Final Results
MTI Wireless Edge Limited
03 March 2008
MTI WIRELESS EDGE LTD
FINANCIAL RESULTS FOR THE YEAR ENDED
31 DECEMBER 2007
MTI Wireless Edge Ltd., (ticker: MWE) ('MTI' or 'the Company'), a market leader
in the manufacture of flat panel antennas for fixed wireless broadband, today
announces its audited full year results for the year ended 31 December 2007.
2007 Highlights
•Revenues increased by 16% to $19m (2006: $16.4m)
•Gross profits up 15% to $8.4m (2006: $7.3m)
•Operating profit improved by 13% to $3.7m (2006: $3.3m)
•Profit before tax up 26% to $5m, (2006: $3.9m). The PBT without warrants
effect* was $4m, an increase of 1%.
•Net Profit of $4.6m ($3.7m without warrant effect*), representing EPS of
8.63c, an increase of 22% and 12%, respectively (2006: $3.8m, 7.7c).
•Net cash generated from continuing operations reached $2.6m; Net cash at
the year end of $14.6m, equivalent to 13.75 pence per share;
•Dividend of 1.85c per share and a $1.5m share buy back
•Strong growth in military antennas including penetration into North
American market.
•Strong penetration to Indian WiMax market
* As announced on November 7th, 2007 the 3,730,631 warrants provided to certain
investors should be recorded at their fair value as a liability in each
financial reporting statement and marked to market by adjusting the liability
against financial income or expenses as applicable
Dov Feiner, CEO of MTI Wireless Edge, commented:'2007 was a challenging year as
we saw increased competition in the WiMax market. Nevertheless, we were able to
maintain our 25% market share based on the quality of our products and our long
term relationships with key customers as well as penetration into new
geographical markets, such as India. Having identified India as one of the
fastest growing markets in wireless communications, we have taken the decision
to establish a manufacturing facility in that country, which the management
intends to have operational in the near future.
'Our military segment almost doubled in 2007 due to a naval contract win, and
penetration into the North American market. Since the start of the new financial
year we have seen recurring demand from the North American market, and further
orders from the naval contract.
'Looking ahead, management is confident about our market position in both fixed
broadband wireless access and in military. We also have new initiatives, such as
RFID and our intended Indian operation and continue to look for additional
opportunities. All of this should continue to deliver contributions to both
revenues and profit over the next 12 months whilst the Company continues to be
mindful of the appreciation of the Shekel against the US Dollar. Overall, we
expect to continue to make good progress in 2008.'
Contacts:
MTI Wireless Edge +972 3 900 8900
Dov Feiner, CEO
Moni Borovitz, Financial Director
Blue Oar Securities +44 20 7448 4400
Shane Gallwey
Matthew Marchant
Daniel Stewart & Co +44 20 7776 6550
Lindsay Mair
Threadneedle Communications +44 207 936 9605
Graham Herring
Josh Royston
About MTI Wireless Edge
MTI designs and manufactures flat panel antennas, largely supplied to
international OEMs of fixed broadband wireless access systems. With over 30
years of technical 'know-how', flexible high volume manufacturing capabilities
and low failure rates, MTI's antennas now comprise approximately 25% of the
global fixed broadband wireless antenna market. In addition, the Company has
successfully developed products for new commercial applications as wireless
systems become increasingly prevalent in new markets.
Chairman's Statement
I'm pleased to report on a successful set of results for the financial year
ended 31 December 2007, achieving another year of continued revenue and profit
growth.
2007 was a challenging year as we saw increased competition in the WiMax market.
Nevertheless, we were able to maintain our 25% market share based on the quality
of our products and our long term relationships with key customers as well as
penetration into new geographical markets, such as India. Having identified
India as one of the fastest growing markets in wireless communications, we have
taken the decision to establish a manufacturing facility in that country which
the management intends to have operational in the near future.
The business enters 2008 in good financial health and with excellent
opportunities for further growth. Nevertheless, the Israeli Shekel has
strengthened sharply (~7%) against the US dollar in the first 2 months of 2008,
which results in some additional costs to our business. This is in addition to a
10% change in the exchange rate in 2007 for which we were able to adjust. Strong
sales growth to our military customers and the increased market penetration in
North America which we achieved in 2007, promises a strong year for this
division. Increased demand from our RFID customers, together with several early
deployment stages provides us with a wider product offering for 2008, although
Fixed Broadband Wireless Access (FBWA/WiMax) will continue to be dominant as we
witness demand increasing for this application.
