TIDMBVC

RNS Number : 8109P

BATM Advanced Communications Ld

22 February 2021

LEI: 213800FLQUB9J289RU66

22 February 2021

BATM Advanced Communications Limited

("BATM" or the "Group")

Full Year Results 2020

Transformational year with significant financial and operational delivery

BATM (LSE: BVC; TASE: BVC), a leading provider of real-time technologies for networking solutions and medical laboratory systems, announces its preliminary results for the year ended 31 December 2020.

Financial Summary

 
                               2020    2019    Change 
                               $m      $m 
                              ------  ------  -------- 
 Revenue                       183.6   123.4   +49% 
                              ------  ------  -------- 
 Gross profit                  60.7    33.1    +83% 
                              ------  ------  -------- 
 Gross margin                  33.1%   26.9%   +620bps 
                              ------  ------  -------- 
 Operating profit              14.2    4.5     +218% 
                              ------  ------  -------- 
 Adj.(*) operating profit      15.0    5.3     +183% 
                              ------  ------  -------- 
 EBITDA                        19.7    9.8     +100% 
                              ------  ------  -------- 
 Cash from operations          20.1    8.4     +138% 
                              ------  ------  -------- 
 Earnings per share (cents)    2.22c   0.93c   +139% 
                              ------  ------  -------- 
 Cash and financial assets     53.4    44.8    +19% 
                              ------  ------  -------- 
 

* Adjusted to exclude the amortisation of intangible assets (s ee note 3 to the financial statements)

Operational Summary

Bio-Medical Division (70% of total revenue)

-- Revenue increased by 100% to $ 128.7 m (2019: $64.4m) driven by sales of COVID-19 diagnostic kits and critical care ventilators

-- Gross margin improved by 1270bps to 36.3% (2019: 23.6%) due to product mix, including the introduction of new molecular diagnostics tests

   --    Diagnostics Unit 

o Rapidly launched RT-PCR and serologic test kits for COVID-19

o Received strong global demand for COVID-19 test kits (reagents) and diagnostic instruments throughout the year

o Developed a new rapid results multi pathogen testing kit for diagnosing respiratory viruses

o Signed agreements with several leading European universities for the co-development of new diagnostics solutions expected to be launched in 2021

o Additional investment of $10m, of which the Group contributed $3m, in associate company Ador Diagnostics to expedite the development of RCA-based technology capable of providing sample-to-answer diagnostics within 30 minutes

   --    Eco-Med Unit 

o Delivered EUR29m order from a European government for 1,000 critical care ventilators

o Entered new market with delivery of first ISS-based insect protein recovery instrument

   --     Distribution Unit 

o Increased revenue through existing activities and the distribution of COVID-19 diagnostic reagents

o Commenced performing COVID-19 tests at the Group's lab in Romania

o Established infrastructure to expand into new geographies

Networking and Cyber Division (30% of total revenue)

-- Revenue was $54.9m (2019: $59.0m), reflecting impact of COVID-19 on ability to travel to customers' premises and install equipment

   --    Gross margin of 25.5% (2019: 30.5%) due to COVID-19 impact on product mix 
   --    Networking Unit 

o Significant milestones achieved with the Group's NFVTime operating system for enabling network function virtualisation ("NFV"):

-- Secured first tier 1 customer, PCCW Global, with multi-year licensing agreement

-- Several successful proofs-of-concept conducted by tier 1 operators in Europe and APAC, including Vodafone

-- Received an order from AdcareIT, an outsourced ICT managed services provider in Kenya

-- Completed enhancement, post period, to enable NFVTime deployment via public cloud environments

o Introduced new carrier Ethernet solutions for increasing home broadband connectivity and quality, which are undergoing proofs-of-concept worldwide

o Post period, entered into an option agreement to sell the Group's NG Soft Ltd subsidiary for NIS 105.1m (c. $33m) in cash to Aztek Technologies (1984) Ltd, a provider of ICT cloud services in Israel

   --    Cyber Unit 

o Awarded a $4m cyber security contract from the Group's long-standing government defence department customer, of which $3.2m was delivered during the year

Commenting on the results, Dr Zvi Marom, Chief Executive Officer of BATM, said: "This was an outstanding year for BATM. We delivered substantial financial growth, which was driven by our Bio-Medical division that was able to respond rapidly to the outbreak of the pandemic to develop COVID-19 diagnostic tests and manufacture critical care ventilators while also continuing its regular activity. In our Networking and Cyber division, we achieved a key milestone in securing our first tier 1 customer for NFVTime, which will soon begin the roll-out of our solution. As a result, we significantly advanced the execution of our strategy in molecular diagnostics and NFV - our key future growth markets.

