Q1 2022 Financial Results

RNS Number : 3401M
MTI Wireless Edge Limited
23 May 2022
 

23 May 2022

MTI Wireless Edge Ltd

("MTI", the "Company" or the "Group")

Q1 2022 Financial Results

MTI Wireless Edge Ltd (AIM: MWE), the technology group focused on comprehensive communication and radio frequency solutions across multiple sectors, is pleased to announce its financial results for the three-month period ended 31 March 2022.

Financial highlights

· Good revenue growth, up by 1 2 % to $ 11.2 m (Q1 2021: $9.95m) reflecting the strength of the Group's long term customer base with over 60% of revenue being generated from clients for 10 years or more

· Profit before tax up 8% to $ 0.97 m (Q1 2021: $0.9m) after costs associated with the acquisition of P.S.K. WIND Technologies Ltd ("PSK")

· EBITDA* increased by 1 5 % to $ 1.35 m (Q1 2021: $ 1.18 m)

· Earnings per share increased by 1 2 % to 0. 89 US cents (Q1 2021 : 0.80 US cents)

· Continued strong operating cash generation with net cash standing at $6.5m on 31 March 2022 (31 March 2021: $9.5m), with the majority of the change reflecting: i) the initial net consideration paid and loan provided in respect of PSK; ii) the Group's exit from its Russian operations (as described in note six to the financial statements); and iii) the dividend paid in March 2022 - together totaling approximately $7m.

Operational highlights by division

Antennas

· A one stop shop for the sale of 'off the shelf' flat and parabolic antennas, combined with the provision of custom-developed antenna solutions to a range of commercial and military customers, with a growing focus on providing 5G backhaul antenna solutions to support mobile phone operators as they roll-out their 5G networks.

· In Q1 2022, there was further interest from Tier 1 corporations for our 5G automatic beam steering ("ABS") antenna solution, which ensures the antenna adapts to any small movements caused by different climate conditions, including wind or temperature changes.

· Orders for our 5G backhaul solution remain strong, but fulfilment is slower due to external issues relating to supply chains at customers (mainly microchip shortages and the impact of lockdowns in China). RFID revenues significantly improved whilst military antenna orders were slower as the sales cycle takes longer, but the opportunities remain significant.

· Taken together this resulted in slightly lower antenna revenue levels in Q1 2022 (compared to Q1 2021), but the underlying future potential across both military and 5G markets remains strong.

Water Control & Management

· Operates under the Mottech brand and provides wireless control systems to manage irrigation and water distribution for agriculture, municipal authorities and commercial entities.

· Solutions reduce water and power usage, whilst providing customers with higher revenue from accurate irrigation, leading to more and better quality crops and plants being grown.

· Q1 2022 was a steady period with revenues increasing slightly against Q1 2021 and underlying sales orders bode well for the year with a growing pipeline of opportunities and the successful introduction of new prices being accepted in service contracts across the division's customer base.

· Sales are expected to commence in Q2 2022 under a strategic partnership agreed in January with Viridix, offering Mottech customers the RooTense® sensor that measures the water available to the roots of crops.

Distribution & Professional Consulting Services

· Operates under the MTI Summit Electronics brand and represents approximately 40 international suppliers of radio frequency/microwave components and sells these products to Israeli customers.

· Expert knowledge of both the international suppliers and customers further enables MTI to act as a consultant to all parties and assist with devising complete radio frequency/microwave solutions.

· In Q1 2022, MTI Summit enjoyed an excellent period delivering strong revenue growth, boosted by the addition of new revenues from the acquisition of PSK. Most importantly, this division has also grown its pipeline of future orders and opportunities and is well placed for a successful year.

· In March 2022, the Company confirmed the sale of the Group's business unit in Russia to the General Manager of the Russian operations. 

 

Moni Borovitz, Chief Executive Officer of MTI Wireless Edge, said:

"We are pleased with the trading performance for the first quarter, which represents a good start to the year and, once again, demonstrates the critical value of being a diversified business enabling us to continue to grow the business in challenging times.