The Board has decided to distribute a dividend of 1.85 cents per share as we
strongly believe it is in the interest of shareholders to receive a yearly yield
on their investment, while the company is managing its growth not only in terms
of profits but also in cash generation. The dividend will be payable on 4 April
2008 to shareholders on the register as of 14 March 2008.
We believe strongly in the success of the Company as evidenced by the board
approval of a $1.5 million share buyback program. We expect to initiate the
stock buyback when our window opens this quarter. Management is excited about
our prospects and remains committed as ever to the continued growth of both our
company and shareholder value.
I would like to complement our employees on this achievement and thank each and
everyone for their dedication and creativity that had enabled our improvement in
the business. I further would like to acknowledge with thanks the employees'
families for their continued support.
Zvi Borovitz
Non Executive Chairman
Chief Executive's Review
On behalf of management, I am delighted to report on a strong year of revenue
growth for the company. Revenues for the year increased by 16% to $19m, with
Profit Before Tax improving by 26% on 2006 to $5m.
The Company remains focused on the growth of the business and on further
developing its position as a leader in the antenna markets for fixed wireless
communication. Maintaining our significant market share of 25% in the fixed
broadband wireless access (WiMax) market is achieved through solid and stable
leadership positioning and through strategically managing the Company's growth
in each of its fields of activities.
Once again we have succeeded in delivering not only top-line growth, but
comprehensive, cross-company, managed growth in terms of geography, technology,
range of competences and customer base within our selected markets.
In 2007 we have seen more deployments of systems in the field coupled with price
pressure. We have shipped over 600,000 antennas (50% growth over 2006) and in
order to continue our growth without impacting upon our margin, we have decided
to open a manufacturing facility in Asia. The necessary processes began in late
2007 and we hope to announce that the facility is fully functional by mid 2008.
Our aim is to strengthen the Company's leadership position within its chosen
markets of operation, as well as increasing our geographical reach, thus
maintaining our status as the partner of choice for antennas. In 2007, we were
able to achieve these goals by gaining some additional original equipment
manufacturer ('OEM') agreements in new areas.
In the past year the 802.16 standard (known as WiMax) has become a leading
technology for future deployment of mobile wireless communication. Leading
companies such as Sprint, Clearwire, Alcatel-Lucent, Nokia, Siemens, Motorola
and Intel have chosen Wimax as their solution for future wireless services and
solutions for 4G. This gave a strong push to the deployment of fixed Wimax
solutions and will provide another area of opportunity for MTI in the future,
when mobile Wimax starts deployment. MTI is developing the base station antennas
for such Mobile WiMax applications to ensure that MTI fully benefits from this
growth when it occurs.
As we have previously stated, although RFID is only in its initial stages, we
strongly believe in the potential of this market. Therefore, we have made some
important steps to position the Company as a key antenna provider, including
penetration to Tier 1 customers, participation in key trials and the provision
of a full range of reader's antennas for portals, forklift and near field
antennas. We foresee 2008 as a next step in key trials and plan to be involved
to ensure that MTI is well positioned to enjoy success once this market enters
the full deployment stage.
Our military segment almost doubled in 2007 due to a naval contract win, and
penetration into the North American market. Since the start of the new financial
year we have seen recurring demand from the North American market, and further
orders from the naval contract.
Looking ahead, management is confident about our market position in both fixed
broadband wireless access and in military. We also have new initiatives, such as
RFID and our intended Indian operation and continue to look for additional
opportunities. All of this should continue to deliver contributions to both
revenues and profit over the next 12 months. Nevertheless, we have experienced a
dramatic change in the Israeli Shekel Vs. the US dollar which impacts upon our
dollar costs (mainly for salaries) which will clearly have an impact on our
profitability, should the exchange rate stay at current levels.
As always, our pipeline orders only reflect several weeks, but the forecast for
the year is built from a combination of long term relationships with our leading
customers and the global expansion of Wimax systems, and is underpinned by some
large scale tenders in which we are currently involved.
I would like to finalize my review by thanking the employees and their families
for the hard work, dedication and support. It is their creativity, perfectionism
and implementation that led MTI to its position in the market and we see them as
the key to our success.
Dov Feiner
Chief Executive Officer
M.T.I Wireless Edge Ltd.
