Interim Results
BATM Advanced Communications Ld
14 September 2006
BATM Advanced Communications Limited - 2006 interim results
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 2006.
Six months ended 30th June 2006(H1) 2005(H1)
Turnover $34.1m $26.2m
Gross Profit $14.0m $11.1m
Operating profit (loss) $ 3.5m $(2.4)m
Pre-tax profit (loss) $ 4.7m $(1.7)m
Profit (loss) per share 1.14c (0.45)c
Half Year Highlights
• Net Profit of $4.4m (H1 2005: loss of $1.7m)
• Revenue growth of 30% over comparable period last year
• Gross margins of 41% compared with 39% for full year 2005 and 36% for
H2 of 2005
• Acquisition of Metrobility Optical Systems Inc. in June for $6.85m
• Strong cash position of $45.4m at 30 June 2006 ($47.1m at 30 June 2005)
Dr Zvi Marom, Chief Executive of BATM, said:
'These results mark a significant period in the Company's progress. Our
recovery from the difficult trading conditions of the last 5 years has been
marked by a return to profitability and the business relationships that we have
established and built upon provide a substantial underpinning of our prospects
for future growth.
'We are encouraged by these favorable results and look forward to a continuation
of our renewed, profitable, strong growth into the second half of this year and
beyond.'
For further information please contact: 14 Sept Thereafter
BATM Advanced Communications Limited
Dr Zvi Marom, Chief Executive 020 7936 9605 00972 9 866 2525
Ofer Bar-Ner, Chief Financial Officer 020 7936 9605 00972 9 866 2525
Dresdner Kleinwort Wasserstein
James Rudd 020 7623 8000 020 7623 8000
Shore Capital
Graham Shore 020 7408 4090 020 7408 4090
Threadneedle Communications
Graham Herring / Josh Royston 020 7936 9605 020 7936 9605
Chairman's Statement
Financial Performance
Revenue for the period was $34,117,000 (H1 2005: $26,177,000), an increase of
30%, which is primarily related to our successful relationships with existing
customers and the addition of a number of new ones in the period.
Our gross profit margin was 41% (2005: 39%, H2: 2005: 36%, H1: 2005: 42%). As
expected, gross margins returned to our targeted levels of above 40%.
Whilst revenues increased significantly during the first half of 2006, selling,
general and administrative expenses of $6,244,000 were maintained at the same
level as last year (H1 2005: $6,222,000). As a percentage of revenue, selling,
general and administrative expenses were 18%, reflecting a decrease of 25%
compared with last year (H1 2005: 24%).
Gross R&D expense in the first half of 2006 was $4,533,000 (H1 2005:
$5,183,000), a decrease of 13%. This decrease is primarily related to the
restructuring of our R&D team in the US. After contributions from the Israeli
Chief Scientist and from the European Community, net research and development
expenditure was $3,945,000 (H1 2005: $4,798,000).
Operating profit after amortization of intangible assets was $3,511,000 for the
first half of 2006 (H1 2005: loss $2,427,000).
Financial income was $1,206,000 (H1 2005: $689,000). This increase is primarily
related to increased gains from the sale of marketable securities, an element of
which was a one off gain of approximately $300,000.
Net profit after amortization of intangible assets and tax, amounted to
$4,439,000 (H1 2005: Loss $1,737,000), resulting in a basic profit per share of
1.14 cents (H1 2005: Loss 0.45 cents).
Our balance sheet remains strong with cash of $45.4m (H1 2005: $47.1m). The
majority of the decrease in cash compared to last year resulted from our
investment of approximately $1.8 million in Metrobility Optical Systems, Inc.
which was completed on 30 June 2006. Period end cash is comprised as follows:
Cash and deposits up to three months duration of $6.6 million; short-term
investments up to one year of $34.9 million; and long-term investments for more
than one year of $3.9 million. We continue to exercise a conservative investment
strategy maintaining most balances in bank deposits.
Sales and Marketing
We have continued with our strategy both to broaden our relationships with
existing OEM clients as well as developing new relationships. As reported in
May, we are expanding an existing relationship with a leading telecom customer
to secure business now that will materialize over the next several years. In
addition, as reported in February and March, we are signing OEM agreements and
have started doing business with new partners. We are optimistic that this trend
of expanding business relationships will continue into the second half of 2006
as well as for 2007 and beyond.
In addition to our success with our OEM clients, we expect that our new products
for Metro Ethernet rings and VOIP solutions will continue to provide growth
opportunities for our direct business.
