MTI Wireless Edge
Ltd
("MTI"
or the "Group")
Final results for
2023
MTI Wireless Edge Ltd. (AIM: MWE),
the technology group focused on comprehensive communication and
radio frequency solutions across multiple sectors, is pleased to
announce its audited results for the year ended 31 December
2023.
2023
Highlights
Strong financial performance and a threefold increase in
share buyback programme
· Revenue of
US$45.6m (2022:
US$46.3m) on a constant currency basis,
this represents an increase of 2% over last year
· Profit from
operations increased 1% to US$4.65m (2022: US$4.59m), including
US$0.2m impairment of goodwill related to the acquisition of
PSK
· Profit before
tax increased 12% to US$4.84m (2022: US$4.32m)
· Earnings per
share increased by 9% to 4.58
US cents (2022: 4.21 US cents)
· A 2% increase in
adjusted EBITDA to US$6.16m (2022: US$6.06m), helped by the
economies of scale from the increasing size of the Group
· Net cash of
US$8.1m at 31 December 2023 (31 December 2022: US$8.1m)
· Increased final
dividend by 3% to 3.1 US cents per share (2022: 3.0 US cents per share)
· Expansion of
buyback programme effective from 12 March 2024 until March 2025
with increased funding from £200K to a maximum of £700K
Solid performance coupled to strong growth drivers for 2024
and beyond
· Antennas -
completed a successful year with 5% revenue growth in 2023 and the
prospect of increasing revenues in 2024. Sales of military antennas
increased sharply with demand from both local and international
markets, while commercial antenna sales decreased primarily in
legacy fixed wireless access antennas (after a sharp increase in
2022). Sales of the Group's 5G backhaul solutions and the ABS®
antenna solution to counter small mast movements continued to
attract strong interest from several Tier One customers.
· Water management
- revenue reduced by 6% due to slower activity in some
international markets, while price increases and a preferable
exchange rate increased the operating profit of this division by 8%
over 2022. Water scarcity remains a fundamental issue,
resulting in increasing demand for Mottech's expanding product
range through good organic growth from existing clients and
expansion of the customer base into new markets.
· Distribution -
revenue was level with 2022 but operating profits were
significantly below 2022. As explained within the half-year
results, PSK encountered delays on two projects which led to losses
for the year in this business. One project completed in 2023 and
the second should be completed in H1 2024. PSK has begun 2024
strongly with a good orderbook for the coming months and the
prospects for this division including PSK are promising, with new
business being driven by Governments worldwide seeking to increase
their investment in defence.
Moni Borovitz, Chief Executive Officer of MTI Wireless Edge,
said: "We made good progress this
year growing revenue on a constant currency basis, and growing
overall profits despite the challenges in Israel in the last
quarter of the year. We are seeing compelling opportunities in all
segments of our operations. In particular, the increase in defence
budgets worldwide and the opening of the Indian market for E-Band
5G backhaul, which represents a substantial opportunity for us over
the medium term.
"Looking ahead, the business
continues to be in a strong financial position with net cash of
US$8.1m at the year end. The Group's three divisions are well
established, with experienced, independent leadership teams and all
utilising the Group's core expertise in radio frequency
communications technology. The macro trends for all three remain
positive: from the continuing roll-out of 5G cellular connectivity;
to tackling the growing global issue of water scarcity; and the
significant increases in local and international defence spending.
Despite the current conflict in Israel, we have continued to
operate relatively normally and judging from the pipeline of
potential opportunities, the Group is well placed, to continue to
expand through a mix of acquisition-led and organic
growth."
Shareholder presentation
Moni Borovitz, Chief Executive
Officer, will provide an investor presentation relating to the
Company's financial results for the year ended 31 December 2023 via
the Investor Meet Company ("IMC") platform today at 10.00 am UK
time.
Investors can sign up for free
via:
https://www.investormeetcompany.com/mti-wireless-edge-ltd/register-investor
Investors who have already
registered on IMC and added to meet the Company, will be
automatically invited to the meeting.
Shareholders should note that the
Company will not post hard copies of its audited annual report and
accounts for the year ended 31 December 2023 (the "Annual Report") to its
shareholders. Shareholders who require a hard copy of the
Annual Report may write to the Company at MTI Wireless Edge Ltd
Headquarters, 11 Hamelacha St. Afek Industrial Park, Rosh-Ha'Ayin,
Israel requesting a hard copy. An electronic version of the
Annual Report will shortly be available on the Company's website at
the following address: www.mtiwirelessedge.com
For further information please
contact:
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MTI
Wireless Edge Ltd
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+972 3 900 8900
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Moni Borovitz, CEO
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http://www.mtiwirelessedge.com
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Allenby Capital Limited (Nomad and Joint Broker)
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+44 20 3328 5656
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Nick Naylor/Alex Brearley/Piers
Shimwell (Corporate Finance)
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Guy McDougall/Amrit Nahal (Sales and
Corporate Broking)
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Shore Capital
(Joint Broker)
Toby Gibbs/Rachel
Goldstein
Fiona
Conroy (Corporate Broking)
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+44 20 7408 4090
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|
Novella (Financial
PR)
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Tim Robertson/Safia
Colebrook
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+44 20 3151 7008
|
About MTI Wireless Edge Ltd. ("MTI")
Headquartered in Israel, MTI is a
technology group focused on comprehensive communication and radio
frequency solutions across multiple sectors through three core
divisions:
Antenna division
MTI is internationally recognized
as a producer of commercial off-the-Shelf and custom-developed
antenna solutions in a broad frequency range of HF to 170 GHz for
commercial, RFID and military applications. MTI continuously
invests in ground breaking technologies, explores new frequencies,
and devises innovative solutions which empower our wireless
communication customers with cutting-edge off-the-shelf and
custom-made antennas.
We are at the forefront of
technology and innovation, being the first to introduce Dual Band
parabolic antennas, E Band Automatic Beam Steering antennas, E Band
FCC compliant flat antennas, and more.
MTI supplies directional and
omnidirectional antennas for outdoor and indoor deployments,
including smart antennas for 5G backhaul, Broadband access, public
safety, RFID, base station and terminals for the utility
market.
Military applications include a
wide range of broadband, tactical and specialized communication
antennas, antenna systems and DF arrays installed on numerous
airborne, ground and naval, including submarine, platforms
worldwide.
Water Control & Management division
Via its subsidiary, Mottech Water
Solutions Ltd ("Mottech"), MTI provides high-end remote control and
monitoring solutions for water and irrigation applications based on
Motorola's IRRInet state-of-the-art control, monitoring and
communication technologies.
As Motorola's global
prime-distributor Mottech serves its customers worldwide through
its international subsidiaries and a global network of local
distributors and representatives. With over 25 years of experience
in providing customers with irrigation remote control and
management, Mottech's solutions ensure constant, reliable and
accurate water usage, increase crops quality and yield while
reducing operational and maintenance costs providing fast ROI while
helping sustain the environment. Mottech's activities are focused
in the market segments of agriculture, water distribution,
municipal and commercial landscape as well as wastewater and
storm-water reuse.
Distribution & Professional Consulting Services
division
Via its subsidiary, MTI Summit
Electronics Ltd., MTI offers consulting, representation and
marketing services to foreign companies in the field of RF and
Microwave solutions and applications including engineering services
(including design and integration) in the field of aerostat systems
and the ongoing operation of Platform subsystems, SIGINT, RADAR,
communication and observation systems which is performed by the
Company. It also specializes in the development, manufacture and
integration of communication systems and advanced monitoring and
control systems for the Government and defence industry
market.
Chairman's statement
I am pleased to report on a
successful year in which the Group delivered good progress at all
levels. While the economic conditions have been challenging
globally for some time and more recently, conflicts have broken out
here in Israel, the business has adapted and continued to perform
well.
The increase in the number of
conflicts worldwide in recent years has directly led to governments
expanding defence programmes and spend on defence. There is a delay
in this increased spend filtering through to the sector's supply
chain, but it is now positively impacting MTI's business. This
together with our unique expertise in commercial markets,
especially in providing our 5G backhaul solutions and wireless
water management solutions, gives us confidence in the direction
where the Company is headed.
Trading overview
Diversification is a key strength.
At any one moment, it is typical for one of the areas of the
business to be particularly strong. In the current environment,
that area for MTI is defence. For obvious reasons which we would
all rather weren't the case, military related orders have been
increasing for some time. NATO countries and the Israeli government
are increasing their defence spend and are expected to continue to
do so. This is also the case for many other countries around the
world. As a result, the pipeline of orders for defence has been
increasing in recent years and there are further opportunities for
MTI at varying stages of progression.
Dividend
Reflecting the strength of the
Company's trading performance the Board is pleased to declare a
final dividend of US$0.031 per share representing a 3% increase on
the previous year (2023: US$0.03). The dividend will be paid on 11 April 2024 to shareholders on the
register at the close of trading on 22 March 2024 (ex-dividend on 21 March
2024). The currency translation into British Pounds will be made on
25 March 2024 and there will not be a scrip dividend
alternative.
We also decided to increase the
Company's share buyback programme effective from 12 March 2024 and
hold the shares purchased for a longer period of time. The board
agreed to increase the funds that can be used under the share
buyback programme from £200K to £700K as we believe strongly in the prospects of the
business.
People
The MTI teams around the globe all
performed very well during the year, maintaining very high
operational performance levels and delivering margin progression. I
would like to specifically thank our teams in Israel for doing
excellent work during a very challenging year for Israel. The
dedication, solidarity and joint focus helped us navigate
successfully through this difficult period. Our teams are working
towards agreed targets and exploiting new opportunities with both
existing and new customers.
Outlook
MTI is a growth business operating
in growth markets. Our products and services are in good demand
across all three divisions. We continue to invest in innovation,
product development and new companies when the opportunities arise,
whilst always remaining focused on radio frequency communications
which lies at the heart of our success.
2024 has started well for the
Company with an increased pipeline of opportunities across all of
our three divisions. We are looking forward to delivering another
year of growth and increased returns for our
shareholders.
Zvi Borovitz
Chairman
Chief Executive's review
Introduction
2023 was a successful year for the
Company. The business grew on a constant currency basis despite
uncertainties in the global economy throughout the year and the
conflict in Israel in the last quarter of 2023. Each division,
under their respective management teams, made good progress,
retaining and expanding their customer bases and growing their
businesses overall. As a result, entering 2024, the Company is well
placed to continue to invest in people, innovation and new
products, alongside generating attractive returns for
shareholders.
