Kordia Interim Report 2012

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KORDIA GROUP LIMITED

INTERIM REPORTHALF YEAR RESULTS

2012


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INTERIM REPORT

KORDIA GROUP LIMITED

CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

FOR THE SIX MONTHS ENDED 31 DECEMBER 2011


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INTERIM REPORT

HALF YEAR RESULTS 2012

Kordia has delivered a strong rst hal result with all our subsidiary businesses trading abovetheir rst hal prot budgets. Compared to the December 2010 hal year, revenue at $196.7mis up 45%. Net Prot Ater Tax at $7.3m compares to the December 2010 ater tax loss o$(18.0)m. Despite the growth-driven unding requirements net debt has been urther reduced,rom $80.6m to $70.8m.

The ve year broadcast to broadband transormation was designed to establish new uturegrowth paths or Kordia Group. Its success is evident as 60% o current revenue is in serviceswhich were non- existent ve years ago.

KORDIA NETWORKS

A marketing campaign has been aimed at establishing Kordia Networks as the only Telcodedicated to business. This is a successul campaign achieving 72% prompted awarenessrom the target audience. Strong growth has continued or OnKor, the wide area networkproduct and the associated ecosystem o services. Broadcast has perormed ahead oexpectations with solid demand or digital TV transmission services.

ORCON

The current business plan assumed that Telecom would provide widespread availability osub-loop extension service (SLES). When this did not eventuate Orcon had an alternative itsGenius product which is also ultra-ast broadband ready. This product was oered nationallyand the ull year sales budget was achieved in the rst two months. Orcon was party to asettlement between Telecom and the Commerce Commission in 2011.

KORDIA SOLUTIONS AUSTRALIA

The last six months has seen a dramatic growth with sta count increasing by 28% rom over570 to 731 personnel. Strong business development eorts have culminated in new businessin the telco and mining sectors. Growth is also attributed to customers shiting more businessto Kordia due to its record o delivering complex network design and build projects on time andwithin budget.

KORDIA SOLUTIONS NZ

Kordia Solutions NZ has been steadily diversiying its customer base outside o the broadcastand telco sectors. It routinely undertakes assignments in dicult locations in Papua NewGuinea, Fiji and the Solomon Islands.

DIVIDEND

Consistent with the disclosure in the Statement o Corporate Intent (SCI) the Group hasdeclared an interim dividend o $1m. A total dividend o $2m is orecast or FY12.

CONCLUSION

Kordia Group is already exceeding targets stated in the SCI and is well positioned or a strongresult this year. The ocus is now on delivering benchmark nancial perormance.

Geo Hunt David ClarkeCEO - KORDIA GROUP CHAIRMAN - KORDIA GROUP

28 February 2012


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INTERIM REPORT

CONTENTS

KORDIA GROUP LIMITEDCONSOLIDATED INTERIM FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 31 DECEMBER 2011

05 INCOME STATEMENT

06 STATEMENT OF COMPREHENSIVE

INCOME

07 STATEMENT OF CHANGES IN EQUITY

09 STATEMENT OF FINANCIAL POSITION

10 STATEMENT OF CASH FLOWS

12 NOTES TO THE INTERIM

FINANCIAL STATEMENTS

INCOME STATEMENTFOR THE SIX MONTHS ENDED 31 DECEMBER 2011

Audited Unaudited30/6/11 In thousands o New Zealand dollars Note 31/12/11 31/12/10

294,541 Revenue 3 196,643 136,028

408 Finance income 59 292

294,949 196,702 136,320

134,896 Direct costs and overheads 98,662 60,415

108,147 Employee and contractor expenses 67,162 50,821

31,692 Depreciation and amortisation expense 16,447 15,933

8,409 Finance costs 3,737 4,208

173 Impairment o advances to associate - 116

1,348 Impairment o assets - -

29,054 Impairment o a cash-generating unit - 29,043

(18,770) Prot/(loss) beore income tax 10,694 (24,216)

(4,050) Income tax expense/(benet) 3,423 (6,212)

(14,720) Pro t /( lo ss ) or the p erio d a tt ribu ta ble t o t he eq uity ho ld er 7,271 (18,004)

The notes set out on pages 12 to 14, orm part o, and should be read in conjunction with, the Interim

Financial Statements.


