Half Yearly Report

RNS Number : 7351K

MTI Wireless Edge Limited

02 August 2013

 



2 August 2013

MTI Wireless Edge Ltd

("MTI" or the "Company")

Financial results for the six months ended 30^th June 2013

MTI Wireless Edge Ltd., (ticker: MWE) ("MTI" or the "Company"), a market leader in the manufacture of flat panel antennas for fixed wireless broadband, today announces its unaudited results for the six months ended 30 June 2013.

Highlights

·     Return to net profit compared with loss of US$457k for same period last year

·     Increased operating profit

·     Significantly improved cash flow

·     Military sector continues to improve

·     Good progress in RFID sector

·     Revenue for the six months was US$6.81m (2012: US$6.49)

Dov Feiner, Chief Executive Officer, commented:

"I am pleased to announce that, following our return to profitability in the first quarter of this year, operating profits have continued to improve, with an operational profit of $136K in the second quarter of 2013 compared with a profit of US$20K in the same period last year.  Our cash generation from operation in the first half of 2013 was also strong at US$0.46m compared with use of cash of US$0.4m in the same period last year.

"These improvements came despite the issues faced by Alvarion, once our biggest customer, for which a receiver was recently appointed by the court. Part of Alvarion's business has already been acquired by third party and orders have resumed.  We hope the second part of its business to be sold shortly, and anticipate that this will result in a further increase in orders.

"During the period, the military sector showed an improved gross margin, and it is now generating 20% of revenue. Assuming this growth in military orders continues, we are well positioned to fulfil the demand. The RFID sector (radio frequency identification) also continued to progress well.

 "Overall, the Company has continued the good progress reported in the first quarter and the Board anticipates that this trend will continue in the second half of 2013.  We remain optimistic and the outlook for the Group remains positive"

Contacts:

MTI Wireless Edge Dov Feiner, CEO Moni Borovitz, Financial Director	[phone]
Allenby Capital Nick Naylor Alex Price	[phone]
Newgate Threadneedle Graham Herring Robyn McConnachie	[phone]

About MTI Wireless Edge

MTI Wireless Edge is a world leader in the development and production of high quality, low cost, antenna solutions including Smart Antennas, MIMO antennas and Dual Polarity for wireless applications such as WiMAX, WiFi, Broadband Wireless Access and RFID.  MTI is supplying antennas for both military and commercial applications from 100 KHz to 90 GHz. We offer the most dynamic variety of off-the shelf and customised antennas range including sector, directional and Omni Directional antennas for all broad and narrow band wireless applications in both licensed and unlicensed bands. MTI Military products include a wide range of broadband, tactical and specialized communications antennas, antenna systems and DF arrays installed on numerous airborne, ground and naval, including submarine, platforms worldwide.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Six months ended June 30,				Year ended December 31,
	2013		2012		2012
	U.S. $ in thousands
	Unaudited				Audited
Revenues	6,809		6,490		12,711
Cost of sales	4,395		4,289		8,291
Gross profit	2,414		2,201		4,420
Research and development expenses	582		544		1,152
Distribution expenses	950		938		1,721
General and administrative expenses	821		1,104		1,911
income (loss) from operations	61		(385)		(364)
Finance expense	82		105		186
Finance income	18		89		229
Loss before income tax	(3)		(401)		(321)
Income tax (tax benefit)	(76)		56		(75)
Net income (loss)	73		(457)		(246)
Other comprehensive income (net of tax):
Items not to be reclassified to profit or loss in subsequent periods:
Re-measurement of defined benefit plans	-		-		53
Total comprehensive income (loss)	73		(457)		(193)
Net income (loss) Attributable to:
Owners of the parent	49		(524)		(365)
Non-controlling interest	24		67		119
	73		(457)		(246)
Total comprehensive income (loss) Attributable to:
Owners of the parent	49		(524)		(312)
Non-controlling interest	24		67		119
	73		(457)		(193)
Net Earnings (loss) per share
Basic and Diluted (dollars per share)	0.0010		(0.0102)		(0.0071)
Weighted average number of shares outstanding
Basic and Diluted	51,571,990		51,571,990		51,571,990

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

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the Six months period ended June 30, 2013:

	Attributed to owners of the parent
	Share capital		Additional paid-in capital		Capital Reserve for share-based payment transactions		Retained earnings		Total attributable to owners of the  parent		Non-controlling interest		Total equity
	U.S. $ in thousands
Balance at January 1, 2013 (Audited)	109		14,945		220		2,313		17,587		156		17,743
Changes during the Six months period ended June 30, 2013 (Unaudited):
Comprehensive income for the period	-		-		-		49		49		24		73
Dividend paid	-		-		-		(299)		(299)		-		(299)
Share based payment	-		-		22		-		22		-		22
Balance at June 30, 2013 (Unaudited)	109		14,945		242		2,063		17,359		180		17,539