"Delivering double digit sales, EBITDA and EPS growth is a creditable performance in the current market, coming out of the pandemic and managing increased costs relating to inflation and the supply chain. Cash generation from operations was again positive, with net cash at $6.5m after paying circa $4.5m in relation to the acquisition of PSK and last year's dividend. The business therefore remains in a strong financial position and well placed for the year.

"The impact on our business from the pandemic has receded but there are still pockets of disruption, most notably in China, where recent lockdowns have added to the delays in the production of components and increased pressure around transportation of goods from China. Inflationary led costs are coming through the business albeit we have been successful to mitigate these to some extent by implementing price increases. Overall, we expect these factors to continue to some degree for the remainder of the year.

"Notwithstanding this, demand across all three divisions for their respective products and services has increased. The market for defence, in particular, is growing, with a visible increase in potential orders over the coming 18 months. Our ABS solution for the 5G market has opened up new conversations with several key Tier 1 & 2 mobile radio manufacturers, strengthening our relationship with existing customers and potential new ones. This has further under pinned the potential of the 5G market for us. Mottech remains a leader in its field and continues to see good demand in many markets, supported by a strong pipeline of potential future orders. MTI Summit was again the leading performer in Q1 with a very encouraging contribution from the recently acquired PSK.

"Looking ahead, we believe the Company's clear focus on providing radio frequency solutions coupled to being diversified across several markets positions us well to continue to grow and expand through a mix of acquisition led and organic growth."

Moni Borovitz, Chief Executive Officer, will provide a live investor presentation relating to the financial results for the three-month period ended 31 March 2022, via the Investor Meet Company ("IMC") platform today at 10.00 am UK time.

Investors can sign up for free via: https://www.investormeetcompany.com/mti-wireless-edge-ltd/register-investor

*Earnings before interest, tax, depreciation and amortisation.

 

 

For further information please contact:

MTI Wireless Edge Ltd

+972 3 900 8900

Moni Borovitz, CEO

http://www.mtiwirelessedge.com



Allenby Capital Limited (Nomad and Joint Broker)

+44 20 3328 5656

Nick Naylor/Alex Brearley/Piers Shimwell (Corporate Finance)


Amrit Nahal/David Johnson (Sales and Corporate Broking)




Shore Capital (Joint Broker)

Toby Gibbs/John More (Corporate Advisory)

+44 20 7408 4090

Fiona Conroy (Corporate Broking)


 


Novella (Financial PR)


Tim Robertson/Safia Colebrook

+44 20 3151 7008

 

About MTI Wireless Edge Ltd. ("MTI")

Headquartered in Israel, MTI is a technology group focused on comprehensive communication and radio frequency solutions across multiple sectors through three core divisions:

Antenna Division

MTI is a world leader in the design, development and production of high quality, state-of-the-art, and cost-effective antenna solutions including Smart Antennas, MIMO Antennas and Dual Polarity Antennas for wireless applications. MTI supplies antennas for both military and commercial markets from 100 KHz to 174 GHz.

Internationally recognized as a producer of commercial off-the-Shelf and custom-developed antenna solutions in a broad frequency range, MTI addresses both commercial and military applications.

MTI supplies directional and omnidirectional antennas for outdoor and indoor deployments, including smart antennas for 5G backhaul, Broadband access, public safety, RFID, base station and terminals for the utility market.

Military applications include a wide range of broadband, tactical and specialized communication antennas, antenna systems and DF arrays installed on numerous airborne, ground and naval, including submarine, platforms worldwide.

Water Control & Management Division

Via its subsidiary, Mottech Water Solutions Ltd ("Mottech"), MTI provides high-end remote control and monitoring solutions for water and irrigation applications based on Motorola's IRRInet state-of-the-art control, monitoring and communication technologies.

As Motorola's global prime-distributor Mottech serves its customers worldwide through its international subsidiaries and a global network of local distributors and representatives. With over 25 years of experience in providing customers with irrigation remote control and management, Mottech's solutions ensure constant, reliable and accurate water usage, increase crops quality and yield while reducing operational and maintenance costs providing fast ROI while helping sustain the environment. Mottech's activities are focused in the market segments of agriculture, water distribution, municipal and commercial landscape as well as wastewater and storm-water reuse.