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INTERIM REPORT

STATEMENT OF CHANGES

IN EQUITYFOR THE SIX MONTHS ENDED 31 DECEMBER 2011 (UNAUDITED)

In thousands o New Zealand dollarsShare

CapitalRetainedEarnings

ForeignCurrency

TranslationReserve

CashfowHedge

Reserve Total

Balance 1 July 2011 87,696 (4,522) 1,240 (2,783) 81,631

Net prot or the period - 7,271 - - 7,271

Other comprehensive income

Foreign currency translationdierences

- - 240 - 240

Eective portion o changes in airvalue o cashfow hedges, net o tax

- - - (515) (515)

Fair value o cashfow hedgestranserred to income statement,net o tax

- - - (198) (198)

Total other comprehensive income - - 240 (713) (473)

Total comprehensive income orthe period

7,271 240 (713) 6,798

Balance 31 December 2011 87,696 2,749 1,480 (3,496) 88,429

FOR THE SIX MONTHS ENDED 31 DECEMBER 2010 (UNAUDITED)



ForeignCurrency

TranslationReserve

CashfowHedge

Reserve Total

Balance 1 July 2010 87,696 10,198 1,065 (2,988) 95,971

Net loss or the period - (18,004) - - (18,004)



- - 738 - 738


- - - 466 466


- - - (17) (17)

Total other comprehensive income - - 738 449 1,187

Total comprehensive income orthe period

- (18,004) 738 449 (16,817)

Balance 31 December 2010 87,696 (7,806) 1,803 (2,539) 79,154



STATEMENT OF

COMPREHENSIVE INCOMEFOR THE SIX MONTHS ENDED 31 DECEMBER 2011

Audited Unaudited

30/6/11 In thousands o New Zealand dollars 31/12/11 31/12/10

(14,720) Pro t /( lo ss ) or the p erio d a tt ribu ta ble t o t he eq uity ho ld er 7,271 (18,004)

175 Foreign currency translation dierences 240 738

289 Eective portion o changes in air value o cashfow hedges (1,015) 642

(84) Tax eect o the eective portion o changes in the air value o

cashfow hedges

302 (193)

380 Other comprehensive income or the period (473) 1,187

(14,340) Total comprehensive income or the period 6,798 (16,817)




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INTERIM REPORT

STATEMENT OF CHANGES

IN EQUITYFOR THE YEAR ENDED 30 JUNE 2011 (AUDITED)



ForeignCurrency

TranslationReserve

CashfowHedge

Reserve Total

Balance 1 July 2010 87,696 10,198 1,065 (2,988) 95,971

Net loss or the year - (14,720) - - (14,720)



- - 175 - 175


- - - 222 222


- - - (17) (17)

Total other comprehensive income - - 175 205 380

Total comprehensive income orthe year

- (14,720) 175 205 (14,340)

Balance 30 June 2011 87,696 (4,522) 1,240 (2,783) 81,631



CONTINUED

STATEMENT OF

FINANCIAL POSITIONAS AT 31 DECEMBER 2011

Audited Unaudited

30/6/11 In thousands o New Zealand dollars Note 31/12/11 31/12/10

Assets

109,277 Property, plant and equipment 111,713 113,803

57,955 Intangible assets 57,029 59,879

60 Derivative assets - 151

4,111 Deerred tax assets 5,940 3,821

- Loan to associate - 721

171,403 Total non-current assets 174,682 178,375

5,559 Cas h 2,295 5,746

60,109 Trade and other receivables and contract work inprogress

73,414 44,226

328 Taxation receivables - 415

5 Derivative assets 8 15

1,177 Inventories 2,095 1,39767,178 Total current assets 77,812 51,799

238,581 Total assets 252,494 230,174

Equity and Liabilities

87,696 Share capital 87,696 87,696

1,240 Foreign currency translation reserve 1,480 1,803

(2,783) Cashfow hedge reserve (3,496) (2,539)

(4,522) Retained earnings 2,749 (7,806)

81,631 Total equity attributable to the equity holder 88,429 79,154

3,777 Payables and deerred income 3,984 3,992

3,884 Derivative liabilities 4,968 3,486

5,484 Provisions 5,747 7,484

167 Finance lease liability 105 270

69,020 Loans and advances 4 52,797 70,466

446 Deerred taxation - -

82,778 Total non-current liabilities 67,601 85,698

60,810 Payables and deerred income 70,420 47,937

1,065 Taxation payable 4,087 -

288 Derivative liabilities 178 450

1,806 Provisions 1,625 1,306

203 Finance lease liability 154 629

10,000 Loans and advances 4 20,000 15,000

74,172 Total current liabilities 96,464 65,322

156,950 Total liabilities 164,065 151,020

238,581 Total equity and liabilities 252,494 230,174

The notes set out on pages 12 to 14, orm part o, and should be read in conjunction with, the InterimFinancial Statements.


