Half Yearly Report

RNS Number : 5368M

BATM Advanced Communications Ld

18 August 2011

 



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

Six months ended 30 June	2011 (H1)	2010 (H1)	Change %
Revenue	$64.5m	$55.3m	16.64%
Gross profit	$23.3m	$19.8m	17.67%
Operating Profit (*)	$3.54m	$1.28m	176.6%
EBITDA	$4.5m	$2.1m	114.3%
Profit/ (loss) for the period	$1.85m	$(1.53)m
Earnings/ (loss) per share (basic)	$0.61	$(0.21)

(*) 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."

For further information please contact:	18 August	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
Singer Capital Markets
Shaun Dobson / Matthew Thomas	020 3205 7626	020 3205 7626
Shore Capital
Pascal Keane	020 7408 4090	020 7408 4090
Threadneedle Communications
Josh Royston / Graham Herring	020 7653 9850	020 7653 9850

Chairman's Statement

Financial Review

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.

Business Review

Telecoms Division

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.

Medical Division

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.

 Registration of Shares in Tel-Aviv

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.

Current Trading and Prospects

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

	Six months ended 30 June
	2 0 1 1	2 0 1 0
	US$ in thousands
	Unaudited	Unaudited
Revenues	64,527	55,285
Cost of revenues	41,234	35,487
Gross profit	23,293	19,798
	------------	------------
Operating expenses
Sales and marketing expenses	7,930	7,212
General and administrative expenses	5,291	4,781
Research and development expenses	6,532	6,522
Other operating expenses	1,996	2,656
Total operating expenses	21,749	21,171
	------------	------------
Operating profit (loss)	1,544	(1,373)
Finance income	2,323	2,529
Finance expenses	(1,190)	(1,494)
Profit / (loss)  before tax	2,677	(338)
Income tax	(824)	(1,194)
Profit / (loss) for the period	1,853	(1,532)
Attributable to:
Owners of the Company	2,452	(867)
Non-controlling interests	(599)	(665)
Income / (loss) for the period	1,853	(1,532)
Earnings / (loss) per share (in cents) basic	0.61	(0.21)
Earnings / (loss) per share (in cents) diluted	0.61	(0.21)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Six months ended 30 June 30,
	2 0 1 1	2 0 1 0
	US$ in thousands
	Unaudited	Unaudited
Profit / (loss) for the period	1,853	(1,532)
Exchange differences on translating foreign operations	1,824	(10,994)
Total Comprehensive Income (loss) of the Period	3,677	(12,526)
Attributable to:
Owners of the Company	4,321	(12,144)
Non-controlling interests	(644)	(382)
	3,677	(12,526)

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	30 June	30 June	31 December
	2 0 1 1	2 0 1 0	2 0 1 0
	US$ in thousands
	Unaudited	Unaudited	Audited
Non-current assets
Goodwill	13,895	11,060	11,300
Other intangible assets Property, plant and equipment Deferred tax asset	18,581 26,234 5,469	20,546 22,106 4,678	19,798 25,943 5,122
	64,179	58,390	62,163
Current assets
Inventories	26,255	19,792	19,470
Financial assets	35,807	32,622	38,079
Trade and other receivables	32,193	25,920	30,900
Cash and cash equivalents	18,856	30,173	22,087
	113,111	108,507	110,536
Total assets	177,290	166,897	172,699
Current liabilities Short-term bank credit Trade and other payables Provisions	4,850 36,646                 2,969               44,465	5,875 28,969 ________3,806 _______38,650	6,135 27,900 _3,190              37,225
Net current assets	68,646	69,857	73,311
Non-current liabilities Long-term payables	11,443	12,755	11,840
Retirement benefit obligation Total liabilities	984                12,427                56,892	793 _______13,548 _______52,198	884 _______12,724          49,949
Net assets	120,398	114,699	122,750
Equity
Share capital	1,215	1,214	1,215
Share premium account	406,747	406,263	406,504
Foreign currency translation reserve and other reserves	(8,637)	(14,673)	(8,798)
Accumulated Deficit	(279,916)	(279,802)	(277,236)
Equity attributable to equity holders of the:
Owners of the Company	119,409	113,002	121,685
Non-controlling interest	989	1,697	1,065
Total equity	120,398	114,699	122,750

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Six month ended on 30 June 2011

