Batm Advanced Regulatory News (BVC)

15 Mar 2006 07:01

BATM Advanced Communications Ld15 March 2006 For immediate release 15 Mar, 2006 BATM Advanced Communications Limited - 2005 preliminary results BATM Advanced Communications Limited ("BATM" or "the Company"), (LSE: BVC), aleading designer and producer of broadband data and telecoms systems, announcesfinal results for the year ended 31 December 2005. 2005 2004 2003 Revenues $56.5m $41.2m $37.1mGross Profit $22.0m $17.5m $11.6mPre-tax profit / (loss) before goodwillamortization and other non-recurring expenses* $ 1.4m $(2.6)m $(10.1)mLoss per share (0.75)c (3.29)c (5.21)c (*) Excluding amortization of goodwill, partial write-down of an investment andcosts associated with the early termination of a US premises lease agreement ($4.1m in 2005 and $9.9m in 2004) Highlights • Revenue growth of 37% over 2004 (2004 growth of 11% over 2003) • Return to Operating Profitability. Pre-tax profit before goodwill amortization and other non-recurring expenses of $1.4m (loss of $2.6m in 2004) • Strong cash position of $48.0m, including short and long-term liquid investments, and no borrowings ($47.1m at 30 June 2005, $50.7m at 31 December 2004) • Gross profit margin of 39% compared with 42.5% in 2004 • Major strategic partnerships consolidated and extended • Long-term contracts secured strengthening the Group's growth prospects Dr Zvi Marom, Chief Executive of BATM, said: The hard work of the last few years and our focus on building a sustainableplatform of growth for the Company has been borne out by these results. BATMhas secured some notable contract wins in a highly competitive market and wehave strengthened our relationships with major strategic partners. I am confident that we are at the beginning of a period of significant renewedgrowth. For further information please contact: 15 March Thereafter BATM Advanced Communications LimitedDr Zvi Marom, Chief Executive 020 7831 3113 00972 9 866 2525Ofer Bar-Ner, Chief Financial Officer 020 7831 3113 00972 9 866 2525 Dresdner Kleinwort WassersteinJames Rudd 020 7623 8000 020 7623 8000 Shore CapitalGraham Shore 020 7408 4090 020 7408 4090 Global Equity IRAmira Bardichev 079 5620 6270 079 5620 6270 Chairman's Statement Review of the Year I am delighted to report on a year that has more than justified my statementlast year that "...2005 will prove to be the year in which the Companydemonstrates that it has returned to a pattern of growth and profitability". In the first half of the year we generated a substantial sales increase of 34%.We did even better in the second half, achieving an increase of 39%, making theincrease 37% for the full year. Although this significant increase was gainedat the cost of a small decrease in our gross margins, mainly in the US, ourcontinued tight control of costs has resulted in the virtual elimination ofannual operating losses. These results have been achieved with little or no benefit from the recentimportant long-term contracts that the Company has gained with major industryplayers and which we confidently expect will provide further impetus to ourfuture growth. During the year we also reached the end of the heavy cost of goodwillamortization arising from our acquisition of Telco Systems in 2000 and this toohas benefited our final results. Financial Performance Turnover for the period was $56,514,000 (2004: $41,218,000), an increase of37.1% compared with 2004. Turnover for the second half of 2005 was $30,337,000(2004: $21,757,000), an increase of 39.4%. This increase in the second half ismostly due to growth in our business with our strategic partners and VOIP basedproducts including the new offerings from our Integral Access (now renamed TelcoNorth (Boston)) operation which was acquired in July 2005. Gross profit was $21,984,000 (2004: $17,540,000), representing an increase of25.3% and a gross profit margin of 39% of turnover (2004: 42.5%). As a result ofnew extended agreements with US carriers, we have experienced a decline in theprofitability of our legacy business in the US. Since these agreements establishfixed pricing for the next few years, our focus will be to improve profitabilityin 2006 by reducing the costs of some of our legacy products and by generatingfurther growth in revenues from new products and maintenance agreements duringthe course of 2006. R&D expenses in this period were $9,675,000 (2004: $9,909,000), representing adecrease of 2.4%. We have continued our strategy of increasing investment in IPbased products and reducing investment in TDM based and legacy products. Sales and Marketing expenses totaled $9,505,000 (2004: $8,984,000), representingan increase of 5.8%. As a percentage of sales, Sales and marketing expenses were16.8% (2004: 21.8%). General and administrative expenses were $2,908,000 (2004:$3,394,000). Overall Sales, marketing and administration expenses have decreasedfrom 30.0% of sales in 2004 to 22.0% in 2005. Goodwill amortization was $2,713,000 (2004: $9,898,000). The majority of theseexpenses relate to the