31 Aug 2010 07:00
EMBLAZE LTD. AND ITS SUBSIDIARIES Emblaze Ltd ("Emblaze" or "the Group") Interim results for six months ended 30 June 2010
Ra'anana, Israel, 31 August 2010: Emblaze Ltd , announces its financial results for the six months ended 30 June 2010. All references to $ are to US Dollars.
Financial Highlights:
* Group revenues have increased by 15% to $265.6 million in the first half of
2010 compared to $230.1 million in the first half of 2009.
* Operating income increased by 58.2% to $18.8 million up from $11.9 million
in the same period last year. The increase is mainly attributed to the improvement in Formula's operating income. * Net income attributable to Company's shareholders from continuing operations amounted to $0.7 million (H1 2009: $0.1 million).
* Net loss attributable to Company's shareholders amounted to $5.9 million
(H1 2009: net loss of $4.4 million). The increase in net loss is mainly the
result of one-time expenses recorded as part of the discontinued
manufacturing activity of ELSE's mobile device.
* Group total assets decreased to $578.0 million (31 December 2009: $599.0
million). The decrease is a result of distribution of dividends by Formula,
exchange rate effects and investments in the innovation arm. * Group consolidated cash and short terms investments as at 30 June 2010 amounted to $142.5 million.
Operational Highlights:
* Further improvement in Formula's profitability, demonstrating the
continuous demand for the products and services offered by the subsidiaries
of Formula, as well as the cost-saving measures implemented throughout the
group.
* On 30 June 2010, Emblaze announced its decision to cease further
investments towards manufacturing of the First ELSEâ„¢ mobile device by its
subsidiary ELSE Ltd, mainly due to critical delays in deliveries by third
parties, and to concentrate efforts only on licensing the ELSE INTUITIONâ„¢
platform and technology in order to realize its potential upside. According
to accounting standards, the First ELSE manufacturing activity has been treated as discontinued operation in the financial statements for all reported periods. * EMOZE continued to expand through further agreements with operators and handset manufacturers. Naftali Shani, Chairman of Emblaze, stated: "This has not been an easy start tothe year for Emblaze as we had to cease the investment in the manufacturing ofthe First ELSE. However, the steps that we have taken, which include a range ofcost savings measures, will, I believe, prove to be prudent over the comingmonths. We are evaluating several strategic options for the group and areoptimistic about the prospects of Emoze to contribute to Emblaze results goingforward. With the bad news now behind it, Emblaze can move forward withconfidence".
Overview
The contribution of each activity to the Emblaze Group is presented in the table below (selected items)*:
Emblaze Group - Financial Highlights Six months ended
(unaudited) June 30, 2010 US$ in millions Formula Innovation Total Arm Revenues 262.5 3.1 265.6 Gross profit 65.5 1.7 67.2 Operating income (loss) 21.3 (2.5) 18.8
Consolidated net income (loss) 15.6 (9.4) 6.2 Net income (loss) attributed to Group 3.2 (9.1) (5.9)
shareholders
* Corporate expenses were allocated equally between Formula and the Innovation Arm.
FORMULAACTIVITY
Formula is dually listed on NASDAQ and TASE and is principally engaged, through its subsidiaries, in providing software consulting services, developing proprietary software products and providing computer-based business solutions.
The Formula group revenues for the first half of 2010 totaled $262.6 millioncompared to $227.9 million in the first half of 2009. Formula's operatingincome in the first half of 2010 was $22.3 million compared to $16.3 million inthe first half of 2009, an increase of 37%. Net income attributable to Formulashareholders reached $8.6 million compare to $7.1 million in the same period in2009.
Formula consists of established companies, with developed products and services that are delivering revenue and profit as outlined henceforth:
Matrix IT Ltd. (TASE: MTRX)
Matrix concluded the second half of 2010 with growth in all sectors of itsactivity and maintains its leading position in the Israeli IT market. Earningsfor the period ended 30 June 2010 amounted to $197.1 million (H1 2009: $179.6million). Matrix's operating profit and net profit for the period ending 30June 2010 reached $16.5 million (H1 2009: $13.2 million) and $11.2 million (H12009: 10.6 million), respectively. As at 30 June 2010 Matrix's cash andshort-term investment balances amounted to approximately $82.3 million.