Financial results
Revenues for the twelve months to
31 December 2023 decreased by 1% to US$45.6m (2022: US$46.3m)
mainly due to currency exchange fluctuations and on a constant
currency basis revenues grew by 2%, a positive
performance.
Our gross margin rates improved
slightly reflecting the mix of products sold in different markets
and the Group's ability to successfully pass price increases onto
customers.
Operating profit in 2023,
excluding a one-off impairment of goodwill charged to general and
administrative cost, grew 6% to US$4.84m (2022: US$4.59m),
demonstrating the scalability of our business.
Profit before tax grew 12% to
US$4.84m (2022: US$4.32m) reflecting the strength of our balance
sheet and the influence of currency exchange rate fluctuation. This
growth includes financial income as a result of revaluing the
contingent liability relating to the potential deferred consideration for the PSK acquisition. This led to a strong increase of 9% in
earnings per share to US4.58 cents (2022: US4.21
cents).
Adjusted EBITDA grew 2% to
US$6.16m (2022: US$6.06m).
Cash flow generated from
operations for 2023 was US$3.6m, similar to 2022 and in line with
our business model to convert most of the operational profit into
operational cash flow. This resulted in a net cash balance of
approximately US$8.1m, similar to that as at 31 December
2022.
The board has agreed to increase
the Share Repurchase Programme (on similar terms and conditions
originally announced by the Company on 13 April 2022) by an
additional £500,000 effective from 12 March
2024 and extend it until 31 March 2025.
The objective of this programme is to assist with trading
liquidity, by accumulating shares in treasury through market
purchases and then selling, at a later stage, blocks of shares to
institutional shareholders.
Operational review
Over the last 50 years MTI has
established its reputation as a global provider of comprehensive
radio frequency solutions across multiple sectors through three
core divisions.
Antennas
This division is a one stop shop
for the sale of 'off the shelf' flat and parabolic antennas,
combined with the provision of custom-developed antenna solutions
to a range of commercial and military customers, with a growing
focus on providing 5G backhaul antenna solutions to support mobile
phone operators as they roll-out their 5G networks.
In 2023, revenues from this
division increased by 5%, a good result reflecting a sharp increase
in demand for military antennas. There was a moderate increase in
Radio Frequency Identification (RFID), while demand for legacy
antennas for fixed wireless access decreased, after an unexpected
increase in 2022. We saw a small decrease in 5G backhaul solutions,
as commercial investments were slower in 2023.
Military antenna sales increased
sharply in 2023, reflecting very high enquiry levels and a
significant increase in global military spending. Demand came from
multiple international projects, mainly European orders, involving
both direct engagement with European systems houses and indirect
exports of MTI's solutions via Israeli systems houses selling a
full solution worldwide. Current events around the world suggest
that requirements for military equipment will continue to grow in
coming years. In Israel, the recent conflict has triggered an
increase in demand which is likely to lead to higher stock levels
and solutions of all military equipment being maintained by the
government going forward.
5G sales were slightly lower in
2023 compared to 2022 as a result of slower installation rates in
key markets. That said, the expected future demand for our 5G
solutions is unchanged. We continue to believe that our solutions
are ideally positioned to generate significant long-term revenues
alongside the roll-out of 5G networks globally by the major mobile
phone operators.
2022 saw the opening of the Indian
market for E-Band 5G backhaul and in 2023 shipments were made
although, as anticipated, the timing of orders has been sporadic.
MTI is well placed in India with a strong local presence and has
demonstrated the quality and reliability of the MTI solution to key
clients. There is no doubt that once 5G is rolled out in India the
requirement for MTI's products will be substantial.
The ABS®antenna solution which ensures the
antenna adapts to any small movements caused by different climate
conditions, including wind or temperature, continues to make
excellent progress and is now entering into production after
successful tests by several key Original Equipment Manufacturers
(OEMs).
Water Control &
Management
This division provides wireless
control systems to manage irrigation and water distribution for
agriculture, municipal authorities and commercial entities. It
operates under the Mottech brand and utilises part of the hardware
technology from Motorola, integrated with the Company's own
proprietary management software. Our solutions reduce water and
power usage, whilst providing higher revenue from accurate
irrigation, leading to more, and higher quality, crops and plants
being grown.
Mottech had another good year,
although revenue declined by 6% primarily due to adverse currency
movements. Conversely and arguably more importantly, currency
movements helped improve profit margins, together with price
increases that were accepted at the end of 2022, resulting in
Operating Profit improving by 8%. Recurring revenues continued to
improve and represented 20% of all of the division's income in
2023.
Mottech continues to seek to
innovate and expand its services to existing and new clients. For
over 30 years, Mottech has been providing irrigation services to a
number of municipalities in Israel, ensuring efficient water usage
across public parkland and green open spaces. More recently,
Mottech has expanded its services into monitoring and partially
controlling urban fountains. The first such project was completed
in Q1 2024, comprising 40 fountains which are now centrally
controlled and monitored, generating significant savings in water
and costs for the municipality, while also adding safety and
security features to the systems. As a result of this project,
other large municipalities in Israel have shown interest in
adopting Mottech's solution for fountain management, suggesting
this may well become a valuable future revenue stream.
The strategic partnership with
Viridix has continued to develop over the last year. Viridix is an
innovative autopilot solution that measures the water available to
the roots of plants enabling greater irrigation precision.
Alongside new Mottech contracts, the Viridix capability is being
adopted in metropolitan irrigation.
Water scarcity continues to be a
very real global problem and Governments are increasingly aware of
the importance of not wasting this vital resource. A report from
2023 suggested that 'global fresh water demand will outstrip supply
by 40% by 2030*'. This level of challenge underlines the importance
of water conservation and solutions like Mottech's which can make a
substantial difference - often able to save a farmer or a city up
to 30% in water usage, while helping the farmer to grow more crops
at a better level of quality.
*UN 2023 Water Conference
Distribution &
Professional Consulting Services
Operating under the MTI Summit
Electronics brand ("MTI Summit"),
this division exclusively represents approximately 40 international
suppliers of radio frequency/microwave components and sells these
products to Israeli customers. Expert knowledge of both the
international suppliers and customers enables MTI to act as a
consultant to all parties and assist with devising complete radio
frequency/microwave solutions.
2023 was a mixed year for MTI
Summit, after nine years of delivering uninterrupted growth,
revenues were flat compared to 2022 with operating profits behind
last year due to losses in PSK resulting from two projects that
were delayed. These were isolated incidents as reported at the time
of the half-year results, and the Company's confidence in the
prospects of PSK are unchanged. Reflecting this, PSK entered 2024
with a healthy orderbook and a good pipeline of future
opportunities.
For MTI Summit and PSK, the
increased defence spending by governments creates a strong market
environment to operate in. This has already generated additional
revenue from within Israel and will continue to do so, partially
from the Israeli defence forces and partially from international
markets via the Israeli systems houses. To this end, the division
continues to complete a number of design
wins for both existing and new customers, which will generate
future sales.
Outlook
The conflict in Ukraine led
directly to a significant increase in defence budgets. This
increase in spend started to influence the 2023 results with 44% of
the Group's sales being defence related (2022: 37%). The conflict
in Israel which started on 7 October 2023 will no doubt further
strengthen this trend.
Overall, MTI remains well
positioned across all three divisions, with each division backed by
strong macro trends underpinning their future prosperity. The first
two months of 2024 have been in line with internal expectations and
judging from the pipeline of potential opportunities, the Group is
well placed, supported by a strong financial platform, to continue
to seek to expand through a mix of acquisition-led and organic
growth.
Moni Borovitz
Chief Executive Officer
M.T.I Wireless Edge
Ltd.
Consolidated Statements of Comprehensive
Income
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For the year ended December
31,
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Revenues
|
4,
6
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45,634
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|
46,270
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Cost of sales
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|
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Gross profit
|
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14,671
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|
14,590
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|
Research and development
expenses
|
|
|
1,047
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|
1,077
|
|
Distribution expenses
|
|
|
3,709
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|
3,924
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|
General and administrative
expenses
|
|
|
5,278
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|
4,998
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|
Profit from sale of property, plant
and equipment
|
|
|
|
|
|
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|
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Profit from operations
|
5
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|
4,650
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|
4,592
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Finance expense
|
7
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|
342
|
|
385
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Finance income
|
7
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|
Profit before income tax
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|
4,835
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4,317
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Tax expenses
|
8
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Profit
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Other comprehensive income
(loss) net of tax:
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Items that will not be reclassified to profit or
loss:
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Remeasurements on defined benefit
plans
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Items that may be reclassified to profit or
loss:
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Adjustment arising from translation
of financial statements of foreign operations
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Total other comprehensive
(loss)
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Total comprehensive income
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Profit attributable
to:
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Owners of the parent
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4,045
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3,721
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Non-controlling interest
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Total comprehensive income attributable to:
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Owners of the parent
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3,891
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3,426
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Non-controlling interest
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Earnings per share
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Basic and Diluted (dollars per
share)
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9
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The
accompanying notes form an integral part of these financial
statements.
M.T.I Wireless Edge Ltd.
Consolidated Statements of Financial
Position
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ASSETS
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Non-current assets :
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Property, plant and
equipment
|
11
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5,398
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5,573
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Customer relations
|
12
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1,439
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|
1,597
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Goodwill
|
12
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2,068
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|
2,261
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Deferred tax assets
|
13
|
968
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|
1,163
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Long-term prepaid
expenses
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Total non-current assets
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|
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9,910
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10,633
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Current assets:
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Inventories
|
14
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7,484
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7,757
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|
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Current tax receivables
|
|
381
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|
549
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|
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Unbilled revenue
|
15
|
4,190
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|
2,204
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Trade and other
receivables
|
15
|
14,284
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|
11,035
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Cash and cash
equivalents
|
16
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Total current assets
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TOTAL ASSETS
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LIABILITIES
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Non-curent liabilities
:
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Contingent consideration
and Put option
liability
|
3
|
1,117
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|
1,432
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Lease liabilities
|
11
|
514
|
|
303
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|
Loans from
banks, net of current
maturities
|
17
|
64
|
|
98
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|
Employee benefits, net
|
18
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|
|
|
|
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Total non-current
liabilities
|
|
|
2,414
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|
2,585
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Current Liabilities:
|
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Current tax payables
|
|
283
|
|
425
|
|
|
Trade and other
payables
|
19
|
12,440
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|
9,366
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Current
maturities and short-term bank credit
|
20
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Total current liabilities
|
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|
13,037
|
|
9,834
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Total liabilities
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these
financial statements.