Distribution & Professional Consulting Services Division

Via its subsidiary, MTI Summit Electronics Ltd., MTI offers consulting, representation and marketing services to foreign companies in the field of RF and Microwave solutions and applications including engineering services (including design and integration) in the field of aerostat systems and the ongoing operation of Platform subsystems, SIGINT, RADAR, communication and observation systems which is performed by the Company. It also specializes in the development, manufacture and integration of communication systems and advanced monitoring and control systems for the Government and defence industry market.

 

 

 

 

 

MTI WIRELESS EDGE LTD.

 (An Israeli Corporation)

 

INTERIM CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

 

Three month period ended

 March 31,

 

Year ended December 31,

 

2022

 

2021

 

2021

 

U.S. $ in thousands

  (Except per share data)

 

Unaudited

 

 







Revenues

11,176


9,9 49


43,184

Cost of sales

7,685


6,783


29,6 85







Gross profit

3,491


3,166


13,499

Research and development expenses

272


283


965

Distribution expenses

884


889


3,686

General and administrative expenses

1,297


1,039


4,448

Loss (profit) from sale of property, plant and equipment

9


(4)


25







Profit from operations

1,029


959


4,425

Finance expenses

78


75

 

454

Finance income

(23)


(15)


(67)







Profit before income tax

974


899


4,038

Tax expenses

164


157


329







Profit

810


742


3,709

Other comprehensive income (loss) net of tax:






Items that will not be reclassified to profit or loss:






Re-measurement of defined benefit plans

-


-


22







Items that may be reclassified to profit or loss:






Adjustment arising from translation of financial statements of foreign operations

24


(113)


(19)







Total other comprehensive income (loss)

24


(113)


3






 

Total comprehensive income

834


629


3,712







Profit attributable to:




 


Owners of the parent

786


705

 

3,598

Non-controlling interests

24


37


111






 

 

810


742


3,709

Total comprehensive income attributable to:




 


Owners of the parent

810


592


3,601

Non-controlling interests

24


37


111

 

834


9 62


3,712







Earnings per share (dollars)




 


Basic and Diluted (dollars per share)

0.0089


0.0080


0.0407







 




 


Weighted average number of shares outstanding




 


Basic and Diluted (dollars per share)

88,501,084


88,538,724

 

88,509,740







 

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

 

 

 

MTI WIRELESS EDGE LTD.

 (An Israeli Corporation)

 

INTERIM CONSOLIDATED STATEMENTS OF

CHANGES IN EQUITY

 

For the three month period ended March 31, 2022 (Unaudited):

 

Attributable to owners of the parent

 

 

Share capital

Additional paid-in capital

Translation differences

Retained earnings

Total attributable to owners of the  parent

Non-controlling interest

Total equity

 

U.S. $ in thousands

 

 

 

 

 

 

 

 

 

Balance at January 1, 2022

209

23,126

172

2,406

25,913

1,098

27,011

 

 

 

 

 

 

 

 

Changes during the three month period

  ended March 31, 2021:








Comprehensive income





 


 

Profit for the period

-

-

-

786

786

24

810

Other comprehensive income

 

 

 

 

 

 

 

Translation differences

-

-

24

-

24

-

24

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

24

786

810

24

834

Acquisition and disposal of treasury shares

-

41

-

-

41

-

41

Dividend

-

-

-

(2,479)

(2,479)

-

(2,479)

 

 

 

 

 

 

 

 

Balance at March 31, 2022

209

23,167

196

713

24,285

1,122

25,407

 

 

 

 

 

 

 

 

 

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

 

 

 

MTI WIRELESS EDGE LTD.

 (An Israeli Corporation)

 

INTERIM CONSOLIDATED STATEMENTS OF

CHANGES IN EQUITY (CONT.)

