Last checked at 17 Mar 2009 18:30
BATM Advanced Communications Limited
Replacement: Preliminary results for 2008
BATM Advanced Communications Limited ("BATM" or "the Company") (LSE: BVC) issues the following replacement to its 2008 preliminary results announcement which was released on 17 March 2009 at 7.00am under RNS number 9370O.
The changes are as follows:
Changes to certain numbers in the Consolidated Statement of Cashflows and Appendix B Acquisition of Subsidiaries. There is no impact on the previously disclosed figure for the Company's cash and cash equivalents at the year end.
Reallocation of balances between Goodwill and Other Intangible Assets in the Consolidated Balance Sheet
The corrected announcement is set out below in full.
BATM Advanced Communications Limited ("BATM" or "the Company") (LSE: BVC), a leading designer and producer of broadband data and telecoms systems, announces its preliminary results for the year ended 31 December 2008.
Full Year Highlights
| Year ended 31 December | 2008 | 2007 | Change % |
| Revenue | $134.5m | $96.9m | + 39 |
| Gross profit | $61.3m | $45.5m | + 35 |
| Operating profit | $23.9m | $16.6m | + 44 |
| Pre-tax profit | $24.0m | $20.0m | + 20 |
| Net profit | $24.5m | $20.1m | + 22 |
| Profit per share | 6.19¢ | 5.08¢ | + 22 |
Highlights
• Revenue growth of 39% to $134.5 million, despite challenging markets
• Operating profits of $23.9m - up 44% over 2007
• Record net profit of over $24 million - up 22% over 2007
• Strong balance sheet maintained with $57 million in liquid investments
• Recommended dividend of 0.69 pence per share (2007: 0.50 pence)
Dr Zvi Marom, Chief Executive of BATM said:
"The year ended 31 December 2008 has provided excellent results. Despite the general weakness and challenges in global markets in 2009, the first two months of the year have started positively and we remain cautiously optimistic about our prospects for this year and beyond.
The Group is well diversified between potential growth markets and more defensive markets. Whilst we continue to improve our core competencies and technology platforms, BATM has continued implementing a strategy of diversification into vertical markets. We have made small acquisitions in both the surveillance and medical devices sectors, which we have integrated into our concept of managed systems and believe that this will provide stable platforms for future sales."
For further information please contact: 17 Mar Thereafter
BATM Advanced Communications Limited
Dr Zvi Marom, Chief Executive 020 7653 9850 00972 9 866 2525
Ofer Bar-Ner, Chief Financial Officer 020 7653 9850 00972 9 866 2525
Shore Capital
Graham Shore 020 7408 4090 020 7408 4090
Singer Capital Markets
Nicholas How 020 3205 7500 020 3205 7500
Threadneedle Communications
Josh Royston / Graham Herring 020 7653 9850 020 7653 9850
Chairman's Statement
I am delighted to report on a year which has delivered both record revenues and profits. BATM has succeeded in navigating difficult market conditions, continued to invest in R&D and strategic acquisitions, whilst delivering over $24 million in profits. Management has kept a tight control on management of capital, ending the year with $57 million of liquid investments.
On the basis of these excellent results, the Board is in a position to recommend the payment of a final dividend of 0.69 pence per share (2007: 0.50 pence (1¢), an increase of 38%).
Financial Performance
Revenues grew 39% in 2008 and reached a Group all time high of $134.5 million (2007: $97.0 million). The increase in the Telecoms sector revenues, the Group's primary focus, is mostly due to stronger demand from major customers, as well as additional demand in new territories from new customers. In addition, our strategic expansion into the medical sector also significantly contributed to revenues (as detailed below), mainly concentrated in Europe.
The gross profit margin has decreased to 45.6% (2007: 46.9%) primarily due to a change in the sales mix. The Telecoms sector continued to provide strong returns, with a gross profit margin of 49%, a result of successfully implementing efficiency programs and the reduction of the impact of fixed costs, given increasing revenues.
