Interim Results
Orad Hi-Tec Systems
26 August 2003
Orad Hi-Tec Systems Ltd ('Orad' or the 'Company')
Results for the six month period and the quarter ended June 30 2003
Tel Aviv, August 26th, 2003 - Orad Hi-Tec Systems Ltd (Frankfurt - Prime
Standard; London - AIM. Symbol: OHT), a leading developer, marketer and
distributor of state-of-the-art, 3D graphical solutions for the broadcasting,
advertising and visual simulation markets, announced today its results for the
second quarter and first half year of 2003.
Highlights :
• Revenues continue to grow - $8.6 million in H1 2003, 12% growth
compared to H1 2002. $4.4 million in Q2 reflecting a growth of 10%
compared to Q2 2002 and a growth of 6% compared to Q1 2003
• 41% decrease in net loss compared to H1 2002
• Orad penetrates Visual Simulations market
• Orad admitted for dual listing on the Alternative Investment Market of
the London Stock Exchange (AIM)
Avi Sharir, Chief Executive of Orad, commented : 'We are pleased to report such
good growth and results in excess of expectations in our first period whilst
traded on AIM as well as on the Frankfurt Prime Standard. The continued growth
in revenues demonstrates the strength of our product range, in particular our
ability to access new markets such as the 3D visual simulation market which we
expect to provide Orad with a strong platform for future growth.'
For further information:
Orad
Avi Sharir 00 972 976 768 62
Shore Capital (London)
Graham Shore 00 44 (0) 20 7408 4090
Jonathan Nelson
Orad Hi-Tec Systems Ltd ('Orad' or the 'Company')
Results for the six month period and the quarter ended June 30 2003
Chief Executive's Statement
Increasing revenues and continuing decreasing of operational costs resulted in a
41% decrease of net loss in the first half of 2003 compared to the first half of
2002. Net loss amounted $2.3 million in the first half of 2003 (compared to $3.8
millions in H1 2002), which is composed mainly of amortization of deferred share
compensation ($0.8 million), depreciation ($0.9 million) and AIM listing
expenses ($0.2 million).
This growth is reflected also in the quarterly results. Q2 2003 revenues were
10% above Q2 2002 revenues and 6% above the last quarter.
Sales growth is attributed to increasing sales to high profile broadcasters such
as TV3 and TVB and the successful penetration of Orad's innovative DVG to the
Visual Simulation Market with sales to leading customers such as British
Aerospace, Naval Research Lab, Northrop Grumann and others.
In June 2003, Orad was the first company to use the new streamlined rules of the
London Stock Exchange for companies also traded on other markets, to made
application for trading on the AIM. Trading on AIM started on July 17, 2003 and
listing on the Prime Standard segment of the German Stock Exchange was not
affected by this move.
Cash position as of June 30, 2003 is $8.5 million; gross margin remains high at
63%.
Operational Highlights for the six months ended June 30, 2003:
• Growing penetration into Visual Simulation market: Orad's
DVG is considered the world's most powerful and scalable visualization cluster
and it is being used in visual simulations and virtual reality applications.
Significant sales have been made to British Aerospace of UK, Northrop Grumann,
Naval Research Lab and Old Dominion University of US, Clarte of France and
Wycone of China.
• New sales of Orad's On Air Graphic product (CyberGraphic)
to high profile customers such as TV3 of Spain, TVB of Hong Kong, ZEE TV of
India and TF1 of France.
Financial & Operational Highlights for the six months and the quarter ended June
30, 2003 compared to the same periods in 2002:
Revenues
The revenues for the first six months of 2003 were $8.6 million, compared to
$7.7 million for the first six months of 2002, an increase of 12%. The revenues
for the second quarter of 2003 were $4.4 million, compared to $4.0 million for
the second quarter of 2002, an increase of 10%. Increase in revenues is
attributed to increasing sales to high profiles broadcasters and the successful
penetration of Orad's innovative DVG to the Visual Simulation Market.
