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POY
POY
POY - Poynting Holdings Limited - Provisional condensed consolidated
financial statements for the year ended 30 June 2011
POYNTING HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1997/011142/06)
Share code: POY ISIN: ZAE000121299
("Poynting" or "the company" or "the group")
PROVISIONAL CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
30 JUNE 2011
HIGHLIGHTS
Revenue of R81,5 million up 7% from R76,3 million. If the discontinued
operations revenue is removed from both periods, the revenue from continued
operations has increased by 22%.
54% increase in profit before taxation from R3,8 million to R5,8 million
excluding the loss in discontinued operations.
EBITDA from continuing operations increased by 25% from R9,8 million in 2010
to R12,3 million in 2011.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
year year
ended ended
Note 30 June 30 June
2011 2010
R`000 R`000
Revenue 81 549 76 294
Cost of sales (28 102) (27 405)
Gross profit 53 447 48 889
Other income 483 508
Operating expenses (47 628) (44 716)
Operating profit 6 302 4 681
Investment income 269 232
Finance costs (730) (1 123)
Profit before taxation 5 841 3 790
Taxation (1 077) (888)
Profit from continuing operations 4 764 2 902
Discontinued operations
Loss from discontinued operations 2 (2 156) (376)
Profit for the year 2 608 2 526
Other comprehensive income - -
Total comprehensive income 2 608 2 526
Attributable to:
Equity holders of parent 1 2 608 2 537
Non-controlling interest - (11)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
year year
ended ended
30 June 30 June
2011 2010
R`000 R`000
ASSETS
Non-current assets 12 127 17 538
Property, plant and equipment 2 081 3 206
Intangible assets 9 993 13 139
Deferred tax - 1 020
Other financial assets 53 173
Current assets 32 798 25 464
Inventories 8 418 7 744
Other financial assets 886 -
Current tax receivable 13 28
Trade and other receivables 18 629 11 186
Cash and cash equivalents 4 852 6 506
Total assets 44 925 43 002
EQUITY AND LIABILITIES
Equity 31 903 29 294
Equity attributable to owners of the 31 875 29 266
parent
Non-controlling interest 28 28
Non-current liabilities 1 633 2 223
Interest-bearing liabilities 1 633 2 223
Current liabilities 11 389 11 486
Interest-bearing liabilities 641 3 357
Trade and other payables 10 732 8 104
Bank Overdraft 16 25
Total equity and liabilities 44 925 43 002
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Retain Non- Total
capita based ed control R`000
l payment earnin ling
R`000 reserve gs interes
R`000 R`000 t R`000
Balance at 1 July 24 - 2 128 39 26 547
2009 380
Changes in equity - - - - -
Issue of shares - - - - -
Net profit for the - - 2 537 (11) 2 526
period
Employees share - - - - -
option
scheme: Options - 221 - - 221
issued
Total changes - 221 2 537 (11) 2 747
Balance at 30 June 24 221 4 665 28 29 294
2010 380
Changes in equity - - - - -
Net profit for the - - 2 608 - 2 608
period
Amounts less than - - - - 1
R1 000 rounded
Total changes - - 2 608 - 2 609
Balance at 30 June 24 221 7 273 28 31 903
2011 380
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Audited
year year
ended ended
30 June 30 June
2011 2010
R`000 R`000
Cash flow from operating activities 4 626 6 401
Cash flow used in investing activities (2 785) (3 687)
Cash flow used in financing activities (3 361) (927)
Net increase in cash and cash (1 520) 1 787
equivalents
Cash and cash equivalents at the 6 481 5 436
beginning of the period
Effect of exchange rate movement on cash (125) (742)
held
Cash and cash equivalents at the end of 4 836 6 481
the year
NOTE 1 - RECONCILIATION OF PROFIT FOR
THE YEAR TO HEADLINE EARNINGS
Reviewed Audited
year year ended
ended 30 June
30 June 2010
2011 R`000
R`000
Profit for the year 2 608 2 537
Adjustments for:
Impairment of intangible assets 299 91
Headline earnings attributable to 2 907 2 628
ordinary shareholders
Weighted average number of ordinary 88 554 88 554 275
shares in issue 275
Weighted average number of diluted 90 586 88 684 020
ordinary shares in issue 388
From continuing and discontinued
operations
Basic earnings per ordinary share 2.95 2.86
(cents)
Diluted earnings per ordinary share 2.88 2.86
(cents)
Headline earnings per ordinary share 3.28 2.97
(cents)
From continuing operations
Basic earnings per ordinary share 5.38 3.29
(cents)
Diluted earnings per ordinary share 5.26 3.28
(cents)
Headline earnings per ordinary share 5.72 3.39
(cents)
NOTE 2 - REVIEWED SEGMENTAL ANALYSIS for the period ending 30 June
