ALARIS HOLDINGS LTD · • Continued acquisitive growth with increased global footprint • Access...

ALARIS HOLDINGS LTD

INTERIM FINANCIAL RESULTS

For the 6 months ended 31 December 2018

Slide#

Summary 3

Operational Highlights 4

Reflection on interim period 5

Group Overview 6 - 19

Financial information 20 - 28

Growth Plan 29 - 32

Q&A

AGENDA

2

SUMMARY

• Revenue decreased by 17% from R102.6 million to R85.0 million.o Alaris revenue declined owing to complex projects taking longer

o COJOT revenue was down compared to exceptional prior period

• Normalised earnings for the Group decreased by 64% from R21.7

million to R7.8 million

• The US acquisition was successfully concluded and consolidated

with an effective date of 1 October 2018.

3

OPERATIONAL HIGHLIGHTS

The Group’s focused strategy is being implemented through 3 core

strategic objectives:

mWAVE acquisition effective 1 October 2018 and initial integration

processes commenced

Purchase consideration:

o Cash payment: US$2,3 million (R30.2 million)

o Balance: US$0,7m was settled by issuing 4.9 million shares

Majority of management will remain in business

4

REFLECTION ON INTERIM PERIOD

POSITIVE DEVELOPMENTS:

• Access to large US defence

market from mWAVE acquisition

• Increase in number of large

orders and imminent opportunities

• COJOT retains focus on smart

antennas which are designed-in

• Stronger interaction between global teams on joint

opportunities

• Expanded product portfolio

CHALLENGES / ANOMALIES:

• Long sales cycles

• Larger projects with

specialized technological

advances resulting in longer delivery time

• Mitigation of risks in project

cycle i.t.o. cost and time

• Deteriorating South African supply chain

• Low margins at mWAVE for

part of their business

5

GROUP

OVERVIEW

GROUP OVERVIEW

Technology holding company listed on

the JSE AltX since July 2008

Alaris Holdings

Alaris Antennas (RSA) COJOT (Finland) mWave (USA)

7

ALARIS

ANTENNAS

• Designs, develops, manufactures and sells specialised broadband

antennas and other Radio Frequency products

• About 70% of revenue received from exports for this half

– mainly Americas, Europe & Asia

• Holds patents for several antenna designs

• Own IP is a key strength

• Customers are system integrators, frequency spectrum regulators,

test & measurement companies and players in the homeland security

space

WHAT DOES ALARIS ANTENNAS DO?

9

ALARIS ANTENNAS MARKET & TERRITORIES

No Presence

879 Products

10 Product categories

Presence

10

13%

16%

29%

42%

Alaris Antennas sales by territory for H1 2019

Americas (13%)

Asia and Middle East (16%)

South Africa (29%)

Europe and UK(42%)

Jamming Direction finding Masts

Counter - RCIED RF Electronics LPDA

Monitoring

ALARIS ANTENNAS OFFERINGS

Test & Meas.

Communication

Services

OMNI-A0246 – Wideband HF Antenna System 1 – 30 MHz, 7.5 kW• Designed for strategic applications to transmit very high power.

• Antenna system combines high power RF antenna design with

control system/automation design. EMI countermeasure design was

required to ensure the two subsystems are isolated from each other.

• The system implements semi-automated mechanics to lift the

antenna in and out of its shelter and hoist it to its fully deployed16m

length at the push of a button.OMNI-A024611

• Designs, develops and manufactures innovative antenna

products, serving public safety and military markets globally

• Develops innovative broadband antennas to improve

connectivity, coverage, and competitiveness of radio equipment deployed to save lives and protect property

• Own brand and IP

• Supplying antenna

technology in some of

the most demanding

global environments

Vehicle Antennas

Manpack/Man Portable Antennas

Antenna Accessories

Services

WHAT DOES COJOT DO?

Mobile Antennas

20 to 6000 MHz

13

COJOT MARKET AND TERRITORIES

222 Products


14

7%

26%

67%

COJOT sales by territory forH1 2019

Finland (7%)


Rest of EU and UK (67%)

COJOT OFFERINGS

ECM (Electronic

Countermeasure)Communications Smart antennas ServicesMonitoring

WIDEBAND ANTENNAS FOR MILITARY APPLICATIONS

TA30512H

15

Adaptive Handheld VHF/UHF Antenna, TA30512H

• Low profile antenna with superior gain performance.

