Preliminary Results

RNS Number : 9651G

BATM Advanced Communications Ld

10 March 2015

 

10 March 2015

BATM Advanced Communications Limited

("BATM" or the "Group")

Preliminary Results for 2014

BATM Advanced Communications Limited (LSE: BVC; TASE: BATM), a leading provider of real-time technologies for the networked telecoms and medical laboratory equipment markets, announces its preliminary results for the year ended 31 December 2014.

Financial Summary

• Group revenues amounted to $109.2m (2013: $114.2m)
• Gross profit of $34.1m (2013: $39.6m)
• EBITDA of $0.9m (2013: $2.1m)
• Net loss for the year reduced to $3.2m (2013: $4.5m loss)
• In the second half of the year, inventory write-off of $1.6m, mostly attributable to the legacy Telecom products
• Adverse foreign exchange impacted Medical division revenues in H2 2014
• Basic loss per share from continuing and discontinued operations of 0.79¢ (2013: 1.12¢ loss per share)
• As at 31 December 2014, the Group had cash and cash equivalents and financial assets of $34.9m (30 June 2014: $36.1m; 31 December 2013: $40.8m)

Operational Summary

Medical division (54% of total sales)

• Distribution unit  continued to grow sales in all territories in which it operates
• Substantial increase in capacity achieved by Pathogenic Waste Treatment Sterilisation unit in H2 2014, through moving into significantly larger facility, enabling it to deliver solid revenue growth in Q4 2014
• Diagnostics unit received certifications of diagnostic kits in several new geographies
• Post period-end, Diagnostics unit was granted a license by the China Food and Drug Administration of People's Republic of China for the importation, marketing and sale of its diagnostic kit for hepatitis C; and the unit is installing new equipment to enable it to substantially increase production capacity

Telecom division (46% of total sales)

• Continued to implement the strategic change to focus on Tier 1 clients, SDN (Software Defined Networking) and NFV (Network Function Virtualisation) solutions
• Won significant multi-year Access Carrier Ethernet contracts with two Tier 1 operators in the APAC region
• Achieved a market first with the introduction of SDN support on its Network Access portfolio of products
• Successfully launched the Open Metro Edge (OME) set of products to enable Network Virtual  Functions
• Introduced four virtual software functions - Firewall, Cloud Tunnelling, Router and Measurement Utility - thus solidifying its software-based offering
• Continued roll out, together with Cisco Systems and Israeli Electric Company, of fibre optic project to create new fibre carrier in Israel to compete with the incumbent carrier, Bezeq
• CELARE, the Group's cyber operation, signed a significant contract, in July 2014, with Oracle for offering integrated solution

Dr Zvi Marom, Chief Executive Officer of BATM, said:

"We are pleased that the Group made solid progress in both its divisions this year. The Medical division is now the dominant business whilst the Telecom division has stabilised and is recovering well. The underlying fundamentals of the businesses are sound and, were it not for the foreign exchange impact in reporting the results and the one-time write-off of the legacy business inventory, the numbers would have reflected the progress achieved in the year.

"Looking ahead, we believe that the momentum of the fourth quarter will continue into 2015, particularly in the Medical division. We expect the Medical division to achieve another year of solid growth with a greater number of products being delivered to more territories and increased cooperation with major industry players. In the Telecom division, we expect to start benefitting from contracts awarded in the second half of 2014. Consequently, the Board is confident of delivering improved results in 2015 compared with 2014."  

Enquiries:

BATM Advanced Communications
Dr Zvi Marom, Chief Executive Officer	[phone]
Moti Nagar, Chief Financial Officer
finnCap
Stuart Andrews	[phone]
Shore Capital
Pascal Keane	[phone]
Luther Pendragon
Harry Chathli, Claire Norbury	[phone]

 

Operational Review

In 2014, BATM continued to make solid progress in all its businesses and experienced a strong end to the year. In Q4 2014, the Group achieved sequential revenue growth over Q3 2014 of 20.0% to $28.7m. Revenues in the Medical division grew by 41.5% over Q3 2014, whilst revenues in the Telecom division remained stable. The Medical division contributed 54% of total sales and the Telecom division accounted for 46% of total 2014 sales.

These results reflect the momentum and progress that the Group has achieved in the Medical division during 2014. They also validate the management's strategic decision to focus on Tier 1 operators and to appoint new leadership at the Telecom division.  

