Half Yearly Report

RNS Number : 2186X

MTI Wireless Edge Limited

27 August 2015

 

27 August 2015

MTI Wireless Edge Ltd

("MTI" or the "Company")

Financial results for the six months ended 30 June 2015

MTI Wireless Edge Ltd., (MWE) ("MTI" or the "Company"), a market leader in the manufacture of flat panel antennas for fixed wireless broadband, and a wireless irrigation solution provider today announces its unaudited results for the six months ended 30 June 2015.

Highlights

·     The results include one month consolidation of our newly acquired wireless irrigation solution provider, Mottech Water Solutions Ltd ("Mottech").

·     Revenue increased by 13% to US$8m (H1 2014: US$7.1m).

·     Operational profit increased by 150% to US$0.5m (H1 2014: US$0.2m).

·     Total comprehensive income doubled to US$0.5m (H1 2014: US$0.25m).

·     Dividend of US 0.68 cent per share paid on 2 April 2015.

·     Shareholder's equity of US$17.8m (at March 31, 2015: US$17.8m), equivalent to 22.2 pence per share (a 100% premium to the closing mid-price on 26 August).

·     Integration of Mottech is progressing well.

Dov Feiner, Chief Executive Officer, commented:

"I am pleased to announce that during the first half of 2015 the Company continued to increase its revenue and profits.

The antenna business has continued to grow, and we have recorded growth across the majority of our core product range compared with H1 2014 with the exception of the 80 GHz products.  These 80 GHz products have nevertheless continued to gain traction in the market and we remain confident in the long term market opportunity for these multi-gigabit wireless backhaul solutions and their future contribution to the business.

On 10 of June 2015, the Company completed the earnings enhancing acquisition of Mottech and I am especially pleased to report that this has made an immediate profit contribution for the month of June, the last month of the H1 reporting period.

The integration of the Mottech business is proceeding well and we anticipate that the Mottech management office will move to MTI's facilities in September, which will accelerate the integration process and and help us achieve operational efficiencies. We continue to see many opportunities for Mottech's water management services, as well as applying Mottech's remote control and monitoring systems in other markets."

For further information please contact:

MTI Wireless Edge Dov Feiner, CEO Moni Borovitz, Financial Director	http://www.mtiwe.com/ [phone]
Allenby Capital Limited Nick Naylor Alex Price	[phone]

About MTI Wireless Edge

MTI is engaged in the development, production and marketing of High Quality, Low Cost, Flat Panel Antennas for Commercial & for Military applications. Commercial applications such as: WiMAX, Wireless Networking, RFID readers &, Broadband Wireless Access. With over 40 years experience, supplying antennas 100KHz to 90GHz including directional antennas and Omni directional for outdoor and indoor deployments including Smart Antennas for WiMAX, Wi-Fi, Public Safety, RFID and for Base Stations and Terminals  - 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.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Six months ended June 30,				Year ended December 31,
	2015		2014		2014
	U.S. $ in thousands
	Unaudited				Audited
Revenues	8,035		7,125		14,341
Cost of sales	5,021		4,360		9,201
Gross profit	3,014		2,765		5,140
Research and development expenses	641		650		1,230
Distribution expenses	942		983		1,815
General and administrative expenses	925		930		1,755
Profit from operations	506		202		340
Finance expense	195		87		281
Finance income	46		66		94
Profit before income tax	357		181		153
Income tax benefit	(43)		(68)		(116)
Profit	400		249		269
Other comprehensive income (net of tax):
Items that will not to be reclassified to profit or loss:
Re-measurement of defined benefit plans	-		-		(29)
	-		-		(29)
Items that will be reclassified to profit or loss:
Adjustment arising from translation of financial statements of foreign operations	101		-		-
	101		-		-
Total other comprehensive income (loss)	101		-		(29)
Total comprehensive income	501		249		240
Profit Attributable to:
Owners of the parent	382		242		247
Non-controlling interest	18		7		22
	400		249		269
Total comprehensive income Attributable to:
Owners of the parent	483		242		218
Non-controlling interest	18		7		22
	501		249		240
Earnings per share (dollars per share)
Basic and Diluted	0.0074		0.0047		0.0048
Weighted average number of shares outstanding
Basic and Diluted	51,571,990		51,571,990		51,571,990

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the Six months period ended June 30, 2015:

			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, 2015 (Audited)	109		14,945		286		-	2,287		17,627		216		17,843
Changes during the six months     ended June 30, 2015 (Unaudited):
comprehensive income
income for the period	-		-		-		-	382		382		18		400
Other comprehensive income
Translation differences	-		-		-		101	-		101		-		101
Total comprehensive income for the period	-		-		-		101	382		483		18		501
Non-controlling Interest of newly purchased subsidiary	-		-		-		-	-		-		8		8
Dividend paid	-		-		-		-	(351)		(351)		-		(351)
Share based payment	-		-		13		-	-		13		-		13
Balance at June 30, 2015 (Unaudited)	109		14,945		299		101	2,318		17,772		242		18,014

