Interim Results

RNS Number : 9479B
BATM Advanced Communications Ld
26 August 2008
 





BATM Advanced Communications Limited


Interim Results 2008


BATM Advanced Communications Limited ('BATM' or 'the Company') (LSE: BVC), a leading designer and producer of broadband data and telecoms systems, announces its interim results for the six months ended 30 June 2008.


Half Year Highlights


Six months ended 30 June

2008(H1)

2007(H1)

Change %

Revenue

$66.4m

$39.6m

+ 68 

Gross profit

$33.1m

$18.1m

+ 83 

Operating profit

$14.3m

$4.8m

197

Pre-tax profit

$14.9m

$5.7m

161

Net profit

$15.4m

$5.2m

196 

Profit per share

3.90c

1.33c

193


Highlights

  • 10th consecutive half of accelerated growth

  • Further gross profit margin improvement to 50% of revenues (H1 2007: 46%)

  • Strong balance sheet with $61.7m in cash and liquid investments (H1 2007: $51.9m)

  • Increased sales and marketing, with focus on eastern Europe


Dr Zvi Marom, Chief Executive of BATM said:


'This outstanding performance has been driven by increased demand from both existing customers and new sales channels. 


'BATM has also increased its product development in vertical markets where our technology and IP expertise can play a significant role. We will continue this programme which, we believe, will benefit our shareholders, employees and community.


'Despite the general weakness in the global economy, our excellent first half underpins our optimism for further growth, both this year and beyond.'


For further information please contact:                                26 Aug                             Thereafter


BATM Advanced Communications Limited

Dr Zvi Marom, Chief Executive                                                     020 7653 9844             00972 9 866 2525

Ofer Bar-Ner, Chief Financial Officer                                           020 7653 9844             00972 9 866 2525


Kaupthing Singer & Friedlander

Nicholas How / Marc Young                                                           020 3205 7620            020 3205 7620


Shore Capital

Graham Shore / Dru Danford                                                        020 7408 4090             020 7408 4090


Threadneedle Communications

Josh Royston / Graham Herring                                                    020 7653 9844             020 7653 9844

  Chairman's Statement


Financial Performance


It gives me great pleasure to report on a highly successful first six months of 2008 with record growth in revenues to $66,440,000 (H1 2007: $39,615,000) - an increase of 68% compared with the same period last year. This increase is primarily related to stronger demand from our major customers, as well as sales from newly developed businesses. We have benefited particularly in this half from strong demand for our products to support new communications systems, including for the Beijing Olympic Games.


Gross profit margin increased to 50% of revenue during the period (H1 2007: 46%). Continuing efforts to remove cost through ever more efficient product design have played a significant role in gross profit improvement. Further benefit has resulted from a favorable product mix and a strong Euro, which is one of our important trading currencies.


Sales and marketing expenditure was $6,925,000 (H1 2007: $5,702,000) an increase of 21% over the same period last year. Spending increased in this area in support of our higher operating level. As a percentage of revenue, sales and marketing expenses were 10% (H1 2007: 14%). Expanded sales and marketing activities in new geographic territories have had successful results as evidenced by our revenue performance in the first half.


General and administrative expenses were $4,553,000 (H1 2007: $2,171,000) representing 6.8% of revenue compared with 5.5% in H1 2007. This increase is primarily related to the support activities for newly acquired businesses.


Net R&D expense in the first half of 2008 was $6,564,000 (H1 2007: $4,924,000) representing 9.8% of revenue compared with 12.4% in H1 2007. The increase resulted from a higher level of spending on new products and the integration of engineering efforts from newly acquired businesses. In addition, higher spending is reflective of reduced participation by the Israeli Chief Scientist, due to budgetary constraints, compared with last year and the appreciation of the Israeli Shekel and the Euro against the US dollar.


Operating profit was $14,272,000 (H1 2007: $4,799,000) an increase of $9,473,000, or 197%, as a result of increased revenue and gross margin.


Net finance income was $604,000 (H1 2007: $1,194,000). During the first half of 2008, we recorded a charge of $381,000 relating to a loss incurred on a forward exchange contract used to hedge against currency fluctuations.  In addition, the average interest rate earned was lower in 2008 versus 2007.


Net profit after tax amounted to $15,386,000 (H1 2007: $5,177,000), resulting in a basic profit per share of 3.90 cents (H1 2007: 1.33 cents) - increases of 196% and 193%, respectively.


Financial Position


Our balance sheet remains strong with effective liquidity of $61.7m (H1 2007: $51.9m). Period end is comprised as follows: cash and deposits up to three months duration of $46.0 million; short-term investments up to one year of $5.2 million; and long-term investments for more than one year of $10.5 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 and exercising prudent spending control.



Sales and Marketing


We have expanded our investment in sales and marketing to allow for additional growth in new areas and territories. Eastern Europe has been a focus for us this year and we increased our investment in this region. We have also invested in additional marketing and sales efforts to expand our expertise into other areas. An example of this initiative is our venture into the newly acquired medical instruments business. 