Continued Discontinued
operations
Commercial Defence Operations Total
2011 Division Division Base Station
Total revenues 48,732 37,105 75 85,912
Intersegment revenue (4,363) 0 0 (4,363)
Total external 44,369 37,105 75 81,549
revenue
Corporate office (838) (632) (1,470)
expense
Depreciation and (3,909) (2,020) (61) (5,990)
amortisation
Operating profit (4,102) 10,917 (513) 6,302
Interest revenue 226 43 - 269
Interest expense (400) (323) (7) (730)
Profit before (4,276) 10,638 (520) 5,841
taxation
Taxation 537 (2,135) 520 (1,077)
Profit from (3,739) 8,503 0 4,764
continuing
operations
Discontinued
operations
Loss from 0 0 (2,156) (2,156)
discontinued
operations
Profit for the year (3,739) 8,503 (2,156) 2,608
Reportable segments 19,764 25,161 0 44,925
assets
Reportable segments (7,749) (5,273) 0 (13,022)
liabilities
Continued Discontinued
operations
Commercial Defence Operations Total
2010 Division Division Base Station
Total revenues 42,400 30,477 9,482 82,359
Intersegment revenue (6,065) 0 0 (6,065)
Total external 36,335 30,477 9,482 76,294
revenue
Corporate office (747) (563) 0 (1,310)
expense
Depreciation and (3,967) (1,605) (401) (5,973)
amortisation
Operating profit (3,234) 7,504 411 4,681
Interest revenue 117 114 1 232
Interest expense (565) (408) (151) (1,123)
Profit before (3,682) 7,210 261 3,790
taxation
Taxation (35) (592) (261) (888)
Profit from (3,717) 6,618 0 2,902
continuing
operations
Discontinued 0
operations
Loss from 0 0 (376) (376)
discontinued
operations
Profit for the year (3,717) 6,618 (376) 2,526
Reportable segments 26,452 14,189 2,361 43,002
assets
Reportable segments (8,432) (5,277) 0 (13,709)
liabilities
GROUP COMMENTARY
INTRODUCTION
Poynting designs, manufactures and sells antenna and telecommunications
products to the cellular, wireless data and defence markets. The company
operates as three divisions, namely Commercial, Defence, and the
discontinued Base Station Equipment. The Base Station Equipment Division was
discontinued in September 2010 due to a dramatic downswing in demand for the
products of this Division. Poynting`s commercial products are used in
cellular and 3G end-user equipment, as well as wireless data networks
employing WiFi, iBurst and WiMAX technologies. During the 2010 financial
year, the Commercial Division also started providing antenna installation
services and has grown in the 2011 financial year. This service offering is
focused on the installation of Poynting`s antennas for end-users of the
large network service providers.
The Defence Division is focused on the electronic warfare market which
comprises monitoring, jamming and direction-finding antennas. This division
sells to military system integrators and specialised distribution partners.
Close partnerships are created with customers and antennas are often custom-
designed.
The Base Station Equipment Division supplied transmission infrastructure
equipment mainly to cellular operators. This equipment includes base station
amplifiers and diplexers as well as some in-building signal splitters and
antennas for in-building repeaters and base stations. This Division was
discontinued early in this financial year as noted above.
Poynting retained a very strong Research and Development department ("R&D")
of around 20 talented members including PhD and MSc level engineers who
design the antennas, develop production methods, develop manufacturing plant
(mainly moulds and stamping tools) and produce first prototypes. Both
Commercial and Defence perform customer-specific designs to supply products
to single customers ("OEM") and generic products which can be sold to
various customers. Typically, the Defence sales come from large military
OEMs whereas Commercial mainly focuses on mass production products sold
through distributors or to corporate customers.
RESULTS OVERVIEW
The highlights of the financial year end results include:
Revenue of R81,5 million, up 7% from R76,3 million. If the discontinued
operations revenue is removed from both periods, the revenue from continued
operations has increased by 22%.
54% increase in profit before taxation from R3,8 million to R5,8 million
excluding the loss in discontinued operations of R2,2 million.
EBITDA from continuing operations increased by 25% from R9,8 million in 2010
to R12,3 million in 2011.
Results in 2011 were driven by continued excellent performance by the
Defence Division. Revenues in Defence increased by 22% from 2010 to 2011 and
the profit before taxation was 44% higher at R10,4 million from R7,2
million.
