BSD.L Regulatory News (BSD)

27 Apr 2006 07:02

Emblaze Ltd27 April 2006 Emblaze Ltd. Preliminary Results for the year ended 31 December 2005 and Trading Update for Q1 2006 Ra'anana, Israel, 27 April 2006: Emblaze Ltd (Emblaze or "the Group") (LSE:BLZ), the wired and wireless telecoms technology group, announces its financialresults for the 12 months ended 31 December 2005 and trading update for thethree months ended 31 March 2006 Financial Highlights •Revenues from operations have tripled to $130.4m (2004: $45.1m*) •Trading in Q1 2006 continued to be strong and ahead of management expectations increasing threefold to over $100m in revenues (Q1 2005: $29m*) •Management expects to double its revenues over 2006 to $260m generating net profit •Operating loss decreased by 93% to $2.3m (2004: $33m*) •Net profit from continuing operations was $10.5m from (2004: $11.1m loss *) •The company has discontinued its Korean manufacturing and moved to cheaper and more effective manufacturing in China and Taiwan. The discontinued operation has created a one time charge of $31.5m, creating an exceptional net loss of $21.1m •Strong balance sheet with total assets amounting to $293.2m (2004: $350.3m*). The decrease in total assets is primarily due to goodwill write-off of the discontinued Korean operation •Net cash remains strong at $239m (2004: $249m*). The decrease of $10m in net cash is mainly due to the acquisition of mobile distribution channels and discontinuing operations in the Far East •The Group reiterates that it anticipates a continuation in growth and profitability in 2006 * For clarity purposes, all 2004 data is presented in its historical value without the net effects of the discontinued operations and prior to implementation of the "single step" accounting in 2005 Operational Highlights •Emblaze Mobile is the main driver of growth for the group business representing 75% of the total revenues in 2005 and vast majority of trading in Q1 2006 •Boost in sales driven mainly via investment and expansion in mobile trading and distribution in Western Europe achieved through the acquisition of UK based European Telecom •Group management intends to focus on expanding and shifting resources to the Group's core growth drivers The Company intends to fuel further growth using its cash reserves mainly for M&A activities with the aim of increasing profitability over the coming years. Eli Reifman, Chief Executive Officer of Emblaze, said: "As the results for 2005demonstrate, Emblaze now moves to the black after 5 long years of fighting thetelecom downturn and is on track to fast growth with a stronger andbetter-focussed business. We now have the visibility for the main drivers of ourgrowth and can better invest in our core competency and business. We take pridein having the scale, technology, financial strength and above all the people tocapitalise on the industry upturn by delivering further strong growth andshareholder value. "Trading in the first quarter of 2006 was ahead of management expectations withthe Group achieving over $100m revenues in the period. This gives us theconfidence to state that revenues are on track to doubling again to $260m and atprofitable levels for the full year 2006." Enquiries: Emblaze LtdDoron Cohen/ Hagit Gal +972 9 7699831/339 Corfin CommunicationsHarry Chathli, Neil Thapar +44 (0)20 7929 8989 Review These are the first full year results of the restructured Emblaze Group after itunderwent extensive changes during 2004 to position it for growth. Adamind wasformed in November 2004 from the merger of the transcoding business units ofRoyal Philips Electronics and Emblaze Ltd: Philips MP4NET and EmblazeTranscoding. In June 2004, Emblaze merged two of its business units: EmblazeSystems, provider of management solutions for video over wireless IP networks;and Emblaze Mobile, the developer of customised rich media handsets. In August2005, Emblaze VCON was formed following the merger of Emblaze Systems, and VCON,a leading video communication systems company based in Israel. In December 2005,Emblaze Mobile acquired a strategic interest in Global Telecoms Distributionplc., repositioning the division as a wireless product distribution company andan