Interim Results

BATM Advanced Communications Ld 10 September 2007 BATM Advanced Communications Limited 2007 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 2007. Half Year Highlights Six months ended 30 June 2007(H1) 2006(H1) Change Revenue $39.6m $34.1m +16% Gross profit $18.1m $13.9m +30% Operating profit $4.8m $3.4m +44% Pre-tax profit $5.7m $4.5m +27% Net profit $5.2m $4.3m +21% Profit per share 1.33c 1.10c +21% • Improved gross margins of 46% compared with 42% for full year 2006 and 41% for H1 of 2006 • Enhanced cash position of $51.9m at 30 June 2007 ($45.4m: 30 June 2006) • Long term supply agreement with major EU telecoms operator to provide Carrier Ethernet equipment • Distribution agreement with CTC Itochu, one of the largest distributors to the Japanese technology market Post Period End • Initial order for pilot programme for Japan's largest telecom operator Dr Zvi Marom, Chief Executive of BATM, said: 'I am very pleased that we have sustained the growth of our revenues and profitability into the first half of 2007. Important customer relationships cultivated during the past two years, combined with the increasing demand for our software platform, have significantly contributed to our strong operating results.' 'We will continue to execute our strategy and are confident of our prospects for the remainder of the year, where we expect revenues for the second half of 2007 to exceed those of the first half, underpinned by strong customer relationships and demand across all sales channels. The signing of three major new contracts, all due to impact next year, provide us with a healthy pipeline of new business for 2008 and beyond.' For further information please contact: 10 Sept Thereafter BATM Advanced Communications Limited Dr Zvi Marom, Chief Executive 020 7936 9606 00972 9 866 2525 Ofer Bar-Ner, Chief Financial Officer 020 7936 9606 00972 9 866 2525 Kaupthing Singer & Friedlander Nicholas How / Marc Young 020 3205 7620 020 3205 7620 Shore Capital Graham Shore 020 7408 4090 020 7408 4090 Threadneedle Communications Josh Royston / Graham Herring 020 7936 9606 020 7936 9606 Chairman's Statement Financial Performance I am happy to report that the first six months of 2007 have shown continued growth with revenues of $39,615,000 (H1 2006: $34,117,000), reflecting an increase of 16% compared with the same period last year. Revenue growth reflected increased purchases by certain strategic customers and greater demand for our new software platform. Our gross profit margin was 46% during the period (2006: 42%, H2 2006: 44%, H1 2006: 41%). The improved gross margin performance is a result of successful cost-reduction efforts, improved product mix and high software content and services. Selling, general and administrative expenses were $7,873,000 (H1 2006: $6,260,000) reflecting an increase of 26% over the same period last year. As a percentage of revenue, selling, general and administrative expenses were 20% (H1 2006: 18%). The increased costs in this area reflect our growing trading activities, especially in the Far East, and ensure that we are providing the best quality of service to our customers. The significant agreements signed in recent months demonstrate that these sales efforts are delivering results Net R&D expense in the first half of 2007 was $4,887,000 (H1 2006: $3,963,000), reflecting an increase of 23%. During the period we invested in the development of new products such as the Access 500 VoIP IAD and enhanced versions of our very successful T-Marc, T5 and T-Metro products. However, the increased cost arises principally from the revaluation of the Israeli Shekel and Euro against the US$. Operating profit was $4,836,000 for the first half of 2007 (H1 2006: $3,368,000), an increase of $1,468,000 or 44%. Net finance income was $1,194,000 (H1 2006: $1,145,000). Net profit after tax amounted to $5,214,000 (H1 2006: $4,284,000), resulting in a basic profit per share of 1.33 cents (H1 2006: 1.10 cents), an increase of 22% and 21% respectively. Our balance sheet remains strong with effective liquidity of $51.9m (H1 2006: $45.4m). Period end cash is comprised as follows: cash and deposits up to three months duration of $12.0 million; short-term investments up to one year of $31.0 million; and long-term investments for more than one year of $8.9 million. We continue to exercise a very conservative investment strategy, maintaining most balances in bank deposits. Sales and Marketing Our relationships with OEM clients have continued to be an important element in our business. A new relationship with a significant distributor in Japan has helped our expansion into the lucrative Far East market and, as announced at our AGM, we have recently received an initial order for a pilot programme for Japan's largest telecom operator. We expect our presence in the Far East to