Final Results - Replacement

RNS Number : 0194P
BATM Advanced Communications Ld
17 March 2009
 




BATM Advanced Communications Limited


Replacement: Preliminary results for 2008


BATM Advanced Communications Limited ('BATM' or 'the Company') (LSE: BVC) issues the following replacement to its 2008 preliminary results announcement which was released on 17 March 2009 at 7.00am under RNS number 9370O.  


The changes are as follows:

  • Changes to certain numbers in the Consolidated Statement of Cashflows and Appendix B Acquisition of Subsidiaries. There is no impact on the previously disclosed figure for the Company's cash and cash equivalents at the year end.  

  • Reallocation of balances between Goodwill and Other Intangible Assets in the Consolidated Balance Sheet 


The corrected announcement is set out below in full. 


BATM Advanced Communications Limited ('BATM' or 'the Company') (LSE: BVC), a leading designer and producer of broadband data and telecoms systems, announces its preliminary results for the year ended 31 December 2008.


Full Year Highlights


Year ended 31 December

2008

2007

Change %

Revenue

$134.5m

$96.9m

+ 39 

Gross profit

$61.3m

$45.5m

+ 35

Operating profit

$23.9m

$16.6m

+ 44

Pre-tax profit

$24.0m

$20.0m

+ 20

Net profit

$24.5m

$20.1m

22 

Profit per share

6.19¢

5.08¢

+ 22


Highlights

• Revenue growth of 39% to $134.5 milliondespite challenging markets 

  • Operating profits of $23.9m - up 44% over 2007

  • Record net profit of over $24 million - up 22% over 2007

  • Strong balance sheet maintained with $57 million in liquid investments

  • Recommended dividend of 0.69 pence per share (2007: 0.50 pence)


Dr Zvi Marom, Chief Executive of BATM said:


'The year ended 31 December 2008 has provided excellent results. Despite the general weakness and challenges in global markets in 2009, the first two months of the year have started positively and we remain cautiously optimistic about our prospects for this year and beyond.


The Group is well diversified between potential growth markets and more defensive markets. Whilst we continue to improve our core competencies and technology platforms, BATM has continued implementing a strategy of diversification into vertical markets. We have made small acquisitions in both the surveillance and medical devices sectors, which we have integrated into our concept of managed systems and believe that this will provide stable platforms for future sales.'


For further information please contact: 17 Mar Thereafter


BATM Advanced Communications Limited

Dr Zvi Marom, Chief Executive                              020 7653 9850                  00972 9 866 2525

Ofer Bar-Ner, Chief Financial Officer                    020 7653 9850                 00972 9 866 2525


Shore Capital

Graham Shore                                                        020 7408 4090                  020 7408 4090


Singer Capital Markets

Nicholas How                                                         020 3205 7500                   020 3205 7500


Threadneedle Communications

Josh Royston / Graham Herring                          020 7653 9850                      020 7653 9850



Chairman's Statement



I am delighted to report on a year which has delivered both record revenues and profits. BATM has succeeded in navigating difficult market conditions, continued to invest in R&D and strategic acquisitions, whilst delivering over $24 million in profits. Management has kept a tight control on management of capital, ending the year with $57 million of liquid investments.


On the basis of these excellent results, the Board is in a position to recommend the payment of a final dividend of 0.69 pence per share (2007: 0.50 pence (1¢)an increase of 38%). 


Financial Performance


Revenues grew 39% in 2008 and reached a Group all time high of $134.5 million (2007: $97.million). The increase in the Telecoms sector revenues, the Group's primary focus, is mostly due to stronger demand from major customers, as well as additional demand in new territories from new customers. In addition, our strategic expansion into the medical sector also significantly contributed to revenues (as detailed below), mainly concentrated in Europe.


The gross profit margin has decreased to 45.6% (2007: 46.9%) primarily due to a change in the sales mix. The Telecoms sector continued to provide strong returns, with a gross profit margin of 49%, a result of successfully implementing efficiency programs and the reduction of the impact of fixed costs, given increasing revenues. 


Total sales and marketing expenses were $13.9 million (2007: $12.4 million), an increase of 13% on the previous year. Spending increased in this area to drive and support the growth of our business. As a percentage of revenue, sales and marketing expenses were 10% (2007: 13%). We have succeeded in reducing these costs by increasing revenues through indirect sales channels with existing customers which typically incur lower direct expense.


General and administrative expenses were $8.4 million (2007: $6.1 million) representing 6.2% of revenue, compared with 6.3% in 2007. This increase is primarily related to the new medical sector business. We plan to continue our integration efforts of these new businesses into our group structure in order to reduce this overhead.