M.T.I Wireless Edge Ltd.
Consolidated Statements of Financial Position
(Cont.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves
attributable to
owners of the
parent
|
23
|
|
|
|
|
|
Share capital
|
|
209
|
|
209
|
|
|
Additional paid-in
capital
|
|
23,061
|
|
23,078
|
|
|
Translation differences
|
|
(466)
|
|
(250)
|
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,030
|
|
26,812
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes form an integral part of these financial
statements.
M.T.I Wireless Edge Ltd.
Consolidated Statements of Cash Flows
|
|
|
For the year ended December
31,
|
|
For the year ended December
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
4,076
|
|
|
|
3,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
1,511
|
|
|
|
1,466
|
|
|
|
Loss
(Gain) on disposal of property, plant and
equipment
|
|
(13)
|
|
|
|
(1)
|
|
|
|
Changes
in Contingent consideration and Put option liability
|
|
(315)
|
|
|
|
-
|
|
|
|
Finance
Income, net
|
|
(5)
|
|
|
|
(82)
|
|
|
|
Income
tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,013
|
|
|
|
5,700
|
|
Changes in working capital
and provisions
|
|
|
|
|
|
|
|
|
|
Decrease
(increase) in inventories
|
|
158
|
|
|
|
(951)
|
|
|
|
(Increase) in trade receivables
|
|
(2,477)
|
|
|
|
(63)
|
|
|
|
(Increase) decrease in unbilled revenues
|
|
(1,986)
|
|
|
|
590
|
|
|
|
(Increase) in other accounts receivables
|
|
(897)
|
|
|
|
(1,134)
|
|
|
|
Increase
in trade and other accounts payables
|
|
3,228
|
|
|
|
572
|
|
|
|
Increase
(Decrease) in employee benefits, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,945)
|
|
|
|
(1,079)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
received
|
|
69
|
|
|
|
-
|
|
|
|
Interest
paid
|
|
(59)
|
|
|
|
(52)
|
|
|
|
Income
tax paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes form an integral part of these financial
statements.
M.T.I Wireless Edge Ltd.
Consolidated Statements of Cash Flows
(Cont.)
|
|
For the year ended December
31,
|
|
For the year ended December
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from sale of property,
plant and equipment
|
62
|
|
|
|
15
|
|
|
|
Acquisition of subsidiary, net of
cash acquired
|
-
|
|
|
|
(1,427)
|
|
|
|
Net cash from sale of previously
consolidated subsidiaries
|
-
|
|
|
|
(2,785)
|
|
|
|
Purchase of property, plant and
equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(364)
|
|
|
|
(4,749)
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
Dividend
|
(2,656)
|
|
|
|
(2,479)
|
|
|
|
Payments of lease
liabilities
|
|
(485)
|
|
|
|
(560)
|
|
|
|
Treasury shares
acquired
|
(516)
|
|
|
|
(118)
|
|
|
|
Treasury shares sold
|
499
|
|
|
|
70
|
|
|
|
Acquisition of the non-controlling
interest in subsidiary
|
(35)
|
|
|
|
-
|
|
|
|
Repayment of long-term loans from
banks
|
(247)
|
|
|
|
(39)
|
|
|
|
Receipt of loans from
banks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in
financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in cash and cash
equivalents
|
|
|
194
|
|
|
|
(4,127)
|
|
Cash and cash equivalents at the beginning of the
year
|
|
|
8,279
|
|
|
|
12,567
|
|
Exchange
differences on balances of cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the
year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
The
accompanying notes form an integral part of these financial
statements.
M.T.I Wireless Edge Ltd.
Notes forming part of the consolidated financial statements
for the year ended December 31, 2023
1. General description of
the Group and its operations
M.T.I Wireless Edge Ltd.
(hereafter - the "Company", or collectively with its subsidiaries,
the "Group") is an Israeli corporation. The Company was
incorporated under the Companies Act in Israel on December 30, 1998
and commenced operations on July 1, 2000. Since March 2006, the Company's shares have been traded on
the AIM market of the London Stock Exchange.
The formal address of the Company
is 11 Hamelacha Street, Afek industrial Park, Rosh-Ha'Ayin,
Israel.
The Company and its subsidiaries
are engaged in the following areas:
- Development, design, manufacture and marketing of antennas
for the military and civilian sectors.
- A leading provider of remote control solutions for water and
irrigation applications based on Motorola's IRRInet state of the
art control, monitoring and communication technologies.
- Providing consulting, representation and marketing services
to foreign companies in the field of radio frequency (RF) and
Microwave, including engineering services in the field of aerostat
systems and system engineering services, together with the
development, manufacture and integration of communication systems
and advanced monitoring and control systems for the Government and
defence industry market.
2. Accounting
policies
The principal accounting policies
adopted in the preparation of the financial statements are set out
below. The policies have been consistently applied to all the years
presented, unless otherwise stated.
A. Basis of
preparation
These consolidated financial
statements have been prepared in accordance with International
Financial Reporting Standards (IFRS). The financial statements have
been prepared under the historical cost convention, except for the
measurement of employee benefit plan assets.
The Company has elected to present
the statement of comprehensive income using the function of expense
method.
B. Estimates
and assumptions
The preparation of the financial
statements requires management to make estimates and assumptions
that have an effect on the application of the accounting policies
and on the reported amounts of assets, liabilities, revenues and
expenses. These estimates and underlying assumptions are reviewed
regularly. Changes in accounting estimates are reported in the
period of the change in estimate and thereafter.
The key assumptions made in the
financial statements concerning uncertainties at the end of the
reporting period and the critical estimates used by the Group that may result in a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed
below.
- Deferred
tax assets: Deferred tax assets are
recognized for unused carryforward tax losses and deductible
temporary differences to the extent that it is probable that
taxable profit will be available against which the losses can be
utilized. Significant management judgment is required to determine
the amount of deferred tax assets that can be recognized, based
upon the estimated timing and the level of future taxable profits
together with future tax planning strategies.
2. Accounting policies
(Cont.)
C. Revenue
recognition
Revenue from contracts with customers
Revenue from contracts with
customers is recognized when control of the goods or services are
transferred to the customer at an amount that reflects the
consideration to which the Company expects to be entitled in
exchange for those goods or services
1. Revenues from Construction Contracts are recognized based on the
percentage of completion to date. The
percentage of completion is determined using the inputs method
The Company elected not to adjust
the transaction price for the effects of financing components in
contracts where the period between when the Company transfers a
promised good or a service to the customer and when the customer
pays for it is one year or less.
2. Revenues from the sale of goods are
recognized at the point in time when
control of the asset is transferred to the customer, generally upon
delivery of the equipment.
At the end of each reporting
period, the Company updates its estimates of variable
consideration.
D. Functional
currency and Foreign currency
transactions
The reporting currency of the
Group is U.S. Dollars ("dollar"; "USD"), which is the currency of
the primary economic environment in which the Company and the
majority of the Group's subsidiaries operate. For each entity, the
Group determines the functional currency and items included in the
financial statements of each entity are measured using that
functional currency.
E. Property,
plant and equipment
Items of property, plant and
equipment are initially and subsequently recognized at cost
including directly attributable
costs. Depreciation is calculated
on a straight line basis, over the useful lives of the
assets at annual rates as follows:
|
|
Rate of
depreciation
|
Mainly
%
|
|
Buildings
|
3 - 4
%
|
3.13
|
|
Machinery and equipment
|
6
- 20 %
|
10
|
|
Office furniture and
equipment
|
6 - 15
%
|
6
|
|
Computer equipment
|
10 - 33 %
|
33
|
|
Vehicles
|
15
%
|
15
|
F. Provision
for warranty
The Group generally offers up to
three year warranties on its products. Based on past experience,
the Group does not record any provision for warranty of its
products and services due to immateriality.
G. Employee
benefits
1. Short-term employee
benefits: Short-term employee
benefits are benefits that are expected to be settled wholly before
twelve months after the end of the annual reporting period in which
the employees render the related services. These benefits include
salaries, paid annual leave, paid sick leave, recreation and social
security contributions and are recognized as expenses as the
services are rendered.
2. Accounting policies
(Cont.)
2. Post-employment
benefits: The plans are normally
financed by contributions to insurance companies and classified as
defined contribution plans or as defined benefit plans.
The Group has defined contribution
plans pursuant to Section 14 of the Severance Pay Law since 2004
under which the Group pays fixed contributions to a specific fund
and will have no legal or constructive obligation to pay further
contributions if the fund does not hold sufficient amounts to pay
all employee benefits relating to employee service in the current
and prior periods. Contributions to the defined contribution plan
in respect of severance or retirement pay are recognized as an
expense simultaneously with receiving the employee's services and
no additional provision is required in the financial statements
except for the unpaid contribution. The Group also operates a
defined benefit plan in respect of severance pay pursuant to the
Severance Pay Law. According to the Law, employees are entitled to
severance pay upon dismissal, retirement and several other events
prescribed by that Law. The liability for post employment benefits is measured
using the projected unit credit method. The actuarial assumptions
include rates of employee turnover and future salary increases
based on the estimated timing of payment. The amounts are presented
based on discounted expected future cash flows using a discount
rate determined by reference to yields on high quality corporate
bonds with a term that matches the estimated term of the benefit
plan.
In respect of its severance pay
obligation to certain of its employees, the Company makes deposits
into pension funds and insurance companies ("Plan assets"). Plan
assets comprise assets held by a Long-term
employee benefits fund or qualifying insurance policies. Plan
assets are not available to the Group's own creditors and cannot be
returned directly to the Group. The liability for employee benefits
presented in the statement of financial position presents the
present value of the defined benefit obligation less the fair value
of the plan assets.
H. Segment
reporting
Segment revenue and segment costs
include items that are attributable to the relevant segments and
items that can be allocated to segments. Items that cannot be
allocated to segments include the Group's financial income and
expenses and income tax.
