Last checked at 26 Aug 2008 07:00
BATM Advanced Communications Limited
Interim Results 2008
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 2008.
Half Year Highlights
| Six months ended 30 June | 2008(H1) | 2007(H1) | Change % |
| Revenue | $66.4m | $39.6m | + 68 |
| Gross profit | $33.1m | $18.1m | + 83 |
| Operating profit | $14.3m | $4.8m | + 197 |
| Pre-tax profit | $14.9m | $5.7m | + 161 |
| Net profit | $15.4m | $5.2m | + 196 |
| Profit per share | 3.90c | 1.33c | + 193 |
Highlights
10th consecutive half of accelerated growth
Further gross profit margin improvement to 50% of revenues (H1 2007: 46%)
Strong balance sheet with $61.7m in cash and liquid investments (H1 2007: $51.9m)
Increased sales and marketing, with focus on eastern Europe
Dr Zvi Marom, Chief Executive of BATM said:
"This outstanding performance has been driven by increased demand from both existing customers and new sales channels.
"BATM has also increased its product development in vertical markets where our technology and IP expertise can play a significant role. We will continue this programme which, we believe, will benefit our shareholders, employees and community.
"Despite the general weakness in the global economy, our excellent first half underpins our optimism for further growth, both this year and beyond."
For further information please contact: 26 Aug Thereafter
BATM Advanced Communications Limited
Dr Zvi Marom, Chief Executive 020 7653 9844 00972 9 866 2525
Ofer Bar-Ner, Chief Financial Officer 020 7653 9844 00972 9 866 2525
Kaupthing Singer & Friedlander
Nicholas How / Marc Young 020 3205 7620 020 3205 7620
Shore Capital
Graham Shore / Dru Danford 020 7408 4090 020 7408 4090
Threadneedle Communications
Josh Royston / Graham Herring 020 7653 9844 020 7653 9844
Chairman's Statement
Financial Performance
It gives me great pleasure to report on a highly successful first six months of 2008 with record growth in revenues to $66,440,000 (H1 2007: $39,615,000) - an increase of 68% compared with the same period last year. This increase is primarily related to stronger demand from our major customers, as well as sales from newly developed businesses. We have benefited particularly in this half from strong demand for our products to support new communications systems, including for the Beijing Olympic Games.
Gross profit margin increased to 50% of revenue during the period (H1 2007: 46%). Continuing efforts to remove cost through ever more efficient product design have played a significant role in gross profit improvement. Further benefit has resulted from a favorable product mix and a strong Euro, which is one of our important trading currencies.
Sales and marketing expenditure was $6,925,000 (H1 2007: $5,702,000) - an increase of 21% over the same period last year. Spending increased in this area in support of our higher operating level. As a percentage of revenue, sales and marketing expenses were 10% (H1 2007: 14%). Expanded sales and marketing activities in new geographic territories have had successful results as evidenced by our revenue performance in the first half.
General and administrative expenses were $4,553,000 (H1 2007: $2,171,000) representing 6.8% of revenue compared with 5.5% in H1 2007. This increase is primarily related to the support activities for newly acquired businesses.
Net R&D expense in the first half of 2008 was $6,564,000 (H1 2007: $4,924,000) representing 9.8% of revenue compared with 12.4% in H1 2007. The increase resulted from a higher level of spending on new products and the integration of engineering efforts from newly acquired businesses. In addition, higher spending is reflective of reduced participation by the Israeli Chief Scientist, due to budgetary constraints, compared with last year and the appreciation of the Israeli Shekel and the Euro against the US dollar.
Operating profit was $14,272,000 (H1 2007: $4,799,000) an increase of $9,473,000, or 197%, as a result of increased revenue and gross margin.
Net finance income was $604,000 (H1 2007: $1,194,000). During the first half of 2008, we recorded a charge of $381,000 relating to a loss incurred on a forward exchange contract used to hedge against currency fluctuations. In addition, the average interest rate earned was lower in 2008 versus 2007.
Net profit after tax amounted to $15,386,000 (H1 2007: $5,177,000), resulting in a basic profit per share of 3.90 cents (H1 2007: 1.33 cents) - increases of 196% and 193%, respectively.
Financial Position
Our balance sheet remains strong with effective liquidity of $61.7m (H1 2007: $51.9m). Period end is comprised as follows: cash and deposits up to three months duration of $46.0 million; short-term investments up to one year of $5.2 million; and long-term investments for more than one year of $10.5 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 and exercising prudent spending control.
Sales and Marketing
We have expanded our investment in sales and marketing to allow for additional growth in new areas and territories. Eastern Europe has been a focus for us this year and we increased our investment in this region. We have also invested in additional marketing and sales efforts to expand our expertise into other areas. An example of this initiative is our venture into the newly acquired medical instruments business.
