REG - BATM Advanced Comm - Full Year Results
28/02/2022 07:00
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RNS Number : 9419C BATM Advanced Communications Ld 28 February 2022
LEI: 213800FLQUB9J289RU66
28 February 2022
BATM Advanced Communications Limited
("BATM" or the "Group")
Full Year Results 2021
Substantial progress across the business drives strong underlying growth
BATM (LSE: BVC; TASE: BVC), a leading provider of real-time technologies for
networking solutions and medical laboratory systems, announces its preliminary
results for the year ended 31 December 2021.
Financial Summary
$m 2021 2020 Change
Results from ongoing operations (adjusted)*
Revenue 132.8 112.6 +18.0%
Gross profit 50.2 41.0 +22.5%
Gross margin 37.8% 36.4% +140bps
Operating profit 11.3 2.6 +339.5%
EBITDA 15.7 6.6 +138.8%
Reported results
Revenue 140.0 183.6 (23.7%)
Gross profit 51.1 60.7 (15.9%)
Gross margin 36.5% 33.1% +340bps
Operating profit 24.4 14.2 +71.3%
EBITDA 29.6 19.7 +50.4%
Cash from operations 8.7 20.1 (56.8%)
Basic earnings per share (cents) 3.26¢ 2.22¢ +46.8%
Cash and financial assets 67.8 53.4 +26.9%
* Adjusted to present the results on an ongoing operations basis by excluding
(1) the contribution to both years from NGSoft, a subsidiary that the Group
sold in March 2021, (2) the contribution to 2020 from a significant contract
for the supply of ventilators, which was exceptional in nature, and (3) the
amortisation of intangible assets for both years. The term 'ongoing
operations' in this announcement is used for comparative purposes only and is
not used in the same context as in accounting standards. For further
information see Note 3 - Other alternative measures.
Operational Summary
Bio-Medical Division (84% of total revenue from ongoing operations)
· Revenue from ongoing operations (excluding the contribution to 2020
from an exceptional ventilator contract) increased by 17.7% to $112.0m (2020:
$95.2m), reflecting growth in all units
· Diagnostics Unit - revenue +38%
o Significant sales growth driven by strong global demand for COVID-19 test
kits (reagents) and diagnostic instruments and supported by increased sales of
products in other disease areas
o Expanded COVID-19 diagnostics portfolio with launch of new solutions,
including a test that uses self-collected saliva samples and the RAPiDgen®
SARS-CoV-2 Ag test for at-home use
o PCR and iso-thermal method being developed by the Group for the rapid and
comprehensive diagnosis of tuberculosis received the backing of the Stop TB
Partnership, an international alliance
· Eco-Med Unit - revenue +37% (excl. contribution from exceptional
ventilator contract)
o Returned to underlying growth with delivery resuming on contracts for the
installation of the Group's ISS-based pathogenic waste treatment solution
o Progress made in projects with Ceva Animal Health and a Taiwanese
agri-food conglomerate
o Awarded a contract for its agri-waste treatment solution by a cattle
facility in Botswana - the Group's first contract for its agri-waste solution
in Africa
· Distribution Unit - revenue +9%
o Increased revenue driven by the distribution of several molecular tests
and of COVID-19 diagnostic reagents and equipment
Networking and Cyber Division (16% of total revenue from ongoing operations)
· Revenue from ongoing operations (which excludes the contribution from
NGSoft to both years) increased by 19.5% to $20.7m (2020: $17.3m), reflecting
underlying growth in both the Networking and Cyber units
· Networking Unit - revenue +13% (excl. contribution from NGSoft)
o Launched Edgility, an ecosystem of networking products and services for
edge computing based on the Group's network function virtualisation ("NFV")
technology
§ Won two edge computing contracts expected to be worth an aggregate of $2.7m
over a multi-year period, which commenced generating revenue post year end
§ Successful proof-of-concepts conducted with several potential customers and
partners worldwide, which the Group expects will translate to orders in 2022
§ Established four new partnerships, including one post period, to boost
Edgility sales and market presence through the offering of joint solutions
§ Expanded addressable market with enhancement of Edgility OS to enable use
for public cloud environments
o Network Edge (Carrier Ethernet)
§ Resumption of normal business practices resulted in an increase in revenue
during the year and a substantial increase in backlog, which is for delivery
in 2022
§ Awarded a contract from a new tier 1 telecommunications operator customer
in APAC, which contributed significantly to the unit's growth
· Cyber Unit - revenue +111%
o Awarded over $18m in cyber security contracts from a long-standing
government defence department customer
o Delivery of these orders commenced during the year and will continue in
2022 and 2023
o The contracts include a $10m multi-year contract for the delivery of an
advanced network security solution containing elements of NFV protection
Commenting on the results, Dr Zvi Marom, Chief Executive Officer of BATM,
said: "We are delighted to be announcing another excellent set of results with
growth from ongoing operations in all of our business units. We are
particularly proud of the significant progress made in our Diagnostics unit,
where our investment in recent years has really come to fruition, and of the
substantial contracts awarded during the year in our cyber business. We were
also excited to launch our Edgility platform for edge computing and virtual
networking, which we believe will be a key driver of our future growth.
