Last checked at 4 Aug 2009 07:00
BATM Advanced Communications Limited
Interim Results 2009
BATM Advanced Communications Limited ("BATM" or "the Company") (LSE: BVC), a leading designer and producer of broadband data and telecoms systems, announces its interim results for the six months ended 30 June 2009.
Half Year Highlights
| Six months ended 30 June | 2009 (H1) | 2008 (H1)* | Change % |
| Revenue | $69.0m | $65.8m | 4.8% |
| Gross profit | $30.0m | $32.9m | (8.8%) |
| Pre-tax profit | $13.7m | $10.2m | 34.3% |
| Net profit | $12.9m | $11.0m | 17.3% |
| Profit per share | 3.35c | 2.80c | 19.6% |
Highlights
• Record revenues of $69.0m
• Balance sheet improved with $69.1m in liquid investments (Dec 08: $57.3m)
• Net income up on H1 2008 by 17.3%
• EPS up on H1 2008 by 19.6%
Dr Zvi Marom, Chief Executive of BATM said:
"Despite challenging global market conditions that have continued to affect our industry, we have succeeded in growing our revenues for a 6th successive year, with outstanding cash generation.
"BATM enjoys diversified revenue streams in a number of geographical areas. We continue to invest in development of new technologies, opening vertical markets and new sales channels to ensure that our shareholders and employees will benefit from a strong and stable future.
"Despite the challenging market conditions, the current pattern of our trading and forward order book gives us confidence that we will achieve our targets for the full year."
* Restated due to change in Functional Currency, see Note 4 to the interim financial statements.
For further information please contact: 4 Aug Thereafter
BATM Advanced Communications Limited
Dr Zvi Marom, Chief Executive 00972 9 866 2525 00972 9 866 2525
Ofer Bar-Ner, Chief Financial Officer 00 1 78 1424 6579 00 1 78 1424 6579
Singer Capital Markets
Nicholas How 020 3205 7620 020 3205 7620
Shore Capital
Graham Shore 020 7408 4090 020 7408 4090
Threadneedle Communications
Josh Royston / Graham Herring 020 7653 9850 020 7653 9850
Chairman's Statement
Financial Performance
It gives me great pleasure to report on the first six months of 2009 with record revenues of $69.0m (H1 2008: $65.8m) - an increase of 4.8% compared with the same period last year. Sales in the Telecoms sector continue to be strong and are still the major revenue generator for the Group, with $55.9m in H1 2009 (H1 2008: $60.2 m). As previously documented, sales in Telecoms in the comparative first half of 2008 were particularly strong, benefiting inter alia, from strong demand for our products to support the communications systems being supplied for the Beijing Olympic Games.
Sales in BATM Medical rose from $5.7m in H1 2008 to $13.1m in H1 2009, due to our investment in this field in 2008. Sales in this sector are similar to those in H2 2008. We believe that these sales will continue to grow.
The gross profit margin has increased to 43.5% from that achieved in H2 2008 of 41.4%, but is still lower than H1 2008 of 49.9%. The increase over H2 2008 is primarily due to the change of the Euro / US Dollar exchange rate. Margins in BATM Medical are lower than those achieved in the Telecoms sector.
Sales and marketing expenses in the first half of 2009 were $6.7m (H1 2008: $6.9m) - a decrease of 3% over the same period last year. The decrease is largely due to efficiency programs that we have successfully implemented without the need for any reduction in staffing levels. As a percentage of revenue, sales and marketing expenses were 9.7% (H1 2008: 10.5%).
General and administrative expenses in the first half of 2009 were $4.5m (H1 2008: $4.5m), representing 6.6% of revenue compared with 6.9% in H1 2008. These costs have been kept steady as a result of integrating the activities of newly acquired businesses into the existing group structure, thereby allowing us to expand the Group's business activities without significant increase in overheads.
Net R&D expense in the first half of 2009 was $5.8m (H1 2008: $6.6m), a decrease of 11%. This decrease is largely a result of the depreciation of the Israeli Shekel against the US dollar, but also reflects our increased R&D in new fields, offset by efficiency programs in BATM's traditional R&D units.
Operating profit in the first half of 2009 was $10.8m (H1 2008: $14.0m), a decrease of $3.2m primarily because of a decrease in profit margin due to a shift in the sale mix towards medical equipment, slightly offset by moderate cost cutting measures. Importantly, operating profit has increased by 13.8% from H2 2008 primarily due to efficiency programs and an improved gross margin. EBITDA has decreased by 10.7%, from $15.9m in H1 2008 to $14.2m in H1 2009.
