RNS Number:1647Z
SatCom Group Holdings plc
02 March 2006
Press Release 2 March 2006
SatCom Group Holdings Plc
("SatCom" or "the Group")
Interim results for the six months ended 31 December 2005
SatCom Group Holdings Plc (AIM: SGH), a leading reseller of mobile satellite
communications equipment and airtime, announces its interim results for the six
months ended 31 December 2005.
Highlights
* Turnover up 24.7% to $27.8 million (2004: $22.3 million)
* EBITDA up 12.9% to $1.72 million (2004: $1.52 million)
* Profit before tax up 8.6% to $1.35 million (2004: $1.25 million)
* Basic earnings per share up 11.6% to 1.92 cents (2004: 1.72 cents)
* Group's first interim dividend as a public company of 0.15 cents per
share announced
* Flotation on AIM on 15 July 2005, raising #3.5 million (gross)
* Acquisition of Horizon Mobile Communications Group ("HMC") in September
2005. HMC is predominately based in Asia supplying satellite
communications and IT solutions to maritime customers
Commenting on the results, Mark White, Chief Executive, of SatCom, said: "These
results clearly demonstrate the Group's ability to deliver earnings enhancing
acquisitions in key global locations as set out in the AIM admission document."
For further information:
SatCom Group Holdings Plc
Mark White, Chief Executive Officer Tel: +44 (0) 1722 439206
mark.white@satcomgroup.com
Martin Ward FCA, Chief Financial Officer Tel: +44 (0) 1722 439201
martin.ward@satcomgroup.com www.satcomgroup.com
Teather & Greenwood Limited (Broker)
Stephen Austin - Corporate Finance Tel: +44 (0) 20 7426 9000
Stephen.Austin@teathers.com www.teathers.com
Ernst & Young LLP (Nominated Adviser)
John Stephan Tel: +44 (0) 20 7951 2000
jstephan@uk.ey.com www.ey.com
Media enquiries:
Abchurch
Heather Salmond / Dana Thomas Tel: +44 (0) 20 7398 7700
heather.salmond@abchurch-group.com www.abchurch-group.com
Interim Statement
Financial Review
Turnover for the six months ended 31 December 2005 increased by 24.7% to $27.8
million (2004: $22.3 million). Adding to the continued growth was the
acquisition of Horizon Mobile Communications Group ("HMC") on 26 September 2005.
Whilst SatCom saw the turnover of Land Mobile Satellite Services division
decrease in line with the rest of the industry as military usage in the Middle
East reduced, this reduction was offset by an increase in the Group's margin as
low margin GSM calls were reduced significantly leaving SatCom to benefit from
higher margin usage. In late 2005, SatCom opened a subsidiary in Dubai to
develop the Middle East and African markets and it is expected that this
location will enhance the Group's ability to react to events in that part of the
world as well as expanding its global footprint.
The Group's Earnings Before Interest, Tax, Depreciation and Amortisation ("
EBITDA") rose by $200,000 to $1.72 million over the same period in 2004. This
was an excellent result as the corresponding period last year included a very
profitable contract which ceased in November 2004 and significantly enhanced
last year's turnover and earnings. Basic earnings per share have increased to
1.92 cents, a rise of 0.20 cents per share or 11.6% on same period last year.
Included in this period's results were legal expenses incurred regarding action
taken by SatCom in a dispute with a supplier. This legal action was concluded in
November 2005 and the cost to SatCom was $125,000 in legal fees. Without these
costs, EBITDA would have risen by 21.1% to $1.84 million and the basic earnings
per share would have reached 2.09 cents.
Flotation
The Group raised #3.5 million (Gross) on flotation in July 2005 by a combination
of ordinary shares (#0.5 million) and Convertible Unsecured Loan Stock ("CULS")
(#3.0 million). The CULS have a coupon of 8% and are repayable in July 2009. The
CULS holders have the option to convert into ordinary shares at 39p per share at
anytime prior to redemption. The funds raised were used to finance the flotation
costs and the initial payment on the acquisition of HMC.
Acquisitions
The acquisition of HMC and its brand brought a new area of Mobile Satellite
Services to SatCom, namely the commercial shipping trade. HMC have a significant
customer base in shipping fleets and offshore oil & gas rigs and since the
acquisition SatCom have set up HMC operations in Houston, Texas and the UK to
increase the worldwide coverage of HMC service. In addition to satellite
communication, HMC offer IT and Mail solutions to their maritime customers,
which improves margins and customer retention.
