Interim Results
For immediate release 10 Sep 2004
BATM Advanced Communications Limited - 2004 interim results
BATM Advanced Communications Limited ('BATM' or 'the Company'), (LSE: BVC), a
leading designer and producer of broadband data and telecoms systems, announces
interim results for the period ended 30 June 2004.
Six months (*) 2004(H1) 2003(H1)
Turnover $19.5m $17.9m
Gross Profit $8.8m $6.9m
Operating loss $(2.8)m $(5.8)m
Pre-tax loss $(1.9)m $(4.9)m
Loss per share (0.51)¢ (1.27)¢
(*) Pro forma results exclude amortization of goodwill (2004 & 2003).
Highlights
* Revenue growth of 9% over the same period last year
* Gross Profit margin of 45.2% compared with 38.9% in the same period of 2003
* Global distribution agreement with a leading European telecoms
infrastructure supplier
* Strong cash position of $49.5m at 30 June 2004
Dr Zvi Marom, Chief Executive of BATM, said:
'The half year results show a continuation of the improvement in our business
which commenced in the second half of last year. I am encouraged by both the
improvement in sales as well as in our gross margins and continued discipline
in our costs. The important alliances that we have entered into with world
leading companies in our markets, such as Nokia, are an important factor in
this improved position.'
For further information please contact: 10 Sept Thereafter
BATM Advanced Communications Limited
Dr Zvi Marom, Chief Executive 020 7831 3113 00972 9 866 2525
Ofer Bar-Ner, Chief Financial Officer 020 7831 3113 00972 9 866 2525
Dresdner Kleinwort Wasserstein
Mark Smith 020 7623 8000 020 7623 8000
Shore Capital
Graham Shore 020 7408 4090 020 7408 4090
Financial Dynamics
James Melville-Ross / Cass Helstrip 020 7831 3113 020 7831 3113
Chairman's Statement
Financial Performance
Turnover for the period was $19,461,000 (H1 2003: $17,872,000), an increase of
9% compared with last year. This increase can attributed to growth in both our
IP switching business as well our Edglink product line.
Gross profit margin improved to 45.2% of turnover (H1 2003: 38.9%). This
increase was primarily a result of change in product mix combined with improved
gross profit from our EdgeLink and Access products as well as lower write down
of inventory $ 40,000 (H1:2003 $344,000).
Selling, general and administrative expenses were again well controlled and
totaled $6,581,000 (H1 2003: $7,011,000), reflecting a reduction of 6%. Ongoing
spending controls have contributed to this reduction.
We have maintained a significant investment in Research and Development (R&D).
Gross R&D in this period was $5,300,000 (H1 2003: $5,990,000) a decrease of
12%. After contributions from the Israeli Chief Scientist and from the European
Community, net research and development expenditure was $4,960,000 (H1 2003:
$5,757,000).
Pro forma operating loss, before goodwill amortization, amounted to $2,753,000
(H1 2003: loss $5,821,000), a 52.7% improvement. Operating loss after goodwill
amortization was $7,702,000 (H1 2003: loss $10,770,000).
Financial income was $890,000 (H1 2003: $937,000). This decrease reflected a
slightly lower level of cash and cash equivalents.
The resulting pro forma loss before tax, excluding the effect of the
amortization of goodwill, was $1,850,000 (H1 2003: loss $4,899,000). Pro forma
loss after taxes and minorities, excluding the effect of the amortization of
goodwill, was $1, 969,000 (H1 2003: loss $4,937,000), resulting in a loss per
share of 0.51 cents (H1 2003: 1.27 cents). Actual loss after taxes, including
the effect of goodwill amortization, amounted to $6,918,000 (H1 2003: Loss
$9,886,000), resulting in a loss per share of 1.78 cents (H1 2003: Loss 2.55
cents).
Our balance sheet remains strong with cash of $49.5m ($51.1m : 31.12.2003) at
the period's end comprised as follows: Cash and deposits up to three months
period $3.2 million, short-term deposits up to one year period $22.8 million
and long-term deposit for three years period $23.5 million. The principal
reason for the small reduction in our cash position is due to an investment of
over $1m in new offices in Netanya, Israel. We continue to exercise a
conservative investment strategy maintaining most balances in bank deposits.