Medical Division

	H1 2014	H2 2014	FY 2014	FY 2013
Revenues	$30.2m	$28.6m	$58.8m	$53.1m
Gross margin	23%	23%	23%	24%
Operating loss	$1.0m	$0.5m	$1.5m	$2.3m

The decline in revenues in the second half of the year was due to the impact of adverse foreign exchange, particularly the depreciation of the Moldavian lei - a significant territory for the Distribution unit - and Euro against the US Dollar (7.8% and 6.1% respectively). Without this, the revenues in the second half would have been in line with those of the first half of the year.

The Distribution unit contributed approximately 64.2% of Medical division revenues in 2014, and achieved annual revenue and profit growth over 2013. The Group expects continued growth in revenues and profit during 2015 in all of the geographies in which the Distribution unit operates.

The Pathogenic Waste Treatment Sterilisation unit constituted 17.4% of the Medical division's revenues and, significantly, continues to achieve operating profitability. The unit grew revenues by 15.2% while maintaining gross and operating margins. The business remains focused on the treatment of medical and biological waste, based on unique patented technology, and the expansion of its OEM relationships. During the fourth quarter, it launched a new version of a smaller steriliser designed for dialysis centres and laboratories, and had already supplied 40 devices by the end of the year. In addition, the Group continued to expand the applications of its biological waste solution, including for pharmaceutical plants.

The Diagnostics unit, which constituted 18.4% of Medical division revenues in 2014, made significant progress during the year in several respects. The business established new customer relationships and invested in automating production in order to increase capacity, which will enable the Group to target major customers and markets. Certification efforts continued, mainly in Latin America and the Far East, with certifications being granted post period-end, including being granted a license by the China Food and Drug Administration of People's Republic of China for the importation, marketing and sale in China of the Group's diagnostic kit for hepatitis C, which it identifies by detecting antibodies to the virus using an ELISA screen. To service the Chinese market, the business has established an office in Wushi, near Shanghai. In addition, the expansion in production capacity, through the installation of additional equipment, is anticipated to achieve a 50% increase in reagent production in 2015. The Group expects that these efforts made in 2014 will yield results in H1 2015.

Telecom Division

	H1 2014	H2 2014	FY 2014	FY 2013
Revenues	$26.4m	$24.0m	$50.4m	$61.1m
Gross margin	45%	36%	41%	44%
Operating profit (loss)	$1.4m	$(0.9m)	$0.5m	$2.4m

The decline in revenues and gross margin in the second half of the year was due to lower revenue and a dead stock inventory write-off of $1.6m in the second half of the year mostly attributed to the legacy products.

As previously announced, in Q3 2014 the Group launched the CloudMetro™ 100, the world's first 10GE platform for virtualised IT services at the network edge. This marks further progress with the Group's new strategy of concentrating on Tier 1 clients, SDN (Software Driven Networks) and NFV (Network Function Virtualisation). The Group is one of the pioneering vendors to offer SDN support on its entire portfolio of products, positioning BATM as an SDN and NFV market leader. This achievement allows the Group to offer many advanced third party software applications on top of its newly created open network platform thereby enabling Worldwide Network Service Providers to extend their offering and revenues beyond the traditional Network connectivity. The Group believes that this technology leadership will enable it to reach strong sustained long-term growth.

By launching IBC (Israel Broadband Company) and securing its first paying customers, together with Cisco Systems and the Israel Electric Company, the Group continued its active leadership in the consortium for the construction of a new nationwide fibre optic infrastructure network in Israel.

BATM's cyber unit, CELARE, signed a collaboration agreement to integrate its cyber solution with the big data solution of Oracle, one of the world's largest software companies. A pilot contract from a major customer was awarded at the end of July 2014 for the integrated solution, which aims to identify unknown network threats using big data analytics and machine learning processes.  

Financial Review

Total Group revenues in 2014 decreased to $109.2m (2013: $114.2m). Medical division revenues increased by 10.7% to $58.8m (2013: $53.1m) as a result of organic growth whilst Telecom division revenues decreased by 17.5% to $50.4m (2013: $61.1m).

The blended gross profit margin for the year was 31.2% (2013: 34.7%). The gross profit of the Medical division remained unchanged at 23% whilst the Telecom division gross profit decreased from 44% to 41% mostly due to a write-off of $1.9m of inventory.

Sales and marketing expenses were $15.2m (2013: $16.7m), representing 14.0% of revenue compared with 14.7% in 2013. The majority of the decrease was in the Telco unit of the Telecom division.

General and administrative expenses were $11.1m (2013: $10.9m), representing 10.2% of revenue, compared with 9.6% in 2013. This increase of $0.2m is mostly due to a one-time allowance for doubtful debts and severance costs in the Telecom division.

