Financial results for Q1 2018

RNS Number : 8911N
MTI Wireless Edge Limited
14 May 2018
 

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

 

14 May 2018

MTI Wireless Edge Ltd

("MTI" or the "Company")

Financial results for Q1 2018

 

MTI Wireless Edge Ltd. (AIM: MWE), a market leader in the manufacture of flat panel antennas for fixed wireless broadband and a wireless irrigation solutions provider, today announces its unaudited results for the three months ended 31 March 2018.

 

Highlights:

·     Revenues decreased by less than 1% year-on-year to $6.16m (Q1 2017: $6.21m)

·     Profit before tax decreased year-on-year to $166,000 (2017: $233,000)

·     Earnings per share doubled year-on-year to 0.91 US cents (2017: 0.43 US cents), due to a large tax income credit.

·     Cash flow from operations tripled to $1.6m (2017: $0.5m).

·     Shareholder's equity grew during the period to $20.6m (31 December 2017: $20.1m), equivalent to 27.5 pence per share*.

 

* Calculated at £/$ rate of 1.35

 

Dov Feiner, CEO of MTI Wireless, commented:

"During the first quarter of 2018 we continued to see good progress in meeting our internal goals in both segments of our business. In our wireless controller segment, via Mottech, we see opportunities to grow the business in the various geographical areas we are now focusing on, including North America and China. In the antenna segment we continue to see good demand in our military, RFID and Millimetre Wave solutions.  Given the current orderbook and pipeline of opportunities in both segments, we have a strong belief that our growth will continue in 2018 and beyond.

We finished the first quarter with operational profits below last year's equivalent profit, but this was due to us taking a calculated long term view of the business and increasing the investment in development and sales efforts.  We believe that during the reminder of the year we will achieve our goal of increasing revenue and profits year on year.    

Pleasingly our EPS has doubled in the first quarter due to large tax credit relating to future tax relief that we are entitled to in our operation in India.  This is a result of a change in the tax regime which has allowed us to reduce our tax liability.

We have recently announced a proposed amalgamation with MTI Computers & Software Services (1982) Ltd, our parent company, and are progressing this transaction.  We believe the transaction to be in the best interests of all shareholders and we are working to complete it as quickly as possible.  Further announcements about the merger will be made as appropriate".

 

For further information please contact:

MTI Wireless Edge Ltd

Dov Feiner, CEO

Moni Borovitz, Financial Director

 

http://www.mtiwe.com/

+972 3 900 8900

Nomad and Joint Broker

Allenby Capital Limited

Nick Naylor

Alex Brearley

 

+44 20 3328 5656

 

Joint Broker
Peterhouse Corporate Finance Limited

Lucy Williams

Eran Zucker

 

+44 20 7469 0930

 

About MTI Wireless Edge

MTI is engaged in the development, production and marketing of high quality, low cost, flat panel antennas for commercial and for military applications. Commercial applications include: WiMAX; wireless networking; RFID readers; and broadband wireless access. With over 40 years' experience  MTI supplies 100KHz to 90GHz antennas (including directional antennas and omni directional) for outdoor and indoor deployments, including smart antennas for WiMAX, Wi-Fi, public safety, RFID and  base stations and terminals for the utility market. Military applications includes 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 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 activities are focused in the market segments of agriculture, water distribution, municipal and commercial landscape and wastewater and storm water reuse.

 

 

 

 

MTI WIRELESS EDGE LTD.