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INTERIM REPORT

STATEMENT OF CASH FLOWSFOR THE SIX MONTHS ENDED 31 DECEMBER 2011

Audited Unaudited


Cash fows rom operating activities

279,832 Receipts rom customers 187,317 139,539

(229,936) Payments to suppliers and employees (160,829) (111,401)

49,896 26,488 28,138

3 Dividends received 2 4

405 Interest received 59 288

(7,881) Interest paid - other (3,567) (3,771)

(38) Interest paid - nance lease (12) (22)

(2,705) Taxes (paid) (1,975) (1,887)

39,680 Net cash rom/(used in) operating activities 20,995 22,750

Cash fows rom investing activities

128 Proceeds rom sale o property, plant and equipment 66 98

(15,112) Acquisition o property, plant and equipment (15,997) (8,501)

(7,069) Acquisition o intangibles and requency licences (1,755) (1,843)(2,376) Acquisition o assets o a company, net o cash acquired - (2,509)

775 Proceeds rom a government grant - -

183 Loan to associate - (324)

(23,471) Net cash rom/(used in) investing activities (17,686) (13,079)

Cash fows rom nancing activities

(13,726) Proceeds rom/(repayment o) loans and advances (6,530) (7,612)

(1,033) Repayment o nance lease liabilities (111) (504)

(14,759) Net cash rom/(used in) nancing activities (6,641) (8,116)

1,450 Ne t in cr eas e/ (de cr eas e) i n ca sh an d cas h eq ui val en ts ( 3, 332 ) 1,555

3,942 Cash and cash equivalents at beginning o the period 5,559 3,942

167 Eect o exchange rate fuctuations on cash 68 249

5,559 Cash and cash equivalents at end o the period 2,295 5,746



STATEMENT OF CASH FLOWSFOR THE SIX MONTHS ENDED 31 DECEMBER 2011

Audited Note Unaudited


Reconciliation o net surplus or the period with cashfows rom operating activities

(14,720) Net surplus/(decit) as per income statement 7,271 (18,004)

Add/(deduct) non cash items:

26,889 Depreciation 13,571 15,291

4,803 Amortisation and write o o licences and intangibles 2,876 642

(145) Unrealised oreign currency losses/(gains) 49 45

(7,391) Change in deerred tax/(uture income tax benet) (1,902) (7,462)

388 Movement in provision or doubtul and bad debts 503 89

269 Unwind/change in make good 137 -

173 Impairment o advance to associate - 116

1,348 Impairment o assets - -

(1,909) Movement in other provisions (100) 129

29,054 Impairment o a cash-generating unit - 29,043

38,759 22,405 19,889

Items classied as investing activities:

135 Loss/(gain) on disposal o property, plant andequipment

54 88

740 Working capital acquired on the acquisition o assetso a company

- 873

875 54 961

Movements in working capital:

(17,178) Receivables and prepayments (13,385) (1,382)

458 Inventories (918) 238

16,766 Payables 12,839 3,044

46 (1,464) 1,900

39,680 Net cash fows rom operating activities 20,995 22,750



CONTINUED


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INTERIM REPORT

NOTES TO THE INTERIM

FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 31 DECEMBER 2011

CONTINUED

The Board is o the opinion, there is minimal liquidity risk because:

Thesplitoffundingbetweencurrentandnon-currentwasaconsciousdecisiontobeinlinewiththeGroups treasury policy which stipulates progressive expiry/renewal dates or debt acilities. Theacility has a portion o one year debt to take advantage o lower bank margins and commitment ees.

Duringthe12monthsended31December2011,theGrouppaidbacknetdebtof$9.8m.TheBoardorecasts a urther debt reduction in the 2012 nancial year and the group continues to trade withstrong EBITDAs.

The acility is supported by a negative pledge by the Company and its guaranteeing subsidiariesover their assets and undertakings. The negative pledge restricts the disposal o assets other than inthe ordinary course o business or within certain materiality thresholds. Under the negative pledge,each guaranteeing subsidiary may be liable or indebtedness incurred by the Company and otherguaranteeing subsidiaries.

The acility is subject to various covenants such as limitations on gearing, interest cover, minimumshareholders; unds and coverage (the proportion o the consolidated group that orms theguaranteeing group under the negative pledge). The Group was in compliance with all covenants orthe interim periods ended 31 December 2011 and 2010 and the year ended 30 June 2011.