"Looking ahead, we entered 2021 with sustained momentum in the Bio-Medical division as we continue to receive strong demand for our COVID-19 test kits and instruments. We are also scheduled to launch various new, very advanced diagnostic testing kits this year. In the Networking and Cyber division, we expect sales of NFVTime to make a good contribution to the full year revenue of this division. This will enable us to achieve further improvement in our gross margin, reflecting the strengthened foundations of the Group. As a result, the Board of BATM looks to the future with great confidence. "

Enquiries:

 
 BATM Advanced Communications 
 Dr Zvi Marom, Chief Executive Officer       +972 9866 2525 
                                            ----------------- 
 Moti Nagar, Chief Financial Officer 
                                            ----------------- 
 
 Shore Capital 
                                            ----------------- 
 Mark Percy, Anita Ghanekar, James Thomas 
  (Corporate Advisory)                       +44 20 7408 4050 
                                            ----------------- 
 Henry Willcocks (Corporate Broking) 
                                            ----------------- 
 
 Luther Pendragon 
                                            ----------------- 
 Harry Chathli, Claire Norbury               +44 20 7618 9100 
                                            ----------------- 
 

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Investor & Analyst Presentation

Dr Zvi Marom, Chief Executive Officer, and Moti Nagar, Chief Financial Officer, will be holding a webinar for analysts and investors today at 2.00pm GMT. To register to participate, please contact Claire Norbury at Luther Pendragon at clairenorbury@luther.co.uk

Group Strategy

BATM brings world-leading expertise and IP to deliver innovative, robust, reliable and cost-effective solutions to complex challenges in mission-critical applications in the Group's focus sectors of bio-medicine and telecom networking. The Group serves a diverse range of customers globally, including large enterprises and governments. BATM delivers value creation from novel idea, to scale-up and mass-market success, and seeks to maximise the long-term value of its businesses through organic and inorganic strategies. A focus on molecular diagnostics and telecom networking reflects both the growth opportunities within those markets and BATM's ability to innovate and disrupt. The challenges that 2020 has brought have, in the Board's opinion, strengthened and accelerated the requirement for the Group's key solutions.

Operational Review

The year to 31 December 2020 was transformational for BATM, with substantial growth delivered by the Bio-Medical division and significant operational milestones achieved in the Networking and Cyber division. As a result of the investment the Group had made in recent years to build a best-in-class diagnostics platform, BATM's Bio-Medical division was able to respond rapidly to provide solutions to the COVID-19 pandemic. This includes the development of COVID-19 antigen and antibody diagnostic tests, which received strong demand throughout the year, and the manufacture of critical care ventilators in the Eco-Med unit. In the Networking and Cyber division, while there was a slowdown in some of its activities as a result of the restrictions on travel imposed by lockdowns, the Group made significant progress with its NFVTime solution - which the Group expects to become a key growth engine - including securing its first tier 1 customer, PCCW Global.

Bio-Medical Division

 
                           FY 2020   FY 2019 
 Revenue                   $128.7m   $64.4m 
                          --------  -------- 
 Gross margin              36.3%     23.6% 
                          --------  -------- 
 Adj.* operating profit    $19.4m    $0.1m 
                          --------  -------- 
 

* Adjusted to exclude the amortisation of intangible assets (s ee note 3 to the financial statements)

Revenue for the Bio-Medical division increased by 100% to $128.7m (2019: $64.4m), reflecting significant growth in all units. Gross margin improved substantially to 36.3% (2019: 23.6%) due to the high-margin nature of the new molecular biology and COVID-19 products in the Diagnostics and Eco-Med units. As a result of the substantially higher revenue and gross margin, the Bio-Medical division generated an adjusted operating profit of $19.4m for 2020 compared with $0.1m in 2019.

Diagnostics

The Diagnostics unit performed exceptionally well during 2020, with revenue growth of 318% and accounting for 18% of Bio-Medical division revenue (2019: 9%). As a result of the investment that the Group has made in advancing the Bio-Medical division in recent years and transitioning to molecular diagnostics, it is now able to rapidly provide solutions for any new pathogen that appears. The Group also responded with speed and efficiency to prepare its Bio-Medical division when it was first alerted to the potential COVID-19 outbreak. Consequently, the Group was able to quickly launch diagnostic test kits for COVID-19, which received strong demand throughout the year. In addition, sales of the Group's diagnostic instruments (readers) increased, and were frequently ordered alongside the COVID-19 test kit reagents. This momentum continued throughout the year with the Diagnostics unit entering 2021 with a substantially higher order book than at the same point of the prior year. To cater to the increased demand, the Group expanded the production capacity of its Adaltis facility in Rome, Italy.

The customers for the Group's COVID-19 solutions were primarily public health authorities in Europe and South East Asia. The Group also received an order from a major new customer that is a significant global private laboratory group, headquartered in Italy. The customer provides COVID-19 testing throughout Europe, primarily for large businesses such as airports. The Group expects to receive further orders from this customer.

COVID-19 diagnostic tests

In 2020, the Group launched both RT-PCR (reverse transcription polymerase chain reaction) antigen tests and serologic antibody tests for COVID-19, which are produced at its Adaltis facility in Rome.

The Group's antigen molecular (RT-PCR) test kit, which detects if someone currently has the COVID-19 virus, underwent clinical verification and evaluation by leading universities and hospitals in February and received certification at the end of March 2020. The Group expanded the gene discovery capability of this test to five (4+1), compared with a market standard of three, during the second half of the year and, importantly, included the spike (S) gene. The S gene is the protein that the virus uses to invade human cells. It is present in a person's blood even if they have a very low viral load of COVID-19 (which might otherwise go undetected). As a result, by being able to detect the S gene, this test can provide more accurate results, reducing the risk of false positives and false negatives.