Net R&D expense in 2008 was $12.8 million (2007: $9.3 million), an increase of 38%. Virtually all of the increase relates to the Telecoms sector, mainly work on integrating and stabilising new components into the new line of metro devices which the Company intends to introduce in 2009. The expense also includes November and December costs for Vigilant, a newly acquired surveillance company, in which R&D spend was directed at completing our advanced Video Management System, NetView Commandwhich was launched earlier this month. In addition R&D spending increased in certain regions as a result of the strength of local salaries against the dollar, and therefore the increased cost of salaries.


Operating profit was $23.9 million (2007: $16.6 million), an increase of $7.3 million or 44% as a result of increased revenues, good gross profit margins and careful control of operating expenses. The operating profit is after amortization of intangibles totalling $2.3 million (2007: $1.1 million), which has increased due to our acquisitions both in 2008 and 2007.


Net finance income was $145,000 (2007: $3.4 million). This figure is net of a one off write-down of $4 million on Nortel Networks Inc bonds held by the Group, and a further $0.4 million loss relating to a foreign currency hedge. The write down on the Nortel bond arose from Nortel requesting Chapter 11 creditor protection, and only an impaired carrying value of only $1.4 million remains on the balance sheet. Against these losses $2.5 million of interest income was recorded. In addition $2.5 million of foreign exchange gains were recorded, resulting primarily from the strengthening of Dollar deposits against the Euro. During 2008, the Company became Euro dominant due to a significant increase in orders from European customers. Management believes that this new sales profile will continue in the future. The change in economic environment caused an accounting change of its functional currency from the Dollar to the Euro.


Net profit after tax attributable to equity holders of the parent amounted to $24.5 million (2007: $19.9 million), resulting in a basic profit per share of 6.19 cents (2007: 5.08 cents) - increases of 23% and 22%, respectively.


Our balance sheet remains strong with effective liquidity of $57.3 million (2007: $64.8 million). The reduction from last year reflects our investments in further product lines and vertical markets as described below. Year end cash is comprised as follows: cash and deposits of up to three months of $30.7 million; short-term investments of up to one year of $21.1 million; and long-term investments of $5.5 million. We continue to exercise careful stewardship over our financial resources during these uncertain economic times through a conservative investment strategy, maintaining most balances in secure bank deposits. Of the $26.6 million classified as investments, $10.million is held in cash deposits of over three months; $10.0 million is held in short term commercial papers that matured in January and February 2009; $1.0 million in structured products which matured in February 2009; $2.1 million in triple A bank notes falling due in 2010; and $3.4 million in long term bonds, including the remaining $1.4 million related to Nortel.


Intangible assets have increased to $15.4 million (2007: $6.7 million), and Goodwill has increased to $14.0 million (2007: $3.2 million). This is mainly as a result of the purchase of Vigilant, as well as other investments both in the Telecoms and the Medical sector.


BATM Medical


During the course of 2008, BATM made a number of strategic investments in medical devices and supporting distribution networks. Earlier this month BATM completed the acquisition of a clinical chemistry diagnostic company based in Italy to strengthen further this business line. In the first full year of operations, BATM Medical generated revenues of $18.4 million. These revenues are mainly concentrated in Eastern Europe. The Medical sector recorded a lower gross profit margin as an element of revenues in this business sector is from distribution which typically yields lower margins. BATM Medical recorded small pre-tax profit during 2008. We believe we can significantly increase this performance in 2009-2010 after each of the companies have been integrated into the Group.


BATM Medical had total gross assets of $20.6 million as at 31 December 2008, including $6.3 million of inventory.


Sales and Marketing


We have continued to invest in marketing and sales during the year with good results, the most successful example of this being the medical devices and distribution segment in which we achieved revenues of $18.4 million in the full year. At the beginning of the year this segment had started with a relatively low level of sales, and has been grown by capitalizing on investment opportunities and finding the right strategic partners. 


In addition we have continued to expand our sales channels, in particular growing existing OEM channels and expanding into new territories.


Research and Development and New Products  


During 2008 we have continued to build on our core BINOS software platform to include speed enhancements and more features. We are also expanding resources on several core technologies to expand the carrier's ability to transform their transport networks to Ethernet. This includes focus on circuit emulation technology to allow TDM services over Ethernet and Ethernet services extended over PDH. 


In 2009 we envisage investment in features which will expand the range of our core Ethernet products into video services, which will allow a more complete and unique offering from our surveillance business.