(An Israeli Corporation)

 

 

INTERIM CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

 

 

Three month period ended March 31,

 

Year ended December 31,

 

2018

 

2017

 

2017

 

U.S. $ in thousands

 

Unaudited

 

 

 

 

 

 

 

 

Revenues

6,156

 

6,211

 

26,376

Cost of sales

3,826

 

3,754

 

16,828

 

 

 

 

 

 

Gross profit

2,330

 

2,457

 

9,548

Research and development expenses

294

 

249

 

927

Distribution expenses

1,018

 

948

 

3,796

General and administrative expenses

769

 

814

 

3,216

loss from sale of property, plant and equipment

-

 

-

 

6

 

 

 

 

 

 

Profit from operations

249

 

446

 

1,603

Finance expense

86

 

220

 

216

Finance income

3

 

7

 

242

 

 

 

 

 

 

Profit before income tax

166

 

233

 

1,629

Tax (income) expense

(308)

 

13

 

320

 

 

 

 

 

 

Profit

474

 

246

 

1,309

 

 

Other comprehensive income net of tax:

 

 

 

 

 

Items that will not be reclassified to profit or loss:

 

 

 

 

 

Re-measurement of defined benefit plans

-

 

-

 

12

 

-

 

-

 

12

 

Items that may be reclassified to profit or loss:

 

 

 

 

 

Adjustment arising from translation of financial statements of foreign operations

23

 

242

 

61

 

23

 

242

 

61

Total other comprehensive income

23

 

242

 

73

 

 

 

 

 

 

Total comprehensive income

497

 

488

 

1,382

 

 

 

 

 

 

Profit attributable to:

 

 

 

 

 

Owners of the parent

486

 

224

 

1,250

Non-controlling interest

(12)

 

22

 

59

 

 

 

 

 

 

 

474

 

246

 

1,309

Total comprehensive income attributable to:

 

 

 

 

 

Owners of the parent

509

 

466

 

1,323

Non-controlling interest

(12)

 

22

 

59

 

 

 

 

 

 

 

497

 

488

 

1,382

 

 

 

 

 

 

Earnings per share (dollars)

 

 

 

 

 

Basic

0.0091

 

0.0043

 

0.0236

Diluted

0.0090

 

0.0042

 

0.0234

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

 

Basic

53,624,318

 

51,837,468

 

52,866,352

Diluted

54,076,697

 

52,679,854

 

53,309,196

 

 

 

 

 

 

 

 

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

 

 

 

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

 

For the three month period ended March 31, 2018 (Unaudited):

 

 

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, 2018

114

15,343

352

105

4,212

20,126

383

20,509

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

486

486

(12)

474

Other comprehensive income

 

 

 

 

 

 

 

 

Translation differences

-

-

-

23

-

23

-

23

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

23

486

509

(12)

497

Share based payment

-

-

6

-

-

6

-

6

 

 

 

 

 

 

 

 

 

Balance at March 31, 2018

114

15,343

358

128

4,698

20,641

371

21,012

 

 

 

 

 

 

 

 

 

(*) less than one thousand dollars

 

 

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

 

 

 

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY (CONT.)

For the three month period ended March 31, 2017 (Unaudited):

 

 

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, 2017

109

14,964

323

44

3,468

18,908

324

19,232

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

224

224

22

246

Other comprehensive income

 

 

 

 

 

 

 

 

Translation differences

-

-

-

242

-

242

-

242

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

242

224

466

22

488

Exercise of options to share capital

*

7

(*)

-

-

7

-

7

Share based payment

-

-

7

-

-

7

-

7

 

 

 

 

 

 

 

 

 

Balance at March 31, 2017

109

14,971

330

286

3,692

19,388

346

19,734

 

 

 

 

 

 

 

 

 

 (*) less than one thousand dollars

 

 

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

 

 

 

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY (CONT.)

 

For the year ended December 31, 2017    :

 

 

 

Attributable to owners of the parent

 

 

Share capital

Additional paid-in capital

Capital Reserve from share-based payment transactions

Translation differences

Retained earnings

Total attributable to owners of the  parent

Non-controlling interest

Total equity

 

U.S. $ in thousands

 

 

 

 

 

 

 

 

 

Balance as at January 1, 2017

109

14,964

323

44

3,468

18,908

324

19,232

 

 

 

 

 

 

 

 

 

Changes during 2017:

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

1,250

1,250

59

1,309

Other comprehensive income

 

 

 

 

 

 

 

 

Re measurements on defined benefit plans

-

-

-

-

12

12

-

12

Translation differences

-

-

-

61

-

61

-

61

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

-

-

-

61

1,262

1,323

59

1,382

Exercise of options to share capital

2

99

(*)