acquisition of Telco Systems which was finally fullyamortized during H1 2005. It also includes the amortization of goodwillresulting from the acquisition of Integral Access. Finance income was $1,459,000 (2004: $1,702,000). This decrease is primarily asa result of reductions in the value of our marketable securities acquired aspart of the sale of Eldor shares in 2004. Other expenses in 2005 of $1,378,000 include the partial write-down of one ofthe company's investments and the costs associated with the early termination ofthe lease agreement of one of our premises in the US. In 2004 other income of$423,000 included the gain on the sale of Eldor shares. Pro forma profit after taxes, excluding the effect of the amortization ofgoodwill and other non-recurring expenses, was $1,168,000 (2004: loss$2,883,000). Actual loss after taxes, including the effect of goodwillamortization and other non-recurring expenses, amounted to $2,929,000 (2004:Loss $12,781,000), resulting in a loss per share of 0.75 cents (2004: Loss 3.29cents). Our balance sheet remains strong with cash (including short-term and long- termliquid investments) of $48.0m (2004: $50.7m) at the period end. Our cashposition is slightly lower than in 2004 mainly due to an increase in inventoryto support the significant growth in sales. We continue to exercise aconservative cash investment strategy, maintaining most balances in bankdeposits. Sales and Marketing Our OEM business and VOIP offerings continued to be our major growth drivers in2005. In the OEM segment we managed to both expand existing relationships, asannounced in November 2005, as well as securing new relationships, as announcedin February 2006. We expect this trend to continue during 2006. We also expectour investment in the Advanced TCA standard as well as our position as the worldleader in Quality Of service of modern Triple IP networks to improve our chancesof winning new customers as well as expanding our relationships with existingcustomers. Our VOIP business has continued to grow for both the residential and corporatemarkets. We experienced significant sequential growth in the residential marketas our customers continued to roll out their services. The integration ofIntegral Access' product offerings has improved our solution for business needsand forged a new relationship with an important customer, Time Warner Telecom.We expect to see further progress upon the introduction of our SIP basedIntegrated Access Devices that will appear in the market in the second half of2006. We will also focus this year on expanding our business in the Far-East. As partof this initiative, we opened a branch in Singapore with a reputable locallyresiding executive to launch our presence in this region. We believe that thereis significant opportunity for our IP based products in this area. We arelooking to establish relationships with local carriers as well as cooperationwith other vendors in the region. Research and Development and New Products We have expanded our line of IP based product and launched the T-Marc. TELEPHONY(R) magazine (www.itmag.com) granted a 2005 Product of the Year Award to thecompany's T-Marc product line, a family of extremely cost effective and compactintelligent Ethernet demarcation and service delivery customer premisesequipment (CPE) devices. Greg Galitzine, editorial director of INTERNETTELEPHONY magazine,.said: "The challenge for carriers in delivering quality intelligent data and voiceservices over an Ethernet-based network is ensuring they meet a performancelevel that enterprises are used to and demand, Carriers can conquer thischallenge by gaining control at the network edge, and T-Marc is one of the firstintelligent demarcation devices to market." This product complements our T-Metro which was released earlier in 2005. In addition to our stand-alone advanced devices, we continue to develop IP basedblades and cards for the Advanced TCA standard. This development is partlyfunded by some of our business partners. It will allow us to present acomprehensive solution of communication blades for this standard in 2006-2008.This standard, Advanced Telecommunication Computing Architecture, is gainingconsiderable traction both with telecom vendors and telecom service providers. In VOIP we continue to improve the performance and costs of our CPE gateways. InJanuary 2006, we launched the Access211N, a next-generation SIP-based VoIPgateway for broadband Internet telephone service. Through integrated routingcapabilities, unique traffic shaping, and its implementation of advanced qualityof service (QoS) standards, service providers and the end user enjoy superiorvoice quality and reduced cost since the need for an external router iseliminated. Investment In July 2005, we purchased certain assets and liabilities of Integral AccessInc., headquartered in Chelmsford, Massachusetts. We have completed theintegration of this product line into Telco Systems' offerings. Prospects The recovery, which started in 2004 and accelerated during 2005, has