3. Acquisition of
subsidiary:
On 3 January 2022 the Company, via
its wholly-owned subsidiary, MTI Summit
Electronics Ltd. ("MTI Summit"), entered into a share
purchase agreement, which included both a purchase of existing
shares in and the making of a new equity investment into P.S.K.
WIND Technologies Ltd. ("PSK"), after which MTI Summit owns 51% of
PSK (the "Acquisition"). The initial consideration for the
Acquisition was approximately US$1.2 million, with an earn out
payment, subject to performance, of up to approximately US$2.56
million. In addition, MTI Summit has made a loan to PSK of US$0.8
million and is party to an option agreement in relation to the
acquisition of the remaining 49% of PSK.
The initial consideration paid by
MTI, to acquire 51% of the equity in PSK, comprised: a) the
purchase of existing shares in PSK for NIS 700,000 (approximately
US$225,000); and b) a subscription of NIS 3,000,000 (approximately
US$ 972,000) for new shares in PSK. In addition, there is an
earn out mechanism under which further consideration may be
payable, as described in the contingent consideration section below
(the "Earn Out"). MTI Summit's loan
3. Acquisition of subsidiary
(Cont.):
to PSK of NIS 2,500,000
(approximately US$800,000) is a term loan which is to be repaid on
1 January 2024 ("Original Loan"). The Original Loan is not
convertible and bears interest of 3.26% per annum.
In addition to the Acquisition,
MTI Summit has an option to purchase and the Shareholders of PSK
("Original Owners") have an option to sell to MTI Summit the
remaining 49% of PSK (the "Option") starting from 2027, subject to
the terms described below.
Cash outflow on the Acquisition
totalled to US$ 1,427,000.
Acquisition cost of PSK at
the date of Acquisition:
|
|
|
Fair value
|
|
|
|
$'000
|
|
|
|
|
|
Cash paid
|
|
1,197
|
|
Contingent consideration
liability
|
|
56
|
|
Put option liability
|
|
1,376
|
|
|
|
|
|
Total acquisition cost
|
|
2,629
|
Set forth below are the
assets and liabilities of PSK at the date of
Acquisition:
|
|
|
Fair value
|
|
|
|
$'000
|
|
|
|
|
|
Trade receivables
|
|
671
|
|
Other receivables
|
|
213
|
|
Inventories
|
|
65
|
|
Property, plant and
equipment
|
|
256
|
|
Intangible assets
|
|
1,710
|
|
Bank loans
|
|
(230)
|
|
Trade payables
|
|
(522)
|
|
Deferred tax liability
|
|
(394)
|
|
Other liabilities
|
|
(436)
|
|
Employee
benefits, net
|
|
(104)
|
|
|
|
|
|
Net identifiable assets
|
|
1,229
|
|
Goodwill arising on
acquisition
|
|
1,400
|
|
|
|
|
|
Total purchase cost
|
|
2,629
|
The results of PSK were
consolidated into the financial statements of the Group from the
beginning of 2022.
The cost of the Acquisition was
allocated to tangible assets, intangible assets and liabilities
which were acquired based on their fair value at the time of the
acquisition. The intangible assets recognized include order backlog
and customer relations in the total amount of US$ 111 thousands and
US$ 1,599 thousands respectively, deferred taxes
in the total amount of US$ 394
thousands and goodwill in the total amount US$ 1,400 thousands. The intangible
assets associated with customer relations are amortized over a
useful life of up to 15 years.
3. Acquisition of subsidiary
(Cont.):
The goodwill arising on
Acquisition is attributed to the expected benefits from the
synergies of the combination of the activities of the Company and
PSK. The goodwill recognized is not expected to be deductible for
income tax purposes. All transaction costs
have been recorded in General and administrative
expenses.
Contingent
consideration:
As part of the purchase agreement
with the owners of PSK, it was agreed that the sellers, who retain
a 49% holding in PSK would be entitled to further consideration to
be paid pursuant to an earn out mechanism dependent on PSK's actual
revenues in 2022 and 2024 versus certain agreed targets in each of
those years and is capped at a maximum of NIS 8,000,000
(approximately US$2.56m), to be paid in cash.
Put Option
liability:
MTI Summit has an option to
purchase and the vendors of PSK have an option to sell to MTI
Summit the remaining 49% of PSK (the "Option") starting from
2027. The value of PSK under the Option is
to be calculated on the basis of eight times the average EBITDA
level of PSK in 2025 and 2026, with MTI being required to pay 49%
of this value upon exercise. If the Option is to be exercised at
any time after the preparation of PSK's financial results for the
first quarter of 2027, the calculation will be based on PSK's
average EBITDA for the last eight quarters. The Option will
remain in place until exercised.
As at the Acquisition date, the
fair value of the contingent consideration was estimated at US$ 56
thousand and the Option at US$ 1.376 million.
The significant non-observable
data used in measuring the fair value of the liability in respect
of the contingent consideration and the Put Option liability are as
follows:
Discount rate: 15.5%
A significant increase (or
decrease) in the estimated amount of PSK's pre-tax income will
result in a significant increase (decrease) in the fair value of
the liability in respect of the contingent consideration whereas a
significant increase (decrease) in the discount rate and default
risk rate will result in a decrease (an increase) in the fair value
of the liability.
At the end of 2023,
MTI Summit and the Original Owners of 49% of PSK
signed an amendment to PSK's share purchase agreement according to
which:
a. On 1 January
2024, MTI Summit granted a new loan to PSK (the "New Loan")
totalling NIS 2,260,000 (approximately
US$625,000), replacing the Original Loan.
This New Loan bears interest equal to the
interest that PSK pays for short term credit in the bank minus 2%
(currently the interest of the New Loan is 6.9% per annum). The
obligations on PSK to secure the repayment of the New Loan remain
unchanged compared to the Original Loan.
b. The Company
will provide PSK with guaranties in order for PSK to receive bank
guaranties in favour of customers, related to projects performed by
PSK, with the costs of such guarantees to be borne by
PSK.
3. Acquisition of subsidiary
(Cont.):
c.
The value of PSK under the Option is to be
calculated on the basis of six (rather than eight in the original
agreement) times the average EBITDA level of PSK in 2025 and 2026.
All other terms of the option shall remain unchanged.
In December 2023, the Group
performed its annual impairment test of the cash generating unit
(PSK) based on a
'value in use' calculation, using cash flow projections from
financial budgets approved by senior management covering a
five-year period. The pre-tax discount rate applied to cash flow
projections was 23%. The projected cash flows for the period
exceeding five years were estimated using a fixed growth rate of
2%. It was concluded that the fair value less costs of disposal did
not exceed the value in use. As a result of this analysis,
management has recognized an impairment charge of USD 193 thousand
in the current year against goodwill. This charge is included in
General administrative expenses.
The Company revalued the
Contingent consideration and the Put option
liabilities of PSK, as stated in the balance sheet on 31 December
2023, resulting in financial
income of USD 315 thousand.
4. Revenues
|
|
|
|
For the year ended December
31,
|
|
|
|
|
2023
|
|
2022
|
|
Revenues arises from:
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
|
Sale of goods *
|
|
|
32,525
|
|
34,618
|
|
Rendering of services
**
|
|
|
7,178
|
|
8,334
|
|
Projects **
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) at a
point in time
(**) over
time
5. Profit from
operations
|
|
|
|
For the year ended December
31,
|
|
|
|
|
2023
|
|
2022
|
|
This has been arrived at after
charging:
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
|
Material
and subcontractors
|
|
|
21,993
|
|
22,424
|
|
Wages and salaries
|
|
|
13,498
|
|
14,150
|
|
Plant,
Machinery and Usage
|
|
|
1,557
|
|
1,628
|
|
Depreciation and amortization
|
|
|
1,511
|
|
1,466
|
|
Travel
and Exhibition
|
|
|
336
|
|
326
|
|
Advertising and Commissions
|
|
|
710
|
|
748
|
|
Consultants
|
|
|
505
|
|
478
|
|
Others
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Operating
segments
The Company and its
subsidiaries are engaged
in the following segments:
- Development, design, manufacture and marketing of antennas
for the military and civilian sectors.
- A leading provider of remote control solutions for water and
irrigation applications based on Motorola's IRRInet state of the
art control, monitoring and communication technologies.
- Providing consulting, representation and marketing services
to foreign companies in the field of RF and Microwave, including
engineering services in the field of aerostat systems and system
engineering services together with the development, manufacture and
integration of communication systems and advanced monitoring and
control systems for the Government and defence industry
market.
1. Segment
information
Year ended December 31, 2023
|
|
|
|
Distribution &
Consultation
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
External
|
12,237
|
17,164
|
16,233
|
-
|
45,634
|
|
Inter-segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income, net
|
|
|
|
|
(185)
|
|
Profit before tax
|
|
|
|
|
|
|
Tax expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
|
|
|
|
|
|
December 31, 2023
|
|
|
|
Distribution &
Consultation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated liabilities
|
|
|
|
|
|
6. Operating Segments
(cont.)
Year ended December 31, 2022
|
|
|
|
Distribution &
Consultation
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
External
|
11,627
|
18,196
|
16,447
|
-
|
46,270
|
|
Inter-segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense, net
|
|
|
|
|
275
|
|
Profit before tax
|
|
|
|
|
|
|
Tax expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
|
|
|
|
|
|
December 31, 2022
|
|
|
|
Distribution &
Consultation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated liabilities
|
|
|
|
|
|
2. Entity wide
disclosures of External revenue by
location of customers.
|
|
For the year ended December
31,
|
|
|
2023
|
|
2022
|
|
|
$'000
|
|
$'000
|
|
Israel
|
28,750
|
|
29,008
|
|
America
|
4,824
|
|
6,489
|
|
Europe Middle East &
Africa
|
7,503
|
|
6,018
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
3. Additional information
about revenues:
There is one single customer from
which revenues amount to 13.6% in 2023 (10% in 2022) of total
revenues reported in the financial statements. This is a customer
for the antenna and distribution & special consulting services
divisions and the credit terms with it are usually end of month +
90 days.