Magic Software Enterprises Ltd.
Magic's revenues for the six-month period ended 30 June 2010 totaled $41.2million compares with revenues of $27.4 million for the same period in 2009.Operating income reached $3.8 million, compares to $1.7 million in first halfof 2009 and net income reached $3.8 million compared to $1.8 million in sameperiod of 2009. During the reported period, Magic successfully signed up newpartners in Europe. New customers and license sales for uniPaaS and iBOLT,particularly in Japan, Germany and France have increased. In addition, Magicgained significant media momentum for its Cloud and Mobile enterpriseapplication platform.
Sapiens International Corporation N.V.
Sapiens's revenues for the six-month period ended 30 June 2010 totaled $24.4million (H1 2009: $21 million), with net income of $2.9 million (H1 2009: $1.9million). The growth in revenues and profits demonstrate a positive momentumtowards Sapiens insurance software solutions portfolio, including its RapidSurePolicy Administration solution, as well as the completion of the acquisition ofHarcase Solutions.INNOVATION ARMELSELtd.As reported at the end of June 2010, the board of the directors of the Companyhas decided to cease further investment towards manufacturing of the First ELSEmobile device due to critical delays in deliveries by third parties. Effortsare currently undertaken for licensing the ELSE Intuition platform andtechnology in order to realize its potential upside.
This decision will drastically reduce the Company's operational and development costs and will positively contribute to its route to profitability.
EMOZE Ltd.
EMOZE is providing transparent, synchronized mobile push-messaging solutionsthat include email, PIM (contacts and calendar) and a push content platform forconsumers, mobile operators, manufacturers and enterprises. Emoze eliminatesthe need for mobile devices to check or poll servers, allowing for real-timemessaging on a far wider range of mobile devices.Emoze can actually transform most low-end mobile devices into BlackBerry*-likedevices, providing the same push mail, PIM and content service. Thanks to itsnovel and efficient technology, Emoze is able to provide the ideal low-costpush solution for the mass market.
During the first six months of 2010, EMOZE continued to expand through licensing of its solutions with operators and handset manufacturers, specifically in the Far East markets.
* BlackBerry is a proprietary name of RIM
ZONE-IP Ltd.
ZONE-IP is engaged, through its subsidiary Emblaze VCON Ltd., in thedevelopment and deployment of high-performance, end-to-end videoconferencingsolutions over IP and ISDN networks for enterprises of all sizes, focusing ondesk top solutions.
The Company would like to use this opportunity to provide update on additional ongoing matters as follows:
Patent infringement:Further to the Company's update dated 30 June 2010, Emblaze wishes to informthat on 28 July 2010 the Company filed a complaint against Apple Inc. forinfringement of Emblaze's patents for media streaming technology. In February2010, the Company also notified Microsoft Corporation that its Smooth Streaming* infringes on Emblaze's patents for media streaming technology and discussionsare held with Microsoft with the aim to reach an amicable resolution bylicensing said IP. The Company will evaluate its course of action pending theresults of these discussions and will provide an update to the market when itis appropriate to do so.
