RNS Number:4415C
F.T.S-Formula Telecom Solutions Ltd
20 August 2007
FORMULA TELECOM SOLUTIONS LTD. (FTS)
ANNOUNCES INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2007
London, UK | August 16, 2007: FTS - Formula Telecom Solutions Ltd. (LSE: FTS), a
global provider of business control, billing and CRM solutions for
communications service providers, today announced its results for the six months
ended 30 June 2007.
Highlights (Thousands of USD):
- Six month revenues up by 2% to US$ 15,531 (2006: US$15,059)
- Six month gross profit up by 57% to US$7,450 (2006: US$4,736)
- Six month operating loss down to US$6 (2006: operating loss US$3,601)
- Six month net profit US$240 (2006: net loss US$1,790)
- 3 new customers announced: Vodafone Iceland, Globalcom Inc., USA and
a multi-million Dollar contract in a Western African country
- New partnerships announced with HP, Allot, Sandvine, a major Chinese
network provider and local African Systems Integrator RT2i
Amos Sivan, FTS' Chief Executive Officer said: "In the first six months of 2007
we have seen positive trends in our industry. FTS fortified its presence in key
target markets in the US, Europe and in the emerging markets. We added three new
major customers to our customer base and expect to see additional customers join
our ranks. Furthermore, we have entered into several agreements that enable us
to further improve our solutions, as well as allow opening new markets and
opportunities. Our solid roadmap of leading products and solutions are already
creating interest among potential customers. We are confident that in the next
six months we will see more contract wins."
About Formula Telecom Solutions (FTS)
Formula Telecom Solutions (LSE: FTS) is a leading global provider of business
control, billing and CRM solutions for communication and content providers. FTS'
business-oriented and service-aware solutions enable providers to improve their
customers' overall experience, thus increasing retention, satisfaction, and
ultimately, ARPU. With implementations in more than 40 countries, FTS delivers
end-to-end and modular solutions to traditional operators and to providers of
the world's most advanced next-generation services. FTS' track record of
successfully implementing complex projects enables customers to keep up with the
ever-changing industry requirements.
In January 2006, FTS was ranked as the 54th fastest growing technology company
on the 2005 Deloitte Technology Fast-500 EMEA. Moreover, FTS was recently voted
the Most Promising Company at the prestigious 2007 TeleStrategies Billing and
OSS World industry event.
For more information, visit us at www.fts-soft.com.
Enquiries:
Sonus PR for FTS
Patrick Smith, Tel. +44 20 7851 4890, patrick.smith@sonuspr.com
Seymour Pierce Limited
Mark Percy Tel: +44 (0) 207 107 8000, markpercy@seymourpierce.com
FTS
investors@fts-soft.com
Chairman's Statement
I am pleased to report FTS' 2007 interim results for the six months to 30 June
2007.
FTS sells Next Generation Business Control and infrastructure software solutions
for communications service providers. Our solutions enable providers to address
the key issues of today's communication market: customer retention and revenue
growth. By analyzing events from a business standpoint rather than just billing
them, FTS allows providers to better understand their customer base and leverage
business value from every event and interaction. FTS deploys its full range of
solutions to customers worldwide and has implemented solutions in wireless,
wireline, cable, content and broadband markets. The Company targets Tier-1
operators in developed markets with its business control solutions as well as
operators in emerging markets.
FTS has managed to overcome the issues related to the toll-road project as
reported in our trading update issued on 22 June 2006. The increase in revenues,
as well as the expense-cutting process which was approved by the board of FTS
and was implemented during the first six months of 2007, have created the
turnaround in the financial results which brought FTS from 2006's annual net
loss of $0.652m to net income of $0.240m at the first half of 2007.
The integration of Viziqor, acquired in December 2005 to improve FTS' footprint
in the North American market, is progressing well above our expectations,
showing financial results significantly higher than planned. FTS' US sales
team is currently involved in a number of bid proposals which are at various
stages of the sales cycle. In January 2007 FTS concluded a successful
acquisition of contracts and employees of US based Danet Inc., as part of its
strategy to grow in the US market through M&A activity. On May 2007, FTS
declared a new contract win at a Globalcom, a fast-growing, privately held
service provider in the USA. A year and a half after acquiring Viziqor we can
proudly announce that this acquisition and its integration into the
group was highly successful.