R&D investment in 2014 was $8.7m (2013: $11.8m). This decrease of $3.1m was primarily due to a change in the focus of R&D towards a new solution for Tier 1 service provider clients and also as a result of a higher contribution from the Israeli Chief Scientist (2014: $1.3m; 2013: $0.6m).

Other operating expenses include amortisation of other intangible assets of $1.7m compared with $3.0m in 2013(including $0.9m amortisation on Vigilant) and a write-off of $2.5m goodwill on Vigilant in 2013.

Net finance expenses were $0.9m (2013: $0.6m expense), comprising $0.7m interest on tax expenses due to final tax assessments for the years 2007-2012, which were agreed with the tax authorities at the beginning of 2015, $0.5m of finance costs as well as a loss of $0.2m on forward transactions, which were partially offset by $0.5m of interest income and gain on marketable securities.

Net income tax benefit was $0.1m (2013: $0.3m), comprising $0.2m corporate tax for the year partially offset by $0.3m change in net deferred tax. During 2013, part of Vigilant carry forward tax losses were recognised by the tax authorities as part of the BATM balance sheet.

Net loss after tax attributable to equity holders of the Group amounted to $3.2m (2013: $4.5m loss), resulting in a basic loss per share of 0.79¢ (2013: 1.12¢ loss).

The Group's balance sheet remains strong with cash and financial assets of $34.9m, a decrease of $1.2m compared with $36.1m as at 30 June 2014 and a decrease of $5.9m compared with $40.8m as at 31 December 2013. The decrease in cash balances during the second half of 2014 is mainly due to operating loss in the second half of the year.

Period end cash is comprised as follows: cash and deposits up to three months duration of $15.9m and short-term cash deposits up to one year of $19.0m.

Intangible assets and Goodwill decreased to $16.4m (31 December 2013: $18.2m). The decrease is due to the amortisation of $1.7m, which is reported in other operating expenses.

Investment in non-consolidated companies relates mostly to the investment of $5.3m in the construction of a new nationwide fibre network of which $1.6m is not yet paid and is recorded as a current liability in the balance sheet. In addition, at the end of  the year, the IBC project was re-appraised by an external valuator and the value increased, resulting in a net gain on available-for-sale financial assets to the Group of $0.47m in 2014 (2013: nil).

Property, plant and equipment including investment property decreased to $22.9m (31 December 2013: $24.7m) due to depreciation of fixed assets. Post period-end, the Group sold a building in Kfar Netter for a consideration of $1.5m.

Total inventories increased from $23.1m at the end of 2013 to $24.2m at 31 December 2014 mainly due to growth in the Distribution unit in Moldova.

Trade and other receivables decreased to $31.0m from $33.6m at the end of 2013. Trade and other payables decreased to $28.0m from $29.8m at the end of 2013. The majority of the decrease in the inventory, accounts receivables and accounts payables is due to the decline in the operation of Anda, which was part of the legacy products.

Current Trading and Prospects

The Group experienced a strong end to 2014, particularly in the Medical division, which the management expects to continue throughout 2015.

Specifically, the BATM management expect the Medical division to benefit from the expansion of the Distribution unit in Hungary; the increase in deliveries of the smaller steriliser units to laboratories; and the installation of a biological pathogenic waste solution at a major pharmaceutical vendor at the beginning of this year with further installations anticipated for later in 2015. In addition, in the Diagnostics unit, production capacity has been expanded to achieve a 50% increase in reagent production in 2015. As a result, the Medical division is expected to grow in 2015.

The Telecom division, which underwent a major strategic shift, has stabilised and is receiving interest as well as initial sales from major industry players for its Software Driven Networking offering. The Group believes that this will continue to be the focus of the industry for the foreseeable future and it expects to benefit from this trend.

As a result, the Board is confident of delivering improved results in 2015 compared with 2014.

 

 

BATM ADVANCED COMMUNICATIONS LTD.

