PILAT TECHNOLOGIES INTERNATIONAL LTD
("PTI", the "Group" or the "Company")
Results for First Quarter ended 31 March 2008
London and Tel Aviv 22 May 2008 - Pilat Technologies International Ltd, the
AIM-quoted human resources management consultancy, software and services group,
announces its results for the quarter ended 31 March 2008 ("Q1"). PTI is also
quoted on the Tel Aviv Stock Exchange.
SUMMARY
Q1 sales up 16% to �2,111,000 (2007: �1,826,000).
Israel sales up 35% compared with Q1 2007.
North America sales up 5% compared with Q1 2007.
Europe sales up 2% compared with Q1 2007.
Operating loss of �62,000 (Q1 2007: loss �96,000).
Through three main subsidiaries, Pilat Europe, Pilat North America and Pilat
Israel, the Group provides consultancy, advanced web based software
applications and data processing and analysis services in the fast growing
field of Human Capital Management. PTI has a wide and varied client base
including many major global corporations and international public sector
bodies. The Company works across all sectors with organisations employing from
a few hundred to hundreds of thousands of staff. PTI has extensive industry
experience in Financial Services, Energy and Telecommunications and sector
specific offerings in Healthcare, Public Housing, Local Government and
Education.
Enquiries
Pilat Technologies International Ltd + 972 3 67 9200
Jonathan Berger, Chief Financial Officer
Hanson Westhouse Limited + 44 (0)113 246 2610
Tim Feather / Matthew Johnson
CHAIRMAN'S STATEMENT
The Board of PTI presents the Company's results for the first quarter of 2008.
Overall sales increased by 16% over the equivalent period last year with sales
growth in all operations of the Company and a particularly strong result in
Israel with growth of 35%.
Gross profits grew by 24% all of which was invested into our Research and
Development activities where spending increased to �185,000 for the quarter
from �75,000 last year.
Sales and Marketing and General and Administrative spending was held flat to
give an operating loss down one third from last year at �62,000 (Q1 2007: Loss
�96,000).
In Israel profits rose by 31% in sterling terms to �59,000 (2007: �45,000).
Our core assessment business continues to perform well and we are happy with
the progress made integrating the acquisitions announced previously. Pilat
Israel has recently entered into an agreement with Watson-Wyatt Worldwide to
act as their agents in the Israeli market for international salary survey data
and our non-assessment business continues to grow. We continue to search for
acquisition opportunities in the Israeli market to further extend our services
whilst remaining focused on the Human Capital Management sector.
In North America, sales increased by over 5% to �506,000 (2007: �481,000) and
the effects of cost savings made last year changed a 2007 Q1 loss of �87,000
into a profit of �47,000 for 2008. Clearly, there is a great deal of
uncertainty in the US market at present with much talk of more difficult times
ahead. We will continue to control costs in the North American business whilst
introducing new product lines. In 2008 we have extended our agreement to
distribute the products of the Center for Talent Retention to include North
America and continue to work to strengthen our distribution network.
In Europe, sales increased moderately (2%) to �646,000 for the quarter (2007: �
633,000). Our core Research and Development activity takes place in the UK and
the increased spending in this area pushed the quarter into a small operating
loss of �18,000 (2007: profit �98,000). We are continuing to expense all
Research and Development costs as incurred. Our core consulting activity,
often the introduction for new client acquisition, continues to perform
excellently.
Our results reflect strong growth in sales together with a much higher level of
Research and Development spending. The Company's small Indian software
development team is now established and we have now released the first version
of our HR-PULSE flagship application with Microsoft .NET and AJAX technology to
provide a much richer user experience. Our capability to service the complex
Talent Management requirements of major international organisations continues
to grow in parallel with their perceived needs for these services. We see this
trend continuing, even as world growth levels are declining.
For the year ahead, our priorities will be to continue to invest sensibly in
Research and Development to maintain our position as the leading technology in
our market niche. To continue to implement our improved sales and delivery
model in order to move more sales into predictable longer term contracts. To
expand the range and depth of our consulting activities as our sales entry
point and source of our expertise and reputation and to re-establish our sales
channels in the Asia Pacific region.
Revenues and profitability
Overall sales in Q1 2008 were �2,111,000, an increase of 16% over the sales in
the same quarter in 2007 (�1,826,000). The increase in sales was evident in
all our operating subsidiaries. In Israel sales increased by 35%, in Europe by
2% and in North America by 5%.
The gross margin for the quarter stood at 38%, compared to a gross margin of
35% in the first quarter of 2007.
Research and development costs increased 147% to �185,000 in line with
management policy.
Sales and marketing expenditure remained stable at �244,000.
General and administrative expenditure also remained stable at �424,000.
Due to the weakness of Sterling and the US dollar in the quarter relative to
the Israeli Shekel (the Company's functional currency), and the reduction of
the value of assets and balances not denominated in Israeli Shekels, the Group
had net financing costs of �69,000.
Balance Sheet
The Group's current assets at 31 March 2008 were �4,524,000, which represents
approximately 88% of assets (91% at 31 March 2007 and 92% at 31 December
2007). The reduction in the proportion of current assets in this period is due
to acquisitions which were financed by cash and are listed as non-current
assets.
Current liabilities decreased over the period from �1,903,000 at the end of
2007 to �1,727,000, mainly due to clearing balances at the year end. Long-term
liabilities stood at �7,000 at the period end.
The Group's current ratio is a healthy 2.62.
Shareholders' equity increased to �3,432,000, which arose from net losses of �
107,000 and positive foreign currency translation adjustments of �215,000.
Liquidity
The Group had a negative cash flow from operating activities of �519,000 from
its continuing operations during the period. The negative cash flow was mainly
due to the loss for the period, an increase in receivables of �125,000 and a
decrease in payables of �314,000 due to the clearing of large balances at the
end of the last quarter of 2007. Acquisitions during the period cost �154,000
bringing the cash used in investing activities to �179,000.
In total, the cash balances decreased during the period by �562,000 compared
with �274,000 during the equivalent period of 2007.
At 31 March 2008 the cash and short term investment balances of the Company
were �1,998,000 with total liabilities to finance providers of �13,000.
Michael Zukerman, Chairman
David Sapiro, CEO
Jonathan Berger, CFO
CONSOLIDATED BALANCE SHEET
British pounds in thousands
March 31, December 31,
2008 2007 2007
Unaudited Audited
CURRENT ASSETS
Cash and cash equivalents 1,849 1,770 2,411
Short term investments 149 147 147
Trade receivables 2,196 2,120 2,013
Other accounts receivable 330 251 278
4,524 4,288 4,849
NON-CURRENT ASSETS
Long - term loans and receivables 27 21 25
Employees benefits assets 70 17 52
Fixed assets, net 313 362 297
Deferred taxes 13 17 7
Intangible assets 219 - 14
642 417 395
TOTAL ASSETS 5,166 4,705 5,244
March 31, December 31,
2008 2007 2007
Unaudited Audited
CURRENT LIABILITIES
Current maturities of long-term bank loans 11 16 10
Trade payables 414 405 359
Other accounts payable 1,288 1,325 1,534
Liabilities related to discontinued operations 14 - -
1,727 1,746 1,903
NON-CURRENT LIABILITIES
Liabilities to banks 2 13 6
Employees benefits liabilities 5 3 3
Liabilities related to discontinued operations - 12 13
7 28
22
SHAREHOLDERS' EQUITY
Share capital 50 49 50
Additional paid-in capital 7,083 7,078 7,083
Capital reserve 50 37 45
Cumulative foreign currency translation 112 (210) (103)
adjustments
Accumulated deficit (3,767) (3,927) (3,660)
Less-shares held by subsidiaries (96) (96) (96)
3,432 2,931 3,319
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 5,166 4,705 5,244
The accompanying notes are an integral part of the interim consolidated
financial statements.