Net finance income in the first half of 2009 was $2.9m (H1 2008: $3.8m loss). During the first half of 2009, we recorded a profit of $0.7m relating to an open forward exchange contract used to hedge against currency fluctuations between the Euro and US Dollar. In addition, there were positive foreign exchange gains, whilst during H1 2008 foreign currency fluctuation losses of $4.4m were recorded due to the weakening of the US Dollar against the Euro. As reported in the Annual Report for 2008, on 01 January 2008 the Company changed its functional currency from the US Dollar to the Euro (see also note 4 to the interim financial statements).
Net profit after tax in the first half of 2009 amounted to $12.9m (H1 2008: $11.0m), resulting in a basic profit per share of 3.35 cents (H1 2008: 2.80 cents) - increases of 17.3% and 19.6%, respectively.
Our balance sheet remains strong with effective liquidity of $69.1m (H1 2008: $61.7m). This has risen by $11.8m from $57.3m as at 31 December 2008. This increase is primarily due to our strong cash from profit ratio (Operating cashflow of $15.9m, H1 2008: $5.6m). Period end cash is comprised as follows: cash and deposits up to three months duration of $28.1m; short-term cash deposits up to one year of $35.1m; $5.9m is held in investments including $2.4m in triple A bank notes falling due in 2010; and $3.5m in long term bonds, including the remaining $1.5m related to Nortel.
Sales and Marketing
The first half of the year has shown significant payback from our marketing efforts through OEM channels in the Far East. We have continued to place a geographical focus on this market as an area with growth potential. We have also continued to expand our OEM channels in the first half of 2009, which we believe will help us further increase our growth in 2010 and beyond.
Research and Development and New Products
Our research and development efforts continue to be focused in areas that will strengthen both our indirect and direct channel advantages. We have developed an easy to build, yet very sophisticated, Metro network product line which provides a versatile configuration management solution. This product allows our channel partners to give their product their own "look and feel" with minimum effort.
In addition, we have migrated our infrastructure to a new component based system built on a new Operating System based on telecom grade Linux. This is the basis for our new T-Metro XG product line. This new infrastructure will allow us to provide fast, flexible and cost effective customizations for both our OEM and direct sales partners.
BATM Vertical Markets Solutions
BATM Medical
During 2009 we successfully added three OEM partners for one of our medical products and we expect this to be beneficial as early as 2010. We continue to invest in innovative R&D within the sector and which, for the first time, BATM will be presenting at a major trade show in November 2009. We believe that the gross profit margin in this sector will begin to increase.
BATM Surveillance
In the surveillance sector we are making progress in the restructuring of Vigilant which we acquired in November 2008. We are progressing according to a program that should return the company to profitability in 2010.
Investments
As reported in our Annual Report for 2008, in February 2009 we completed the acquisition of a small company that designs and develops clinical chemistry equipment. This acquisition has been integrated into our BATM Medical portfolio. This product line is not expected to make a significant contribution to revenues before 2010.
In March 2009 we strengthened our local presence in the Telecoms business in Israel by purchasing the trade and assets of a local company and integrating it into our existing local structure.
Prospects
The results of the first half of 2009 strengthen our cautious optimism for the outcome for the full year. As always, we keep a close eye on general developments in the global economy as well as in our industry which may affect us, and we react accordingly. Despite the challenging market conditions, the current pattern of our trading and forward order book gives us confidence that we will achieve our targets for the full year.