In partnership with Tor Vergata University of Rome, the Group continually tests its kits against any mutation that is perceived to be clinically material. The Group has confirmed that its kits are accurately able to detect all known variants of COVID-19.

The Group launched its ELISA serological test in May 2020, which diagnoses if a patient has had COVID-19 by detecting antibodies against it present in their blood. The Group subsequently advanced this test to be able to measure the quantity of antibodies in the blood rather than just identifying their presence or absence (qualitative test). This was in response to growing medical research suggesting that the volumes of antibodies in the blood of someone who has recovered from COVID-19 is low and declines. The upgraded test measures both IgM antibodies, which are produced a few days after infection and remain in the blood for a short period, and IgG antibodies, which are longer-term (produced a few days after infection and remain in the blood for a few months) antibodies. This test has the same levels of sensitivity and specificity as those of the market-leading brands, with sensitivity of 100.0% and specificity of 99.8%.

New molecular diagnostics tests

During the second half of the year, the Group also developed a new molecular PCR diagnostics test that is able to test for multiple respiratory pathogens at the same time. In less than an hour, it can identify the specific cause (pathogen) of a respiratory illness, enabling the correct treatment or action to be rapidly implemented. It can detect all prominent respiratory viruses as well as the bacteria that cause the serious pulmonary illnesses that are believed to be a secondary infection of COVID-19, such as pneumonia and Legionnaires' disease. This test is in the final stages of CE certification. The Group expects to commence production and sales of this kit in the coming months.

In addition, the Group entered into agreements with several leading universities in Europe for the co-development of diagnostic solutions, which are expected to be launched in 2021. These new molecular biology tests will be for the diagnosis of infectious diseases, which are a key focus area for the Group's diagnostics activities.

Ador Diagnostics

Ador Diagnostics ("Ador"), the Group's associate company, is developing the NATlab molecular biology solution that provides rapid sample-to-answer diagnosis of bacterial, viral or fungal infections using DNA or RNA sampling. During the year, Ador developed an innovative technology using the rolling circle amplification ("RCA") method. This will enable the NATlab system to provide test results in a significantly shorter timeframe - within 30 minutes - and with greater accuracy than Ador previously envisaged. Ador is in the advanced stages of incorporating the RCA technology into the NATlab system, which it expects to be ready for in-hospital trials in H1 2021. To expedite the development of the new RCA-based system, the Group and its partners in Ador invested an additional $10m, of which BATM contributed $3m. Following this investment, Ador has an enterprise value of $54.5m and the Group's shareholding is 37%.

Eco-Med

The Eco-Med unit achieved significant growth, with revenue increasing by 509% and accounting for 31% of the Bio-Medical division's revenue (2019: 10%). This was as a result of the delivery of a EUR29m contract from a European government for 1,000 critical care ventilators to support that country's public health response to COVID-19. The ventilators were manufactured by the Group's Celitron subsidiary in Hungary, which has been producing equipment for medical environments globally for over 10 years.

As a result of the pandemic and the restrictions on travel, the Eco-Med unit focused its efforts on the delivery of the ventilator project in 2020. As lockdown measures are lifted, the Group is resuming work on the installation of its pathogenic waste treatment solutions based on its Integrated Steriliser and Shredder ("ISS") technology. The Group expects to complete the delivery of its solution to its food manufacturing customers, under its existing contracts, in the Philippines and Taiwan this year. The Group also expects to complete the delivery of a contract, awarded in 2020, from Ceva Animal Health, a leading developer of animal health products, to expand and enhance the ISS-based solution installed at its facility in Hungary.

Towards the end of the year, the Group completed the delivery of the first of its ne w ISS-based instrument that recovers high-quality protein and oils from insects such as worms and flies. The customer, which is headquartered in Belgium, recycles insect nutrients into valuable products for the feedstock industry. It intends to use the Group's solution to produce insect protein powder that can be a substitute for fishmeal and oils used in aquaculture feed. This marks the entry into a new market segment for the Group and is an area that the Group believes offers great potential as a sustainable source of protein.

Distribution

Revenue in the Distribution unit increased by 26% in 2020 over the prior year and accounted for approximately 51% of the Bio-Medical division's revenue (2019: 81%).

The increased revenue was due to growth in its existing distribution activities as well as through the provision of third-party reagents for COVD-19 tests, both PCR and serologic, to public health authorities in Eastern Europe. In the second half of the year, the Group's lab in Romania also commenced performing COVID-19 tests for private sector customers. In addition, the Group established infrastructure to expand its distribution activities into Hungary, which is expected to commence this year.

