Batm Advanced Regulatory News (BVC)

17 Mar 2005 07:01

Embargoed for release at 7 am, 17 March 2005 BATM Advanced Communications Limited Preliminary announcement of Final Results for the Year Ended 31 December 2004 BATM Advanced Communications Limited (LSE: BVC), a leading designer andproducer of broadband data and telecoms systems, announces final results forthe year ended 31 December 2004.Key features Year Ended Year Ended 31 31 Dec 2004 Dec 2003 Turnover $ 41.2m $ 37.1m Gross margin 44.1% **40.2% Pre-tax loss before goodwill $(2.6)m $(10.1)mamortization * Loss per share (cents) (3.29) (5.21) Net cash $50.7m $51.1m* Goodwill amortization was $9.9m in 2004 and in 2003.** (In 2003 excluding write down of Inventory). * Increase in revenues of 11% compared to 2003. * Increase in revenues of 13% in H2, 2004 compared with H2, 2003. * Gross profit margins improved from 40.2 % in 2003 to 44.1 % in 2004. * Strong cash position: $50.7m, including short and long-term deposits and bonds and no borrowings (2003: $51.1m) * Company gains "best performing supplier" award by Nokia Networks * Continued significant growth in our residential VOIP solution with 3 major deployments during the year * Major new VOIP order with US service provider (see separate announcement) Dr Zvi Marom, Chief Executive of BATM, said:In 2004 we have started to feel the recovery in the telecom markets in which weoperate, after a lengthy period of recession.We have signed important strategic agreements with major telecom companies thatwe believe will have a growing positive impact over the coming years, and ourrelationships with our main customers are better than ever.We believe that this upward trend will continue this year and increasingly insubsequent years.Enquiries: BATM Advanced Communications 020 7831 3113 (on 17.03.05) Dr Zvi Marom, Chief Executive Ofer Bar Ner, Chief Financial Officer Dresdner Kleinwort Wasserstein 020 7623 8000 Mark Smith Shore Capital 020 7408 4090 Graham Shore Financial Dynamics James Melville-Ross / Cass Helstrip 020 7831 3113 Chairman's Statement Review of the PeriodIn my statement last year and interim statement for 2004, I indicated that wecould look forward to an improved trading performance. Our results for 2004fully justify those predictions and confirm the upward trend in activity forwhich we have been positioning ourselves during the severe conditions of thelast few years. Our strategy of developing innovative products to the marketand strategic partnerships with major customers, combined with a rigorouscontrol of expenditure and focus on margin improvement, have all combined toproduce a significant improvement in our results.We were particularly proud to have been awarded "Best Performing Supplier"status by Nokia, confirming our rigorous approach to the standards of ourproducts.Our cash position remains extremely strong.Financial PerformanceTurnover for the period was $41,218,000 (2003: $37,054,000), reflecting anincrease of 11% compared with the prior year. This increase is primarilyrelated to increased demand for new VOIP products and our successful OEMrelationships, particularly with Nokia.Gross profit was $18,206,000 (2003: $11,638,000) reflecting an increase of$6,568,000 or 56%. This increase was the result of the higher turnover for theyear and improved gross profit margin. As a percentage of turnover, grossprofit margin was 44.1% (2003: 31.4% and excluding a provision for write downinventory of $3,283,000: 40.2%). This increase was primarily related to afavorable shift in product mix in the Edgelink product family. Inventorywrite-down in 2003 related to legacy products in the US and did not recur in2004.Selling, general and administrative expenses were $13,044,000 during 2004compared with $13,431,000 in 2003 reflecting a 3% decrease. We continue withthe tight cost control programme that was instigated in 2003 whilst taking careto maintain both high quality customer service and an efficient operatingenvironment.Gross research and development expenditure in this period was $10,823,000(2003: $11,247,000). However, after contributions from the Israeli ChiefScientist and from the European Community, net research and developmentexpenditure was $9,909,000 (2003: $10,119,000). Although there was a smalldecrease (2%) in net spending on research and development, our focused efforton key IP development projects was not compromised. The decrease was primarilybecause we needed less spending to keep certain maturing product lines fresh.Operating loss, before goodwill amortization amounted to $4,747,000 (2003: loss$11,912,000) a reduction of $7,165,000 or 60% compared with last year. Thisimprovement in operating results is a result of the increase in gross profitand turnover. Additionally, improved inventory management in 2004 avoided theneed for significant inventory write-off in contrast with 2003.Financial income was $1,702,000 (2003: $1,775,000) and reflected a decrease of4%.This decrease resulted from a slightly reduced level of average cash,short-term cash investments and long-term cash investments compared with 2003.The loss after taxes