CONSOLIDATED STATEMENTS OF INCOME
British pounds in thousands (except for net earnings (loss) per share amounts)
Three months ended Year
ended
March 31,
December
31,
2008 2007 2007
Unaudited Audited
Revenues 2,111 1,826 7,873
Cost of revenues 1,313 1,185 4,623
Gross profit 798 641 3,250
Research and development costs 185 75 500
Selling and marketing expenses 244 237 880
General and administrative expenses 424 425 1,621
Other expenses, net 7 - 2
Operating income (loss) (62) (96) 247
Capital gain from sale of fixed assets 2 - 3
Financial income 13 12 74
Financial expenses (82) (14) (100)
Net income (loss) before taxes on income (129) (98) 224
Taxes on income 22 28 (27)
Net income (loss) (107) (70) 197
Net earnings (loss) per share (in British
Pence):
Basic Net earnings (loss) per share (0.41) (0.27) 0.75
Diluted Net earnings (loss) per share (0.39) (0.26) 0.73
CONSOLIDATED STATEMENT OF CASHFLOWS
British pounds in thousands
CONSOLIDATED STATEMENTS OF CASH FLOWS
British pounds in thousands
Three months Year
ended ended
March 31, December
31,
2008 2007 2007
Unaudited Audited
Cash flows from operating activities:
Net income (loss) (107) (70) 197
Adjustments to reconcile net income to net cash
provided by (used in) operating activities (a) (412) (178) 179
Net cash provided by (used in) operating activities (519) (248) 376
Cash flows from investing activities:
Purchase of fixed assets (42) (44) (102)
Proceeds from sale of fixed assets 5 - 21
Short and long term investments, net 12 - 6
Purchase of intangible assets (154) - (16)
Net cash used in investing activities (179) (44) (91)
Cash flows from financing activities:
Repayment of long-term loans from banks (3) (5) (18)
Shares issue - - 6
Net cash used in financing activities (3) (5) (12)
Effect of exchange rate changes on cash and cash
equivalents 139 23 94
Increase (decrease) in cash and cash equivalents (562) (274) 367
Cash and cash equivalents at the beginning of the
period 2,411 2,044 2,044
Cash and cash equivalents at the end of the period 1,849 1,770 2,411
Three months Year
ended ended
March 31, December
31,
2008 2007 2007
Unaudited Audited
(a) Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating income:
Income and expenses not involving cash flows:
Stock - based compensation 5 5 13
Depreciation and amortization 40 36 145
Deferred taxes (4) (42) (37)
Increase (decrease) in employees benefits Assets/
Liabilities, net (12) 4 (25)
Capital gain from sale of fixed assets (2) - (3)
Erosion of long-term loans - 1 -
Changes in operating assets and liability items:
Increase in trade receivables, other accounts
receivable and long-term loans and receivables (125) (319) (183)
Increase (decrease) in trade payables and other
accounts payable (314) 137 269
(412) (178) 179
(b) Non cash investing and financing activities
Sale of fixed assets - - 7
Purchase of intangible assets 50 - -
(c) Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest 1 1 4
Income taxes 1 - 48
Cash received during the period for:
Interest 13 13 67
Note 1: General
These financial statements have been prepared for the first time in accordance
with the International Financial Reporting Standards (hereinafter - the IFRS
standards) in an abbreviated format as of March 31, 2008, and for the period of
three months ended on that date (hereinafter - the interim consolidated
financial statements). The Company's annual financial statements as at December
31, 2007 and for the year then ended, the last annual financial statements that
were prepared in accordance with generally accepted accounting principles in
Israel should be reviewed in connection with certain notes, such as information
in respect of commitments, contingent liabilities and claims, and similar
items.
The IFRS standards on the basis of which the accounting policies in the
consolidated interim financial statements have been set, are the same IFRS
standards that will be in force or which can be adopted early in the first
annual financial statements in accordance with the IFRS standard, as at
December 31, 2008 and for the year then ended, and accordingly, they are
subject to changes that may occur in them and to their implementation in those
annual financial statements. As a result, the financial policies that will be
implemented in the annual financial statements, as aforesaid, in so far as it
is relevant to these interim financial statements, will only be finally
determined at the time of the preparation of the abovementioned annual
financial statements.
The Company has adopted the IFRS standards for the first time in 2008 and
accordingly the time of the transition to reporting in accordance with the IFRS
standards is January 1, 2007. Before the adoption of the IFRS standards, the
Company prepared its financial statements in accordance with generally accepted
accounting principles in Israel. The Company's last annual financial statements
in accordance with generally accepted accounting principles in Israel were
prepared as at December 31, 2007 and for the year then ended.
See Note 7 on the subject of the reconciliation between the reporting in
accordance with generally accepted accounting principles in Israel and the
reporting in accordance with the IFRS standards.
The format for the preparation of the interim consolidated financial statements
The interim consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for the preparation of financial
statements for interim periods, as set forth in International Financial
Reporting Standard IAS 34 - Financial reporting for interim periods", and also
in accordance with the disclosure requirement in Part D' of the Securities
Regulations (Periodic and immediate reports) 1970.
Note 2: Principal accounting policies
The following are the main accounting policies that the Company has implemented
in these financial statements, with the adoption of the IFRS standards for the
first time, and which have been implemented consistently throughout the periods
that are presented:
A. The basis of linkage in the financial statements
The Company's financial statements have been prepared on the basis of cost,
except for investment property, land and buildings, derivatives and financial
instruments, liabilities in respect of share based payment arrangements,
liabilities to return properties to original state, liabilities in respect of
benefits to employees and assets that are presented at calculated cost in
accordance with IFRS 1, which are measured in accordance with their fair
values.
Consolidated financial statements
The consolidated financial statements include the financial statements of
companies in which the Company exercises control (subsidiary companies).
Control exists where the Company has the ability, directly and indirectly, to
direct the financial and operating policies of the Company that is controlled.
The affect of potential voting rights that can be exercised as of the balance
sheet date are taken into account in the testing for control. The consolidation
of the financial statements is carried out as from the time that control is
achieved, and up to the time that control is discontinued.
Material, mutual balances and transactions and profits and losses that derive
from transactions between companies in the group have been eliminated in full
in the consolidated financial statements.
Mutual balances and transaction and profits and losses that derive from
transactions between the Group and the Company under joint control have been
eliminated in accordance with the holding rate in the Company under joint
control.
