JT 8.2016This article, written by Jennifer Tan (left, Director, Research & Products,  Equities & Fixed Income, at the Singapore Exchange), originally was published in SGX's kopi-C: the Company brew series on 25 November 2016. The article is republished with permission.



Global Invacom Executive Chairman, Tony Taylor
(Photo: Company)

Executive Chairman Tony Taylor's odyssey with satellite communications equipment supplier Global Invacom Group Ltd began 10 years ago - through a single handshake.

The company, which is listed in both London and Singapore, began operations in 1986 as Global Communications Ltd, founded by Roger and Helen Pannell in the kitchen of their semi-detached Essex home.

Taylor, who previously held roles in IT businesses ranging from semiconductors and automotive electronics to military and industrial components, was introduced to the founders in 2006 when they decided to retire.

Before he accepted the job, the Bachelor of Science with Honours graduate from UK's Coventry University was forced to do some serious soul-searching.

LQM 8F7557“We had two sales teams, two business development teams, two finance teams, and they were all calling the same customers. It was obvious we needed to get the two entities together, but it wasn't easy - there were many egos at stake.”


- Tony Taylor

Executive Chairman

Global Invacom

"It was all in a handshake - there was never any offer in writing from Roger, and I kept asking myself, 'Should I trust this guy?'," Taylor recalled.

There was also a stark contrast between his previous job and the prospective one.

"I was running a big facility, with lots of machines and people, and when my son saw the manor house that the business was based in, he went 'Dad, don't do it!'," he grinned.

"But of course, I did."

And it proved to be a tempestuous journey.

The Group then had a sister company - Invacom Ltd - which was loss-making.

"We had two sales teams, two business development teams, two finance teams, and they were all calling the same customers. It was obvious we needed to get the two entities together, but it wasn't easy - there were many egos at stake," he said.

Global Invacom Ltd was finally established in April 2008. After buying Roger and Helen out and restructuring the merged company, Taylor ran into another snag.

"At that point, some of our senior directors said they wanted to sell out. I was very disappointed, but I was able to line up a deal to sell the business to private equity for a good price."


Money Wrenches

In December 2009, a few days before the sale was due for completion, Global Invacom's principal contract manufacturer in China - Radiance Group Ltd - was placed in the hands of liquidators.

"That was quite a big setback for us - that supplier had all our tooling and test equipment on site, as well as seven to eight products that had been qualified by several key customers, so it would have been extremely challenging and time-consuming to move production and re-qualify all those products," Taylor said.

Management decided to hold off the sale, and tracked down the liquidators to see if they could buy over the business. They paid five million pounds for a 52.4% stake in Radiance Group, which triggered a mandatory cash offer that required a sum of another five million pounds.

LQM B58B56All of us threw in every penny we had, and pooled enough money to do the GO to take control of the company.

 

- Tony Taylor
Executive Chairman

Global Invacom

"That was when we hit a brick wall. We couldn't find a bank willing to loan us five million pounds in 2010 to do the general offer, even though there was more than enough cash in Radiance - about 12 million pounds - that could have been used to offset the loan," he said.

Pushed to the point of frustration, Taylor approached the Pannells and the board for funding. "All of us threw in every penny we had, and pooled enough money to do the GO to take control of the company," he said.

"That year, I couldn't afford school fees for the kids. I told them, no riding lessons, no holidays. That was how bad it was."

In October 2010, Taylor was appointed Executive Chairman of Global Invacom. He had another game plan up his sleeve - to engineer the reverse takeover (RTO) of Global Invacom by SGX-listed Radiance Group Ltd.

Radiance, which provided electronics manufacturing services for the satellite communications industry, was listed on Singapore Exchange's smaller board - known then as Sesdaq - in June 2003.

"It made a lot of sense to vertically integrate the two companies. Global Invacom represented 90% of Radiance Shanghai's business - we drove the profits in the company then," Taylor noted.

"Although this decision was driven by a crisis, it turned out to be a pretty good strategy."

♦  Rollercoaster Ride

The RTO process, initiated in November 2010, was riddled with challenges.

"It was a long and painful procedure that took 17 months, bogged down by many legal and technical issues. While we learnt an amazing amount in that time, many of us were wondering, 'Why bother with this? Why not do something else instead?'," he said.

Taylor's stubborn streak, however, refused to let him abandon the project. "It's easy, when something isn't going as well as you would hope, to step away. But if it's important, you need to keep at it, and get through to the end."