7. Finance expense and
income
|
|
For the year ended December
31,
|
|
|
2023
|
2022
|
|
|
$'000
|
$'000
|
|
Finance expense
|
|
|
|
Net Foreign exchange
loss
|
-
|
108
|
|
Leases
|
32
|
52
|
|
Interest and bank fees
|
|
|
|
|
|
|
|
|
342
|
385
|
|
Finance income
|
|
|
|
Net Foreign exchange
profit
|
35
|
-
|
|
Change in contingent consideration
and Put Option liability
|
315
|
-
|
|
Interest from bank
deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Tax
expenses
A. Tax Laws in
Israel
1. Amendments to the Law for the Encouragement of Capital
Investments, 1959 (the "Encouragement Law"):
In December 2010, the "Knesset"
(Israeli Parliament) passed the Law for Economic Policy for 2011
and 2012 (Amended Legislation), 2011 ("the Amendment"), which
prescribes, among others, amendments to the Law. The Amendment
became effective as of January 1, 2011. According to the
Amendment, the benefit provisions in the Law were modified and a
flat tax rate applies to the Company's entire preferred income.
Commencing from the 2011 tax year, the Group will be able to opt to
apply (the waiver is non-recourse) the Amendment and from the
elected tax year and onwards, it will be subject to the amended tax
rates that are: 2014 and thereafter will
be 16% (in development area A - 9%).
The Group applied the Amendment
effectively from the 2011 tax year.
On 15 November 2021 an amendment
to the Encouragement Law was approved (the
"2021 Amendment"). According to the 2021 Amendment companies that
had retained earnings from exempt income earned before 31 December
2020 can distribute those earnings with a lower tax rate of 10% to
the Company and withholding tax of 15% to the
shareholders.
2. Tax rates:
On December 29, 2016, the Law for
Economic Efficiency (Legislative Amendments for Achieving the
Budgetary Goals for 2017-2018) was published in Reshumot (the
Israeli government official gazette), which enacts, among other
things, the following amendments:
-
Decreasing the corporate tax rate to
24% in 2017 and to 23% in 2018 and thereafter (instead of
25%).
- Commencing tax
year 2017 and thereafter the tax rate on the income of preferred
enterprises of a qualifying Company in Development Zone A as stated
in the Encouragement of Capital Investment
8. Tax
expenses
(cont.)
Law, shall decrease to 7.5%
(instead of 9%) and for companies located in zones other than Zone
A the rate shall remain 16%.
- In
addition, the tax rate on dividends distributed on January 1, 2014
and thereafter originating from preferred income under the
Encouragement Law will be raised to 20% (instead of
15%).
Therefore the Company's applicable
corporate tax rate for 2014 and thereafter is 16%.
B. The principal tax rates applicable
to the subsidiaries whose place of incorporation is outside Israel
are:
A company incorporated in India -
The statutory tax rate is 28% and the Company was in an exempt zone
until end of March 2013 and further in a
50% tax exempt zone until end of March 2018. Nevertheless from the Tax Year
2011-12, in the absence of taxable income or tax due on taxable
income (calculated as per normal rates) being less than 18.5% of
the Accounting Book Profits during a particular year, the Indian
regulation states that the company has to pay a Minimum Alternate
tax at a rate of 18.5% of the Accounting Book Profits for that
year. Such excess Minimum Alternate Tax paid on book profits over
the Tax due on
Actual Taxable Income (calculated
as per normal rates) of each year is capable of set off
against the taxable profits of future years.
A company incorporated in
Switzerland - The weighted tax rate applicable to a company
operating in Switzerland is about 25% (composed of Federal,
Cantonal and Municipal tax). Provided that the company meets
certain conditions, the weighted tax rate applicable to its income
in Switzerland will not exceed 10%.
A company incorporated in South
Africa - the statutory tax rate is 27% (2022:
28%)
A company incorporated in
Australia - the statutory tax rate is 30%
A company incorporated in United
States of America - the statutory tax rate is 21%.
A Company incorporated in Canada -
the statutory tax rate is 25%.
A Company incorporated in China -
the statutory tax rate is 25% but for small entities the tax rate
is 10%. To be classified as a small entity all following should
apply (i) Annual taxable income not
exceeding 3 million yuan, (ii) Number of employees not exceeding
300 and (iii) Total assets not exceeding 50 million yuan. The
Company meets the criteria of a small entity.
C. Income tax
assessments
The Company has tax assessments
considered as final up to and including the year 2018.
|
|
For the year ended December
31,
|
|
|
2023
|
2023
|
2022
|
2022
|
|
|
$'000
|
$'000
|
$'000
|
$'000
|
|
Current tax
expense
|
|
|
|
|
|
Income
tax on profits for the year
|
768
|
|
846
|
|
|
Taxes in
respect of previous years
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax expenses
(income) (see note 13)
|
|
|
|
|
|
Origination and reversal of temporary differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Tax
expenses
(cont.)
The adjustments for the difference
between the actual tax charge for the year and the standard rate of
corporation tax in Israel applied to profits for the year are as
follows:
|
|
For the year ended December
31,
|
|
|
2023
|
2022
|
|
|
$'000
|
$'000
|
|
Profit
before income tax
|
|
|
|
|
|
|
|
Tax using
the Company's domestic tax rate of 16%
|
773
|
691
|
|
Non-deductible expenses
|
53
|
-
|
|
Taxes
resulting from different tax rates applicable to foreign and other
subsidiaries
|
55
|
81
|
|
Utilization of prior year's tax losses for which deferred
taxes were not provided
|
(119)
|
(108)
|
|
Adjustments for current income tax of prior years
|
(204)
|
(209)
|
|
Other
|
|
|
|
|
|
|
|
Total
income tax expense
|
|
|
9. Earnings per
share
Net earnings per share
attributable to equity owners of the parent
|
|
For the year
ended
December
31,
|
|
|
2023
|
|
2022
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Net
Earnings used in basic and diluted EPS
|
4,045
|
|
3,721
|
|
Weighted
average number of shares used in basic and diluted EPS
|
88,283,490
|
|
88,444,356
|
|
|
|
|
|
|
|
|
|
|
|
basic and
diluted net EPS (dollars)
|
|
|
|
|
|
|
|
|
10. Dividends
|
|
For the year
ended
December
31,
|
|
|
2023
|
|
2022
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Dividend
paid
|
|
|
|
|
|
|
|
|
11. Property, plant and
equipment
|
|
|
|
Office
furniture & equipment
|
|
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
Balance as of January 1,
2023
|
5,316
|
6,763
|
752
|
2,547
|
1,324
|
1,936
|
18,638
|
|
Acquisitions
|
10
|
94
|
18
|
135
|
169
|
643
|
1,069
|
|
Disposals
|
-
|
-
|
-
|
-
|
(125)
|
(559)
|
(684)
|
|
Exchange
differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Depreciation:
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2023
|
2,644
|
5,645
|
652
|
2,375
|
606
|
1,143
|
13,065
|
|
Additions
|
120
|
147
|
26
|
144
|
193
|
530
|
1,160
|
|
Disposals
|
-
|
-
|
-
|
-
|
(76)
|
(547)
|
(623)
|
|
Exchange
differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value as of
December 31, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities
|
Year ended
December
31
|
|
|
2023
|
2022
|
|
|
$'000
|
$'000
|
|
|
|
|
|
Interest expense
|
32
|
43
|
|
Total cash outflow for
leases
|
517
|
474
|
|
Additions to right-of-use
assets
|
643
|
533
|
The Company has two types of lease
agreements mainly for the (i) premises on lease at the Cochin
Special Economic Zone (CSEZ) in India for 15 years and (ii) leases
of cars in Israel for the use of its employees for up to three
years.
|
December
31, 2023
|
|
Less than one
year
|
|
1 to 2
years
|
|
2 to 3
years
|
|
3 to 4
years
|
|
> 4
years
|
|
Total
|
|
|
|
|
$'000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2022
|
|
Less than one
year
|
|
1 to 2
years
|
|
2 to 3
years
|
|
3 to 4
years
|
|
> 4
years
|
|
Total
|
|
|
|
|
$'000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
Property, plant and equipment (cont.)
|
|
|
|
Office
furniture & equipment
|
|
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
Balance as of January 1,
2022
|
5,216
|
6,570
|
701
|
2,428
|
1,157
|
1,695
|
17,767
|
|
Initially
consolidated company
|
89
|
92
|
27
|
|
48
|
-
|
256
|
|
Acquisitions
|
25
|
114
|
35
|
136
|
242
|
533
|
1,085
|
|
Disposals
|
-
|
-
|
-
|
-
|
(27)
|
(292)
|
(319)
|
|
Exchange
differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Depreciation:
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2022
|
2,524
|
5,456
|
633
|
2,296
|
446
|
863
|
12,218
|
|
Additions
|
122
|
198
|
24
|
88
|
197
|
572
|
1,201
|
|
Disposals
|
-
|
-
|
-
|
-
|
(13)
|
(292)
|
(305)
|
|
Exchange
differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value as of
December 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.
Intangible assets
|
|
Goodwill from business
combination
|
|
|
|
|
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
Balance
as of December 31, 2023
|
|
|
|
|
|
|
|
|
|
Accumulated Amortization and
impairments:
|
|
|
|
|
Balance
as of January 1, 2023
|
1,227
|
828
|
2,055
|
|
Amortization and impairments charge
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2023
|
|
|
|
|
|
|
|
|
|
Net book value as of
December 31, 2023
|
|
|
|
|
|
|
|
|
12.
Intangible assets (cont.)
|
|
Goodwill from business
combination
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
Balance
as of January 1, 2022
|
2,088
|
715
|
2,803
|
|
Acquired
through business combinations
|
|
|
|
|
Balance
as of December 31, 2022
|
|
|
|
|
|
|
|
|
|
Accumulated
Amortization:
|
|
|
|
|
Balance
as of January 1, 2022
|
1,227
|
562
|
1,789
|
|
Amortization charge
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2022
|
|
|
|
|
|
|
|
|
|
Net book value as of
December 31, 2022
|
|
|
|
|
|
|
|
|
(*)
Customer relations is amortized over an
economic useful life of between 6.5 to 10 years.
13. Deferred
tax assets
Deferred tax asset is calculated
on temporary differences under the liability method using the
tax rates that are expected to apply to
the period when the asset is realised.