The telecoms market is evolving with the growth in IP based communication and
continuing consolidation in the market. In response to market changes, providers
are restructuring their businesses and aligning vendors to their future needs.
This is both a challenge and long-term opportunity for FTS. FTS predicted these
transformations in the industry and has been working aggressively to adapt the
Company to the new market environment as well as developing new products and
services that meet the customers' ever changing requirements.
FTS is in the midst of repositioning and re-branding its product line. This
repositioning requires additional development investment in adapting the product
to address future market requirements. Initial market response is highly
positive with strong feedback from industry analysts, industry press, potential
partners, and customers stressing the real market need the Company is addressing
and the superiority of the solutions it presents. FTS expects to continue its
marketing efforts during 2007 to leverage this new momentum with a marketing and
sales campaign to launch the new strategy and products. The Company anticipates
this new positioning and the associated marketing campaign will result in market
interest in its products and lead to new bid proposals. It is expected that some
of these will materialize into contracts in 2007, although it is difficult to
predict the exact timing.
Results
In the six months to 30 June 2007 total revenue increased by 2% to $15.351m
(2006: $15.059m).
Gross profit for the six months was $7.450m (2006: $4.736m), an increase of 57%,
gross margin was 49% compared to 31% in 2006. The increase in both the gross
profit and the gross margin were result of a successful implementation of
expense cutting process, which brought the turnaround in FTS results.
Research and development expenditure in the six months to 30 June 2007 was
$2.635m (2006: $3.101m), a decrease of 15%. This decrease was mainly due to
diversion of R&D efforts towards delivery of projects.
Sales and marketing costs in the six months to 30 June 2007 were $2.300m (2006:
$3.182m), a decrease of 28%.
General and administrative costs in the six months to 30 June 2007 were $2.521m
(2006: $2.054m), an increase of 23%. During the first half of 2006 some doubtful
debts were collected, reducing the G&A costs, compared to the first half of
2007.
The Company's operating income in the six months to 30 June 2007 was negligible
(2006: operating loss of US$3.601m). The operating income in the second quarter
of 2007 was $1.034m.
The financial income for the six months to 30 June 2007 was $0.088m (2006:
financial income of $0.333m) which resulted from gains on securities and bonds,
less interest paid on bank loans.
Net income for the six months to 30 June 2007 was $0.240m (2006: net loss of
$1.790m).
Outlook
The increase in revenue as well as the implementation of the expense-cutting
plan brought FTS back into profitability in the second half of 2006 and the
first half of 2007. We believe that this positive momentum will continue in the
second half of the year and will increase the Company's profitability in 2007.
The board continues to believe that FTS is ideally placed to exploit the
opportunities offered in both developed and emerging markets. The acquisition of
Viziqor in December 2005 provides an excellent platform to further develop and
expand our footprint in the United States and this, combined with the very
positive response we have received from the repositioning and re-branding of our
product line, gives us the confidence to believe that FTS can develop the
business further in 2007.
The Company is involved in a number of bid proposals which are at various stages
of the sales cycle. We expect some of these to crystallize into contracts in the
near future although it is difficult to predict the exact timing.
We also believe that our business control solutions based on our Leap BCE
product will enable us to penetrate Tier-1 service providers in developed
markets.
Dan Goldstein
Chairman
CONSOLIDATED BALANCE SHEETS
30.6.2007 30.6.2006 31.12.2006
Unaudited Unaudited Audited
U.S. $ In thousands
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 4,380 3,183 10,691
Short-term investments 5,325 7,142 5,436
Trade receivables 12,927 14,893 11,014
Other accounts receivables and prepaid expenses 4,817 3,672 4,138
Total current assets 27,449 28,890 31,279
LONG-TERM UNBILLED RECEIVABLES 243 - 309
RENTAL DEPOSITS 70 299 134
SEVERANCE PAY FUND 147 211 164
PROPERTY AND EQUIPMENT, NET 1,129 1,588 1,317
OTHER ASSETS, NET 8,583 8,222 8,052
37,621 39,210 41,255
The accompanying notes form an integral part of the financial statements.
