3rd Quarter Results

RNS Number : 0306P

MTI Wireless Edge Limited

14 November 2016

 

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR)

14 November 2016

MTI Wireless Edge Ltd

("MTI" or the "Company")

Financial results for the nine months ended 30 September 2016

MTI Wireless Edge Ltd. (AIM: MWE), a market leader in the manufacture of flat panel antennas for fixed wireless broadband and a wireless irrigation solution provider, today announces its unaudited results for the nine months ended 30 September 2016 (the "Period").

Highlights:

·     Revenue increased by 31 per cent. year-on-year in the Period to US$17.6m (nine months to 30 September 2015: US$13.4m), primarily due to the acquisition of Mottech.

·     Gross profit increased by 22 per cent. year-on-year to US$6.5m (nine months to 30 September 2015: US$5.4m).

·     Operating profit of approximately US$1.0m in the Period, in line with nine months to 30 September 2015.

·     Cash flow generated from operations tripled to US$1.5m (nine months to 30 September 2015: US$0.5m).

·     Dividend of US 1.1 cent per share for the year ended 31 December 2015 paid on 1 April 2016.

·     Shareholders' equity of US$18.6m (at 30 September 2015: US$17.9m) after payment of dividend, equivalent to 28.9 pence per share.

Dov Feiner, the Company's Chief Executive Officer, commented:

"I am happy to report on another excellent quarter for Mottech and its contribution to revenue growth and profit. Our antenna business is continuing to make a good progress in the third quarter, with another military contract win, as announced in August, which provides us with longer-term visibility. The RFID business has experienced a very good year to date and together with the continued development of the 60 - 80 GHz line we continue to be confident about the long-term future of the antenna business. At Mottech, we continue to see a variety of opportunities over many continents, all of which makes us believe that the combined business will continue to grow and be successful in 2016 and beyond". 

For further information, please contact:

MTI Wireless Edge Dov Feiner, CEO Moni Borovitz, Financial Director	http://www.mtiwe.com/ [phone]
Allenby Capital Limited (Nominated adviser and broker) Nick Naylor Alex Brearley	[phone]

About MTI Wireless Edge

MTI is engaged in the development, production and marketing of High Quality, Low Cost, Flat Panel Antennas for Commercial & for Military applications. Commercial applications such as: WiMAX, Wireless Networking, RFID readers &, Broadband Wireless Access. With over 40 years' experience, supplying antennas 100KHz to 90GHz including directional antennas and Omni directional for outdoor and indoor deployments including Smart Antennas for WiMAX, Wi-Fi, Public Safety, RFID and for Base Stations and Terminals - Utility Market. Military applications include a wide range of broadband, tactical and specialized communications antennas, antenna systems and DF arrays installed on numerous airborne, ground and naval, including submarine, platforms worldwide.

Via its subsidiary, Mottech Water Solutions Ltd ("Mottech"), MTI is also a leading provider of remote control solutions for water and irrigation applications based on Motorola's IRRInet state of the art control, monitoring and communication technologies. Mottech, headquartered in Israel, is the global prime distributor of Motorola for the IRRInet remote control solutions serving its customers worldwide through its subsidiaries and a global network of local distributers and representatives. It utilizes over 25 years of experience in providing its customers with remote control and management systems which ensure constant, reliable and accurate water usage, while reducing operational costs and maintenance costly expenses. Mottech's activities are focused in the market segments of agriculture, water distribution, Municipal and Commercial Landscape and Wastewater and Storm Water Reuse.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Nine months ended September 30,				Year ended December 31,
	2016		2015		2015
	U.S. $ in thousands
	Unaudited				Audited
Revenues	17,582		13,405		19,579
Cost of sales	11,040		8,041		11,870
Gross profit	6,542		5,364		7,709
Research and development expenses	828		962		1,216
Distribution expenses	2,570		1,693		2,408
General and administrative expenses	2,129		1,656		2,323
Profit from operations	1,015		1,053		1,762
Finance expense	307		234		432
Finance income	55		9		44
Profit before income tax	763		828		1,374
Income tax expense	136		74		110
Profit	627		754		1,264
Other comprehensive income (net of tax):
Items that will not be reclassified to profit or loss:
Re-measurement of defined benefit plans	-		-		(42)
	-		-		(42)
Items that may be reclassified to profit or loss:
Adjustment arising from translation of financial statements of foreign operations	202		(67)		(77)
	202		(67)		(77)
Total other comprehensive income (loss)	202		(67)		(119)
Total comprehensive income	829		687		1,145
Profit Attributable to:
Owners of the parent	585		710		1,222
Non-controlling interest	42		44		42
	627		754		1,264
Total comprehensive income Attributable to:
Owners of the parent	787		643		1,103
Non-controlling interest	42		44		42
	829		687		1,145
Earnings per share (dollars)
Basic	0.0113		0.0138		0.0237
Diluted	0.0111		0.0138		0.0235
Weighted average number of shares outstanding
Basic	51,657,245		51,571,990		51,571,990
Diluted	52,657,327		51,571,990		51,897,027