The movement in the deferred tax
asset is as shown below:
|
|
|
2023
|
|
2022
|
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
At
January 1
|
|
1,163
|
|
994
|
|
Charged to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
At December
31
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets have been
recognized in respect of all differences giving rise to deferred
tax assets because it is probable that these assets will be
recovered.
Composition:
|
|
|
31.12.2023
|
|
31.12.2022
|
|
|
|
$'000
|
|
$'000
|
|
Accrued
severance pay
|
|
103
|
|
96
|
|
Other provisions and employee-related
obligations
|
|
113
|
|
110
|
|
Research
and development expenses deductible over 3 years
|
|
147
|
|
143
|
|
Carry
forward tax losses
|
|
922
|
|
1,156
|
|
Customer
relations - arising from acquisition of P.S.K
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets relating to
carry forward capital losses of the Group total
approximately $984 and
$1,014 thousand as of 31
December, 2023 and 2022 respectively were not recognized in the
financial statements because their
utilization in the foreseeable future is not
probable.
14.
Inventories
|
|
|
31.12.2023
|
|
31.12.2022
|
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
Raw
materials and consumables
|
|
5,638
|
|
5,621
|
|
Work-in-progress
|
|
56
|
|
173
|
|
Finished
goods and goods for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15. Trade
receivables, other receivables and unbilled
revenue
|
|
|
31.12.2023
|
|
31.12.2022
|
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
Trade
receivables
|
|
12,124
|
|
9,735
|
|
Unbilled
revenue - Projects
|
|
4,190
|
|
2,204
|
|
Other
receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables:
|
|
|
31.12.2023
|
|
31.12.2022
|
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
Trade
receivables (*)
|
|
11,858
|
|
9,161
|
|
Notes
receivable
|
|
353
|
|
666
|
|
|
|
|
|
|
|
Allowance
for expected credit losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Trade
receivables are non-interest bearing. They are generally on 60-120
day terms.
As at 31 December 2023 trade
receivables of $320,000 (2022 - $328,000) were past due but not
impaired.
They relate to the customers with
no default history.
Unbilled revenue:
|
|
|
31.12.2023
|
|
31.12.2022
|
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
Actual completion costs
|
|
4,610
|
|
2,756
|
|
Revenue recognised
|
|
1,954
|
|
2,801
|
|
Billed
revenue
|
|
|
|
|
|
Total
Unbilled receivables - Projects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Other receivables:
|
|
|
31.12.2023
|
|
31.12.2022
|
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
1,056
|
|
644
|
|
Advances to suppliers
|
|
818
|
|
199
|
|
Tax authorities - V.A.T
|
|
106
|
|
206
|
|
Employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16. Cash
and cash equivalents
|
|
|
31.12.2023
|
|
31.12.2022
|
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
In U.S. dollars
|
|
4,236
|
|
3,224
|
|
In other currencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17. Loans
from banks
|
|
|
31.12.2023
|
|
31.12.2022
|
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
NIS
|
|
375
|
|
133
|
|
South African Rand
|
|
3
|
|
8
|
|
Less - current
maturities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All bank loans are for the
purchase of cars and are secured by a fixed lien on the
cars, aside from the use of a short term credit
line by PSK.
Mottech South Africa has a loan
agreement of approximately
US$ 30 thousand for the
purchase of cars for which the reminder will be paid in Q1 2024.
The interest rate is linked to the South Africa prime lending
rate.
During 2022 PSK had entered into a
loan agreement of approximately
US$ 133 thousand for the
purchase of cars, which is payable over 36 - 48 months on a monthly
basis. The interest rate is linked to the Prime interest
rate.
|
At December 31
2023
|
|
First
year
|
|
Second
year
|
|
|
Third
year and
thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
loan
|
|
314
|
|
36
|
|
|
28
|
|
18.
Employee benefits
A. Composition:
|
|
As at December
31
|
|
|
2023
|
|
2022
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Present value of the
obligations
|
1,757
|
|
1,660
|
|
Fair value of plan
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Movement
in plan assets:
|
|
2023
|
|
2022
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Year
beginning
|
908
|
|
983
|
|
Foreign exchange gain
(loss)
|
73
|
|
(121)
|
|
Interest income
|
33
|
|
22
|
|
Contributions
|
15
|
|
13
|
|
Benefit paid
|
(9)
|
|
-
|
|
Re measurements gain
(loss)
|
|
|
|
|
Actuarial gain (loss) from
financial assumptions
|
(1)
|
|
7
|
|
Return on plan assets (excluding
interest)
|
|
|
|
|
|
|
|
|
|
Year end
|
|
|
|
C. Movement in the liability
for benefit obligation:
|
|
2023
|
|
2022
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Year
beginning
|
1,660
|
|
1,851
|
|
Initially consolidated
company
|
-
|
|
104
|
|
Foreign exchange loss
(profit)
|
48
|
|
(196)
|
|
Interest cost
|
105
|
|
41
|
|
Current service cost
|
43
|
|
37
|
|
Benefits paid
|
(48)
|
|
(58)
|
|
Re
measurements loss
(gain)
|
|
|
|
|
Actuarial gain from financial
assumptions
|
(12)
|
|
(120)
|
|
Adjustments
(experience)
|
|
|
|
|
|
|
|
|
|
Year end
|
|
|
|
|
|
|
|
|
Supplementary
information
1. The Group's
liabilities for severance pay, retirement and pensions pursuant to
Israeli law and employment agreements are recognized in full - in
part by managers' insurance policies, for which the Group makes
monthly payments and accrued amounts in severance pay funds and the
rest by the liabilities which are included in the financial
statements.
18.
Employee benefits (cont.)
2. The amounts funded
displayed above include amounts deposited in severance pay funds
with the addition of accrued income. According to the Severance Pay
Law, the aforementioned amounts may not be withdrawn or mortgaged
as long as the employer's obligations have not been fulfilled in
compliance with Israeli law.
3. Principal nominal
actuarial assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate on plan asset
|
|
5.20%
|
|
5.18%
|
|
Expected increase in pensionable salary
|
|
2%
|
|
2%
|
4. Sensitivity test
for changes in the expected rate of salary increase or in the
discount rate of the plan assets and liability:
|
|
Change in defined benefit
obligation
|
|
|
As at December
31,
|
|
|
2023
|
2022
|
|
|
$'000
|
$'000
|
|
The
change as a result of:
|
|
|
|
Salary increases of 1 %
|
37
|
54
|
|
Salary decreases of 1 %
|
(34)
|
(48)
|
|
|
|
|
|
The
change as a result of:
|
|
|
|
Increase of 1% in discount
rate
|
(32)
|
(48)
|
|
Decrease of 1% in discount rate
|
35
|
54
|
|
|
|
|
|
2023
|
2022
|
|
|
$'000
|
$'000
|
|
|
|
|
|
Expenses
in respect of defined contribution plans
|
|
|
|
|
|
|
19. Trade
and other payables
|
|
|
|
|
|
|
2023
|
|
2022
|
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
Trade
payables
|
|
7,882
|
|
5,739
|
|
Employees' wages and other related liabilities
|
|
1,816
|
|
1,675
|
|
Advances from trade receivables
|
|
1,004
|
|
348
|
|
Accrued
expenses
|
|
848
|
|
909
|
|
Government
authorities
|
|
171
|
|
209
|
|
Lease
liability
|
|
366
|
|
449
|
|
Others
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20. Current maturities and
short-term bank credit
|
|
|
|
|
|
|
Interest
rate
as at December 31,
2023
|
|
2023
|
|
2022
|
|
|
%
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
|
|
Current
maturities In NIS
|
Prime +
0.9 - 2.2
|
|
311
|
|
38
|
|
Current
maturities In SA ZAR
|
9.5
- 11
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current maturities and short-term bank loans
|
|
|
|
|
|
Changes in liabilities arising from financing
activities
Reconciliation of the changes in
liabilities for which cash flows have been, or will be classified
as financing activities in the statement of cash flows
|
|
Loans and
borrowings
|
Lease
liabilities
|
Total
|
|
|
$'000
|
|
At 1 January
2023
|
141
|
752
|
893
|
|
Changes from financing cash
flows:
|
|
|
|
|
Payments
of lease liabilities
|
-
|
(485)
|
(485)
|
|
Receipt loans from banks
|
460
|
-
|
460
|
|
Repayment
of long-term loans from banks
|
|
|
|
|
Total
changes from financing cash flows
|
354
|
267
|
621
|
|
Changes in fair
value:
|
|
|
|
|
New
leases
|
-
|
643
|
643
|
|
Interest
expense
|
-
|
32
|
32
|
|
Interest
paid
|
|
|
|
|
Total
changes from financing cash flows
|
354
|
910
|
1,264
|
|
Effects
of foreign exchange
|
|
|
|
|
|
|
|
|
|
At 31 December
2023
|
|
|
|
|
|
|
|
|
|
At 1 January
2022
|
31
|
905
|
936
|
|
Changes from financing cash
flows:
|
|
|
|
|
Payments
of lease liabilities
|
-
|
(560)
|
(560)
|
|
Receipt of long-term loans from
banks
|
141
|
-
|
141
|
|
Repayment
of long-term loans from banks
|
|
|
|
|
Total
changes from financing cash flows
|
133
|
345
|
478
|
|
Changes in fair
value:
|
|
|
|
|
New
leases
|
-
|
533
|
533
|
|
Interest
expense
|
-
|
52
|
52
|
|
Interest
paid
|
|
|
|
|
Total
changes from financing cash flows
|
133
|
878
|
1,011
|
|
Effects
of foreign exchange
|
|
|
|
|
|
|
|
|
|
At 31 December
2022
|
|
|
|
|
|
|
|
|
21.
Financial instruments - Risk Management
The Group is exposed through its operations to
the following financial risks:
· Foreign currency
risk
· Liquidity
risk
· Credit
risk
Foreign currency
risk
Foreign exchange risk arises when
Group companies enter into transactions denominated in a currency
other than their functional currency.
The Group's policy is to allow the
Group's entities to pay liabilities denominated in their functional
currency using the cash flows generated from the operations of each
entity. When the Group's entities have liabilities denominated in a
currency other than their functional currency (and the entity does
not have sufficient cash balances in this currency to settle the
liability) the Group, if possible, transfers cash balances from one
entity to another entity in the Group. The Group's currency risks
are as follows:
Most of the Company's revenues are
in US dollars or linked to that currency, and the Company's inputs
are mainly linked due to the importation of raw materials paid for
in US Dollars, but the wages and salary expenses (which constitutes
a material input in the Company's operations) are in NIS.