-

-

101

-

101

Dividend

3

280

-

-

(518)

(235)

-

(235)

Share based payment

-

-

29

-

-

29

-

29

Balance as at December 31, 2017

114

15,343

352

105

4,212

20,126

383

20,509

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(*) less than one thousand dollars

 

 

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

 

 

 

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

 

 

31.03.2018

 

31.03.2017

 

31.12.2017

 

U.S. $ in thousands

 

Unaudited

 

 

ASSETS

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

3,963

 

4,926

 

2,642 

Other current financial assets

2,021

 

-

 

2,011 

Trade receivables

7,932

 

9,122

 

8,988

Other receivables

389

 

630

 

850

Current tax receivables

307

 

540

 

360

Inventories

4,963

 

4,151

 

5,281

 

 

 

 

 

 

 

19,575

 

19,369

 

20,132

 

 

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS:

 

 

 

 

 

Long term prepaid expenses

22

 

39

 

34

Property, plant and equipment

5,288

 

5,340

 

5,302

Investment property

603

 

625

 

609

Deferred tax assets

603

 

597

 

582

Intangible assets

185

 

294

 

212

Goodwill

573

 

573

 

573

 

 

 

 

 

 

 

7,274

 

7,468

 

7,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

26,849

 

26,837

 

27,444

 

 

 

 

 

 

 

 

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

 

 

 

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

 

 

31.03.2018

 

31.03.2017

 

31.12.2017

 

U.S. $ In thousands

 

Unaudited

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Current maturities and short term bank credit and loans

840

 

994

 

848

Trade payables

1,832

 

2,036

 

2,239

Other accounts payables

1,936

 

2,071

 

2,322

Current tax payables

8

 

56

 

114

 

 

 

 

 

 

 

4,616

 

5,157

 

5,523

 

 

 

 

 

 

NON- CURRENT LIABILITIES:

 

 

 

 

 

Loans from banks, net of current maturities

737

 

1,505

 

935

Employee benefits, net

484

 

441

 

477

 

 

 

 

 

 

 

1,221

 

1,946

 

1,412

 

 

 

 

 

 

Total liabilities

5,837

 

7,103

 

6,935

 

 

 

 

 

 

EQUITY

 

 

 

 

 

Equity attributable to owners of the parent

 

 

 

 

 

Share capital

114

 

109

 

114

Additional paid-in capital

15,343

 

14,971

 

15,343

Capital reserve from share-based payment transactions

358

 

330

 

352

Translation differences

128

 

286

 

105

Retained earnings

4,698

 

3,692

 

4,212

 

 

 

 

 

 

 

20,641

 

19,388

 

20,126

 

 

 

 

 

 

Non-controlling interest

371

 

346

 

383

 

 

 

 

 

 

Total equity

21,012

 

19,734

 

20,509

 

 

 

 

 

 

 

 

 

 

 

 

Total equity and liabilities

26,849

 

26,837

 

27,444

 

 

 

 

 

 

             

 

 

May 13, 2018

 

 

 

Date of approval of financial statements

Moshe Borovitz

Chief 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

 

 

Three months period ended March 31,

 

Year ended December 31,

 

 

 

2018

 

2017

 

2017

 

 

U.S. $ in thousands

 

 

 

Unaudited

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Profit for the period

 

474

 

246

 

1,309

 

Adjustments for:

 

 

 

 

 

 

 

Depreciation and amortization

 

145

 

164

 

637 

 

Loss (gain) from investments in financial assets

 

(16)

 

77

 

-

 

Loss from sale of property, plant and equipment

 

-

 

-

 

6

 

Equity settled share-based payment expense

 

6

 

7

 

29

 

Finance expenses, net

 

17

 

28

 

 162 

 

Income tax expense (benefit)

 

(308)

 

(13)

 

 320

 

Changes in operating assets and  liabilities:

 

 

 

 

 

 

 

Decrease (increase) in inventories

 

