Batm Advanced Regulatory News (BVC)

BATM Advanced Communications Limited

Interim results for six months ended 30 June 2011

BATM Advanced Communications Limited ("BATM" or the "Company") (LSE: BVC), a leading designer and producer of broadband data and telecoms systems and medical laboratory equipment, announces its interim results for the six months ended 30 June 2011.

Half Year Highlights

(*) excluding other operating expenses

Highlights

·; Revenues up 16.6% compared with H1-2010, primarily reflecting strong organic growth

·; Gross margin up to 36% from 35% in H2-2010

·; Return to operating and net profit

·; Strong balance sheet with liquid assets of $54.7 million

·; Shares to be listed also on Tel Aviv Stock Exchange

Dr Zvi Marom, Chief Executive of BATM said:

"I am pleased to report on a strong first half for the Company which has seen a marked improvement in both top and bottom line growth. Our Telecoms division has shown recovery and growth despite the loss of orders from a major OEM experienced last year. In the Medical division we are preparing for the launch of our sterilising shredder for the treatment of medical waste and expect our first sales of this exciting new product in the second half of the year.

"We continue to invest in the future growth of the business, whilst maintaining a very robust balance sheet. We are also proposing to file our shares to be listed on the Tel Aviv Stock Exchange, due to investor demand, which we expect to take place before the end of the current year. We continue to believe that we are building a strong company whose strength lies in the quality of its technology and we remain confident of long term future success."

Chairman's Statement

Revenues in the first half of 2011 increased by $9.2 million to $64.5 million (H1-2010: $55.3 million). Telecoms division revenues increased 19.3% to $42.6 million (H1-2010: $35.7 million) and Medical division revenues increased 11.7% to $21.9m (H1-2010: $19.6 million). Almost all the growth during the period was organic.

The gross profit margin for the first half of 2011 was 36.1% (H1-2010: 35.8%), 1% higher than the gross profit margin in the second half of 2010. Both the Telecoms and Medical divisions showed improvements in gross margins compared to the second half of 2010.

Sales and marketing expenses were $7.9 million (H1-2010: $7.2 million), an increase of 9.7% on the previous year and slightly lower than the $8.1 million recorded in the second half of 2010. The increase is mostly due to increased distribution costs and associated sales expenses.

General and administrative expenses were $5.3 million (H1-2010: $4.8 million) representing 8.2% of revenue, compared with 8.6% in the first half of 2010.

R&D investment in the first half of 2011 was $6.5 million (H1-2010: $6.5 million). On a like-for-like basis, R&D expenses incurred were lower by $0.5m in H1 2011 because H1 2010 included a $0.5m contribution from the Israeli Chief Scientist. There was no contribution in H1 2011.

Operating profit for the first half was $1.5 million (H1-2010: loss of $1.4 million) after other operating expenses of $2.0 million (H1:2010: $2.7 million) of which $1.9 million related to non-cash amortization of intangible assets.

Net finance income was $1.1 million (H1-2010: $1.0 million), comprising of $0.5 million of interest income, as well as $1.9 million of foreign exchange gains, which have been offset by a loss of $1.0 million on forward transaction and $0.2 million of finance costs. As a result of our lower revenues in Euros, BATM has reverted back to the US dollar as its functional currency, representing the primary economic operating environment of the company.

Tax expenses of $0.8 million includes $0.7 million tax on dividends of $5.1 million.

Net profit after tax attributable to equity holders of the parent amounted to $2.45 million (H1-2010: loss $0.87 million), resulting in a basic earnings per share of 0.61¢ (H1:2010 loss: 0.21¢).

Our balance sheet remains strong with effective liquidity of $54.7 million, a decrease of $5.5 million from $60.2 million as at 31 December 2010. The reduction in cash balances is mainly as a result of the acquisition of the assets of ANDA Networks ($2.0 million) and the payment of Vigilant debt of $1.5 million as well as a mortgage on our property in Israel of $0.6 million. These payments resulted in a reduction of short and long term debt respectively. Period end cash is comprised as follows: cash and deposits up to three months duration of $18.9 million; short term cash deposits up to one year of $35.8 million.

Intangible assets and Goodwill have increased to $32.5 million (December 2010: $31.1 million). The increase is due to the acquisition of ANDA networks in April 2011.

Property, plant and equipment remain unchanged since the end of 2010.

Total inventories increased from $19.5 million at the end of 2010 to $26.2 million at 30 June 2011. The majority of the increase is in the Telecoms division, where stocks have been increased to satisfy the growing demand for our products. In addition, we increased the inventory level at our Medical division to prepare for the launch of our new medical waste solution (ISS).

Trade and other receivables increased to $32.2 million from $30.9 million at the end of 2010. The increase is largely due to increased receivables in the medical distribution business and VAT. The trade and other payables increased to $36.6 million from $27.9 million at the end of 2010. The majority of the increase relates to the accrual for the dividends and related taxes ($5.8 million) that were paid on 18 July 2011.

The first half of the year showed a significant improvement over the same period last year. We have seen improvements in both our OEM channels and direct business.