"Looking ahead, we entered the new year with sustained momentum across the
business and we remain on track to deliver significant growth for full year
2022, in line with market expectations. We have established solid foundations
in core technologies that are now at an inflexion point of becoming market
disrupters. We will continue to cultivate growth and development across our
business as well as pursue opportunities to accelerate the realisation of the
value of the IP within our different units through strategic transactions. We
have an exciting future ahead of us and we look forward to reporting on our
progress and delivering value for our shareholders."
Enquiries:
BATM Advanced Communications
Dr Zvi Marom, Chief Executive Officer +972 9866 2525
Moti Nagar, Chief Financial Officer
Shore Capital
Mark Percy, Anita Ghanekar, James Thomas (Corporate Advisory) +44 20 7408 4050
Henry Willcocks (Corporate Broking)
Luther Pendragon
Harry Chathli, Claire Norbury +44 20 7618 9100
The information communicated in this announcement is inside information for
the purposes of Article 7 of Regulation 596/2014.
Investor & Analyst Presentations
Dr Zvi Marom, Chief Executive Officer, and Moti Nagar, Chief Financial
Officer, will be holding presentations for analysts and investors today, 28
February 2022, at 9.00am GMT and 5.30pm GMT respectively. To register to
attend, please contact Lara Apstein at Luther Pendragon at
laraapstein@luther.co.uk (mailto:laraapstein@luther.co.uk)
Forward-looking statements
This document contains forward-looking statements. Those statements reflect
the current opinions, evaluations and estimations of the Group's management,
and are based on the current data regarding the Group's business as is
detailed in this document and in the Group's periodical, interim and immediate
reports. The Group does not undertake any obligation or make any
representation that actual results and events will be in line with those
statements, and stresses that they may differ materially from those
statements, due to changes in the Group's business, market, competition,
demand for the Group's products or services, general economic factors or other
factors that can influence the Group's business and results, and due to
information and factors that are currently unknown to the Group's management
and that, if known, would affect the management's opinions, evaluations or
estimations. The Group will report the actual results and events according to
its legal, accounting and regulatory obligations, and does not undertake any
other obligation to report them or their deviations from the forward-looking
statements, or to update any of the forward-looking statements in this
document or to report that it is not valid anymore.
Group Strategy
BATM brings world-leading expertise and IP to deliver innovative, robust,
reliable and cost-effective solutions to complex challenges in
mission-critical applications in the Group's focus sectors of bio-medicine and
networking and cyber security. The Group serves a diverse range of customers
globally, including large enterprises and governments. BATM delivers value
creation from novel idea, to scale-up and mass-market success, and seeks to
maximise the long-term value of its businesses through organic and inorganic
strategies. A focus on molecular diagnostics, networking and cyber security
reflects both the growth opportunities within those markets and the Board's
belief that BATM has the ability to build innovative and disruptive businesses
in these sectors with inherent value that can be realised on strategic
disposal.
Operational Review
The 12 months to 31 December 2021 was another year of strong operational and
strategic delivery for BATM, with underlying growth in all of the Group's
business units in both divisions (excluding the contribution from NGSoft to
both years and the Group's exceptional ventilator contract to 2020). In
particular, the underlying growth of the Group was led by the significant
increase in sales in the Diagnostics unit of the Bio-Medical division. This
was based on sustained demand for the COVID-19 diagnostic solutions that the
Group had developed in the prior year while it continued to expand its
portfolio with the launch of further tests offering significant advantages in
speed and ease-of-use. In the Networking and Cyber division, the Group
launched its edge computing and NFV offering, Edgility, which the Board
expects will be a key driver of future growth. During the year, a number of
customers and partners were secured for Edgility and, post year end, initial
revenue generation has commenced.