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

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the Six months period ended June 30, 2012:

	Attributed to owners of the parent
	Share capital		Additional paid-in capital		Capital Reserve for share-based payment transactions		Retained earnings		Total attributable to owners of the  parent		Non-controlling interest		Total equity
	U.S. $ in thousands
Balance at January 1, 2012 (Audited)	109		14,945		176		2,625		17,855		37		17,892
Changes during the Six months period ended June 30, 2012 (Unaudited):
Comprehensive income (loss) for the period	-		-		-		(524)		(524)		67		(457)
Share based payment	-		-		22		-		22		-		22
Balance at June 30, 2012 (Unaudited)	109		14,945		198		2,101		17,353		104		17,457

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

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the year ended December 31, 2012:

	Attributable to owners of the parent
	Share capital		Additional paid-in capital		Capital Reserve for share-based payment transactions		Retained earnings		Total attributable to owners of the  parent		Non-controlling interest		Total equity
	U.S. $ in thousands
	Audited
Balance at January 1, 2012	109		14,945		176		2,625		17,855		37		17,892
Changes during 2012:
Net Loss for the year	-		-		-		(365)		(365)		119		(246)
Other comprehensive income	-		-		-		53		53		-		53
Total comprehensive income (loss) for the year	-		-		-		(312)		(312)		119		(193)
Share based payment	-		-		44		-		44		-		44
Balance at December 31, 2012	109		14,945		220		2,313		17,587		156		17,743

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

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

	30.6.2013		30.6.2012		31.12.2012
	U.S. $ in thousands
	Unaudited				Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	1,793		752		4,648
Other current financial assets	5,251		6,350		2,503
Trade receivables	4,203		4,898		4,373
Other receivables	832		847		520
Inventories	2,949		3,169		2,947
	15,028		16,016		14,991
NON-CURRENT ASSETS:
Long term prepaid expenses	34		40		45
Property, plant and equipment	5,403		5,487		5,478
Investment property	1,292		1,328		1,310
Deferred tax assets	225		268		220
Goodwill	406		406		406
	7,360		7,529		7,459
Total assets	22,388		23,545		22,450

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

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

	30.6.2013		30.6.2012			31.12.2012
	U.S. $ In thousands
	Unaudited				Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit	250		612		250
Trade payables	1,500		2,028		1,404
Other accounts payables	672		681		603
Current tax payables	277		185		209
	2,699		3,506		2,466
NON- CURRENT LIABILITIES:
Loans from banks	1,688		1,938		1,813
Employee benefits	290		268		256
Provisions	172		376		172
	2,150		2,582		2,241
Total liabilities	4,849		6,088		4,707
EQUITY
Equity attributable to owners of the parent
Share capital	109		109		109
Additional paid-in capital	14,945		14,945		14,945
Capital reserve from share-based payment transactions	242		198		220
Retained earnings	2,063		2,101		2,313
	17,359		17,353		17,587
Non-controlling interest	180		104		156
Total equity	17,539		17,457		17,743
Total equity and liabilities	22,388		23,545		22,450

August 1, 2013
Date of approval of financial statements		Moshe Borovitz Finance Director	Dov Feiner Chief Executive Officer	Zvi Borovitz Non-executive Chairman

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

INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

			Six months ended June 30,						Year ended December 31,
		2013			2012			2012
		U.S. $ in thousands
		Unaudited						Audited
Cash Flows from Operating Activities:
Net income (loss) for the period		73			(457)		(193)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		215			235		482
Loss (gain) from other current financial assets		19			(56)		(210)
Equity settled share-based payment expense		22			22		44
Finance expenses		51			57		111
Income tax		(76)			56		(75)
Changes in operating assets and  liabilities:
Decrease (increase) in inventories		(2)			(173)		49
Increase in trade receivables		170			376		901
Increase in other accounts receivables and prepaid expenses		(301)			(355)		(33)
Increase (decrease) in trade and other accounts payables		167			(366)		(894)
Increase in provisions		-			280		76
Increase (decrease) in employee benefits, net		34			3		(9)
Interest paid		(51)			(57)		(111)
Income tax received		139			41		244
Net cash provided by (used) in operating activities		460			(394)		382

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

 INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

			Six months ended June 30,					Year ended December 31,
			2013			2012		2012
			U.S. $ in thousands
				Unaudited				Audited
Cash Flows From Investing Activities:
Sale (purchase) of short-term investment, net			(2,767)			357		4,358
Purchase of property, plant and equipment			(124)			(73)		(467)
Net cash provided by (used in) investing activities			(2,891)			284		3,891
Cash Flows From Financing Activities:
Receipt of short-term loan from banks			-			362		-
Dividend paid to the holders of the parent			(299)			-		-
Repayment of long-term loan from banks			(125)			(125)		(250)
Net cash provided by (used in) financing activities			(424)			237		(250)
Increase in cash and  cash equivalents			(2,855)			127		4,023
Cash and cash equivalents  at the beginning of the period			4,648			625		625
Cash and cash equivalents at the end of the period			1,793			752		4,648