• Fast tuning to a new frequency band allows the antenna

to be used in different applications.

• Supports very wide transmission bandwidths.

• Control integrated to the connector to optimize the

performance at the required frequency.

WHAT DOES mWAVE DO?

17

• Designs, manufactures and supports a wide range of standard and

custom microwave antenna products for commercial, government

and defense applications.

• Specialises in parabolic grids, solid parabolic and wide band feed

assemblies

• Antenna product range covers VHF to 100 GHz

frequency range

• Own IP

• Own outdoor antenna test range is used to

support new antenna development &

production verification

• Offers third party testing for its customers.

mWAVE MARKET AND TERRITORIES


18

97%

2% 1%

mWAVE sales by territory forH1 2019

Americas (97%)


Europe (1%)

mWAVE OFFERINGS

19

HRP3–800: 3FT/0.9m high performance parabolic antenna, 71-86 GHz.

• This 3 foot diameter 80 GHz antenna was designed based on firm requests from manufacturers to increase path length.

• The design includes the option to attach to an antenna positioner to maintain path alignment.

Services HRP3-800

Grid AntennasCustom ProductsParabolic Antennas

RadomesHigh Frequency

Antennas

FINANCIALS

ALARIS GROUP REVENUE

21

42 36

85 103

85

46

96

75

84

-

0

20

40

60

80

100

120

140

160

180

200

2015 2016 2017 2018 2019

R'm

CONTINUING OPERATIONS REVENUE - 5 YEARS

December (H1) June (H2)

SEGMENT – ALARIS ANTENNAS

Unaudited six months

ended

Audited

year

ended

R’000 Dec 2018 Dec 2017 Jun 2018

Revenue 53 943 62 713 121 968

Revenue growth y-o-y -14% -7% (1%)

PAT 9 367 15 492 32 541

PAT growth y-o-y -40% -26% (7%)

PAT margin 17% 25% 27%

42 36

67 63 54

46 81

56 59

-

20

40

60

80

100

120

140

2015 2016 2017 2018 2019

R'm

Alaris Antennas Revenue


9 6

21 15

9

12

28

14

17

-

5

10

15

20

25

30

35

40

2015 2016 2017 2018 2019

R'm

Alaris Antennas PAT


• Higher portion of precision engineering projects, which took longer to complete

• Aim to secure design-in solutions

• Investment in the project management office to counter the impact of the more complex design processes on the large projects

• Slower order intake in first half

• Profit margin impacted by lower revenue

22

SEGMENT – COJOT

• Lower first half vs the

exceptional

comparative period

• Deliveries of several

orders are scheduled

for 2nd half

• Margins impacted

from lower revenue


ended

Audited

year ended

R’000 Dec 2018 Dec 2017 Jun 2018

Revenue 22 071 39 882 65 107

Revenue Growth y-o-y -45% 128% 79%

PAT 3 579 11 763 14 945

PAT growth y-o-y -70% 383% 288%

PAT Margin 16% 29% 23%

17

40

2215

19

25

-

10

20

30

40

50

60

70

2016 2017 2018 2019

R'm

COJOT Revenue


23

2

12

45

1

3

-

2

4

6

8

10

12

14

16

2016 2017 2018 2019

R'm

COJOT PAT


SEGMENT – mWAVE

• Consolidated into

Group effective 1

October 2018

• Low contribution from

short 3 month

timeframe

• Should be assessed

over 12 month period

• Positive about

opportunities in the US

market

Unaudited six

months ended

R’000 Dec 2018

Revenue 9 029

PAT 146

PAT Margin 2%

24

SEGMENT – CORPORATE & CONSOLIDATION

Main costs before tax:

• Net foreign exchange gains of R0.5 million (Dec 2017: R0.1 million loss)

• Employee costs, cost of the share incentive option scheme for Group

executives and board fees totalling R4.0 million (Dec 2017: R5.0 million)

• Legal and consulting fees including the costs to be listed on the JSE, advisory

fees, group audit fees and legal fees for the mWAVE acquisition totalling R2.9

million (Dec 2017: R1.1 million)


ended

Audited year

ended

R’000 Dec 2018 Dec 2017 Jun 2018

Loss for the period (6 687) (5 630) (14 567)

25

STATEMENT OF PROFIT AND LOSS

• Results of combined

operations lower

due to larger

opportunities with

longer sales and

delivery cycles

• COJOT had an

exceptional

performance in

comparative period

• mWAVE contributed

11% revenue, at low

gross margin.