Therefore, there is an exposure to changes in the exchange rate of
the NIS against the Dollar.
Management mitigates that risk by
holding some cash and cash equivalents and deposit accounts in NIS.
The Company also purchases from time to time some forward contracts
on the NIS/$ exchange rate to hedge part of the salary costs. Since
the purchase of Mottech
the Group has an additional currency risk due to
its subsidiaries' activity.
The following is a sensitivity
analysis of a change of 5% as of the date of the financial position
in the NIS exchange rates against the functional currency, while
the rest of the variables remain constant, and their effect on the
pre-tax profit or loss on equity:
|
|
Profit (loss) from
change
|
|
Profit (loss) from
change
|
|
|
|
|
|
|
|
|
|
NIS
exchange rate
|
|
|
|
|
|
|
|
|
|
Total assets,
net ($'000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NIS
exchange rate
|
|
|
|
|
|
|
|
|
|
Total assets, net
($'000)
|
|
|
|
|
|
|
|
|
The Company's exposure to changes
in foreign currency in all other currencies is
immaterial.
21. Financial instruments - Risk Management
(Cont.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
8,454
|
2,234
|
1,983
|
4,237
|
Cash and cash
equivalents
|
|
16,314
|
579
|
8,513
|
7,222
|
Trade receivables
|
|
2,160
|
159
|
1,850
|
151
|
Other receivables
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
current liabilities:
|
|
314
|
3
|
311
|
-
|
Current
maturities and short-term bank credit and loans
|
|
7,882
|
894
|
4,502
|
2,486
|
Trade
payables
|
|
4,192
|
870
|
3,128
|
194
|
Other
accounts payables
|
|
|
|
|
|
non- current liabilities:
|
|
1,117
|
-
|
1,117
|
-
|
Contingent consideration and Put option liability
|
|
64
|
-
|
64
|
-
|
Loans from
banks, net of current
maturities
|
|
|
|
|
|
|
|
|
|
|
|
Total assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
8,279
|
1,972
|
3,083
|
3,224
|
Cash and cash
equivalents
|
|
11,939
|
639
|
6,668
|
4,632
|
Trade receivables
|
|
1,300
|
22
|
1,126
|
152
|
Other receivables
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
current liabilities:
|
|
43
|
5
|
38
|
-
|
Current
maturities and short-term bank credit and loans
|
|
5,739
|
1,115
|
3,048
|
1,576
|
Trade
payables
|
|
3,178
|
881
|
2,079
|
218
|
Other
accounts payables
|
|
|
|
|
|
non- current liabilities:
|
|
98
|
3
|
95
|
-
|
Loans from
banks, net of current
maturities
|
|
|
|
|
|
|
|
|
|
|
|
Total assets, net
|
|
|
|
|
|
|
Liquidity
Risk
Liquidity risk is the risk that
arises when the maturity of assets and liabilities does not match.
An unmatched position potentially enhances profitability but can
also increase the risk of insufficient liquidity means to fulfil
its immediate obligations. The Group's objective is to maintain a
balance between continuity of funding and flexibility. The Group
has sufficient availability of cash, including the short-term
investment of cash surpluses, and can raise loans to meet its
obligations by cash management, subject to the Group's policies and
guidelines.
The table below summarizes the
maturity profile of the Group's financial liabilities based on
contractual undiscounted payments (including interest
payments):
21. Financial instruments - Risk Management
(Cont.)
|
December
31, 2023
|
|
Less than one
year
|
|
1 to 2
years
|
|
2 to 3
years
|
|
3 to 4
years
|
|
> 4
years
|
|
Total
|
|
|
|
|
$'000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration and Put option liability
|
|
-
|
|
280
|
|
-
|
|
-
|
|
837
|
|
1,117
|
|
|
Loans
from banks
|
|
314
|
|
36
|
|
28
|
|
-
|
|
-
|
|
378
|
|
|
Trade
payables
|
|
7,882
|
|
-
|
|
-
|
|
-
|
|
-
|
|
7,882
|
|
|
Payables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2022
|
|
Less than one
year
|
|
1 to 2
years
|
|
2 to 3
years
|
|
3 to 4
years
|
|
> 4
years
|
|
Total
|
|
|
|
|
$'000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration and Put option liability
|
|
-
|
|
-
|
|
58
|
|
-
|
|
1,372
|
|
1,432
|
|
|
Loans
from banks
|
|
43
|
|
41
|
|
38
|
|
19
|
|
-
|
|
141
|
|
|
Trade
payables
|
|
5,739
|
|
-
|
|
-
|
|
-
|
|
-
|
|
5,739
|
|
|
Payables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
risks
Financial instruments which have
the potential to expose the Group to credit risks are mainly
deposit accounts, trade receivables and other receivables. The
Group holds cash and cash equivalents in short term deposit
accounts in banking institutions in Israel that are considered
financially sound, thereby substantially reducing the risk to
suffer credit loss.
With respect to trade receivables,
the Group believes that there is no material credit risk which is
not mitigated in light of Group's policy to assess the credit risk
of customers before entering contracts.
Moreover, the Group evaluates trade receivables on a timely basis
and adjusts the allowance for expected credit losses accordingly.
Since January 2019 the Company has had an agreement with a credit
insurance company to further mitigate this risk. The aging
analysis of these trade-receivable balances by business segment is
as follows:
|
|
|
|
|
Past due trade receivables
with aging of
|
|
|
|
|
|
|
|
|
< 30
|
|
|
|
|
|
|
|
|
|
Antennas - other
receivables
|
12,237
|
7,906
|
7,759
|
140
|
7
|
|
Water Solutions - other
receivables
|
17,164
|
3,229
|
3,131
|
54
|
44
|
|
Distribution & Consultation -
other receivables
|
16,577
|
5,179
|
5,104
|
22
|
53
|
|
Intercompany
|
(344)
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
21. Financial instruments - Risk Management
(Cont.)
|
|
|
|
|
Past due trade receivables
with aging of
|
|
|
|
|
|
|
|
|
< 30
|
|
|
|
|
|
|
|
|
|
Antennas - other
receivables
|
11,627
|
5,570
|
5,394
|
175
|
1
|
|
Water Solutions - other
receivables
|
18,196
|
3,645
|
3,567
|
54
|
24
|
|
Distribution & Consultation -
other receivables
|
16,662
|
2,724
|
2,650
|
58
|
16
|
|
Intercompany
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value
A.
Fair value of financial assets and liabilities:
|
|
|
Fair value measurements
using input type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
liability (see note 3)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
liability (see note 3)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of fair value
measurements that are categorized within Level 3 of the fair value
hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1
|
1,432
|
|
Contingent consideration liability (see note 3)
|
-
|
|
Net loss
(profit) recognized in Profit or loss
|
|
|
|
|
|
Balance as of December 31
|
|
|
|
|
B.
Financial instruments not measured at fair value:
The carrying amount of cash and
cash equivalents, trade receivables, other accounts receivable,
credit from banks and others, trade payables and other accounts
payable approximate their fair value.
The Group is not exposed to cash
flow risk due to interest rates since the long-term loan bears
fixed interest.
The following table demonstrates
the carrying amount and fair value of the groups of financial
instruments that carrying amounts does not approximate fair
value:
21. Financial instruments - Risk Management
(Cont.)
|
|
|
Carrying
amount
|
|
Fair value
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Financial
liabilities:
|
|
$'000
|
|
Long-term loan with interest
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The
fair value of the long-term loan received with fixed interest is
based on the present value of cash flows using an interest rate
currently available for a loan with similar terms.
Linkage terms of financial
liabilities by groups of financial instruments pursuant to IAS
39
December 31, 2023:
|
|
NIS
|
Unlinked
|
S.A Rand
|
Total
|
|
|
$'000
|
|
|
|
|
|
|
|
Financial liabilities measured at
amortized cost
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022:
|
|
NIS
|
Unlinked
|
S.A Rand
|
Total
|
|
|
$'000
|
|
|
|
|
|
|
|
Financial liabilities measured at
amortized cost
|
|
|
|
|
|
|
|
|
|
|
Capital
management
The Group's objective is to
maintain, as much as is possible, a stable capital structure. In
the opinion of Group's management its current capital structure is
stable. Consistent with others in the industry, the Group monitors
capital, including others also, on the basis of the gearing
ratio.
This ratio is calculated as net
debt divided by total capital. Net debt is calculated as total
borrowings (including 'current and non-current borrowings' as shown
in the consolidated statement of financial position) less cash and
cash equivalents. Total capital is calculated as 'equity' as shown
in the consolidated statement of financial position plus net
debt.
The gearing ratios at 31 December
2023 and 2022 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Loans from banks
|
103
|
141
|
|
bank credit
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
209
|
209
|
|
Additional paid-in
capital
|
23,061
|
23,078
|
|
Retained earnings
|
5,226
|
3,775
|
|
Capital reserves
|
(466)
|
(250)
|
|
Non-controlling interest
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
|
|
|
Leverage ratio
|
|
|
|
|
|
|
21. Financial instruments - Risk Management
(Cont.)
The net debt ratios stem from the
Board of Directors' decision to continue to invest in the Company's
development, but without the use of excessive leverage. The Group
intends to examine the leverage ratio from time to time and to
define it according to its needs. The increase in the net debt
ratio in 2023 derived mainly from the increase in short time credit
used by the Company to finance part of its activity. The Group
intends to maintain the leverage ratio in future periods as well.
Beyond that stated above, there were no other material changes in
the objectives, policies or processes of managing the Group's
capital during the year, as well as in the Group's definition of
capital.
22.
Subsidiaries:
A.