  Research and Development and New Products  


We continue to expand our offerings on our Carrier Ethernet product line. These programs include product enhancements to improve the speed of our existing platforms and new features to differentiate our products. We are also expanding resources on several core technologies to expand the carriers' 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. 



Investments


In February of this year, we acquired the broadband multiplexer product line from Charles Industries. Products from this acquisition provide a strategic complement to our EdgeLink product family. With the addition of these products, our offering in the cellular backhaul space is significantly strengthened with the added feature of Ethernet over PDH. 


We have also invested in a medical instruments company in Eastern Europe. This investment furthers our strategy to expand our IP expertise into other vertical markets as IP controllers play a major role in the management software for these devices. We believe that this business has significant potential for growth in the coming years.


On Wednesday 20th August, we received approval from the shareholders of Vigilant Technology Ltd for our proposed acquisition of the company. Vigilant is a developer and manufacturer of intelligent video recording and surveillance solutions for mission-critical applications.  This modest acquisition provides entry into a niche market where our expertise in IP technology can add value to Vigilant's innovative product portfolio. With our management expertise and careful cost control, we believe that this business will soon operate in line with our current business model. 


  

Principal Risks and Uncertainties


*    Loss of key personnel

*    A major downturn in the purchasing pattern of telecoms companies


  

Prospects


The results of the first half of 2008 point to another successful outcome for the full year. As always we keep a close eye on general developments in the world economy and in our industry in particular. Notwithstanding the uncertainties of the economic environment in which we operate we remain confident that our business strategy is sound and that we can continue to build on our success. 


Peter Sheldon

Chairman


26 August, 2008


Responsibility statement 


The Directors confirm that the condensed set of financial statements for the six months ended 30 June 2008, which have been prepared in accordance with International financial reporting standards (IFRS) give true and fair view of the assets, liabilities, financial position and profit and loss of the company and that the accompanying Chairman's statement includes a fair review of the information required by the United Kingdom Listing Authority Disclosure and Transparency Rules DTR 4.2.7 R and DTR 4.2.8 R. There have been no appointments or resignations as Directors since the publication of the Annual Report for the year ended 31 December 2007 and the names of the Directors are available from the Company's website (www.batm.com).



BATM ADVANCED COMMUNICATIONS LTD. 
CONSOLIDATED INCOME STATEMENTS


  

 
Six months ended June 30,
 
         2008
2007
 
US$ in thousands
 
        Unaudited
        Unaudited
 
 
 
Revenues
66,440
39,615
 
 
 
Cost of revenues
33,310
21,501
 
 
 
Gross profit
33,130
18,114
 
---------
---------
 Operating expenses
 
 
 
 
 
  Sales and marketing expenses
6,925
5,702
 
 
 
  General and administrative expenses
4,553
2,171
 
 
 
  Research and development expenses
6,564
(*)4,924
 
 
 
  Amortization of intangible assets
816
518
 
 
 
   Total operating expenses
18,858
13,315
 
---------
---------
 Operating profit 
14,272
4,799
 
 
 
Investment revenue 
1,234 
1,340
  Finance cost   
(630)
(146)
  Other expenses
   (7)
  (310)
 
 
 
Profit  before tax
14,869
5,683
 
 
 
Tax
   815
  (470)
 
 
 
Profit for the period
15,684
5,213
 
 
 
Attributable to:
 
 
Equity holders of the parent
15,386
5,177
Minority interest
298
   36
 
 
 
Income for the period
15,684
5,213
 
 
 
Income per share (in cents) basic
3.90
1.33
Income per share (in cents) diluted
3.85
1.32


(*)Restated to reflect a change in accounting policies regarding government grants.      

BATM ADVANCED COMMUNICATIONS LTD. 
CONSOLIDATED BALANCE SHEETS

 
June 30,
June 30,
December 31,
 
   2 0 0 8
2 0 0 7
2 0 0 7
 
US$ in thousands
 
        Unaudited
        Unaudited
        Audited
Non-current assets
 
 
 
 
Goodwill
 
5,653
 
1,984
 
3,184
Other intangible assets
Property, plant and equipment
Held to maturity investments
Other investment
Deferred tax asset
9,228
10,127
10,527
4,844
2,068
6,672
9,262
8,905
-
505
6,737
8,702
10,501
-
2,217
 
42,447
27,328
31,341
 
 
 
 
Current assets
 
 
 
Inventories
19,614
13,929
12,211
Investments
5,209
30,950
18,462
Trade and other receivables
31,107
19,361
26,216
Cash and cash equivalents
45,968
12,027
35,809
 
101,898
76,267
92,698
 
 
 
 
Total assets
144,345
103,595
124,039
 
Current liabilities
Short-term bank credit
Trade and other payables
Current tax liabilities
provisions
 
 
 