330

 

870

 

(269)

 

Decrease (increase) in trade receivables

 

1,062

 

(839)

 

(879)

 

Decrease (increase) in other accounts receivables and prepaid expenses

 

472

 

121

 

(88)

 

Increase (decrease) in trade and other accounts payables

4

(782)

 

(51)

 

 396 

 

Increase in employee benefits, net

 

7

 

35

 

 84 

 

Interest received

 

-

 

-

 

22

 

Interest paid

 

(17)

 

(28)

 

(109)

 

Income tax received (paid)

 

233

 

(114)

 

(190)

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

1,623

 

503

 

1,430

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                   

 

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

 

 

 

 INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS (cont.)

 

 

 

Three months period ended March 31,

 

Year ended December 31,

 

 

2018

 

2017

 

2017

 

 

U.S. $ in thousands

 

 

Unaudited

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

Purchase of investments in financial assets, net

 

-

 

-

 

(2,000)

Proceeds from sale of property, plant and equipment

 

-

 

-

 

100

Purchase of property, plant and equipment

 

(100)

 

(8)

 

(447)

 

 

 

 

 

 

 

Net cash used in investing activities

 

(100)

 

(8)

 

(2,347)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

Proceeds from exercise of share options

 

-

 

7

 

101

Dividend paid to the owners of the parent

 

-

 

-

 

(235)

Short term loan received from banks

 

-

 

166

 

-

Long term loan received from banks

 

10

 

-

 

60

Repayment of long-term loan from banks

 

(210)

 

(210)

 

(829)

 

 

 

 

 

 

 

Net cash used in financing activities

 

(200)

 

(37)

 

(903)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents during the period

 

1,323

 

458

 

(1,820)

 

Cash and cash equivalents  at the beginning of the period

 

2,642

 

4,428

 

4,428

 

Exchange differences on balances of cash and   cash equivalents

 

(2)

 

40

 

34

 

 

 

 

 

 

 

 

Cash and cash equivalents

 at the end of the period

 

3,963

 

4,926

 

2,642

 

 

 

 

 

 

 

                   

 

 

Appendix A - Non-cash transactions:

 

 

Three months period ended March 31,

 

Year ended December 31,

 

 

 

2018

 

2017

 

2017

 

 

 

U.S. $ in thousands

 

 

 

Unaudited

 

 

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment against trade payables

 

3

 

6

 

3

 

Scrip dividend

 

-

 

-

 

283

 

 

 

 

 

 

 

 

 

                   

 

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

 

 

 

MTI WIRELESS EDGE LTD.

(An Israeli Corporation)

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 - General:

 

Corporate information:

M.T.I Wireless Edge Ltd. (hereafter - 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), commenced operations on July 1, 2000 and since March 2006 the Company's shares have been traded on the AIM market of the London 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.

Via its subsidiary, Mottech Water solutions Ltd., 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.

 

Certain operational and administrative services are provided by the Parent Company.

 

 

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, 2017 was approved by the board on February 15, 2018. The report of the auditors on those financial statements was unqualified.

The interim consolidated financial statements as of March 31, 2018 have not been audited.

The interim consolidated financial information should be read in conjunction with the annual financial statements as of December 31, 2017 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, 2017 are applied consistently in these interim consolidated financial statements, except for the adoption of new standards effective as of 1 January 2018.

New IFRSs adopted  in the period

1.   IFRS 9 Financial Instruments

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The details of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

 

(a)  Classification and measurement

The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.

 

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at fair value through profit or loss ("FVTPL"):

-     it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

-     its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

-    

A debt investment is measured at fair value through other comprehensive income ("FVOCI") if it meets both of the following conditions and is not designated as at FVTPL:

 

-     it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

-     its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment-by-investment basis.

 

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.

 

The following accounting policies apply to the subsequent measurement of financial assets.

 

Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

 

Financial assets at amortized cost: These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses (see b below). Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

 

Debt investments at FVOCI: These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

 

Equity investments at FVOCI: These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.

