
(1,102)
(3,417)
Cash generated from operating activities
2,192
1,294
6,523
930
Interest paid
(64)
(105)
(119)
(217)
Income tax paid
(2)
(331)
(79)
(135)
Net cash generated from operating activities
2,126
858
6,325
578
Cash Flows from Investing Activities
Interest received
42
7
44
10
Purchase of property, plant and equipment
(421)
(601)
(711)
(861)
Proceeds from disposal of property, plant and equipment
28
-
28
27
Decrease in restricted cash
-
1,000
-
1,000
Net cash (used in)/generated from investing activities
(351)
406
(639)
176
Cash Flows from Financing Activities
Proceeds from borrowings
12,629
17,837
24,270
28,542
Repayment of borrowings
(13,475)
(15,628)
(23,700)
(26,138)
Net cash (used in)/generated from financing activities
(846)
2,209
570
2,404
Net increase in cash and cash equivalents
929
3,473
6,256
3,158
Cash and cash equivalents at the beginning of the period
12,512
6,442
7,152
6,742
Effect of foreign exchange rate changes on the balance of cash held in foreign currencies
(55)
18
(22)
33
Cash and cash equivalents at the end of the period(i)
13,386
9,933
13,386
9,933
Note:
(i) For the purpose of presentation in the consolidated statement of cash flows, the consolidated cash and cash equivalents comprise the following:
Q2
FY2018
Q2
FY2017
1H
FY20181H
FY2017
US$'000
US$'000
US$'000
US$'000
Cash and bank balances
13,356
9,904
13,356
9,904
Fixed deposits
30
229
30
229
13,386
10,133
13,386
10,133
Less: Restricted cash*
-
(200)
-
(200)
Cash and cash equivalents per the consolidated statement of cash flows
13,386
9,933
13,386
9,933
* Restricted cash in Q2 FY2017 included fixed deposits amounted to US$200,000 pledged with the banks for banker's guarantee and loans granted to the Group. As at 30 June 2018, the Group had utilised US$8,595,000 of the facilities and loans granted.
1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii) changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year.
Group
Share
capital
Treasury shares
Merger reserves
Capital redemption reserves
Share options reserve
Capital reserve
Foreign currency translation reserve
Retained profits
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
Balance as at 1 Jan 2018
60,423
(1,656)
(10,150)
6
706
(3,695)
(872)
10,708
55,470
Share-based payments
-
-
-
-
8
-
-
-
8
Profit for the period
-
-
-
-
-
-
-
326
326
Other comprehensive income:
Exchange differences on translating foreign operations
-
-
-
-
-
-
124
-
124
Total other comprehensive income for the period
-
-
-
-
-
-
124
326
450
Balance as at 31 Mar 2018
60,423
(1,656)
(10,150)
6
714
(3,695)
(748)
11,034
55,928
Share-based payments
-
-
-
-
3
-
-
-
3
Profit for the period
-
-
-
-
-
-
-
206
206
Other comprehensive income:
Exchange differences on translating foreign operations
-
-
-
-
-
-
69
-
69
Total other comprehensive income for the period
-
-
-
-
-
-
69
206
275
Balance as at 30 Jun 2018
60,423
(1,656)
(10,150)
6
717
(3,695)
(679)
11,240
56,206
Balance as at 1 Jan 2017
60,423
(1,656)
(10,150)
6
613
(3,695)
(986)
7,759
52,314
Share-based payments
-
-
-
-
40
-
-
-
40
Profit for the period
-
-
-
-
-
-
-
605
605
Other comprehensive loss:
Exchange differences on translating foreign operations
-
-
-
-
-
-
(113)
-
(113)
Total other comprehensive income for the period
-
-
-
-
-
-
(113)
605
492
Balance as at 31 Mar 2017
60,423
(1,656)
(10,150)
6
653
(3,695)
(1,099)
8,364
52,846
Share-based payments
-
-
-
-
35
-
-
-
35
Profit for the period
-
-
-
-
-
-
-
873
873
Other comprehensive income:
Exchange differences on translating foreign operations
-
-
-
-
-
-
221
-
221
Total other comprehensive income for the period
-
-
-
-
-
-
221
873
1,094
Balance as at 30 Jun 2017
60,423
(1,656)
(10,150)
6
688
(3,695)
(878)
9,237
53,975
Company
Share
capital
Treasury shares
Share options reserve
Capital reserve
Foreign currency translation reserve
Accumulated losses
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
Balance as at 1 Jan 2018
74,240
(1,656)
706
(4,481)
(1,927)
(7,618)
59,264
Share-based payments
-
-
7
-
-
-
7
Loss for the period
-
-
-
-
-
(234)
(234)
Other comprehensive loss:
Exchange differences on translating foreign operations
-
-
-
-
-
-
-
Total other comprehensive loss for the period
-
-
-
-