The accompanying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the nine months period ended September 30, 2016:

	Attributed to owners of the parent
	Share capital	Additional paid-in capital	Capital Reserve for share-based payment transactions	Adjustment arising from translation of financial statements of foreign operations	Retained earnings	Total attributable to owners of the  parent	Non-controlling interest	Total equity
	U.S. $ in thousands
Balance at January 1, 2016 (Audited)	109	14,945	304	(77)	3,116	18,397	266	18,663
Changes during the nine months     ended September 30, 2016 (Unaudited):
Comprehensive income
Profit for the period	-	-	-	-	585	585	42	627
Other comprehensive income
Translation differences	-	-	-	202	-	202	-	202
Total comprehensive income for the period	-	-	-	202	585	787	42	829
Share issuance to non-controlling interest in subsidiary	-	(10)	-	-	-	(10)	10	-
Exercise of options to share capital	*	23	(1)	-	-	22	-	22
Dividend paid	-	-	-	-	(568)	(568)	-	(568)
Share based payment	-	-	14	-	-	14	-	14
Balance at September 30, 2016 (Unaudited)	109	14,958	317	125	3,133	18,642	318	18,960

(*) less than 1 thousand dollar

The accompanying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the nine months period ended September 30, 2015:

	Attributed to owners of the parent
	Share capital	Additional paid-in capital	Capital Reserve for share-based payment transactions	Adjustment arising from translation of financial statements of foreign operations	Retained earnings	Total attributable to owners of the  parent	Non-controlling interest	Total equity
	U.S. $ in thousands
Balance at January 1, 2015 (Audited)	109	14,945	286	-	2,287	17,627	216	17,843
Changes during the nine months     ended September 30, 2015 (Unaudited):
comprehensive income
Profit for the period	-	-	-	-	710	710	44	754
Other comprehensive income
Translation differences	-	-	-	(67)	-	(67)	-	(67)
Total comprehensive income for the period	-	-	-	(67)	710	643	44	687
Non-controlling Interest of newly purchased subsidiary	-	-	-	-	-	-	8	8
Dividend paid	-	-	-	-	(351)	(351)	-	(351)
Share based payment	-	-	19	-	-	19	-	19
Balance at September 30, 2015 (Unaudited)	109	14,945	305	(67)	2,646	17,938	268	18,206

The accompanying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the year ended December 31, 2015    :

	Attributable to owners of the parent
	Share capital	Additional paid-in capital	Capital Reserve from share-based payment transactions	Adjustment arising from translation of financial statements of foreign operations	Retained earnings	Total attributable to owners of the  parent	Non-controlling interest	Total equity
	U.S. $ in thousands
	Audited
Balance as at January 1, 2015	109	14,945	286	-	2,287	17,627	216	17,843
Changes during 2015:
Comprehensive income
Profit for the year	-	-	-	-	1,222	1,222	42	1,264
Other comprehensive income
Re measurements on defined benefit plans	-	-	-	-	(42)	(42)	-	(42)
Translation differences	-	-	-	(77)	-	(77)	-	(77)
Total comprehensive income for the year	-	-	-	(77)	1,180	1,103	42	1,145
Non-controlling Interest of newly purchased subsidiary	-	-	-	-	-	-	8	8
Dividend paid	-	-	-	-	(351)	(351)	-	(351)
Share based payment	-	-	18	-	-	18	-	18
Balance as at December 31, 2015	109	14,945	304	(77)	3,116	18,397	266	18,663