Gross Margin
Gross margin for the first six months of 2003 and for the second quarter was 63%
compared to 61% in the first six months of 2002 and the second quarter of 2002.
The Company managed to achieve higher margins compared to previous year due to
increased sales volume and cost saving, mainly due to Orad's Digital Video
Graphic (DVG) engine that is now powering all the company's software
applications, replacing 3rd-party computers.
Research & Development
Research and development (R&D) expenses were $1.9 million in the first six
months of 2003, compared to $2.4 million in the first six months of 2002. R&D
expenses in the second quarter of 2003 were $0.9 compared to $1.1 million in the
second quarter of 2002. The decrease is mainly due to measures taken by the
Company towards increasing efficiency and consolidation of R&D efforts of
subsidiaries having complementary technologies.
Selling & Marketing
Selling and Marketing (S&M) expenses were $3.8 million in the first six months
of 2003 compared to $4.0 million in the first six months of 2002, a decrease of
$0.2 million due to expenses reductions. S&M expenses in the second quarter of
2003 were $2.3 million compared to $2.2 million in the second quarter of 2002.
General & Administrative
General & Administrative (G&A) expenses were $ 1.2 million in the first six
months of 2003, compared to $1.9 million in the first six months of 2002. G&A
expenses in the second quarter of 2003 were $0.6 million compared to $0.9
million in the second quarter of 2002. In both cases the decrease is mainly due
to a decrease in bad debts allowance expenses and to expenses cuts.
Other Expenses
Other expenses in the first six months of 2003 and in the second quarter of 2003
were $0.2 million and are attributed to our admission to AIM.
Financial income (expenses)
Financial income consists primarily of exchange rate differences related to
non-US dollar balances and interest income earned on short-term deposits offset
by bank charges. Financial income for the first six months of 2003 was $0.2
million, compared to financial income of $0.9 million in the first six months of
2002. Financial income for the second quarter of 2003 was $0.1 million compared
to $0.9 million in the second quarter of 2002. The increase is due to exchange
rate differences resulting from significant strengthening of the Euro compared
to the Dollar offset by the decrease in interest from short-term bank deposits.
Net Loss
Net loss for the first six months of 2003 was $2.3 million compared to $3.8
million for the first six months of 2002. Net loss for the second quarter of
2003 was $1.3 million compared to $1.6 million for the second quarter of 2002.
The decrease in losses is due to the continued implementation of cutting
expenses and increasing efficiency. Net loss for the second quarter is composed
mainly of amortization of deferred share compensation ($0.2 million),
depreciation ($0.4 million) and AIM listing expenses ($0.2 million).
Net loss per share
Net loss per share for the second quarter of 2003 was $0.12, compared to a net
loss per share of $0.16 for the second quarter of 2002. Net loss per share for
the first six months of 2003 was $0.22, compared to a net loss per share of
$0.37 for the first six months of 2002.
Cash Position
As of June 30, 2003, cash and short-term bank deposits amounted $8.5 million
compared to $9.2 million at the end of the first quarter of 2003, a decrease of
$0.7 million mainly in order to finance operation.
Financial & Operational Highlights of second quarter 2003 compared to first
quarter 2003:
Revenues
Revenues for the second quarter of 2003 amounted to $4.4 million compared to
$4.2 million in the first quarter of 2003, an increase of 6%.
Gross Margin
Gross margin in the second quarter of 2003 is 63% compared to 64% in the first
quarter of 2003. The Company maintained this high margin due to improved sales
volumes and expenses savings obtained by centralizing all manufacturing
activities in one location.
Research & Development
Research and development (R&D) expenses in the second quarter of 2003 were $0.93
million compared to $0.98 million in the first quarter of 2003.
Selling & Marketing
Selling and Marketing (S&M) expenses in the second quarter of 2003 increased to
$2.3 million, compared to $1.5 million in the previous quarter partly due to an
increase in exhibitions costs.
General & Administrative
General & Administrative (G&A) expenses were about $0.6 million in the second
quarter of 2003 compared to $0.7 million in the first quarter of 2003.