Sales and Marketing
We have continued to focus on building relationships with several large
customers who provide us with significant and stable business opportunities. In
addition to our successful relationships with other OEMs, such as Nokia, in
March of 2004, we announced a new relationship with a leading European telecom
infrastructure supplier. We will continue to pursue this avenue of business by
leveraging our investment in the development of new Ethernet platforms in the
access market to forge similar relationships with other suppliers. These
agreements enable BATM to gain customer access in partnership with some of the
world's leading system integrators and infrastructure players.
We also continue to develop relationships with US Service providers. We believe
that the migration to Voice Over IP and the adoption of fiber based transport
to the home/ business provides a significant opportunity for us. Our portfolio
of IP based products is uniquely positioned in these emerging markets and
provides an excellent base to expand our relationship with existing customers
and penetrate new accounts.
In June of this year, we announced the appointment of Larry Asten as the
President of Telco Systems, our wholly owned US subsidiary. Larry rejoined
Telco Systems in May of 2003 as Vice President of Sales and Services after an
absence of just over 10 years. Larry's experience includes senior executive
positions in sales, service, marketing and engineering at ADC Telecom, Nortel,
GTE as well as Telco's Vice President of Sales in the early nineties. Under
Larry's leadership, Telco Systems was awarded the Verizon Supplier Excellence
Award for 'outstanding effort and achievement in demonstrating performance
excellence.' in April of this year.
Research and Development and New Products
We continue to expand our line of IP switches to address the market for Fiber
To The Home / Business. Our existing products support delivery of `triple-play'
services (Voice, Video and Data) over active or passive Ethernet. Our new
products will improve the quality and allow more services to be delivered over
fiber. In addressing this market, we adopted the ATCA standard and already have
seen promising feedback from several potential customers at the Supercomm 2004
trade show which was recently held in Chicago.
We continue to expand our transport solution with the introduction of SONET
interfaces to our Edgelink HUB platform. This product, required by many major
US telecom providers, will expand the deployment opportunities within the US.
We officially released our Access 211 to address the market for VOIP adapters
in June of this year. This product has already been tested successfully by
several service providers. We are currently trialling the Access 211 with 34
customers and hope to convert some of them to actual deployments as early as
the second half of this year. We continue to invest in new platforms to address
the need for VOIP support both in residential and small to medium size
businesses.
Investment
At the end of July, we completed the sale of our 49.9% holding in Eldor
Computers Limited to Taldor Group. In exchange for our holdings in Eldor we
received 430,000 shares in Taldor, a publicly traded company on the Tel-Aviv
Stock exchange. These shares represent 4.1% of the outstanding shares of
Taldor. We expect to record approximately $400,000 of capital gain in the
second half of this year.
Prospects
Current signs suggest that our improved trading performance will continue into
the second half of 2004.
Peter Sheldon
Chairman
10 September 2004
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months Six months
ended June 30, ended June
2004 30, 2003
$US'000 $US'000
Unaudited Unaudited
Turnover 19,461 17,872
Cost of sales 10,673 10,925
Gross profit 8,788 6,947
Operating expenses
Research and development costs 5,300 5,990
Less - participation 340 233
Research and development costs, net 4,960 5,757
Selling, general and administrative expenses 6,581 7,011
Amortization of Goodwill 4,949 4,949
Total operating expenses 16,490 17,717
Operating loss (7,702) (10,770)
Financial income, net 890 937
Other income (expenses), net 13 (15)
Loss before Group's share in loss of (6,799) (9,848)
associated company
Group's share in loss of (119) (38)
associated company
Loss for the period (6,918) (9,886)
Loss per share (in cents) (1.78) (2.55)
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED BALANCE SHEET
As at As at
30th June 30th June
2004 2003
$US'000 $US'000