Research and Development and New Products
As carriers continue to migrate to IP and Ethernet based infrastructure, we
continue to enhance our solutions in these areas. Our major investment is in our
software platform. This software platform is expanding to include additional
resiliency capabilities as well as different layout configurations. Support for
legacy services is another area where we have a unique position in the market.
We are also working on releasing additional hardware platforms, all based on our
unique software. These new platforms will allow us to present complete Ethernet
based solutions for the access and metro space.
Plans to integrate Metrobility's product line with our solutions are well
underway. Together with the Metrobility products, we are now positioned to
provide even more solutions for our customers' needs.
In the VOIP area, we have released a new version of our popular residential
solution. We are building on this success and will introduce a new access
solution for business customers before the end of the year. These products are
designed to meet the needs of carriers as they migrate services to IP based
networks.
Investment
On 21 June 2006, we announced the acquisition of the business and assets of
Metrobility Optical Systems, Inc. for a total consideration of $6.85m payable in
cash over the next two years. Metrobility's products complement our offerings in
both the US market and South America. We expect to integrate them into our US
operations as soon as possible.
Prospects
We are encouraged by these favorable results and look forward to a continuation
of our renewed, profitable, strong growth in the second half of this year and
beyond.
Peter Sheldon
Chairman
14 September 2006
BATM ADVANCED COMMUNICATIONS LTD.
--------------------------------
CONSOLIDATED INCOME STATEMENTS
------------------------------
Six months ended June Six months ended June
30, 2006 30, 2005
--------------------- ---------------------
$US'000 $US'000
--------- ---------
Unaudited Unaudited
--------- ---------
Revenues 34,117 26,177
Cost of revenues 20,149 15,109
-------- --------
Gross profit 13,968 11,068
Operating expenses
Research and development
expenses, net 3,945 (*)4,798
Sales and marketing expenses 4,808 (*)4,584
General and administrative
expenses 1,436 (*)1,638
Amortization of intangible assets 268 2,475
-------- --------
Total operating expenses 10,457 13,495
-------- --------
Operating profit (loss) 3,511 (2,427)
Finance income, net 1,206 689
Other income, net 2 1
-------- --------
Profit (loss) before tax 4,719 (1,737)
Tax (280) -
-------- --------
Profit (loss) for the period 4,439 (1,737)
======= =========
Profit (loss) per share (in cents) basic 1.14 (0.45)
-------- --------
Profit (loss) per share (in cents) diluted 1.12 (0.45)
-------- --------
(*) Restated to reflect stock options granted to employees
BATM ADVANCED COMMUNICATIONS LTD.
--------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
June 30,
2 0 0 6 2 0 0 5
US$ in thousands
Unaudited
Non-current assets
Intangible assets 7,181 -
Property, plant and equipment 10,606 10,628
Investment in companies 3,475 3,688
Long-term investments 3,959 8,607
-------- --------
Total non-current assets 25,221 22,923
-------- --------
Current assets
Inventories 12,128 10,322
Short term investments 34,888 37,736
Trade and other receivables 17,027 11,810
Cash and cash equivalents 6,592 801
-------- --------
70,635 60,669
-------- --------
-------- --------
Total assets 95,856 83,592
======== ========
Current liabilities
Short-term credit 2,254 -
Trade and other payables 17,495 13,782
-------- --------
19,749 13,782
-------- --------
-------- --------
Net current assets 50,886 46,887
-------- --------
Non-current liabilities
Liability for employee termination
benefits, net 369 402
Other long-term Liabilities 2,560 -
-------- --------
2,929 402
-------- --------
Total liabilities 22,678 14,184
-------- --------
Net assets 73,178 69,408
======== ========
Equity
Share capital 1,178 1,177
Share premium account 398,415 (*)397,610
Foreign currency translation adjustment 16 16
Deficit (326,431) (*)(329,395)
-------- --------
Total equity 73,178 69,408
======== ========
(*) Restated to reflect stock options granted to employees
BATM ADVANCED COMMUNICATIONS LTD.