The successful RTO resulted in the Group's backdoor listing on SGX in June 2012. Two years later, Global Invacom shares were admitted to trading on the AIM Market of the London Stock Exchange.

Global Invacom has a market capitalisation on SGX of about S$44 million. Between 2012 and 2015, its revenues grew from US$74.7 million to US$129.1 million. While the Group was loss-making in 2012 and 2015, it reported net income of US$7.8 million in 2013 and US$4.3 million in 2014.

Global Invacom

Stock Price

16.2c

Market Cap

S$44m

52-week High Low

10.4c to 20.5c

PE

6.7x

EV/EBITDA

3.7x

Source: SGX StockFacts
(data as of 30 Nov 2016)

Since then, its fortunes have turned. The Group swung to a net profit of US$0.7 million for the three months ended 30 September 2016 from a net loss of US$2.7 million in the year-ago period, marking its second straight quarter in the black.

In the year-to-date, Global Invacom shares have generated a total return of 9.6%, compared with 4.2% for the FTSE ST All-Share Index and 2.1% for the benchmark Straits Times Index (STI).

On hindsight, spearheading the merger of the Global Invacom Group, as well as facilitating the company's subsequent listings in Singapore and London, were key milestones in his career, Taylor said.

Like a stomach-churning rollercoaster ride, those experiences swung him from wild elation to deep despair. Despite this, there are no regrets.

"If I had to do it all again, I wouldn't have done anything differently, really," he added.


Ripe for Consolidation


Looking ahead, Global Invacom aims to capitalise on the rising number of acquisition opportunities in the SatComms industry.

"We're ranked third in the industry in terms of revenue, but number two or number one in profits. Our goal has always been to bring together different elements of the industry and become the largest player."

Its 2015 purchase of US satellite terminals manufacturer Skyware Global for US$8.8 million was a case in point. The acquisition of Skyware, which designs and manufactures antennas for the Direct-to-Home and Very Small Aperture Terminals markets, boosts Global Invacom's portfolio of products, widens its customer base and adds a North American presence to its manufacturing footprint that spans Asia and Europe.


Waveguide Solution
Global Invacom cellular infrastructure unit, The Waveguide Solution, is a major supplier to the global cellular infrastruture industry supplying leading OEMs, installers and distributers.
(Photo: Company)

The Group continues to evaluate consolidation opportunities as they occur, Taylor said.

"Many of these players, some bigger than Global Invacom, are family-run businesses, comprising elderly stakeholders with kids who may not want to be involved, and thus have no proper exit strategy. It's in the best interests of these stakeholders to sell, but many are not ready to let go," he said.

"At any given time, we have two to three potential acquisitions in the pipeline that could close at the drop of a hat, if circumstances are right. It's all about timing."

In terms of outlook, the SatComms industry doesn't lack growth drivers, Taylor noted.

According to the Tauri Group, the average number of satellites launched per year between 2011 and 2015 has surged 36%, while the global satellite manufacturing and launch market is projected to expand at a compounded annual rate of 5.1% between 2014 and 2019. In particular, satellite TV demand is booming, and accounted for nearly 80% of satellite consumer revenues in 2015.

The low-cost, ubiquitous coverage offered by satellites, particularly in remote regions where traditional terrestrial copper or fibre networks fall short of reliability and speed, has spurred developing Asian nations like Indonesia and Myanmar to switch to this technology, he pointed out.

Bank Rakyat Indonesia launched its own satellite from French Guiana in September to cut third-party transponder fees required to operate its ATM network, while the country's retailers are adopting SatComms technology to facilitate basic services like credit card transactions, as shopping malls sprout up in remote areas.

Myanmar is grappling with the challenges of its mountainous terrain after the government liberalised its domestic telecommunications sector in 2013. The country, which has an ambitious goal to provide broadband connectivity to at least 70% of its 54 million-strong population in the next three years, has made SatComms the backbone of its national broadband network, underscoring its advantages over terrestrial lines, he added.


♦ Cutting Edge

Robust prospects aside, the spectre of increasing costs continues to loom large. "A big challenge is keeping costs down and staying competitive, because at the crux of it, we're using space technology with military precision, and offering it at consumer prices," Taylor said.

Staying abreast of advancements in the industry is another must, and Global Invacom's ability to develop new technologies in partnership with its suppliers is a key advantage.

The Group has 59 granted patents, a further 65 patent applications, and a 30-year track record of pioneering new products.

"Being innovators in the industry, we usually get invited by major broadcasters to jointly come up with designs, and that's a privilege," Taylor said.

