Ansys `under-performs` in interims

By Leon Engelbrecht, ITWeb senior writer
Johannesburg, 05 Nov 2008

AltX-listed defence and transport technology company Ansys has confirmed 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 4.73c (6.26c earnings: 2007).

CEO Allan Holloway 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 rather than the defence side of the business.

He also 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.

Expanding client base

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 base more into the industrial sector" and says it "will boost the company`s ability to provide 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 R150 million have been received for execution in the current financial year.

This should ensure the group exceeded its forecast turnover of R138 million 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."

International market

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. 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 infrared optical components to high-performance TV sensors, as well as video switching units and displays.

At the time of the Optocon transaction, Holloway noted 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. However, management is working hard to minimise these effects, he notes.