Total sales and marketing expenses were $13.9 million (2007: $12.4 million), an increase of 13% on the previous year. Spending increased in this area to drive and support the growth of our business. As a percentage of revenue, sales and marketing expenses were 10% (2007: 13%). We have succeeded in reducing these costs by increasing revenues through indirect sales channels with existing customers which typically incur lower direct expense.
General and administrative expenses were $8.4 million (2007: $6.1 million) representing 6.2% of revenue, compared with 6.3% in 2007. This increase is primarily related to the new medical sector business. We plan to continue our integration efforts of these new businesses into our group structure in order to reduce this overhead.
Net R&D expense in 2008 was $12.8 million (2007: $9.3 million), an increase of 38%. Virtually all of the increase relates to the Telecoms sector, mainly work on integrating and stabilising new components into the new line of metro devices which the Company intends to introduce in 2009. The expense also includes November and December costs for Vigilant, a newly acquired surveillance company, in which R&D spend was directed at completing our advanced Video Management System, NetView Command, which was launched earlier this month. In addition R&D spending increased in certain regions as a result of the strength of local salaries against the dollar, and therefore the increased cost of salaries.
Operating profit was $23.9 million (2007: $16.6 million), an increase of $7.3 million or 44% as a result of increased revenues, good gross profit margins and careful control of operating expenses. The operating profit is after amortization of intangibles totalling $2.3 million (2007: $1.1 million), which has increased due to our acquisitions both in 2008 and 2007.
Net finance income was $145,000 (2007: $3.4 million). This figure is net of a one off write-down of $4 million on Nortel Networks Inc bonds held by the Group, and a further $0.4 million loss relating to a foreign currency hedge. The write down on the Nortel bond arose from Nortel requesting Chapter 11 creditor protection, and only an impaired carrying value of only $1.4 million remains on the balance sheet. Against these losses $2.5 million of interest income was recorded. In addition $2.5 million of foreign exchange gains were recorded, resulting primarily from the strengthening of Dollar deposits against the Euro. During 2008, the Company became Euro dominant due to a significant increase in orders from European customers. Management believes that this new sales profile will continue in the future. The change in economic environment caused an accounting change of its functional currency from the Dollar to the Euro.
Net profit after tax attributable to equity holders of the parent amounted to $24.5 million (2007: $19.9 million), resulting in a basic profit per share of 6.19 cents (2007: 5.08 cents) - increases of 23% and 22%, respectively.
Our balance sheet remains strong with effective liquidity of $57.3 million (2007: $64.8 million). The reduction from last year reflects our investments in further product lines and vertical markets as described below. Year end cash is comprised as follows: cash and deposits of up to three months of $30.7 million; short-term investments of up to one year of $21.1 million; and long-term investments of $5.5 million. We continue to exercise careful stewardship over our financial resources during these uncertain economic times through a conservative investment strategy, maintaining most balances in secure bank deposits. Of the $26.6 million classified as investments, $10.1 million is held in cash deposits of over three months; $10.0 million is held in short term commercial papers that matured in January and February 2009; $1.0 million in structured products which matured in February 2009; $2.1 million in triple A bank notes falling due in 2010; and $3.4 million in long term bonds, including the remaining $1.4 million related to Nortel.
Intangible assets have increased to $15.4 million (2007: $6.7 million), and Goodwill has increased to $14.0 million (2007: $3.2 million). This is mainly as a result of the purchase of Vigilant, as well as other investments both in the Telecoms and the Medical sector.
BATM Medical
During the course of 2008, BATM made a number of strategic investments in medical devices and supporting distribution networks. Earlier this month BATM completed the acquisition of a clinical chemistry diagnostic company based in Italy to strengthen further this business line. In the first full year of operations, BATM Medical generated revenues of $18.4 million. These revenues are mainly concentrated in Eastern Europe. The Medical sector recorded a lower gross profit margin as an element of revenues in this business sector is from distribution which typically yields lower margins. BATM Medical recorded a small pre-tax profit during 2008. We believe we can significantly increase this performance in 2009-2010 after each of the companies have been integrated into the Group.
