RNS Number:9058R
Gilat Satcom Limited
27 February 2007
Gilat Satcom Ltd
("Gilat" or "the Company")
Gilat Satcom Ltd. ("Gilat"), the provider of international broadband satellite
services in the developing world (AIM symbol: GLT), announces its financial
results for 2006.
Financial Highlights
Figures in Q1 Q2 Q3 Q4 Year +/- % Year
US$000s ended ended
Unaudited Unaudited Unaudited Unaudited 31.12.06 31.12.05
Audited Audited
Revenues 8,048 8,712 9,830 10,494 37,084 16.8 31,751
Gross 2,471 2,394 2,007 2,809 9,681 0.1 9,668
profit
Gross
margin 31% 27% 20% 26.8% 26.% 30%
(%)
Operating
profit 648 271 (193) 659 1,385 -64.3 3,876
Operating
margin (%) 8% 3% -2% 6.3% 4% 12%
EBITDA 2,061 1,677 1,253 2,171 7,163 -17.7 8,702
Profit
before 325 6 (480) 402 252 -92.8 3,501
tax
Earnings 15 (*) (82) (*) 141 303 377 -87.2 2,939
(*) restated, see review of results below.
In 2006, we continued to build our core competencies in order to become a major
player in satellite broadband internet connectivity for emerging markets. The
challenges facing our management include:
- Increasing customer satisfaction and reducing customer churn by investing in
service quality, customer support, technical support, technological
applications and marketing and sales teams
- Achieving adequate sales growth.
- Increasing gross profit by introducing new measures to improve space segment
usage and to acquire new capacity cost effectively.
- Implementing and improving customer relations and financial management systems
across the group
- Refocusing the company on business development and sales
- Strengthening the upper management team
Management continues its focus on these challenges in order to overcome
operational problems and create a successful turnaround.
During 2006, the demand for satellite services continued to be strong in our
core African markets. Our growth areas include internet backbone connectivity
for both large telecommunication operators and for small to medium businesses
and private data networks. However, we achieved growth rates and profitability
lower than in previous years, partly due to the trend of increasing space
segments prices. As space segments and other related expenses are responsible
for more then 50% of our cost of goods sold, we are implementing technological
solutions to increase efficiency of our space segments.
Following the results of previous quarters the board has defined profit margin
growth as a major goal for 2007. Although it is too early to predict the outcome
for the current year, based on the initial indications on new contracts with
customers and on the measures undertaken during 2006, we believe that these
targets are achievable.
Contacts:
Gilat Satcom Ltd.: +972 3 925 5015
Liat Helman, CFO
Commitment-IR: +972 3 61144 66
Yael Nevat or Zion Bahloul
Seymour Pierce +44 20 7107 8000
Stuart Lane or John Depasquale
Chief Executive Officer's statement
Overview
During 2006, we reinforced and created the required measures to become a major
player in satellite broadband internet connectivity for emerging markets. We
have strengthened our top management team, completed reorganization in our
operations departments and changed our sales force and sales strategy in order
to build a sound foundation for further growth and profitability.
The steps described above were not reflected in the full year results for 2006
and therefore we achieved growth rates and profitability lower than in previous
years. Although the general results for 2006 were lower then expected, our cash
flow from operations allowed us to return over US$7 million of loans to banks.
Operations and actions being taken
During 2006 we took a number of significant steps in order to reorganize our
activities and create a solid base to allow further sustainable growth and
expansion of our business.
We have built engineering and operational infrastructure, recruited employees to
strengthen our technical support and customer care teams, reorganized the
service departments, implemented new operational tools and procedures and
enhanced the existing management systems in order to enable more efficient
communication and better response time with our customers.
We also implemented training sessions for employees, resellers and business
partners.
We have secured the additional transponder capacity required for future
expansion and have implemented new engineering tools in order to improve the
usage efficiency of space segments.
We have upgraded the hubs and teleports to improve service quality by investing
US$2.5 million in our facilities during the past year.