The Company has implemented the classification and measurement requirements of IFRS 9 retrospectively on the basis of the facts and circumstances that existed as of January 1, 2018 by recognizing the cumulative effect of the retrospective application as an adjustment to the opening balance of retained earnings and other components of equity as of January 1, 2018.

 

(b)  Impairment

IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than under IAS 39.

 

Under IFRS 9, loss allowances are measured on either of the following bases:

-     12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and

-     lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.

 

The Company has elected to measure loss allowances for trade receivables at an amount equal to lifetime ECLs.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company's historical experience and informed credit assessment and including forward-looking information.

 

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of 'investment grade'.

 

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

 

Trade receivables

Exposures within each Company were segmented based on common credit risk characteristics such as credit risk grade, geographic region and industry - for wholesale customers; and delinquency status, geographic region, age of relationship and type of product purchased - for other customers.

 

Actual credit loss experience was adjusted by scalar factors to reflect differences between economic conditions during the period over which the historical data was collected, current conditions and the Company's view of economic conditions over the expected lives of the receivables.

 

Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, on the basis of the facts and circumstances that existed as of January 1, 2018 by recognizing the cumulative effect of the retrospective application as an adjustment to the opening balance of retained earnings and other components of equity as of January 1, 2018.

 

The adoption of IFRS 9 did not have an impact on the financial statements.

 

IFRS 15 Revenue from Contracts with Customers

IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The core principle of IFRS 15 is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

 

IFRS 15 sets out a single revenue recognition model, according to which the entity shall recognize revenue in accordance with the said core principle by implementing a five-step model framework:

 

1.   Identify the contract(s) with a customer.

2.   Identify the performance obligations in the contract.

3.   Determine the transaction price.

4.   Allocate the transaction price to the performance obligations in the contract.

5.   Recognize revenue when the entity satisfies a performance obligation.

 

Below are the significant accounting policies and judgments applied by the Company in recognizing revenue from customer contracts in detail according to the Company's main activities:

 

(a)  Sale of goods

The Company's contracts with customers for the sale of goods generally include one performance obligation. The Company has concluded that revenue from sale of goods should be recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the equipment.

 

Variable consideration

Under IFRS 15, volume rebates give rise to variable consideration. The variable consideration is estimated at contract inception and constrained until the associated uncertainty is subsequently resolved. The application of the constraint on variable consideration increases the amount of revenue that will be deferred.

 

Under IFRS 15, retrospective volume rebates give rise to variable consideration. To estimate the variable consideration to which it will be entitled, the Company applied the 'most likely amount method' for contracts with a single volume threshold and the 'expected value method' for contracts with more than one volume threshold. The selected method that best predicts the amount of variable consideration was primarily driven by the number of volume thresholds contained in the contract. The Company then applies the requirements on constraining estimates of variable consideration.

 

Warranty obligations

The Company generally provides warranties for general repairs of defects that existed at the time of sale, as required by law. As such, most warranties are assurance-type warranties under IFRS 15, which the Company accounts for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, consistent with its practice prior to the adoption of IFRS 15.

 

Financing components

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

 

(b)  Rendering of services

Provided the amount of revenue can be measured reliably and it is probable that the Company will receive any consideration, revenue from services is recognized in the period in which they are rendered.

 

(c)  Revenues from Construction Contracts

Revenues are reported by the "percentage of completion" method. The percentage of completion is determined by dividing actual completion costs incurred to date by the total completion costs anticipated. 

 

When a loss from a contract is anticipated, a provision is made in the period in which it first becomes evident, for the entire loss anticipated, as assessed by the company's management.

 

The Company recognizes income from construction contracts over time, since the Company's performance does not create an asset with alternative use to the Company and the Company has the right to enforce payment for performance completed up to that date.

 

The payment terms in the projects are based on milestones set at the date of signing the contract and are based mainly on the rate of progress. For this reason, the Company is not expected to recognize assets in respect of contracts and liabilities in respect of contracts in significant amounts in relation to these contracts.

