Earnings Release • Mar 10, 2015
Earnings Release
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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
Operational Summary
Medical division (54% of total sales)
Telecom division (46% of total sales)
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 | +972 9866 2525 |
| Moti Nagar, Chief Financial Officer | |
| finnCap | |
| Stuart Andrews | +44 20 7220 0500 |
| Shore Capital | |
| Pascal Keane | +44 20 7408 4090 |
| Luther Pendragon | |
| Harry Chathli, Claire Norbury | +44 20 7618 9100 |
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 $29.8m at the end of 2013. The majority of the decrease in the inventory, accounts receivables and accounts payables is due to the decline in the operation of Anda, which was part of the legacy products.
Current Trading and Prospects
The Group experienced a strong end to 2014, particularly in the Medical division, which the management expects to continue throughout 2015.
Specifically, the BATM management expect the Medical division to benefit from the expansion of the Distribution unit in Hungary; the increase in deliveries of the smaller steriliser units to laboratories; and the installation of a biological pathogenic waste solution at a major pharmaceutical vendor at the beginning of this year with further installations anticipated for later in 2015. In addition, in the Diagnostics unit, production capacity has been expanded to achieve a 50% increase in reagent production in 2015. As a result, the Medical division is expected to grow in 2015.
The Telecom division, which underwent a major strategic shift, has stabilised and is receiving interest as well as initial sales from major industry players for its Software Driven Networking offering. The Group believes that this will continue to be the focus of the industry for the foreseeable future and it expects to benefit from this trend.
As a result, the Board is confident of delivering improved results in 2015 compared with 2014.
UNAUDITED CONSOLIDATED INCOME STATEMENTS
| Year ended 31 December | ||||
| 2 0 1 4 | 2 0 1 3 | |||
| US$ 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 |
This information is provided by RNS
The company news service from the London Stock Exchange
END
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