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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
COJOT
• 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
5 Product categories
14
7%
26%
67%
COJOT sales by territory forH1 2019
Finland (7%)
Asia and Middle East (26%)
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.
MWAVE
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
7 Product categories
18
97%
2% 1%
mWAVE sales by territory forH1 2019
Americas (97%)
Asia and Middle East (2%)
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
December (H1) June (H2)
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
December (H1) June (H2)
• 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
Unaudited six months
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
December (H1) June (H2)
23
2
12
45
1
3
-
2
4
6
8
10
12
14
16
2016 2017 2018 2019
R'm
COJOT PAT
December (H1) June (H2)
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)
Unaudited six months
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)
Unaudited six months
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)
Unaudited six months
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
Unaudited six months
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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