Interim Results
BATM Advanced Communications Ld
08 September 2005
For immediate release 8 Sep 2005
BATM Advanced Communications Limited - 2005 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 2005.
Six months (*) 2005(H1) 2004(H1)
Turnover $26.2m $19.5m
Gross Profit $11.1m $8.3m
Operating profit (loss) $ 0.1m $(2.8)m
Pre-tax profit (loss) $ 0.8m $(1.9)m
Profit (loss) per share 0.20c (0.51)c
(*) Pro forma results exclude amortization of goodwill (2005 & 2004).
Highlights
• Revenue growth of 34% over the same period last year
• Operating profit pre goodwill amortization the first profitable half since
2000
• Gross Profit margin of 42.3% compared with 42.8% in the same period of
2004
• Strong cash position of $47.1m at 30 June 2005
Dr Zvi Marom, Chief Executive of BATM, said:
These results show the success of our business strategy during the last few
difficult years of trading. Our products are proving themselves in testing
and competitive markets. The significant increase in sales and continued
attention to margins and cost control has resulted in a return to operating
profitability earlier than we had expected. The improved trading outlook for
the Company and our healthy cash position, suggests that we will finish the
year in the strongest position for many years
For further information please contact: 8 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
Michael Covington 020 7623 8000 020 7623 8000
Shore Capital
Graham Shore 020 7408 4090 020 7408 4090
Global Equity IR 079 5620 6270 079 5620 6270
Amira Bardichev
Chairman's Statement
Financial Performance
Turnover for the period was $26,177,000 (H1 2004: $19,461,000), an increase
of 34% compared with last year. This increase is primarily related to
increased demand for our new VOIP products and our successful OEM
relationships, particularly with Nokia and Alcatel.
Gross profit margin was 42.3% of turnover (H1 2004: 42.8%).
Despite the increase in turnover, selling, general and administrative
expenses remained at broadly the same level and totaled $6,203,000 (H1 2004:
$6,130,000) and as a percentage of turnover represented 24% (H1 2004: 31%).
We have maintained a significant investment in Research and Development
(R&D). Gross R&D in this period was $5,159,000 (H1 2004: $5,300,000) a
decrease of 2.7%. After contributions from the Israeli Chief Scientist and
from the European Community, net research and development expenditure was
$4,774,000 (H1 2004: $4,960,000).
Pro forma operating profit, before goodwill amortization, amounted to
$91,000 (H1 2004: loss $2,753,000), Operating loss after goodwill
amortization was $2,384,000 (H1 2004: loss $7,702,000). Amortization on
goodwill on our acquisitions has formed a significant cost since 2000. The
final tranche of $2,475,000 has been expensed in this period and there will
be no further costs on our acquisitions to date to be borne moving forward.
Financial income was $689,000 (H1 2004: $890,000). This decrease is
primarily as a result of reductions in value of our marketable securities.
Pro forma profit after taxes and minorities, excluding the effect of the
amortization of goodwill, was $781,000 (H1 2004: loss $1,969,000), resulting in
an income per share of 0.20 cents (H1 2004: loss 0.51 cents). Actual loss after
taxes, including the effect of goodwill amortization, amounted to $1,694,000 (H1
2004: Loss $6,918,000), resulting in a loss per share of 0.44 cents (H1 2004:
Loss 1.78 cents).
Our balance sheet remains strong with cash of $47.1m (H1 2004: $49.5m) at
the period end. The principal reason for the reduction in our cash position
is due to an increase in inventory to support the growth in sales. We
continue to exercise a conservative treasury strategy, maintaining most
balances in bank deposits.
Sales and Marketing
We have experienced significant growth in both our OEM business as well as
our VOIP initiative. Overall these segments of our business, which are up
300% over the same period last year, are the drivers behind our growth. Our
relationships with our 2 OEM partners have continued to expand during the
period. We expect to win additional business from these channels during the
second half of this year. These new contracts will have a positive impact on
our business from 2006 onward.
We will continue to focus in the second half on expanding our relationships
with our existing partners as well as finding new potential partners. We
will also target direct customers with our new Ethernet and VOIP offerings.
Research and Development and New Products
We continue to expand our line of Ethernet based products to allow delivery
of both IP and TDM traffic over Ethernet transport. This expansion of our
portfolio is driven by specific requirements from our major channels. The
investment will allow us to strengthen our position as a player in the
Ethernet access space.
We are adding circuit emulation support to our Ethernet switches to allow
both fixed and mobile operators to backhaul TDM as well as IP based traffic
over Ethernet links. These capabilities will be available both on branded
and non-branded products.
In addition we are expanding our residential termination devices to support
delivery of Ethernet and TDM services to business users over Ethernet links.
We will launch a line of Ethernet based bridges in the second half of the
year to allow transport of Ethernet services over copper pairs. This market
is driven by the demand for Ethernet services and the lack of fiber in the
access.
We also continue to expand our VOIP offerings with new products for
residential and business customers.
Investment
In July 2005, we purchased certain assets and liabilities of Integral Access
Inc., headquartered in Chelmsford, Massachusetts. We are integrating this
business into our US based subsidiary as quickly as possible and expect an
early profitable return on our modest investment.
Prospects
We expect the trend of the first half to continue into the second half and
to report a significantly improved performance for the year as a whole.