In the sales and marketing department we started our reorganization by
appointing a new executive VP for marketing and sales during the second quarter.
During the last quarter of the year we reviewed our main markets and strategy
and decided to focus on our main markets in Africa. We established a sales
office in Nigeria, recruited new sales managers and implemented new incentive
plans for our sales managers. We also implemented a new reseller plan and
partnerships with local service providers in some of the countries in which we
operate.
In Q3 we suffered from certain one-off costs incurred which included additional
short-term carriage costs arising from a change in customs procedures in
Nigeria, lost revenue resulting from a temporary failure in one of the
satellites used to deliver internet services and a provision for vendor costs
relating to 2005 and the first half of 2006. These factors are not expected to
affect the overall potential of the business going forward.
In Q4 2006 we initiated an action plan to increase profitability. The following
marketing and business development steps were taken:
* We announced a new VPN service targeted to large corporations,
government institutions and international entities who seek connectivity
amongst their branches. This new service is based on IDirect's platform. We
have signed a certified reseller agreement and already purchased a hub and
peripheral equipment from iDirect. Our solution is a dual-connectivity: It
provides an entirely private network for a client's organization, and in
parallel supplies a link to the International Internet backbone via
satellite.
* Our wholly owned subsidiary, Gilat Satcom Nigeria, has filed a request
to the Nigerian Communications Commissions (NCC) for an International Direct
Access license. We received the licence in February 2007. This license will
allow Gilat Satcom Nigeria to operate as a local satellite communications
services provider and to provide services to a wider range of customers
* We announced the launch of an additional new service in the second
quarter of 2007 aimed at SOHO (Small office, home office) businesses in West
Africa.
Sales and business development
As published in April 2006, Telkom Kenya, the incumbent national
telecommunications company and sole provider of landline phone services in Kenya
, signed an agreement to significantly increase services with us. We have
supplied satellite broadband internet services to Telkom Kenya since 2002. It is
the main internet connectivity provider to Telkom Kenya which, in turn,
distributes internet services through its landline telecoms infrastructure.
We have won contracts for the supply of data storage equipment to cellular
operators in Uganda and Zambia during 2006. Our data storage solutions (by
Network Appliance) have made a significant breakthrough in Africa this year with
a 57% growth in sales.
We won a contract with El-Al, the national Israeli airline, to install Iridium
mobile satellite phones in all of their Boeing 767 and 747-200 aircrafts to
enable pilots and passengers to make international calls during flight.
Two "Multistar" government contracts in Nigeria are in the stages of
implementation, good progress has been achieved in adding new customers in the
Middle East and initial sales have been made in Eastern Europe.
Additional new contracts won during the fourth quarter include the following:
* Implementation of an agreement signed in Tanzania to provide Internet
connectivity via satellite to the Tanzanian Ministry of Education. The
partnered companies won a tender last June to provide equipment and
connectivity service and support to 31 remote sites of the Tanzanian
Teachers' College. Installations began early August and most sites have been
connected as of December 2006.
* Contract with Tanzania Telecommunications Company Limited (TTCL) to
provide broadband connectivity to the Internet backbone until 2009. We will
provide the Tanzanian telco a backup link to the internet backbone via
satellite.
* Contract with a Kenyan ISP to significantly expand its current capacity.
We continue to focus on acquiring satellite transponder capacity for suitable
price levels. Pricing trends are cyclical and reflect the amount of spare
satellite transponder capacity at any point in time. During the first half of
2005, we committed US$16.8 million to forward capacity for seven years with one
satellite carrier, providing cost effective capacity. During 2006, additional
capacity was acquired at a higher price on other satellites. For the longer
term, we are investigating options for acquiring additional long-term capacity
more cost effectively.
Review of results
Total revenues for the year ended 31 December 2006 rose 17% to US$37.1 million
(2005: US$31.8 million) with profit before tax decreasing by 93% to US$0.25
million (2005: US$3.5 million) and net profit down 87% to US$0.4 million (2005:
US$2.9 million).