30.6.2007 30.6.2006 31.12.2006
Unaudited Unaudited Audited
U.S. $ In thousands
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowing 5,168 6,120 7,234
Trade payables 3,518 4,938 3,256
Customer advances and deferred revenue 4,440 5,459 6,670
Other payables 4,357 3,987 4,273
Total current liabilities 17,483 20,504 21,433
LONG-TERM LIABILITIES:
Accrued severance pay 637 583 561
SHAREHOLDERS' EQUITY
Share capital
Ordinary shares of no par value June 30,2007,
December 31,2006 and June 30,2006: 261,504,012
authorized shares.
Issued and outstanding shares June 30,2007:
32,956,012 shares (December 31,2006 and June
30,2006: 32,812,012 and 32,784,012 shares,
respectively). 1 1 1
Additional paid-in capital 9,943 9,943 9,943
Retained earnings 10,020 8,642 9,780
19,964 18,586 19,724
Cost of 260,000 company shares held by the (463) (463) (463)
company
Total shareholders' equity 19,501 18,123 19,261
37,621 39,210 41,255
2007
Date of approval of Dan Goldstein Alon Raz Amos Sivan
financial
statements Chairman of the Chief Financial Chief Executive
Board Officer Officer and
Director
CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months Year ended
ended June 30 December 31
Unaudited Audited
2007 2006 2006
U.S. $ in thousands
Revenues 15,351 15,059 32,760
Cost of revenues 7,901 10,323 19,238
Gross profit 7,450 4,736 13,522
Research and development expenses, net 2,635 3,101 5,144
Selling and marketing expenses 2,300 3,182 6,150
General and administrative expenses, net 2,521 2,054 4,546
Operating income (loss) (6) (3,601) (2,318)
Financial income, net 88 333 290
Other income (expenses), net (1) 3 16
Income (loss) before income tax 81 (3,265) (2,012)
Income tax 159 1,475 1,360
Net income (loss) 240 (1,790) (652)
Earnings per share ($):
Basic 0.0074 (0.055) (0.0201)
Diluted 0.0073 (0.055) (0.0201)
Weighted average number of shares
outstanding:
Basic 32,625,205 32,524,012 32,511,771
Diluted 32,696,012 32,852,858 32,696,012
The accompanying notes form an integral part of the financial statements.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the six months ended June 30, 2007:
Number of Amount Additional Cost of Retained Total
shares paid-in company earnings
capital shares
held by
the
company
U.S. $ in thousands
32,552,012 1 9,943 (463) 9,780 19,261
Balance at
January 1, 2007
(Audited)
Changes during the
six months ended
June 30, 2007:
Exercise of employee 144,000 - - - - -
shares option
Net income - - - - 240 240
Balance at 32,696,012 1 9,943 (463) 10,020 19,501
June 30, 2007
For the six months ended June 30, 2006:
Number of Amount Additional Cost of Retained Total
shares paid-in company earnings
capital shares
held by
the
company
U.S. $ in thousands
32,524,012 1 9,943 - 12,244 22,188
Balance at
January 1, 2006
(Audited)
Changes during the
six months ended
June 30, 2006:
Dividend distribution - - - - (1,812) (1,812)
Company's purchase of - - (463) - (463)
company shares
Net loss - - - - (1,790) (1,790)
Balance at 32,524,012 1 9,943 (463) 8,642 18,123
June 30, 2006
The accompanying notes form an integral part of the financial statements.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended December 31, 2006:
Number of Amount Additional Retained Cost of Total
shares paid-in earnings company
capital shares
held by
the
company
U.S. $ in thousands
Balance at 32,524,012 1 9,943 12,244 - 22,188
January 1, 2006
(Audited)
Changes during 2006:
Exercise of employee 288,000 - - - - -
shares option
Dividend declared - - - (1,812) - (1,812)
Company's purchase (260,000) - - - (463) (463)
of company's shares
Net income (loss) - - - (652) - (652)
Balance at 32,552,012 1 9,943 9,780 (463) 19,261
December 31, 2006
(Audited)
The accompanying notes form an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months Year ended
ended June 30 December 31
Unaudited Audited
2007 2006 2006
U.S. $ in thousands
Cash Flows from Operating Activities:
Net income (loss) 240 (1,790) (652)
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization 1,399 871 1,730
Gain from sale of property and equipment 24 - (1)
Deferred taxes (273) (1,479) (1,684)
Changes in operating assets and liabilities:
Decrease (increase) in short-term 111 (1,281) (67)
investments, net