* IIS Smooth Streaming is a proprietary name of Microsoft Corporation
HM Revenue Customs:
As reported by the Company on 30 June 2010, the legal proceedings in thismatter are still ongoing. Final legal submissions were made to the Tribunal inearly July 2010 and judgment is expected within a few months. Further updatewill be provided following developments in this matter
Enquiries:
Jonathan Shillington/Alistair Scott, Grayling +44 20 7932 1850
alistair.scott@grayling.com About Emblaze
Emblaze Ltd is a group of technology companies addressing both growth and innovation activities and includes:
Formula Systems , which harbors the followingsubsidiaries: Magic Software Enterprises Ltd. develops,markets and supports composite application development and deployment platformswith a service-oriented architecture (SOA), including application integrationand business process management (BPM), with existing and legacy systems; MatrixIT Ltd. (TASE: MTRX) is one of Israel's leading integration and informationtechnology services companies, active in four principal areas: softwaresolutions and services, software products, infrastructure solutions andhardware products, and training and assimilation.; Sapiens InternationalCorporation N.V. is a provider of IT solutions thatmodernize business processes to enable insurance and other companies to quicklyadapt to changes, ELSE Ltd. (formerly Emblaze Mobile), a design house forcutting-edge mobile technology; EMOZE, a provider of Push Email andsynchronisation technology for mobile devices; and ZONE-IP (Emblaze V CON), aprovider of wireless video communications technologies and conferencingsolutions for operators and enterprise markets over IP networks.The Emblaze Group is traded on the London Stock Exchange since 1996.www.Emblaze.comCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands June 30, December 31, 2010 2009 Unaudited Audited ASSETS CURRENT ASSETS: Cash and cash equivalents $ 95,189 $ 107,617
Short-term investments and restricted deposits 47,293 58,622
Trade receivables, net 122,079 130,858
Other receivables and prepaid expenses 27,134 23,328
Inventories 4,531 4,356
Assets of discontinued operations 543 1,215
Totalcurrent assets 296,769 325,996
LONG-TERM RECEIVABLES AND INVESTMENTS 10,308 13,840
SEVERANCE FUND 45,237 45,022 PROPERTY AND EQUIPMENT, NET 10,677 10,277 GOODWILL 164,761 156,132 OTHER ASSETS, NET 50,279 47,766 Total assets $ 578,031 $ 599,033
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
June 30, December 31, 2010 2009 Unaudited Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES: Trade payables $ 36,208 $ 44,668
Short-term liabilities to banks and others 9,783 10,469 Other payables and accrued expenses 89,653 93,937 Liability due to activity acquisition 3,287 210 Liabilities of discontinued operations 3,296 3,914
Debentures 14,316 14,639 Total current liabilities 156,543 167,837 LONG-TERM LIABILITIES Debentures 42,947 43,918 Liabilities to bank and other 5,618 8,556 Deferred tax liability 5,022 4,134 Other long term liabilities 1,778 1,300
Liability due to activities acquisition 4,753 1,517
Accrued severance pay 56,104 55,112 Totallong-term liabilities 116,222 114,537 SHAREHOLDERS' EQUITY: Share capital:
Ordinary shares of NIS 0.01 par value - 416 416 Authorized: 200,000,000 shares at June 30, 2010 and December 31, 2009 ; Issued: 140,578,154 shares at June 30, 2010 and December 31, 2009 ; Outstanding: 111,755,932 shares at June 30, 2010 and December 31,
2009 Additional paid-in capital 467,741 469,562 Treasury stock, at cost (75,555) (75,555)
Accumulated other comprehensive income 5,046 6,924
Accumulated deficit (290,835) (284,961)
Total Company's Shareholders' equity 106,813 116,386
Non- controlling interest 198,453 200,273 Total equity 305,266 316,659 Total liabilities and equity $ 578,031 $
599,033
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except share and per share data
Six months ended Year ended June 30 December 31 2010 2009 2009 Unaudited Audited Revenues $ 265,616 $ 230,065 $ 473,843 Cost of revenues 198,413 172,017 354,830 Gross profit 67,203 58,048 119,013 Operating expenses:
Research and development, net 4,315 3,807 7,774
Selling and marketing 22,084 22,096 41,152 General and administrative 22,039 20,287 44,099 Other income - - (2,014) Total Operating Expenses 48,438 46,190 91,011 Operating Income 18,765 11,858 28,002 Financial income (expenses) (1,530) 2,782 460 Other income (expenses) (931) 107 (240) Income before taxes on income 16,304 14,747 28,222 Taxes on income 3,205 4,728 7,969 Income before non-controlling interest 13,099 10,019 20,253 and equity losses
Equity losses of affiliated companies, (378) - (335)
net Income before non-controlling interest 12,721 10,019 19,918 from continuing operations Loss from discontinued operations, net (6,554) (4,461) (6,514) Consolidated net income 6,167 5,558 13,404 Less: net income attributable to (12,041) (9,913) (22,510) non-controlling interest Net loss attributable to Company's $ (5,874) $ (4,355) $ (9,106) shareholders
Basic and diluted income (loss) per share to Company's shareholders:
From continuing operations $ *) - $ *) - $ (0.02) From discontinued operations $ (0.06) $ (0.04) $ (0.06) Net loss per share $ (0.06) $ (0.04) $ (0.08)
Weighted average number of shares used 111,755,932 111,755,932 111,755,932 in computing basic and diluted earnings
(loss) per share
*) Represents an amount lower than $ 0.01.