2006 revenues reflect a full consolidation of IP Planet Networks Ltd. which was
acquired on 30 March 2005. On a pro-forma basis 2006 reflects an increase of
5.4% in revenues. The increase in revenues was mainly in our core broadband
connectivity services and also in our voice services and storage equipment
compared to a decrease in our local services in Israel and in equipment sales.
Cost of services increased from US$22.1 million or 70% of revenues to US$27.4
million or 74% of revenues. The main reasons for the increase in costs of
services are increases in space segment costs as we renewed contracts that ended
in 2006 together with purchase of additional capacity during the year. We made a
provision for a one time payment, which reduced the cost of sales by
approximately $300 thousand.
Gross margins decreased compared to 2005, This is due mainly to the increase of
space segments prices, top management changes and attention to internal
rearrangement which delayed new transactions as well as to the mixture of
revenues and increase in voice services revenues with lower gross margin.
Sales, marketing and G&A expenses grew in 2006 from US$5.8 million to US$8.3
million and as a percentage of revenue, from 18.2% in 2005 to 22.4% in 2006. The
increase in Sales & Marketing and G&A expenses is due to the increase in Sales &
Marketing activities, the flotation on AIM and top management changes.
Operating profit for 2006 was US$1.4 million or 4.0% of total revenue, compared
to US$3.9 million or 12.2% of total revenue in 2005. The decrease in operating
profit and margin is due to the decrease in gross profit and increase in
operating expenses as detailed above.
2006 EBITDA was US$7.2 million or 19.3% of total revenue, compared to US$8.7
million or 27.4% of total revenue in 2005.
Financial expenses for 2006 were US$1.1 million compared with US$385 thousands
for 2005. The increase was partly due to the financial income in 2005 attributed
by exchange rate differences between the Israeli Shekel and the US Dollar. In
addition 2005 bank interest expenses reflected approximately half year of
expenses since the majority of it's bank loans was taken by the company during
2005.
Income Tax benefit for 2006 was US$125 thousands representing the changes in the
deferred taxes assets and liabilities. During the second and third quarter of
2006 we have reported income tax benefits of US$241 thousands and US$764
thousands, respectively. Following a thorough review of the tax assets we have
restated our annual tax benefit to US$125 thousands. The updated tax benefit
(expense) for the second and third quarter are (US$88) and US$621 thousands,
respectively.
Net Profit for 2006 was US$377 thousands compared with US$2.9 million in 2005.
Balance sheet overview
As of 31 December 2006, cash and cash equivalents were US$6.2 million, compared
to US$7.1 million in 31 December 2005. Net Debt (bank debt less cash) as of 31
December 2006 was US$5.4 million compared to US$11.4 million on 31 December
2005. The significant decrease was due to the fact that we utilized our cash
flow from operations to pay down over US$7 million of bank debt during the year.
Current assets for 31 December 2006 totaled to US$10.4 million including US$6.2
million cash, US$3.3 million receivables and US$1.0 inventory. Current assets
for 31 December 2005 totaled US$12.0 million and included US$7.1 million cash,
US$3.8 million receivables and US$1.0 inventory.
Non current Assets for 31 December 2006 were US$29.4 million, compared to
US$31.4 million on 31 December 2005. Major changes included the depreciation of
fixed assets and intangible assets, offset by new investments in fixed assets
and in a fiber optic long term lease to connect our facilities to the internet
backbone.
Current Liabilities for 31 December 2006 were US$8.6 million, compared to US$7.5
million on 31 December 2005. The current liabilities include US$3.2 million of
current maturities of bank loans and lease obligations and US$5.4 million of
accounts payable. The current liabilities for 31 December 2005 included US$3.9
million of current maturities and US$3.5 million of accounts payable.
Non current liabilities for 31 December 2006 were US$16.1 million, compared to
US$21.2 million on 31 December 2005. The decrease was mainly due to the pay down
of bank loans.
Shareholders' equity for 31 December 2006 is US$15.2, compared to US$14.7 on 31
December 2005.