The financial statements of the Company and of the consolidated companies have
been prepared as of identical dates and for identical periods. The accounting
policies in the financial statements of the consolidated company have been
implemented in a uniform and consistent manner to the manner in which they were
implemented in the Company's financial statements.
B. The functional currency and foreign currency
1. The functional currency and the presentation currency
The financial statements are presented in Pounds Sterling. The Company's
functional currency is the New Israeli Shekel.
The functional currency, which is the currency that best reflects the economic
environment in which the Company operates and its transactions, has been
determined separately for each company in the Group and the state of its
financial position and the results of its operations are measured in accordance
with this currency. Where the functional currency of a company in a group is
different from the presentation currency, that company constitutes foreign
activity and the figures in its financial statements are translated for the
purpose of their inclusion in the consolidated financial statements as follows:
a. Assets and liabilities at each balance sheet date (including the
comparative figures) are translated in accordance with the closing rate at each
balance sheet date. Goodwill and all of the adjustments of fair value to the
carrying value of the assets and the liabilities at the time of the acquisition
are treated as assets and liabilities and translated in accordance with the
closing rate, at each balance sheet date.
b. Income and expenses in each of the periods that are presented in
the statement of income (including the comparative figures) are translated in
accordance with average exchange rates in each of the periods that are
presented, however, in cases in which there has been significant fluctuations
in the exchange rates, the income and expenses are translated in accordance
with the exchange rates that were in force at the time of the transactions
themselves.
c. Share capital, capital reserves and other capital movements are
translated in accordance with the exchange rates at the time that they
occurred.
d. The accumulated earnings are translated on the basis of the
opening balance, which was translated in accordance with the exchange rate at
that time and the relevant additional movements during the course of the
period, which have been translated as aforesaid in sections b and c above.
e. All of the exchange differences that have been created are
reflected as a separate item under shareholders' equity, in a capital reserve
"adjustments deriving from the translation of financial statements.
Loans between companies in the group, which there is no intention to clear and
which are not expected to be cleared in the foreseeable future and accordingly
they essentially constitute part of the investment in overseas activities, are
dealt with as part of the investment, where the exchange differences from these
loans are reflected in that same section of the shareholders' equity, as
aforesaid in section e) above.
Exchange differences in respect of a loan in foreign currency, which
constitutes the hedging of a net investment in foreign activity, are reflected
after setting off the tax effects, to that same section of the shareholders'
equity, as aforesaid in section e) above. At the time that the net investment
is realized, these exchange differences are reflected under financing income or
expenses.
2. Transactions in foreign currency
Transactions that are denoted in foreign currency are recorded when they are
initially recognized in accordance with the exchange rates at the time of the
transaction. Monetary assets and monetary liabilities that are denoted in
foreign currency have been translated into the functional currency in
accordance with the exchange rate as of the balance sheet date. Exchange
differences are reflected in the statement of income. Non-monetary assets and
liabilities that are denoted in foreign currency are presented in accordance
with their fair values and translated into the functional currency in
accordance with the exchange rate at the time that the fair value was
determined.
B. The functional currency and foreign currency (continued)
3. Following are data regarding the exchange rate of the
British pound in relation to the NIS:
Exchange rate of
As of one British pound
NIS
March 31, 2008 7.0639
March 31, 2007 8.1253
December 31, 2007 7.7105
Change during the period %
March 2008 (three months) (8.4)
March 2007 (three months) (2.0)
December 2007 (12 months) (7.0)
C. Cash equivalents
Highly liquid investments, which include deposits in entities for the
short-term, whose original period did not exceed three months from the time of
the investment and which are not restricted by a charge are considered to be
cash equivalents.
D. Short-term deposits
Deposits in banking entities for the short-term, whose original periods did not
exceed three months from the time of the investment. The deposits are presented
in accordance with the terms under which they were deposited.
E. The provision for doubtful debts
The provision for doubtful debts is determined specifically in respect of
debts, whose collection, in the opinion of the Company's management, lies in
doubt. Moreover, the Company records a provision in respect of groups of
customers, which is evaluated collectively in respect of impairment in value,
based on their credit risk characteristics. Customer debts, where an impairment
has occurred in their value, will be written down at the time at which it is
determined that these debts are non-recoverable.
F. Financial instruments
Financial assets to which IAS 39 applies are recognized at the time that they
are originally recognized in accordance with their fair value, with the
addition of the transaction costs that relate directly to them, except in
respect of investments that are presented at fair value with the changes
therein being reflected in the statement of income.
Following the initial recognition, the accounting treatment of investments in
financial assets is based on their classification into one of the following
four groups.
Financial assets, which are measured at fair value through the statement of
income.
Investments that are held to redemption.
Loans and debit balances.
Financial assets that are available for sale.
1. Loans and debit balances
The loans and debit balances are financial assets that are non-derivative
having fixed payments or where it can be determined that there is not an active
market for them. Following the initial recognition, loans and debit balances
are measured at cost and depreciated in accordance with the effective interest
rate, whilst taking transaction costs into account and after setting off any
provisions for impairment in value. Profits and losses are reflected in the
statement of income when the loans and debit balances are disposed of or if an
impairment in value is recognized in respect of them, and also as the result of
systematic amortization.
2. Interest bearing loans and credit
Loans and interest bearing credit balances are initially recognized in
accordance with their fair value and less the transactions costs that can be
directly attributed (for example the costs of raising loans). Following the
initial recognition, the loans and interest bearing credit are presented at
amortized cost whilst using the effective interest method, taking the
transactions costs that can be directly attributed into account. Profits and
losses are recognized in the statement of income at the time of the closing of
the loan and as a result of systematic amortization.
3. Treasury shares
Shares in the Company that are held by consolidated companies are presented in
accordance with cost, which is set-off against the Company's shareholders'
equity. Profits or losses in respect of the purchase, sale or cancellation of
treasury shares are reflected directly in shareholders' equity.
G. Impairment in the value of monetary assets
The Group tests for the existence of impairment in value of financial assets or
a group of financial assets at each balance sheet date.
1. Assets that are presented at depreciated cost
If objective evidence exists that a loss exists from impairment in value in
respect of loans and debtors that are presented at their amortized cost, the
amount of the loss that is reflected in the statement of income is measures as
the difference between the carrying value of the asset and the present value of
the estimated future cash flows (which do not include future credit losses that
have not yet been incurred), discounted in accordance with the original
effective interest rate for the financial asset (the effective interest rate
that was calculated at the time of the initial recognition). The carrying value
of the asset is reduced by means of the recording of a provision. The amount of
the loss is reflected in the statement of income.
2. Assets that are available for sale
If objective evidence exists that a loss exists from impairment in value, the
amount of the loss is measured as the difference between the cost (less
payments on account of principal and amortization) and the fair value, less any
loss from impairment in value that was reflected in the statement of income in
the past. This loss is transferred from the shareholders' equity to the
statement of income. The cancellation of a loss from impairment in value is not
reflected in the statement of income. The cancellation of a loss from the
impairment in value in respect of debt instruments is reflected in the
statement of income if the increase in the fair value of the instrument can be
objectively attributed to an event that occurred subsequent to the los in
respect of impairment in value being reflected in the statement of income.