grow substantially in due course. We have also signed a long-term supply agreement with a major European telecoms operator to provide Carrier Ethernet equipment, which is likely to be worth several million US dollars. As a result of our success in developing new markets, we remain optimistic that we can continue to expand our existing relationships and develop more in the future. Building on the success with our OEM clients, we are also experiencing increased demand for new products for Metro Ethernet rings and VoIP solutions. Research and Development and New Products We believe that our robust operating system offers a significant area of growth for the company. To that end, we are continuing to invest heavily in BiNOS. As the cornerstone of all of our switching products, we have committed our R&D resources to ensure that our (leading)position in the market is maintained. We will shortly be offering our customers a Linux real time embedded version of the BiNOS giving them greater flexibility and more choices. We have added a suite of new features to our EdgeGate CPE family of products to address new applications in the residential and small business markets. Our development efforts are aimed at meeting the ever-increasing demand for more bandwidth with unique product solutions. Development advancements in Ethernet demarcation have resulted in our new T-Marc 300 demarcation series already having been requested by several customers. Incorporating Advanced Layer 2 (Optional L3) Networking as well as MPLS/Hvpls QOS traffic shaping and load balancing, this family of products is designed to provide significant value to service providers delivering converged services. More products within this range are expected to be introduced during 2008. Investment During the first half of 2007, $310,000 was recorded as Impairment of Investments in relation to one small investment in Lynx Photonic Networks Inc which we have now completely written off. Prospects The further development of our OEM strategy has been a key element of our success in the first six months of 2007. Looking forward, strong forecasts from our customers and a good success rate in tenders provides confidence for the medium term. We expect revenues for the second half of the year, which has started strongly, to exceed those of the first half. The signing of three major new contracts, all due to impact next year, provide us with a healthy pipeline of new business for 2008 and beyond.' Peter Sheldon Chairman 10 September 2007 BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED INCOME STATEMENTS Six months Six months ended June 30 ended June 30 2007 2006 $US'000 $US'000 ----------- ----------- Unaudited Unaudited ----------- ----------- Revenue 39,615 34,117 Cost of sales 21,501 (*)20,258 ----------- ----------- Gross profit 18,114 13,859 Sales and marketing expenses 5,702 (*)4,811 General and administration expenses 2,171 (*)1,449 Research and development expenses 4,887 (*)3,963 Other expenses 518 268 ----------- ----------- Total operating expenses 13,278 10,491 ----------- ----------- Operating profit 4,836 3,368 ----------- ----------- Investment revenue 975 953 Other gains 365 (*)217 Finance costs (146) (25) Impairment of investments (310) - ----------- ----------- Profit before tax 5,720 4,513 Tax (470) (229) ----------- ----------- Profit for the period 5,250 4,284 =========== ============ Attributable to Equity holders of the parent 5,214 4,284 =========== ============ Minority interests 36 - ----------- ----------- 5,250 4,284 ----------- ----------- Profit per share (in cents) basic 1.33 1.10 ------- ------- Profit per share (in cents) diluted 1.32 1.08 ----------- ----------- (*) Restated to reflect IFRS BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED BALANCE SHEETS June 30 2 0 0 7 2 0 0 6 $US'000 Unaudited Non-current assets Goodwill 1,984 1,984 Other intangible assets 6,672 4,897 Property, plant and equipment 9,262 (*)9,316 Investment in companies - 3,475 Held to maturity investments 8,905 3,959 Deferred tax assets 505 700 ----------- ----------- Total non-current assets 27,328 24,331 Current assets Inventories 13,929 12,128 Short term investments 30,950 34,888 Trade and other receivables 19,361 17,027 Cash and cash equivalents 12,027 6,592 76,267 70,635 Total assets 103,595 94,966 Current liabilities 134 985 Short-term bank credit 17,891 16,696 Trade and other payables 177 164 Current tax liabilities 2,310 1,502 Provisions 20,512 19,347 Net current assets 55,755 51,288 Non-current liabilities Long-term payables - 1,804 Retirement benefit obligation 293 369 Long-term provisions 385 756 678 2,929 Total liabilities 21,190 22,276 Net assets 82,405 72,690 Equity Share capital 1,186 1,178 Share premium account 400,118 (*)398,592 Revaluation reserve - (*)(158) Accumulated deficit (319,107) (*)(326,922) Equity