HMC was acquired in September 2005 for an initial consideration of $4.8 million
including professional costs. There are deferred payments based on HMC's gross
profits earned in 2005 and 2006. At the date of acquisition, the expected
payouts were forecast to be in the region of $1,400,000, payable in new shares
and cash based on HMC achieving target gross profit levels. On acquisition the
fair value of HMC's net assets totalled $1.4 million and accordingly goodwill of
$4.8 million was recognised. The goodwill is shown under Intangible Assets and
is being amortised over 20 years.
HMC has proved to be an earnings-enhancing acquisition during the three month
period of its ownership to 31 December 2005 and has enabled SatCom to achieve
some of its initial key objectives, namely strengthening the Group's presence in
Asia, as well as commencing the growth into commercial shipping communications.
We expect the impact of this acquisition to grow in future periods as the HMC
brand is expanded across the other global locations of SatCom.
The Group acquired Net Africa Arabia Limited, an Inmarsat Distribution Partner,
in December 2005. This acquisition is expected to improve the margin and revenue
of future data traffic.
Dividends
SatCom intends to pay an interim dividend of 0.15 cents per ordinary share
(approximately 0.08 pence). This will be paid on 7 April 2006 to all
shareholders on the register at 8 March 2006. In accordance with FRS21 the
dividend payment will be set against profit in the second half of this financial
year. This represents the first dividend paid by the Company following its
admission to AIM on 15 July 2005 and is in accordance with the stated dividend
policy in the Group's AIM admission document.
Outlook
The Group will continue its acquisition strategy, targeting profit-enhancing
companies with strong airtime revenues and in global locations that assist the
sales profile of new and existing Group products. SatCom's management are
determined not to overpay for acquisitions and whilst looking to pursue the
acquisition strategy, remain willing to walk away from dilutive deals. SatCom
sees significant organic growth opportunity in high-speed data equipment and
airtime with the recent launch of Inmarsat's BGAN services.
SatCom will continue to look for further opportunities to reduce costs
throughout its operations.
David Hickey Mark White
Chairman Chief Executive Officer
1 March 2006
Group profit and loss account
Consolidated accounts for the six months ended 31 December 2005
Notes Unaudited Unaudited Audited
half year 31
Dec 05 half year year ended
$'000's
31 Dec 04 30 Jun 05
$'000's $'000's
Turnover 2
Continuing operations
- Ongoing 24,893 22,318 47,457
- Acquisitions 2,942 - 473
27,835 22,318 47,930
Cost of sales (23,553) (18,913) (40,684)
Gross profit 4,282 3,405 7,246
Administrative expenses (2,563) (1,882) (4,213)
EBITDA 1,719 1,523 3,033
Depreciation and amortisation (204) (106) (186)
Operating profit (EBIT) 3
Continuing operations
- Ongoing 1,252 1,417 2,928
- Acquisitions 263 - (81)
1,515 1,417 2,847
Net interest and similar charges (161) (91) (166)
Share of joint venture losses - (79) (79)
Profit on ordinary activities before
taxation 1,354 1,247 2,602
Taxation on ordinary activities 4 (419) (415) (967)
Profit on ordinary activities after
taxation 935 832 1,635
Minority interests 37 - 35
Profit attributable to members of 972 832 1,670
the parent company
Dividends - (181) (181)
Retained earnings 972 651 1,489
Basic earnings per share 6 1.92 cents 1.72cents 3.45cents
Diluted earnings per share 6 1.91 cents 1.72cents 3.44cents
Group balance sheet
Consolidated accounts as at 31 December 2005
Unaudited Unaudited Audited
half year half year year ended
31 Dec 05 31 Dec 04 30 Jun 05
Notes $'000's $'000's $'000's
Fixed assets
Intangible assets 6,578 1,154 1,172
Tangible assets 919 309 399
7,497 1,463 1,571
Current assets
Stocks 2,959 1,250 1,694
Debtors falling due within one year 14,356 8,279 10,789
Cash at bank and in hand 2,199 2,190 5,161
19,514 11,719 17,644
Creditors: (19,567) (15,476) (19,355)
amounts falling due within one year
Net current liabilities (53) (3,757) (1,711)
Total assets less current liabilities 7,444 (2,294) (140)
Creditors: (6,435) (40) (1,538)
amounts falling due after one year
Provisions for liabilities and charges (19) (16) (19)
990 (2,350) (1,697)
Minority interests 138 (84) 101
Net assets / 1,128 (2,434) (1,596)
(liabilities)
Capital and reserves
Called-up share capital 5,250 4,845 4,935
Share premium account 723 - -
Contingent share capital 10 714 - -
Merger reserve 11 (10,884) (10,884) (10,884)
Profit and loss account 5,325 3,605 4,353
Equity shareholders' funds 1,128 (2,434) (1,596)
