Half-year Report

RNS Number : 0588G

MTI Wireless Edge Limited

03 August 2016

 

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

3 August 2016

MTI Wireless Edge Ltd

("MTI" or the "Company")

Financial results for the six months ended 30 June 2016

MTI Wireless Edge Ltd. (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 six months ended 30 June 2016.

Highlights:

·     Strong 2^nd quarter in 2016 - revenue of US$6.1m (an increase of 15% over Q1 2016) and operational profit of US$0.6m (loss of US$0.1m in Q1 2016).

·     Revenue increased by 41% year-on-year in the first half to US$11.3m (H1 2015: US$8.0m), due to the acquisition of Mottech.

·     Gross profit increased by 41% year-on-year to US$4.2m (H1 2015: US$3m).

·     Operating profit of US$0.5m in the first half (H1 2015: US$0.5m).

·     Antenna business returned to operating profit in the second quarter of 2016.

·     Cash flow generated from operations of US$1.2m (H1 2015: cash use of US$0.2m).

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

·     Shareholders' equity of US$18.3m (at 31 March 2016: US$18.5m) after payment of dividend, equivalent to 26.5 pence per share.

Dov Feiner, Chief Executive Officer, commented:

"I am happy to report on another excellent quarter for Mottech and its contribution to revenue and profit growth. Our antenna business also made a good progress in the second quarter and returned to an operating profit, allowing us to report a significant consolidated growth in profit this quarter. We won an interesting military contract in the quarter which provides us with longer-term visibility and we currently have good pipe line of opportunities in the antenna segment. This together with the continued development of the 60 - 80 GHz line and RFID provides us with confidence for the long-term future of the antenna business. At Mottech, we continue to see variety of opportunities in many continents, all of which makes us believe that the combined business will continue to grow and continue to be successful in 2016". 

For further information, please contact:

MTI Wireless Edge Dov Feiner, CEO Moni Borovitz, Financial Director	http://www.mtiwe.com/ [phone]
Allenby Capital Limited 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

	Six months ended June 30,				Year ended December 31,
	2016		2015		2015
	U.S. $ in thousands
	Unaudited				Audited
Revenues	11,325		8,035		19,579
Cost of sales	7,067		5,021		11,870
Gross profit	4,258		3,014		7,709
Research and development expenses	574		641		1,216
Distribution expenses	1,819		942		2,408
General and administrative expenses	1,375		925		2,323
Profit from operations	490		506		1,762
Finance expense	163		195		432
Finance income	22		46		44
Profit before income tax	349		357		1,374
Income tax expense (benefit)	104		(43)		110
Profit	245		400		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	177		101		(77)
	177		101		(77)
Total other comprehensive income (loss)	177		101		(119)
Total comprehensive income	422		501		1,145
Profit Attributable to:
Owners of the parent	232		382		1,222
Non-controlling interest	13		18		42
	245		400		1,264
Total comprehensive income Attributable to:
Owners of the parent	409		483		1,103
Non-controlling interest	13		18		42
	422		501		1,145
Earnings per share (dollars)
Basic	0.0045		0.0074		0.0237
Diluted	0.0044		0.0074		0.0235
Weighted average number of shares outstanding
Basic	51,621,990		51,571,990		51,571,990
Diluted	52,616,775		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 Six months period ended June 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 six months     ended June 30, 2016 (Unaudited):
Comprehensive income
Profit for the period	-	-	-	-	232	232	13	245
Other comprehensive income
Translation differences	-	-	-	177	-	177	-	177
Total comprehensive income for the period	-	-	-	177	232	409	13	422
Share issuance to non-controlling interest in subsidiary	-	(10)	-	-	-	(10)	10	-
Exercise of options to share capital	*	22	(1)	-	-	21	-	21
Dividend paid	-	-	-	-	(568)	(568)	-	(568)
Share based payment	-	-	5	-	-	5	-	5
Balance at June 30, 2016 (Unaudited)	109	14,957	308	100	2,780	18,254	289	18,543

(*) 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 Six months period ended June 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 six months     ended June 30, 2015 (Unaudited):
comprehensive income
Profit for the period	-		-		-		-	382		382		18		400
Other comprehensive income
Translation differences	-		-		-		101	-		101		-		101
Total comprehensive income for the period	-		-		-		101	382		483		18		501
Non-controlling Interest of newly purchased subsidiary	-		-		-		-	-		-		8		8
Dividend paid	-		-		-		-	(351)		(351)		-		(351)
Share based payment	-		-		13		-	-		13		-		13
Balance at June 30, 2015 (Unaudited)	109		14,945		299		101	2,318		17,772		242		18,014

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

	30.6.2016		30.6.2015		31.12.2015
	U.S. $ in thousands
	Unaudited				Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	4,862		1,957		2,634
Other current financial assets	-		2,529		2,086
Trade receivables	8,131		7,693		8,074
Other receivables	909		1,105		1,296
Current tax receivables	331		117		139
Inventories	3,893		4,574		4,426
	18,126		18,314		18,655
NON-CURRENT ASSETS:
Long term prepaid expenses	49		22		28
Property, plant and equipment	5,562		5,231		5,643
Investment property	640		1,221		656
Deferred tax assets	475		372		393
Intangible assets	375		483		429
Goodwill	573		573		573
	7,674		7,902		7,722
Total assets	25,800		26,216		26,377