BATM Medical had total gross assets of $20.6 million as at 31 December 2008, including $6.3 million of inventory.
Sales and Marketing
We have continued to invest in marketing and sales during the year with good results, the most successful example of this being the medical devices and distribution segment in which we achieved revenues of $18.4 million in the full year. At the beginning of the year this segment had started with a relatively low level of sales, and has been grown by capitalizing on investment opportunities and finding the right strategic partners.
In addition we have continued to expand our sales channels, in particular growing existing OEM channels and expanding into new territories.
Research and Development and New Products
During 2008 we have continued to build on our core BINOS software platform to include speed enhancements and more features. We are also expanding resources on several core technologies to expand the carrier's ability to transform their transport networks to Ethernet. This includes focus on circuit emulation technology to allow TDM services over Ethernet and Ethernet services extended over PDH.
In 2009 we envisage investment in features which will expand the range of our core Ethernet products into video services, which will allow a more complete and unique offering from our surveillance business.
Investments
Investments have been made in three business segments in 2008. In our core Telecoms business we acquired the broadband multiplexer product line from Charles Industries at the beginning of the year. This acquisition has been fully integrated into our Ethernet offering
We have made several investments in the medical segment, both in companies owning the intellectual property of medical devices and supporting distribution networks (collectively "BATM Medical"). Our latest acquisition was completed early in February 2009, and adds clinical chemistry diagnostic equipment capabilities to the Group. We believe that we can achieve synergies between this business and our existing medical distribution network.
In November 2008 the acquisition of Vigilant Technology Ltd was completed. Vigilant is a developer and manufacturer of high-end surveillance and recording platforms. We have begun the process of integrating Vigilant into the BATM Group, and plan to increase sales channels in 2009.
Dividend
The Board is of the opinion that, in light of the Company's profitability, it should pursue a dividend policy of regular dividend increases, subject to performance. Accordingly, it has proposed, subject to shareholder consent, a final dividend for 2008 of 0.69 pence per share (2007: 0.50 pence (1 US¢)). In making this decision the Board has carefully considered the likely future capital requirements of the business and believes that the Company should have fully adequate cash resources to meet these requirements. The Board does not envisage recommending an interim dividend in the coming year.
Prospects
Despite the general weakness and challenges in global markets in 2009, the first two months of the year have started positively and we remain cautiously optimistic about our prospects for this year and beyond.
We have made a number of acquisitions in both the surveillance and medical devices sectors, which we have integrated into our concept of managed systems and we believe that we will continue to strengthen through our core competencies and technology platforms as well as our diversified portfolio of quality product offerings and markets.