The principal subsidiaries of the Company, all of which have been
consolidated in these consolidated financial statements, are as
follows:
|
Name
|
|
Proportion of ownership
interest on 31 December
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AdvantCom
Sarl
|
Switzerland
|
100%
|
100%
|
M.T.I
Wireless Edge
|
|
Global
Wave Technologies PVT Limited
|
India
|
80%
|
80%
|
AdvantCom Sarl
|
|
Ginat
Wave India Private ltd.
|
India
|
100%
|
49%
|
M.T.I
Wireless Edge
|
|
MTI
Wireless Communication India Pvt. Ltd.
|
India
|
100%
|
-
|
M.T.I
Wireless Edge
|
|
Mottech
water solutions ltd.
|
Israel
|
100%
|
100%
|
M.T.I
Wireless Edge
|
|
Aqua
infrastructure management systems ltd
|
Israel
|
100%
|
100%
|
Mottech
water solutions
|
|
Mottech Water Management
(pty) ltd.
|
South
Africa
|
85%
|
85%
|
Mottech
water solutions
|
|
Mottech USA Inc.
|
United
states
|
100%
|
100%
|
Aqua
water control solution
|
|
Mottech
Water Management (Shenzhen) Ltd.
|
China
|
100%
|
100%
|
Mottech
water solutions ltd.
|
|
Mottech
Parkland (pty) Ltd.
|
Australia
|
50%
|
50%
|
Mottech
water solutions ltd.
|
|
Mottech Water Management
ltd.
|
Canada
|
100%
|
100%
|
Mottech
water solutions ltd.
|
|
M.T.I
Engineering ltd.
|
Israel
|
100%
|
100%
|
M.T.I
Wireless Edge
|
|
Summit
electronics ltd.
|
Israel
|
100%
|
100%
|
M.T.I
Engineering ltd.
|
|
M.T.I
Summit electronics ltd.
|
Israel
|
100%
|
100%
|
M.T.I
Wireless Edge
|
|
P.S.K
Wind Technologies Ltd.
|
Israel
|
51%
|
51%
|
M.T.I
Summit electronics ltd.
|
23. Share
capital
|
|
Authorized
|
|
|
2023
|
2023
|
2022
|
2022
|
|
|
Number
|
NIS
|
Number
|
NIS
|
|
|
|
|
|
|
|
Ordinary
shares of NIS 0.01 each
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued and fully
paid
|
|
|
|
2023
|
2023
|
2022
|
2022
|
|
|
|
Number
|
NIS
|
Number
|
NIS
|
|
|
|
|
|
|
|
|
|
Ordinary shares of NIS 0.01
each at beginning of the year
|
88,538,724
|
885,388
|
88,538,724
|
885,388
|
|
|
Changes
during the year
|
|
|
|
|
|
|
Exercise
of options to share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of
the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(*) Please see notes 26 and 27
regarding share-based payments to the controlling
shareholders.
On 24 January 2019, the Company
announced a share repurchase program to conduct market purchases of
ordinary shares of par value 0.01 Israeli Shekels each ("Ordinary
Shares") in the Company up to a maximum value of £150,000 (the
"Programme"). Thereafter, the board of directors of the Company and
the board of directors of MTI Engineering decided to continue with
the Programme for several further periods. On 13 April 2022, the
Company announced that it would extend the Programme until 31 March
2023, with the Programme having an increased maximum value of up to
£200,000 and with the Programme being managed by Shore Capital
Stockbrokers Limited pursuant to the terms as announced.
On 10
March 2024 the board of
directors of the Company and the board of directors of MTI
Engineering decided to extend the Programme effective from 12 March
2024 until 31 March 2025 and increase the maximum value of the
Programme up to £700,000, with the intention to hold the Ordinary
Shares purchased for a longer period of time. As at 31 December
2023, 220,000 Ordinary Shares were held in treasury under the
Programme, and as at 10 March 2024, 470,000 Ordinary Shares were
held in treasury under the Programme.
24. Commitments and
guarantees
A. Royalty
commitments
(i) The Group is committed to pay
royalties to the Government of Israel on proceeds from the sales of
products that have resulted from research and development activity
funded by the Government of Israel by way of grants. Under the
terms of the Group's funding from the Government of Israel,
royalties of 2%-3.5% are payable on sales of products developed
from a project so funded, up to 100% of the amount of the grant
received, including amounts received by the Parent
Company and its subsidiaries since July 1, 2000. In 2023 and
2022, the Group received $90,000 and $123,000 respectively, as
additional grants for the development of new products and therefore
the maximum royalty amount payable by the
Group as at December 31, 2023, is US$ 830,000.
No provision is recognized as the
Group does not expect to sell relevant products in the foreseeable
future and in relation to new products a provision will be created
once development is in more advance stages.
During 2023 and 2022 the Group did not pay any
royalties.
24. Commitments and guarantees
(cont.)
(ii) The
Group is committed to pay royalties to the Government of Israel on
proceeds from growth in sales of Mottech's products in China of
which the Government of Israel participates by way of grants. Under
the terms of the Group's funding from the Government of Israel,
royalties of 3% from the increase of sales in China (base year was
2017) shall be paid up to 100% of the amount of the grant received.
Payment of royalties shall begin after completion of the grant
receipt, which occurred in 2020. The maximum royalty amounts
payable by the Group as at December 31, 2023 and 2022 is US$
217,000.
B. Guarantees
The Group has provided guarantees
in favour of customers and government institutes in the amount of
US$ 705,000 and
US$ 119,000
respectively. The guarantees are mainly to guarantee advances
received from customers and the performance of contracts
signed.
25. Transactions with related
parties:
A.
Service Agreement with controlling
shareholder:
On 9 March 2022, an amendment to
the agreement with Mokirey Aya Management Ltd. (hereinafter: the
"Management Company") was renewed to include remuneration (per
month) of:
1. 56,000 NIS to
Mr. Zvi Borovitz for his service as the chairman of the board of
the Company for at least 50% of a standard working week;
and
2. 79,000 NIS to
Mr. Moni Borovitz for his service as CEO of the Company for at
least 90% of a standard working week.
All amounts are prior to VAT which
will be added to the invoices and are linked to the increase in the
consumer price index. In addition to the above, and in accordance
with the remuneration policy adopted by the Company, as required
under rule 20 of the Israeli Companies Law, a bonus scheme was
granted to each of the managers. The bonus scheme states that Zvi
Borovitz and Moni Borovitz will each be entitled to a bonus
amounting to 2.5% of the Company's net profit exceeding US$800,000
per year, prior to any bonuses granted by the Company. In the case
of a loss in a year, the bonus for the next year will be for a net
profit exceeding US$800,000 above the loss made in the previous
year. In addition, Mr. Moni Borovitz shall be entitled to a bonus
equal to three months' management fee, based on the meeting of
targets specified by the remuneration committee at the beginning of
each year or per the remuneration
committee's decision to give such for special performance, plus
one month's management fee if the
consolidated revenue of the Company increases by more than 5% from
the previous year. A ceiling to the bonuses was set at eight months
management fees for Mr. Moni Borovitz and US$100,000 for Mr. Zvi
Borovitz. The agreement also states that the Company shall
reimburse the Management Company for any expense made in
performance of the manager's duty. The Company shall also provide
each of the managers with a car and phones and will be responsible
for all of the related expenses, including all relevant
taxes.
For participation of Mr. Moni
Borovitz in the employee share option plan please see section 26 F
and 27 A below.
25. Transactions with related
parties (cont.)
B. Transaction with the Parent
Group:
The following transactions
occurred with the Controlling shareholder and other related
parties:
|
|
2023
|
|
2022
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Management Fee
|
|
|
|
|
|
|
|
|
Compensation of key management
personnel of the Group:
|
|
2023
|
|
2022
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Short-term employee benefits *
|
|
|
|
|
|
|
|
|
* Including Management fees for
the CEO, Directors, Executive Management and other related parties
including the Controlling shareholder. Please see notes 26 and 27 regarding share-based payments to
the controlling shareholders.
Balances with related
parties:
|
|
2023
|
|
2022
|
|
|
$'000
|
|
$'000
|
|
|
|
|
|
|
Other
accounts payables
|
|
|
|
|
|
|
|
|
26. Significant
Events:
A. On 14 March,
2023 at the Company's annual general meeting, Mr. Michael Yehezkel
Karo was elected as an independent non-executive
director.
B. On 11 July,
2023 the Company acquired the minority holdings in Ginat Wave India
Private ltd for a non-material amount and now holds 100% of this
company.
C. On 19 July,
2023 the Company completed the registration of its fully owned
subsidiary, MTI Wireless Communication India Private Limited, in
India in order to support local demand in the market.
D. On 7 October,
2023 Israel was attacked by the Hamas terror organization leading
to war in the Gaza region. The war has led to a slowdown in the
Israeli economy and if this war continues for a prolonged period
then it may begin to impact the Company. The wide usage of military
reserve personnel, adverse foreign currency exchange rates and
restrictions on access to certain areas in Israel are risks which
may affect the Company if there is a prolonged period of war. As of
the date of this report, and to the best of the Company's
knowledge, the war has not had a significant effect on it. The
Company continues to review the effects of the war on its trading
as it believes that if the war continues for a long period of time
then the overall Israeli economy will be effected, and factors
including the lack of available manpower, interest rates and
foreign currency exchange rates may have an impact on its
trading.
E. On 19
November, 2023 the remuneration committee and the board of
directors approved an option plan in relation to the Company's
shares ("Option Plan").
26. Significant Events
(cont.)
The Option Plan includes the
authority to grant 2,000,000 options (2.2% of the Company's issued
share capital on fully diluted basis) with the following
terms:
1. Each
option can be exercised into one ordinary share of the Company at a
price of 40p being 25% above the share price at the date preceding
the announcement of the Option Plan in November 2023.
2. The
vesting of the options will be: 50% after two years, 25% after
three years and 25% after four years with expiration of the options
being six years after granting.
3. The
economic value of the options based on a Black-Scholes calculation
is US$259,000 for the total 2 million options approved by the board
of directors.
27. Subsequent events
A. On 5 January,
2024 following the passing of an
extraordinary shareholders meeting, 600,000 share options were
granted to Mr. Moshe (Moni) Borovitz, the Company's Chief Executive
Officer and 100,000 share options were granted to Mr. Dov Feiner,
the General Manager of the Company's Antenna division as part of
the Option Plan.
B. The Board
of directors has decided to declare a cash dividend of
3.1 US cents per share
being approximately $2,745,000. This dividend will be paid on 11
April 2024 to shareholders on the register at the close of trading
on 22 March 2024 (ex-dividend on 21 March 2024). The currency
translation into British Pounds will be made on 25 March 2024 and
there will not be a scrip dividend alternative.
C. The
financial statements were authorized for issue by the board as a
whole following their approval on 10 March 2024.