 

For the three month period ended March 31, 2021 (Unaudited):

 

Attributable to owners of the parent

 

 

Share capital

Additional paid-in capital

Translation differences

Retained earnings

Total attributable to owners of the  parent

Non-controlling interest

Total equity

 

U.S. $ in thousands

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

209

23,167

191

999

24,566

987

25,553

 

 

 

 

 

 

 

 

Changes during the three month period

  ended March 31, 2021:








Comprehensive income





 


 

Profit for the period

-

-

-

705

705

37

742

Other comprehensive income

 

 

 

 

 

 

 

Translation differences

-

-

(113)

-

(113)

-

(113)

 

 

 

 

 

 

 

 

Total comprehensive income (loss) for the period

-

-

(113)

705

592

37

622

Dividend

-

-

-

(2,213)

(2,213)

-

(2,213)

 

 

 

 

 

 

 

 

Balance at March 31, 2021

209

23,167

78

(509)

22,945

1,024

23,969

 

 

 

 

 

 

 

 

 

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

 

 

 

MTI WIRELESS EDGE LTD.

 (An Israeli Corporation)

 

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONT.)

 

For the year ended December 31, 2021 :

 

Attributable to owners of the parent

 

 

Share capital

Additional paid-in capital

Translation differences

Retained earnings

Total attributable to owners of the parent

Non-controlling interests

Total equity

 

 

 

 

 

 

 

U.S. $ in thousands

 

 

 

 

 

 

 

209

23,167

191

999

24,566

987

25,553

 

 

 

 

 

 

 

Changes during 2021: 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

Profit for the year

-

-

-

3,598

3,598

111

3,709

Other comprehensive income

 

 

 

 

 

 

 

Re measurements on defined benefit plans

-

-

-

22

22

-

22

Translation differences

-

-

(19)

-

(19)

-

(19)

 

 

 

 

 

 

 

 

Total comprehensive income (loss) for the year

-

-

(19)

3,620

3,601

111

3,712

-

-

-

(2,213)

(2,213)

-

(2,213)

-

(41)

-

-

(41)

-

(41)

 

 

 

 

 

 

 

209

23,126

172

2,406

25,913

1,098

27,011

 

 

 

 

 

 

 

 

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

 

 

 

MTI WIRELESS EDGE LTD.

(An Israeli Corporation)

 

INTERIM CONSOLIDATED STATEMENTS OF

FINANCIAL POSITION

 

 

31.03.2022

 

31.03.2021

 

31.12.2021

 

U.S. $ in thousands

 

Unaudited

 

 

ASSETS






CURRENT ASSETS:






Cash and cash equivalents

6,517


9,585


12,567 

Trade and other receivables

11,201


9,244


10,628

Unbilled revenue

3,542


2,389


2,794

Current tax receivables

281


489


518

Inventories

6,622

 

5,631


6,849







 

28,163

 

27,338

 

33,356







 






NON-CURRENT ASSETS:






Long term prepaid expenses

43


27


26

Property, plant and equipment

5,710


5,312


5,548

Deferred tax assets

1,123


689


994

Intangible assets

4,057

 

1,053


1,014







 

10,933

 

7,081

 

7,582

 

 

 

 

 



 

 

 


 







Total assets

39,096

 

34,419


40,938







 

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

 

 

 

INTERIM CONSOLIDATED STATEMENTS OF

F INANCIAL P OSITION

 

31.03.2022

 

31.03.2021

 

31.12.2021

 

U.S. $ In thousands

 

Unaudited

 

 

LIABILITIES AND EQUITY






CURRENT LIABILITIES:






Current maturities and short term bank credit and loans

11


36


23

Trade payables

6,167


4,157


5,346

Other accounts payable

4,367


4,762


6,895

Current tax payables

374


142


322







 

10,919


9,097


12,586







NON- CURRENT LIABILITIES:






Contingent consideration

1,432


49


-

Lease liabilities

360


464


465

Loans from banks, net of current maturities

15


30


8

Employee benefits, net

963


810


868







 

2,770


1,353


1,341







Total liabilities

13,689


10,450


13,927







EQUITY






Equity attributable to owners of the parent

 

 

 

 

 

Share capital

209


209


209

Additional paid-in capital

23,167


23,167


23,126

Translation differences

196


78


172

Retained earnings

713


(509)


2,406







 

24,285


22,945


25,913







Non-controlling interest

1,122


1,024


1,098







Total equity

25,407


23,969


27,011







Total equity and liabilities

39,096


34,419


40,938







 

May 22, 2022

 

 

 

Date of approval of financial statements

Moshe Borovitz

Chief Executive Officer

Elhanan Zeira

Controller

Zvi Borovitz

Non-executive Chairman of the Board

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

 

 

 

MTI WIRELESS EDGE LTD.