Networking and Cyber Division

 
                                  FY 2020   FY 2019 
 Revenue                          $54.9m    $59.0m 
                                 --------  -------- 
 Gross margin                     25.5%     30.5% 
                                 --------  -------- 
 Adj.* operating profit/(loss)    $(4.5)m   $5.2m 
                                 --------  -------- 
 

* Adjusted to exclude the amortisation of intangible assets (s ee note 3 to the financial statements)

Revenue in the Networking and Cyber division was slightly lower in 2020 than the previous year due to COVID-19 lockdown measures, which continued throughout the year, causing restrictions on travelling to the premises of customers and suppliers. As a result of a shift in sales mix towards lower margin products mainly in ICT, combined with the continued investment in new solutions, notably NFVTime, the Networking and Cyber division recorded an operating loss. The adjusted operating profit for the prior year also included an exceptional gain of $3.4m from the sale of the Group's rights in IBC Holdings, a joint venture to construct a fibre optic broadband network in Israel that was acquired by Cellcom Israel Ltd.

NFV solutions

The Group made significant progress with its NFVTime operating system, developed by its Telco Systems subsidiary, that enables network carriers to deploy their own virtualised software-based networks. Virtual networks can be a key element in allowing operators to leverage the benefits of 5G through edge computing and provide additional differentiated services to their enterprise customers as well as reducing the costs, time and carbon footprint involved with physical networks.

The Group achieved a key milestone in securing its first tier 1 customer, PCCW Global, for NFVTime with a three-year licensing agreement. PCCW Global selected NFVTime to enrich its managed SD-WAN service offering, which it provides to its multinational enterprise customers as well as to operators that it services on a wholesale basis. The Group will receive a licence fee for a minimum of three years for each deployment of NFVTime. The Group expects PCCW Global will be making NFVTime available to its customers during Q1 2021.

The Group conducted several successful proofs-of-concept of NFVTime with tier 1 operators in Europe during the year. In particular, Vodafone, a leading global network operator headquartered in the UK, completed a proof-of-concept of the Arm-based uCPE that is run on the NFVTime operating system. The solution, which was tested for both small/medium business and enterprise use-cases, performed highly successfully in the deployment and management of virtual and cloud network functions and was able to handle high traffic requirements - performing to levels not seen by other comparable platforms. The Group continues to work closely with Arm and Vodafone for the next step in the process, which the Group expects will be field trials.

The Group is receiving significant interest in NFVTime from prospective customers and the pipeline of potential orders continues to expand. NFVTime is currently undergoing evaluation with several leading network operators and multi-service providers worldwide. A number of these evaluations are at an advanced stage and the Group is confident that they will translate to orders in due course.

Also during the year, the Group received an order for NFVTime from AdcareIT, an outsourced ICT managed service provider in Kenya. AdcareIT intends to use NFVTime together with Clavister solutions (deployed as virtual network functions) to provide SD-WAN and Firewall services to its customers. Clavister is a leader in high-performance virtual cybersecurity solutions and it became part of the Group's NFVTime Arm-based ecosystem through a strategic partnership in 2019.

Post period, the Group completed the enhancement of NFVTime to enable compatibility with, and receiving certification of use for, public cloud environments, such as Amazon Web Services and Microsoft Azure. This expands the addressable market for the product to customers that operate cloud-based networks - which is typically enterprise customers or larger operators with a multinational footprint - as well as those that lack the internal resource to run the software in their datacentre.

ICT and Carrier Ethernet solutions and services

As noted, some of the Group's activities in the Networking unit were impacted by the COVID-19 lockdown measures and, consequently, there was a reduction in revenue generated from the installation and servicing of equipment. However, the Group expects sales of its carrier Ethernet solutions and services to return to growth as restrictions on travel are lifted.

The Group continued its development efforts during the year. This includes introducing new solutions to its T-Marc R3305 series of multiservice business routers to enable customers to increase home broadband connectivity and quality. This is designed to meet the increased demand for products to support productivity for people working and learning at home. The T-Marc R3305 platform is undergoing proofs-of-concept worldwide and is in field trials with a tier 2 operator in Europe.

The Group also received increasing interest in its ultra-high capacity service aggregation and cloud gateway platform, the T-Metro 8104, which it launched in Q4 2019. During the year, the Group completed the deployment of hundreds of units for multi-service providers across North America that want to increase their network capacity to keep up with the ever-growing demand from their customers for more bandwidth.

Cyber

Towards the start of the year, the Group was awarded a $4m contract from its long-standing government defence department customer. This further order, the majority of which was delivered during 2020, was for the provision of additional hardware and software cyber security products as the customer rolls out the Group's solution to encompass further employees. Following this latest order, the total contracted revenue awarded to the Group to date by this customer for this cyber solution is over $18m.

Overall, revenue in the Group's cyber security business was lower in 2020 than in 2019 as a result of COVID-19 restrictions as well as the diversion of government budgets in response to the pandemic. However, the Group expects increased activity in this area in 2021 as public authorities begin to return to postponed projects.

NGSoft option agreement

Post period, as announced on 12 January 2021, BATM entered into an option agreement to sell its NG Soft Ltd ("NGSoft") subsidiary for a total cash consideration of NIS 105.1m (c. $33m), of which the Group would receive NIS 93.7m (c. $29m) , to Aztek Technologies (1984) Ltd., a provider of ICT cloud services in Israel and a portfolio company of SKY Fund. NGSoft is a software and digital services company that provides creative digital and technology solutions. Its development activities do not include any of the Group's NFV or cyber solutions. Accordingly, the Board believes that it would be in the best interests of BATM and of all shareholders to generate value from the sale of NGSoft and invest the proceeds to accelerate the Group's core activities.