Strategy
For 2007, our focus is on improving our financial figures and strengthening our
ability to cope with the trend of increasing space segments prices. As space
segments and other related expenses are responsible for more then 50% of our
cost of goods sold, we are implementing technological solutions to increase
efficiency of our space segments.
In major markets, we plan to establish a local sales and customer service
presence. Nigeria is our first location where we established a wholly owned
subsidiary and received a license from the NCC. We are also strengthening our
core offering of broadband internet over satellite and VSAT private networks, by
introducing new products and services.
At the same time as stepping up our sales and marketing activities, we will
continue to develop our satellite networks and engineering activities which
underpin our services and are crucial to our continued success.
Management
We appointed new officers during the year in order to improve our capabilities
and to meet market changes and challenges.
On 18 January 2006, Mr. Amos Lasker was appointed CEO (we released a detailed
report about Mr. Lasker's nomination on 18 January 2006)
On 1 April Mr Avihu Bergman, was appointed VP Marketing and Sales. Mr. Bergman
previously served as VP Sales of Gilat Satellite Networks Ltd. and before that
served in similar positions in other telecommunication equipment companies.
Naftaly Barak, who has been appointed Chief Operating Officer, is focusing on
operational activities with particular responsibility for the group's satellite
network and engineering.
Ms. Alicia Rotbard, former Chief Executive Officer of Doors Information Systems,
Roni Avni, a partner in the law firm, M Seligman & Co, and Ms. Keren Aslan,
Chief Executive Officer of Kaniel Packaging Industries, have been appointed
non-executive directors.
Further managerial changes were made during the year.
The top management changes affected the internal rearrangement and form the core
of a strong team for the next growth phase.
On 23 February 2007 Worldgroup Holdings Ltd. (which holds 53% of Satcom Systems
Ltd., which holds 79% of Gilat shares), has announced that its controlling
shareholder Silverboim Holdings Ltd has sold 50.01% of its shares in Worldgroup
Holdings Ltd. to Enter Holdings Ltd. Worldgroup holdings ltd. and Enter Holdings
Ltd. are public companies, traded on Tel Aviv Stock Exchange.
Amos Lasker, CEO
26 February 2007
Gilat Satcom Ltd.
Consolidated Profit & Loss Account (Audited)
Year ended December 31,
2 0 0 6 2 0 0 5
Revenues 37,084 31,751
Cost of revenues 27,403 22,083
Gross profit 9,681 9,668
Operating expenses:
Selling and marketing, net 3,206 2,479
General and administrative 5,090 3,313
Total operating expenses 8,296 5,792
Profit from operations 1,385 3,876
Financial Income 235 (*) 539
Financial expenses (1,368) (*) (924)
Other income, net - 10
Profit before tax 252 3,501
Income tax benefit (expenses) 125 (562)
Profit for the year 377 2,939
Basic earnings per share (in dollars) 0.021 0.191
Diluted earning per share (in dollars) 0.021 0.190
Number of shares used in computing basic earnings
per share (in thousand) 17,692 15,384
Number of shares used in computing diluted earnings
per share (in thousand) 17,724 15,408
(*) Reclassified
Gilat Satcom Ltd.
Consolidated Balance Sheet (Audited)
December 31
2 0 0 6 2 0 0 5
ASSETS
CURRENT ASSETS
Cash and cash equivalents 5,916 6,987
Short-term deposits 248 160
Trade receivables 2,315 (*) 1,970
Other receivables 946 (*) 1,882
Inventories 1,011 1,000
Total current assets 10,436 11,999
NON-CURRENT ASSETS
Property and equipment 20,339 21,336
Intangible assets 7,430 9,101
Deferred income taxes 1,130 702
Other 536 (*) 353
Total non-current assets 29,435 31,492
39,871 43,491
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long term loans 2,600 3,934
Current maturities of long term leases 626 -
Trade accounts payable 3,863 3,249
Other payables and current liabilities 1,539 (*) 344
Total current liabilities 8,628 7,527
NON-CURRENT LIABILITIES
Long-term credit from banks 8,925 14,572
Obligations under finance leases 7,080 6,300
Deferred income taxes - 304
Liabilities for severance pay, net 70 51
Total non-current liabilities 16,075 21,227
Commitments and Contingent liabilities
EQUITY 15,168 14,737
39,871 43,491
(*) Reclassified
Gilat Satcom Ltd.