-
(234)
(234)
Balance as at 31 Mar 2018
74,240
(1,656)
713
(4,481)
(1,927)
(7,852)
59,037
Share-based payments
-
-
4
-
-
-
4
Loss for the period
-
-
-
-
-
(240)
(240)
Other comprehensive loss:
Exchange differences on translating foreign operations
-
-
-
-
-
-
-
Total other comprehensive loss for the period
-
-
-
-
-
(240)
(240)
Balance as at 30 Jun 2018
74,240
(1,656)
717
(4,481)
(1,927)
(8,092)
58,801
Balance as at 1 Jan 2017
74,240
(1,656)
613
(4,481)
(2,067)
(6,994)
59,655
Share-based payments
-
-
38
-
-
-
38
Loss for the period
-
-
-
-
-
(85)
(85)
Other comprehensive income:
Exchange differences on translating foreign operations
-
-
-
-
140
-
140
Total other comprehensive income for the period
-
-
-
-
140
(85)
55
Balance as at 31 Mar 2017
74,240
(1,656)
651
(4,481)
(1,927)
(7,079)
59,748
Share-based payments
-
-
37
-
-
-
37
Loss for the period
-
-
-
-
-
(56)
(56)
Other comprehensive loss:
Exchange differences on translating foreign operations
-
-
-
-
-
-
-
Total other comprehensive loss for the period
-
-
-
-
-
(56)
(56)
Balance as at 30 Jun 2017
74,240
(1,656)
688
(4,481)
(1,927)
(7,135)
59,729
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.
1H FY2018
No. of shares
US$'000
Balance as at 1 Jan 2018 and 30 Jun 2018
271,662,227
72,584
1H FY2017
No. of shares
US$'000
Balance as at 1 Jan 2017 and 30 Jun 2017
271,662,227
72,584
There were 10,740,072 treasury shares held by the Company as at 30 June 2018 and 30 June 2017 and there was no subsidiary holdings.
1(d)(iii) To show the total number of issued shares excluding treasury shares as at the end of the current financial period and as at the end of the immediately preceding year.
30 Jun 2018
31 Dec 2017
Total number of issued shares excluding treasury shares
271,662,227
271,662,227
1(d)(iv) A statement showing all sales, transfers, disposal, cancellation and/or use of treasury shares as at the end of the current financial period reported on.
1H FY2018
No. of shares
US$'000
Balance as at 1 Jan 2018 and 30 Jun 2018
10,740,072
1,656
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.
1H FY2018
No. of shares
US$'000
Balance as at 1 Jan 2018 and 30 Jun 2018
-
-
2. Whether the figures have been audited or reviewed and in accordance with which auditing standard or practice.
These figures have not been audited or reviewed.
3. Where the figures have been audited or reviewed, the auditors' report (including any qualifications or emphasis of a matter).
Not applicable.
4. Whether the same accounting policies and methods of computation as in the issuer's most recently audited annual financial statements have been applied.
The accounting policies and methods of computation have been applied consistently for the current financial period ended 30 June 2018 as those used in the audited financial statements for the year ended 31 December 2017, except for the adoption of the new or revised International Financial Reporting Standards ("IFRS") applicable for the financial period beginning 1 January 2018.
5. If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change.
The Group has adopted all of the new or revised IFRS that are effective for the financial period beginning 1 January 2018 and are relevant to its operations. The adoption of these IFRS does not have financial impact on the Group's financial position or results.
6. Earnings per ordinary share of the group for the current financial period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends.
Earnings per ordinary share of the Group, after deducting any provision for preference dividends
Group
Group
Q2
FY2018
US$
Q2
FY2017
US$
1H
FY2018
US$
1H
FY2017US$
(a) Based on weighted average number of ordinary shares on issue; and
0.08 cent
0.32 cent
0.20 cent
0.54 cent
(b) On a fully diluted basis
0.08 cent
0.32 cent
0.20 cent
0.54 cent
Weighted average number of ordinary shares used in computation of basic earnings per share
271,662,227
271,662,227
271,662,227
271,662,227
Weighted average number of ordinary shares used in computation of diluted earnings per share
271,662,227
272,196,579
271,662,227
272,501,910
* Diluted earnings per share for Q2 FY2018 and 1H FY2018 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.
