Interim Results

RNS Number : 9479B

BATM Advanced Communications Ld

26 August 2008

 



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

	Share capital	Share Premium  Account	Translation reserve	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).

 

END

 

 

IR SEFFFLSASEFA