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF CHANGES IN EQUITY
U.S. dollars in thousands
Share Additional Treasury Accumulated
Accumulated Non-controlling Total Total
other deficit interest capital paid-in stock, Equity comprehensive capital at cost comprehensive income (loss) income (loss) Balance as of $ 416 $ 470,716 $(75,654) $ 6,951 $ (275,855) $ 190,556 $317,130 $ (20,310) December 31, 2008 Decrease in the - (757) - - - 1,716 959 - Company's holding in subsidiaries Dividend to - - - - - (15,369) (15,369) - non-controlling interest shareholders Non-controlling - (595) - - - (2,937) (3,532) - interests changes due to holding changes and exercise of put option Issuance of shares *) (99) 99 - - 1,463 1,463 - upon exercise of options Share based - 297 - - - 1,845 2,142 - compensation expenses Comprehensive loss: Unrealized loss - - - (260) - (102) (362) (362) from available-for-sale marketable securities, net Foreign currency - - - 233 - 591 824 824 translation adjustments Net profit (loss) - - - - (9,106) 22,510 13,404 13,404 Balance as of 416 469,562 (75,555) 6,924 (284,961) 200,273 316,659 December 31, 2009 Total $ 13,866 comprehensive income Sale of subsidiary - (1,419) - - - 1,419 - - shares to minority Sale of shares by - (295) - - - (35) (330) - subsidiaries to minority Dividend to - - - - - (13,350) (13,350) - non-controlling interest shareholders Share based - 110 - - - 973 1,083 - compensation expenses Exercise of 847 847 - options in a subsidiary Increase in - (217) - - - 161 (56) - holding of subsidiary due to purchase of shares Comprehensive loss: Unrealized loss - - - 89 - (8) 81 81 (gain) from available-for-sale marketable securities and hedge funds, net Foreign currency - - - (1,967) - (3,868) (5,835) (5,835) translation adjustments Net profit (loss) - - - - (5,874) 12,041 6,167 6,167 Balance as of June $ 416 $ 467,741 $(75,555) $ 5,046 $ (290,835) $ 198,453 $305,266 30, 2010 (unaudited) Total $ 413 comprehensive income
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands Six months ended Year ended December June 30, 31, 2010 2009 2009 Unaudited
Cash flows from operating activities:
Consolidated net income $ 6,167 $ 5,558 $ 13,404
Less: losses from discontinued (6,554) (4,802) (10,595)
operations*
Income from continuing operations 12,721 10,360 23,999 Depreciation and amortization 8,134 7,573 17,200 Gain from sale of a subsidiary - - (4,284) Impairment and amortization of - 141 388 marketable debt securities premiums and
accretion of discounts, net
Share based compensation expenses 110 945 297 Share based compensation expenses of 665 143 1,877
subsidiaries
Net loss (gain) on sales of marketable 71 (1,653) (2,794) securities and changes in accrued
interest, net
Impairment of investment in marketable - 40 41
securities and others Equity (gain) losses, net 378 - 335
Revaluation of long term loans and (49) (119) (210)
deposits, net
Gain from sale of property and equipment - - (2,219) Decrease in trade receivables, other 6,533 17,237 27,180 receivables and prepaid expenses and
inventories
Amortization of debentures discount, 223 - 2,535 changes in embedded derivative and increase in value and accrued interest
on debentures
Decrease in trade payables, other (3,635) (10,401) (12,726) payables and accrued expenses , accrued severance pay, net and other long term
liabilities Changes in deferred tax, net (1,821) 511 329
Liability to option to non-controlling - (371) (73)
interest payment
Change in value of put options and - (1,933) (2,709)
derivatives Other 153 (26) 294
Net cash provided by operating 23,483 22,447 49,460 activities from continuing operations Net cash used in operating activities (6,852) (9,123) (14,436)
from discontinued operations
Net cash provided by operating 16,631 13,324 35,024
activities
Cash flows from investing activities: Purchase of property and equipment, net (2,230) (1,389) (2,811) Proceeds from sale of property and 26 443 5,666
equipment