Group
Company
30 Jun 2018
US$
31 Dec 2017
US$
30 Jun 2018
US$
31 Dec 2017
US$
Net asset value per ordinary share based on issued share capital
20.69 cents
20.42 cents
21.64 cents
21.82 cents
Total number of issued shares
271,662,227
271,662,227
271,662,227
271,662,227
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 2018 ("1H FY2018") was US$55.4 million from US$57.4 million in the prior year ("1H FY2017") partly driven by slower orders from key customers in the US and expected delays for Very Small Aperture Terminal ("VSAT") projects. Revenue for the quarter ended ("Q2 FY2018") amounted to US$26.5 million against US$29.9 million in the prior year quarter ("Q2 FY2017").
Geographically, Group revenue for 1H FY2018 increased in Europe by US$3.7 million (+37.1%) although offset by reductions in America, Asia and Rest of the World ("RoW") by US$3.5 million (-8.5%), US$0.6 million (-16.5%) and US$1.6 million (-55.3%), respectively. Similarly, revenue for Q2 FY2018 increased in Europe by US$1.8 million (+38.4%) but declined in America, Asia and RoW by US$4.3 million (-19.4%), US$0.3 million (-18.5%) and US$0.6 million (-43.1%), respectively compared to the earlier year.
Reflecting the satellite broadcasting industry's growing adoption of the technological change to Digital Channel Stacking Switch ("DCSS"), the Group is now providing 100% DCSS product to its largest customer.
In addition to its provision of services for the Direct-to-Home ("DTH") market, 38.7% of its revenue in 1H FY2018 has been derived from the fast growing data/internet market including VSAT products where the Group holds a strong position following the acquisition of Global Skyware in FY2015.
Gross Profit
Gross profit margin improved 0.6 percentage point from 20.6% to 21.2% with gross profit for 1H FY2018 remaining level at US$11.8 million on reduced revenue.
Similarly, for Q2 FY2018, gross profit margin improved by 2.1 percentage points from 19.4% to 21.5% from product mix and manufacturing improvements with gross profit remaining on a level with previous year at US$5.7 million from US$5.8 million on lower revenues.
Administrative Expenses
Administrative expenses for 1H FY2018 increased 2.9% to US$10.6 million compared to US$10.3 million in 1H FY2017, representing 19.2% and 18.0% of revenue, respectively, with more spent on research and development on new initiatives and projects. Administrative expenses for Q2 FY2018 maintained at US$5.2 million compared to the previous year.
Other Operating Expenses
Other operating expenses in Q2 FY2018 derived primarily from foreign exchange losses and loss on disposal of machinery and equipment.
Profit Before Tax & Net Profit
The Group posted a profit before tax of US$0.8 million in 1H FY2018, compared to US$1.9 million the year earlier, representing margins of 1.4% and 3.3%, respectively. Excluding a one-off write-back of payables amounting to US$0.6 million following the closure of the non-core subcontracting site in 1H FY2017, margins would be 1.4% and 2.3%, respectively.
For Q2 FY2018, the Group recorded US$0.3 million profit before tax compared to US$1.1 million in the prior year quarter, representing margins of 1.1% and 3.7%, respectively. Similarly, excluding the write-back of payables amounting to US$0.6 million in Q2 FY2017, margins would be 1.1% and 1.7%, respectively.
Overall, the Group posted a net profit of US$0.5 million in 1H FY2018, compared to US$1.5 million in 1H FY2017, representing net margins of 1.0% and 2.6%, respectively. Excluding the write-back of payables amounting to US$0.6 million following the closure of the non-core subcontracting site in 1H FY2017, margins would be 1.0% and 1.6%, respectively.
The Group recorded a net profit of US$0.2 million in Q2 FY2018 compared to US$0.9 million the prior year quarter, representing net margins of 0.8% and 2.9%, respectively. Excluding the write-back of payables amounting to US$0.6 million following the closure of the non-core subcontracting site in Q2 FY2017, margins would be 0.8% and 1.0%, respectively.
Review of Financial Position
Non-current assets decreased, primarily due to the depreciation of property, plant and equipment as well as the amortisation of intangible assets.
Net current assets increased by US$1.8 million to US$33.7 million as at 30 June 2018 compared to US$31.9 million as at 31 December 2017. Inventories and trade and other receivables decreased by US$0.5 million and US$4.1 million, respectively, owing to tighter control and faster collections from the customers. Trade and other payables decreased by US$0.8 million following the continuing rectification of trade supplier payments. Borrowings increased by US$0.6 million to US$8.6 million offset by an increase in cash and cash equivalents of US$6.2 million to US$13.4 million as at 30 June 2018 compared to US$7.2 million as at 31 December 2017.