Financial income (expenses)
Financial income consists primarily of exchange rate differences related to
non-US dollar balances and interest income earned on short-term deposits offset
by bank charges. Financial income for the second quarter of 2003 was $0.13
million, compared to financial income of $0.04 million in the first quarter of
2003. The change is explained by, exchange rate differences resulting from
devaluation of the Dollar versus the Euro (in Q2 the Euro strengthened by 4.6%
compared to the Dollar while in Q1 it strengthened compared to the Dollar by
3.7%) and by the weakening of the Dollar compared to the NIS.
Net Loss
Net loss for the second quarter of 2003 amounted to $1.3 million, compared to
$0.98 million in the first quarter of 2003.
Net loss per share
Net loss per share for the second quarter of 2003 was $0.12, compared to a net
loss per share of $0.09 for the first quarter of 2003.
Contact:
Orad Hi-Tec Systems Ltd.
Sarit Sagiv
Chief Financial Officer
PO Box 2177
Kfar Saba 44425, Israel
Tel: +972-9-767-6862 ext. 578
Fax: +972-9-767-6861
E-Mail: sarit@orad.tv
www.orad.tv
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December 31, June 30,
2002 2003
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,034 $ 8,014
Restricted cash 500 500
Trade receivables, net 5,062 6,124
Other receivables and prepaid expenses 1,314 1,202
Inventories and work in process 4,984 4,655
Total current assets 21,894 20,495
SEVERANCE PAY FUNDS 482 574
EQUIPMENT LEASED TO CUSTOMERS, NET 354 191
PROPERTY AND EQUIPMENT, NET 3,834 3,212
$ 26,564 $ 24,472
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit and current maturities of long-term bank loans $ 149 $ 56
Trade payables 2,242 1,584
Deferred revenues 490 571
Other payables and accrued expenses 3,194 3,261
Total current liabilities 6,075 5,472
LONG-TERM BANK LOANS, NET OF CURRENT MATURITIES 13 -
ACCRUED SEVERANCE PAY 1,097 1,163
MINORITY INTEREST (88) (132)
SHAREHOLDERS' EQUITY:
Share capital 28 28
Additional paid-in capital 74,682 75,107
Warrants 425 -
Deferred share compensation (784) -
Accumulated other comprehensive loss (547) (547)
Accumulated deficit (54,337) (56,619)
Total shareholders' equity 19,467 17,969
$ 26,564 $ 24,472
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except per share data
Year ended Six months ended Three months ended
December 31, June 30, June 30,
2002 2002 2003 2002 2003
Unaudited
Revenues $ 14,506 $ 7,708 $ 8,642 $ 4,028 $ 4,439
Cost of revenues 6,091 2,986 3,161 1,578 1,628
Gross profit 8,415 4,722 5,481 2,450 2,811
Operating expenses:
Research and development, net 4,527 2,362 1,910 1,148 934
Sales and marketing, net 7,639 4,003 3,802 2,244 2,299
General and administrative 3,573 1,856 1,243 942 593
Amortization of deferred share 2,400 1,200 784 600 184
compensation
Total operating expenses 18,139 9,421 7,739 4,934 4,010
Operating loss 9,724 4,699 2,258 2,484 1,199
Financial income, net 962 860 166 872 129
Other expenses , net 8 - 234 - 234
Loss before minority interest in 8,770 3,839 2,326 1,612 1,304
losses (income) of a subsidiary
Minority interest in losses 28 (10) 44 (17) 4
(income) of a subsidiary
Net loss $ 8,742 $ 3,849 $ 2,282 $ 1,629 $ 1,300
Basic and diluted net loss per $ 0.84 $ 0.37 $ 0.22 $ 0.16 $ 0.12
share
Weighted average number of shares 10,461 10,448 10,562 10,451 10,562
used in computing basic and
diluted net loss per share
('000's shares)
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands
Share Additional Warrants Deferred Accumulated Accumulated Total
capital paid-in share other deficit
capital compensation comprehensive
loss
Balance as of $ 28 $ 74,518 $ 535 $ (3,184) $ (154) $ (45,595) $ 26,148
