Ansys “underperforms” in six-months-to-August

AltX-listed defence and transport technology company Ansys has confirmed that delays in the issuing and adjudication of a number of major tenders from key customers has caused the business to “under perform” during the six months to end August.
Its interim results released yesterday show that turnover decreased from R61.3 million in the first half of 2007 to R41.2 million.
On the back of that, the company made a first half after tax loss of R6.6 million (as opposed to a profit of R8.2 million last year) and a Headline Loss per Share of 4.73 cents (6.26 cents earnings 2007).
Company CEO Allan Holloway has previously declined to identify the companies concerned, saying he did not wish to embarrass them. He did say, however, that the contracts affected were in the transport – not defence side of the business.
He has also said he expected the company to return to profit by the end of its current financial year in February.
Holloway yesterday announced a further acquisition “to inject new vigour into the business in the second half.”
It has bought engineering and project management company AR Process Projects in a R95 million deal effective from 1 January.
Holloway says AR Process Projects has a 30 year track record in its field and is an “excellent fit with Ansys in that it has large corporate clients in the chemical, nuclear, renewable energy, mining, power, fertilizer and pulp and paper industries while Ansys and its subsidiaries currently operate largely in the state-owned transport and defence industries.”
He adds “the transaction is consistent with Ansys` objective of expanding its client based more into the industrial sector” and says it “will boost the company`s ability to provided state-of-the-art engineering and project management solutions for large-scale private sector projects”.
Further good news”, he says, is that the delay in securing State contracts has now finally been broken and to date contracts with a combined value of R150m have been received for execution in the current financial year.
This should ensure that the group exceeded its forecast turnover of R138m for financial 2009. Some of the new contracts include the expansion of Transnet`s Wayside Reader project; locomotive communications systems contracts for Transnet and the export of specialised optical equipment to China and Turkey.
Holloway says the Chinese deal involves the provision of thermal imagers to an undisclosed customer. He adds that this deal and the Turkish contract will help the company post an expected year-end profit. “Unfortunately, the weakening rand will also help us as our contracts are priced in dollars and euro.”
Ansys subsidiary Optocon Systems won the R20 million contract from Ankara-based defence company Aselsan in April. The optical equipment is derived from that developed for the SA Rooivalk attack helicopter project and will be fitted to the country`s new fleet of Agusta AW129 Mangusta attack helicopters. Ironically the Turks preferred the Mangusta over the Rooivalk.

The initial order was for the development and production of eight main sight systems. Ansys at the time said there was a potential requirement for an additional 80 sights.

Ansys bought Optocon for R14.5 million in January. Optocon is noted for its capability in the manufacture of precision electro-optical systems ranging from infra-red optical components to high performance TV sensors as well as video switching units and displays.

At the time of the Optocon transaction Holloway noted that there was “huge opportunity” for Optocon in the international defence industry market. Optocon`s customers currently include armaments manufacturers Denel, Norinco, SAAB and diamond miner De Beers.

Holloway says the company`s two other new subsidiaries – Quadsoft and Emerging Signals – are also expected to meet their results targets for the 2009 financial year.
So, while he says the purchase of Process Projects and the new contracts that have been secured should give a significant boost to ANSYS` performance in the second half, the under recoveries experienced in the first half will impact negatively on the full year`s earnings – although management, he notes, is working hard to minimise these effects.