ODM virtual manufacturer with integrated supply chain and logistic servicesbusiness. The Group results represented strong growth with revenues from operations of$130.4m according to the following breakdown: Business Units* Full Year 2005 Revenues (US$million)Emblaze Mobile 97.3Orca Interactive 5.3Adamind 6.2Emblaze VCON 4.5Other revenues 17.1 _______________________Total $130.4 (*) In addition to the above, the Group generated financial income of $11.6m The cash investments portfolio decreased by $10m to $239.0m and is presented inthe balance sheet under the following breakdown: 31 December 2005 $mCash and cash equivalents 25.1Short-term bank deposits, marketable securities and accrued interest net of short term borrowing 55.0 ================Long-term (over 1 year to maturity) marketable securities*, deposits and other long term investments 158.9 ================Total: 239.0 *Marketable securities are mainly comprised of US Government Treasuries andother agencies and highly rated corporate debentures. The cash investments portfolio increased in April 2006 by $32.9m due to the saleof the Adamind holding. In accordance with the Israeli Court's approval to repurchase up to 13% of theissued ordinary shares of the Group, Emblaze has to date purchased approximately3.4% of the ordinary share capital. We continue to regularly review costs in relation to our view on how our marketsare developing. Operating Review Emblaze Mobile Emblaze Mobile trading performance represents 75% of the total Group revenues(2004: 81%). Geographically, Western Europe sales accounted for over 80% of therevenues. With the acquisition of UK based Global Telecoms Distribution plc, EmblazeMobile is now a supplier into the "end to end" mobile business. The business isengaged in strengthening its relationships with all of the top tier vendors andproviding more products and solutions as part of its portfolio. The division hasUK based management, Israeli R&D and Far East outsourced manufacturing thusexploiting the "best of all worlds" according to management view. Emblaze VCON Emblaze VCON is a leading provider of wireless video communications technologiesand conferencing solutions for operators and enterprise markets over IP networksrepresenting 3.5% of the Group's revenues. Emblaze VCON has one of the mostadvanced range of technologies and products for IP video conferencing sellinginternationally, primarily to Government institutions worldwide. Orca Interactive Orca Interactive (LSE: ORCA), provider of Interactive Television IPTV middlewarefor Video On Demand (VOD) and broadcast services, aimed at telecom, cable andxDSL operators. It makes up 4.1% of the group revenues. The company isconsidered by trade analysts as one of the top producers of middleware softwarefor IPTV, i.e. the management software for television and video services over IPnetworks, second only to Microsoft. IPTV is considered as one of the "hottest"markets today in the telecom industry with multi-billion dollar potential perannum. Orca has managed to position itself as one of the frontrunners in thegame alongside giants as Alcatel and Siemens and others at internationaltenders. emoze emoze, a free global "push-email" service for mobile devices that will push sendemails and PIM (Personal Information Management) data anywhere and to anydevice. The service was established using proprietary technology to provide a"Blackberry like" push-email service to mobile devices. The philosophy behindthe service is that email communication should become a commodity service verymuch like a voice call and not the privilege of the elite few. With this inmind, emoze provides push-email and PIM on most mobile devices and for free -thus addressing the hundreds of millions of mobile users market vs. the likes ofBlackberry that reach a small percentage of the market. The advertising businessmodel is based on comparables such as Hotmail and gMail by Microsoft and Google. Visual Defence Visual Defence (LSE: VDI), a provider of wireless and IP video solutions formilitary and homeland security markets. Visual Defence is the leader in thefield of Visual Security projects and has won significant contracts worldwide tobuild and integrate the