As noted, there was underlying growth in all of the Group's business units as
normal business practices increasingly resumed in several of its markets that
had experienced a slowdown due to the impact of the COVID-19 pandemic and
associated restrictions on travel. In addition, BATM continued to execute on
its value creation strategies with the sale of its non-core NGSoft subsidiary,
which generated a capital gain of $13.0m.
Bio-Medical Division
The Bio-Medical division consists of three units: Diagnostics, Eco-Med and
Distribution. In Diagnostics, the Group develops its own in-vitro diagnostic
instruments and reagents (assay kits or panels) to detect and diagnose viral
infections, immune system diseases and measure hormone responses (such as
levels of insulin in diabetes). The Eco-Med unit develops and supplies
innovative solutions to sustainably treat pathogenic waste, such as in
medical, pharmaceutical or agricultural settings, using an
environmentally-friendly process. In the Distribution unit, BATM administers
diagnostic tests and distributes diagnostic equipment and medical supplies of
other leading brands.
Reported Adjusted*
$m 2021 2020 Change 2021 2020 Change
Revenue 112.0 128.7 (12.9%) 112.0 95.2 17.7%
Gross margin 36.4% 36.3% 10bps 36.5% 34.8% 170bps
Operating profit 16.5 19.2 (13.7%) 17.0 10.1 67.4%
* Adjusted to present the results an ongoing operations basis by excluding (1)
the contribution to 2020 from a significant contract for the supply of
ventilators, which was exceptional in nature, and (2) the amortisation of
intangible assets for both years.
On an underlying basis, to exclude the contribution to 2020 from the
exceptional ventilator contract in the Eco-Med unit, revenue for the
Bio-Medical division increased by 17.7% to $112.0m (2020: $95.2m), reflecting
growth in all units. Adjusted gross margin improved significantly to 36.5%
(2020: 34.8%), primarily reflecting the Diagnostics unit's growth in sales and
the increased contribution to revenue from molecular diagnostics and COVID-19
products, which are high-margin. Similarly, there was a substantial increase
the Bio-Medical division's underlying operating profit to $17.0m (2020:
$10.1m) due to the higher revenue and improvement in gross margin.
Diagnostics
The Diagnostics unit achieved significant growth in 2021, with revenue
increasing by 37.7% and accounting for 28.2% of Bio-Medical division revenue
(2020: 24.1% of Bio-Medical division revenue excluding the contribution from
the ventilator contract). This growth was driven by sustained demand for the
Group's diagnostic tests for COVID-19 as well as sales of its diagnostic
instruments (readers) that were frequently ordered alongside the reagents.
However, there was also growth in sales of the Group's diagnostic products in
other (non-COVID-19) disease areas. To cater for the increased demand, the
Group further expanded the production capacity of its Adaltis facility in
Rome, Italy.
COVID-19 diagnostic tests
As noted above, the Group continued to receive strong demand for its COVID-19
solutions during 2021, with customers primarily being public health
authorities in Europe, the Middle East and South East Asia. The Group also
continued to expand its portfolio of COVID-19 tests with the launch of a
saliva-based PCR test and rapid lateral flow test:
· The Group's test that uses self-collected saliva samples to diagnose
COVID-19 using the RT-PCR technique involves the individual spitting into a
collector tube rather than deep swabbing via the nose (nasopharyngeal swab) or
back of the throat (oropharyngeal swab). This offers advantages in terms of
speed and ease of sample collection as well as lab processing and it is more
cost effective than the RT-PCR process for standard swab-based tests. The
test, which detects all known variants, is being produced at the Group's
Adaltis facility.
· The Group's RAPiDgen® SARS-CoV-2 Ag test is a lateral flow test for
at-home use with an easy-to-use design and that gives results in 10 minutes.
Developed by the Group's Adaltis subsidiary and Gamidor Diagnostics
("Gamidor"), it is being marketed in Europe under the Adaltis brand and
produced at Gamidor's facility in Israel, with initial deliveries being to
public health authorities.