Peter Sheldon
Chairman
17 March 2009
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED INCOME STATEMENTS
| Year ended 31 December | ||
| 2008 | 2007 | |
| US$ in thousands | ||
| Revenues | 134,462 | 96,952 |
| Cost of revenues | 73,157 | 51,456 |
| Gross profit | 61,305 | 45,496 |
| --------- | --------- | |
| Operating expenses | ||
| Sales and marketing expenses | 13,948 | 12,353 |
| General and administrative expenses | 8,376 | 6,119 |
| Research and development expenses | 12,829 | 9,275 |
| Amortization of intangible assets | 2,292 | 1,146 |
| Total operating expenses | 37,445 | 28,893 |
| --------- | --------- | |
| Operating profit | 23,860 | 16,603 |
| Investment revenue | 2,453 | 2,667 |
| Gains (losses) on financial instruments | (4,340) | 481 |
| Foreign exchange differences | 2,512 | 557 |
| Finance cost | (480) | (286) |
| Other income (expenses) | - | (60) |
| Profit before tax | 24,005 | 19,962 |
| Tax | 454 | 135 |
| Profit for the period | 24,459 | 20,097 |
| Attributable to: | ||
| Equity holders of the parent | 24,510 | 19,874 |
| Minority interest | (51) | 223 |
| Income for the period | 24,459 | 20,097 |
| Income per share (in cents) basic | 6.19 | 5.08 |
| Income per share (in cents) diluted | 6.15 | 5.02 |
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED BALANCE SHEETS
| 31 December | 31 December | |
| 2 0 0 8 | 2 0 0 7 | |
| US$ in thousands | ||
| Non-current assets | ||
| Goodwill | 14,023 | 3,184 |
| Other intangible assets Property, plant and equipment Held to maturity investments Deferred tax asset | 15,400 10,041 5,468 2,102 | 6,737 8,702 10,501 2,217 |
| 47,034 | 31,341 | |
| Current assets | ||
| Inventories | 20,984 | 12,211 |
| Investments | 21,086 | 18,462 |
| Trade and other receivables | 29,192 | 26,216 |
| Cash and cash equivalents | 30,737 | 35,809 |
| 101,999 | 92,698 | |
| Total assets | 149,033 | 124,039 |
| Current liabilities Short-term bank credit Trade and other payables Current tax liabilities Provisions | 3,632 20,174 109 _____ 2,181 _____ 26,096 | 90 22,266 280 _ ___ 2,952 ____ 25,588 |
| Net current assets | 75,903 | 67,110 |
| Non-current liabilities Long-term payables | 3,933 | 2,388 |
| Retirement benefit obligation Total liabilities | ______ 926 ______ 4,859 ______ 30,955 | ___ 335 __ 2,723 __ 28,311 |
| Net assets | 118,078 | 95,728 |
| Equity | ||
| Share capital | 1,210 | 1,186 |
| Share premium account | 404,928 | 400,646 |
| Translation reserve | (6,060) | (29) |
| Accumulated Deficit | (286,459) | (307,033) |
| Equity attributable to equity holders of the: | ||
| parent | 113,619 | 94,770 |
| Minority Interest | 4,459 | 958 |
| Total equity | 118,078 | 95,728 |
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
| Year ended 31 December | ||
| 2 0 0 8 | 2 0 0 7 | |
| US$ in thousands | ||
| Net cash from operating activities (Appendix A) | 9,094 | 12,629 |
| ---------- | ---------- | |
| Investing activities | ||
| Interest received Dividend received from available for sale investments Proceeds on disposal of held to maturity investments Proceeds on disposal of available for sale investments Proceeds on disposal of deposits Proceeds on disposal of investment in a company | 1,363
-
1,472
13,608 17,908 - | 2,945
15
1,904
26,273 34,104 941 |
| Purchases of property, plant and equipment Purchases of held to maturity investments Purchases of available for sale investments Purchases of deposits | (1,154) (1,050) (21,574) (14,000) | (1,012) (10,292) (26,665) (18,387) |
| Investment in a company | (280) | - |
| Acquisition of subsidiaries (Appendix B) | (6,327) | (2,440) |
| Net cash from (used in) investing activities | (10,034) | 7,386 |
| ---------- | ---------- | |
| Financing activities | ||
| Dividend payment | (3,936) | - |
| Decrease in short-term bank credit | (1,549) | (237) |
| Proceeds on issue of shares | 2,603 | 668 |
| Net cash from ( used in ) financing activities | (2,882) | 431 |
| ----------- | ----------- | |
| Decrease from foreign exchange fluctuations | (1,250) | ___- |
| Increase (decrease) in cash and cash equivalents | (5,072) | 20,446 |
| Cash and cash equivalents at the beginning of the year | 35,809 | 15,363 |
|
| ||
| Cash and cash equivalents at the end of the year | 30,737 | 35,809 |
|
| ||
BATM ADVANCED COMMUNICATIONS LTD.