The Group's net asset value stood at US$56.2 million as at 30 June 2018, compared to US$55.5 million as at 31 December 2017.
Review of Cash Flows
In Q2 FY2018, net cash generated from operating activities amounted to US$2.1 million, comprising US$1.7 million cash inflow from operating activities (before working capital changes), US$0.5 million net working capital inflow and US$0.1 million payment of interest.
In 1H FY2018, net cash generated from operating activities amounted to US$6.3 million, comprising US$3.1 million cash inflow from operating activities (before working capital changes), US$3.4 million net working capital inflow and US$0.2 million payment of interest and income tax.
Net cash used in investing activities in Q2 FY2018 and 1H FY2018 amounted to US$0.4 million and US$0.6 million, respectively, relating predominately to purchase of machinery.
Net cash used in financing activities amounted to US$0.8 million in Q2 FY2018 and net cash generated from financing activities amounted to US$0.6 million in 1H FY2018, attributable to the net repayment and proceeds of borrowings, respectively.
Overall, the Group recorded a net increase in cash and cash equivalents amounting to US$0.9 million and US$6.3 million in Q2 FY2018 and 1H FY2018, respectively, bringing cash and cash equivalents per the consolidated statement of cash flows to US$13.4 million as at 30 June 2018.
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.
According to the research report by MarketsandMarkets1 the Satellite Communications ("Sat Comms") equipment market - Global Forecast to 2022 - is estimated to be US$20.2 billion in 2017, driven by the growing demand for dynamic and uninterrupted communication cross-industries. Moreover, as satellite equipment manufacturers leverage on infrastructure constraints to make available higher bandwidth (4K and developing 8K) amidst emerging trends including 5G convergence, the growth of autonomous vehicles and connected devices.
Amidst media reports that the growing popularity of OTT streaming, or 'cord-cutting', could threaten the satellite broadcasting industry, there is a growing consensus of co-existence with traditional pay TV. Instead of customer defection and direct substitute, the industry views OTT as a complementary layer to linear television services. Distribution and monetisation models are still evolving ahead of the advent of broadcasting technologies such as the UHD/4K transmissions and even 8K, amidst the ongoing migration of the satellite broadcasting industry to DCSS technology. These will require stable infrastructure that can handle spikes in bandwidth consumption. Sat Comms technology, which can save costly investments in terrestrial technology is able to distribute such content over many parts of the globe.
In the data/internet segment, the demand for high-bandwidth connectivity is growing worldwide as operators in developing countries seek lower-cost equipment to meet demand in emerging markets. The Group's acquisitions recently, including Global Skyware in FY2015, recognised this fast-growing demand in this segment and has given it a strong position with this segment now accounting for close to 40% of revenues in 1H FY2018.
The DCSS technological shift and the demand for new, less costly data/internet components continues to underpin the Group's commitment to R&D.
The forward strategy of the Group will revolve on:
i) Rolling out product pipelines to include more advanced Sat Comms broadcasting equipment products to customers in Americas and Europe. These include DCSS products such as the new Western Arc Hybrid LNB, launched in 2H FY2017. Other new products - including slimline products and low-cost LNBs based on a new chip design - are expected to enter production throughout the rest of FY2018.
ii) Developing and rolling out new products and antennas for satellite ground equipment for data and internet usage. Of the Group's subsidiaries, Global Skyware will supply 100% new design antennas to its major customer from August 2018 and Foxcom recently launched its Hangar Repeater Solution to enable aircraft ground engineers to undertake 24/7 avionics testing of Inmarsat, Iridium and GPS satellite signals indoors.
iii) Having achieved the financial turnaround of its US and Israel subsidiaries through oprerational refinement and cost reductions, the Group will further streamline the supply chain across its global footprint.
iv) Refining product development across its global footprint to meet requirements and match demand in key markets. To this end, the Group announced on 1 June 2018 the appointment of Mr Malcolm John Burrell as Chief Technology Officer. Mr Burrell will remain Executive Director and Chief Risk Officer.
The Group will also increase investor engagement with a view to exiting the SGX-Watch List (having been included since June 2018 due to the Minimum Trading Price criterion).
1 Source: Satellite Communications Equipment Market by Product, Technology, End-Use, Vertical and Region - Global Forecast to 2022 by MarketsandMarkets.
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 2018.
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 2018.
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 2018 to be false or misleading in any material aspect.
On behalf of the Board
Anthony Brian Taylor
Director
Matthew Jonathon Garner
Director
BY ORDER OF THE BOARD
Anthony Brian Taylor
Executive Chairman
10 August 2018
The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDIR FKCDPABKDKFK
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