H. Fixed assets
Fixed asset items are presented at cost with the addition of direct acquisition
cost, less accumulated depreciation, less losses from impairment in value that
have accumulated and less investment grants that have been received in respect
of them and which are not included in expenses for the purposes of routine
maintenance. The cost includes spare parts and ancillary equipment that can be
used only in connection with plant and machinery.
The cost of assets that have been set up independently include the cost of the
materials, direct labor costs and financing costs as well as additional costs
that can be attributed directly to the bringing of the asset to its present
location and status, in a manner that it will be able to operate in the manner
that management planned, as well as the costs of the dismantling and removal of
the items and the rehabilitation of the site where the item was located.
Depreciation is calculated at equal annual rates, on the straight line method,
over the useful lives of the assets, as follows:
% Main %
Software and computers 33
Motor vehicles 15-25 (Primarily 15%)
Office furniture and 6-20 (Primarily 6%)
equipment
Leasehold improvements (Over the length of the rental period, including
option periods)
The cost of a fixed asset item includes an initial estimate of the cost of the
dismantling and removal of the item and the rehabilitation of the site where
the item was located, in respect of which a commitment arises for the Company,
where the item is acquired or as the result of the use of the item over a
certain period of time, other than for the purpose of the production of
inventory during the course of that period.
The components of a fixed asset item, having a cost that is material in
relation to the overall cost of the item, are depreciated separately, in
accordance with the components method. The depreciation is calculated in
accordance with the equal depreciation method at annual rates that are
calculated to be sufficient to depreciate the assets over the length of their
estimated useful lives.
Leasehold improvements are depreciated in accordance with lower of the straight
line method over the course of the rental period (including the option period
for an extension that is held by the Group and which it intends to exercise) or
in accordance with the estimated useful lives of the assets.
The residual value and the estimated useful lives of an asset are examined at
least at the end of the year and changes are treated as a change in accounting
estimate by way of from henceforth. See section J below in respect of the
testing for impairment in the value of fixed assets.
The Group recognizes the replacement cost of part of a fixed asset item as part
of the value of the fixed asset item in the accounting records, where the cost
has been incurred, and it is expected that the economic benefits that are
connected to the item will flow to the Group and the cost of the item can be
reliably measured. Routine maintenance costs are reflected in the statement of
income as incurred.
The depreciation of an asset is discontinued at the earlier of the time at
which the asset is classified as held for sale and the time at which the asset
is disposed of. An asset is removed from the accounting records at the time
that it is sold or when it is no longer expected that there will be economic
benefits from the use of the asset. A profit or loss on the removal of the
asset (which is calculated as the difference between the net consideration from
the disposal and the depreciated cost in the accounting records), is included
in the statement of income in the period in which the asset is disposed of.
A fixed asset that has been received in an exchange transaction is measured in
accordance with its fair value, unless the transaction has no commercial
significance or where it is not possible to reliably measure the fair value of
the fixed asset that is received or which is given. A transaction has
commercial significance if it leads to a change in the amount, the timing and
the risk of the future cash flows from the asset.
The transition from fixed assets to investment property is carried out where
the owners re-designate the asset from self use or were a new rental agreement
commences, or where the construction work has been completed.
I. Intangible assets
Intangible assets that are acquired separately are measured at the time of
their initial recognition in accordance with cost with the addition of direct
acquisition costs. Intangible assets that are acquired in business combinations
are recorded in accordance with the fair value at the time of the acquisition.
Following the initial recognition, intangible assets are presented in
accordance with their cost less accumulated amortization and less accumulated
losses from impairment in value. Costs in respect of intangible assets which
have been developed internally, except for capitalized development costs, are
reflected in the statement of income as incurred.
In accordance with evaluations made by the Company's management, the intangible
assets have defined useful lives. The assets are amortized over the length of
their useful economic lives, and impairment in value are tested for in respect
of them where signs exist indicating that an impairment has occurred in the
value of an intangible asset. The amortization period and the method of
depreciation in respect of an intangible asset with a defined useful life are
examined at least once a year. A change in the useful lives or the patterns of
the expected consumption of the economic benefit that is expected to derive
from the asset are to be treated as a change in the period or the method of
amortization and are to be reported as a change in accounting estimate.
Amortization expenses in respect of intangible assets with a defined useful
life are reflected in the statement of income.
The useful lives of the intangible assets are as follows:
Customer portfolios - 3 to 6 years.
J. Impairment in the value of non-monetary assets
The Company examines the need to test for the impairment in the carrying value
of non-monetary assets where there are signs that as the result of events or of
changes in the circumstances there are indications that the carrying value is
not recoverable. In cases in which the carrying value of non-monetary assets
exceeds their recoverable amount, the assets are written down to the
recoverable amount. The recoverable amount of an asset is the higher of the net
selling price and the value in use. In the evaluation of the value in use, the
cash flows that are expected are discounted in accordance with a pre-tax
discount rate that reflects the specific risks for each asset. In respect of an
asset that does not produce independent cash flows, the recoverable amount is
determined for the cash generating unit to which the asset belongs.
Losses from impairment in value are reflected in the statement of income under
losses from impairment, except for impairment in value of an asset that has
been revalued in the past and where the revaluation has been reflected in a
capital reserve, in which case the impairment is reflected against the capital
reserve, up to the amount of the revaluation and the balance is reflected in
the statement of income.
The following criteria are implemented in the testing for impairment in value
for the following specific assets:
1. Goodwill
The Company tests goodwill for impairment in value once a year on December 31,
or more frequently if events or changes in the circumstances indicate that an
impairment in value has occurred.
Impairment in value is determined in respect of goodwill by means of the
testing of the recoverable amount of a cash generating unit (or a group of cash
generating units) to which the goodwill relates. Where the recoverable amount
of a cash generating unit (or a group of cash generating units) is lower than
the carrying value of the cash generating unit (or a group of cash generating
units) to which the goodwill has been allocated, a loss on impairment in value
is recognized. Losses from the impairment in value of goodwill are not
cancelled.
2. Intangible assets with an indefinite useful life.
The testing for impairment in value is carried out once a year on December 31,
or more frequently if events or changes in the circumstances indicate that an
impairment in value has occurred.
K. Taxes on income
Taxes on income in the statement of income include current taxes and deferred
taxes. The tax expenses in respect of current taxes or deferred taxes are
reflected in the statement of income, except where they relate to items that
are reflected directly under shareholders' equity, in which case the tax effect
is also reflected under the relevant item under shareholders' equity.
1. Current taxes
The liability in respect of current taxes is determined whilst using the tax
rates and the tax laws that have been enacted, or show enactment has been
effectively completed, up to the balance sheet date, and also the adjustments
that are required in respect of the liability to taxation in respect of
previous years.
2. Deferred taxes
Deferred taxes are calculated in respect of timing differences between the
amounts that are recorded in the financial statements and the amounts that are
taken into account for tax purposes, except for a limited number of exceptions.
The deferred tax balances are calculated in accordance with the tax rates that
are expected to apply when those taxes are expected to be reflected in the
statement of income or under shareholders' equity, based on the tax laws that
have been enacted, or show enactment has been effectively completed, up to the
balance sheet date. The amount at which deferred taxes are stated in the
statement of income reflects the changes in the abovementioned balances in the
reporting period.