(An Israeli Corporation)

 

INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

 

 

Three month period ended

 March 31,

 

Year ended December 31,

 

 

2022

 

2021

 

2021

 

 

U.S. $ in thousands

 

 

Unaudited

 

 

Cash Flows from Operating Activities:







Profit for the period


810


742


3,709

Adjustments for:







Depreciation and amortization


327


221


976

Loss (Gain) from sale of property, plant and equipment


4


13


(25)

Finance (income) expenses, net


(9)


(24)


53

Tax expenses 


164


157


329

Changes in operating assets and  liabilities:







Decrease (increase) in inventories


291


729


(479)

Decrease in trade receivables


262


1,457


604

Increase in other accounts receivables


(355)


(112)


(448)

Increase in unbilled revenues


(748)


(71)


(476)

Increase (decrease) in trade and other accounts payables


593


(369)


2,803

Increase (decrease) in employee benefits, net

 

(9)

 

(16)

 

64








Cash from operations

 

1,330


2,727


7,110

 

 













Interest received

 

-

 

5

 

52

Interest paid

 

(11)

 

(10)

 

(88)

Income tax paid

 

(407)

 

(155)

 

(481)








Net cash provided by operating activities


912


2,567


6,593








 

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

 

 

 

  INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS (cont.)

 

 

 

Three month period ended

 March 31,

 

Year ended December 31,

 

 

 

2022

 

2021

 

2021

 

 

 

U.S. $ in thousands

 

 

 

Unaudited

 

 

 

Cash Flows From Investing Activities:







 

Proceeds from sale of property, plant and equipment


-


23


153

 

Acquisition of subsidiary, net of cash acquired


(1,427)


-


-

 

Net cash from sale of previously consolidated subsidiaries


(2,785)





 

Payment of contingent consideration regarding business acquisition


-


-


(54)

 

Purchase of property, plant and equipment

 

(181)

 

(151)

 

(835)

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

(4,393)

 

(128)

 

(736)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities:







 

Dividend


(2,479)


(2,213)


(2,213)

 

Payments of lease liabilities


(123)


(103)


(449)

 

Treasury shares acquired


-


-


(41)

 

Treasury shares sold


41


-


-

 

Repayment of long-term loans from banks

 

(4)

 

(82)

 

(117)

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

(2,565)

 

(2,398)

 

(2,820)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Decrease)/Increase in cash and

cash equivalents during the period 

 

(6,046)


41


3,037

 

Cash and cash equivalents

 at the beginning of the period

 

12,567

 

9,577

 

9,577

 

Exchange differences on balances of cash and cash equivalents

 

(4)

 

(33)

 

(47)

 

 

 

 

 

 

 


 

Cash and cash equivalents

 at the end of the period

 

6,517

 

9,585

 

12,567

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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", or collectively with its subsidiaries, the "Group") is an Israeli corporation. The Company was incorporated under the Companies Act in Israel on December 30, 1998, and commenced operations on July 1, 2000. 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 and its subsidiaries are engaged in the following areas:

-  Development, design, manufacture and marketing of antennas for the military and civilian sectors.

-  A leading provider of remote control solutions for water and irrigation applications based on Motorola's IRRInet state of the art control, monitoring and communication technologies.

-  Providing consulting, representation and marketing services to foreign companies in the field of RF and Microwave, including engineering services in the field of aerostat systems and system engineering services.

In these financial statements, the Company included the results of its aerostat system division in its representation and consulting services division, as it deems this appropriate given the nature of the consulting services provided in both segments and the respective size of these segments.

 

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, 2021 was approved by the board on March 6, 2022. The report of the auditors on those financial statements was unqualified.

The interim consolidated financial statements as of March 31, 2022 have not been audited.

The interim consolidated financial information should be read in conjunction with the annual financial statements as of December 31, 2021 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, 2021 are applied consistently in these interim consolidated financial statements.