Consolidated Statement of Cash Flows (Audited)
Year ended December 31,
2 0 0 6 2 0 0 5
Cash flows from operating activities:
Net Profit for the period 377 2,939
Adjustments to reconcile net profit to net
cash provided by operating activities:
Depreciation of property and equipment 5,778 4,826
and amortization of intangible assets
Share based payment 88 97
Appreciation of finance lease 381 247
Appreciation of bank deposits (88) (27)
Decrease (increase) in trade receivables (345) (*) (1,945)
Decrease in other receivables 937 1,593
Decrease (increase) in inventories (11) 199
Increase in other non current assets (183) (3)
Increase in trade accounts payable 615 129
Increase (Decrease) in other payables and
current liabilities 1,195 (*) (1,329)
Increase (decrease) in deferred income taxes (175) 578
Increase in liabilities for severance pay, net 19 -
Net cash provided by operating activities 8,588 7,304
Cash flows from investing activities:
Acquisition of subsidiaries - Appendix A - (7,185)
Purchases of property and equipment (2,505) (11,381)
Purchase of intangible assets (18) (3,256)
Proceeds from withdrawl of short-term bank deposits - 123
Net cash used in investing activities (2,523) (21,699)
Cash flows from financing activities:
Repayments of loans to related parties - (8,111)
Repayments of loans from banks (21,805) (1,496)
Receipt of long term loans from bank 14,825 20,002
Repayment of finance lease (156)
Decrease in Short term loans - (12)
Receipt on account of shares issuance - 6,850
Net cash provided by financing activities (7,136) 17,233
Increase (decrease) in cash and cash equivalents (1,071) 2,838
Cash and cash equivalents at the beginning of the
year 6,987 4,149
Cash and cash equivalents at the end of the year 5,916 6,987
Significant Accounting Policies
Basis of Accounting
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS"). The significant accounting policies
applied in the financial statements, on a consistent basis, are as follows:
(a) Use of estimates:
The preparation of financial statements in accordance with IFRS requires
estimates and assumptions by the management that affect the amounts reported in
the financial statements and the accompanying notes. Actual results could differ
from the estimates.
(b) Functional and presentation currency:
The majority of the Company's sales are mainly denominated the U.S. dollar. A
substantial portion of the Company's expenses, mainly cost of revenues, selling
and marketing expenses are incurred in U.S. dollars or linked thereto. The
majority of the company's assets are purchased in US dollars as well. Therefore,
the Company has determined that the U.S. Dollar is the currency of the primary
economic environment of the Company, and thus its functional and presentation
currency.
(c) Foreign Currencies:
Transactions in currencies other than U.S. dollars are recorded at the rates of
exchange prevailing on the dates of the transactions. At each balance sheet
date, monetary assets and liabilities that are denominated in foreign currencies
are translated at the rates prevailing on the balance sheet date. Gains and
losses arising from translation are included in net profit or loss for the
period.
(d) Basis of Consolidation:
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) as of the
end of each reporting period. Control is achieved where the Company has the
power to govern the financial and operating policies of an investee entity so as
to obtain benefits from its activities.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognized as goodwill.
The results of subsidiaries acquired or disposed of during the reporting period
are included in the consolidated income statements from the effective date of
acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
(e) Cash equivalents:
The Company considers all highly liquid investments originally purchased with
maturities of three months or less to be cash equivalents.
(f) Short-term deposits:
The Company classifies deposits with original maturities of more than three
months and less than one year as short-term deposits. The short-term deposits
are presented at cost, including accrued interest.