UNAUDITED CONSOLIDATED INCOME STATEMENTS

	Year ended 31 December
	2 0 1 4		2 0 1 3
	US$ in thousands
Revenues	109,247		114,155
Cost of revenues	75,143		74,564
Gross profit	34,104		39,591
	------------		------------
Operating expenses
Sales and marketing expenses	15,243		16,746
General and administrative expenses	11,165		10,919
Research and development expenses	8,716		11,830
Other operating expenses	1,708		5,534
Total operating expenses		36,832		45,029
	------------		------------
Operating loss from continuing 06d dilutedued operationoperations	(2,728)		(5,438)
Finance income	510		256
Finance expenses	(1,454)		(865)
Loss before tax	(3,672)		(6,047)
Income tax benefits	140		314
Loss for the year from continuing operations	(3,532)		(5,733)
Profit for the year from discontinued operations	-		319
Loss for the year	(3,532)		(5,414)
Attributable to:
Owners of the Company	(3,176 )		(4,513 )
Non-controlling interests	(356)		(901)
Loss for the year	(3,532)		(5,414)
Earnings/(loss) per share (In cents):
From continuing and discontinued operations Basic and Diluted From continuing operations Basic and Diluted From discontinued operations Basic and Diluted	(0.79) (0.79) -		(1.12) (1.20) (0.08)

BATM ADVANCED COMMUNICATIONS LTD.

UNAUDITEDCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

	Year ended 31 December
	2 0 1 4	2 0 1 3
	US$ in thousands
Loss for the year Item that may be reclassified subsequently to profit or loss: Net gain on available-for-sale financial assets	(3,532) 473	(5,414) -
Exchange differences on translating foreign operations	(4,254)	1,717
Total Comprehensive loss for the year	(7,313)	(3,697)
Attributable to:
Owners of the Company	(7,037)	(2,331)
Non-controlling interests	(276)	(1,366)
	(7,313)	(3,697)

                                      BATM ADVANCED COMMUNICATIONS LTD.

UNAUDITEDCONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	31 December
	2 0 1 4	2 0 1 3
	US$ in thousands
Current assets
Cash and cash equivalents	15,940	13,812
Trade and other receivables	31,025	33,552
Financial assets	18,974	27,012
Inventories Assets classified as held for sale	24,202 916	23,118 -
	91,057	97,494
Non-current assets
Property, plant and equipment	20,250	20,860
Investment property Goodwill Other intangible assets Available for sale investments carried at fair value Investment  accounted for using the equity method Deferred tax asset	2,659 11,459 4,946 5,741 - ____5,990	3,802 12,096 6,089 3,585 598 ___5,483
	51,045	52,513
Total assets	142,102	150,007
Current liabilities Short-term bank credit Trade and other payables Provisions	4,187 27,973              3,562  35,722	2,658 29,761              2,826                35,245
Non-current liabilities Long-term liabilities Deferred tax liabilities	4,983 1,174	5,690 1,339
Retirement benefit obligation	786  6,943	1,028  8,057
Total liabilities	42,665	43,302
Equity
Share capital	1,216	1,216
Share premium account	407,345	407,300
Reserves	(15,674)	(11,813)
Accumulated deficit	(293,064)	(289,888)
Equity attributable to:
Owners of the Company	99,823	106,815
Non-controlling interest	(386)	(110)
Total equity Total equity and liabilities 106,705 110,241	99,437 142,102	106,705 150,007

                                   BATM ADVANCED COMMUNICATIONS LTD.

UNAUDITEDCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Year ended 31 December 2014

	Share Capital	Share Premium Account	Translation reserve		Other reserve			Accumulated Deficit	Attributable to owners of the Parent	Non-Controlling Interests	Total equity
	US$ in thousands
Balance as at 1 January  2014	1,216	407,300		(11,478)	(335)	(289,888)			106,815	(110)	106,705
Exercise of share based options by employees	-	3							3	-	3
Recognition of share-based payments		42							42	-	42
Loss for the year						(3,176)			(3,176)	(356)	(3,532)
Comprehensive loss for the year				(4,334)	473				(3,861)	80	(3,781)
Total Comprehensive loss for the year				(4,334)	473		(3,176)		(7,037)	(276)	(7,313)
Balance as at 31 December 2014	1,216	407,345		(15,812)	138	(293,064)			99,823	(386)	99,437

BATM ADVANCED COMMUNICATIONS LTD.

UNAUDITEDCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (cont.)

Year ended 31 December 2013

	Share Capital	Share Premium Account	Translation reserve		Other reserve	Accumulated Deficit	Attributable to owners of the Parent	Non-Controlling Interests	Total equity
	US$ in thousands
Balance as at 1 January  2013	1,215	407,140		(13,660)	(335)	(285,375)	108,985	1,256	110,241
Exercise of share based options by employees	1	36					37	-	37
Recognition of share-based payments		124					124	-	124
Loss for the year						(4,513)	(4,513)	(901)	(5,414)
Comprehensive income for the year				2,182			2,182	(465)	1,717
Total Comprehensive income for the year				2,182		(4,513)	(2,331)	(1,366)	(3,697)
Balance as at 31 December 2013	1,216	407,300		(11,478)	(335)	(289,888)	106,815	(110)	106,705

BATM ADVANCED COMMUNICATIONS LTD.