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the Six months period ended June 30, 2014:

	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, 2014 (Audited)	109		14,945		259		2,420		17,733		194		17,927
Changes during the Six months period     ended June 30, 2014 (Unaudited):
Comprehensive income for the period	-		-		-		242		242		7		249
Dividend paid	-		-		-		(351)		(351)		-		(351)
Share based payment	-		-		12		-		12		-		12
Balance at June 30, 2014 (Unaudited)	109		14,945		271		2,311		17,636		201		17,837

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

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the year ended December 31, 2014:

	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, 2014	109		14,945		259		2,420		17,733		194		17,927
Changes during 2014:
Income for the year	-		-		-		247		247		22		269
Other comprehensive income	-		-		-		(29)		(29)		-		(29)
Total comprehensive income for the year	-		-		-		218		218		22		240
Dividend paid	-		-		-		(351)		(351)		-		(351)
Share based payment	-		-		27		-		27		-		27
Balance at December 31, 2014	109		14,945		286		2,287		17,627		216		17,843

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

	30.6.2015		30.6.2014		31.12.2014
	U.S. $ in thousands
	Unaudited				Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	1,957		2,502		2,918
Restricted cash	339		-		-
Other current financial assets	2,529		3,736		3,728
Trade receivables	7,693		5,051		5,012
Other receivables	1,105		844		771
Current tax receivables	117		152		143
Inventories	4,574		3,133		2,941
	18,314		15,418		15,513
NON-CURRENT ASSETS:
Long term prepaid expenses	22		24		12
Property, plant and equipment	5,231		5,312		5,209
Investment property	1,221		1,257		1,240
Deferred tax assets	372		308		368
Intangible assets	483		-		-
Goodwill	573		406		406
	7,902		7,307		7,235
Total assets	26,216		22,725		22,748

	30.6.2015		30.6.2014			31.12.2014
	U.S. $ In thousands
	Unaudited				Audited
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities and short term bank credit and loans	812		261		270
Trade payables	2,227		2,001		1,907
Other accounts payables	1,609		811		1,018
Current tax payables	189		-		-
	4,837		3,073		3,195
NON- CURRENT LIABILITIES:
Loans from banks, net of current maturities	2,847		1,465		1,345
Employee benefits	426		350		365
Other liabilities	92		-		-
	3,365		1,815		1,710
Total liabilities	8,202		4,888		4,905
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	299		271		286
Translation differences	101		-		-
Retained earnings	2,318		2,311		2,287
	17,772		17,636		17,627
Non-controlling interest	242		201		216
Total equity	18,014		17,837		17,843
Total equity and liabilities	26,216		22,725		22,748

INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

			Six months ended June 30,						Year ended December 31,
		2015			2014			2014
		U.S. $ in thousands
		Unaudited						Audited
Cash Flows from Operating Activities:
Profit for the period		400			249		269
Adjustments for:
Depreciation		258			223		451
Loss (Gain) from investments in financial assets		79			(5)		(37)
Equity settled share-based payment expense		13			12		27
Finance expenses, net		20			45		87
Income tax benefit		(43)			(68)		(116)
Changes in operating assets and  liabilities:
Decrease (increase) in inventories		6			(42)		150
Decrease (increase) in trade receivables		(631)			308		347
Increase in other accounts receivables and prepaid expenses		(117)			(281)		(196)
Increase (decrease) in trade and other accounts payables		(187)			61		162
Increase in employee benefits, net		27			34		20
Decrease in provisions		-			(112)		(40)
Interest paid		(20)			(45)		(87)
Income tax paid		(27)			(1)		(4)
Net cash provided by (used in)        operating activities		(222)			378		1,033

			Six months ended June 30,					Year ended December 31,
			2015			2014		2014
			U.S. $ in thousands
				Unaudited				Audited
Cash Flows From Investing Activities:
Sale of investments in financial assets, net			1,176			2,022		2,053
Acquisition of subsidiary, net of cash acquired			(3,042)			-		-
Increase in restricted cash			(339)			-		-
Purchase of property, plant and equipment			(160)			(108)		(276)
Net cash provided by (used in)        investing activities			(2,365)			1,914		1,777
Cash Flows From Financing Activities:
Short term loan paid			-			(301)		(292)
Long term loan received from banks			2,090			-		31
Dividend paid to the owners of the parent			(351)			(351)		(351)
Repayment of long-term loan from banks			(135)			(130)		(272)
Net cash provided by (used in)         financing activities			1,604			(782)		(884)
Increase (decrease) in cash and  cash equivalents during the period			(983)			1,510		1,926
Cash and cash equivalents  at the beginning of the period			2,918			992		992
Exchange differences on balances of cash and cash equivalents			22			-		-
Cash and cash equivalents  at the end of the period			1,957			2,502		2,918

