Embargoed for release, Friday 21 March 2003 - 07.00am (GMT)
BATM Advanced Communications Limited
Final Results for the Year Ended 31 December 2002
BATM Advanced Communications Limited (LSE: BVC), a leading designer and
producer of broadband data and telecoms systems, today announces preliminary
results for the year ended 31 December 2002. The results are in line with a
trading statement given on 9 January 2003.
Key features
Twelve months ended 31 December 2002 2001
Turnover $ 48.6m $ 82.0m
Pre-tax loss before goodwill amortisation $(9.1)m $(11.7)m
*
Loss per share before goodwill (2.39)c (3.17)c
amortisation*
*After goodwill amortisation of ($11.3m) (2001: ($255.1m)), pre-tax losses were
$20.4m (2001: loss $266.8m) and loss per share was 5.31c (2001: loss per share
69.13c)
* Strong cash position: $55.2 m and no borrowings (2001: $56.6m)
* Significant R&D programme maintained
* Selling, general and administrative overheads reduced by 37% - in line with
strategy
* Awarded an exclusive contract with a leading regional Bell operating
company in H2
* Won first major contract for VOIP platform in the US
Dr Zvi Marom, Chief Executive of BATM, said:
"Despite continued difficult trading conditions, particularly in the USA, we
have managed to maintain our cash position and actually increase the number of
major customers we are serving in our main markets. We believe that once
markets start to recover we shall be among the first to benefit from such
recovery."
Enquiries:
BATM Advanced Communications 020 7831 3113
Peter Sheldon, Chairman
Dr Zvi Marom, Chief Executive
Ofer Bar Ner, Chief Financial Officer
Dresdner Kleinwort Wasserstein 020 7623 8000
Mark Smith
Shore Capital 020 7408 4090
Graham Shore
Financial Dynamics 020 7831 3113
James Melville-Ross
A conference call for analysts and investors will be held at 11a.m. GMT on
Friday 21 March 2003. For further details please contact James Melville-Ross,
Financial Dynamics, on 020 7831 3113.
Chairman's Statement
Review of the Period
2002 was an extremely difficult year for our business and our industry. We
experienced an extremely harsh trading environment, fierce competition and a
significant decline in turnover from our legacy business in the US.
Our response to this has been threefold: first, we have actively worked to
manage tight cost controls; second, we have continued to focus on new product
development within core areas of the business; and third, we have aimed our
sales efforts on the businesses and regions where demand for our products is
strongest.
As a result we managed to reduce our selling, general and administrative costs
by 37% compared with 2001 and have carefully husbanded our cash resources with
the result that we finished the year with approximately the same amount of cash
as at the beginning ($55.2 million: 2002, $56.6 million: 2001).
Financial Performance
Turnover for the period was $48,661,000 (2001: $82,001,000), a decrease of 41
per cent. This decrease is a direct result of lower sales in the US market, due
primarily to the decline of our legacy business.
Gross profit margin returned to a more normal level of 39.5 per cent (2001:
34.1 per cent), an increase mostly arising as a result of inventory write down
in 2001, which was not repeated this year.
Selling, general and administrative expenses were reduced by 37 per cent as we
have sought to address the effects of the downturn by reducing non-core
expenditure.
Gross research and development expenditure in this period was $12,779,000
(2001: $15,655,000). However, after contributions from the Israeli Chief
Scientist, US-IS Foundation and from the European Community, net research and
development expenditure was $12,185,000 (2001: $14,293,000).
Operating loss, before goodwill amortization, amounted to $10,499,000 (2001:
loss $14,033,000). Operating loss after goodwill amortization was $21,802,000
(2001: loss $269,133,000).
Financial income was $1,388,000 (2001: $2,221,000), reflecting lower interest
rates on largely unchanged cash and other investment balances.
The loss before tax, excluding the effect of the amortization of goodwill, was
$9,120,000 (2001: loss $11,747,000). Loss after taxes and minorities, excluding
the effect of the amortization of goodwill, was $9,267,000 (2001: loss
$12,256,000), giving a loss per share of 2.39 cents (2001: loss 3.17 cents).