The Commercial Division was also 22% higher, but a loss before taxation of
R4,3 million versus a previous year loss of R3,7 million was recorded. The
larger loss in the Commercial Division was in spite of improved turnover and
gross margin in 2011 versus 2010. This was due to increased overheads as a
result of the dissolution of the Base Station Equipment Division, a large
provision for bad debt, stock write-off and provisions, extraordinary legal
costs and provisions and costs associated with corporate activities
negotiation earlier this year.
Poynting has managed to raise an Industrial Development Corporation order
finance facility of R4 million for major projects. This, together with
profitable results and improved management of working capital, has improved
the company`s liquidity position.
Intangible assets have reduced over a three-year period while tangible net
asset value per ordinary share has increased from 14 cents per share (2009)
to 25 cents per share (2011) over the period. The current net asset value
per ordinary share of 36 cents per share includes an intangible asset of 11
cents per share which the board believes is a conservative value and mainly
represents value of product-related Intellectual Property (IP).
SUBSEQUENT EVENTS
The board of directors is not aware of any material matters or circumstances
arising since the year-end and up to the date of this report.
PROSPECTS
The Defence Division is expected to show continued revenue growth and
profits in 2012. This Division currently has a stronger order book than at
the same point last year and has a healthy number of proposals and
opportunities in the pipeline. International acceptance and demand for our
Defence products is showing growth and we are developing a broader customer
and product base.
The Commercial Division is starting to re-invest in product development
again after some severe reduction on spending in this area for the past two
years. Good opportunities are becoming apparent in the area of cellular
coverage driven by the high growth in cellular data products both locally
and internationally. We envisage increased growth in cellular product sales.
Our drive to combine cellular products with installations in South Africa is
proving popular. The Commercial Division is also forming a close
relationship with a BEE partner to start providing innovative coverage
solutions to cellular service providers. This offering has been well
received and we hope to expand this business in future.
We have also had discussions with an international company regarding a
possible acquisition by the Commercial Division during the last financial
year. Even though this proved unsuccessful we shall continue to look for
further opportunities to increase our operational scale and international
footprint. We are also on the lookout for similar opportunities for
corporate activity to strengthen our international footprint for the Defence
Division. These are not profit forecasts and are not reviewed.
BASIS OF PREPARATION
The accounting policies applied in the preparation of these condensed
consolidated financial statements, which are based on reasonable judgments
and estimates, are consistent with those applied in the annual financial
statements for the year ended 30 June 2010. These summarised financial
statements as set out in this report have been prepared in terms of the
recognition and measurement requirements of the International Financial
Reporting Standards ("IFRS"), presentation and disclosure requirements of
IAS 34 - Interim Financial Reporting, the Companies Act, 2008 (Act 71 of
2008), the AC500 standards as issued by the APB and the Listings
Requirements of JSE Limited.
AUDITOR`S REPORT
The condensed consolidated financial statements for the year ended 30 June
2011 have been reviewed by the group`s auditors, KPMG Inc. Their review
report is available for inspection at the company`s registered office which
contained an unmodified conclusion on the condensed consolidated financial
statements. This report included a report on other legal and regulatory
requirements due to a reportable irregularity which has been identified and
reported as discussed below.
REPORTABLE IRREGULARITY
In accordance with the auditor`s responsibilities in terms of the Auditing
Profession Act, the company`s auditor has reported the following matter to
the Independent Regulatory Board for Auditors. The operation of a subsidiary
without the required Development, Manufacturing and Services Permit in terms
of the Armaments Development and Production Act, 1968 (Act No. 57 of 1968,
as amended) for the period 19 November 2010 to 6 July 2011.
This permit was subsequently issued on 7 July 2011.
Management does not expect any material loss to the entity or to any
partner, member, shareholder, creditor or investor of the entity in respect
of his or her or its dealings with the entity as a result of this issue.
DIRECTORATE
There were no current or post year-end changes to the board prior to the
date of this report.
By order of the board
Andre Fourie Johan Ebersohn
Chief Executive Officer Financial Director and the financial
statement preparer
29 September 2011
Johannesburg
Directors: Coen Bester* (Chairman), Andre Fourie (Chief Executive Officer),
Juergen Dresel (Managing Director) (German) Johan Ebersohn (Financial
Director), Zuko Kubukeli*, Richard Willis, Jones Kalunga (Sales Director)
*Independent Non-executives
Registered Office: 33 Thora Crescent, Wynberg, 2090. (PO Box 76579,
Wendywood, 2144)
Designated Adviser: Merchantec Capital
Company Secretary: Merchantec Capital
Auditors: KPMG Inc.
Date: 29/09/2011 17:33:05 Produced by the JSE SENS Department.
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