5. COMMITMENTS

Audited Unaudited


96,897 Operating lease commitments 102,976 83,366

5,156 Capital commitments 5,327 3,734

6. CONTINGENT LIABILITIES

As part o its contractual obligations with clients, the Group has an undertaking to provide services ata certain level and should this not be achieved, the Group may be liable or contract penalties. It isnot possible to quantiy what these may be until an event has occurred. The Directors do not expectany liabilities to occur as a result o these contractual obligations.

The Company makes advances to its subsidiary companies. The Companys loan acility comprises asyndicated revolving cash advance acility committed to a maximum amount o $110 million (2010:$120 million). The acility is supported by a negative pledge by the Company and its guaranteeingsubsidiaries over their assets and undertakings. Under the negative pledge, each guaranteeingsubsidiary may be liable or indebtedness incurred by the Company and other guaranteeing

subsidiaries. The Company considers the negative pledge in the individual subsidiaries nancialstatements to be an insurance contract. Such contracts and cross guarantees are treated as acontingent liability and only recognised as a liability i a payment becomes probable.

7. EVENTS SUBSEQUENT TO BALANCE DATE

On 28 February 2012 the Board o Directors declared an interim dividend o $1 million (2011: nil).

There are no other events subsequent to balance date which have a signicant eect on the nancialstatements.

NOTES


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INTERIM REPORT

DIRECTORYKordia has harmonised its business to deliver what customers want. With a wealth oexperience in broadcast and telecommunications solutions, and specialised networks, weare poised to leverage that experience, and deliver what people want rom technology. Ourproducts and our inrastructure are a valuable asset but not as precious to us as our people.

Our people are who we are, what we stand or and how we deliver. You can contact us online atwww.kordia.co.nz or at any o the ollowing locations:

NEW ZEALAND

AucklandLevel 4, Fidelity House81 Carlton Gore RoadNewmarket

P O Box 2495Auckland 1023

P. +64 9 551 7000F. 0800 KORFAX

ChristchurchUnit 12, Cavendish BusinessPark150 Cavendish RoadCasebrook 8051

P O Box 5320Papanui 8542

P. +64 3 550 1015F. 0800 KORFAX

Dunedin182 Albany StreetNorth Dunedin 9016

P O Box 6080Dunedin 9059

P. +64 3 550 1032F. 0800 KORFAX

Hamilton14 Aztec PlaceFranktonHamilton 3204

P. +64 7 562 1015F. 0800 KORFAX

Wellington

Level 12, Kordia House109-125 Wi llis StreetP O Box 98Wellington 6040

P. +64 4 914 8000F. 0800 KORFAX

Level 6Avalon Business CentrePercy Cameron StreetP O Box 31642Lower Hutt 5040

P. +64 4 914 8335F. +64 4 914 8377

AUSTRALIA

ACTLevel 282 Northbourne AvenueBraddonACT 2612

P. +61 2 9856 2600F. +61 2 6230 7462

New South WalesLevel 24 Drake AvenueMacquarie ParkNSW 2113

P. +61 2 9856 2600

F. +61 2 9856 2695

Unit 6, 21 Kangoo RoadSomersbyNSW 2250

P. +61 2 9856 2600F. +61 2 4340 1426

23 Uhrig RoadHomebushNSW 2140

P. +61 2 9856 2600F. +61 2 9648 3170

Queensland11 Ashtan PlaceBanyoQLD 4014

P. +61 2 9856 2600F. +61 7 3267 7321

South Australia29 Walsh StreetThebartonSA 5031

P. +61 2 9856 2600F. +61 8 8234 2227

VictoriaUnit 11181 Rooks RoadVermontVIC 3133

P. +61 2 9856 2600F. +61 3 9873 5012

Unit 1B4 Rocklea DrivePort MelbourneVIC 3207

P. +61 2 9856 2600F. +61 3 8359 0350

Western Australia

1/21 Tulloch WayCanning ValeWA 6155

P. +61 2 9856 2600F. +61 8 9456 2130

THAILAND

Thailand60/1 Monririn Building(Room A105)Soi Phaholyothin8 Phaholyothin RoadSamsennai PhayathaiBangkok 10400

Tel: +66 2 270 1520Fax: +66 2 271 2225

ORCONNEW ZEALAND

AucklandBuilding B28 The Warehouse WayAkoranga Business ParkNorthcoteAucklandTel: 0800 55 2000Fax: 0800 19 99 99

BANKERS

Bank o New Zealand / National Australia Bank

Commonwealth Bank o Australia

Australia New Zealand Banking Group

AUDITORS

KPMG on behal o the Auditor-General

SOLICITORS

Simpson Grierson (New Zealand)

Blake Dawson (Australia)


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