Income statement for the year ended 31 December 2007
Year ended December 31,
2007 (*) 2006
$'000 $'000
------- --------
Revenues 19,035 16,463
Cost of sales 10,605 9,159
------- --------
Gross profit 8,430 7,304
Research and development expenses 1,415 1,121
Distribution costs 1,946 1,783
General and administrative expenses 1,340 1,088
------- --------
Profit from operations 3,729 3,312
Finance cost 94 102
Finance income 1,369 746
------- --------
Profit before tax 5,004 3,956
Tax on profit from ordinary activities 364 161
------- --------
Profit for the year 4,640 3,795
======= ========
Earnings per share
Basic (dollars per share) 0.0863 0.0770
======= ========
Diluted (dollars per share) 0.0853 0.0741
======= ========
(*) Restated - see note 2.
M.T.I Wireless Edge Ltd.
Statement of changes in equity for the year ended December 31, 2007
*Additional
Share paid in *Retained
capital capital earnings Total
$'000 $'000 $'000 $'000
Balance at January 1, 2006 2 7,561 374 7,937
Changes in equity for 2006:
Profit for the year - - 3,795 3,795
Issuance of share capital*** ** 79 - 79
Share capital as a result
of split 80 (80) - -
Additional capital raised
in AIM listing **** 33 7,385 - 7,418
Dividend distributed - - (2,000) (2,000)
---- ------ ------ ------
Balance at December 31, 2006 115 14,945 2,169 17,229
Changes in equity for 2007:
Profit for the year - - 4,640 4,640
Dividend distributed - - (898) (898)
---- ------ ------ ------
Balance at December 31, 2007 115 14,945 5,911 20,971
==== ====== ====== ======
* Restated - see note 2.
** Less than 1 thousands dollar.
*** Exercise of employee's warrants to shares, grant of shares to directors and
warrants to investors.
**** Net of issuance expenses in the amount of $1,631 thousand.
M.T.I Wireless Edge Ltd.
Balance sheets
As at December 31, As at December 31,
2007 2007 * 2006 * 2006
$'000 $'000 $'000 $'000
ASSETS
Non-current assets:
Property, plant and
equipment (PPE) 1,522 1,435
Goodwill 406 406
Long-term prepaid
expenses 55 32
Deferred tax assets 95 69
----- -----
Total non-current
assets 2,078 1,942
Current assets:
Inventories 2,253 1,724
Trade and other
receivables 6,369 5,360
Other financial
assets 11,203 11,133
Cash and cash
equivalents 3,370 2,167
------ ------
Total current
assets 23,195 20,384
------ ------
TOTAL ASSETS 25,273 22,326
------ ------
LIABILITIES
Non-current liabilities:
Financial liabilities - 22
Employee benefits 266 231
------ -----
Total Non-current
liabilities 266 253
Current Liabilities:
Trade and other
payables 3,222 3,267
Tax liability 494 250
Other financial
liabilities 22 87
Liabilities due to
warrants 298 1,240
----- -----
Total current
liabilities 4,036 4,844
----- -----
Total liabilities 4,302 5,097
----- -----
TOTAL NET ASSETS 20,971 17,229
====== ======
(*) Restated - see note 2.
M.T.I Wireless Edge Ltd.
Liabilities and shareholders' equity
As at December 31, As at December 31,
2007 2007 (*) 2006 (*) 2006
$'000 $'000 $'000 $'000
Capital and reserves
attributable to equity
holders of the company
Share capital 115 115
Additional paid-in capital 14,945 14,945
Retained earnings 5,911 2,169
------ ------
------ ------
TOTAL EQUITY 20,971 17,229
------ ------
(*) Restated - see note 2.
M.T.I Wireless Edge Ltd.
Cash flow statement for the year ended December 31, 2007
For the year For the year
ended December 31, ended December 31,
2007 2007 (*) 2006 (*) 2006
$'000 $'000 $'000 $'000
Operating Activities:
Net profit
from ordinary
activities 4,640 3,795
Adjustments for:
Depreciation 309 281
Gain from
short-term
investments (104) (340)
Deferred tax assets (26) (13)
Issuance of
share capital - 79
Decrease in fair
value of liabilities
due to warrants (942) (172)
----- -----
Operating profit before
changes in working
capital and provisions 3,877 3,630
Increase in inventories (529) (716)
Increase in trade
receivables (1,094) (1,749)
Decrease in
other accounts receivables
for short and long term 62 43
Increase (decrease) in
trade and other payables (20) 1,066
Increase in
tax liability 244 169
Increase in
employee benefits 35 57
----- -----
(1,302) (1,130)
------ -------
Cash generated from
operations 2,575 2,500
====== =======
Additional Information
Cash paid during the year for:
Income tax 181 11
====== ======
(*) Restated - see note 2.