(g) Trade accounts receivable:
Trade receivables are recognized and carried at original invoice amount or
unbilled amount less an allowance for any uncollectible amounts. A specific
estimate for doubtful debts is made when collection of the full amount is no
longer probable. Bad debts are written-off when detected by management.
(h) Inventories:
Inventories are stated at the lower of cost and net realizable value. Cost is
determined on the "first in first out" basis. Net realizable value presents the
estimated selling price loss costs necessary to make the sale.
(i) Property and equipment:
Property and equipment are stated at cost, less accumulated depreciation and any
accumulate impairment losses. Depreciation is calculated by the straight-line
method over the estimated useful lives of the assets at the following annual
rates:
%
Satellites transponders 14
Satellites communication equipment 10-20 (mainly 10)
Computers and peripheral equipment 10-33 (mainly 33)
Office furniture and equipment 6
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets, or where shorter, the term of the
relevant lease.
(j) Leasing:
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
(k) The Company As Lessee:
Assets held under finance leases are recognized as assets of the Company at the
present value of the minimum lease payments. The corresponding liability to the
lessor is included in the balance sheet as a finance lease obligation. Lease
payments are apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly against income.
(l) Intangible assets
Customer portfolio and International satellite communication license are stated
at cost, net of accumulated amortization and accumulated impairment losses.
Amortization is calculated by the straight-line method over their estimated
useful lives.
(m) Goodwill:
Goodwill arising from business combinations represents the excess of the cost of
acquisition over the Company's interest in the fair value of the identifiable
assets and liabilities of a subsidiary at the date of acquisition.
Goodwill is reviewed for impairment at least annually. Any impairment is
recognized immediately in profit or loss and is not subsequently reversed.
(n) Severance pay:
Pursuant to Israeli severance pay law, employees are entitled to one month's
salary for each year of employment or a portion thereof. As a policy, all of the
company's employees are entitled to receive all severance pay payments that were
deposited on their name as a part of their insurance policy regardless whether
they have resigned or have been laid off. Over the years, the average rate of
the increase in the salaries suits common discount rate. Based on these facts,
the Company's liability for severance pay is calculated based on the most recent
salary of the employees multiplied by the number of years of employment, as of
the balance sheet date. The Company's liability for all of its employees is
provided by monthly deposits with insurance policies and by an accrual.
The deposited funds include profits accumulated up to the balance sheet date.
The value of the deposited funds is based on the cash surrender value of the
insurance policies.
(o) Revenue recognition:
Revenue is measured at the fair value of the consideration received or
receivable.
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions
are satisfied:
* The Company has transferred to the buyer the significant risks and
rewards of ownership of the goods;
* The Company retains neither continuing managerial involvement to the
degree usually associated with ownership nor effective control over the
goods sold;
* The amount of revenue can be measured reliably;
* It is probable that the economic benefits associated with the
transaction will flow to the entity; and
* The costs incurred or to be incurred in respect of the transaction can
be measured reliably.
Revenue from rendering of services
The Company records its revenues from rendering of services on a relative basis
over the period of the agreement or performance of the service.
(p) Taxation:
The Company accounts for income taxes under the liability method of accounting.
Under the liability method, deferred taxes are determined based on the
differences between the financial statement and tax basis of assets and
liabilities at enacted tax rates in effect in the year in which the differences
are expected to reverse. Deferred tax assets in respect of carry forward losses
and other temporary deductible differences are recognized to the extent that it
is probable that they will be utilized.
The tax benefit (expense) represents the sum of the tax currently payable and
deferred tax.
Deferred tax is charged or credited in the income statements, except when it
relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
(q) Impairment of tangible and intangible assets excluding goodwill:
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if any). Where the
asset does not generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash-generating unit to which the
asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less that its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognized as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognized
for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognized as income immediately.
(r) Share-based Payments
The Company has applied the requirements of IFRS 2 Share-based Payment. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested as of 1
January 2005.