The taxes that would apply in the event of the disposal of the investments in
investee companies have not been taken into account in the calculation of the
deferred taxes, so long as the sale of the investments in the investee
companies is not expected in the foreseeable future. Similarly, no deferred
taxes have been taken into account in respect of the distribution of profits by
investee companies as dividends, since the distribution of a dividend does not
involve an additional liability or as a result of the Company's policy not to
initiate the distribution of a dividend that would result in an additional tax
liability.
Deferred taxes that relate to items that are reflected directly under
shareholders' equity, are also reflected under the same items under
shareholders' equity.
Deferred tax assets and deferred tax liabilities are presented in the balance
sheet as non-current assets and as long-term liabilities, respectively.
Deferred taxes are set-off if a legal right exists that can be enforced and
which enables the setting off of a current tax asset against a current tax
liability and the deferred taxes relate to the same entity, which is chargeable
to tax to the same tax authority.
L. Share based payment transactions
The Company's employees are entitled to benefits by way of share based payments
in consideration for capital instruments (hereinafter - transactions that are
cleared with capital).
The cost of the transactions that are cleared with capital is recognized in the
statement of income together with the parallel increase in shareholders' equity
over the period in which the terms of the performance and/or the service are
met and ends at the time at which the relevant employees are entitled to
remuneration (hereinafter - the vesting period). The cumulative expense is
recognized in respect of transactions that are cleared with capital instruments
at each reporting date up to the time of vestments, reflecting the degree to
which the vesting period has passed and the Group's best estimate in respect of
the number of capital instruments that will vest at the end of the period. The
charge or the credit in the statement of income reflects the change in the
cumulative expense that has been recognized at the beginning and at the end of
the period.
The expense in respect of grants that will no vest at the end of the day is not
recognized, except for grants whose vesting is dependent on market terms, which
are handled as grants which have vested, with no connection to the existence of
the terms in the market, on the assumption that all of the performance terms
have been met.
Where the Company makes changes in the terms of the grant that is cleared with
capital instruments, an additional expense is recorded over and above the
original expense that was calculated. An additional expense is recognized in
respect of a change that increases the overall fair value of the share based
payment arrangement or which benefits the employee in accordance with the fair
value at the time of the change.
The cancellation of a grant that is to be cleared with a capital instrument is
treated as of it had vested at the date of the cancellation and the expenses
that have not yet been recognized in respect of the grant are recognized
immediately. Together with this, if the grant that was cancelled is replaced by
a new grant and this is intended as a replacement grant at the time that it was
granted, the cancelled grant and the new grant are both treated as a change in
the original grant as described in the previous paragraph.
M. Liabilities in respect of benefits to employees
The group maintains a number of post employment benefit schemes. The schemes
are generally financed by deposits in insurance companies and these are
designated as defined deposit schemes and also as defined benefit schemes.
1. Short-term benefits for employees
The short-term benefits to employees include salaries, holiday pay, sick leave,
recuperation pay and deposits for National Insurance, and these are recognized
as an expense when the services are provided. The liability in respect of a
cash bonus or a profit participation scheme is recognized where the Group has a
legal commitment or a deduced commitment to pay the said amount in respect of
service that has been given by the employ in the past and where the amount can
be reliably estimated.
2. Post retirement benefits
The Group has defined deposit schemes, in accordance with section 14 of the
Severance Pay Law, according to which the Group consistently makes payments
without it having a legal or inferred liability to make additional payments
even if sufficient funds have not accumulated in the funds in order to pay all
of the benefits to an employee that relate to the employee's service in the
current period and in previous periods. Deposits in the defined deposit schemes
are recorded as an expense at the time of the deposit in the scheme in parallel
to the receipt of labor services from the employee and no additional provision
is required in the accounting records.
Moreover, the Group operates a defined benefits scheme in respect of the
payment of severance pay in accordance with the Severance Pay Law. In
accordance with the Law, employees are entitled to receive severance pay when
they are dismissed or when they retire. The severance pay is calculated in
accordance with the last monthly salary of the employee at the time of the
termination of their employment, multiplied by the number of years for which
they were employed.
The Company deposits monies in respect of its liabilities to pay severance pay
for some of its employees, in a routine manner, in pension funds and in
insurance companies (hereinafter - plan assets).
The cost of the payment of severance pay is determined in accordance with the
forecast actuarial value of the forecast unit of entitlement. Actuarial gains
and losses are reflected in the statement of income in the period in which they
arise.
N. The recognition of income
Income is recognized in the statement of income when it can be reliably
measured, it is expected that the economic benefits that are connected to the
transaction will flow to the Company and where, in addition, the costs that
have been incurred or which will be incurred in respect of the transaction can
be reliably measured. Income is measured in accordance with the fair value of
the consideration for a transaction, less trade discounts, quantity discounts
and returns.
Income from transactions where the sale is made on credit, which include a
financing transaction are recorded at their present value, such that the
difference between the fair value of the transaction and denoted amount of the
consideration is recognized in the statement of income as financing income,
whilst using the effective interest method.
The following are specific directives in respect of the Group's income, which
have to be complied with in order for income to be recognized:
Income from the provision of services
Income from the provisions of services is recognized in accordance with the
stage of the completion of the transaction as of the balance sheet date. In
accordance with this method, the income is recognized in the reporting periods
in which the services have been provided. In the event that the results of a
contract cannot be measured in a reliable manner, the income is recognized only
in the event that it is possible to recoup the expenses that have been
incurred.
Revenues from software transactions
Software transactions comprise multi - component sales (e.g. software,
installation, integration, upgrades, support, training, consulting, etc.). The
Company is examining the components of the transaction, including those
supplied on the basis "if and when available", in order to decide whether the
components can be identified separately.
The Company recognizes revenues from the sale of goods as software transactions
only after the transfer of the significant risks and yields derived from
ownership of the goods to the buyer, where an essential but not satisfactory
condition is the condition of delivering the software, whether physically,
electronically, granting the right of use, or permission to make existing
copies. The Company recognizes revenues connected with the provision of
services from software transactions, whose results can be reliably measured,
according to the stage of completion of the transaction on the balance sheet
date. Should the services be provided in a number of steps, which cannot be
determined, over a defined period, revenues are recognized by the straight line
method over the defined period, unless proof exists that another method would
better reflect the stage of completion.
The reporting of income on the gross basis or on the net basis
In cases in which the Group operates as an agency or as a broker without
bearing the risks and being entitled to the yields that are derived from the
transaction, its income is presented on the net basis. As compared with this,
in cases in which the Group acts as the main supplier and bears the risks and
is entitled to the yields that are derived from the transaction, its income is
presented on the gross basis.
O. Earnings (loss) per share
The earnings per share has been calculated in accordance with the number of
ordinary shares. Only shares that were actually in existence in the course of
the period are included in the calculation of the basic earnings per share.