Actual loss after taxes, including the effect of goodwill, amortization
amounted to $20,570,000 (2001: loss $267,356,000), giving a loss per share of
5.31 cents (2001: loss 69.13 cents).
The balance sheet remains strong with cash of $55.2 million at the period's end
comprised as follows: Cash and deposits, up to three months duration of $15.5
million; short-term deposits, up to one year of $3.7 million; and long-term
deposits for more than one year of $36 million.
Sales and Marketing
The difficult market conditions resulted in a major drop in turnover from our
legacy products in the US, a trend that is continuing into the current year.
This is the major reason for our lower turnover in 2002. However, we believe,
we have maintained our position as a viable vendor to the major US carriers.
This has been demonstrated by our recent success in securing a major contract
with a leading US carrier (announced at the interims) and by our continuing
ability to get new products approved at the carriers' networks. Furthermore, we
have actually increased the number of major customers we are serving in our
main markets despite the difficult conditions.
As we have seen many small carriers in the US either disappear or remain in a
potentially insecure financial situation, we are maintaining our focus on the
major carriers. We have also increased our focus on the wireless providers'
market where demand for our products is relatively strong.
During 2002 we have expanded our relationship with major vendors and expect it
to continue to grow in 2003.
The Far East remains a significant potential market for our products and this
area of opportunity for us has begun to develop. A number of substantial
contracts for our products have been entered into and we anticipate a
significant contribution from this area in the coming years.
Our business in Europe remained relatively strong and we expect it to continue
in this way in 2003.
Research & Development
During 2002 we introduced several new products to both our IP and TDM
portfolios. In our IP portfolio, we have successfully introduced and deployed
our new Edgegate "Fiber to The Home" solution as well as our new T5C for
carriers' networks. The new T5C has been certified by 2 major US carriers for
deployment in their internal networks. On the TDM side, we added a HUB solution
to our M13 offerings. This product includes 9 DS1 to DS3 multiplexors in one
compact box. This product is at testing stages with several major carriers. We
also introduced in early March 2003 our first product in the SONET space - the
OTM 1000. This product can drop both traditional DS1 and DS3 services as well
as Ethernet from an OC 3 connection.
Notwithstanding the unsatisfactory state of the market we firmly believe that
our policy of continuing to commit to a significant R&D programme is a policy
that will stand us in good stead for the future.
Investment
Our Israeli associated company, Eldor Computers Limited, has made a significant
improvement this year that has resulted in a profit of $350,000 on revenues of
approximately $25million. As we own 49.9% of the company, our share of turnover
is not included in these statements. The net results are, however, included, on
an equity basis, in the Consolidated Profit and Loss Accounts under Group's
share of income (loss) from associated companies.
Outlook
We do not anticipate an early return to the levels of activity of recent years
but remain confident that our strategy for preparing for the upturn in
business, which will surely come, is sound. We will continue to maintain a
cautious view of the market and to adjust our
expense levels to match lower turnover levels, so that we return to
profitability at an early date.
During the current year we will increase our focus on our OEM customers for
both our IP and TDM product lines. We will maintain a substantial R&D programme
and continue to develop our line of IP switches to support major fibre
deployment projects. This will include enhancements to our software platform as
well as several new hardware platforms to be released in 2003. We will also
carry out further development of our alarm aggregation platforms and SONET
terminal multiplexors.
We will also maintain our policy of a strict control on our cash resources,
which are such an important part of the stability on which we have built this
business.
We are not immune from one of the most severe and sharp deterioration in
business confidence that we have ever witnessed. BATM's business is, however, a
solid one and our policies are based on conservative but sound principles. We
are confident that we will emerge from this difficult period in good shape.