The Company and Satcom Systems Ltd. the controlling shareholder ("Satcom")
issued equity-settled share-based payments to certain employees. Equity-settled
share-based payments are measured at fair value at the date of grant. The fair
value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period of each instatement,
based on the Company estimate of awards that will eventually vest.
Fair value is measured by use of B&S model. The expected life used in the model
has been adjusted based on management's best estimate, for the effects of
non-transferability, and behavioral considerations.
(s) Exchange rates and linkage basis:
Assets and liabilities in or linked to the Israeli currency, New Israeli Shekel
("NIS") are included in the financial statements according to the representative
exchange rate as published by the Bank of Israel on balance sheet date.
Data regarding exchange rates of NIS in relation to U.S. dollar are as follows:
Exchange rate of one
U.S. dollar
31 December 2006 4.225
31 December 2005 4.603
(t) Fair value of financial instruments:
The carrying amounts of cash and cash equivalents, short-term bank deposits,
trade receivables, trade payables, obligations under finance leases and
liabilities for severance pay are usually identical, or approximate their fair
value.
(u) Reclassified amounts
Certain prior period amounts were reclassified in order to conform with the
current year presentation.
(v) Adoption of new and revised Standards
At the date of authorisation of these financial statements, the following
Standards and Interpretations were in issue but not yet effective:
* IAS 1 - Presentation of Financial Statements - Effective - January 1,
2007.
* IFRS 7 - Financial Instruments: Disclosures - Effective - January 1,
2007.
* IFRS 8 - Operating Segments - Effective for annual periods beginning on
or after 1 January 2009
* IFRIC 7 - Applying the Restatement Approach under IAS 29, Financial
Reporting in Hyperinflationary Economies - Effective for annual periods
beginning on or after 1 March 2006.
* IFRIC 8 - Scope of IFRS 2 - Effective for annual periods beginning on or
after 1 May 2006
* IFRIC 9 - Reassessment of Embedded Derivatives - Effective for annual
periods beginning on or after 1 June 2006
* IFRIC 10 - Interim Financial Reporting and Impairment. - Effective for
annual periods beginning on or after 1 November 2006
* IFRIC 11 - IFRS 2 - Group and Treasury Share Transactions - Effective
for annual periods beginning on or after 1 March 2007
* IFRIC 12 - Service Concession Arrangement - Effective for annual periods
beginning on or after 1 January 2008
The directors anticipate that the adoption of these Standards and
Interpretations in future periods will not have material impact on the financial
statements of the Group.
Note 13 - Share capital
December 31,
2 0 0 6 2 0 0 5
Number of shares
Ordinary shares: of NIS 0.01 par value of NIS 0.01 par value
Authorized (see note b) 50,000,000 50,000,000
Issued and fully paid 17,692,066 17,692,066
Share issuance for receipt on account of shares
In June 2005 the Company issued 100 ordinary (Nis 1 par value) shares in
consideration for $8,328 thousand, which was recorded as a payment on account of
shares on June 2002.
Share split and bonus shares
According to a shareholders' resolution from July 2005, each share
was split into 100 shares resulting in an authorized share capital of 2,080,000
shares par value NIS 0.01 per share.
On August 2005 the Company's board of directors approved the issuance of
13,860,000 bonus shares, so that each holder of 1 ordinary share (0.01 NIS par
value) as of the date hereof shall be entitled to receive 693 ordinary shares,
and to capitalize a sum of $31 thousand of retained earnings as reflected in the
Company's financial statements as of December 31, 2005. Following the
distribution of bonus shares and prior to the IPO, the Company's issued and
outstanding share capital is comprised of 13,880,000 ordinary shares par value
NIS 0.01 each.
Earnings per share
The earnings per share presented in the income statements are
computed - for all the reported periods - on the basis of the number of shares
as if the share split and the bonus shares were always in effect. see b. above.
Employees stock option plan
The Company intends to adopt an employee stock option plan of up to 7%
of the share capital.