Peter Sheldon
Chairman
8 September 2005
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months ended June Six months ended June
30, 2005 30, 2004
$US'000 $US'000
Unaudited Unaudited
Turnover 26,177 19,461
Cost of sales 15,109 (*)11,124
------- ------
Gross profit 11,068 8,337
Operating expenses
Research and development 5,159 5,300
costs
Less - participation 385 340
------- ------
Research and development 4,774 4,960
costs, net
Selling, general and 6,203 (*)6,130
administrative expenses
Amortization of Goodwill 2,475 4,949
------- ------
Total operating expenses 13,452 16,039
------- ------
Operating loss (2,384) (7,702)
Financial income, net 689 890
Other income, net 1 13
------- ------
Loss before Group's share
in loss of
associated company (1,694) (6,799)
Group's share in loss of
associated company - (119)
------- ------
Loss for the period (1,694) (6,918)
------- ------
Loss per share (in cents) (0.44) (1.78)
------- ------
(*) Reclassified
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED BALANCE SHEET
As at As at
30th June 30th June
2005 2004
$US'000 $US'000
Unaudited Unaudited
Fixed assets
Tangible assets 10,628 10,790
Goodwill, net - 7,424
-------- ---------
Total fixed assets 10,628 18,214
Current assets
Inventory 10,322 5,832
Debtors 11,810 7,853
Short-term investments 37,736 22,764
Cash and cash equivalents 801 3,185
-------- ---------
60,669 39,634
Creditors: amounts falling due within one year 13,782 8,923
-------- ---------
Net current assets 46,887 30,711
Long-term investments
Investment in associated company - 1,145
Investment in other companies 3,688 3,688
Long-term investments in banks 8,607 23,563
-------- ---------
12,295 28,396
-------- ---------
Total assets less current liabilities 69,810 77,321
Non-current liabilities
Severance pay fund, net of provision (402) (373)
-------- ---------
Net assets 69,408 76,948
-------- ---------
Capital and reserves
Share capital 1,177 1,177
Additional paid-in capital 397,567 397,550
Foreign currency translation adjustment 16 16
Retained loss (329,352) (321,795)
-------- ---------
Shareholders' funds 69,408 76,948
-------- ---------
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended June Six months ended June
30, 2005 30, 2004
$US'000 $US'000
Unaudited Unaudited
Net cash outflow from (3,387) (1,121)
operating activities
---------- ----------
Investing activities
Repayment of loan to - 77
associated company
Acquisition of fixed (648) (1,285)
tangible assets
Proceeds from (5,965) 2,186
(investment
in)short-term investments
Investment in long term (8,445) -
bank investments
Proceeds from long term 18,075 -
bank investments
---------- ----------
Net cash inflow from 3,017 978
investing activities
---------- ----------
Financing activities
Exercise of options by 18 10
employees
---------- ----------
Net cash inflow from 18 10
financing activities
----------- -----------
Decrease in cash
and cash equivalents (352) (133)
Cash and cash
equivalents at
the beginning of the
period 1,153 3,318
---------- ----------
Cash and cash
equivalents at 801 3,185
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 ended June Six months ended June
30, 2005 30, 2004
$US'000 $US'000
Unaudited Unaudited
Loss for the period (1,694) (6,918)
Company's share in loss - 119
of associated company
Amortization of goodwill 2,475 4,949
Depreciation and 607 723
amortization
Increase in severance
pay fund,
net of provision 26 14
Decrease (increase) in (2,897) 1,851
Inventory
Decrease (increase) in (2,031) 470
debtors
Increase (decrease) in 559 (1,623)
creditors
Loss from marketable 154 51
securities
Interest incurred on (586) (755)
investments
Interest incurred on - (2)
loan for affiliate
Net cash outflow from (3,387) (1,121)
operating activities
BATM ADVANCED COMMUNICATIONS LTD
NOTES TO THE FINANCIAL STATEMENTS
Note 1 - General
The unaudited results for the six months ended 30th June 2005 have been
prepared in accordance with generally accepted accounting principles set out
in the Annual Report and Accounts for the year ended 31st December 2004. The
unaudited results for the six months ended 30th June 2004 were prepared on
the same basis.
Note 2 - Loss per share
Loss per share is based on the weighted average number of shares in issue
for the period of 388,541,758 (2004 H1: 388,471,534).
Note 3 - Reconciliation of movements in shareholders' funds
Foreign
Additional currency
Share paid-in capital translation Retained
capital US$'000 adjustment loss Total
US$'000 US$'000 US$'000 US$'000
As at January 1,177 397,549 16 (327,658) 71,084
1, 2005
Exercise of (*) 18 18
options by
Employees
Loss for the ---- ---- ----- (1,694) (1,694)
period
-------- --------- ------- --------- ---------
As at June 1,177 397,567 16 (329,352) 69,408
30, 2005
(unaudited)
-------- --------- ------- --------- ---------
(*) Less than $1 thousand
Note 4 - 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 of the fair value, if any, at the date of the
award, of stock options granted to employees. Under UK GAAP (FRS 20, Share
Based Payments, which is identical to IFRS 2) such a fair value is charged
to the profit and loss account, 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, 2005 would have increased by $147 thousand and
$0.038 per share, respectively and for the six months ended June 30, 2004
the loss and the loss per share would have increased by $296 thousand and
$0.076 per share, respectively.
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