Peter Sheldon
Chairman
04 August 2009
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED INCOME STATEMENTS
| Six months ended June 30, | ||
| 2009 | 2008 * | |
| US$ in thousands | ||
| Unaudited | Unaudited | |
| Revenues | 68,995 | 65,844 |
| Cost of revenues | 39,012 | 32,972 |
| Gross profit | 29,983 | 32,872 |
| --------- | --------- | |
| Operating expenses | ||
| Sales and marketing expenses | 6,716 | 6,925 |
| General and administrative expenses | 4,524 | 4,520 |
| Research and development expenses | 5,842 | 6,564 |
| Amortization of intangible assets | 2,080 | 816 |
| Total operating expenses | 19,162 | 18,825 |
| --------- | --------- | |
| Operating profit | 10,821 | 14,047 |
| Investment revenue | 806 | 1,234 |
| Gains (losses) on financial instruments | 1,057 | (389) |
| Foreign exchange differences | 1,158 | (4,422) |
| Finance cost | (160) | (240) |
| Profit before tax | 13,682 | 10,230 |
| Tax | (800) | 800 |
| Profit for the period | 12,882 | 11,030 |
| Attributable to: | ||
| Equity holders of the parent | 13,451 | 10,732 |
| Minority interest | (569) | 298 |
| Income for the period | 12,882 | 11,030 |
| Income per share (in cents) basic | 3.35 | 2.80 |
| Income per share (in cents) diluted | 3.34 | 2.76 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Six months ended June 30, | ||
| 2009 | 2008 | |
| US$ in thousands | ||
| Unaudited | Unaudited | |
| Profit for the period | 12,882 | 11,030 |
| Translation adjustment | 1,138 | 4,927 |
| Total Comprehensive Income of the Period | 14,020 | 15,957 |
* see note 4
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED BALANCE SHEETS
| June 30, | June 30, | December 31, | |
| 2 0 0 9 | 2 0 0 8 * | 2 0 0 8 | |
| US$ in thousands | |||
| Unaudited | Unaudited | Audited | |
| Non-current assets | |||
| Goodwill | 12,345 | 5,653 | 9,418 |
| Other intangible assets Property, plant and equipment Held to maturity investments Other investment Deferred tax asset | 26,794 12,956 5,871 - 2,065 | 9,228 10,314 10,527 4,844 2,068 | 19,700 10,041 5,468 - 2,102 |
| 60,031 | 42,634 | 46,729 | |
| Current assets | |||
| Inventories | 17,392 | 19,661 | 20,984 |
| Investments | 35,093 | 5,209 | 21,086 |
| Trade and other receivables | 36,985 | 31,107 | 29,192 |
| Cash and cash equivalents | 28,117 | 45,968 | 30,737 |
| 117,587 | 101,945 | 101,999 | |
| Total assets | 177,618 | 144,579 | 148,728 |
| Current liabilities Short-term bank credit Trade and other payables Current tax liabilities Provisions | 6,477 32,023 - 2,818 41,318 | 1,610 26,545 - 2,464 30,619 | 3,632 20,174 109 2,181 26,096 |
| Net current assets | 76,269 | 71,326 | 75,903 |
| Non-current liabilities Long-term payables | 7,546 | 3,016 | 3,933 |
| Retirement benefit obligation Total liabilities | 983 8,529 49,847 | 824 3,840 34,459 | 926 4,859 30,955 |
| Net assets | 127,771 | 110,120 | 117,773 |
| Equity | |||
| Share capital | 1,212 | 1,195 | 1,210 |
| Share premium account | 405,465 | 401,990 | 404,928 |
| Translation and other reserve | (5,115) | 4,898 | (6,060) |
| Accumulated Deficit | (277,874) | (300,237) | (286,764) |
| Equity attributable to equity holders of the: | |||
| Parent | 123,688 | 107,846 | 113,314 |
| Minority Interest | 4,083 | 2,274 | 4,459 |
| Total equity | 127,771 | 110,120 | 117,773 |
* see note 4
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Six month ended on June 30th 2009.
| Share Capital | Share Premium Account | Translation and other reserve | Accumulated Deficit | Parent | Minority Interest | Total equity | |
| US$ in thousands | |||||||
| As at January 1, 2009 | 1,210 | 404,928 | (6,060) | (286,764) | 113,314 | 4,459 | 117,773 |
| Exercise of share based options by employees | 2 | 139 | 141 | - | 141 | ||
| Stock options granted to employees | 398 | 398 | - | 398 | |||
| Translation adjustment | 1,159 | 1,159 | 193 | 1,352 | |||
| Minority Interest acquired | (214) | (214) | - | (214) | |||
| Proposed Dividend | (4,561) | (4,561) | - | (4,561) | |||
| Profit for the period | - | - | - | 13,451 | 13,451 | ( 569) | 12,882 |
| As at June 30, 2009 (unaudited) | 1,212 | 405,465 | (5,115) | (277,874) | 123,688 | 4,083 | 127,771 |
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (cont.)