UNAUDITEDCONSOLIDATED STATEMENT OF CASH FLOWS

	Year ended 31 December
	2 0 1 4	2 0 1 3
	US$ in thousands
Net cash from (used in) operating activities  (Appendix A)	(5,282)	634
	-------------	-------------
Investing activities
Interest received 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 Proceeds on available for sale investments carried at fair value	150 293 240 32,556 133	89 111 442 6,142 -
Purchases of property, plant and equipment Purchases of financial assets carried at fair value through profit and loss Purchases of deposits	(1,788) (157) (24,946)	(1,680) (6,341) (23,582)
Investment in Available for sale investments carried at fair value Investment accounted for using the equity method	(408) -	(3,548) (598)
Net Cash outflow on acquisition of business combinations	(676)	(38)
Net cash from (used in) investing activities	5,397	(29,003)
	-------------	-------------
Financing activities
Increase in short-term bank credit	478	62
Bank loan repayment	(1,427)	(2,190)
Bank loan received	2,537	1,323
Proceeds on issue of shares	3	37
Net cash from (used in) financing activities	1,591	(768)
	-------------	-------------
Increase (decrease) in cash and cash equivalents	1,706	(29,137)
Cash and cash equivalents at the beginning of the year	13,812	42,686
Effects of exchange rate changes on the balance of cash held in foreign currencies	422	263
Cash and cash equivalents at the end of the year	15,940	13,812

BATM ADVANCED COMMUNICATIONS LTD.

APPENDICES TO UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

APPENDIX A

RECONCILIATION OF OPERATING LOSS FOR THE YEAR TO NET CASH

FROM (USED IN) OPERATING ACTIVITIES

	Year ended 31 December
	2 0 1 4		2 0 1 3
	US$ in thousands
Operating loss  from continuing operations Adjustments for:	(2,728)		(5,119)
Amortisation of intangible assets	1,708		3,040
Impairment of intangible assets and goodwill	-		2,494
Depreciation of property, plant and equipment	1,883		2,031
Share based payments	42		124
Increase in retirement benefit obligation	91		72
Decrease in provisions	(77)		(75)
Operating cash flow before movements in working capital	919		2,567
Increase  in inventory	(3,044)		(2,341)
Decrease (increase) in receivables	290		(844)
Increase (decrease) in payables	(3,314)		2,920
Cash generated by operations	(5,149)		2,302
Income taxes paid	(222)		(1,419)
Income taxes received	341		148
Interest paid	(252)		(397)
Net cash from (used in) operating activities		(5,282)		634

BATM ADVANCED COMMUNICATIONS LTD

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - General

The preliminary results for the year ended 31 December 2014 and the comparative 2013 information will be presented in the full Annual Report in accordance with International Financial Reporting Standards ("IFRS").

Note 2 - Profit/(loss) per share

Profit/(loss) per share is based on the weighted average number of shares in issue for the year of 403,146,217 (2013: 403,039,724). The number used for the calculation of the diluted profit per share for the year (which includes the effect of dilutive stock option plans) is 403,146,217 shares (2013: 403,039,724).

Note 3 - Disposal group classified as held for sale

During June 2012, the Company entered into a MOU agreement to dispose of its older time division multiplexing (TDM) based products ("Legacy") business, which formed part of the Group's Telecom operations. This event, which was completed during the six month period ended 30 June 2013, is consistent with the Group's long-term policy to focus on growing the Carrier Ethernet portfolio.

During the first half of 2013, the Group completed the sale of the legacy business excluding one of the product lines that re-integrated back into the Group's portfolio. This product line was previously classified as discontinued operation.

Profit for the year from discontinued operations:

	Year ended 31 December
	2 0 1 4 $'000s	2 0 1 3 $'000s
Revenues	-	1,889
Expenses	-	1,570
Profit before tax	-	319
Tax expenses	-	-
Profit for the year	-	319

Cash flows from discontinued operations:

	Year ended 31 December
	2 0 1 4 $'000s	2 0 1 3 $'000s
Net cash inflows from operating activities	-	1,075
Net cash inflows from investing activities	-	-
Net cash outflows from financing activities	-	-
Net cash inflows	-	1,075

Earnings per share (in cents) from discontinued operations:

	Year ended 31 December
	2 0 1 4	2 0 1 3
Basic and Diluted	-	0.08

 

END

 

 

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