Together with the tests launched in the previous year, the Group has a
comprehensive range of tests for diagnosing COVID-19 that cater for the
requirements of different customers or users (whether in terms of speed,
accuracy, ease or method of use), and offering advantages compared with many
competing solutions in terms of speed, accuracy and ease of use. The Board
believes that this demonstrates the key strengths of the Group, which is the
ability to bring together its expertise and IP, and the right partners, to
develop and deliver innovative and reliable solutions to address complex
challenges.
Progress in other disease areas
Sales of the Group's diagnostic products that are not related to COVID-19
testing also increased during the year. In particular, there was growing
demand for reagents to detect HIV (human immunodeficiency virus), HPC
(hepatitis C) and HPV (human papillomavirus) among others.
The Group also progressed its development work. Its new molecular diagnostics
test that is able to test for multiple respiratory pathogens (that often
present with overlapping symptoms) at the same time continued to advance
through the certification and validation stage and the Group expects to
commence sales in the current year. In under an hour, this test can identify
the pathogen causing a respiratory illness, enabling the correct treatment or
action to be rapidly implemented. It can detect all prominent respiratory
viruses as well as the bacteria that cause serious pulmonary illnesses, such
as pneumonia and Legionnaires' disease. By detecting multiple pathogens on the
same test (multiplexing), with a single patient sample, patients, laboratories
and healthcare providers benefit from a reduction in unnecessary testing and
gaining important insights more quickly.
Ador Diagnostics
Ador Diagnostics ("Ador"), the Group's associate company, is primarily focused
on developing the NATlab molecular biology solution that provides rapid
sample-to-answer diagnosis of bacterial, viral or fungal infections using DNA
or RNA sampling.
During the year, Ador progressed the development of its innovative diagnostics
technology that uses the rolling circle amplification ("RCA") method. The RCA
method offers a number of advantages over the more prevalent PCR method. This
includes allowing for the multiplexing of a far higher number of pathogens,
and enabling test results to be provided in a significantly shorter timeframe
and with greater accuracy. During the year, clinical trials were successfully
completed of the meningitis panel that Ador has developed based on the RCA
method. The Group expects Ador to commence sales of RCA-based testing kits to
laboratories during the current year. Work also continued on incorporating the
RCA method into the NATlab system, which is primarily designed for use at
point-of-care rather than laboratories. The Group expects Ador to commence
sales of the RCA-based NATlab instruments and reagents to point-of-care
settings next year.
Ador, alongside the Group's Adaltis subsidiary, also received the backing of
the Stop TB Partnership, an international alliance comprising governmental and
non-governmental organisations, for a new method that the Group has developed
(in cooperation with a leading university in Italy and the University of
Heidelberg) for the rapid and comprehensive diagnosis of tuberculosis using
the RCA process. The testing and validation of products developed under this
programme is taking place, and the Group expects commercial-scale testing to
start next year, which is being part-funded under a programme of the Stop TB
Partnership.
Post year end, as announced on 31 January 2022, the Group and its partners
invested an additional $10m into Ador, of which the Group contributed $4m
(giving the Group a shareholding of 37.2%). The additional investment will be
used to prepare Ador for the pre-production stage, register additional patents
(mainly in the US), progress development of more disease panels and
certifications, and increase the cooperation with international bodies,
including the World Health Organisation.
Eco-Med
On an underlying basis, to exclude the contribution to the Eco-Med unit in
2020 of the exceptional ventilator contract, revenue increased by 37.1% and
accounted for 7.7% of the Bio-Medical division's revenue in 2021 (2020: 6.6%
of Bio-Medical division revenue excluding the contribution from the ventilator
contract). On a reported basis, revenue in the Eco-Med unit in 2021 was
substantially lower than the prior year due to the significant ventilator
contract in 2020.
The underlying growth was based on delivery on the Group's contracts for the
installation of its pathogenic waste treatment solutions based on its
Integrated Steriliser and Shredder ("ISS") technology that had been paused
during 2020 owing to government lockdowns and restrictions on travel following
the global pandemic. In particular, the Group progressed the delivery of its
contract to expand and enhance the ISS-based solution installed at the
Hungarian facility of Ceva Animal Health, a leading developer of animal health
products, and with the installation of its ISS-based solution for its
agri-food conglomerate customer in Taiwan. The completion of the delivery of
these contracts is expected to occur in the first half of 2022, subject to
government restrictions in these countries due to COVID-19.
Distribution
Revenue in the Distribution unit increased by 8.9% in 2021 over the prior year
and accounted for approximately 64.1% of the Bio-Medical division's revenue
(2020: 69.3% of Bio-Medical division revenue excluding the contribution from
the ventilator contract).