| Six month ended on June 30th 2008 *. | |||||||||
| Share Capital | Share Premium Account |
Translation reserve | Accumulated Deficit | Parent | Minority Interest | Total equity | |||
| US$ in thousands | |||||||||
| As at January 1, 2008 | 1,186 | 400,646 | (29) | (307,033) | 94,770 | 958 | 95,728 | ||
| Exercise of share based options by employees | 9 | 1,016 | 1,025 | - | 1,025 | ||||
| Stock options granted to employees | 328 | 328 | - | 328 | |||||
| Translation adjustment | 4,927 | 4,927 | - | 4,927 | |||||
| Minority Interest acquired | - | 1,018 | 1,018 | ||||||
| Proposed Dividend | (3,936) | (3,936) | - | (3,936) | |||||
| Profit for the period | - | - | - | 10,732 | 10,732 | 298 | 11,030 | ||
| As at June 30, 2008 (unaudited) | 1,195 | 401,990 | 4,898 | (300,237) | 107,846 | 2,274 | 110,120 | ||
* see note 4
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
| Six months ended June 30 | ||
| 2009 | 2008 | |
| US$ in thousands | ||
| Unaudited | Unaudited | |
| Net cash from operating activities (Appendix A) | 15,943 | 5,592 |
| ------------- | ------------- | |
| Investing activities | ||
| Interest received Proceeds on disposal of held to maturity investments Proceeds on disposal of investments Proceeds on disposal of deposits | 736 1,050 18,095 10,000 | 1,610 222 7,609 13,908 |
| Purchases of property, plant and equipment Purchases of held to maturity investments Purchases of available for sale investments Purchases of deposits | (2,407) - (14,991) (27,953) | (688) (1,050) (5,000) (4,000) |
| Investment in other business combinations | (4,440) | (4,844) |
| Acquisition of subsidiaries (Appendix B) (*) | 183 | (4,052) |
| Net cash from (used in) investing activities | (19,727) | 3,715 |
| ------------- | -------------- | |
| Financing activities | ||
| Increase (decrease) in short-term bank credit | 191 | (205) |
| Proceeds on issue of shares | 141 | 1,025 |
| Net cash from financing activities | 332 | 820 |
| ------------- | -------------- | |
| Decrease from foreign exchange fluctuations | 832 | 32 |
| Increase (decrease) in cash and cash equivalents | (2,620) | 10,159 |
| Cash and cash equivalents at the beginning of the period | 30,737 | 35,809 |
|
| ||
| Cash and cash equivalents at the end of the period | 28,117 | 45,968 |
|
| ||
(*) see note 3
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
| Six months ended June 30 | ||
| 2009 | 2008 | |
| US$ in thousands | ||
| Unaudited | Unaudited | |
| Operating profit from continuing operations Adjustments for: | 10,821 | 14,047 |
| Amortization of intangible assets | 2,080 | 816 |
| Depreciation of property, plant and equipment | 1,309 | 1,073 |
| Stock options granted to employees | 398 | 328 |
| Increase in retirement benefit obligation | 62 | 160 |
| Increase (decrease) in provisions | (13) | 140 |
| Operating cash flow before movements in working capital | 14,657 | 16,564 |
| Decrease (increase) in Inventory | 3,953 | (3,853) |
| Increase in receivables | (7,844) | (1,906) |
| Increase (decrease) in payables | 5,446 | (4,606) |
| Cash generated by operations | 16,212 | 6,199 |
| Income taxes paid | (109) | (376) |
| Interest paid | (160) | (231) |
| Net cash from operating activities | 15,943 | 5,592 |
APPENDIX B
ACQUISITION OF SUBSIDIARIES
| Six months ended June 30 | ||
| 2009 | 2008 | |
| US$ in thousands | ||
| Unaudited | Unaudited | |
| Net assets acquired | ||
| Property, plant and equipment | 1,359 | 1,810 |
| Inventory | 205 | 2,993 |
| Trade and other receivables | 446 | 2,149 |
| Trade and other payables Short-term bank credit Retirement benefit obligation Provisions | (2,374) (2,641) - - | (3,142) (1,725) (329) (178) |
| Long-term payables | (3,149) | - |
| Minority Interest | ____- | (1,018) |
| (6,154) | 560 | |
| Intangible assets | 5,971 | 5,392 |
| Total consideration | (183) | 5,952 |
| Less-consideration recorded as liability | - | (1,900) |
| Total cash consideration (*) | (183) | 4,052 |
(*) see note 3
BATM ADVANCED COMMUNICATIONS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General
The unaudited results for the six months ended 30th June 2009 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 2008. The unaudited results for the six months ended 30th June 2008 were prepared on the same basis.