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
Year ended December 31,
2 0 0 2 2 0 0 1
US$ 000's US$ 000's
Turnover 48,661 82,001
Cost of sales 29,440 53,991
Gross profit 19,221 28,010
Operating expenses
Research and development costs 12,779 15,655
Less - participation 594 1,362
Research and development costs, net 12,185 14,293
Selling, general and administrative expenses 17,535 27,750
Amortization and write-off of Goodwill 11,303 255,100
Total operating expenses 41,023 297,143
Operating loss (21,802) (269,133)
Financial income, net 1,388 2,221
Other income (expenses), net (9) 65
Loss before taxes on income (20,423) (266,847)
Taxes on income 4 (267)
Loss after taxes on income (20,419) (267,114)
Group's share in net loss of associated company (151) (242)
Retained loss for the year (20,570) (267,356)
Loss per share (in cents) (5.31) (69.13)
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED BALANCE SHEETS
December 31,
2 0 0 2 2 0 0 1
US$ 000's US$ 000's
Fixed assets
Tangible assets 11,160 12,770
Goodwill 22,271 32,169
Total fixed assets 33,431 44,939
Current assets
Stocks 13,446 21,027
Debtors 8,725 18,292
Short term investments 3,682 4,923
Cash and cash equivalents 15,519 51,697
41,372 95,939
Creditors: amounts falling due within one year 11,638 24,600
Net current assets 29,734 71,339
Long Term Investments
35,978 --
Long term deposits
Investments in associated companies 1,453 2,676
Investments in other companies 3,688 5,688
41,119 8,364
Total assets less current liabilities 104,284 124,642
Non-current liabilities
Severance pay fund, net of provision (330) (295)
Net assets 103,954 124,347
Capital and reserves
Share capital 1,175 1,173
Additional paid-in capital 397,419 397,244
Foreign currency translation adjustment 16 16
Profit and loss account (294,656) (274,086)
Shareholders' funds 103,954 124,347
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
2 0 0 2 2 0 0 1
US$ 000's US$ 000's
Net cash inflow (outflow) from operating (2,959) 1,730
activities
Investing activities
Repayment of loan to associated company 1,069 473
Acquisition of fixed tangible assets (509) (2,817)
Proceeds from sale of fixed tangible assets 28 20
Proceeds from short term bank deposits 1,253 45,207
(35,222) --
Investment in long term bank deposits
Proceeds from (investment in) marketable (8) 325
securities, net
Net cash inflow (outflow) from investing (33,389) 43,208
activities
Financing activities
Exercise of options and shares by employees 177 140
Repayment of short-term credit, net (7) (636)
Net cash inflow (outflow) from financing 170 (496)
activities
Increase (decrease) in cash and cash equivalents (36,178) 44,442
Cash and cash equivalents at the beginning of the 51,697 7,255
year
Cash and cash equivalents at the end of the year 15,519 51,697
RECONCILIATION OF NET PROFIT FOR THE YEAR TO NET CASH INFLOW (OUTFLOW) FROM
OPERATNG ACTIVITIES
Consolidated
Year ended December 31,
2 0 0 2 2 0 0 1
US$ 000's US$ 000's
Loss for the year (20,570) (267,356)
Company's share in loss of associated company 151 242
Amortization and write off of goodwill 9,898 255,100
Write-down of investment in a company 2,000 --
Write-off of fixed assets -- 616
Depreciation and amortization 2,082 2,973
Increase (decrease) in severance pay fund, net 35 (29)
of provision
Decrease in stocks 7,581 7,235
Decrease in debtors 9,567 7,752
Decrease in creditors (12,955) (4,902)
Loss from marketable securities 38 115
Interest incurred on investments (798) (88)
Interest incurred on loan for affiliate 3 47
Loss on disposal of fixed assets 9 25
Net cash inflow (outflow) from operating (2,959) 1,730
activities
Notes:
1. The financial information for the years ended 31 December 2002 and 31
December 2001 is extracted from the Company's audited financial statements
for those periods which carried an unqualified audit report. The annual
report and audited financial statements will be sent to shareholders
shortly.
2. Loss per share for the years ended 31 December 2002 and 31 December 2001
are calculated using 387,783,799 shares in issue in 2002 and 386,712,251
shares in issue in 2001.
3. Further copies of this announcement are available from the offices of
Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB.
END