 

Causes of uncertainty in material estimates

Measuring the progress of long-term performance commitments - the Company is required to estimate the total cost of completing each project based on estimates of material costs, labor costs, subcontractor performance, and more.

 

First time application

The Company elected to apply IFRS 15 retrospectively for the first time by recognizing the cumulative effect of the retroactive application as an adjustment to the opening balance of retained earnings as at January 1, 2018.

 

The adoption of IFRS 15 did not have an impact on the financial statements.

 

 

Note 3 - REVENUES:

 

 

Three months period ended 

    March 31,

 

Year ended December 31,

 

 

 

2018

 

2017

 

2017

 

 

U.S. $ in thousands

 

 

Unaudited

 

 

Revenues arises from:

 

 

 

 

 

 

Sale of goods

 

4,603

 

4,957

 

21,271

Rendering of services

 

725

 

546

 

2,492

Projects

 

828

 

708

 

2,613

 

 

6,156

 

6,211

 

26,376

 

 

 

 

 

 

 

                 

 

 

Note 4 - operating SEGMENTS:

The following table's present revenue and profit information regarding the Group's operating segments for the Three months period ended March 31, 2018 and 2017 respectively and for the year ended December 31, 2017.

 

Three months period ended March 31, 2018 (Unaudited)

 

 

 

 

 

 

 

 

Antennas

 

Water Solutions

 

 

Total

 

 

U.S. $ in thousands

Revenue

 

 

 

 

 

 

External

 

3,054

 

3,102

 

6,156

 

 

 

 

 

 

 

Total

 

3,054

 

3,102

 

6,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit

 

102

 

147

 

249

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance expense, net

 

 

 

 

 

(83)

 

 

 

 

 

 

 

 

Profit before income tax

 

 

 

 

 

 

166

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

Depreciation and amortization

 

135

 

10

 

145

 

 

 

 

 

 

 

 

 

 

Three months period ended March 31, 2017 (Unaudited)

 

 

 

 

 

 

 

 

Antennas

 

Water Solutions

 

 

Total

 

 

U.S. $ in thousands

Revenue

 

 

 

 

 

 

External

 

3,129

 

3,082

 

6,211

 

 

 

 

 

 

 

Total

 

3,129

 

3,082

 

6,211

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit

 

166

 

280

 

446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance expense, net

 

 

 

 

 

(213)

 

 

 

 

 

 

 

 

Profit before income tax

 

 

 

 

 

 

233

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

Depreciation and amortization

 

147

 

17

 

164

 

 

 

 

 

 

 

 

 

Year ended December 31, 2017

 

 

 

 

Antennas

 

Water Solutions

 

Total

 

 

U.S. $ in thousands

Revenue

 

 

 

 

 

 

External

 

13,267

 

13,109

 

26,376

 

 

 

 

 

 

 

Total

 

13,267

 

13,109

 

26,376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit 

 

67

 

1,536

 

1,603

 

 

 

 

 

 

 

Unallocated corporate expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance income, net

 

 

 

 

 

26

 

 

 

 

 

 

 

 

Profit before income tax

 

 

 

 

 

 

1,629

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

Depreciation and amortization

 

586

 

51

 

637

 

 

 

 

 

 

 

 

 

Note 5 -TRANSACTIONS AND BALANCES WITH RELATED PARTIES:

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

 

 

 

 

 

 

Three months period ended 

    March 31,

 

Year ended December 31,

 

 

 

2018

 

2017

 

2017

 

 

U.S. $ in thousands

 

 

Unaudited

 

 

Purchased Goods

 

57

 

60

 

 252

Management Fee

 

117

 

116

 

 498

Services Fee

 

72

 

65

 

 259  

Lease income

 

(18)

 

(18)

 

(72)

                 

 

 

Compensation of key management personnel of the Group:

 

 

 

Three months period ended 

    March 31,

 

Year ended December 31,

 

 

 

2018

 

2017

 

2017

 

 

U.S. $ in thousands

 

 

Unaudited

 

 

Short-term employee benefits *)

 

203

 

201

 

920

 

 

 

 

 

 

 

                 

 

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

All Transactions were made at market value.