The growth was driven by the distribution of several molecular biology tests
and, in particular, reflects the ongoing demand for COVID-19 reagents and
diagnostic equipment. In addition, post year end, the Group has begun
providing its distribution activities in Hungary, albeit the Group does not
expect this to make a material contribution to the Distribution unit's revenue
in the near term.
Networking and Cyber Division
The Networking and Cyber division consists of two units: Networking and Cyber.
The Networking unit develops and supplies wide-area access solutions to
mobile, cloud and wireline infrastructure markets. Innovation is primarily
focused on virtualisation and edge computing in the Group's Edgility business,
while the Group continues to supply (with some development work) carrier
ethernet and multiprotocol label switching (MPLS) access solutions in its
Network Edge business. In the Cyber unit, the Group provides network
monitoring and encryption solutions for very high speed, large area networks.
Reported Adjusted*
$m 2021 2020 Change 2021 2020 Change
Revenue 28.0 54.9 (49.0%) 20.7 17.3 19.5%
Gross margin 36.9% 25.5% 1,140bps 45.0% 45.6% (60)bps
Operating profit/(loss) 7.8 (4.9) 259.0% (5.6) (7.6) 25.3%
* Adjusted to present the results an ongoing operations basis by excluding (1)
the contribution to both years from NGSoft, a subsidiary that the Group sold
in March 2021, and (2) the amortisation of intangible assets for both years.
Revenue for the year from ongoing operations in the Networking and Cyber
division (excluding the contribution to both years from NGSoft) increased by
19.5%, reflecting growth in the both the Networking and Cyber units as market
conditions increasingly normalised following the impact of COVID-19. This is
demonstrated by revenue from ongoing operations for the second half of 2021
being 27.4% higher than the first six months of the year.
There was a slight reduction in gross margin from ongoing operations due to
increased materials costs related to the global challenges of electronic
component shortages. However, gross margin from ongoing operations was
substantially higher than reported gross margin (which includes NGSoft), owing
to the lower margin nature of the NGSoft business.
Operating loss from ongoing operations was reduced to $5.6m (2020: $7.6m)
thanks to the higher revenue. A significant proportion of the operating
expenses in the Networking and Cyber division is related to the investment in
establishing the Group's NFV offering, which the Board believes will be a key
driver of future growth.
On a reported basis, the Networking and Cyber division recorded an operating
profit as a result of the capital gain of $13.0m from the sale of NGSoft.
Networking
In the Networking unit, revenue from ongoing operations (excluding the
contribution to both years from NGSoft) increased by 13.4%, which was based on
growth in Network Edge (Carrier Ethernet) sales.
Edgility - Edge Computing and NFV solutions
During the year, the Group launched Edgility, which is its new brand of
networking products and services designed for virtualisation and edge
computing and based on the Group's NFV operating system, Edgility OS (formerly
NFVTime). Edgility OS enables telecoms operators and service providers to
deploy their own virtualised software-based networks. Virtual networks can be
a key element in allowing operators to leverage the benefits of 5G through
edge computing and provide additional differentiated services to their
enterprise customers as well as reducing the costs, time and carbon footprint
involved with physical networks. The name 'Edgility' also reflects the Group's
focus on edge computing whereby data processing takes place at the network
edge, nearer to the end device, to improve response times and save bandwidth.
Edge computing is fundamental in enabling Internet of Things ("IoT")
technologies.
Towards the end of the year, the Group was awarded two contracts for Edgility,
which are expected to have an aggregate value of $2.7m over a five-year
period, and initial revenue generation commenced post year end. The first
enterprise customer was signed for Edgility, CEMEX, S.A.B, (NYSE: CX), which
is a global construction materials company that intends to use the platform to
enable seamless managed connections between CEMEX facilities worldwide,
connecting its thousands of locations. This followed an extensive
proof-of-concept, during which the Group's R&D team developed and
implemented several bespoke technology features to meet the customer's
requirements. The other contract was awarded by e-Qual, a global Managed
Services Provider (MSP) based in France that operates in 55 countries, which
selected Edgility to improve the management and orchestration (MANO) platform
for its managed enterprise services.
Edgility continued to undergo evaluation with leading network operators and
multi-service providers worldwide, with successful proof-of-concepts being
conducted with several potential customers and partners. The Group expects a
number of these to translate to orders in 2022.