 

Note 3 - Acquisition of subsidiary:

On 3 January 2022 the Company, via its wholly-owned subsidiary, MTI Summit Electronics Ltd. ("MTI Summit"), entered into a share purchase agreement, which includes both a purchase of existing shares in and the making of a new equity investment into P.S.K. WIND Technologies Ltd. ("PSK"), after which MTI Summit will own 51% of PSK (the "Acquisition"). The initial consideration for the Acquisition is approximately US$1.2 million, with an earn out payment, subject to performance, of up to approximately US$2.56 million. In addition, MTI Summit has made a loan to PSK of US$0.8 million and is party to an option agreement in relation to the acquisition of the remaining 49% of PSK.

The initial consideration paid by MTI, to acquire 51% of the equity in PSK, comprises: a) the purchase of existing shares in PSK for NIS 700,000 (approximately US$225,000); and b) a subscription of NIS 3,000,000 (approximately US$0.95m) for new shares in PSK.  In addition, there is an earn out mechanism under which further consideration may be payable, as described in the contingent consideration section below (the "Earn Out").  MTI Summit's loan to PSK of NIS 2,500,000 (approximately US$800,000) is a term loan which is to be repaid on 1 January 2024. The loan is not convertible and bears interest of 3.26% per annum.

In addition to the Acquisition, MTI Summit has an option to purchase and the vendors of PSK have an option to sell to MTI Summit the remaining 49% of PSK (the "Option") starting from 2027, subject to the terms described below.

Cash outflow/inflow on the Acquisition:

 

 

$'000

 

 

Unaudited

 

 

 

  Cash and cash equivalents acquired

  at the acquisition date

 

1,037

  Bank credit

 

(1,267)

Cash paid

 

(1,197)

 

 

 

Net cash

 

(1,427)

 

Acquisition cost of PSK at the date of Acquisition:

 

 

Fair value

 

 

$'000

 

 

Unaudited

 

 

 

Cash paid


1,197

Contingent consideration liability


56

Put options liability

 

1,376

 

 

 

Total acquisition cost

 

2,629

 

Note 3 - Acquisition of subsidiary (cont'):

Set forth below are the assets and liabilities of PSK at the date of Acquisition:

 

 

Fair value

 

 

$'000

 

 

Unaudited

 

 

 

Cash and cash equivalents

 

1,037

Trade receivables

 

671

Other receivables

 

213

Inventories

 

65

Property, plant and equipment

 

256

Intangible assets

 

1,710

Bank loans

 

(1,267)

Trade payables

 

(522)

Deferred tax liability

 

(394)

Other liabilities

 

(436)

Employee benefits, net

 

(104)

 

 

 

Net identifiable assets

 

1,229

Goodwill arising on acquisition

 

1,400

 

 

 

Total purchase cost

 

2,629

 

The results of PSK were consolidated into the financial statement of the Group from the beginning of the year.

Goodwill:

 

 

$'000

 

 

Unaudited

 

 

 

Balance at January 1, 2022 (audited)

 

861

additions

 

1,400

 

 

 

Balance at 31 March, 2022

 

2,261

The goodwill arising on Acquisition is attributed to the expected benefits from the synergies of the combination of the activities of the Company and PSK.

The goodwill recognized is not expected to be deductible for income tax purposes.

Contingent consideration:

As part of the purchase agreement with the owners of PSK, it was agreed that the sellers, who retain a 49% holding in PSK would be entitled to further consideration to be paid pursuant to an earn out mechanism dependent on PSK's actual revenues in 2022 and 2024 versus certain agreed targets in each of those years and is capped at a maximum of NIS 8,000,000 (approximately US$2.56m), to be paid in cash.

Note 3 - Acquisition of subsidiary (cont'):

Put Option liability:

MTI Summit has an option to purchase and the vendors of PSK have an option to sell to MTI Summit the remaining 49% of PSK (the "Option") starting from 2027 . The value of PSK under the Option is to be calculated on the basis of eight times the average EBITDA level of PSK in 2025 and 2026, with MTI being required to pay 49% of this value upon exercise. If the Option is to be exercised at any time after the preparation of PSK's financial results for the first quarter of 2027, the calculation will be based on PSK's average EBITDA for the last eight quarters.  The Option will remain in place until exercised.  