The Group's option is exercisable up to and including 1 March 2021, which, in accordance with the terms of the option agreement, can be extended by the Group to 17 May 2021 under certain predefined circumstances. The Group will update the market in due course.

Financial Review

 
                    H1 2020   H2 2020   FY 2020   FY 2019 
                             -------- 
 Revenue            $77.4m    $106.2m   $183.6m   $123.4m 
                   --------  --------  --------  -------- 
 Gross margin       29.7%     35.6%     33.1%     26.9% 
                   --------  --------  --------  -------- 
 Adj.* operating 
  profit            $2.8m     $12.2m    $15.0m    $5.3m 
                   --------  --------  --------  -------- 
 

* Adjusted to exclude the amortisation of intangible assets (s ee note 3 to the financial statements)

Total Group revenue for 2020 increased by 49% to $183.6m (2019: $123.4m). This reflects significant growth in the Bio-Medical division, which accounted for 70% of total revenue (2019: 52%) and 30% was contributed by the Networking and Cyber division (2019: 48%). The second half of the year was particularly strong, with revenue in H2 2020 being 37% higher than H1 2020.

The gross margin for the year improved to 33.1% (2019: 26.9%). This is due to a substantial increase in the gross margin for the Bio-medical division to 36.3% (2019: 23.6%), and the significantly increased contribution to total revenue from the division, as a result of the high-margin nature of the new molecular biology diagnostic kits and COVID-19 products. This more than offset the lower gross margin in the Networking and Cyber division.

Sales and marketing expenses were $20.2m (2019: $16.3m), representing 11% of revenue compared with 13% in 2019. The increase in sales and marketing expenses is attributable to the Group's COVID-19 related products in the Diagnostics and Eco-Med units of the Group's Bio-Medical division. There was also an increase in sales activity in the Distribution unit, which reflects its ongoing business development (and only partially related to COVID-19 solutions).

General and administrative expenses were $15.9m (2019: $11.8m), representing 9% of revenue compared with 10% in 2019, reflecting the greater size and activity of the Group.

R&D expenses were higher in 2020 than the previous year at $10.3m (2019: $6.8m), which reflects investments in the Group's molecular biology and COVID-19 products as well as investment in its NFV technology.

Adjusted operating profit increased by 183% to $15.0 m compared with $5.3 m in 2019 . This growth reflects the significantly higher revenue and gross profit. It also includes a capital gain of $0.6m from the part realisation of the Group's ownership of Ador. The adjusted operating profit for 2019 includes (under other operating income) a capital gain of $3.2m from the part realisation of the Group's ownership of Ador and $3. 4m from the sale of the Group's rights in IBC Holdings.

EBITDA grew by 100% to $19.7m (2019: $9.8m), reflecting the increased operating profit.

Net finance expense was $0.9m (2019: $0.3m income), which is primarily due to the adverse effect of foreign exchange rate fluctuations (primarily in the Euro, Moldovan Leu and Hungarian Forint), compared with a positive impact in 2019. Currency fluctuations had an immaterial impact on revenue and operating profit.

Net profit after tax attributable to equity holders of the parent increased to $9.8m (2019: $3.9m) resulting in a significant increase in basic earnings per share to 2.22c (2019: 0.93c).

As at 31 December 2020, inventory was $33.9m (31 December 2019: $22.7m). The increase is primarily due to the expansion of production of diagnostic products to satisfy orders to be delivered in 2021. Trade and other receivables decreased slightly to $41.5m (31 December 2019: $42.8m).

Intangible assets and goodwill at 31 December 2020 were $ 23.7 m (31 December 2019: $23.7m).

Property, plant and equipment and investment property was $18.0m (31 December 2019: $16.1m). The increase is mostly due to investments in the Diagnostics unit to expand production capacity.

The balance of trade and other payables was $53.6m (31 December 2019: $44.5m). The increase is primarily due to provisions for suppliers for the Group's ventilator project that are due to be paid in Q1 2021 as well as for supplies to support the ongoing demand for the Group's diagnostic solutions.

Cash generated from operations increased to $20.1m (2019: $8.4m) and cash from operating activities, which includes tax and interest payments, was $18.5m for 2020 compared with $7.2m for the prior year. The growth is mainly due to the increased profit for the year and an improvement in working capital.

The Group's balance sheet was strengthened with effective liquidity of $53.4m at 31 December 2020 compared with $ 44.3m at 30 June 2020 and $44.8m at 31 December 2019. This is comprised of cash and cash equivalents of $50.6m (30 June 2020: $40.0m; 31 December 2019: $40.6m) and financial assets of $2.8m (30 June 2020: $4.3m; 31 December 2019: $4.3m). Financial assets represent cash deposits of more than three months' duration, held for trading bonds and marketable securities. The change in financial assets compared with the prior periods reflects timing of deposit disposals. The increase in cash and cash equivalents relates to the higher profit and improvement in working capital.