Research and Development and New Products
We continue to expand our offerings on our Carrier Ethernet product line. These programs include product enhancements to improve the speed of our existing platforms and new features to differentiate our products. We are also expanding resources on several core technologies to expand the carriers' 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.
Investments
In February of this year, we acquired the broadband multiplexer product line from Charles Industries. Products from this acquisition provide a strategic complement to our EdgeLink product family. With the addition of these products, our offering in the cellular backhaul space is significantly strengthened with the added feature of Ethernet over PDH.
We have also invested in a medical instruments company in Eastern Europe. This investment furthers our strategy to expand our IP expertise into other vertical markets as IP controllers play a major role in the management software for these devices. We believe that this business has significant potential for growth in the coming years.
On Wednesday 20th August, we received approval from the shareholders of Vigilant Technology Ltd for our proposed acquisition of the company. Vigilant is a developer and manufacturer of intelligent video recording and surveillance solutions for mission-critical applications. This modest acquisition provides entry into a niche market where our expertise in IP technology can add value to Vigilant's innovative product portfolio. With our management expertise and careful cost control, we believe that this business will soon operate in line with our current business model.
Principal Risks and Uncertainties
* Loss of key personnel
* A major downturn in the purchasing pattern of telecoms companies
Prospects
The results of the first half of 2008 point to another successful outcome for the full year. As always we keep a close eye on general developments in the world economy and in our industry in particular. Notwithstanding the uncertainties of the economic environment in which we operate we remain confident that our business strategy is sound and that we can continue to build on our success.
Peter Sheldon
Chairman
26 August, 2008
Responsibility statement
The Directors confirm that the condensed set of financial statements for the six months ended 30 June 2008, which have been prepared in accordance with International financial reporting standards (IFRS) give true and fair view of the assets, liabilities, financial position and profit and loss of the company and that the accompanying Chairman's statement includes a fair review of the information required by the United Kingdom Listing Authority Disclosure and Transparency Rules DTR 4.2.7 R and DTR 4.2.8 R. There have been no appointments or resignations as Directors since the publication of the Annual Report for the year ended 31 December 2007 and the names of the Directors are available from the Company's website (www.batm.com).
BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED INCOME STATEMENTS
| | Six months ended June 30, | |
| | 2008 | 2007 |
| | US$ in thousands | |
| | Unaudited | Unaudited |
| | | |
| Revenues | 66,440 | 39,615 |
| | | |
| Cost of revenues | 33,310 | 21,501 |
| | | |
| Gross profit | 33,130 | 18,114 |
| | --------- | --------- |
| Operating expenses | | |
| | | |
| Sales and marketing expenses | 6,925 | 5,702 |
| | | |
| General and administrative expenses | 4,553 | 2,171 |
| | | |
| Research and development expenses | 6,564 | (*)4,924 |
| | | |
| Amortization of intangible assets | 816 | 518 |
| | | |
| Total operating expenses | 18,858 | 13,315 |
| | --------- | --------- |
| Operating profit | 14,272 | 4,799 |
| | | |
| Investment revenue | 1,234 | 1,340 |
| Finance cost | (630) | (146) |
| Other expenses | (7) | (310) |
| | | |
| Profit before tax | 14,869 | 5,683 |
| | | |
| Tax | 815 | (470) |
| | | |
| Profit for the period | 15,684 | 5,213 |
| | | |
| Attributable to: | | |
| Equity holders of the parent | 15,386 | 5,177 |
| Minority interest | 298 | 36 |
| | | |
| Income for the period | 15,684 | 5,213 |
| | | |
| Income per share (in cents) basic | 3.90 | 1.33 |
| Income per share (in cents) diluted | 3.85 | 1.32 |
(*)Restated to reflect a change in accounting policies regarding government grants.
BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED BALANCE SHEETS
| | June 30, | June 30, | December 31, |
| | 2 0 0 8 | 2 0 0 7 | 2 0 0 7 |
| | US$ in thousands | ||
| | Unaudited | Unaudited | Audited |
| Non-current assets | | | |
| Goodwill | 5,653 | 1,984 | 3,184 |
| Other intangible assets Property, plant and equipment Held to maturity investments Other investment Deferred tax asset | 9,228 10,127 10,527 4,844 2,068 | 6,672 9,262 8,905 - 505 | 6,737 8,702 10,501 - 2,217 |
| | 42,447 | 27,328 | 31,341 |
| | | | |
| Current assets | | | |
| Inventories | 19,614 | 13,929 | 12,211 |
| Investments | 5,209 | 30,950 | 18,462 |
| Trade and other receivables | 31,107 | 19,361 | 26,216 |
| Cash and cash equivalents | 45,968 | 12,027 | 35,809 |
| | 101,898 | 76,267 | 92,698 |
| | | | |
| Total assets | 144,345 | 103,595 | 124,039 |
| Current liabilities Short-term bank credit Trade and other payables Current tax liabilities provisions | 1,610 26,545 - 2,464 30,619 | 134 (*)18,191 177 2,310 20,812 | 90 22,266 280 2,952 25,588 |
| Net current assets | 71,279 | 55,455 | 67,110 |
| | | | |
| Non-current liabilities Long-term payables | 3,016 | (*)2,425 | 2,388 |
| Retirement benefit obligation | 824 | 293 | 335 |
| Long-term provisions | - | 385 | - |
| | 3,840 | 3,103 | 2,723 |
| Total liabilities | 34,459 | 23,915 | 28,311 |
| | | | |
| | | | |
| Net assets | 109,886 | 79,680 | 95,728 |
| | | | |
| Equity | | | |
| Share capital | 1,195 | 1,186 | 1,186 |
| Share premium account | 401,990 | 400,118 | 400,646 |
| Translation reserve | 10 | - | (29) |
| Accumulated Deficit | (295,583) | (*)(321,832) | (307,033) |
| Equity attributable to equity holders of the: | | | |
| parent | 107,612 | 79,472 | 94,770 |
| Minority Interest | 2,274 | 208 | 958 |
| Total equity | 109,886 | 79,680 | 95,728 |
(*)Restated to reflect a change in accounting policies regarding government grants.
BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| Sharecapital | Share Premium Account |
Translationreserve | 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 | 39 | 39 | - | 39 | |||
| Minority Interest acquired | - | 1,018 | 1,018 | ||||
| Proposed Dividend | (3,936) | (3,936) | - | (3,936) | |||
| Profit for the period | - | - | - | 15,386 |
15,386 | 298 | 15,684 |
| As at June 30, 2008 (unaudited) | 1,195 | 401,990 | 10 | (295,583) | 107,612 | 2,274 | 109,886 |
BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED STATEMENT OF CASH FLOWS
| | Six months ended June 30 | |
| | | |
| | 2008 | 2007 |
| | | |
| | US$ in thousands | |
| | | |
| | Unaudited | Unaudited |
| | | |
| Net cash from operating activities (Appendix) | 5,624 | 1,559 |
| | ---------- | ---------- |
| 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 | 1,610 - 222 7,609 13,908 - | 1,195 15 - 24,370 16,075 691 |
| Purchases of property, plant and equipment Purchases of held to maturity investments Purchases of available for sale investments Purchases of deposits | (688) (1,050) (5,000) (4,000) | (653) (5,494) (26,398) (13,387) |
| Investment in a company | (4,844) | - |
| Acquisition of subsidiaries | (4,052) | (1,969) |
| Net cash from (used in) investing activities | 3,715 | (5,555) |
| | ---------- | ---------- |
| Financing activities | | |
| | | |
| Increase (decrease) in short-term bank credit | (205) | 46 |
| Proceeds on issue of shares | 1,025 | 614 |
| Net cash from financing activities | 820 | 660 |
| | ----------- | ----------- |
| | | |
| Increase (decrease) in cash and cash equivalents | 10,159 | (3,336) |
| | | |
| Cash and cash equivalents at the beginning of the period | 35,809 | 15,363 |
| | | |
| Cash and cash equivalents at the end of the period | 45,968 | 12,027 |
| | | |
BATM ADVANCED COMMUNICATIONS LTD. APPENDICES TO CONSOLIDATED STATEMENT OF CASH FLOWS
APPENDIX
RECONCILIATION OF OPERATING PROFIT FOR THE PERIOD TO NET CASH
FROM OPERATING ACTIVITIES
| Six months ended June 30 | ||
| 2008 | 2007 | |
| US$ in thousands | ||
| Unaudited | Unaudited | |
| Operating profit from continuing operations Adjustments for: | 14,272 | 4,799 |
| Amortization of intangible assets | 816 | 518 |
| Depreciation of property, plant and equipment | 1,073 | 837 |
| Stock options granted to employees | 328 | 442 |
| Increase (decrease) in retirement benefit obligation | 160 | (17) |
| Increase (decrease) in provisions | 140 | (6) |
| Operating cash flow before movements in working capital | 16,789 | 6,573 |
| Decrease (increase) in Inventory | (4,110) | 435 |
| Increase in receivables | (2,871) | (2,138) |
| Decrease in payables | (3,577) | (3,139) |
| Cash generated by operations | 6,231 | 1,731 |
| Income taxes paid | (376) | (26) |
| Interest paid | (231) | (146) |
| Net cash from operating activities | 5,624 | 1,559 |
Note 1 - General
The unaudited results for the six months ended 30th June 2008 have been prepared in accordance with International Financial Reporting Standards (IFRS) set out in the Annual Report and Accounts for the year ended 31st December 2007. The unaudited results for the six months ended 30th June 2007 were prepared on the same basis.
Note 2 - Profit per share
Profit per share is based on the weighted average number of shares in issue for the period of 394,362,614 (2007 H1: 390,778,083). 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 399,634,970 shares (2007 H1: 395,288,758).