 

Balances with related parties:

 

As at

 

31.03.2018

 

31.03.2017

 

31.12.2017

 

U.S. $ in thousands

 

Unaudited

 

 

Other accounts payables

105

 

243

 

467

 

 

 

 

 

 

 

 

Note 6 - SIGNIFICANT AND SUBSEQUENT EVENTS:

 

1.   During March 2018 the Company announced that it is in preliminary discussions with its majority shareholder, MTI Computers & Software Services (1982) Ltd ("MTIC"), regarding a potential merger between the two companies (the "Proposed Transaction"). MTIC, whose shares are listed on the Tel Aviv Stock Exchange, currently holds 53.2% of the Company's issued ordinary shares. Following the announcement on March 2018, on May 1, 2018 the Company announced that it had entered into a merger agreement (the "Merger Agreement") with its majority shareholder, MTIC and the Company together being the "Merging Companies", according to which, and in accordance with the provisions of Sections 350-351 of the Israeli Companies Law, 5759-1999 (the "Companies Law"), as a court approved scheme of arrangement between the Company, MTIC and their shareholders (the "Scheme of Arrangement"), MTIC will be merged into the Company in a statutory merger, so that MTIC will be dissolved and all of its activities, assets and liabilities, subject to certain qualifications, will be transferred to the Company in consideration for the allotment of new ordinary shares of the Company and the transfer of MTIC's existing holdings in the Company, to all of MTIC's shareholders (the "Merger").

 

As consideration for the Merger, the Company will allocate to the shareholders of MTIC 31,600,436 new ordinary shares in the Company, subject to a Conversion Ratio Mechanism (as defined below). In addition, MTIC's existing holdings in the Company will also be transferred to all of the shareholders in MTIC, pro rata to their holdings of shares in MTIC.

 

On the date of record for the Merger the Company will allocate to the shareholders of MTIC (the "Date of Record for the Merger" and the "Shareholders of MTIC" respectively) 31,600,436 new ordinary shares in the Company, according to the Conversion Ratio (as defined below) as of the date of the Merger Agreement, subject to the Conversion Ratio Mechanism (as defined below) (the "Allotted Shares") and will transfer them, together with MTIC's Holdings in the Company (the "Sold Shares"), to all of the shareholders in MTIC, pro rata to their holdings of shares in MTIC on the Date of Record for the Merger, according to the Conversion Ratio. With respect to the Merger Agreement, the "Conversion Ratio" - a ratio of 5.2689055 Sold Shares for each share in MTIC as of the date of entry into the Merger Agreement, which has been determined according to a valuation of the business activities of MTIC and the Company, on the basis of the consolidated and audited financial statements for the year ended 31 December 2017 of each company as valued by an independent appraiser (the "Appraiser"), which is subject to updates, as necessary, according to the Conversion Ratio Mechanism (as defined below). According to the aforesaid valuation, which constitutes part of the Merger Agreement (the "Valuation"), the equity ratio as of 31 December 2017, between the value of MTIC excluding MTIC's holdings in the Company (approximately US$10.7 million as of 31 December 2017) when compared with the value of the Company (approximately US $18.8 million as at 31 December 2017) is approximately 1.75: in favor of the Company. Following completion of the Merger, assuming the Conversion Ratio is not adjusted in accordance with the Conversion Ratio Mechanism (as defined below) and provided none of the options granted by the Company are exercised, the issued share capital of the Company will be 87,038,724 ordinary shares.

 

The completion of the Merger pursuant to the terms of the Merger Agreement is contingent upon the fulfillment of the conditions precedent (the "Conditions Precedent") by 30 August 2018, unless such date is extended by the Merging Companies, explicitly and in writing.

 

2.   On April 5, 2018 the company paid a dividend of US 2 cents per share totaling approximately US$396,000 and in addition 1,813,970 new ordinary shares were issued to qualifying shareholders that chose the scrip dividend alternative.


This information is provided by RNS
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