APPENDICES TO CONSOLIDATED STATEMENT OF CASH FLOWS
APPENDIX A
RECONCILIATION OF OPERATING PROFIT FOR THE PERIOD TO NET CASH
FROM OPERATING ACTIVITIES
| year ended December 31, | ||
| 2008 | 2007 | |
| US$ in thousands | ||
| Operating profit from continuing operations Adjustments for: | 23,860 | 16,603 |
| Amortization of intangible assets | 2,292 | 1,146 |
| Depreciation of property, plant and equipment | 2,401 | 1,690 |
| Stock options granted to employees | 791 | 916 |
| Increase in retirement benefit obligation | 154 | 25 |
| Decrease in provisions | (313) | (269) |
| Operating cash flow before movements in working capital | 29,185 | 20,111 |
| Decrease (increase) in Inventory | (4,080) | 2,100 |
| Decrease (increase) in receivables | 3,965 | (8,308) |
| Decrease in payables | (18,709) | (483) |
| Cash generated by operations | 10,361 | 13,420 |
| Income taxes paid | (844) | (505) |
| Interest paid | (423) | (286) |
| Net cash from operating activities | 9,094 | 12,629 |
APPENDIX B
ACQUISITION OF SUBSIDIARIES
| Year ended 31 December | ||
| 2008 | 2007 | |
| US$ in thousands | ||
| Net assets acquired | ||
| Property, plant and equipment | 2,727 | 195 |
| Inventory | 4,436 | 1,135 |
| Trade and other receivables | 6,008 | 1,548 |
| Trade and other payables Short-term bank credit Retirement benefit obligation Long term payables | (14,310) (5,091) (437) (1,117) | (3,404) (327) - - |
| Provisions | (178) | - |
| Minority Interest | (3,678) | (735) |
| (11,640) | (1,588) | |
| Good will | 11,519 | 1,200 |
| Intangible assets | 9,772 | 3,326 |
| Total consideration | 9,651 | 2,938 |
| Less-consideration recorded as liability | (2,412) | (498) |
| Less-share based payment | (912) | - |
| Total cash consideration | 6,327 | 2,440 |
BATM ADVANCED COMMUNICATIONS LTD
CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY
| Share capital | Share Premium Account |
Translation reserve | Accumulated Deficit | Parent | Minority Interest | Total equity | |
| US$ in thousands | |||||||
| As at 1 January 2008 | 1,186 | 400,646 | (29) | (307,033) | 94,770 | 958 | 95,728 |
| Exercise of share based options by employees | 20 | 2,583 | 2,603 | - | 2,603 | ||
| Stock options granted to employees | 791 | 791 | - | 791 | |||
| Share based purchase of Vigilant | 4 | 908 | 912 | - | 912 | ||
| Translation adjustment | (5,985) | (5,985) | (126) | (6,111) | |||
| Purchase of minority interest | (46) | (46) | - | (46) | |||
| Minority Interest acquired | 3,678 | 3,678 | |||||
| Dividend | (3,936) | (3,936) | - | (3,936) | |||
| Profit for the period | - | - | - | 24,510 | 24,510 | (51) | 24,459 |
| As at 31 December 2008
| 1,210 | 404,928 | (6,060) | (286,459) | 113,619 | 4,459 | 118,078 |
BATM ADVANCED COMMUNICATIONS LTD
NOTES TO THE FINANCIAL STATEMENTS
Note 1 - General
The preliminary results for the year ended 31 December 2008 and the comparative 2007 information are presented in accordance with International Financial Reporting Standards ("IFRS").
Note 2 - Profit per share
Earning per share is based on the weighted average number of shares in issue for the year of 396,222,088 (2007: 391,530,389). The number used for the calculation of the diluted earning per share for the year (which includes the effect of dilutive stock option plans) is 398,679,591 shares (2007: 396,146,949).