Appendix A - Non-cash transactions:

			Six months ended June 30,				Year ended December 31,
			2015		2014		2014
			U.S. $ in thousands
		Unaudited					Audited
Purchase of property and equipment   against trade payables		17			71		11

Appendix B - Acquisition of subsidiary, net of cash acquired:

			Six months ended June 30,				Year ended December 31,
			2015		2014		2014
			U.S. $ in thousands
		Unaudited					Audited
Working capital (excluding cash and cash      equivalents)		2,530			-		-
Property and equipment		95			-		-
Intangible assets		483			-		-
Goodwill		167			-		-
Deferred taxes		(66)			-		-
Non-current liabilities		(67)			-		-
The subsidiaries' assets (excluding cash and cash equivalents) and liabilities at date of acquisition		3,142			-		-
Non-controlling interests		(8)			-		-
Payables from acquisition of investments in subsidiaries		(92)			-		-
Total		3,042			-		-

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) and commenced operations on July 1, 2000.

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. Via its subsidiary, Mottech Water solutions, 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

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, 2014 was approved by the board on February 19, 2015. The report of the auditors on those financial statements was unqualified. The interim consolidated financial statements as of June 30, 2015 have not been audited.

The interim consolidated financial information should be read in conjunction with the annual financial statements as of 31 December, 2014 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, 2014 are applied consistently in these interim consolidated financial statements, except for the impact of the adoption of the Standards and Interpretations described below.

Intangible assets:

Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalized development costs, are recognized in profit or loss when incurred.

Intangible assets with a finite useful life are amortized over their useful life and reviewed for impairment whenever there is an indication that the asset may be impaired. The amortization period and the amortization method for an intangible asset are reviewed at least at each year end.

Note 2 - Significant Accounting Policies (CONT.): 

Intangible assets with indefinite useful lives are not systematically amortized and are tested for impairment annually or whenever there is an indication that the intangible asset may be impaired. The useful life of these assets is reviewed annually to determine whether their indefinite life assessment continues to be supportable. If the events and circumstances do not continue to support the assessment, the change in the useful life assessment from indefinite to finite is accounted for prospectively as a change in accounting estimate and on that date the asset is tested for impairment. Commencing from that date, the asset is amortized systematically over its useful life.

Note 3 - BUSINESS CMBINATIONS:

On April 28, 2015 the Company signed an agreement for the purchase of 100% of the share capital of Mottech Water Solutions ltd ("Mottech"), a provider of wireless control products and services, for a consideration of approximately US$ 4 million (15.5 million New Israeli Shekels) plus an additional contingent payment based on performance which could rich up to about US$ 750 thousand (3 million New Israeli Shekels). The acquisition was completed on June 11, 2015 and funded by long-term bank loan and independent sources. To secure the long-term bank loan the Company recorded a charge on the share capital of Mottech and in addition has undertaken to meet the following financial covenant to be computed on the basis of the separated financial statements of the Company:

·   The amount of equity shall not be lower than 40% of total assets of the Company. As of June 30, 2015 the Company meets its obligations.

Mottech is a global distributor and integrator of Motorola's wireless control solutions, which includes a portfolio of radio-enabled sensors and switches managed by control software. Mottech primarily operates in the water management sector and has developed proprietary wireless management solutions for commercial irrigation, municipal water authorities and water distributors. A typical solution reduces costs for the client, for example Mottech provides a commercial farm irrigation system that monitors the local environment, weather and soil sensors in real-time and Mottech's propriety software automatically operates irrigation and fertilizer pump stations to optimize these critical costs for the farm.

Mottech was set up in May 2014 and acquired its business and assets at the same time from the Israeli court. The assets had been placed in the Israeli court following the previous owner going into administration as result of business failure of a subsidiary which is not part of Mottech or its business today.

The cost of acquisition was allocated to tangible assets, intangible assets and liabilities which were acquired based on their fair value at the time of the acquisition. The intangible assets recognized include customer relations in the total amount of US$ 417 thousands and goodwill in the total amount US$ 167 thousands. The customer relation is amortized over an economic useful life of up to 10 years.

