Batm Advanced Regulatory News (BVC)

28 Feb 2007 07:02

BATM Advanced Communications Ld28 February 2007 BATM Advanced Communications Limited - 2006 preliminary results BATM Advanced Communications Limited ("BATM" or "the Company"), (LSE: BVC), aleading designer and producer of broadband data and telecom systems, announcespreliminary results for the year ended 31 December 2006. The preliminary results and the comparative 2005 information are presented inaccordance with International Financial Reporting Standards ("IFRS") Highlights 2006 2005 Turnover $73.5m $56.5mGross Profit $31.1m $21.8mOperating profit (loss) $ 7.7m $(4.5)mPre-tax profit (loss) $ 7.4m $(3.1)mBasic earning (loss) per share 1.77c (0.88)c • A significant return to profitability for the full year• Turnover growth of 30.1% over 2005• Gross margin of 42.3% compared with 38.5% for 2005• Operating profit of $7.7m compared to operating loss of $4.5m in 2005• Net profit of $6.9m compared to net loss of $3.4m in 2005• Strong cash position of $50.4m at year end, excluding short and long-term notes payable in connection with the acquisition of Metrobility Optical Systems Inc.• Company cash generative after investment in Metrobility, now fully integrated Dr Zvi Marom, Chief Executive of BATM, said:"2006 has seen BATM deliver excellent top line growth with a strong increase inmargins to see the Group return to profitability for the year. Together with ouracquisition of Metrobility and our strong cash position, these results confirmour belief that BATM has emerged from the telecoms recession in excellent shape. "We believe that our relationships with the leading players in our industry andthe infrastructure that we have put in place will continue to drive us forwardin all aspects of our business." For further information please contact: 28 Feb Thereafter BATM Advanced Communications LimitedDr Zvi Marom, Chief Executive +972 9 866 2525 00972 9 866 2525Ofer Bar-Ner, Chief Financial Officer +972 9 866 2525 00972 9 866 2525 Shore CapitalGraham Shore +44 20 7408 4090 +44 20 7408 4090 Kaupthing Singer and FriedlanderNicholas How +44 20 3205 7620 +44 20 3205 7620 Threadneedle CommunicationsGraham Herring / Josh Royston +44 20 7936 9605 +44 20 7936 9605 Chairman's Statement Financial Performance I am delighted to report on a year that has seen the Company return toprofitability in a significant way. Turnover was $73.5m (2005: $56.5m), an increase of 30.1% compared with lastyear. Revenues for the second half of 2006 at $39.4m (H2 2005: $30.3m) broadlymaintained the rate of increase achieved in the first half of the year.. Gross profit margin was 42.3% (2005: 38.5%). Our margins have improvedthroughout 2006 as increased sales from our higher-margin software businessreplaced the declining revenues in our legacy business. Selling, general and administrative expenses were $14.5m (2005: $12.6m),representing 19.7% (2005: 22.3%) as a percentage of revenue. General andadministrative expenses in 2006 include expenses of $400k related to theacquisition and relocation of Metrobility to Telco Systems' facilities andexpenses of $357k related to the grant of stock options to employees. Net R&D expense for the year amounted to $8.2m (2005: $9.9m) a decrease of17.0%. This primarily relates to our software related development activities,where some of the costs have been allocated to Cost of Goods Sold as a result ofthe growth in our software business. The balance represents the restructuring ofour R&D team in the US. Operating profit after amortisation of intangible assets for the year was $7.7m(2005: loss of $4.5m). Financial income was $2.3m (2005: $1.7m). The increase is mainly due to higherinterest rates, gains from the sale of marketable securities and higher cashbalances. Impairment of investments in 2006 amounted to $2.6m (2005: $294k). A significantportion (approximately $2.3m) of this is related to a loss on the expected saleof our shares in Lantech, a Taiwanese company acquired by BATM in 2001. Theremainder represents our investment in Vidyatel, a small startup company thatdevelops specialist video technology, which was fully expensed in 2006. Net profit after amortisation of intangible assets and tax amounted to $6.9m(2005: Loss $3.4m), resulting in a basic earnings per share of 1.77 cents (2005:Loss of 0.88 cents). Our balance sheet remains strong and we ended the year with cash balances of$50.4m (H1 2006: $45.4m; year end 2005: $48.0m).The increase in cash compared toJune 30, 2006 and December 31, 2005 is principally related to increased revenuesand improved operating profit. Period end cash is comprised as follows: Cash anddeposits up to three months duration of $15.4m; short-term investments up to oneyear of $31.6m; and long-term investments for more than one year of $3.4m. Wecontinue to exercise a conservative investment strategy, maintaining mostbalances in bank deposits. Our balance sheet at December 31, 2006 also includes$1.8m of short-term notes payable and $1.9m of long-term notes payable relatingto the acquisition of Metrobility during the year. Sales and Marketing 2006 saw us increase our direct relationships with Tier 2 customers such as TimeWarner Telecom, as well as embarking on several large-scale, long-term projectswith other new carriers. In addition, we have increased our global presence