The accompanying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

	30.9.2016		30.9.2015		31.12.2015
	U.S. $ in thousands
	Unaudited				Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	5,100		3,054		2,634
Restricted cash	-		170		-
Other current financial assets	-		2,051		2,086
Trade receivables	7,886		7,721		8,074
Other receivables	1,169		1,392		1,296
Current tax receivables	393		74		139
Inventories	3,943		4,239		4,426
	18,491		18,701		18,655
NON-CURRENT ASSETS:
Long term prepaid expenses	52		21		28
Property, plant and equipment	5,545		5,130		5,643
Investment property	635		1,212		656
Deferred tax assets	564		336		393
Intangible assets	348		456		429
Goodwill	573		573		573
	7,717		7,728		7,722
Total assets	26,208		26,429		26,377

The accompanying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

	30.9.2016		30.9.2015			31.12.2015
	U.S. $ In thousands
	Unaudited				Audited
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities and short term bank credit and loans	811		790		792
Trade payables	2,239		2,392		1,772
Other accounts payables	1,702		1,777		2,098
Current tax payables	100		170		192
	4,852		5,129		4,854
NON- CURRENT LIABILITIES:
Loans from banks, net of current maturities	1,870		2,578		2,381
Employee benefits	434		424		387
Other liabilities	92		92		92
	2,396		3,094		2,860
Total liabilities	7,248		8,223		7,714
EQUITY
Equity attributable to owners of the parent
Share capital	109		109		109
Additional paid-in capital	14,958		14,945		14,945
Capital reserve from share-based payment transactions	317		305		304
Translation differences	125		(67)		(77)
Retained earnings	3,133		2,646		3,116
	18,642		17,938		18,397
Non-controlling interest	318		268		266
Total equity	18,960		18,206		18,663
Total equity and liabilities	26,208		26,429		26,377

November 13, 2016
Date of approval of financial statements	Moshe Borovitz Finance Director	Dov Feiner Chief Executive Officer	Zvi Borovitz Non-executive Chairman

The accompanying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

			Nine months ended September 30,						Year ended December 31,
		2016			2015			2015
		U.S. $ in thousands
		Unaudited						Audited
Cash Flows from Operating Activities:
Profit for the period		627			754		1,264
Adjustments for:
Depreciation and amortization		385			428		593
Loss (gain) from investments in financial assets		7			(1)		(36)
Equity settled share-based payment expense		14			19		18
Finance expenses, net		79			74		113
Income tax expense		136			74		110
Changes in operating assets and  liabilities:
Decrease in inventories		534			269		90
Decrease (increase) in trade receivables		315			(763)		(1,136)
Decrease (increase) in other accounts receivables and prepaid expenses		126			(418)		(326)
Increase (decrease) in trade and other accounts payables		9			202		(98)
Increase (decrease) in employee benefits, net		47			25		(54)
Interest paid		(79)			(74)		(113)
Income tax paid		(658)			(77)		(214)
Net cash provided by (used in)  operating activities		1,542			512		211

The accompanying notes form an integral part of the financial statements.

 INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

		Nine months ended September 30,						Year ended December 31,
		2016		2015				2015
		U.S. $ in thousands
		Unaudited					Audited
Cash Flows From Investing Activities:
Sale of investments in financial assets, net		2,142		1,639				1,639
Acquisition of subsidiary, net of cash acquired		-		(3,042)				(3,042)
Increase in restricted cash		-		(170)				-
Purchase of property, plant and equipment		(171)		(195)				(297)
Net cash provided by (used in) investing activities		1,971		(1,768)				(1,700)
Cash Flows From Financing Activities:
Exercise of share options		22		-				-
Long term loan received from banks		27		2,090				2,090
Dividend paid to the owners of the parent		(568)		(351)				(351)
Repayment of long-term loan from banks		(582)		(331)				(526)
Net cash provided by (used in) financing activities		(1,101)		1,408				1,213
Increase (decrease) in cash and cash equivalents during the period		2,412		152				(276)
Cash and cash equivalents  at the beginning of the period		2,634		2,918				2,918
Exchange differences on balances of cash and        cash equivalents		54		(16)				(8)
Cash and cash equivalents  at the end of the period		5,100		3,054				2,634

Appendix A - Non-cash transactions:

			Nine months ended September 30,				Year ended December 31,
			2016		2015		2015
			U.S. $ in thousands
		Unaudited					Audited
Purchase of property, plant and equipment   against trade payables		27			17		8

The accompanying notes form an integral part of the financial statements.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - General:

Corporate information:

M.T.I Wireless Edge Ltd. (hereafter - the "Company", or collectively with its subsidiaries, the "Group") is an Israeli corporation. The Company was incorporated under the Companies Act in Israel on December 30, 1998 as a wholly-owned subsidiary of M.T.I Computers and Software Services (1982) Ltd. (hereafter - the "Parent Company") and commenced operations on July 1, 2000.