In May we hired Itzik Weinstein as the new CEO of Telco Systems, reporting directly to Dr. Zvi Marom, CEO of BATM. Itzik brings to BATM over 20 years of significant management experience and a strong track record in the hi-tech industry. In his previous position he served as President and CEO of ECtel, a provider of revenue management solutions to the telecommunications industry and a NASDAQ traded company.

At the end of April we acquired the major assets and intellectual property of ANDA Networks. ANDA is a leading provider of Carrier Class Ethernet and wireless backhaul platforms that deliver cost-effective Metro Ethernet services over fibre, copper and wireless networks. Ethernet over legacy networks from ANDA and Telco Systems' fibre based switching and aggregation solutions combine to offer a fully integrated range of carrier class Ethernet solutions.

Operating profit for the telecom division was $5.4 million, a significant increase over the $1.8 million recorded in the first half of 2010. The improvement is a result of higher revenues, slightly better gross margin and lower operating expenses.

We continue to execute on our strategy to first stabilize the Telecom business and then resume the growth.

The sterilization business was mainly focused on the launch of our new Integrated Shredder Steriliser to treat medical waste. We now have three operating units in Hungary and Israel and performance has exceeded expectation. We expect to sell at least 20 units during the second half of this year. In addition, we have expanded our manufacturing capabilities and inventories in our manufacturing plant in Hungary to address the expected growth.

The distribution business in Romania and Moldova continues to grow. We are engaging in several new initiatives that will allow us to further accelerate the growth rate in this part of our business. From the beginning of 2011 the distribution business has returned positive cash-flow, at a rate of $1 million per annum, to allow the Group to use these cash-flows for other investments.

In the diagnostics business we have launched several projects to re-start the manufacturing of several key reagents with our own intellectual properties. This process, which requires the testing and certification of recognized notified bodies, is taking longer than originally anticipated and will continue at least until the end of 2012. Once these products are approved, we anticipate significantly improved gross margin. In addition, we have recently established a new joint venture in Hong Kong with a Chinese company to accelerate our sales of raw materials and finished products in the Chinese market.

The operating loss for the medical division was $1.9 million in the first half of 2011 (H2-2010: $1.7 million).

The higher loss is as a result of a $1.1m increase in operating expenses, mainly in Sales and Marketing.

We expect the medical group to continue to grow sales and improve gross margins during 2011. We will continue to invest in the growth of the sterilization and diagnostics business, whilst continuing to benefit from the positive cash flow from our distribution business.

The board is pleased to announce that we have decided to list our shares also on the Tel-Aviv Stock Exchange. We are finalizing the details with the Tel-Aviv Stock Exchange and the relevant registrars in Israel and UK and expect the listing to be effective before the end of 2011.

Trading since the end of June has shown a similar trend to the first six months. This gives us confidence that we continue to be on track to meet market expectations of trading for the year as a whole. In particular, the second half is expected to show an improved performance in our Medical Division.

Peter Sheldon

Chairman

18 August 2011

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED INCOME STATEMENTS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Six month ended on 30 June 2011

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (cont.)

Six month ended on 30 June 2010

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENT OF CASH FLOWS

BATM ADVANCED COMMUNICATIONS LTD.

APPENDICES TO CONSOLIDATED STATEMENT OF CASH FLOWS

APPENDIX A

RECONCILIATION OF OPERATING PROFIT (LOSS) FOR THE PERIOD TO NET CASH

FROM OPERATING ACTIVITIES

BATM ADVANCED COMMUNICATIONS LTD

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - General

The unaudited results for the six months ended 30 June 2011 have been prepared in accordance with International Financial Reporting Standards (IFRS) set out in the Annual Report and Financial Statements for the year ended 31 December 2010. The unaudited results for the six months ended 30 June 2010 were prepared on the same basis.

Note 2 - Profit (loss) per share

Profit (loss) per share is based on the weighted average number of shares in issue for the period of 402,833,721 (H1 2010: 402,393,379). The number used for the calculation of the diluted profit per share for the period (which includes the effect of dilutive stock option plans) is 403,196,592 shares (H1 2010: 403,894,193).

Note 3 - Significant events during the reporting period

On January 23 2011, the company signed an agreement with the minority shareholders in part of the medical division to purchase their holding of 25%. The consideration is as follows: Cash of $1.159 million and a small percentage of the future receipts from the medical division, estimated at $373,000 as of 30 June 2011.

In April 2011, the Group acquired the trade and assets of an Israeli Telecoms software services provider called Mantis Ltd ("Mantis") for consideration of $0.8 million.

In April 2011, the Group acquired the major assets and intellectual property of ANDA Networks, Inc. ("ANDA") for consideration of $2.0 million.

As at the date of this interim results statement, the Purchase Price Allocation ("PPA") of ANDA and Mantis had not been completed. The allocation used for these financial statements represent management best estimates.

BATM ADVANCED COMMUNICATIONS LTD

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - Segments

Business Segment

* Excluding other operating expenses

Note 5- Events after the reporting period

Dividend

A dividend of GBP 0.8 pence per share, totalling GBP 3.208 million ($5.132 million), was declared on 7 March 2011 and paid on 18 July 2011.