withactivities in several new geographical markets, mainly in Asia, where previouslywe have not been active. We expect these activities to increase during 2007 andbecome a significant portion of our business in 2008. As reported in May, we have commenced a relationship with one of the world's largest suppliers of network equipment for mobile telecommunications and we believe that this relationship will secure business opportunities for the next several years. We are optimistic that this trend of expanding business relationships willcontinue into 2007 and beyond with substantial revenue opportunitiesmaterialising in 2008. Research and Development and New Products R&D activities continue to enhance our product range for Carrier Ethernetsolutions as we look to expand our Ethernet demarcation family, our integratedbusiness solution and Advanced TCA offerings. The acquisition of Metrobility increased our product portfolio for Ethernettransport and demarcation, and our focus now is to launch next generationproducts in 2007 that will deliver higher speed services, guarantee the qualityof services and improve testing capabilities for operators. The first half of 2007 will also see the launch of our integrated businesssolution in the North American market. This product allows carriers to provideboth new and legacy services over IP networks. The product incorporates ourlatest IP software with interfaces to many of the standard telecom protocols andwill enhance our direct channels position primarily in the US and subsequentlyin Europe and the Rest of the World. In addition to new products to address our direct channels, we continue toinvest in Advanced TCA technology. In co-operation with some of our largestcustomers we are developing the fastest, most advanced products in this field.Although our efforts are currently focused on existing OEM channels, we believethat this will lead to further contracts with new clients in the future. Investment At the end of the first half of 2006, we acquired Metrobility. Its productscomplement our offerings in both the US and South American markets. Metrobilityhas been fully integrated into our business during the second half of 2006 andrelocated to our Telco Systems facilities in the U.S. Following negotiations in late 2006, we agreed at the beginning of 2007 to sellour holdings in Lantech, a Taiwanese manufacturer of Ethernet switches, withconsideration for our holding expected to amount to approximately $700k. As theremaining book value of our holdings was approximately $3.0m, we have recognisedthe loss of approximately $2.3m in our 2006 income statement under Impairment ofInvestments. Prospects Our return to profitability in 2006 is vindication of the positive stance thatthe company took throughout the telecoms downturn and we are taking additionalsteps to improve further our operating performance for 2007 and beyond. Thecurrent phase of industry consolidation, which includes some of our majorcustomers, means that there may be some uncertainty of visibility in the nextfew months, whilst in the medium and long term we believe the effects for theCompany will be positive . BATM continues to adapt and respond to the market inorder to support our growth objectives. Together with a multi-year strategicplan and our new customer and channel relationships, we are committed tobuilding on the success of 2006 and remain confident that our growth andprofitability will continue. Peter SheldonChairman 28 February 2007 BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED INCOME STATEMENTS Year ended Year ended December 31, December 31, 2006 2005 $US'000 $US'000 --------- ---------Revenues 73,472 56,514 Cost of sales 42,412 34,748--------------- -------- -------- Gross profit 31,060 21,766 Sales and marketing expenses 10,402 9,521 General and administration expenses 4,063 3,109 Research and development expenses, net 8,205 9,887 Other expenses 691 3,780 ----- ------- Total operating expenses 23,361 26,297 -------- -------- Operating profit (loss) 7,699 (4,531) Investment income 1,906 1,535 Other gains 567 194 Finance costs (201) (51)Impairment of investments (2,582) (294) ------- --------Profit (loss) before tax 7,389 (3,147) Tax (504) (276) ------- -------Profit (loss)for the year 6,885 (3,423) ======= ========= Earning (loss) per share (in cents) basic 1.77 (0.88) ------ --------Earning (loss) per share (in cents) diluted 1.74 (0.88) ------ -------- BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE Year ended Year ended December 31, December 31, 2006 2005 $US'000 $US'000 --------- --------- Gains(losses) on revaluation of available-for-sale investments taken to equity 158 (219) Tax on items taken directly to equity (40) - -------- -------Net income (loss) recognised directly in equity 118 (219) TransfersTransferred to profit or loss on sale of available-for-sale investments 219 - -------- -------Profit (loss) for the year 337 (219) -------- -------Total recognised income and expense for the year 7,222 (3,642) ======== ======= BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED BALANCE SHEETS December 31, 2 0 0 6 2 0 0 5 US$ in thousandsNon-current assets Goodwill 2,284 -Other Intangible assets 4,556 1,088Property, plant and equipment 9,185 9,296Investments in other companies 1,001 3,388Held to maturity investments 3,432 8,635Deferred