• Average tax rate of

21% (R&D tax

rebate)

• mWAVE acquisition

partially settled by

issuing 4.9 million

shares (weighted

from 1 Oct)


endedAudited

R’000December

2018

December

2017June 2018

Revenue 85 043 102 595 187 075

Cost of sales (27 699) (27 770) (53 589)

Gross profit 57 344 74 825 133 486

Other income 585 63 738

Operating expenses (49 896) (47 344) (91 502)

Trading operating profit 8 033 27 544 42 722

Finance income 180 140 380

Finance costs (81) (265) (392)

Profit before taxation 8 132 27 419 42 710

Taxation (1 727) (5 794) (9 791)

Profit for the period 6 405 21 625 32 919

Weighted average number of

ordinary shares in issue 118 436 265 116 116 771 116 116 771

HEPS 5,41 18.62 28,35

26

STATEMENT OF FINANCIAL POSITION

• Goodwill and

intangible assets

increased -

mWAVE purchase

price allocation

• Inventories

increased

(mWAVE)


endedAudited

R’000December

2018

December

2017June 201

Assets

Non-Current Assets

Plant and equipment 7 351 7 301 6 619

Goodwill 51 213 24 749 26 582

Intangible assets 18 681 12 247 12 782

Deferred tax assets 1 688 3 802 2 539

78 933 48 099 48 522

Current Assets

Inventories 25 124 16 560 19 080

Current tax receivable 5 678 1 108 1 194

Trade and other receivables 38 841 48 882 35 151

Cash and cash equivalents 18 458 31 542 51 679

88 101 98 092 107 104

Total Assets 167 034 146 191 155 626

Total Equity 133 365 99 938 116 328

Total Liabilities 33 669 46 253 39 298

Total Equity and Liabilities 167 034 146 191 155 626

Net Asset Value per ordinary

share110.14 86.07 100.18

27

CASH FLOW

• Provisional taxes paid

in December 2018

based on stronger

FY18 profits

• mWAVE acquisition

partly paid in cash

R30m

• 64% cash in hard

currency


endedAudited

R’000December

2018

December

2017June 2018

Profit before taxation 8 132 27 419 42 710

Adjusted for non-cash items 3 911 5 011 10 909

Working capital changes (9 262) (14 453) (1 621)

Cash generated from operations 2 781 17 977 51 998

Net finance cost 96 (125) (83)

Taxation (paid) / received (5 755) 508 (8 140)

Net cash (used in) / from

operating activities(2 878) 18 360 43 775

Net cash used in investing

activities (31 391) (3 856) (5 957)

Net cash from / (used in)

financing activities94 (49 853) (49 778)

Cash and cash equivalents at the

beginning of the year51 679 65 083 65 083

Effect of exchange rate

movement on cash balances 954 (1 912) (1 444)

Total cash and cash equivalents

at end of the year18 458 27 822 51 679

28

GROWTH

PLAN

FOCUS AREAS FOR GROWTH

• Finalise integration of mWAVE into the Group and improve their

gross margin

• Establishing Alaris USA as a division of mWAVE

• Further organic growth through technological advances in

engineering solutions and focus on smart antennas

• Diversified territorial sales channels, allowing us to be closer to

our customers

30

FOCUS AREAS FOR GROWTH (continued)

• Focus on design-in solutions to benefit from repeat orders

• Utilise broader supply chain available through international

divisions

• Placing more importance on upfront project assessments with

increased effort on understanding the technical risks, scope,

pricing and timelines.

31

ALARIS INVESTMENT ATTRIBUTES

• Alaris, COJOT and mWAVE hold their own IP and registered patents

• Continued acquisitive growth with increased global footprint

• Access to large US defence market through mWAVE acquisition

• Majority of customers are international with more than 80% export

based revenue in hard currency

• Local manufacturing

• Stable and proven track record of 18 years in the industry

• 11 years listed on the JSE AltX

32

THANK

YOUQ & A

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