Investment in short and long-term bank (954) (13,886) (36,144) deposits and restricted deposits Proceeds from short-term bank deposits 593 358 4,031 and short and long term restricted
deposits
Proceeds from maturity of short-term - 3,292
marketable securities
Investment in long-term marketable (2,610) (4,996)
securities
Proceeds from sales, calls and maturity 18,419 10,064 29,304
of marketable securities
Capitalization of software development (4,264) (3,366) (6,960) and other costs of subsidiaries Purchase of non-controlling interest in - (20) (6,455)
subsidiaries
Proceeds from sale of subsidiary's 70 43 105 operations
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands Six months ended Year ended December June 30, 31, 2010 2009 2009 Unaudited
Proceeds from realization of investment $ - $ - $ 4,320 Acquisition of newly consolidated (10,832) (6,455) (1,262)
subsidiaries
Payment to former stockholders of (960) - subsidiary in respect to a purchase
liability Other investments (167) (269) -
Net cash used in investing activities of (2,909) (16,181) (10,206)
continuing operations
Net cash provided by (used in) investing 642 (515) (578) activities from discontinued operations Net cash used in investing activities (2,267) (16,696) (10,784) Cash flows from financing activities:
Exercise of stock options in 171 (1,197) 1,224 subsidiaries
Dividend to non-controlling interest (20,241) (17,950) (23,138) shareholders in subsidiaries Short-term borrowing and bank credit, 168 1,496 (2,054)
net
Repayment of long-term loans in (3,825) (5,533) (10,216)
subsidiaries
Receipt (repayment) of short-term loans - - 3,180
in subsidiaries
Deposits - SWAP deal in a subsidiary - 1,026 1,060 Repayment of convertible debt in a - (402) (5,824)
subsidiary
Proceeds from sale of subsidiaries - 921 959
shares
Purchase of non- controlling interest (1,006) (992) (3,774) Net cash used in financing activities of (24,733) (22,631) (38,583)
continuing operations
Net cash used in financing activities of - - -
discontinued operations Net cash used in financing activities $ $ $ (38,583) from continuing operations (24,733) (22,631)
Effect of exchange rate on cash of $ (2,059) $ (1,017) $ (237)
continuing operations
Increase (decrease) in cash and cash $ (6,218) $ $ 434 equivalents from continuing operations (17,382) Decrease in cash and cash equivalents (6,210) (9,638) (15,014)
from discontinued operations
Cash and cash equivalents from 107,617 122,197 122,197 continuing and discontinued operations at the beginning of the period Cash and cash equivalents from $ 95,189 $ 95,177 $ 107,617 continuing operations at the end of the
period
* The cash flow related to the discontinued operation of Next Source was not separated due to immateriality.
The accompanying notes are an integral part of the financial statements.
NOTE 1:- GENERAL
Emblaze Ltd. ("Emblaze" or "the Company") is an Israeli corporation. The Company's shares are traded on the London Stock Exchange ("LSE") under the symbol BLZ. The Company operates in two principal business segments, namely Growth and Innovation. The Growth segment relates to the development, production and marketing of information technology ("IT") solutions and services. The Innovation segment relates to research and development of technology for advanced wireless and cellular solutions and products.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2009, are applied consistently in these financial statements.
NOTE 3:- UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesfor interim financial information. Accordingly, they do not include all theinformation and footnotes required by accounting principles generally acceptedin the United States for complete financial statements. In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for a fair presentation have been included. Operatingresults for the six-month period ended June 30, 2010 are not necessarilyindicative of the results that may be expected for the year ended December 31,2010. - - - - - - - - - - - - - - - - - - - -
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