Investments


Investments have been made in three business segments in 2008. In our core Telecoms business we acquired the broadband multiplexer product line from Charles Industries at the beginning of the year. This acquisition has been fully integrated into our Ethernet offering


We have made several investments in the medical segment, both in companies owning the intellectual property of medical devices and supporting distribution networks (collectively 'BATM Medical'). Our latest acquisition was completed early in February 2009, and adds clinical chemistry diagnostic equipment capabilities to the Group. We believe that we can achieve synergies between this business and our existing medical distribution network. 


In November 2008 the acquisition of Vigilant Technology Ltd was completed. Vigilant is a developer and manufacturer of high-end surveillance and recording platforms. We have begun the process of integrating Vigilant into the BATM Group, and plan to increase sales channels in 2009.



Dividend


The Board is of the opinion that, in light of the Company's profitability, it should pursue a dividend policy of regular dividend increases, subject to performance. Accordingly, it has proposed, subject to shareholder consent, a final dividend for 2008 of 0.69 pence per share (2007: 0.50 pence (1 US¢)). In making this decision the Board has carefully considered the likely future capital requirements of the business and believes that the Company should have fully adequate cash resources to meet these requirements. The Board does not envisage recommending an interim dividend in the coming year.  


  

Prospects


Despite the general weakness and challenges in global markets in 2009, the first two months of the year have started positively and we remain cautiously optimistic about our prospects for this year and beyond.


We have made a number of acquisitions in both the surveillance and medical devices sectors, which we have integrated into our concept of managed systems and we believe that we will continue to strengthen through our core competencies and technology platforms as well as our diversified portfolio of quality product offerings and markets.  





Peter Sheldon

Chairman


17 March 2009





  


BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED INCOME STATEMENTS


  


Year ended 31 December


         2008

2007


US$ in thousands





Revenues

134,462

96,952




Cost of revenues

73,157

51,456




Gross profit

61,305

45,496


---------

---------

 Operating expenses






  Sales and marketing expenses

13,948

12,353




  General and administrative expenses

8,376

6,119




  Research and development expenses

12,829

9,275




  Amortization of intangible assets

2,292

1,146




   Total operating expenses

37,445

28,893


---------

---------

 Operating profit 

23,860

16,603




Investment revenue

2,453

2,667

Gains (losses) on financial instruments

(4,340)

481

  Foreign exchange differences

2,512

557

  Finance cost  

(480)

(286)

  Other income (expenses)

-

  (60)




Profit before tax

24,005

19,962




Tax

454

135




Profit for the period

24,459

20,097




Attributable to:



Equity holders of the parent

24,510

19,874

Minority interest

(51)

  223




Income for the period

24,459

20,097




Income per share (in cents) basic

6.19

5.08  

Income per share (in cents) diluted

6.15

5.02  










  BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED BALANCE SHEETS



31 December

31 December


  2 0 0 8

2 0 0 7


US$ in thousands




Non-current assets




Goodwill


14,023


3,184

Other intangible assets

Property, plant and equipment

Held to maturity investments 

Deferred tax asset

15,400

10,041

5,468

2,102

6,737

8,702

10,501

2,217


47,034

31,341




Current assets



Inventories

20,984

12,211

Investments

21,086

18,462

Trade and other receivables

29,192

26,216

Cash and cash equivalents

30,737

35,809


101,999

92,698




Total assets

149,033

124,039


Current liabilities

Short-term bank credit

Trade and other payables

Current tax liabilities

Provisions




3,632

20,174

109

_____  2,181

 _____   26,096



90

22,266

280

_ ___  2,952

____  25,588

Net current assets

75,903

67,110




Non-current liabilities

Long-term payables


3,933


2,388

Retirement benefit obligation


Total liabilities

______   926

______   4,859

______   30,955


___   335

__  2,723

__  28,311


Net assets

118,078

95,728




Equity



Share capital

1,210

1,186

Share premium account

404,928

400,646

Translation reserve

(6,060)

(29)

 Accumulated Deficit

(286,459)

(307,033)

Equity attributable to equity holders of the:



parent

113,619

94,770

Minority Interest

4,459

958

Total equity

118,078

95,728


BATM ADVANCED COMMUNICATIONS LTD.