visual defence systems of airports such as ZurichInternational, Heathrow, Toronto and many other public traffic areas and HMSnational projects. Outlook After a long period of telecom downturn, Emblaze has emerged as a businessfocussed on delivering services to the telecommunications industry via itsvarious subsidiaries. This strategy saw the Group move into net profit from itscontinuing operations in 2005. The management now has the visibility for themain drivers of our growth and can better invest in the Company's corecompetency and business. Trading in the first quarter of 2006, especially in its Emblaze Mobile division,was ahead of management expectations with the Group achieving over $100mrevenues over the period. With the mobile market set to continue to growdramatically, the Board is confident to at least double revenues for the fullyear 2006. CONSOLIDATED BALANCE SHEETSU.S. dollars in thousands, except share data 31 December ---------------------- 2004 2005 -------- -------- ASSETSCURRENT ASSETS:Cash and cash equivalents $ 28,332 $ 25,110Short-term bank deposits 348 217Deposit in escrow - 5,526Accrued interest 2,288 2,056Short-term marketable securities 52,990 51,033Trade receivables 2,080 16,006Other receivables and prepaid expenses 5,552 12,577Inventories 6 4,536Assets of discontinued operations 92,234 32 -------- --------Total current assets 183,830 117,093----- -------- --------LONG-TERM INVESTMENTS:Long-term marketable securities 97,270 155,146Restricted deposit 51,955 3,751Other long-term investments 9,028 3,990Severance pay fund 1,194 1,645 -------- --------Total long-term investments 159,447 164,532 -------- --------PROPERTY AND EQUIPMENT, NET 1,831 2,390 -------- --------GOODWILL 2,167 4,112 -------- --------INTANGIBLE ASSETS, NET 3,008 5,033 -------- -------- $350,283 $293,160 ======== ========LIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIES:Short-term loans $ - $ 3,799Trade payables 1,404 16,272Deferred revenues 333 1,238Other payables and accrued expenses 13,992 17,241Liabilities of discontinued operations 72,411 74 -------- --------Total current liabilities 88,140 38,624----- -------- --------ACCRUED SEVERANCE PAY 1,921 2,334 -------- --------LONG-TERM LIABILITIES 4,559 3,270 -------- --------MINORITY INTERESTS 11,115 27,452 -------- --------SHAREHOLDERS' EQUITY:Share capital:Ordinary shares of NIS 0.01 par value: 416 416Authorized - 200,000,000 shares as of 31 December 2005and 2004, Issued - 140,562,700 shares as of 31 December2005 and 2004; Outstanding - 135,064,166 shares as of31 December 2004 and 135,856,738 as of 31 December 2005Additional paid-in capital 465,896 466,348Foreign Currency Translation Adjustment 1,785 (46)Treasury stock, at cost (8,623) (7,381)Accumulated other comprehensive income (284) (2,141)Accumulated deficit (214,642) (235,716) -------- --------Total shareholders' equity 244,548 221,480----- -------- -------- $350,283 $293,160 ======== ======== CONSOLIDATED STATEMENTS OF OPERATIONSU.S. dollars in thousands, except share and per share data Year ended 31 December ------------------------------------ 2003 2004 2005 -------- -------- --------Revenues *) $ 7,282 $ 20,952 $130,436 -------- -------- --------Costs and expenses:Cost of revenues 3,344 2,332 96,922Research and development, net 8,975 6,454 7,680Selling and marketing 11,054 9,571 19,138General and administrative 8,108 8,875 8,839Amortization of intangible assets 1,823 459 877Restructuring, other charges and impairment of property and equipment - 6,338 (720) -------- -------- --------Total costs and expenses 33,304 34,029 132,736----- -------- -------- --------Operating loss (26,022) (13,077) (2,300)Financial income, net 9,940 9,512 11,578Taxes on income - - (353) -------- -------- --------Loss before minority interests in losses of subsidiaries (16,082) (3,565) 8,925Minority interests in losses of certain subsidiaries - 61 1,549 -------- -------- --------Income (loss) from continuing operations (16,082) (3,504) 10,474Loss from discontinued operations, net of capital gain (29,964) (19,659) (31,548) -------- -------- --------Net income (loss) $(46,046) $(23,163) $(21,074) ======== ======== ========Basic and diluted net income (loss) per share:From continuing operations $ (0.12) $ (0.08) $ 0.08 ======== ======== ========From discontinued operations, net of capital gain $ (0.22) $ (0.09) $ (0.23) ======== ======== ========Basic net loss per share $ (0.34) $ (0.17) $ (0.15) ======== ======== ========Weighted average number of shares used in computing basic net income (loss) per share 135,628,372 134,953,259 135,856,738 =========== =========== ===========Weighted average number of shares used in computing diluted net income (loss) per share 135,628,372 134,953,259 137,160,113 =========== =========== =========== *) Revenues include capital gain and other incomes. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITYU.S. dollars in thousands Share Additional Deferred Treasury capital paid-in stock Stock, capital compen- at sation cost ------- -------- -------- --------Balance as of 1 January 2003 $ 412 $464,798 $ (1,200) $ (2,909) Repurchase of shares, net - - - (2,793) Issuance of shares upon exercise of stock options 2 258 - - Amortization of deferred stock compensation - - 981 - Comprehensive loss: Unrealized gain on put and call option contracts, net - - - - Net loss - - - - ------- -------- -------- -------- Total comprehensive loss Balance as of 31 December 2003 414 465,056 (219) (5,702) Repurchase of shares, net - - - (3,539) Issuance of shares upon exercise of stock options 2 848 - 618 Amortization of deferred stock compensation, net - (8) 219 - Comprehensive loss: Unrealized losses on put and call option contracts, net - - - - Unrealized losses from available-for-sale marketable securities, net - - - - Foreign currency translation adjustments - - - - Net loss - - - - ------- -------- -------- ------- Total comprehensive loss Balance as of 31 December 2004 416 465,896 - (8,623) Repurchase of shares, net Issuance of shares upon exercise of stock options - 452 - 1,242 Comprehensive loss: Unrealized losses from available-for-sale marketable securities, net - - - - Foreign currency translation adjustments - - - - Net loss - - - - ------- -------- --------- -------Total comprehensive loss Balance as of 31 December 2005 $ 416 $466,348 $ - $ (7,381) ======= ======== ========= ======= STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Cont.)U.S. dollars in thousands Accum- Accum- Total Total ulated ulated compre- other deficit hensive compre- loss hensive income (loss) -------- --------- --------- ------- Balance as of 1 January 2003 $ 19 $(145,433) $315,687 Repurchase of shares, net - - (2,793) Issuance of shares upon exercise of stock options - - 260 Amortization of deferred stock compensation - - 981 Comprehensive loss: Unrealized gain on put and call option contracts, net 47 - $ 47 47 Net loss - (46,046) (46,046) (46,046) -------- --------- --------- -------Total comprehensive loss $ 45,999) =========Balance as of 31 December 2003 66 (191,479) 268,136 Repurchase of shares, net - - (3,539) Issuance of shares upon exercise of stock options - - 1,468 Amortization of deferred stock compensation, net - - 211 Comprehensive loss: Unrealized losses on put and call option contracts, net (66) - $ (66) (66) Unrealized losses from available-for-sale marketable securities, net (284) - (284) (284) Foreign currency translation adjustments 1,785 - 1,785 1,785 Net loss - (23,163) (23,163) (23,163) -------- --------- --------- -------- Total comprehensive loss $(21,728) =========Balance as of 31 December 2004 1,501 (214,642) 244,548 Repurchase of shares, net Issuance of shares upon exercise of stock options - - 1,694 Comprehensive loss: Unrealized losses from available-for-sale marketable securities, net (1,857) - $ (1,857) (1,857) Foreign currency translation adjustments (1,831) - (1,831) (1,831) Net loss - (21,074) (21,074) (21,074) -------- --------- --------- --------Total comprehensive loss $(24,762) =========Balance as of 31 December 2005 $ (2,187) $(235,716) $221,480 ======== ========= ======== CONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousands Year ended 31 December ------------------------------------ 2003 2004 2005 -------- -------- --------Cash flows from operating activities:------------------------------------- Net loss $(46,046) $(23,163) $(21,074) Less: Net loss from