--------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
Six months ended June Six months ended June
---------------------- ----------------------
30, 2006 30, 2005
---------------------- ----------------------
$US'000 $US'000
--------- ---------
Unaudited Unaudited
--------- ---------
Net cash used in operating
activities (Appendix A) (1,747) (3,387)
-------- --------
Investing activities
Investment in short-term investments (11,031) (5,965)
Investment in long-term investments (474) (8,445)
Proceeds from long-term investments 3,092 18,075
Purchase of property, plant and
equipment (378) (648)
Investment in a company (87) -
Acquisition of subsidiary
(Appendix B) (1,863) -
-------- --------
Net cash from (used in) investing
activities (10,741) 3,017
-------- --------
Financing activities
Increase in short-term bank credit 431 -
Exercise of share based options
by employees 172 18
-------- --------
Net cash from financing activities 603 18
-------- --------
Decrease in cash and cash
equivalents (11,885) (352)
Cash and cash equivalents at the
beginning of the period 18,477 1,153
-------- --------
Cash and cash equivalents at the
end of the period 6,592 801
======== ========
BATM ADVANCED COMMUNICATIONS LTD.
--------------------------------
APPENDICES TO CONSOLIDATED STATEMENT OF CASH FLOWS
--------------------------------------------------
APPENDIX A
----------
RECONCILIATION OF PROFIT (LOSS) FOR THE PERIOD TO NET CASH
USED IN OPERATING ACTIVITIES
Six months ended Six months ended
---------------- ----------------
June 30, 2006 June 30, 2005
---------------- ----------------
$US'000 $US'000
--------- ---------
Unaudited Unaudited
----------- -----------
Profit (loss) for the period 4,439 (*)(1,737)
Amortization of intangible assets 268 2,475
Depreciation of property, plant and equipment 455 607
Stock options granted to employees 280 (*)43
Increase (decrease) in liability of
employee termination benefits, net (3) 26
Loss (profit) from marketable securities (303) 154
Interest incurred on investments (640) (586)
-------- --------
Operating cash flow before movements in
working capital 4,496 982
Decrease (increase) in Inventory 32 (2,897)
Decrease (increase) in receivables (4,782) (2,031)
Increase (decrease) in payables (1,493) 559
-------- --------
Net cash used in operating activities (1,747) (3,387)
======== ========
APPENDIX B
----------
ACQUISITION OF SUBSIDIARY
Six months ended June 30, 2006
------------------------------
$US'000
---------
Unaudited
-----------
Net assets acquired
Property, plant and equipment 206
Inventory 1,715
Trade and other receivables 1,450
Trade and other payables (1,173)
Short-term bank credit (1,823)
-------
375
Intangible assets 5,772
-------
Total consideration 6,147
Less-consideration recorded as liability (4,284)
-------
Total cash consideration 1,863
-------
(*) Restated to reflect stock options granted to employees
BATM ADVANCED COMMUNICATIONS LTD
--------------------------------
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
Note 1 - General
The unaudited results for the six months ended 30th June 2006 have been prepared
in accordance with generally accepted accounting principles set out in the
Annual Report and Accounts for the year ended 31st December 2005. The unaudited
results for the six months ended 30th June 2005 were prepared on the same basis.
Note 2 - Profit (loss) per share
Profit (loss) per share is based on the weighted average number of shares in
issue for the period of 389,031,244 (2005 H1: 388,541,758). The number used for
the calculation of the diluted profit per share for H1:2006 (which includes the
effect of dilutive stock option plans) is 395,107,967 shares.
Note 3 - Reconciliation of movements in shareholders' equity
Foreign
Share currency
Share Premium translation
capital Account adjustment Deficit Total
------- ------- ---------- ------- --------
US$'000 US$'000 US$'000 US$'000 US$'000
------- ------- ---------- ------- --------
As at January 1, 2006 1,178 (*)397,963 16 (*)(330,870) 68,287
Stock options granted to
employees 280 280
Exercise of share
based options by
employees (**) 172 172
Profit for the period - - - 4,439 4,439
------ ------ ------ ------ ------
As at June 30,
2006 (unaudited) 1,178 398,415 16 (326,431) 73,178
====== ====== ====== ====== ======
(*) Restated to reflect stock options granted to employees
(**) Less than $1 thousands
Note 4 - Material difference between Israeli and UK GAAP
The material difference between Israeli and UK GAAP, as applicable to the
Group's financial statements, is the accounting treatment with regard to
employees share option schemes. Israeli GAAP require the 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
starting only from January 1, 2006 ( while restating the comparative figures for
grants made after March 15, 2005). Under UK GAAP (FRS 20 'share-based payments')
such a difference is charged to the income statement, basically over the vesting
period of the options.
Had the company applied UK GAAP, the profit and the profit per share, for the
six months ended June 30, 2006 would have decreased by $47 thousands and $0.012
per share, respectively and for the six months ended June 30, 2005 the loss and
the loss per share would have increased by $82 thousands and $0.02 per share,
respectively.
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