M.T.I Wireless Edge Ltd.
Cash flow statement for the year ended December 31, 2007 (Cont.)
For the year For the year
ended December 31, ended December 31,
2007 2007 2006 2006
$'000 $'000 $'000 $'000
Cash flows from
operating activities
brought forward 2,575 2,500
Investing Activities:
Sale (purchase)
of short-term
investment 34 (10,793)
Purchase of PPE (421) (263)
----- -----
(387) (11,056)
Financing Activities:
Dividend paid
to shareholders equity (898) (2,000)
Issue of ordinary shares - 8,830
Repayment of
bank borrowing (87) (87)
----- -----
(985) 6,743
----- -----
Increase (decrease) in
cash and cash equivalents 1,203 (1,813)
===== ======
For the year
ended December 31,
2007 2006
$'000 $'000
Non-cash activities:
Purchase of PPE against
trade and other payables 41 66
===== =====
1 Basis of Preparation
The principal accounting policies adopted in the preparation of the financial
statements are set out below. The policies have been consistently applied to all
the years presented, unless otherwise stated.
These financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs and IFRIC interpretations) issued by the
International Accounting Standards Board (IASB). The financial statements have
been prepared under the historical cost convention, as modified by the
revaluation of financial assets and financial liabilities at fair value through
profit or loss.
2 Restatement
The Company has restated the financial data for the period ending 31.12.2006 in
order to retroactively reflect the change made in the accounting treatment of
warrants granted to certain investors.
The restatement relates to the 3,730,631 warrants (the 'Warrants') issued to
certain investors. These Warrants contain an option to be exercised on a
'cashless' basis (allowing the investors to get less shares but with no payment
for the exercise, resulting in a lower dilution to existing shareholders). These
Warrants should have been recorded at their fair value as a liability instead of
Company's equity on the IPO date, and thereafter in each financial reporting
statement be marked to market by adjusting the liability against financial
income or expenses as applicable.
A. Following are the effects of the restatement on the balance sheet items (in
US$ thousands):
As of 31.12.2006:
Prior to the restatement Net change Following the restatement
Liabilities
due to warrants - 1,240 1,240
Additional
paid-in capital 16,357 (1,412) 14,945
Retained earnings 1,997 172 2,169
B. Following are the effects of the restatement on the statement of operations
items (in US$ thousands):
For the period ended 31.12.2006:
Prior to the restatement Net change Following the restatement
Financial
(income)expenses, net (472) (172) (644)
Net profit 3,623 172 3,795
C. Following are the effects of the restatement on the earnings, per share:
For the period ended 31.12.2006:
Prior to the restatement Net change Following the restatement
Basic 0.0736 0.0034 0.0770
Diluted 0.0708 0.0033 0.0741
3 Turnover by Geography
The Company's secondary reporting format for reporting segment information is
geographic segments.
----------------
External revenue
by location of customers
----------------
--------
2007 2006
-------- --------
$'000 $'000
-------- --------
Israel 10,012 7,996
North America 4,374 3,738
Europe 3,358 3,548
Asia 1,172 1,029
Other 119 152
------ ------
19,035 16,463
====== ======
4 Earnings per share
2007 2006
--------- ---------
$'000 $'000
--------- ---------
Earnings used in basic EPS 4,640 3,795
Earnings used in diluted EPS 4,640 3,795
Weighted average number of shares
used in basic EPS 53,779,998 49,262,202
Effects of:
shareholders and underwriters share options 625,035 1,920,376
------- ---------
Weighted average number of shares
used in dilutedEPS 54,405,033 51,182,578
========== ==========
Basic net EPS 0.0863 0.0770
====== ======
Diluted net EPS 0.0853 0.0741
====== ======
5 Dividends
2007 2006
--------- ---------
$'000 $'000
--------- ---------
Dividend of 1.67 (2006 - 5.2) cents per ordinary share
proposed and paid during the year relating to
the previous year's results 898 2,000
==== =====
The directors are proposing a dividend of 1.85 cents per share totaling US$ 995
thousands. This dividend has not been accrued at the balance sheet date.
6. The Annual Report and Accounts
The annual report and accounts for the year ending 31 December 2007 will be
posted to shareholders on or before end of March, 2008 and copies will be
available from the offices of Blue Oar Securities, 30 Old Broad Street, London
EC2N 1HT.
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