amounted to $12,781,000 (2003: loss $20,221,000), giving aloss per share of 3.29 cents (2003: loss 5.21 cents).The balance sheet remains strong with cash and near-cash investments of $50.7million at the year-end (June 2004: $49.5m; December 2003: $51.1m) comprised asfollows: Cash and deposits, up to three months duration, of $1.1 million;short-term deposits and bonds, up to one year, of $46.5 million; and long-termbond for more than one year of $3.1 million.InvestmentAs indicated in our Interim statement the company has benefited from additionalincomeof $ 410,000 from the sale of our 49.9% holding in Eldor Computers Limited.Research & DevelopmentOur Research and Development efforts are targeted at the technology revolutionpresently occurring in the communications industry. Some of our exciting newproducts designed to meet these emerging requirements are as follows:VoIP - (Voice over Internet Protocol)Plans are underway to introduce a new product for small to medium sizebusinesses in June of this year. This product will allow carriers to providevoice and data services over one IP link. Additional interfaces to supportmultiple links as well as European standards are scheduled for release in thesecond half of this year.We continue to enhance our residential solutions to address the needs of thisrapidly expanding market. Additional LAN ports as well as support for wirelessdeployment are also planned for this year.FTTH - (Fiber to the Home)We are working to release a new customer premise gateway product to allow costeffective deployment of outdoor solutions. We already have a competing localexchange carrier committed to deploy this product. We continue to add featuresto integrate the customer premise gateways into our Ethernet switches.Carrier Class EthernetThere are many initiatives in progress to address the transitional issues thatcarriers are faced with as they begin to migrate to IP networks whilecontinuing to maintain their TDM networks. We are expanding our portfolio ofproducts to provide Carrier Class Ethernet solutions. We are certifyingmultiple platforms for deployment at carriers' central office locations and weare adding capabilities to carry both IP and TDM traffic over Ethernet links.Our support for Ethernet ring deployment is expanding with redundancyfunctionality that is comparable to traditional transport protocols.Sales and MarketingVoIPWe have launched a product aimed at meeting the needs of residential customersof the new VoIP service providers. These providers offer customers withbroadband connections a full residential telephone service delivered throughtheir broadband connection over IP. Our product converts the signal from theirexisting telephones into IP and the IP voice traffic back into speech. It isprovided by the service operator to the customer as part of the service. Ourresidential VoIP product continues to expand its customer base. With thesuccess of 3 major deployments in North America during 2004 (Sun Rocket, USDatanet and one other) we expect the number of major deployments to growfurther in 2005. We are also exploring similar opportunities for Voice overBroadband in the International markets.OEMEarlier this year we announced a new OEM relationship with Alcatel. This is inline with our previously announced strategy to build relationships with majortelecom suppliers. We continue both to expand these relationships as well aswork to find new integrators for our carrier class Ethernet based platforms. In2004, our overall OEM business grew 150% compared with 2003.Carrier class EthernetDuring 2004, we experienced increased interest in our Carrier Class Ethernetbased platforms. The global demand to provide multiple services, especiallyvideo services by telecom companies is accelerating the migration fromtraditional TDM and ATM networks to new all IP networks. Recently, we wereselected to provide platforms for this service by 3 providers (one in the US,one in Europe and one in the Far East). We will continue our focus on thisgrowing market in 2005 both in the US and internationally.AppreciationAt a time when we have reversed a declining trend and enter a period of what webelieve will be renewed growth in the Company's activities, I would like to paytribute to the commitment and efforts of all of our employees over the last fewdifficult years.I would particularly like to extend my gratitude to my executive boardcolleagues, led by Dr. Zvi Marom. They have shown considerable skill inidentifying the correct areas of focus for the Company and demonstratedenormous energy in carrying the Company through a most difficult period. Iwould also like to thank my non-executive board colleagues for their counseland strategic support, which has been invaluable.Daniel Goldman, who has been a non-executive director of the company since1999, has indicated that, in order to be able to concentrate on his growingcommercial interests, he will not be offering himself for re-election at theAnnual General Meeting. I would like to place on record our deepest thanks forhis contribution to the Board during his period of office.OutlookWe