Note 3 - BUSINESS CMBINATIONS (CONT.):

Acquisition cost of Mottech at the date of acquisition:

		Fair value
		$'000
		Unaudited
Cash paid		4,003
Contingent consideration liability		92
Total acquisition cost		4,095

Set forth below are the assets and liabilities of Mottech at date of acquisition:

		Fair value
		$'000
		Unaudited
Cash and cash equivalents		961
Trade receivables		1,991
Other receivables		217
Inventories		1,586
Property, plant and equipment		95
Intangible assets		11
Trade payables		(268)
Other liabilities		(1,071)
Net identifiable assets		3,522
Intangible assets arising on acquisition		573
Total purchase cost		4,095

The result of the company were consolidated into the financial statement of the group commencing May 31, 2015 and from that date Mottech has contributed US$ 152 thousand to the consolidated profit and US$1,093 thousand to the consolidated revenue turnover. If the business combination had taken place at the beginning of the year, the consolidated net profit would have been US$ 32 thousand and the consolidated revenue turnover would have been US$ 12,275 thousand.

Cash outflow/inflow on the acquisition:

		$'000
		Unaudited
Cash and cash equivalents acquired           at the acquisition date		961
Cash paid		(4,003)
Net cash		(3,042)

Note 3 - BUSINESS CMBINATIONS (CONT.):

Goodwill:

		$'000
		Unaudited
Balance at January 1, 2015 (audited)		406
additions		167
Balance at June 30, 2015		573

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

The goodwill recognized is expected to be deductible for income tax purposes.

Contingent consideration:

As part of the purchase agreement with the previous owner of Mottech, it was agreed that the previous owner would be entitled to an additional contingent consideration ("the contingent consideration"). The Group will pay the contingent consideration to the previous owner based on calculation:

Up to US$ 720 thousand, if the acquired Company's accumulated revenue in 2016 - 2017 exceeds US$ 25.8 Million (100 million New Israeli Shekels) ("the revenue target").

As of the acquisition date, the fair value of the contingent consideration was estimated at US$ 92 thousand. The fair value was determined using the Monte-Carlo method.

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

Discount rate: 12.8%

A significant increase 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 - operating SEGMENTS:

Following the acquisition of the new operation the Group's chief operating decision maker examines operating segments differently from the past and therefore commencing the current financial statements the following table's present revenue and profit information regarding the Group's operating segments for the six months ended June 30, 2015 and 2014, respectively and for the year ended December 31, 2014.

Six months ended June 30, 2015 (Unaudited)
		Antennas*		Water Solutions**		Total
		$'000
Revenue
External		6,942		1,093		8,035
Total		6,942		1,093		8,035
Segment income		325		181		506
Finance expense, net						(149)
Profit before income tax						357
Other
Depreciation and other non-cash expenses		256		2		258

(*)  Reclassified.

(**) Results for one month ending on June 30, 2105.

Six months ended June 30, 2014 (Unaudited)
		Antennas*		Water Solutions		Total
		$'000
Revenue
External		7,125		-		7,125
Total		7,125		-		7,125
Segment income		202		-		202
Finance expense, net						(21)
Profit before income tax						181
Other
Depreciation and other non-cash expenses		223		-		223

(*) Reclassified.

Note 4- operating SEGMENTS (CONT.):

Year ended December 31, 2014 (audited)
		Antennas*		Water Solutions		Total
		$'000
Revenue
External		14,341		-		14,341
Total		14,341		-		14,341
Segment income		311		-		311
Unallocated corporate expenses
Unallocated income						29
Finance expense, net						(187)
Profit before income tax						153
Other
Depreciation		451		-		451

(*) Reclassified.

Note 5 -TRANSACTIONS AND BALANCES 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,
		2015		2014			2014
		$'000
		Unaudited					Audited
Purchased Goods		86		152			301
Management Fee		191		201			387
Services Fee		106		104			208
Lease income		(60)		(60)			(120)

Compensation of key management personnel of the Group:

		Six months ended      June 30,				Year ended December 31,
		2015		2014			2014
		$'000
		Unaudited					Audited
Short-term employee benefits *)		355		366			717

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

All Transactions are made at market value.

Note 5 -TRANSACTIONS AND BALANCES WITH RELATED PARTIES (CONT.):

Balances with related parties:

	As at
	30.6.2015		30.6.2014		31.12.2014
	$'000
	Unaudited				Audited
Related parties	9		44		25

Note 6 - SIGNIFICANT EVENTS:

a.   On April 2, 2015 the company paid a dividend of 0.68 cents per share totaling approximately $351,000.

b.   To secure guarantees that the bank gave to the subsidiaries customers it recorded a charge of approximately US$ 339 thousand on some of subsidiaries bank deposits.   

Note 7 - SUBSEQUENT EVENTS:

On July 2, 2015 the Group concluded an agreement with its former employee who filed a suit against it (as described in Note 25 C in the annual financial statements of the Company as of December 31, 2014). The provision recognized in the 2014 financial statements was sufficient.

 

END

 

 

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