1,610
26,545
-
   2,464
   30,619
 
 
134
(*)18,191
177
   2,310
   20,812
 
 
90
22,266
280
   2,952
   25,588
Net current assets
71,279
55,455
67,110
 
 
 
 
Non-current liabilities
Long-term payables
 
3,016
 
(*)2,425
 
2,388
Retirement benefit obligation
824
293
335
Long-term provisions
     -
   385
     -
 
   3,840
   3,103
   2,723
Total liabilities
   34,459
    23,915
   28,311
 
 
 
 
 
 
 
 
Net assets
109,886
79,680
95,728
 
 
 
 
Equity
 
 
 
Share capital
1,195
1,186
1,186
Share premium account
401,990
400,118
400,646
Translation reserve
10
-
(29)
 Accumulated Deficit
(295,583)
(*)(321,832)
(307,033)
Equity attributable to equity holders of the:
 
 
 
parent
107,612
79,472
94,770
Minority Interest
2,274
208
958
Total equity
109,886
79,680
95,728


(*)Restated to reflect a change in accounting policies regarding government grants.



 

BATM ADVANCED COMMUNICATIONS LTD. 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY





Share
capital


Share Premium 
Account 

 


Translation
reserve




Accumulated

Deficit 




   Parent




Minority 
Interest




Total 
equity



US$ in thousands

As at January 1, 2008



1,186



400,646



(29)



(307,033)



94,770




958



95,728









Exercise of share based options by employees 




9




1,016






1,025




-




1,025

Stock options granted to employees 




328





328



-



328

Translation adjustment





39



39


-


39

Minority Interest acquired







-



1,018



1,018

Proposed Dividend 





(3,936)


(3,936)


-


(3,936)

Profit for the period


   -


   -


   -


   15,386

 

 15,386


   298


  15,684

As at June 30, 2008

(unaudited)    



1,195



401,990



10



(295,583)



107,612



2,274



109,886





BATM ADVANCED COMMUNICATIONS LTD. 
CONSOLIDATED STATEMENT OF CASH FLOWS



 
Six months ended June 30
 
 
 
 
 2008
2007
 
 
 
US$ in thousands
 
 
 
 
        Unaudited
Unaudited
 
 
 
Net cash from operating activities  (Appendix)
5,624
1,559
 
----------
----------
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
 
1,610
-
222
7,609
13,908
-
 
1,195
15
-
24,370
16,075
691
Purchases of property, plant and equipment
Purchases of held to maturity investments
Purchases of available for sale investments
Purchases of deposits
(688)
(1,050)
(5,000)
(4,000)
(653)
(5,494)
(26,398)
(13,387)
Investment in a company
(4,844)
-
Acquisition of subsidiaries 
(4,052)
  (1,969)
Net cash from (used in) investing activities
3,715
(5,555)
 
----------
----------
Financing activities
 
 
 
 
 
Increase (decrease) in short-term bank credit
(205)
46
Proceeds on issue of shares 
1,025
  614
Net cash from financing activities
820
660
 
-----------
-----------
 
 
 
Increase (decrease) in cash and cash equivalents
10,159
(3,336)
 
 
 
Cash and cash equivalents at the beginning of the period
 
   35,809
 
  15,363
 
 
 
Cash and cash equivalents at the end of the period
   45,968
  12,027
 
 
 



BATM ADVANCED COMMUNICATIONS LTD. 
APPENDICES TO CONSOLIDATED STATEMENT OF CASH FLOWS


APPENDIX 

RECONCILIATION OF OPERATING PROFIT FOR THE PERIOD TO NET CASH 

FROM OPERATING ACTIVITIES 


Six months ended June 30


 2008

2007


US$ in thousands


Unaudited

Unaudited




Operating profit from continuing operations

Adjustments for:

14,272

4,799

Amortization of intangible assets

816

518

Depreciation of property, plant and equipment

1,073

837

Stock options granted to employees

328

442

Increase (decrease) in retirement benefit obligation

160

(17)

Increase (decrease) in provisions  

   140

  (6)

Operating cash flow before movements in working capital

16,789

6,573

Decrease (increase) in Inventory

(4,110)

435

Increase in receivables

(2,871)

(2,138)

Decrease in payables

(3,577)

(3,139)

Cash generated by operations

6,231

1,731

Income taxes paid  

(376)

(26)

Interest paid

   (231)

   (146)

Net cash from operating activities  

5,624

  1,559



Note 1 - General


The unaudited results for the six months ended 30th June 2008 have been prepared in accordance with International Financial Reporting Standards (IFRS) set out in the Annual Report and Accounts for the year ended 31st December 2007. The unaudited results for the six months ended 30th June 2007 were prepared on the same basis.  


Note 2 - Profit per share 


Profit per share is based on the weighted average number of shares in issue for the period of 394,362,614 (2007 H1: 390,778,083). The number used for the calculation of the diluted profit per share for H1:2008 (which includes the effect of dilutive stock option plans) is 399,634,970 shares (2007 H1: 395,288,758).



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