Appendix A - Non-cash activities:

			Six months ended June 30,				Year ended December 31,
			2013		2012		2012
			U.S. $ in thousands
		Unaudited					Audited
Purchase of property, plant and equipment with trade payables credit		7			183		9

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

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - General:

A.    Corporate information:

M.T.I Wireless Edge Ltd. (hereafter - the Company) is an Israeli corporation. It was incorporated under the Companies Act in Israel on December 30, 1998 as a wholly- owned subsidiary of M.T.I Computers and Software Services (1982) Ltd. (hereafter - the Parent Company) and commenced operations on July 1, 2000 and since March 2006, the Company's shares have been traded on the AIM Stock Exchange.

The formal address of the company is 11 Hamelacha Street, Afek industrial Park, Rosh-Ha'Ayin, Israel.

The Company is engaged in the development, design, manufacture and marketing of antennas and accessories.

B.    Assets and Liabilities in foreign currencies

Henceforth are the details of the foreign currencies of the main currencies and the changes percentage in the reporting period:

	June 30,			December 31,
	2013		2012	2012
NIS (in Dollar per 1 NIS)	0.276		0.255	0.268

	Six months ended June 30,			Year ended December 31,
	2013		2012	2012
	%		%	%
NIS	3.18		(2.6)	2.36

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 a 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, 2012 was approved by the board on February 19, 2013. The report of the auditors on those financial statements was unqualified. The interim consolidated financial statements as of June 30, 2013 have not been audited.

The interim consolidated financial information should be read in conjunction with the annual financial statements as of 31 December, 2012 and for the year ended on that date and with the notes thereto,

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2012 are applied consistently in these interim consolidated financial statements.

Note 2 - Significant Accounting Policies (CONT.): 

Adoption of New Standards, Amendments and Interpretations Effective for the first time from January 1, 2013:

-        IAS 19 (as revised in 2011) Employee Benefits:

The revised IAS 19 includes a number of changes to the recognition and measurement of defined benefit plans and termination benefit and to the disclosures for all employee benefits within IAS 19. Set forth below is a summary of the key changes:

-    "Actuarial gains and losses" are renamed "re-measurements" and recognized immediately in OCI.

-    Past-service costs recognized immediately in the period of a plan amendment including unvested benefits.

-    Annual expenses for a funded benefit plan include net interest expense or income, calculated by applying the discount rate to the net defined benefit asset or liability.

-    The distinction between short-term and long-term benefits for measurement purposes is be based on when payment is expected in full, not when payment can be demanded.

-    A clarification that any benefit that has a future-service obligation is not a termination benefit. A liability for a termination benefit is recognized when the entity can no longer withdraw the offer of the termination benefit or recognizes any related restructuring costs.

The amendment is effective for periods beginning on or after 1 January 2013. Earlier application is permitted.

The amendment has been applied retrospectively commencing from the financial statements for periods beginning on January 1, 2013 (see note 3).

-        Amendment to IAS 1 Presentation of Financial Statements

The amendments to IAS 1 revised the presentation of other comprehensive income (OCI). Separate subtotals are required for items which may subsequently be recycled through profit or loss and items that will not be recycled through profit or loss. The Group has updated the presentation of OCI on the face of the Statement of Comprehensive Income.

The following new standards and amendments apply for the first time in 2013. However, they do not impact the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group.

-     IFRS 10 Consolidated Financial Statements

-     IFRS 12 - Disclosure of Interests in Other Entities

-     IFRS 13 Fair Value Measurement

-     IFRS 7 Financial Instruments: Disclosures: Amendments - Offsetting Financial Assets and Financial Liabilities

-     Annual Improvements to IFRSs (2009 - 2011 Cycle)

Note 3 - Adoption of New Amendments:

Following the Adoption of the IAS 19 (as revised in 2011) Employee Benefits as described above (note 2), here is the effects of the change on the financial statements:

Year ended December 31, 2012
$'000
As presented in these financial statements	IAS 19	As previously reported
Audited
1,911	53	1,858	General and administrative expenses
(321)	(53)	(268)	Loss before income tax
(246)	(53)	(193)	Net loss
53	53	-	Re measurement of benefit plans
(193)	-	(193)	Total comprehensive loss
(0.0071)	(0.0011)	(0.0060)	Net loss per share Basic and Diluted (dollars per share)

Note 4 - SEGMENTS:

The following table's present revenue and profit information regarding the Group's operating segments for the six months ended June 30, 2013 and 2012, respectively and for the year ended December 31, 2012.