Potential ordinary shares (convertible securities such as convertible bonds,
options warrants and options to employees) are only included in the diluted
earnings per share in the event that their impact dilutes the earnings per
share, because their conversion reduced the earnings per share or increases the
loss per share from continuing activities. In addition, convertible securities
that were converted during the course of he period have been included in the
diluted earnings per share only up to the time of their conversion, and from
that time they have been included in the basic earnings per share. The
Company's share of the profits of investee companies has been calculated in
accordance with its share in the earnings per share of those same investee
companies as multiplied by the number of shares that the Company holds.
P. Disclosure in respect of new IFRS standards in the period before
their implementation
1. IFRS 8 - Operating segments
IFRS 8 (hereinafter - the standard), deals with operating segments and replaces
IAS 14. The standard will apply to companies whose securities are registered,
or which are in the process of registration, for trade on any securities
exchange whatsoever. The standard is to be applied in respect of financial
statements for periods commencing on January 1, 2009. The early implementation
of the standard is possible. The provisions of the standard are to be
implemented retrospectively, by way of restatement, unless the information that
is required in accordance with the provisions of the standard is not available
and it is not practical to find it.
The standard determines that an entity is to adopt the "management approach" in
its reporting on the financial performance of the operating segments. The
segmental information is to be the information that the management uses
internally for the purposes of evaluating segmental performance and for the
purposes of making decisions on the way in which resources are to be allocated
to the operating segments
Moreover, information is to be provided on the subject of the income that
derives from the entity's products or from the services that it provides (or
from a group of similar products or services), the countries from which the
income or the assets derive as well as the main customers, and this without
taking into account whether the management uses this information for the
purposes of its operating decisions.
The Company is examining the impact of the amended standard on the financial
statements, but it is unable to evaluate its results at this stage.
2. IAS 23 (Amended) - Credit costs
In accordance with the amended IAS 23, it is mandatory to capitalize credit
costs that relate directly to the acquisition and setting up or production of a
qualifying asset. A qualifying asset is an asset for which a significant period
of time is required for its preparation for its intended use or for its sale
and it is recorded under fixed assets, investment property or inventory that
requires an extended period of time in order to bring it to a state in which it
can be sold. The possibility of reflecting these costs immediately as an
expense has been cancelled.
The amended standard will apply as from the financial statements for periods
commencing on January 1, 2009. The early implementation of the standard is
possible.
In the Company's opinion, the standard is not expected to have a material
impact on its financial position, the results of its activities or its cash
flows.
3. IAS 1 (Amended) - Presentation of financial statements
In accordance with the amendment to IAS 1, there is also a requirement to
present an additional, separate report - "the statement of overall income", in
which there are to be presented, besides the amount of the net income, which is
taken from the statement of income, all of the items that have been reflected
during the reporting period directly under shareholder's equity and which do
not derive from transactions with shareholders (overall other income), such as
adjustments deriving from the translation of overseas activities, adjustments
of fair value for financial assets that are classified as available for sale,
adjustments to the revaluation reserve in respect of fixed assets and similar
items, as well as the tax effect of these item, which was also reflected
directly under shareholders' equity, with an appropriate attribution between
the Company and the minority interests. Alternatively, it is possible to
details of the overall other income together with the items in the statement of
income in one report, which is to be called "the statement of overall income",
which will come in place of the statement of income, with an appropriate
attribution between the Company and the minority interests. Only the times that
are reflected under shareholders' equity, which derive from transactions with
shareholders as shareholders (such as issues of capital, the distribution of a
dividend and similar items) are to be presented in the statement of changes in
shareholders' equity, as well as a summary row, which is to be carried over
from the statement of overall income, with an appropriate attribution between
the Company and the minority interests.
Moreover, the amendment determines that in cases where there is a change in the
comparative figures as the result of a change in the accounting policy, which
is implemented retrospectively, restatement or reclassification, a balance
sheet at the beginning of the period is also to be presented for the
comparative figures in respect of which the change was made.
The amendment of IAS 1 will apply in respect of the annual financial statements
for periods commencing on January 1, 2009. The early implementation of the
standard is possible.
The impact of the amendment to IAS 1 will be to require the Company to give the
disclosure that is required, as aforesaid, in the financial statements.
4. IFRS 3 (Amended) - Business combinations and IAS 27 (Amended) -
Consolidated and separate financial statements
IFRS 3, as amended, and IAS 27, as amended, (hereinafter - the standards) are
to be implemented in respect of the annual financial statements for periods
commencing on January 1, 2010. The early implementation of the two standards,
together, is possible, as from the annual financial statements for periods
commencing on January 1, 2008.
The following are the main changes that are expected to apply following the
implementation of the standards:
As of today, IFRS 3 determines that goodwill, in contrast to the other
identified assets and liabilities of the Company that is being acquired, is to
be measures as the surplus of the cost of acquisition over the acquiring
company's share of the fair value of the net identified assets at the time of
the acquisition. In accordance with the standards, it is possible to elect,
separately, in respect of each business combination transaction, to measure the
goodwill on the basis of its full fair value and not only in accordance with
the part that has been acquired.
A contingent consideration in a business combination is to be measured in
accordance with its fair value, where changes in the fair value of the
contingent consideration, which do not constitute adjustments to the cost of
acquisition in the period of measurement, are not to be recognized in parallel
as an adjustment of goodwill. Generally, the contingent consideration is to be
considered to be a financial derivative, to which IAS 39 applies, which is to
be presented at fair value with changes therein being reflected in the
statement of income.
Direct acquisition costs, which relate to a business combination transaction
are to be recognized in the statement of income as incurred, whereas the
requirement up to know, which was to reflect them as part of the consideration
for the cost of the business combination, has been cancelled.
A transaction with the minority interests, whether it is a sale or a purchase,
is to be treated as a transaction on the capital plain and therefore it will
not lead to recognition as a gain or loss and nor will it affect the amount of
the goodwill, respectively.
Losses of a subsidiary company, even if they lead to a capital deficit for the
subsidiary company, are to be allocated between the parent company and the
minority interests, even if the minority is not a guarantor or if it has no
contractual commitment to support the subsidiary company or to make an
additional investment.
At the time of the loss of control in a subsidiary company, the balance of the
holding, if it exists, is to be revalued as its fair value against the gain or
loss on the disposal and this fair value will form the basis for its cost for
the purposes of its continuing treatment.
In the Company's opinion, the standards are not expected to have a material
impact on its financial position, the results of its activities or its cash
flows.
5. IFRS 2 - Share based payments
In accordance with IFRS 2, as amended, (hereinafter - the amended standard),
the definition of the terms for vesting is to include only service terms and
performance terms, and in addition, the clearance of a grant, which includes
terms that are not vesting terms, whether by the Company and whether by the
other side, are to be treated by away of the acceleration of the vesting and
not by way of forfeiture. The standard is to be implemented retrospectively in
respect of financial statements for periods commencing on January 1, 2009. The
early implementation of the standard is possible.
Vesting terms include service terms, which commit the opposite party to
complete a defined period of service, and also performance terms, which require
the meeting of defined targets for performance. Terms that do not fall within
the bounds of service terms or performance terms are to be considered to be
terms that are not vesting terms and therefore they are to be taken into
account in the estimate of the fair value of the instrument that is granted.