Dividend

The Board of BATM has resolved to recommend the distribution of a dividend for full year 2020 following the publication of the Group's audited annual report and accounts, in accordance with Israeli law. The Group will provide further details in due course.

Outlook

The Group entered 2021 receiving increasing demand for the solutions in its key target areas in both of its divisions.

The momentum in the Bio-Medical division has been sustained as it continues to receive strong demand for its molecular diagnostic test kits and instruments. In the Diagnostics unit, the order book is significantly higher than at the equivalent period last year and, in the current year, management expects the Bio-Medical Division to remain the largest contributor to Group revenues.

In the Networking and Cyber division, the Group expects sales of NFVTime to make a material contribution to the full year revenue of this division resulting from the scheduled roll-out of the solution by PCCW Global and the anticipated adoption by other operators. In addition, due to the advanced technology of its carrier Ethernet and cyber security solutions, the Group is confident that sales in these product areas will return to growth once lockdown restrictions are lifted and normal business practices resume.

As noted above, in January 2021, BATM entered into an option agreement to sell its NGSoft Ltd subsidiary and the Group intends to make an announcement on this shortly. If the Group exercises its option, the Board expects to use the proceeds from the disposal to strengthen its innovation engine organically and through acquisition to enable the Group to accelerate its core activities - in particular, in NFV and molecular diagnostics. As previously noted, the Board believes these areas offer transformational growth opportunities in the short- to medium-term.

For 2021, the Group expects revenue growth from continuing operations, excluding the impact of the large ventilator contract received in 2020. Also, the Board expects to achieve further improvement in its gross margin for 2021 resulting from the anticipated increased contribution to Group revenue from its molecular diagnostics and NFV solutions. This reflects the strengthened foundations of the Group, which the Board of BATM believes positions the Group for sustainable growth in profitability.

As a result, the Board of BATM looks to the future with great confidence and will update the market on its progress.

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

 
                                                                       Year ended 31 December 
                                                                        2020              2019 
                                                                          US$ in thousands 
 
 Revenues                                                            183,566           123,396 
 
 Cost of revenues                                                    122,856            90,251 
 
 Gross profit                                                         60,710            33,145 
                                                                   ---------         --------- 
 Operating expenses 
 
    Sales and marketing expenses                                      20,197            16,307 
 
    General and administrative expenses                               15,884            11,753 
 
    Research and development expenses                                 10,258             6,772 
 
    Other operating expenses (income)                                    138           (6,169) 
 
 Total operating expenses                                             46,477            28,663 
                                                                   ---------         --------- 
 Operating profit                                                     14,233             4,482 
 
    Finance income                                                       820             1,612 
 
    Finance expenses                                                 (1,754)           (1,316) 
 
    Profit before tax                                                 13,299             4,778 
 
    Income tax expenses                                              (1,043)             (475) 
 
 Profit for the year before share of loss of a 
  joint venture 
  and associated companies                                            12,256             4,303 
 
    Share of loss of a joint venture and associated 
     companies                                                         (774)           (1,033) 
 
 Profit for the year                                                  11,482             3,270 
 
 Attributable to: 
    Owners of the Company                                              9,793             3,917 
    Non-controlling interests                                          1,689             (647) 
 
 Profit for the year                                                  11,482             3,270 
 Profit per share (in cents): 
 Basic                                                                  2.22              0.93 
 
 Diluted                                                                2.21              0.92 
 

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
                                                                          Year ended 31 December 
                                                                               2020          2019 
                                                                              US$ in thousands 
  Profit for the year                                                        11,482         3,270 
  Items that may be reclassified subsequently 
   to profit or loss: 
 
  Exchange differences on translating foreign operations                      3,148           398 
 
                                                                             14,630         3,668 
  Items that will not be reclassified subsequently 
   to profit or loss: 
  Losses on property revaluation                                              (508)             - 
  Re-measurement of defined benefit obligation                                   16          (44) 
                                                                              (492)          (44) 
  Total comprehensive income for the year                                    14,138         3,624 
 
    Attributable to: 
 
    Owners of the Company                                                    13,560         3,664 
  Non-controlling interests                                                     578          (40) 
                                                                             14,138         3,624 
 

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 
                                                                   31 December 
                                                          2020             2019 
                                                             US$ in thousands 
 Current assets 
   Cash and cash equivalents                            50,575           40,584 
   Trade and other receivables                          41,467           42,784 
   Financial assets                                      2,803            4,254 
   Inventories                                          33,893           22,672 
                                                       128,738          110,294 
 Non-current assets 
   Property, plant and equipment                        16,109           14,203 
   Investment property                                   1,878            1,899 
   Right of-use assets                                   9,607            9,945 
   Goodwill                                             16,838           16,804 
   Other intangible assets                               6,879            6,941 
   Investment in joint venture and associate            13,271            9,497 
   Investments carried at fair value                     1,027            1,013 
   Deferred tax assets                                   5,759            3,234 
                                                        71,368           63,536 
 