CONSOLIDATED STATEMENT OF CASH FLOWS




Year ended 31 December





 2 0 0 8

2 0 0 7




US$ in thousands










Net cash from operating activities  (Appendix A)

9,094

12,629


----------

----------

Investing activities




Interest received

Dividend received from available for sale investments

Proceeds on disposal of held to maturity investments

Proceeds on disposal of available for sale investments

Proceeds on disposal of deposits

Proceeds on disposal of investment in a company


1,363

 

-

 

1,472

 

13,608

17,908

-


2,945

 

15

 

1,904

 

26,273

34,104

941

Purchases of property, plant and equipment

Purchases of held to maturity investments

Purchases of available for sale investments

Purchases of deposits

(1,154)

(1,050)

(21,574)

(14,000)

(1,012)

(10,292)

(26,665)

(18,387)

Investment in a company

(280)

-

Acquisition of subsidiaries (Appendix B)

(6,327)

(2,440)

Net cash from (used in) investing activities

(10,034)

7,386


----------

----------

Financing activities






Dividend payment

(3,936)

-

Decrease in short-term bank credit

(1,549)

(237)

Proceeds on issue of shares 

2,603

668

Net cash from ( used in ) financing activities

(2,882)

431


-----------

-----------




Decrease from foreign exchange fluctuations

(1,250)

___-




Increase (decrease) in cash and cash equivalents

(5,072)

20,446




Cash and cash equivalents at the beginning of the year


  35,809


  15,363

 



Cash and cash equivalents at the end of the year

  30,737

  35,809

 





  BATM ADVANCED COMMUNICATIONS LTD.

APPENDICES TO CONSOLIDATED STATEMENT OF CASH FLOWS


APPENDIX A

RECONCILIATION OF OPERATING PROFIT FOR THE PERIOD TO NET CASH 

FROM OPERATING ACTIVITIES 


year ended December 31,


 2008

2007


US$ in thousands




Operating profit from continuing operations

Adjustments for:

23,860

16,603

Amortization of intangible assets

2,292

1,146

Depreciation of property, plant and equipment

2,401

1,690

Stock options granted to employees

791

916

Increase in retirement benefit obligation

154

25

Decrease in provisions  

  (313)

  (269)

Operating cash flow before movements in working capital

29,185

20,111

Decrease (increase) in Inventory

(4,080)

2,100

Decrease (increase)  in receivables

3,965

(8,308)

Decrease in payables

(18,709)

(483)

Cash generated by operations

10,361 

13,420 

Income taxes paid  

(844)

(505)

Interest paid

  (423)

  (286)

Net cash from operating activities  

9,094

12,629


APPENDIX B

ACQUISITION OF SUBSIDIARIES


Year ended 31 December


2008

2007


US$ in thousands




Net assets acquired



Property, plant and equipment

2,727

195

Inventory

4,436

1,135

Trade and other receivables

6,008

1,548

Trade and other payables

Short-term bank credit

Retirement benefit obligation

Long term payables

(14,310)

(5,091)

(437)

(1,117)

(3,404)

(327)

-

-

Provisions

(178)

-

Minority Interest

(3,678)

(735)


(11,640)

(1,588)

Good will

11,519

1,200

Intangible assets

9,772

3,326

Total consideration

9,651

2,938

Less-consideration recorded as liability

(2,412)

(498)

Less-share based payment

(912)

-

Total cash consideration

6,327

2,440






BATM ADVANCED COMMUNICATIONS LTD

CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY





Share capital


Share Premium Account 

 


Translation reserve




Accumulated

Deficit 




Parent




Minority Interest




Total equity



US$ in thousands

As at 

1 January 2008



1,186



400,646



(29)



(307,033)



94,770




958



95,728









Exercise of share based options by employees 




20




2,583






2,603




-




2,603

Stock options granted to employees





791






791




-




791

Share based purchase of Vigilant




4




908






912




 




912

Translation adjustment





(5,985)



(5,985)


(126)


(6,111)

Purchase of minority interest  






(46)




(46)



  -  



(46)

Minority Interest acquired










3,678



3,678

Dividend 




(3,936)

(3,936)

-

(3,936)

Profit for the period


  -


  -


  -


   24,510


   24,510


   (51)


  24,459

As at 31 December 2008

    



1,210



404,928



(6,060)



(286,459)



113,619



4,459



118,078
















BATM ADVANCED COMMUNICATIONS LTD

NOTES TO THE FINANCIAL STATEMENTS


Note 1 - General


The preliminary results for the year ended 31 December 2008 and the comparative 2007 information are presented in accordance with International Financial Reporting Standards ('IFRS').



Note 2 - Profit per share 


Earning per share is based on the weighted average number of shares in issue for the year of 396,222,088 (2007: 391,530,389). The number used for the calculation of the diluted earning per share for the year (which includes the effect of dilutive stock option plans) is 398,679,591 shares (2007: 396,146,949).




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