Since March 2006, the Company's shares have been traded on the AIM Stock Exchange.

The formal address of the company is 11 Hamelacha Street, Afek industrial Park, Rosh-Ha'Ayin, Israel.

The Company is engaged in the development, design, manufacture and marketing of antennas and accessories.  Since September 11, 2015 via its subsidiary, Mottech Water solutions, MTI is also a leading provider of remote control solutions for water and irrigation applications based on Motorola's IRRInet state of the art control, monitoring and communication technologies.

Note 2 - Significant Accounting Policies:

The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in International Accounting Standard No. 34 ("Interim Financial Reporting").

The interim consolidated financial information set out above does not constitute full year end accounts within the meaning of Israeli Companies Law. It has been prepared on the going concern basis in accordance with the recognition and measurement criteria of the International Financial Reporting Standards (IFRS). Statutory financial information for the financial year ended December 31, 2015 was approved by the board on February 16, 2016. The report of the auditors on those financial statements was unqualified.

The interim consolidated financial statements as of September 30, 2016 have not been audited.

The interim consolidated financial information should be read in conjunction with the annual financial statements as of 31 December, 2015 and for the year then ended and with the notes thereto. The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2015 are applied consistently in these interim consolidated financial statements.

Note 3 - operating SEGMENTS:

The following tables present revenue and profit information regarding the Group's operating segments for the nine months ended September 30, 2016 and 2015, respectively and for the year ended December 31, 2015.

Nine months ended September 30, 2016 (Unaudited)
		Antennas		Water Solutions		Total
		U.S. $ in thousands
Revenue
External		8,324		9,258		17,582
Total		8,324		9,258		17,582
Segment income		(305)		1,320		1,015
Finance expense, net						(252)
Profit before income tax						763
Other
Depreciation and amortization		347		38		385

Nine months ended September 30, 2015 (Unaudited)
		Antennas*		Water Solutions**		Total
		U.S. $ in thousands
Revenue
External		10,297		3,108		13,405
Total		10,297		3,108		13,405
Segment income		648		405		1,053
Finance expense, net						(225)
Profit before income tax						828
Other
Depreciation and amortization		408		20		428

 (*)  Reclassified.

 (**)  Results for four month ending on September 30, 2015.

Year ended December 31, 2015 (audited)
		Antennas		Water Solutions*		Total
		U.S. $ in thousands
Revenue
External		13,305		6,274		19,579
Total		13,305		6,274		19,579
Segment profit		859		903		1,762
Unallocated corporate expenses
Finance expense, net						(388)
Profit before income tax						1,374
Other
Depreciation and amortization		561		32		593

(*)  Results for seven month ending December 31, 2015.

Note 4-TRANSACTIONS AND BALANCES WITH RELATED PARTIES:

The following transactions occurred with the Parent Company and other related parties:

		Nine months ended      September 30,				Year ended December 31,
		2016		2015			2015
		U.S. $ in thousands
		Unaudited					Audited
Purchased Goods		221		218			328
Management Fee		320		314			410
Services Fee		187		159			212
Lease income		(54)		(86)			(104)

Compensation of key management personnel of the Group:

		Nine months ended      September 30,				Year ended December 31,
		2016		2015			2015
		U.S. $ in thousands
		Unaudited					Audited
Short-term employee benefits *)		584		560			738

*) Including Management fees for the CEO, Directors Executive Management and other related parties

All Transactions were made at market value.