have entered the new financial year in a spirit of quiet optimism. Ourimproved trading performance is continuing and our relationships with ourcustomers have never been stronger. Our products have proven their quality andreliability in a highly challenging environment. We are firmly based, in everyarea of our operations, to take advantage of the opportunities that arepresenting themselves in our industry, particularly the growth of Voice over IPand the use of Broadband.I have every expectation that 2005 will prove to be the year in which theCompany demonstrates that it has returned to a pattern of growth andprofitability.Peter Sheldon17 March 2005BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED PROFIT AND LOSS ACCOUNTS Year ended December 31, 2004 2003 US$ in thousands, except per share data Turnover 41,218 37,054 Cost of sales 23,012 *25,416 Gross profit 18,206 11,638 --------- --------- Operating expenses Research and development costs 10,823 11,247 Less - participation 914 1,128 Research and development costs, net 9,909 10,119 Selling, general and administrative expenses 13,044 *13,431 Amortization of Goodwill 9,898 9,898 Total operating expenses 32,851 33,448 --------- --------- Operating loss (14,645) (21,810) Financial income, net 1,702 1,775 Other income, net 423 15 Loss before taxes on income (12,520) (20,020) Taxes on income (142) (60) Loss after taxes on income (12,662) (20,080) Group's share in loss of associated company (119) (141) Loss for the year (12,7 81) (20,221) Loss per share (in cents) (3.29) (5.21) *Reclassified. BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED BALANCE SHEETS December 31, 2 0 0 4 2 0 0 3 US$ in thousands Fixed assets Tangible assets, net 10,587 10,228 Goodwill, net 2,475 12,373 Total fixed assets 13,062 22,601 Current assets Stocks 7,425 7,683 Debtors 9,779 8,323 Short term investments 46,478 8,406 Cash and cash equivalents 1,153 3,318 64,835 27,730 Creditors: amounts falling due within one year 13,223 10,546 Net current assets 51,612 17,184 Long Term Investments Long term investment 3,098 39,403 Investments in associated companies 3,688 5,027 6,786 44,430 Total assets less current liabilities 71,460 84,215 Non-current liabilities Severance pay fund, net of provision (376) (359) Net assets 71,084 83,856 Capital and reserves Share capital 1,177 1,177 Additional paid-in capital 397,549 397,540 Foreign currency translation adjustment 16 16 Profit and loss account (327, 658) (314,877) Shareholders' funds 71,084 83,856 BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended December 31, 2 0 0 4 2 0 0 3 US$ in thousands Net cash outflow from operating activities (1,924) (4,884) Investing activities Proceed from repayment of loan from associated 477 -company Acquisition of fixed tangible assets (1,767) (869) Proceeds from sale of fixed tangible assets - 23 Proceeds from (investment in) short term bank 1,040 (4,594)investments Investment in long term bank deposits - (2,000) Net cash outflow from investing activities (250) (7,440) Financing activities Exercise of options and shares by employees 9 123 Net cash inflow from financing activities 9 123 Decrease in cash and cash equivalents (2,165) (12,201) Cash and cash equivalents at the beginning of 3,318 15,519the year Cash and cash equivalents at the end of the 1,153 3,318year RECONCILIATION OF NET LOSS FOR THE YEAR TO NET CASH OUTFLOW FROM OPERATINGACTIVITIES Year ended December 31, 2 0 0 4 2 0 0 3 US$ in thousands Loss for the year (12,781) (20,221) Group's share in loss of associated company 119 141 Amortization of goodwill 9,898 9,898 Depreciation and amortization 1,408 1,711 Increase in severance pay fund, net of 17 29provision Decrease in stocks 258 5,763 Decrease (increase) in debtors (1,456) 402 Increase (decrease) in creditors 2,677 (1,092) Gain from selling an Investment in associated (410) -company Gain from marketable securities (27) (102) Interest incurred on investments (1,627) (1,453) Interest incurred on loan for affiliate - (27) Loss on disposal of fixed assets - 67 Net cash outflow from operating activities (1,924) (4,884)Non Cash Activities:On July 2004 the company sold its Investment in Eldor Computers Limited (cost$743,000) in exchange for 430,000 shares in Taldor Computer Systems Ltd valuedat the date of sale at$1,153,000, giving a profit of $410,000, included in other income.Notes: 1. Loss per share for the years ended 31 December 2004 and 31 December 2003 are calculated using an average 388,486,036 shares in issue in 2004 and an average 388,167,140 shares in issue in 2003. 2. Reconciliation of movements in shareholders' funds Sharecapital Additional Foreign currency Retained loss Total paid-incapital translation adjustment US$'000 US$'000 US$'000 US$'000 US$'000 As at January 1, 1,177 397,540 16 (314,877) 83,856 2004 Exercise of 9 9 options by Employees Loss for the - - - (12,781) (12,781) year As at December 1,177 397,549 16 (327,658) 71,084 31, 2004 3. Further copies of this announcement are available from the offices of Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB. ENDBATM ADVANCED COMMUNICATIONS LTD