During the period the following standards came into effect:
IAS 1 (revised) Presentation of Financial Instruments
IFRS 8 Operating segments
Note 2 - Profit per share
Profit per share is based on the weighted average number of shares in issue for the period of 401,171,587 (2008 H1: 394,362,614). The number used for the calculation of the diluted profit per share for H1:2008 (which includes the effect of dilutive stock option plans) is 402,239,043shares (2008 H1: 399,634,970).
Note 3 - Acquisition of Subsidiaries
During February 2009 the Group acquired 51% of the issued share capital of I.S.E s.r.l ("I.S.E") for a consideration of Euro 30k for the share capital, and the provision of a further Euro 3m credit line. I.S.E is engaged in the development, production and sales of clinical chemistry analyzers and their associated reagent kits.
This transaction has been accounted for by the purchase method of accounting.
| I.S.E | US$ in thousands |
| Net assets acquired | |
| Property, plant and equipment | 1,359 |
| Inventory | 205 |
| Trade and other receivables | 446 |
| Short-term bank credit | (2,641) |
| Trade payables | (2,374) |
| Long-term payables | (3,149) |
| (6,154) | |
| Intangible assets | 5,971 |
| Total consideration | (183) |
As of the authorisation of these financial statements, the Purchase Price Allocation ("PPA") of I.S.E had not been completed. The allocation used for these financial statements represent management best estimates.
During March 2009 the Group acquired the trade and assets of an Israeli Telecoms software services provider for a consideration of $ 4.4m.
This transaction has been accounted for by the purchase method of accounting.
BATM ADVANCED COMMUNICATIONS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Acquisition of Subsidiaries (Cont.)
As at 31 December 2008, the PPA with respect to the acquisition of Vigilant on November 2008 had not been completed, and the transaction was accounted for based on managements best estimates. As a result of the completion of the PPA, $4,605 k has been reclassified from Goodwill to Other Intangible assets in the comparative figures as at 31 December 2008. In addition an additional $ 305 k was amortised in 2008 compared to the numbers published in the Financial Statements for the year ended 31 December 2008.
Note 4 - Change of functional currency
As disclosed in Note 2 to the Annual Financial Statement for the financial year ended 31 December 2008, 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, which change was recognized in the full year's accounts. At the time of the publication of the interim financial statements for the six months ended 30 June 2008, the Company did not identify this change and the financial statements were based on a USD functional currency.
The effect of this change on the financial statements for the six months ended 30 June 2008 is set out below:
| Six months ended June 30, 2008 | Previously Reported Figures | restatement | Revised Figures |
| Revenues | 66,440 | (596) | 65,844 |
| Cost of revenues | (33,310) | 338 | (32,972) |
| General and administrative expenses | (4,553) | 33 | (4,520) |
| Finance income (expenses) | 597 | (4,414) | (3,817) |
| Tax | 815 | (15) | 800 |
| Profit for the year | 15,684 | (4,654) | 11,030 |
| Property, plant and equipment | 10,127 | 187 | 10,314 |
| Inventories | 19,614 | 47 | 19,661 |
| Translation reserve | 10 | 4,888 | 4,898 |
| Accumulated deficit | (295,583) | (4,654) | (300,237) |
BATM ADVANCED COMMUNICATIONS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Segments
Business Segment
| Six months ended June 30, 2 0 0 9 | |||
| Telecommunications | Medical | Total | |
| US$ in thousands | |||
| Revenues | 55,915 | 13,080 | 68,995 |
| Segment profit (loss) | 13,993 | (1,111) | 12,882 |
| Assets | 144,122 | 33,496 | 177,618 |
| Six months ended June 30, 2 0 0 8 | |||
| Telecommunications | Medical | Total | |
| US$ in thousands | |||
| Revenues | 60,180 | 5,664 | 65,844 |
| Segment profit | 10,483 | 547 | 11,030 |
| Assets | 127,631 | 16,948 | 144,579 |
Note 6 - Events after the balance sheet date
Dividend
A dividend of GBP 0.069 per share, aggregating to GBP 2,759 thousand ($3,936 thousand), was declared on March 17, 2009 and paid on July 20, 2009.