 Total assets                                          200,106          173,830 
 Current liabilities 
   Short-term bank credit                                5,365            5,915 
   Trade and other payables                             53,618           44,459 
   Current maturities of lease liabilities               2,244            2,070 
   Tax liabilities                                       3,046              313 
                                                        64,273           52,757 
 Non-current liabilities 
   Long-term bank credit                                   675              762 
   Long-term liabilities                                 6,416            6,215 
   Long-term lease liabilities                           8,440            8,339 
   Deferred tax liabilities                                711              626 
   Retirement benefit obligation                           828              715 
                                                        17,070           16,657 
 
 Total liabilities                                      81,343           69,414 
 
   Equity 
   Share capital                                         1,320            1,320 
   Share premium account                               425,686          425,477 
   Reserves                                           (14,323)         (18,582) 
   Accumulated deficit                               (290,090)        (299,391) 
 Equity attributable to the: 
   Owners of the Company                               122,593          108,824 
   Non-controlling interests                           (3,830)          (4,408) 
 Total equity                                          118,763          104,416 
 Total equity and liabilities                          200,106          173,830 
 

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Year ended 31 December 2020

 
                              Share                                              Attributable   Non-Controlling 
                    Share     Premium    Translation    Other      Accumulated    to Owners      Interests         Total 
                    Capital   Account    Reserve        Reserve    Deficit        of the                           Equity 
                                                                                  Company 
                                                              US$ in thousands 
 Balance as 
  at 1 January 
  2020                1,320   425,477       (18,070)      (512)      (299,391)        108,824           (4,408)   104,416 
 Profit for 
  the year                -         -              -          -          9,793          9,793             1,689    11,482 
 Re-measurement 
  of defined 
  benefit 
  obligation              -         -              -          -             16             16                 -        16 
 Losses on 
  property 
  revaluation             -         -              -          -          (508)          (508)                 -     (508) 
 Exchange 
  differences 
  on translating 
  foreign 
  operations              -         -          4,259          -              -          4,259           (1,111)     3,148 
 Total 
  comprehensive 
  income for 
  the year                -         -          4,259          -          9,301         13,560               578    14,138 
 Exercise of 
  share based 
  options by 
  employees               -        51              -          -              -             51                 -        51 
 Recognition 
  of share-based 
  payments                -       158              -          -              -            158                 -       158 
 Balance as 
  at 31 December 
  2020                1,320   425,686       (13,811)      (512)      (290,090)        122,593           (3,830)   118,763 
 
 

Year ended 31 December 2019

 
                              Share                                              Attributable   Non-Controlling 
                    Share     Premium    Translation    Other      Accumulated    to Owners      Interests         Total 
                    Capital   Account    Reserve        Reserve    Deficit        of the                           Equity 
                                                                                  Company 
                                                              US$ in thousands 
 Balance as 
  at 1 January 
  2019                1,217   407,796       (17,861)      (512)      (303,264)         87,376           (4,368)    83,008 
 Profit (loss) 
  for the year            -         -              -          -          3,917          3,917             (647)     3,270 
 Re-measurement 
  of defined 
  benefit 
  obligation              -         -              -          -           (44)           (44)                 -      (44) 
 Exchange 
  differences 
  on translating 
  foreign 
  operations              -         -          (209)          -              -          (209)               607       398 
 Total 
  comprehensive 
  income (loss) 
  for the year            -         -          (209)          -          3,873          3,664              (40)     3,624 
 Issue of share 
  capital                93    16,981              -          -              -         17,074                 -    17,074 
 Exercise of 
  share based 
  options by 
  employees              10       595              -          -              -            605                 -       605 
 Recognition 
  of share-based 
  payments                -       105              -          -              -            105                 -       105 
 Balance as 
  at 31 December 
  2019                1,320   425,477       (18,070)      (512)      (299,391)        108,824           (4,408)   104,416 
 
 

BATM ADVANCED COMMUNICATIONS LTD.

CONSOLIDATED STATEMENT OF CASH FLOW

 
                                                                        Year ended 31 December 
                                                                       2020                2019 
                                                                          US$ in thousands 
 
 Net cash from operating activities (Appendix 
  A)                                                                 18,459               7,166 
 Investing activities 
    Interest received                                                   101                 205 
    Proceeds on disposal of property, plant and 
     equipment                                                           39                 113 
    Tax paid on disposal of property, plant and 
     equipment                                                            -                (19) 
     Proceeds on disposal of deposits                                 3,122               3,234 
    Proceeds on disposal of financial assets 
     carried at fair value                                              761                   - 
     through profit and loss 
    Proceeds on sale of investment                                        -               3,430 
    Purchases of property, plant and equipment                      (3,386)               (686) 
     Increase of other intangible assets                              (328)             (1,523) 
     Purchases of financial assets carried at 
      fair value through profit and loss                            (2,009)               (760) 
    Purchases of deposits                                             (314)             (3,112) 
     Investment in joint venture                                    (3,000)             (1,952) 
     Investment in associated companies                               (467)               (575) 
     Acquisition of subsidiaries (Appendix B)                             -               (937) 
    Net cash used in investing activities                           (5,481)             (2,582) 
 Financing activities 
    Lease payment                                                   (2,428)             (2,361) 
    Bank loan repayment                                            (13,852)             (9,922) 
    Bank loan received                                               12,980              10,086 
    Proceed on issue of share capital, net                                -              17,074 
    Proceed on exercise of shares                                    ___ 51                 605 
    Net cash from (used in) financing activities                    (3,249)              15,482 
 Net increase in cash and cash equivalents                            9,729              20,066 
 Cash and cash equivalents at the beginning 
  of the year                                                        40,584              20,811 
    Effects of exchange rate changes on the balance 
     of cash held in foreign currencies                                 262               (293) 
 Cash and cash equivalents at the end of the 
  year                                                               50,575              40,584 
 

BATM ADVANCED COMMUNICATIONS LTD.