tax assets 735 649 Total non-current assets 21,193 23,056 Current assetsInventories 13,176 10,445Investments 31,612 17,773Trade and other receivables 16,360 10,794Cash and cash equivalents 15,363 21,560 76,511 60,572 Total assets 97,704 83,628 Current liabilities Trade and other payables 16,748 13,605Current tax liabilities 199 171 Provisions 2,116 949 19,063 14,725 Net current assets 57,448 45,847 Non-current liabilities Long-term payables 1,901 -Retirement benefits obligation 310 286 Long-term provisions 385 760 2,596 1,046 Total liabilities 21,659 15,771 Net assets 76,045 67,857 EquityShare capital 1,180 1,178Share premium account 399,068 398,104Revaluation reserve 118 (219)Deficit (324,321) (331,206)Total equity 76,045 67,857 ======== ======== BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED STATEMENT OF CASH FLOWS Year ended Year ended December 31, December 31, 2006 2005 $US'000 $US'000 --------- ---------Net cash (used in)/from operating activities 3,760 (3,256) Investing activities Interest received 1,551 4,042Dividends received from available-for-sale investments 16 43Proceeds on disposal of held to maturity investments 3,000 1,500Proceeds on disposal of available-for-sale investments 8,956 6,359Proceeds on disposal of deposits 13,000 39,193Purchases of property, plant and equipment (1,279) (692)Purchases of held to maturity investments - (3,423)Purchases of available-for-sale investments (7,657) (5,041)Purchases of deposits (24,625) (18,000)Investment in a Company (200) -Acquisition of subsidiaries (1,933) (200) -------- ---------Net cash (used in)/from investing activities (9,171) 23,781 Financing activitiesRepayments of borrowings (985) (250)Exercise of shares based options by employees 199 132 -------- ---------Net cash used in financing activities (786) (118) -------- ---------Net increase/(decrease) in cash and cash equivalents (6,197) 20,407 Cash and cash equivalents at beginning of year 21,560 1,153 Cash and cash equivalents at -------- --------- end of year 15,363 21,560 ======== ========= BATM ADVANCED COMMUNICATIONS LTD. APPENDICES TO CONSOLIDATED STATEMENT OF CASH FLOWS Year ended Year ended December 31, December 31, 2006 2005 $US'000 $US'000 --------- ---------Operating profit(loss) from continuing operations 7,699 (4,531)Adjustments for: Depreciation of property, plant and equipment 1,598 1,463Stock options granted to employees 767 420Amortisation of intangible assets 691 2,696Increase in retirement benefit obligation 24 5Increase/(decrease) in provisions (175) (281) ------- ------- 10,604 (228)Operating cash flows before movements in working capitalIncrease in inventories (1,433) (2,283)Increase in receivables (4,007) (366)Decrease in payables (1,184) (297) ------- -------Cash generated by operations 3,980 (3,174) Income taxes paid (19) (31)Interest paid (201) (51) ------- -------Net cash (used in)/fromoperating activities 3,760 (3,256) ======= ======= Cash and cash equivalents (which are presented as a single class of assets onthe face of the balance sheet) comprise cash at bank and other short-term highlyliquid investments with a maturity of three months or less. BATM ADVANCED COMMUNICATIONS LTD. APPENDICES TO CONSOLIDATED STATEMENT OF CASH FLOWS Acquisition of subsidiaries: Year ended Year ended December 31, December 31, 2006 2005 $US'000 $US'000 --------- ---------Net assets acquired Property, plant and equipment 164 443 Inventories 1,198 737 Trade and other receivables 1,483 649 Trade and other payables (1,860) (1,137) Bank loan (985) (250) Provisions (257) (613) ----- ----- (257) (171)Other Intangible assets 4,120 1,311 ------Goodwill 2,284 - ------ ------Total consideration 6,147 1,140 Less- consideration recorded as liability (4,284) (940) ------ ------ Total consideration 1,863 200 ======= ====== Year ended December 31, 2006 $US'000 ---------Net assets acquired Property, plant and equipment 44 Inventories 100 Trade and other receivables 81 Trade and other payables (84) ---- 141 Goodwill 39 ----Total consideration 180 Less- consideration recorded as liability (110) ----- Total consideration 70 ===== BATM ADVANCED COMMUNICATIONS LTD NOTES TO THE FINANCIAL STATEMENTS Note 1 - General The preliminary results for the year ended 31st December 2006 and thecomparative 2005 information are presented in accordance with InternationalFinancial Reporting Standards ("IFRS"). Note 2 - Earning (loss) per share Earning (loss) per share is based on the weighted average number of shares inissue for the year of 389,467,186 (2005: 388,578,761). The number used for thecalculation of the diluted earning per share for 2006 (which includes the effectof dilutive stock option plans) is 394,741,263 shares. Note 3 - Reconciliation of movements in shareholders' equity Share capital Share Premium Revaluation Deficit Total Account reserve US$000 US$000 US$000 US$'000 US$000 ------ ------ ------ ------- -------As at January 1, 2006 1,178 398,104 (219) (331,206) 67,857 Stock options granted to employees 767 767Exercise of share based options by employees 2 197 199Recognized income and expense 337 337Profit for the year - - - 6,885 6,885 - - - ------ ------ As at December 31, 2006 1,180 399,068 118 (324,321) 76,045 ====== ======= === ========= ======= This information is provided by RNS The company news service from the London Stock Exchange