The Company is examining the impact of the amended standard on the financial
statements, but it is unable to evaluate its results at this stage.
NOTE 3:- GEOGRAPHIC SEGMENTS
Three months ended March 31, 2008
Israel Europe North America Adjustments Total
Unaudited
British pounds in thousands
Revenue
from
external
customers 959 646 506 - 2,111
Inter
segment
sales - 21 - (21) -
Total
revenues 959 667 506 (21) 2,111
Segment
results 59 (18) 47 - 88
General
joint
expenses
unallocated (150)
Operating
loss (62)
Three months ended March 31, 2007
Israel Europe North America Adjustments Total
Unaudited
British pounds in thousands
Revenue
from
external
customers 712 633 481 - 1,826
Inter
segment
sales - 57 - (57) -
Total
revenues 712 690 481 (57) 1,826
Segment
results 45 98 (87) - 56
General
joint
expenses
unallocated (152)
Operating
loss (96)
Year ended December 31, 2007
Israel Europe North America Adjustments Total
Audited
British pounds in thousands
Revenue
from
external
customers 3,114 2,658 2,101 - 7,873
Inter
segment
sales - 232 - (232) -
Total
revenues 3,114 2,890 2,101 (232) 7,873
Segment
results 221 442 84 - 747
General
joint
expenses
unallocated (500)
Operating
income 247
Note 4: Share based payments
In January 2008, 295,000 non- marketable options, which are exercisable into
regular shares of the Company of par value 0.01 NIS each, were granted to
employees of the Company. The exercise price of the options on conversion into
shares is �0.14,for employee outside Israel and 1.265 NIS for Israeli employees
constituting the market value of 1.1% of total shares on the day on which the
share options were granted.
The fair value of the options was estimated at the time of the grant using the
binomial model, in accordance with the terms and the data according to which
the share options were granted.
The contractual lifetime of the share options, in the event that they do vest,
is 5 years from the time that they were granted.
The following are the data that were used in the measurement of the fair value
of the share options in accordance with the binomial model for the costing of
options in respect of the abovementioned plan.
The expected fluctuation in the share price - 65%
The risk free interest rate - 5.3%
The contractual lifetime of the share options - 5 years
The weighted average share price - �0.14
In accordance with the above data, the fair value of the options was determined
to be �34 thousands at the time of the grant.
Note 5: Material events during the course of the period
1. In January 2008 the Company has signed an acquisition contract
of activity salary surveys, training and consultancy in the sphere of salaries
and remuneration, in total cost of �191 thousands, which attributed to
intangible assets.
The Company has signed an acquisition contract of activity engaged in the
conducting of salary surveys, in total cost of �23 thousands, which attributed
to intangible assets.
Note 6: Events after the balance sheet date
On April 2008 the directors of the company declared a dividend of 1p per
ordinary share, in respect of the year ended 31 December 2007. the total sum of
the dividend is �265,391. the payment date is 26 June 2008.
On 17 April 2008, the company engaged the services of a financial adviser to
produce valuation reports on the Company and Adam-Milo Ltd., a private Israeli
company engaged in the provision of assessment, recruitment and organisational
consulting services. Adam Milo is controlled by Sky Private Equity Fund,
("Sky") who also control 23 percent of the issued share capital of Pilat
Following the receipt of the valuation reports the board will decide whether
the company should enter into negotiations with Sky concerning a possible
transaction.
At this stage there is no certainty that a transaction will proceed and
the two companies continue to trade separately.
Note 7 :- Disclosure regarding adoption of international financial
reporting standards (IFRS)
As described in Note 2A, these interim financial statements are the first
interim financial statements of the Company to be prepared in accordance with
the IFRS standards. The Company has adopted the IFRS standards for the first
time in 2008 and accordingly the time of the transition to reporting in
accordance with the IFRS standards is January 1, 2007. The Company has prepared
an opening balance sheet as of the time of the transition, from which the
reporting in accordance with the IFRS standards has commenced.
Prior to the adoption of the IFRS standards, the Company prepared its financial
statements in accordance with generally accepted accounting principles in
Israel.
The last interim financial statements that the Company prepared in accordance
with generally accepted accounting principles in Israel, were prepared as of
September 30, 2007 and for the period of none months and of three months ended
on that date. The first annual financial statements in accordance with the IFRS
standards will be the financial statements as at December 31, 2008 and for the
year ended on that date.
Accordingly, the Company presents the following adjustments between the
reporting in accordance with generally accepted accounting principles in Israel
and the reporting in accordance with the IFRS standards as of January 1, 2007
(the time of the transition to reporting in accordance with the IFRS
standards), as at December 31, 2007 and for the year ended on that date and as
of March 31, 2007 and for the period of three months ended on that date.
IFRS 1 in respect of the initial adoption of the IFRS standards determines, as
a matter of principle, that the implementation of the IFRS standards in the
opening balance sheet as of the transition to reporting in accordance with the
IFRS standards is to be done retrospectively (ab initio).
IFRS 1 permits a number of subjects in respect of which the retrospective
implementation at the time of the transition to reporting in accordance with
the IFRS standards is not required.