Group cash flow
Consolidated accounts for the six months ended 31 December 2005
Unaudited Unaudited Audited
half year half year year ended
31 Dec 05 31 Dec 04 30 Jun 05
Notes $'000's $'000's $'000's
Net cash (outflow)/inflow from operating (2,380) 1,956 6,019
activities 5 (b)
Net interest paid (157) (83) (155)
Interest element of hire purchase (4) (4) (8)
Net cash outflow from returns on
investments and servicing of finance (161) (87) (163)
Taxation (594) (478) (629)
Purchase of intangible fixed assets (472) - (18)
Purchase of tangible fixed assets (367) (77) (222)
Net cash outflow for capital expenditure (839) (77) (240)
Purchase of subsidiary undertakings 5 (c) (4,779) (252) (252)
Net cash acquired with subsidiary 867 6 104
undertakings
Net cash outflow from acquisitions (3,912) (246) (148)
Equity dividends paid - (181) (181)
Net cash (outflow)/inflow before use of
liquid resources and financing (7,886) 887 4,658
Issue of ordinary share capital (net of costs) 1,038 - -
Issue of Convertible Unsecured Loan Stock ("CULS") 5,467 - -
Decrease in short term borrowing (1,558) (331) (1,107)
Capital element of hire purchase (23) (27) (51)
Net cash inflow/(outflow) from financing 4,924 (358) (1,158)
(Decrease)/increase in net cash (2,962) 529 3,500
Notes to the interim statement
1. Basis of preparation
The interim statement for the six months to 31 December 2005 has been prepared
on the basis of the accounting policies applied in the Group's statutory
accounts for the year to 30 June 2005.
The interim statement does not constitute statutory accounts as defined by
Section 240 of the Companies Act 1985. The information for the year to 30 June
2005 has been extracted from the full financial statements for that year, which
received an unqualified audit report, and which, have been filed with the
Registrar of Companies.
2. Turnover by geographical destination of customer
Unaudited Unaudited Audited
half year half year year ended
31 Dec 05 31 Dec 04 30 Jun 05
$'000's $'000's $'000's
European Union 2,871 2,801 6,096
United States 20,183 18,693 40,070
Asia 3,205 150 321
Rest of World 1,576 674 1,443
27,835 22,318 47,930
3. Operating profit
Operating profit is stated after charging:
Unaudited Unaudited Audited
half year half year year ended
31 Dec 05 31 Dec 04 30 Jun 05
$'000's $'000's $'000's
Depreciation 107 46 113
Amortisation 97 60 73
Auditors' remuneration 40 15 30
Operating lease costs: land and buildings 75 35 74
Net loss on foreign currency translation 8 37 31
4. Taxation
The tax charge of $419,000 (2004: $415,000) is calculated by applying the
effective tax rate for each of the Group's material tax jurisdictions to the
profit before tax in each jurisdiction.
5. Cash flow
Unaudited Unaudited Audited
half year Half year year ended
31 Dec 05 31 Dec 04 30 Jun 05
$'000's $'000's $'000's
(a) Reconciliation to net debt
(Decrease)/increase in net cash (2,962) 529 3,500
Net cash outflow from hire purchase and other loans 1,581 358 1,158
Change in net funds resulting from cash (1,381) 887 4,658
flows
Opening net funds/(debt) 1,571 (3,087) (3,087)
Closing net funds/(debt) 190 (2,200) 1,571
Being:
Cash 2,199 2,190 5,161
Hire purchase obligations (43) (90) (66)
Directors' loan accounts (1,966) (4,300) (3,524)
Closing net funds/(debt) 190 (2,200) 1,571
(b) Reconciliation of operating profit to net cash (outflow)/ inflow from operating activities
Operating profit 1,515 1,417 2,847
Depreciation 107 46 113
Amortisation 97 60 73
(Increase)/decrease in stocks (621) (332) (708)
(Increase)/decrease in debtors (1,267) 503 (2,345)
Increase/(decrease) in creditors (2,211) 262 6,039
Net (outflow)/cash flow from operating (2,380) 1,956 6,019
activities
(c) Purchase of subsidiary undertakings
Net assets acquired, in respect of the acquisition of Horizon Mobile Communications Group ("HMC") in
September 2005, were as follows:
Tangible fixed assets 459
Stocks 644
Debtors 2,300
Cash 867
Creditors (2,895)
1,375
Goodwill 3,404
4,779
6. Earnings per share
The calculations of the earnings per ordinary share are based on the earnings
attributable to shareholders and the following data. In July 2005, as part of
the company's flotation, the number of fully paid ordinary shares in issue was
increased from 48,450,000 to 50,116,667. In October 2005, a further 1,482,155
new ordinary shares were issued in part consideration of the acquisition of
Horizon Mobile Communications Group. The basic earnings per share figure
averages the effect of these increases and the diluted earnings per share figure
also takes into account share options and CULS which, if converted, would
increase the weighted average share capital by 7,530,718 and would increase
attributable profit by $137,247.