Unaudited Unaudited
Fixed assets
Tangible assets 10,790 10,526
Goodwill, net 7,424 17,322
Total fixed assets 18,214 27,848
Current assets
Inventory 5,832 11,343
Debtors 7,853 5,810
Short-term investments 22,764 3,753
Cash and cash equivalents 3,185 14,808
39,634 35,714
Creditors: amounts falling due within one 8,923 10,831
year
Net current assets 30,711 24,883
Long-term investments
Investment in associated company 1,145 1,470
Investment in other companies 3,688 3,688
Long-term deposit 23,563 36,627
28,396 41,785
Total assets less current liabilities 77,321 94,516
Non-current liabilities
Severance pay fund, net of provision (373) (324)
Net assets 76,948 94,192
Capital and reserves
Share capital 1,177 1,177
Additional paid-in capital 397,550 397,541
Foreign currency translation adjustment 16 16
Retained loss (321,795) (304,542)
Shareholders' funds 76,948 94,192
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Six months ended
June 30, 2004 June 30, 2003
$US'000 $US'000
Unaudited Unaudited
Net cash outflow from operating activities (1,121) (515)
---------- ----------
Investing activities
Repayment of loan to associated company 77 --
Acquisition of fixed tangible assets (1,285) (374)
Proceeds from sale of fixed tangible assets - 23
Proceeds from short-term bank deposits 2,240 29
Proceeds from (investment in) marketable (54) 2
securities, net
Net cash inflow (outflow) from investing 978 (320)
activities
---------- ----------
Financing activities
Exercise of options by employees 10 124
Net cash inflow from financing activities 10 124
----------- -----------
Decrease in cash (133) (711)
and cash equivalents
Cash and cash equivalents at 3,318 15,519
the beginning of the period
Cash and cash equivalents at 3,185 14,808
the end of the period
BATM ADVANCED COMMUNICATIONS LTD.
APPENDIX TO CONSOLIDATED STATEMENT OF CASH FLOWS
RECONCILIATION OF LOSS FOR THE PERIOD TO NET CASH
OUTFLOW FROM OPERATING ACTIVITIES
Six months Six months
ended June ended June
30, 2004 30, 2003
$US'000 $US'000
Unaudited Unaudited
Loss for the period (6,918) (9,886)
Company's share in loss of associated company 119 38
Amortization of goodwill 4,949 4,949
Depreciation and amortization 723 968
Increase (decrease) in severance pay fund, 14 (6)
net of provision
Decrease in Inventory 1,851 2,103
Decrease in debtors 470 2,915
Decrease in creditors (1,623) (807)
Loss (gain) from marketable securities 51 (72)
Interest incurred on investments (755) (679)
Interest incurred on loan for affiliate (2) (55)
Loss on disposal of fixed assets - 17
Net cash outflow from operating activities (1,121) (515)
BATM ADVANCED COMMUNICATIONS LTD
NOTES TO THE FINANCIAL STATEMENTS
Note 1 - General
The unaudited results for the six months ended 30th June 2004 have been
prepared in accordance with generally accepted accounting principles set out in
the Annual Report and Accounts for the year ended 31st December 2003. The
unaudited results for the six months ended 30th June 2003 were prepared on the
same basis.
Note 2 - Loss per share
Loss per share is based on the weighted average number of shares in issue for
the period of 388,471,534 (2003 H1: 387,879,206).
Note 3 - Reconciliation of movements in shareholders' funds
Sharecapital Additional Foreign currency Retainedloss Total
US$'000 paid-incapital translationadjustment US$'000
US$'000 US$'000
US$'000
As at January 1, 1,177 397,540 16 (314,877) 83,856
2004
Exercise of - 10 10
options by
Employees
Loss for the ---- ---- ----- (6,918) (6,918)
period
As at June 30, 1,177 397,550 16 (321,795) 76,948
2004
(unaudited)
Note 3 - Material difference between Israeli and UK GAAP
The material difference between Israel and UK GAAP, as applicable to the
Group's financial statements, is the accounting treatment with regard to
employees share option schemes. Israeli GAAP does not require any reflection in
the financial statements for the difference, if any, at the date of the award,
between the fair value of the share and the exercise price of the option. Under
UK GAAP (UITF 17) such a difference is charged to the profit and loss account,
basically over the vesting period of the options.
Had the company applied such UK GAAP, the loss and the loss per share, for the
six months ended June 30, 2004 would have increased by $352 thousands and $0.09
per share, respectively and for the six months ended June 30, 2003 the loss and
the loss per share would have increased by $674 thousands and $0.17 per share,
respectively.
BATM Advanced Communications Limited - Interim results 2004