To expand the sales and marketing reach, and provide further routes to market,
the Group established a number of strategic partnerships, primarily involving
Edgility being pre-integrated with, or pre-installed on, the partner's network
appliances (with customers that use the Edgility solution contracting with the
Group directly). The Group expects these partnerships will accelerate the
adoption and sales of Edgility. This includes partnerships with:
· AudioCodes (NASDAQ, TASE: AUDC), a leading provider of advanced
communications software, products and productivity solutions for the digital
workplace, where Edgility has been made available on AudioCodes' Mediant 800
uCPE multi-service business router.
· albis-elcon, a German-based supplier of networking products and
services primarily to tier 1 telecommunications operators in Europe and Latin
America, which has integrated Edgility into its recently launched uSphir
solution.
· Stem Connect, which services enterprise and telecommunication customers
in the UK, France and South Africa and will offer Edgility to its customers.
· Post year end, Advantech (TWSE: 2395), a global leader in industrial
IoT, which will provide Edgility pre-installed on a variety of its universal
edge network appliances.
The Group also continued to develop and expand its Edgility product offering.
It completed the enhancement of Edgility OS to enable certified compatibility
with public cloud environments, such as Amazon Web Services and Microsoft
Azure. This expands the addressable market for the product to customers that
operate cloud-based networks, which is typically enterprise customers or
larger operators with a multinational footprint, as well as those that lack
the internal resource to run the software in their datacentre. The Group
launched new products under the Edgility product suite, including a Fast
SD-WAN & Firewall offering (in partnership with Clavister) that provides
secure network connectivity for the small office and home office market.
Network Edge solutions and services
Revenue from network edge solutions and services (formerly described as the
Group's 'Carrier Ethernet' business) grew as normal business practices
increasingly resumed following the slowdown as a result of COVID-19. There was
growth in revenue in all geographic regions where the Group operates, which
was primarily based on repeat business from existing clients, but also some
new customers. In particular, the Group was selected as the preferred supplier
by a tier 1 telecommunications operator in APAC to provide demarcation units,
which made a significant contribution to the growth in Network Edge revenue.
The Group's backlog in this unit was also significantly higher at year-end
than at the start of the year, although this partly reflects the impact of
global electronic components shortages that have delayed delivery of some of
the Group's orders into 2022.
Cyber
During 2021, the Group was awarded cyber security contracts totalling $18m
from its long-standing government defense department customer. This includes a
$10m contract for an advanced solution that includes a unique cyber defence
capability for large volume high speed network traffic combined with elements
of virtualisation protection developed under the Group's NFV offering.
The Group commenced delivery on these contracts during the year, which
resulted in growth in the Cyber unit's revenue compared with 2020. However,
the vast majority is to be delivered in 2022 and 2023, which partly reflects
the impact of global electronic components shortages that have delayed some
delivery into 2022.
During the year, the Group also continued its development efforts. In
particular, it is in the process of developing a version of its cyber security
solution aimed beyond the defence industry, which will expand the addressable
market.
Sale of NGSoft
As announced on 19 March 2021, during the year BATM sold its NGSoft subsidiary
to Aztek Technologies (1984) Ltd., a provider of ICT cloud services in Israel
and a portfolio company of SKY Fund. NGSoft is a software and digital services
company that provides creative digital and technology solutions. Its
development activities did not include any of the Group's NFV or cyber
solutions. Accordingly, the Board believes that the best interests of BATM and
all shareholders were served as a result of the disposal, generating a $13.0m
capital gain from the sale of NGSoft.
Financial Review
Reported Adjusted*
$m 2021 2020 Change 2021 2020 Change
Revenue 140.0 183.6 (23.7%) 132.8 112.6 18.0%
Gross margin 36.5% 33.1% 340bps 37.8% 36.4% 140bps
Operating profit 24.4 14.2 71.3% 11.3 2.6 339.5%
* Adjusted to present the results an ongoing operations basis by excluding (1)
the contribution to both years from NGSoft, a subsidiary that the Group sold
in March 2021, (2) the contribution to 2020 from a significant contract for
the supply of ventilators, which was exceptional in nature, and (3) the
amortisation of intangible assets for both years.