7. Investments
Details of the trading investments in which, as at 31 December 2005, the group
holds 20% or more of the nominal value of any class of share capital, are as
follows:
Name of subsidiary Holding % of shares held Nature of business Country
SatCom Distribution Ltd Ordinary 100% Distribution of satellite UK
shares communication equipment
and airtime
SatCom Distribution Inc Ordinary 100% Distribution of satellite USA
shares communication equipment
O'Gara Satellite Systems Inc Ordinary 100% Distribution of satellite USA
shares communication airtime
Northstar Communications Inc Ordinary 80% Distribution and satellite USA
shares installation of HF Radio
equipment
SatCom Distribution (Asia) Ordinary 60% Distribution of satellite Hong Kong
Ltd shares communication equipment
SatCom Distribution Middle Ordinary 55% Distribution of satellite UAE
East FZ LLC shares communication equipment
Horizon Mobile Ordinary 100% Interim group Thailand
Communications Co Ltd shares administration and
customer support
Horizon Mobile Ordinary 100% Distribution of satellite Singapore
Communications Pte shares communication equipment
(Singapore) Ltd
Horizon Mobile Ordinary 100% Distribution of satellite Australia
Communications (Australia) shares communication equipment
Pty and airtime
HMC America Ltd Limited 80% Distribution of satellite USA
partnership communication equipment
and airtime
Net Africa Arabia Ltd Ordinary 100% Distribution of satellite UK
shares communication airtime
8. Share options
On 8 July 2005, options over 76,360 Ordinary shares of $0.10 each were granted
to a customer of the Group as set out in the company AIM admission document
dated 15 July 2005. The exercise price of this grant is 9.625p per share. On 28
October 2005, options over a total of 173,838 Ordinary shares of $0.10 each in
the Company were granted to Group employees (none of whom were directors). The
exercise price of this grant is 34p per share. On 23 December, options over a
total of 19,188 Ordinary shares of $0.10 each in the Company were granted to
Group employees, none of whom were directors. The exercise price of these
options is 30p per share.
As at 31 December 2005, 181,571 options were outstanding under an Enterprise
Management Incentive Scheme and 212,456 options were outstanding under an
Unapproved Scheme for overseas employees.
9. Reconciliation of movements in shareholders' funds
Unaudited Unaudited Audited
half year half year year ended
31 Dec 2005 31 Dec 2004 30 Jun 2005
$'000's $'000's $'000's
Profit for the financial period 972 832 1,670
Dividends paid - (181) (181)
Bonus issue of shares - - (90)
972 651 1,399
Contingent share capital 714 - -
New shares issued (net of costs) 1,038 - 90
Net movement in shareholders' funds 2,724 651 1,489
Opening shareholders' funds/(deficit) (1,596) (3,085) (3,085)
Closing shareholders' funds/(deficit) 1,128 (2,434) (1,596)
10. Contingent share capital
Under the terms of the acquisition of Horizon Mobile Communications Group ("HMC
"), SatCom have deferred consideration to pay based on the gross profit achieved
by HMC in the two years ended 31 December 2006. The deferred consideration is
payable 50% by cash and, subject to SatCom share price at the time of issue, 50%
by the issue of new ordinary shares in SatCom at a 5% discount to the average
closing mid price over the previous month. Based on the forecasted results,
SatCom expects to have an obligation in deferred consideration of $1.428 million
of which 50% will be settled in new shares with a value of $714,000. The payment
dates are at the end of March 2006 and March 2007.
11. Merger reserve
The acquisition by the Company of SatCom Distribution Limited and its
subsidiaries in May 2004 has been accounted for as a merger. Accordingly a debit
merger reserve has been recognised in the consolidated balance sheet
representing the difference between the consideration paid to acquire the group
and its net assets at the date of the transaction.
- Ends -
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