	Share Capital	Share Premium Account	Translation reserve		Other reserve	Accumulated Deficit	Attributable to owners of the Company	Non-Controlling Interests	Total equity
	US$ in thousands
As at 1 January  2011	1,215	406,504		(10,026)	1,228	(277,236)	121,685	1,065	122,750
Exercise of share based options by employees	-	60					60	-	60
Recognition of share-based payments		183					183	-	183
Purchase of non- controlling interest				(889)	(819)		(1,708)	568	(1,140)
Proposed Dividend						(5,132)	(5,132)	-	(5,132)
Comprehensive Income for the period	-	-		1,869		2,452	4,321	(644)	3,677
As at 30 June 2011 (unaudited)	1,215	406,747		(9,046)	409	(279,916)	119,409	989	120,398

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (cont.)

Six month ended on 30 June 2010

		Share Capital		Share Premium Account	Translation reserve		Other reserve		Accumulated Deficit		Attributable to owners of the Company	Non-Controlling Interests		Total equity
		US$ in thousands
As at 1 January 2010		1,214	405,961			(4,015)		7866	(270,808)	133,138			1,912	135,050
Exercise of share based options by employees		-	83							83			-	83
Recognition of share-based payments			219							219			-	219
Purchase of non- controlling interest								(167)		(167)			167	-
Proposed Dividend									(8,127)	(8,127)			-	(8,127)
Comprehensive loss for the period		-	-			(11,277)			(867)	(12,144)			(382)	(12,526)
As at 30 June 2010 (unaudited)		1,214	406,263			(15,292)		6199	(279,802)	113,002			1,697	114,699

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENT OF CASH FLOWS

	Six months ended 30 June
	2 0 1 1	2 0 1 0
	US$ in thousands
	Unaudited	Unaudited
Net cash from operating activities  (Appendix A)	32	7,208
	-------------	-------------
Investing activities
Interest received Proceeds on disposal of held to maturity investments Proceeds on disposal of property, plant and equipment Proceeds on disposal of financial assets carried at fair value through profit and loss Proceeds on disposal of deposits	393 - 61 - 24,268	570 1,183 - 13,108 21,805
Purchases of property, plant and equipment Purchases of financial assets carried at fair value through profit and loss Purchases of deposits	(1,045) - (22,605)	(1,881) (16,672) (19,328)
Net Cash outflow on acquisition of business combinations	(2,611)	(959)
Net cash used in investing activities	(1,539)	(2,174)
	-------------	-------------
Financing activities
Increase (decrease) in short-term bank credit	69	(1,779)
Bank loan received	-	1,500
Bank loan repayment	(2,072)	(462)
Purchase of non-controlling interest	(767)	-
Proceeds on issue of shares	60	83
Net cash used in financing activities	(2,710)	(658)
	-------------	-------------
Increase (decrease) in cash and cash equivalents	(4,217)	4,376
Cash and cash equivalents at the beginning of the period	22,087	28,095
Effects of exchange rate changes on the balance of cash held in foreign currencies	986	(2,298)
Cash and cash equivalents at the end of the period	18,856	30,173

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

	Six months ended 30 June
	2 0 1 1	2 0 1 0
	US$ in thousands
	Unaudited	Unaudited
Operating profit (loss)  from continuing operations Adjustments for:	1,544	(1,373)
Amortization of intangible assets	1,855	1,890
Depreciation of property, plant and equipment	1,106	1,299
Stock options granted to employees	183	219
Increase (decrease) in retirement benefit obligation	100	(82)
Increase (decrease) in provisions	(18)	14
Operating cash flow before movements in working capital	4,770	1,967
Decrease (Increase)  in Inventory	(5,577)	1,906
Decrease (Increase) in receivables	(678)	4,112
Increase (decrease) in payables	2,148	(236)
Cash generated by operations	663	7,749
Income taxes paid	(453)	(169)
Interest paid	(178)	(372)
Net cash from operating activities	32	7,208

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

Six months ended 30 June 2011
	Telecommunications		Medical	Total
US$ in thousands
Revenues		42,568	21,959	64,527
Operating profit (loss)*		5,442	(1,902)	3,540

Six months ended 30 June 2 0 1 0
	Telecommunications	Medical	Total
US$ in thousands
Revenues	35,648	19,637	55,285
Operating profit (loss)*	1,775	(492)	1,283

*   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.

 

END

 

 

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