discontinued operations 29,964 19,659 31,548 -------- -------- -------- Net income (loss) from continuing operations (16,082) (3,504) 10,474 Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used in) operating activities from continuing operations: Impairment of property and equipment - 1,646 - Depreciation and amortization 4,718 2,642 2,205 Amortization of marketable debt securities premiums and accretion of discounts, net 2,743 1,669 584 Stock compensation expenses 981 211 - Net gain on sales of marketable securities (140) (1,267) (112) Equity in losses of an affiliate - - 613 Capital gain, net 97 (12,564) (7,356) Minority interests in losses of subsidiaries - (61) (1,301) Decrease in trade receivables, other receivables and prepaid expenses, inventories and accrued interest 1,374 1,271 6,136 Increase (decrease) in trade payables, other payables and accrued expenses and accrued severance pay, net (4,777) 4,822 (5,697) Increase (decrease) in deferred revenues (298) 5 905 Increase (decrease) in long-term restructuring accrual (366) 2,678 (1,977) Other (97) 49 82 -------- -------- --------Net cash provided by (used in) operating activities from continuing operations (11,847) (2,403) 4,556Net cash used in operating activities from discontinued operations (25,282) (47,067) (4,350) -------- -------- --------Net provided by (cash used) in operating activities (37,129) (49,470) 206 -------- -------- --------Cash flows from investing activities:------------------------------------- Purchase of property and equipment, net (1,366) (230) (1,382) Proceeds from sale of property and equipment 435 13 123 Investment in short-term bank deposits - (240) - Proceeds from short-term bank deposits - - (5,395) Investment in short-term marketable securities (17,020) (24,333) (267,431) Proceeds from maturity of short-term marketable securities 55,126 1,031 255,366 Investment in long-term marketable securities (59,473) (68,147) (84,081) Proceeds from sales, calls and maturity of long-term marketable securities 33,880 154,344 32,851 Investment in long-term bank deposits (571) (56,477) 57,062 Proceeds from long-term bank deposits 64 - - Payment for acquisition of subsidiaries and affiliates (21) (500) (8,704) -------- -------- --------Net cash provided by (used in) investing activities from continuing operations 11,054 5,461 (21,591)Net cash provided by (used in) investing activities from discontinued operations (2,222) 32,825 (12,792) -------- -------- --------Net cash provided by (used in) investing activities 8,832 38,286 (34,383) -------- -------- -------- CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)U.S. dollars in thousands Year ended 31 December ------------------------------------ 2003 2004 2005 -------- -------- --------Cash flows from financing activities:-------------------------------------Repurchase of shares, net (2,793) (3,539) -Short-term borrowing (120)Proceeds from Initial Public Offering of Adamind Ltd, net 24,740Proceeds from Initial Public Offering of Orca Interactive Ltd, net - 22,621 -Proceeds from exercise of stock options, net 223 405 2,759 -------- -------- --------Net cash provided by (used in) financing activities from continued operations (2,570) 19,487 27,379Net cash used in financing activities from discontinued operations - (3,327) - -------- -------- --------Net cash provided by (used in) financing activities (2,570) 16,160 27,379 Effect of exchange rate translation adjustment on cash of discontinued operations - 237 - -------- -------- --------Increase (decrease) in cash and cash equivalents from continuing operations (3,363) 22,545 10,344Decrease in cash and cash equivalents from discontinued operations (27,504) (17,332) (17,142)Cash and cash equivalents from continuing operations at the beginning of the year 45,988 26,192 28,332Cash and cash equivalents from discontinued operations at the beginning of the year 11,574 503 3,576 -------- -------- --------Cash and cash equivalents from continuing operations at the end of the year $ 26,192 $ 28,332 $ 25,110 ======== ======== ========Cash and cash equivalents from discontinued operations at the end of the year $ 503 $ 3,576 $ - 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