The Group has elected to adopt the following easements:
1. Share based payments
IFRS 2, which deals with share based payment transactions, has not been
implemented in respect of capital instruments, which were granted before
November 7, 2002 and which vested before the time of the transition. The Group
has not implemented IFRS 2 in respect of liabilities that were cleared before
the time of the transition in respect of share based payments transactions,
which are cleared in cash
2. Employee benefits
The Group recognizes all of the net actuarial gains or losses that had
accumulated as of January 1, 2007 and has reflected them in the balance of
retained earnings under shareholders' equity
January 1, 2007 March 31, 2007 December 31, 2007
Effect of Effect of Effect of
Israeli transition to Israeli transition to Israeli transition to
Note GAAP IFRS IFRS GAAP IFRS IFRS GAAP IFRS IFRS
British pounds in thousands
CURRENT
ASSETS
Cash and
cash
equivalents 2,044 - 2,044 1,770 - 1,770 2,411 - 2,411
Short term
investments 144 - 144 147 - 147 147 - 147
Trade
receivables 1,828 - 1,828 2,120 - 2,120 2,013 - 2,013
Other
accounts
eceivable 1 208 - 208 272 (21) 251 298 (20) 278
4,224 - 4,224 4,309 (21) 4,288 4,869 (20) 4,849
NON-CURRENT
ASSETS
Loans and
receivables 14 - 14 21 - 21 25 - 25
Employees
benefits
assets 2 - 20 20 - 17 17 - 52 52
Fixed
assets, net 350 - 350 362 - 362 297 - 297
Deferred
taxes 1 2 (2) - 4 13 17 2 5 7
Intangible
assets - - - - - - 14 - 14
366 18 384 387 30 417 338 57 395
TOTAL
ASSETS 4,590 18 4,608 4,696 9 4,705 5,207 37 5,244
January 1, 2007 March 31, 2007 December 31, 2007
Effect of Effect of Effect of
Israeli transition Israeli transition Israeli transition
Note GAAP to IFRS IFRS GAAP to IFRS IFRS GAAP to IFRS IFRS
British pounds in thousands
CURRENT LIABILITIES
Current maturities
of long-term bank
loans 18 - 18 16 - 16 10 - 10
Trade payable 334 - 334 405 - 405 359 - 359
Other accounts
payable 1 1,266 (19) 1,247 1,325 - 1,325 1,534 - 1,534
1,618 (19) 1,599 1,746 - 1,746 1,903 - 1,903
NON-CURRENT
LIABILITIES
Liabilities to
banks 15 - 15 13 - 13 6 - 6
Employees benefits
liabilities 2 12 (9) 3 22 (19) 3 16 (13) 3
Liabilities related
to discontinued
operations 12 - 12 12 - 12 13 - 13
Deferred taxes 1,2 - 24 24 - - - - - -
39 15 54 47 (19) 28 35 (13) 22
TOTAL LIABILITIES 1,657 (4) 1,653 1,793 (19) 1,774 1,938 (13) 1,925
SHAREHOLDERS' EQUITY
Share capital 49 - 49 49 - 49 50 - 50
Additional paid-in
capital 7,078 - 7,078 7,078 - 7,078 7,083 - 7,083
Capital reserve 4 - 32 32 3 34 37 8 37 45
Cumulative foreign
currency
translation
adjustments (251) - (251) (210) - (210) (103) - (103)
Accumulated deficit (3,847) (10) (3,857) (3,921) (6) (3,927) (3,673) 13 (3,660)
Less-shares held by
subsidiaries (96) - (96) (96) - (96) (96) - (96)
2,933 22 2,955 2,903 28 2,931 3,269 50 3,319
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY 4,590 18 4,608 4,696 9 4,705 5,207 37 5,244
b. The following are adjustments to
the statement of income between reporting in accordance with GAAP and in
accordance with IFRS
For the three months ended March 31, 2007 For the year ended December 31 2007
Effect of Effect of
Israeli transition to transition to
Note GAAP IFRS IFRS Israeli GAAP IFRS IFRS
� thousands- excluding data on net earnings per share
Revenues 1,826 - 1,826 7,873 - 7,873
Cost of revenues 2,4 1,189 (4) 1,185 4,649 (26) 4,623
Gross profit 637 4 641 3,224 26 3,250
Research and
development costs 75 - 75 500 - 500
Selling and marketing
expenses 237 - 237 880 - 880
General and
administrative expenses 2,4 426 (1) 425 1,626 (5) 1,621
Other expenses, net - - - 2 - 2
Operating income (loss) (101) 5 (96) 216 31 247
Capital gain from sale
of fixed assets - - - 3 - 3
Financial income 3 12 - 12 74 - 74
Financial expenses 3 (14) - (14) (100) - (100)
Net income before taxes
on income (103) 5 (98) 193 31 224
Taxes on income
(expenses) 2 29 (1) 28 (19) (8) (27)
Net income (74) 4 (70) 174 23 197
Net earnings per share (in British pence):
Basic net earnings (0.28) 0.01 (0.27) 0.67 0.08 0.75
Diluted net earnings (0.28) 0.02 (0.26) 0.65 0.08 0.73
c. Notes to the adjustment of the balance sheet as at January 1,
2007,and March 31, 2007 and December 31, 2007, and the statement of income for
the three months ended March 31, 2007 and for the year ended December 31, 2007
between reporting in accordance with Israeli GAAP and in accordance with the
IFRS
1. Deferred taxes
According to Israeli GAAP,deferred taxes are presented as short-term assets
in other receivables and their balance totals � 20 thousand and an additional
of �2 thousand was presented in long-term deferred taxes assets. Upon the
transition to reporting in accordance with IFRS, according to International
Accounting Standard (IAS) 12 - "taxes on income", all deferred taxes balances
are presented as non-current assets.
2. Benefits to employees
According to Israeli GAAP, the balance sheet liability for severance pay is
measured on the basis of the number of years of employment and the latest
monthly salary of each employee according to the "shut down method".
The funded amount for severance pay is measured in accordance with the
redemption value on the balance sheet date.
According to International Accounting Standard 19 - IAS 19 - "benefits to employees"
a severance pay plan of the Company is considered as a defined benefit plan, and
therefore the liability for employees benefits must be presented on an actuarial basis.
The actuarial calculation takes into account future salary increases and the
employees' turnover rate as the basis of the evaluation of the timing and size
of future payments.
According to IAS 19 the actuarial calculation must be based on the rate of interest
of investment grade, shekel denominated, corporate bonds, whose due -date is closely
matched to the period of the liability relating to the severance pay. However the
interest rate used in calculating the actuarial liability is based on interest
rates for Israeli Government bonds with similar due dates, as in the Company's
opinion, the market for investment grade shekel denominated corporate bonds is
limited. The subject of discount rate is being examined and it is possible
that in future the interest rate used will be of suitable corporate bond.
Should the interest rate change the impact of the use of a higher interest rate
will reduce the actuarial liability on the one hand and increase the current
financing expenses for the actuarial liability on the other hand.
According to the provisions of IFRS 1, the Company has chosen the exemption according
to which it recognizes in its retained earning all net actuarial profits or losses as at
January 1, 2007. Upon the transition to reporting in accordance with IFRS, the balance of
the employees benefit liabilities has declined by �9 thousand, the employees
benefit assets increased by �20 thousand and the net balance of deferred taxes
increased by �7 thousand. In total, the net difference of the measured amounts
of the net liabilities as at January 1, 2007 results in an increase of about �
22 thousand.
On December 31, 2007, the balance of employees benefit liabilities decreased by
�13 thousand, the employees benefit assets increased by �52 thousand and the
balance of deferred taxes liabilities less deferred taxes assets increased by �
15 thousand. In total, the difference between the measured amounts of assets
less net liabilities resulted in an increase of about �50 thousand.
As a result of the change in the balances during 2007, the Company recognized a
reduction in remuneration expenses in the cost of revenues of �30 thousand, a
reduction in remuneration expenses of general and administrative expenses of �6
thousand and additional deferred tax expenses of �8 thousand.
3. Financing revenues and expenses
According to Israeli GAAP, financing expenses and revenues were presented net
in the statement of income. According to IFRS standards financing expenses and
financing revenues must be presented separately in the statement of income and,
therefore, financing expenses of �100 thousands and financing revenues of �74
thousand were presented for the year ended December 31, 2007.
4. Share-based payments
According to the provisions of Accounting Standard No. 24 of
the Israel Accounting Standards Board - "Share-based Payments", the Company
recognized a benefit for grants to employees only regarding share-based payment
transactions made before March 15, 2005, and which have not yet vested by
January 1, 2006.
Upon the transition to reporting in accordance with IFRS
standards, the Company has adopted the provisions of International IFRS 2,
"Share-based Payments", which state that the financial benefit must be measured
for the granting of such capital instruments, made before March 15, 2005, but
after November 7, 2002, and which have not yet vested on January 1, 2007.
END
Pilat (LSE:PIA)
Historical Stock Chart
From Oct 2024 to Nov 2024
Pilat (LSE:PIA)
Historical Stock Chart
From Nov 2023 to Nov 2024