January 1, 2002
Comprehensive
loss:
Net loss - - - - - (8,742) (8,742)
Other - - - - (393) - (393)
comprehensive
loss - foreign
currency
translation
adjustments
Total (9,135)
comprehensive
loss
Amortization of - - - 2,400 - - 2,400
deferred share
compensation
Issuance of *) - 54 - - - - 54
contingent
shares
Forfeiture of - 110 (110) - - - -
warrants
Balance as of 28 74,682 425 (784) (547) (54,337) 19,467
December 31,
2002
Comprehensive
loss:
Net loss for the - - - - - (2,282) (2,282)
period
Total (2,282)
comprehensive
loss
Amortization of - - - 784 - - 784
deferred share
compensation
Forfeiture of - 425 (425) - - - -
warrants
Balance as of $ 28 $ 75,107 $ - $ - $ (547) $ (56,619) $ 17,969
June 30, 2003
(unaudited)
Balance as of $ 28 $ 74,518 $ 535 $ (3,184) $ (154) $ (45,595) $ 26,148
January 1, 2002
Comprehensive
loss:
Net loss for the - - - - - (3,849) (3,849)
period
Other - - - - (416) - (416)
comprehensive
loss - foreign
currency
translation
adjustments
Total (4,265)
comprehensive
loss
Amortization of - - - 1,200 - - 1,200
deferred share
compensation
Issuance of - 54 - - - - 54
contingent
shares
Forfeiture of - 110 (110) - - - -
warrants
Balance as of $ 28 $ 74,682 $ 425 $ (1,984) $ (570) $ (49,444) $ 23,137
June 30, 2002
(unaudited)
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended Six months ended
December 31, June 30,
2002 2002 2003
Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,742) $ (3,849) $ (2,282)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 1,880 872 859
Amortization of deferred share compensation 2,400 1,200 784
Minority interest in income (losses) of a subsidiary (28) 10 (44)
Accrued interest on short-term bank deposits (49) (48) -
Decrease (increase) in trade receivables, other receivables 1,439 1,890 (950)
and prepaid expenses
Decrease (increase) in inventories and work in process (511) (58) 297
Decrease in trade payables, other payables and accrued (1,024) (601) (536)
expenses, deferred revenues and accrued severance pay, net
Other 8 8 -
Net cash used in operating activities (4,627) (576) (1,872)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment and equipment leased to (248) (140) (66)
customers
Proceeds from sale of property and equipment 78 32 24
Proceeds from short-term bank deposits, net 10,131 7,130 -
Restricted cash (500) (500) -
Net cash provided by (used in) investing activities 9,461 6,522 (42)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term bank credit, net (53) (32) (30)
Payment of long-term loans (175) (95) (76)
Payment of long-term loan from shareholders (125) - -
Net cash used in financing activities (353) (127) (106)
Net effect of exchange rate on cash and cash equivalents - 1 -
Increase (decrease) in cash and cash equivalents 4,481 5,820 (2,020)
Balance of cash and cash equivalents at beginning of the 5,553 5,553 10,034
period
Balance of cash and cash equivalents at end of the period $ 10,034 $ 11,373 $ 8,014
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
SUPPLEMENTARY INFORMATION
a. Company's shares and options held by members of the board of directors
and officers of the Company:
Number of Number of
Ordinary shares share options *)
Avi Sharir 1,214,982 184,932
Michael Tamir 1,214,982 184,932
Moshe Nissim - 56,428
Sarit Sagiv - 15,000
Orna Nehustan - 20,000
*) Each share option is convertible into one Ordinary share.
b. As of June 30, 2003, the Company employs 116 employees.
c. Further copies of these results are available from the
registered office of the Company, PO Box 2177, Kfar Saba 44425, Israel, or from
www.orad.tv.
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