Six months ended June 30, 2013 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		5,466		1,343		6,809
Total		5,466		1,343		6,809
Segment income		17		44		61
Unallocated corporate expenses
Finance expenses, net						64
Loss before income tax						(3)
Other
Depreciation and other non-cash expenses		188		27		215

Note 4 - SEGMENTS (CONT.):

Six months ended June 30, 2012 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		5,621		869		6,490
Total		5,621		869		6,490
Segment profit (loss)		129		(512)		(385)
Unallocated corporate expenses
Finance expenses, net						16
loss before taxes on income						(401)
Other
Depreciation		215		20		235

Year ended December 31, 2012 (audited)
		Commercial		Military		Total
		$'000
Revenue
External		10,686		2,025		12,711
Total		10,686		2,025		12,711
Segment income (loss)		399		(710)		(311)
Unallocated corporate expenses
Re-measurement of defined benefit plans						(53)
Finance income, net						43
loss before income tax						(321)
Other
Depreciation and other non-cash expenses		434		48		482

Note 5 -TRANSACTIONS WITH RELATED PARTIES:

The Parent Company and other related parties provide certain services to the Group as follows:

		Six months ended      June 30,				Year ended December 31,
		2013		2012			2012
		U.S. $ in thousands
		Unaudited					Audited
Purchased Goods		170		121			268
Management Fee		154		142			282
Services Fee		95		80			160
Lease income		(60)		(60)			(120)

Compensation of key management personnel of the Group:

		Six months ended      June 30,				Year ended December 31,
		2013		2012			2012
		U.S. $ in thousands
		Unaudited					Audited
Short-term employee benefits *)		305		310			605

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

All Transactions are made at market value.

As of June 30, 2013, June 30, 2012 and December 31, 2012 the parent company and related parties owe to the Group US $103,000, US $65,000 and US $30,000 respectively. 

Note 6 - SIGNIFICANT EVENTS:

On April 4, 2013 the company paid a dividend of 0.58 cents per share totaling approximately $299,000.

Note 7 - SUBSEQUENT EVENTS:

A.        Amendment to Service Agreement with controlling shareholder :

Following the receipt of recommendations of both the remuneration committee and the board of directors of the company, an amendment to the service agreement between the Company and the controlling shareholders (via their management company) was approved by a shareholders' meeting held on July 5, 2013. According to the amendment, the agreement shall be in place for 3 years starting July 1^st, 2013, after which it will be renewed for periods of 3 years in accordance to the relevant rules and regulations. Nevertheless the agreement can be terminated by either party by providing 90 days notice. The agreement includes remuneration (per month) of:

Note 7 - SUBSEQUENT EVENTS (CONT.):

1.   20,000 NIS to Mr. Zvi Borovitz for his service as a chairman of the board of the company in capacity of at least 25% and

2.   60,000 NIS to Mr. Moni Borovitz for his service as a CFO of the company in capacity of at least 80%.

All amounts are prior to VAT which will be added to the invoices and are linked to the increase in the consumer price index.

In addition to the above, and in accordance to the remuneration policy adopted by the company, as required under rule 20 to the Israeli Companies Law, a bonus scheme was granted to each of the managers. The bonus scheme states that Zvi Borovitz and Moni Borovitz will be entitled (each one of them) to a bonus amounting 2.5% of the company's net profit exceeding 250,000 USD per year, prior to any bonuses grant in the Company. In case of a loss in a year (commencing from 2013 as first year for accumulation) the bonus for the next year will be for a net profit exceeding 250,000 USD above the loss made in the previous year. In addition Mr. Moni Borovitz shall be entitled to a bonus equal to one month management fee, based on the meeting of targets specified by the remuneration committee at the beginning of each year. A ceiling to the bonuses was set at 8 months management fees for Mr. Moni Borovitz and 100,000 USD for Mr. Zvi Borovitz. 

The agreement also states that the Company shall reimburse the management company for any expense made in performance of the manager's duty. The Company shall also provide each of the managers with a car and phones and will be responsible for all its related expenses, including all relevant taxes.    

As part of the new policy the shareholders meeting also approved a change to the share option plan of the Company, subject to the approval of the Israeli Tax Authorities. As part of the new option plan Mr. Zvi Borovitz was granted 200,000 options and Mr. Moni Borovitz was granted 250,000 options. Further details re the new option plan are detailed below.

B.  New Option Plan

A new Option Plan was adopted by the Company at the shareholders meeting held on July 5, 2013. Under the new Plan, subject to the approval of the Israeli Tax Authorities, all previous plans shall be cancelled and the new plan shall enter into effect. The new plan includes total of 2 million options to be converted to 2 million shares (approximately 4% of the company's outstanding shares) at a price of 9.5 pence per share. The vesting period of the options shall be: 2 years for 50% of the options, 3 years for additional 25% of the options and 4 years for the reminder of the options.

 

END

 

 

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