Total Group revenue from ongoing operations (which excludes the contribution
to 2021 and 2020 from NGSoft, a subsidiary of the Networking and Cyber
division that the Group sold in March 2021, and the contribution to 2020 from
an exceptional contract in the Bio-Medical division for the supply of critical
care ventilators) increased by 18.0% to $132.8m (2020: $112.6m). This was
driven by significant underlying growth in the Bio-Medical division and strong
growth from ongoing operations in the Networking and Cyber division. The
Bio-Medical division accounted for 84.4% of revenue from ongoing operations
and the Networking and Cyber division accounted for 15.6%. On a reported
basis, total Group revenue was $140.0m (2020: $183.6m), which reflects 2021
including a three-month contribution from NGSoft compared with a full year in
2020 as well as the significant ventilator contract that the Group delivered
in 2020.
The gross margin for ongoing operations improved to 37.8% (2020: 36.4%),
reflecting the increased contribution to revenue from the new molecular
biology diagnostic kits and COVID-19 products of the Bio-Medical division that
are higher-margin. On a reported basis, gross margin was 36.5% (2020: 33.1%),
with the change primarily reflecting the reduced contribution to revenue from
the relatively lower margin ICT services as a result of the sale of NGSoft.
Sales and marketing expenses for ongoing operations were $18.1m (2020:
$16.9m), representing 13.7% of revenue compared with 15.0% in 2020. On a
reported basis, sales and marketing expenses were $18.3m (2020: $20.2m).
General and administrative expenses from ongoing operations were $11.9m (2020:
$13.2m), representing 9.0% of revenue (2020: 11.7%). On a reported basis,
general and administrative expenses were $12.2m (2020: $15.9m).
The lower percentage of revenue accounted for by sales and marketing and
general and administrative expenses reflects the operational gearing of the
business, with an increase in sales not requiring a commensurate increase in
expenses, as well as strong cost discipline.
R&D expenses for 2021 were $8.6m for ongoing operations and $8.7m on a
reported basis. This compares with $8.5m from ongoing operations in 2020 and
$10.3m on a reported basis.
Operating profit from ongoing operations increased by 339.5% to $11.3m
compared with $2.6m in 2020. This growth reflects the significantly higher
revenue and gross profit generated by the Diagnostics unit of the Bio-Medical
division.
On a reported basis, operating profit increased by 71.3% to $24.4m compared
with $14.2m in 2020. The growth reflects the capital gain from the sale of
NGSoft and the contribution from the Diagnostics as described above, partly
offset by the contribution to 2020 from the profit from the delivery of the
ventilators contract and a full year profit from NGSoft.
As a result of the increase in operating profit, EBITDA from ongoing
operations increased by 138.8% to $15.7m (2020: $6.6m). On a reported basis,
EBITDA grew by 50.4% to $29.6m (2020: $19.7m).
Net finance income was $0.6m (2020: expenses of $0.9m), which primarily
reflects the positive impact of foreign exchange in 2021.
Profit before tax (on a reported basis) increased by 87.5% to $24.9m (2020:
$13.3m), reflecting the growth in the business and the gain from the sale of
NGSoft.
Tax expenses were $9.3m (2020: $1.0m). The increase is mainly as a result of a
tax provision related to the sale of NGSoft and tax expenses due to the
increase in profit of the Bio-Medical division. The comparatively low tax
expenses of 2020 also reflect the utilisation of carry forward losses as well
as the recording of a deferred tax asset related to carry forward losses.
On a reported basis, profit after tax attributable to the Owners of the
Company increased to $14.3m (2020: $9.8m) resulting in a significant increase
in basic earnings per share to 3.26¢ (2020: 2.22¢).
As at 31 December 2021, inventory was $31.0m (31 December 2020: $33.9m). Trade
and other receivables were $34.9m (31 December 2020: $41.5m), with the
decrease due to the disposal of NGSoft.
Intangible assets and goodwill as at 31 December 2021 were $16.0m (31 December
2020: $23.7m). The decrease is due to the sale of NGSoft.
Property, plant and equipment and investment property was $19.8m (31 December
2020: $18.0m). The increase is mostly due to investment in the Diagnostics
unit to expand the Group's laboratories to support future growth, which offset
the reduction from the disposal of NGSoft.
The balance of trade and other payables was $47.5m (31 December 2020: $53.6m).
The decrease is primarily due to the sale of NGSoft as well as provisions as
at 31 December 2020 for suppliers for the Group's ventilator project that were
due to be paid in Q1 2021.