continuedfurther into the beginning of 2006. The agreements that have been signed withmajor partners and our substantial recent long-term project tender wins supportour conviction that we have embarked on a period of substantial growth. I am confident that 2006 will be a year when BATM will demonstrate that it hasbecome a significant player in our industry. Peter SheldonChairman15 March 2006 BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED PROFIT AND LOSS ACCOUNTS Year ended December 31, 2005 2004 US$ in thousands, (except per share data) Sales 56,514 41,218 Cost of sales 34,530 (*)23,678 Gross profit 21,984 17,540 Operating expenses Research and development expenses, net 9,675 9,909Sales and marketing expenses 9,505 (*)8,984General and administrative expenses 2,908 3,394Amortization of goodwill 2,713 9,898Total operating expenses 24,801 32,185 Operating loss (2,817) (14,645) Finance income, net 1,459 1,702Other income (expenses), net (1,378) 423 Loss before tax (2,736) (12,520) Tax (193) (142) Loss after tax (2,929) (12,662) Company's share in results of associated company - (119) Loss for the year (2,929) (12,781) Loss per share (in cents) (0.75) (3.29) (*)Reclassified BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED BALANCE SHEETS December 31, 2 0 0 5 2 0 0 4 US$ in thousands Non-current assets Goodwill 1,678 2,475Property, plant and equipment 10,477 10,587Investment in companies 3,388 3,688Long-term investments 8,635 3,098 Total fixed assets 24,178 19,848 Current assetsInventories 10,445 7,425Short term investments 20,856 46,478Trade and other receivables 10,794 9,779Cash and cash equivalents 18,477 1,153 60,572 64,835 Total assets 84,750 84,683 Current liabilities Trade and other payables 15,331 13,223 Net current assets 45,241 51,612 Non-current liabilitiesLiability for employee termination benefits, net 372 376Other long-term Liabilities 760 - 1,132 376 Total liabilities 16,463 13,599 Net assets 68,287 71,084 EquityShare capital 1,178 1,177Share premium account 397,680 397,549Foreign currency translation adjustment 16 16Deficit (330,587) (327,658) Total equity 68,287 71,084 BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended December 31, 2 0 0 5 2 0 0 4 US$ in thousands Net cash used in operating activities (Appendix A) (2,092) (1,924) Investing activitiesProceeds from (investment in) short term investments (12,110) 1,040Investment in long term investments (8,423) - Proceeds from long term investments 40,959 -Repayment of loan from associated company - 477Purchases of property, plant and equipment (692) (1,767)Acquisition of subsidiary (Appendix B) (200) -Net cash from (used in) investing activities 19,534 (250) Financing activitiesRepayment of bank loan (250) -Exercise of share based options by employees 132 9Net cash from (used in) financing activities (118) 9 Increase (decrease) in cash and cash equivalents 17,324 (2,165) Cash and cash equivalents at the beginning of the year 1,153 3,318 Cash and cash equivalents at the end of the year 18,477 1,153 BATM ADVANCED COMMUNICATIONS LTD. APPENDICES TO CONSOLIDATED STATEMENTS OF CASH FLOWS A. RECONCILIATION OF NET LOSS FOR THE YEAR TO NET CASHUSED IN OPERATING ACTIVITIES Consolidated Year ended December 31, 2 0 0 5 2 0 0 4 US$ in thousands Loss for the year (2,929) (12,781)Group's share in loss of associated company - 119Write-down of an investment 300 -Amortization of goodwill 2,713 9,898Depreciation of property, plant and equipment 1,245 1,408Increase (decrease) in liability of employeetermination benefits, net (4) 17Gain from selling an Investment in associated company - (410)Loss(gain) from marketable securities 49 (27)Interest incurred on investments (390) (1,627)Operating cash flow before movements in workingcapital 984 (3,403)Decrease (increase) in inventories (2,283) 258Increase in receivables (366) (1,456)Increase (decrease) in payables (427) 2,677 Net cash used in operating activities (2,092) (1,924) B. ACQUISITION OF SUBSIDIARY Consolidated Year ended December 31, 2 0 0 5 2 0 0 4 US$ in thousands Net assets acquiredProperty, plant and equipment 443 -Inventories 737 -Trade and other receivables 649 - Trade and other payables (2,535) -Bank loan (250) -Other long-term liabilities (760) - (1,716) -Goodwill 1,916 - GoodwillTotal consideration 200 - BATM ADVANCED COMMUNICATIONS LTD. NOTES TO THE FINANCIAL STATEMENTS 1. Loss per share for the years ended 31 December 2005 and 31 December 2004 arecalculated using an average 388,578,761 shares in issue in 2005 and an average388,486,036 shares in issue in 2004. 2. Reconciliation of movements in shareholders' funds Foreign currency Share premium translation Share capital account adjustment Deficit Total US$'000 US$'000 US$'000 US$'000 US$'000 As at January 1, 2005 1,177 397,549 16 (327,658) 71,084 Exercise of share basedoptions byEmployees 1 131 132Loss for the year - - - (2,929) (2,929) As at December 31, 2005 1,178 397,680 16 (330,587) 68,287 This information is provided by RNS The company news service from the London Stock Exchange