Balances with related parties:

	As at
	30.9.2016		30.9.2015		31.12.2015
	U.S. $ in thousands
	Unaudited				Audited
Other receivables (Other accounts payables)	(113)		(17)		50

Amendment to Service Agreement with controlling shareholder:

Following the receipt of recommendations of both the remuneration committee and the board of directors of the Company, an amendment to the service agreement between the Company and the controlling shareholders (via their management company) was approved at a shareholders' meeting held on May 18, 2016. According to the amendment, the agreement is in place for 3 years starting September 1, 2016, after which it will be renewed for periods of 3 years in accordance to the relevant rules and regulations. Nevertheless the agreement can be terminated by either party by providing 90 days' notice. The agreement includes remuneration (per month) of:

1.     25,000 NIS to Mr. Zvi Borovitz (raised from 20,000 NIS prior to this approval) for his service as a chairman of the board of the Company in capacity of at least 25% and

2.     65,000 NIS to Mr. Moni Borovitz (raised from 60,000 NIS prior to this approval) for his service as CFO of the Company in capacity of at least 80%.

All amounts are prior to VAT which will be added to the invoices and are linked to the increase in the consumer price index.

In addition to the above, and in accordance with the remuneration policy adopted by the Company, as required under rule 20 to the Israeli Companies Law, a bonus scheme was granted to each of the managers. The bonus scheme states that Zvi Borovitz and Moni Borovitz will be entitled (each one of them) to a bonus amounting 2.5% of the company's net profit exceeding US$400,000 per year (raised from US$250,000 prior to this approval), prior to any bonuses grant in the Company. In case of a loss in a year the bonus for the next year will be for a net profit exceeding US$400,000 above the loss made in the previous year. In addition Mr. Moni Borovitz shall be entitled to a bonus equal to two months management fee, based on the meeting of targets specified by the remuneration committee at the beginning of each year.

A ceiling to the bonuses was set at 8 months management fees for Mr. Moni Borovitz and US$100,000 for Mr. Zvi Borovitz. 

The agreement also states that the Company shall reimburse the management of the Company for any expense made in performance of the manager's duty. The Company shall also provide each of the managers with a car and phones and will be responsible for all its related expenses, including all relevant taxes.   

Note 5 - SIGNIFICANT EVENTS:

a.  On January 12, 2016, following the approval of its shareholders, the Company adopted a change to its article of association allowing the Company the ability to pay dividends by way of scrip, meaning the board would be able to announce a dividend which could be paid in cash or through the issue of new shares in the Company (the "Scrip Dividend Policy").Under the Scrip Dividend Policy, shareholders could, in the future, be given the option to elect to receive dividends in new shares of the Company rather than in cash. The default arrangement will be for the payment of dividends in cash, and if the shareholder prefers to receive their dividends in new shares of the Company, then they would have to make an election. There would be no ability to make mixed elections and each shareholder would be able to choose either cash or new shares but not both. The decision to offer shareholders a scrip dividend alternative for future dividend payments will be at the sole discretion of the Board.

b.  During the first half of 2016 several employees exercised options over 167.5 thousand shares in exchange for an approximately of US$22,000.

c.  On April 1, 2016 the company paid a dividend of 1.1 US cents per share totaling approximately $568,000.

d.  On May 2, 2016 shares in Mottech Water Management (Pty) Ltd. in South Africa ("Mottech SA") were allotted to its general manager. Following this allotment the Company owns 85% of Mottech SA.

e.  A new option scheme for key Employees was approved at the Company's Annual General Meeting on May 18, 2016. Under the plan, options to purchase 800,000 ordinary shares were granted (with each option being over one ordinary share). This represents approximately 1.5% of the Company's current issued and voting share capital on a fully diluted basis. The vesting period of the options shall be as follows: 2 years for 50% of the options, 3 years for additional 25% of the options and 4 years for the reminder of the options. Unexercised options expire nine years after date of the grant, after which they will be void. Options are forfeited when the employee leaves the Company. There is no cash settlement of the options.

The weighted average fair value of the options as at the grant date is 6 pence (approximately 9 US cents) per option, which was estimated using a Black and Scholes option pricing model based on the following significant data and assumptions:

Share price - 19.88 pence (representing approximately 29 US cents)

Exercise price - 27 pence (representing approximately 39 US cents)

Expected volatility - 45.34%

Risk-free interest rate - 0.85%

And expected average life of options 4.375 years

The volatility measured at the standard deviation of expected share price returns is based on the historical volatility of the Company's share price. The options were granted as part of a plan that was adopted in accordance with the provision of section 102 of the Israeli Income Tax Ordinance.

 

END

 

 

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