As at the Acquisition date, the fair value of the contingent consideration was estimated at US$ 56 thousand and the Option at US$ 1.376 million.

The significant non-observable data used in measuring the fair value of the liability in respect of the contingent consideration and the Put Option liability are as follows:

Discount rate: 15.5%

A significant increase (or decrease) in the estimated amount of the acquired company's pre-tax income will result in a significant increase (decrease) in the fair value of the liability in respect of the contingent consideration whereas a significant increase (decrease) in the discount rate and default risk rate will result in a decrease (an increase) in the fair value of the liability.

 

Note 4 - REVENUES:


 

Three month period  ended 

  March 31,

 

Year ended December 31,

 


 

2022

 

2021

 

2021


 

U.S. $ in thousands


 

Unaudited

 

 

Revenues arise from:


 

 

 

 

 

Sale of goods*


9.135

 

7,879

 

35,308

Rendering of services**


1,713

 

1,444

 

5,729

Projects**


328


626


2,147

 


11,176

 

9,949

 

43,184

 

 

 

 

 

 

(*) at the point in time

(**) over time

 

Note 5 - operating SEGMENTS:

The following tables present revenue and profit information regarding the Group's operating segments for the three month period ended March 31, 2022 and 2021 respectively and for the year ended December 31, 2021.

Three month period ended March 31, 2022 (Unaudited):


Antennas

Water Solutions

Distribution & Consultation Services

Adjustment & Elimination

Total

 

U.S. $ in thousands

Revenues






External

2,728

4,258

4,190

-

11,176

Internal

-

-

49

(49)

-

 

 

 

 

 

 

Total

2,728

4,258

4,239

(49)

11,176

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit (loss)

(132)

396

742

25

1,031

 

 

 

 

 

 

Finance expense, net





63

Tax expenses





164

 

 

 

 

 

 

Profit

 

 

 

 

804

 

 

 

 

 

 

 

31 March 2022:

 

Antennas

Water Solutions

Distribution & Consultation Services

Adjustment & Elimination

Total


U.S. $ in thousands

 

 

 

 

 

 

Segment assets

13,770

11,892

12,020

-

37,682

 

 

 

 

 

 

Unallocated assets

 

 

 

 

3,419

 

 

 

 

 

 

Segment liabilities

3,558

4,804

6,193

-

14,555

 

 

 

 

 

 

Unallocated liabilities

 

 

 

 

1,145

 

Three month period ended March 31, 2021 (Unaudited):

 


Antennas

Water Solutions

Distribution & Consultation Services

Adjustment & Elimination

Total

 

U.S. $ in thousands

Revenues






External

2,802

4,161

2,986

-

9,949

Internal

-

-

23

(23)

-

 

 

 

 

 

 

Total

2,802

4,161

3,009

(23)

9,949

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit

63

396

393

107

959

 

 

 

 

 

 

Finance expense, net





60

Tax expenses





157

 

 

 

 

 

 

Profit

 

 

 

 

742

 

 

 

 

 

 

 

Note 5 - operating SEGMENTS (CONT.):

31 March, 2021:

 

 

Antennas

Water Solutions

Distribution & Consultation Services

Adjustment & Elimination

Total


U.S. $ in thousands

 

 

 

 

 

 

Segment assets

14,863

9,030

7,861

-

31,754

 

 

 

 

 

 

Unallocated assets

 

 

 

 

2,665

 

 

 

 

 

 

Segment liabilities

2,936

2,976

3,702

 

9,614

 

 

 

 

 

 

Unallocated liabilities

 

 

 

 

836

 

 

Year ended December 31, 2021


Antennas

Water Solutions

Distribution & Consultation Services

Adjustment & Elimination

Total

 

U.S. $ in thousands

Revenues

 

 

 

 

 

External

11,294

17,606

14,284

-

43,184

Inter-segment

-

-

174

(174)

-

 

 

 

 

 

 

Total

11,294

17,606

14,458

(174)

43,184

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit

282

2,074

1,845

224

4,425

 