Issuance of options
According to an option agreement between the Company and Seymour
Pierce (nominated advisor) dated 5 August 2005 the company has granted Seymour
Pierce immediately following Admission, an option over 1.5 per cent. of the
ordinary share capital of the Company exercisable by Seymour Pierce at the Issue
Price (GBP 1.2 per share) at any time until four years after Admission and
subject to other terms set in the option agreement.
The fair value of the options granted is $137 thousand (computed based on the
following data: share price $ 2.14, expected volatility - 41%, risk free rate -
3%, reduction of 15% based on the lock up period).
Admission of the Company's share capital to the AIM
On August 9, 2005 the company's shares were registered on the London
AIM stock exchange.
The company issued 21.5% of its shares for the amount of approximately
$8 million. The company paid total expenses in relation of the public offering
of $2.115 million(*). Satcom agreed to pay all costs beyond that amount that
relate to the registration of the shares to trading.
(*) Including fair value of share based payments granted to the
nominated advisor and to others that were considered incremental and directly
related to the IPO.
Share - based payments for Satcom's shares
On August 2004 Satcom's board of directors approved the
formulation of an employee and officer compensation program, to include its
(present as well as future) subsidiaries, pursuant to which the Company
employees have been allotted 624,000 options exercisable into an identical
number of Satcom shares. This allotment has been carried out in accordance with
Section 102 of the Income Tax Ordinance, capital-gains track (with a trustee).
These options, which may be exercised within a period of five
years, were offered for no consideration, at an adjusted exercise price of NIS
2.76 per share.
In addition, in May 2005, Satcom's board of directors resolved,
within the framework of an employee and officer compensation program, to allot
to the employees of the Company for no consideration, a total of 590,000 options
exercisable into 590,000 ordinary Satcom shares. The adjusted exercise price of
the options would equal NIS 3.94. A total of 480,000 were issued in July and
August, 2005.
Note 13 - Share capital (Cont.)
Share - based payments for Satcom's shares (cont.)
According to the terms of both programs, each recipient would be
entitled to exercise the options into shares as follows: 25% upon allotment and
25% at the end of every year thereafter so that after three years all the
options would be exercisable into shares. Entitlement to options is contingent
upon continued employment with the Company.
Year Ended December 31,
2 0 0 6 2 0 0 5
Number of Weighted Average Number of Weighted Average
options Exercise Price options Exercise Price
Outstanding
at 1,225,250 $1.31 950,250 $0.77
year end
Exercisable
at 1,009,688 $1.42 373,125 $0.73
year end
Share - based payments for the company's shares
See notes 12(d) , (f) and 13 (e).
On June 2006 Mr. Amos Lasker, the company's CEO, was granted 550,000
options, each to purchase one Ordinary share par value of NIS 0.01 of the
Company at an exercise price per share of 100p (the "Options"). Subject to the
Services Agreement with the CEO and to his continued employment with the
Company, 50% of the options become vested and exercisable on September 1, 2006
and the additional 50% on December 31, 2006. All terms and conditions including
price adjustments and dividend adjustments are according to the company's share
option plan. The fair value of the options granted to the CEO is $75 thousand
(computed based on the following data: share price 92.5p, expected volatility-
33%, risk free rate - 4.68%).
Provided that the Service Agreement has not terminated or expired, then on the
second anniversary of the Effective Date of this Agreement and on each
anniversary of the Effective Date thereafter until and including the fifth
anniversary, Mr. Lasker shall be granted additional options to purchase 177,000
shares of the Company which shall vest on the date on which they are granted.
On February 2007 one of the managers of the company, was granted
options exercisable to company's shares in the amount of 176,923 options. The
options, each to purchase one Ordinary share par value of NIS 0.01 of the
Company at an exercise price per share of 120p. Subject to his continued
employment with the Company, 44% are fully vested at the grant day and
additional 7% will become vested at the end of each calendar quarter, until the
end of 2008 All terms and conditions including price adjustments and dividend
adjustments are according to the company's share option plan. The fair value of
the options granted to the manager is $10 thousand (computed based on the
following data: share price 40p, expected volatility: 45%, risk free rate - 5%).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SESFAMSWSEDE
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