Decrease (increase) in trade receivables (1,837) 819 3,817
Decrease (increase) in other accounts (602) (416) 148
receivables,
prepaid expenses and rental deposits
Increase (decrease) in trade payables 236 573 (1,077)
Increase (decrease) in other payables 39 (2,794) (1,444)
Net Increase in accrued severance pay 93 36 61
Increase (decrease) in customer advances and (2,310) (1,850) (639)
deferred revenues
Net cash provided by (2,880) (7,311) 192
(used in) operating activities
The accompanying notes form an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months Year ended
ended June 30 December 31
Unaudited Audited
2007 2006 2006
U.S. $ in thousands
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalization of software development costs (1,177) (944) (1,921)
Proceeds from sale of property and equipment 1 - 5
Purchase of property and equipment (137) (660) (797)
Purchase of business (Appendix A) (52) - -
Net cash (used in) provided by investing (1,365) (1,604) (2,713)
activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term bank borrowing, net (2,066) 2,564 3,678
Dividend distribution - (1,812) (1,812)
Company's purchase of company shares - (463) (463)
Net cash used in financing activities (2,066) 289 1,403
NET DECREASE IN CASH AND CASH EQUIVALENTS (6,311) (8,626) (1,118)
CASH AND CASH EQUIVALENTS AT BEGINNING 10,691 11,809 11,809
OF PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD 4,380 3,183 10,691
The accompanying notes form an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosure on cash flow information:
For the six months Year ended
ended June 30 December 31
Unaudited Audited
2007 2006 2006
U.S. $ in thousands
Cash paid during the period for:
Income tax 127 113 740
Non-cash activities:
Purchase of property and equipment 46 52 20
Against trade payables
Appendix A - Purchase of Business
For the six months
ended June 30
2007
U.S. $ in thousands
Working capital (108)
Property and equipment 17
Customer contracts and related customer 143
relationships
52
The accompanying notes form an integral part of the financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL:
F.T.S. - Formula Telecom Solutions Ltd (the "Company") was founded in January
1997 under the law of the state of Israel.
The Company is a global provider of convergent telecom management solutions for
mobile, fixed-line and advanced services operators. The Company provides a range
of versatile solutions to the market, which include convergent real-time prepaid
and postpaid billing and Customer Relationship Management ("CRM") order
management, infrastructure management, Electronic Bill Presentation software, as
well as call center implementations.
The Company operates in one operating segment.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
The significant accounting policies applied in the annual financial statements
of the Company as of December 31, 2006 are applied consistently in these interim
consolidated financial statements.
Note 3 -SUBSEQUENT EVENTS:
On February 15, 2007, the board of directors approved a maximum pool of up to
975,000 shares reserved for issuance upon exercise of options that may be
granted pursuant to the 2005 share option plan. In July 2007, the Company's
Board of Directors adopted an option plan pursuant to which the Company will
grant options to employees of the Company to purchase up to an aggregate of
856,500 Ordinary Shares. In accordance with this plan, employees of FTS and its
subsidiaries will be granted for no consideration, 856,500 options, each of
which may be exercised for one Ordinary Share of the Company at an exercise
price of GBP 0.6-0.97 per share. Any option not exercised within 10 years will
expire. 50% of the options will be exercisable from January 1, 2008 and 50% will
be exercisable from January 1,2009. The grant to the employees is to be made on
August 20, 2007.
ANNUAL GENERAL MEETING
The Company hereby announces that pursuant to its notice dated 4 July 2007
regarding the convening of the general meeting of the shareholders to be held on
16 August 2007, all resolutions were duly passed.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SFMFMASWSESA
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