APPICES TO CONSOLIDATED STATEMENT OF CASH FLOW

APPIX A

RECONCILIATION OF OPERATING PROFIT FOR THE YEAR TO NET CASH FROM OPERATING ACTIVITIES

 
                                                                        Year ended 31 December 
                                                                       2020                2019 
                                                                         US$ in thousands 
 Operating profit from operations 
  Adjustments for:                                                   14,233               4,482 
    Amortisation of intangible assets                                   718                 794 
    Depreciation of property, plant and equipment and 
     investment property                                              4,757               4,561 
    Capital loss of property, plant and equipment                        31                  31 
    Gain on sale of investment                                            -             (3,380) 
    Capital gain on reduce of holdings in associated 
     company                                                          (602)             (3,161) 
    Stock options granted to employees                                  158                 105 
    Increase in retirement benefit obligation                            96                 121 
    Increase in provisions                                            2,114                 298 
 Operating cash flow before movements in working 
  capital                                                            21,505               3,851 
     Decrease (increase) in inventory                              (11,198)               1,387 
     Decrease (increase) in receivables                                 916             (7,896) 
     Increase in payables                                             7,111              11,361 
     Effects of exchange rate changes on the balance 
      sheet                                                          1,7 29               (264) 
 Cash from operations                                                20,063               8,439 
    Income taxes paid                                                 (637)               (410) 
    Income taxes received                                                 3                  10 
    Interest paid                                                     (970)               (873) 
 Net cash from operating activities                                  18,459               7,166 
 

APPENDIX B

ACQUISITION OF SUBSIDIARY - Remedium

 
                                                             Year ended 31 December 
                                                                             2019 
                                                                US$ in thousands 
 Net assets acquired 
   Property, plant and equipment                                            1,257 
   Net working capital                                                        607 
   Short-term bank credit                                                   (134) 
   Long term liabilities                                                    (635) 
                                                                            1,095 
   Non- controlling interest                                                (543) 
   Gain from bargain purchase                                               (248) 
 Total consideration                                                          304 
 Satisfied by: 
   Cash                                                                       304 
   Consideration recorded as a liability                                        - 
                                                                              304 
 Net cash outflow arising on acquisition 
   Cash consideration                                                         316 
   Cash and cash equivalents acquired                                        (12) 
                                                                              304 
 

Acquisition of subsidiaries in the Consolidated Statement of Cash Flows of 2019 also includes the final payment of $0.6m for Green Lab Hungary Engineering Ltd, which was acquired in 2016.

BATM ADVANCED COMMUNICATIONS LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - General

The final results for the year ended 31 December 2020 and the comparative 2019 information will be presented in the full Annual Report in accordance with International Financial Reporting Standards ("IFRS").

Note 2 - Profit per share

Profit per share is based on the weighted average number of shares in issue for the period of 440,291,783 (2019: 421,141,507). The number used for the calculation of the diluted profit per share for the period (which includes the effect of dilutive stock option plans) is 444,055,231 shares (2019: 425,096,611).

Note 3 - Other alternative measures

 
                                                                   Year ended 31 December 
                                                         2020                         2019 
                                                                  US$ in thousands 
 Operating profit                                      14,233                        4,482 
 Amortisation of Intangible assets                        718                          794 
 Adjusted operating profit                             14,951                        5,276 
 Depreciation                                           2,341                        2,101 
 Depreciation of right-of-use assets                    2,416                        2,460 
 EBITDA                                                19,708                        9,837 
 

Note 4 - Segments

Business Segment

Year ended 31 December 2020

 
                                     Networking   Bio-Medical   Unallocated     Total 
                                      and Cyber         $'000         $'000     $'000 
                                          $'000 
 Revenues                                54,884       128,682             -   183,566 
 Adjusted operating profit 
  (loss) (*)                            (4,479)        19,430             -    14,951 
 Reconciliation - other operating 
  expenses (*)                                                                  (718) 
 Operating profit                                                              14,233 
 Net finance expenses                                                           (934) 
 Profit before tax                                                             13,299 
 

Year ended 31 December 2019

 
                                     Networking   Bio-Medical   Unallocated     Total 
                                      and Cyber         $'000         $'000     $'000 
                                          $'000 
 Revenues                                58,960        64,436             -   123,396 
 Adjusted operating profit 
  (*)                                     5,144           132             -     5,276 
 Reconciliation - other operating 
  expenses (*)                                                                  (794) 
 Operating profit                                                               4,482 
 Net finance income                                                               296 
 Profit before tax                                                              4,778 
 

(*) See note 3

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February 22, 2021 02:00 ET (07:00 GMT)