"So we keep an eye on what's on the horizon, share our vision of where the technology is going, and decide if that fits our sweet spot. Options range from doing it ourselves, buying a development team, or using an existing team."

To decompress from work, the fan of US singer-songwriter James Taylor and Irish rock band The Script throws himself into his guitar. He has a collection of at least a dozen acoustic folk guitars, with one strategically placed in every office location.

LQM 8F7557“Being innovators in the industry, we usually get invited by major broadcasters to jointly come up with designs, and that's a privilege.”


- Tony Taylor

Executive Chairman

Global Invacom

"My wife would go nuts if she knew how many guitars I have," he chortled.

"I usually strum a few songs before dinner or when I'm in my hotel room. It's really therapeutic - helps me get my mind off work and focus on something totally different."

Apart from music, Taylor, 54, is passionate about bringing out the best in his staff and colleagues.

"It's great to be able to impart to people things that you've learnt the hard way. If you're able to teach them early in their career, it can help them progress further and faster," noted the father of a son, 22, and a daughter, 20.

His favourite books are "The Goal" by Israeli business management guru Eliyahu Goldratt, and "How to Become a CEO" by marketing consultant Jeffrey J Fox. He usually keeps spare copies of these titles to pass on to friends and colleagues.

"I really loved 'How to Become a CEO'. I first spotted that book in an airport bookstore after my flight was delayed, and my first reaction was, 'C'mon, be serious!'," Taylor grinned.

"But after I read it, it really changed my life - it got me to quit my job then and move on to something else."

Also at the top of Taylor's list are principles of honesty, openness and integrity.

"Those values cover so much ground, don't they?" he smiled. "But really, you can lose your integrity only once."



Financial results

Year ended 31 Dec
(US$ '000)
FY2015 FY2014 FY2013 FY2012
Revenue 129,107 134,135 115,750 74,697
Gross profit 24,897 31,791 29,204 14,053
Attributable net profit/ loss -2,049 4,287 7,783 -17,085

 

Quarter ended 30 Sep
(US$ '000)
3Q2016 3Q2015 YoY Change
Revenue 32,068 32,192 -0.4%
Gross profit 7,235 6,271 15.4%
Attributable net profit/ loss 698 -2,711 N.M.*

Source: Company data
*NM: Not meaningful




Outlook
  • RQM B58B56The 3Q 2016 results mark the Group's second consecutive quarter of profitability. It intends to build on this turnaround in the coming quarters as it reaps the benefits of its restructuring and cost improvement initiatives.
  • The integration of the Group's US subsidiary Raven Antenna Systems - previously trading as Skyware Global - has progressed significantly, although there are further improvements and R&D projects to complete. It will recognise Global Skyware's first full-year revenue contribution in FY2016.
  • The Group is exploring the potential consolidation of its activities in China under its wholly owned subsidiary, Global Invacom Manufacturing (Shanghai) Co Ltd, to optimise manufacturing cost efficiencies. Critical equipment and customer inventory from the Group's Shenzhen subsidiary may be transferred to the Shanghai subsidiary.
  • The Group believes the expected launch of two new communication satellites in the coming months by a leading US broadcaster will underpin demand for its next-generation SatComms products.
  • Despite global concerns about Brexit, the Group remains upbeat. The weakening of the pound against major currencies has provided, and is expected to continue providing, short-term FX benefits for the Group's UK-based operating costs. Revenue from its SatComms sales, as well as bulk of its raw material spend, is predominantly transacted in US dollars.
  • The Group remains mindful of the significant change that recently swept the satellite ground equipment industry with the introduction of digital channel stacking switch (DCSS) technology. This impacted the Group's FY2015 performance as major customers had to destock, and this effect will likely persist for the rest of FY2016.
  • The Group has completed research on next-generation Low Noise Blocks (LNBs) that support DCSS, and has secured approval from a main customer to supply LNBs. Being one of only two main suppliers for this project, this approval marks a significant achievement for the Group, which has invested in next-generation LNBs since 2014.


Global Invacom Group Ltd

Global Invacom Group Ltd, which is listed on the SGX Mainboard and the AIM Market of the London Stock Exchange, is a fully integrated satellite equipment provider with seven 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 US. Global Invacom provides a full range of dish antennas, LNB receivers, transmitters, switches and video distribution components, electronics manufacturing services in satellite communications as well as manufacturing services in TV peripherals, computer peripherals, medical, and consumer electronics industries.

The company website is: www.globalinvacom.com.

Click here for the company's StockFacts page.

For its third quarter results ended 30 Sep 2016, click here.


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