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

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

	30.6.2016		30.6.2015			31.12.2015
	U.S. $ In thousands
	Unaudited				Audited
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities and short term bank credit and loans	799		812		792
Trade payables	2,155		2,227		1,772
Other accounts payables	1,786		1,609		2,098
Current tax payables	20		189		192
	4,760		4,837		4,854
NON- CURRENT LIABILITIES:
Loans from banks, net of current maturities	2,017		2,847		2,381
Employee benefits	388		426		387
Other liabilities	92		92		92
	2,497		3,365		2,860
Total liabilities	7,257		8,202		7,714
EQUITY
Equity attributable to owners of the parent
Share capital	109		109		109
Additional paid-in capital	14,957		14,945		14,945
Capital reserve from share-based payment transactions	308		299		304
Translation differences	100		101		(77)
Retained earnings	2,780		2,318		3,116
	18,254		17,772		18,397
Non-controlling interest	289		242		266
Total equity	18,543		18,014		18,663
Total equity and liabilities	25,800		26,216		26,377

August 3, 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

			Six months ended June 30,						Year ended December 31,
		2016			2015			2015
		U.S. $ in thousands
		Unaudited						Audited
Cash Flows from Operating Activities:
Profit for the period		245			400		1,264
Adjustments for:
Depreciation and amortization		312			258		593
Loss (gain) from investments in financial assets		(10)			79		(36)
Equity settled share-based payment expense		5			13		18
Finance expenses, net		64			20		113
Income tax expense (benefit)		104			(43)		110
Changes in operating assets and liabilities:
Decrease in inventories		551			6		90
Decrease (increase) in trade receivables		102			(631)		(1,136)
Decrease (increase) in other accounts receivables and prepaid expenses		368			(117)		(326)
Increase (decrease) in trade and other accounts payables		44			(187)		(98)
Increase (decrease) in employee benefits, net		1			27		(54)
Interest paid		(64)			(20)		(113)
Income tax paid		(553)			(27)		(214)
Net cash provided by (used in) operating activities		1,169			(222)		211

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

 

 INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

		Six months ended June 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		1,176				1,639
Acquisition of subsidiary, net of cash acquired		-		(3,042)				(3,042)
Increase in restricted cash		-		(339)				-
Purchase of property, plant and equipment		(146)		(160)				(297)
Net cash provided by (used in) investing activities		1,996		(2,365)				(1,700)
Cash Flows From Financing Activities:
Exercise of share options		21		-				-
Long term loan received from banks		-		2,090				2,090
Dividend paid to the owners of the parent		(568)		(351)				(351)
Repayment of long-term loan from banks		(403)		(135)				(526)
Net cash provided by (used in) financing activities		(950)		1,604				1,213
Increase (decrease) in cash and cash equivalents during the period		2,215		(983)				(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		13		22				(8)
Cash and cash equivalents  at the end of the period		4,862		1,957				2,634

Appendix A - Non-cash transactions:

			Six months ended June 30,				Year ended December 31,
			2016		2015		2015
			U.S. $ in thousands
		Unaudited					Audited
Purchase of property, plant and equipment against trade payables		23			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 - "MTI", or the "Company") 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 June 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 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 June 30, 2016 have not been audited.

The interim consolidated financial information should be read in conjunction with the annual financial statements as of December 31, 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 table's present revenue and profit information regarding the Group's operating segments for the six months ended June 30, 2016 and 2015, respectively and for the year ended December 31, 2015.

Six months ended June 30, 2016 (Unaudited)
		Antennas		Water Solutions		Total
		U.S. $ in thousands
Revenue
External		5,304		6,021		11,325
Total		5,304		6,021		11,325
Segment income		(345)		835		490
Finance expense, net						(141)
Profit before income tax						349
Other
Depreciation and amortization		288		24		312

Six months ended June 30, 2015 (Unaudited)
		Antennas		Water Solutions*		Total
		U.S. $ in thousands
Revenue
External		6,942		1,093		8,035
Total		6,942		1,093		8,035
Segment income		325		181		506
Finance expense, net						(149)
Profit before income tax						357
Other
Depreciation and amortization		256		2		258

 (*) Results for one month ending on June 30, 2015.

Note 3- operating SEGMENTS (CONT.):

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 months ending December 31, 2015.

Note 4-TRANSACTIONS AND BALANCES WITH RELATED PARTIES:

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

		Six months ended June 30,				Year ended December 31,
		2016		2015			2015
		U.S. $ in thousands
		Unaudited					Audited
Purchased Goods		105		86			328
Management Fee		185		191			410
Services Fee		124		106			212
Lease income		(36)		(60)			(104)

Compensation of key management personnel of the Group:

		Six months ended  June 30,				Year ended December 31,
		2016		2015			2015
		U.S. $ in thousands
		Unaudited					Audited
Short-term employee benefits *)		353		355			738

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

All Transactions are made at market value.

Note 4 -TRANSACTIONS AND BALANCES WITH RELATED PARTIES (CONT.):

Balances with related parties:

	As at
	30.6.2016		30.6.2015		31.12.2015
	U.S. $ in thousands
	Unaudited				Audited
Other receivables (Other accounts payables)	(90)		9		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 by a shareholders' meeting held on May 18, 2016. According to the amendment, the agreement is in place for 3 years starting June 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 (raise from 20K 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 (raise from 60K 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 to 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 400,000 USD per year (raise from $250K 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 400,000 USD 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 100,000 USD 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 articles 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 to 155 thousand shares in exchange for approximately of $21 thousand.

c.  On April 1, 2016 the company paid a dividend of US 1.1 cents per share totaling approximately $567 thousand

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 thousands ordinary shares were granted (each option to 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 option. Unexercised options expire six 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 cents) per option, and 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 cents)

Exercise price - 27 pence (representing approximately 39 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. 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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