 

 

 

 

 

Finance expense, net





387

Tax expenses





329


 

 

 

 

 

Profit

 

 

 

 

3,709

 

 

31 December, 2021:

 

Antennas

Water Solutions

Distribution & Consultation Services

Adjustment & Elimination

Total


U.S. $ in thousands

 

 

 

 

 

 

Segment assets

14,399

11,100

11,999

-

37,498

 

 

 

 

 

 

Unallocated assets

 

 

 

 

3,440

 

 

 

 

 

 

Segment liabilities

3,090

3,626

6,282

-

12,998

 

 

 

 

 

 

Unallocated liabilities

 

 

 

 

929

 

Note 6 - sale of previously consolidated subsidiaries:

On 22 March 2022, the Company announced that it had disposed of its Russian operations and sold its entire holding in M.T.I Summit SPB ltd. ("SPB") for a de minimis amount, with this sale not having any significant profit/loss impact on the Company.

 

The effect of the sale on the financial position of the Group is as follows:

 

 

$'000

 

 

Unaudited

 

 

 

Other receivables

 

(417)

Inventories

 

(6)

Current tax receivables

 

(10)

Cash and cash equivalents

 

(2,785)

Other trade payables

 

3,218

 

 

 

Net assets and liabilities

 

-

 

 

 

Consideration received, satisfied in cash


-

Cash and cash equivalents disposed of

 

(2,785)

 

 

 

Net cash outflows

 

(2,785)

 

Note 7 - SIGNIFICANT EVENTS:

A.  On 6 March 2022, the Board of directors declared a cash dividend of 2.8 US cents per share, representing approximately $2,479,000, in total. This dividend was paid on 31 March 2022 to shareholders on the register at the close of trading on 18 March 2022.

B.  On 24 January 2019, the Company announced a share repurchase program to conduct market purchases of ordinary shares of par value 0.01 Israeli Shekels each ("Ordinary Shares") in the Company up to a maximum value of £150,000 (the "Programme"). Thereafter, the board of directors of the Company and the board of directors of MTI Engineering decided to continue with the Programme for several further periods. On 13 April 2022, the Company announced that it would extend the Programme until 31 March 2023, with the Programme having an increased maximum value of up to £200,000 and with the Programme being managed by Shore Capital Stockbrokers Limited pursuant to the terms as announced. As at 31 March 2022, no Ordinary Shares were held in treasury under the Programme.

On 9 March 2022 at an extraordinary shareholders meeting, Mr. Luke Ahern was elected as an external director for three year term. At the same meeting approval for the extension of an updated Remuneration Policy for a period of three years or for a longer period, to the extent prescribed in the provisions of the Israeli Companies Law, was granted as well as the extension of an updated management services agreement (the "Management Services Agreement"), between the Company and Mokirei Aya Management (2003) Ltd. (the "Management Company") for the provision of the services of the Chairman and CEO of the Company for a further three years or for a longer period, to the extent prescribed in the provisions of the Israeli Companies Law with effect from 1 March 2022.

C.  Outbreak of COVID-19 and Business Continuity - In December 2019, the COVID-19 pandemic broke out in China, and the virus has spread to many countries around the world. In January 2020, the World Health Organization announced the outbreak of the Coronavirus as a global health emergency, and in March 2020, the World Health Organization declared the pandemic to be a global pandemic. In 2021 and until the date of this report the Company was able to maintain good levels of operation using remote working procedures where appropriate and a sufficient level of production in its production facilities while assuring the health of its employees. Since March 2022 most of the Group's operations have returned to a normal level of activity but aspects of the Group's supply chain are still working slower, and the Company's industry has been affected on the operational level, along with the rest of the world economy as it faces the risk of a global recession where the ability to predict the timing of a recovery is uncertain. In particular, shipment costs are higher and availability of shipping is lower, some of the components or other parts (used by the Company or its vendors or its customers) are still under shortage and this can effect the ability to supply part of the demand. This uncertainty of the level of the global economic slowdown, its duration and its medium to long term effects creates challenges, but the Company believes that if there is no further deterioration in the situation, its financial strength and business stability will allow it to navigate through this.

 

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