attributable to equity holders of the parent 82,197 72,690 Minority Interest 208 - Total equity 82,405 72,690 (*) Restated to reflect IFRS BATM ADVANCED COMMUNICATIONS LTD. CONSOLIDATED STATEMENT OF CASH FLOWS Six months Six months ended June 30 ended June 30 2007 2006 $US'000 $US'000 ----------- ----------- Unaudited Unaudited ----------- ----------- Net cash from (used in operating activities (Appendix A) 1,559 (1,880) Investing activities Interest received 1,195 516 Dividend received from available for sale investments 15 15 Proceeds on disposal of held to maturity investments - 3,000 Proceeds on disposal of available for sale investments 24,370 33,181 Proceeds on disposal of deposits 16,075 5,000 Proceeds on disposal of investment in a company 691 - Purchases of property, plant and equipment (653) (378) Purchases of held to maturity investments (5,494) - Purchases of available for sale investments (26,398) (33,550) Purchases of deposits (13,387) (19,525) Investment in a company - (87) Acquisition of subsidiaries (Appendix B) (1,969) (1,863) ----------- ----------- Net cash used in investing activities (5,555) (13,691) ----------- ----------- Financing activities Increase in short-term bank credit 46 431 Proceeds on issue of shares 614 172 ----------- ----------- Net cash from financing activities 660 603 ----------- ----------- Decrease in cash and cash equivalents (3,336) (14,968) Cash and cash equivalents at the beginning of the period 15,363 21,560 ----------- ----------- Cash and cash equivalents at the end of the period 12,027 6,592 BATM ADVANCED COMMUNICATIONS LTD. APPENDICES TO CONSOLIDATED STATEMENT OF CASH FLOWS APPENDIX A RECONCILIATION OF OPERATING PROFIT FOR THE PERIOD TO NET CASH FROM (USED IN) OPERATING ACTIVITIES Six months Six months ended June 30 ended June 30 2007 2006 $US'000 $US'000 ----------- ----------- Unaudited Unaudited ----------- ----------- Operating profit from continuing operations 4,836 3,368 Adjustments for: Amortization of intangible assets 518 268 Depreciation of property, plant and equipment 837 522 Stock options granted to employees 442 316 Increase (decrease) in retirement benefit obligation (17) 83 Decrease in provisions (6) (208) Operating cash flow before movements in working capital 6,610 4,349 Decrease(increase) in Inventory 435 (485) Increase in receivables (2,138) (4,750) Decrease in payables (3,176) (949) Cash generated by operations 1,731 (1,835) Income taxes paid (26) (20) Interest paid (146) (25) Net cash from (used in) operating activities 1,559 (1,880) ============ APPENDIX B ACQUISITION OF SUBSIDIARIES Six months Six months ended June 30 ended June 30 2007 2006 $US'000 $US'000 ----------- ----------- Unaudited Unaudited ----------- ----------- Net assets acquired Property, plant and equipment 261 164 Inventory 1,188 1,198 Trade and other receivables 863 1,483 Trade and other payables (2,031) (1,860) Short-term bank credit (88) (985) Provisions - (257) Minority Interest (171) - ----------- ----------- 22 (257) Intangible assets 2,634 6,104 ----------- ----------- Total consideration 2,656 5,847 Less-consideration recorded as liability (687) (3,984) ----------- ----------- Total cash consideration 1,969 1,863 =========== =========== BATM ADVANCED COMMUNICATIONS LTD NOTES TO THE FINANCIAL STATEMENTS Note 1 - General The unaudited results for the six months ended 30th June 2007 have been prepared in accordance with International Financial Reporting Standards (IFRS) set out in the Annual Report and Accounts for the year ended 31st December 2006. The unaudited results for the six months ended 30th June 2006 were prepared on the same basis. Note 2 - Profit per share Profit per share is based on the weighted average number of shares in issue for the period of 390,778,083 (2006 H1: 389,031,244). The number used for the calculation of the diluted profit per share for H1:2007 (which includes the effect of dilutive stock option plans) is 395,288,758 shares (2006 H1: 395,107,967). Note 3 - Consolidated statements of changes in equity Share Premium Revaluation Accumulated Minority Share capital Account reserve Deficit Parent Interest Total equity US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 As at January 1, 2007 1,180 399,068 118 (324,321) 76,045 - 76,045 Stock options granted to employees 442 442 - 442 Exercise of share based options by employees 6 608 614 - 614 Released on disposal of available for sale investments (118) (118) - (118) Minority Interest acquired - 172 172 Profit for the period - - - 5,214 5,214 36 5,250 --------- --------- --------- --------- --------- --------- --------- As at June 30, 2007 (unaudited) 1,186 400,118 - (319,107) 82,197 208 82,405 This information is provided by RNS The company news service from the London Stock Exchange SMFEWSWSELU

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