The Group generated $8.7m in cash from operations (2020: $20.1m). After
payments of tax and interest, net cash from operating activities was $5.6m
(2020: $18.5m). The reduction compared with the prior year is primarily due to
payment being made during 2021 to suppliers related to the Group's ventilator
project that had been delivered during 2020.
The Group's balance sheet was strengthened with cash and financial assets of
$67.8m as at 31 December 2021 compared with $64.9m at 30 June 2021 and $53.4m
at 31 December 2020. This is comprised of cash and cash equivalents of $65.3m
(30 June 2021: $62.2m; 31 December 2020: $50.6m) and financial assets of $2.4m
(30 June 2021: $2.7m; 31 December 2020: $2.8m). Financial assets represent
cash deposits of more than three months' duration, held for trading bonds and
marketable securities. The increase in cash and cash equivalents compared with
the prior year resulted primarily from the proceeds of the sale of NGsoft in
the first quarter of 2021 and the profit of 2021.
Capital Allocation
The Group's primary use of capital is investment in research and development
and its go-to-market strategy, capital expenditure and for working capital.
The Board also considers returns to shareholders to be an important element of
its strategy to deliver shareholder value. As announced on 23 February 2022,
the Group is seeking shareholder approval, at a forthcoming general meeting,
for the buyback of up to 44,053,412 ordinary shares of NIS0.01 in the capital
of the Group, representing 10% of the Group's issued share capital as at the
date of this announcement. The Board also keeps under review the prospect of
declaring a dividend for shareholders.
Outlook
The Group entered the new year with a substantially higher backlog for ongoing
operations than at the same point the prior year and is continuing to
experience sustained momentum across the business. Accordingly, the Group
remains on track to deliver significant growth for full year 2022 in line with
market expectations. In particular, BATM expects the Bio-Medical division to
continue to be the largest contributor to Group revenue, however with an
increased proportion being accounted for by the Networking and Cyber division,
reflecting strong growth in that division.
In the Networking and Cyber division, both units are expected to achieve
significant growth. Both units entered the year with a strong backlog and have
continued to receive increasing demand for their products and services as
normal business practices resume.
In the Bio-Medical division, demand for the Group's COVID-19 diagnostic
products has continued alongside a strong increase in orders for solutions in
other disease areas as public health organisations return focus to routine
care. The Eco-Med unit expects to complete the delivery of its existing orders
as well as win further contracts for its agri-waste treatment solution this
year.
At present, the Group is confident of delivering against its backlog, but it
remains mindful of the potential impact of global supply chain challenges,
particularly related to any further shortages of electronics components.
In addition, the Board continues to keep under review potential value creation
opportunities. BATM has established solid foundations in core technologies
that it believes will be market disrupters. As these technologies transition
and ramp up to commercialisation, the Board will consider enhancing value
realisation through strategic transactions, such as partnerships and
disposals.
Accordingly, the Board of BATM remains confident in the prospects of the
business and looks forward to delivering shareholder value.
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
Year ended 31 December
2021 2020
US$ in thousands
Unaudited Audited
Revenues 140,038 183,566
Cost of revenues 88,977 122,856
Gross profit 51,061 60,710
--------- ---------
Operating expenses
Sales and marketing expenses 18,290 20,197
General and administrative expenses 12,243 15,884
Research and development expenses 8,713 10,258
Other operating expenses (income) (12,563) 138
Total operating expenses 26,683 46,477
--------- ---------
Operating profit 24,378 14,233
Finance income 1,466 820
Finance expenses (911) (1,754)
Profit before tax 24,933 13,299
Income tax expenses (9,337) (1,043)
Profit for the year before share of loss of a joint venture
and associated companies
15,596 12,256
Share of loss of a joint venture and associated companies (839) (774)
Profit for the year 14,757 11,482
Attributable to:
Owners of the Company 14,340 9,793
Non-controlling interests 417 1,689
Profit for the year 14,757 11,482
Profit per share (in cents):
Basic 3.26 2.22
Diluted 3.23 2.21
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended 31 December
2021 2020
Unaudited Audited
US$ in thousands
Profit for the year 14,757 11,482
Items that may be reclassified subsequently
to profit or loss:
Disposal of a foreign operation (522) -
Exchange differences on translating foreign operations (4,880) 3,148
9,355
14,630
Items that will not be reclassified subsequently
to profit or loss:
Revaluation of investment - (508)
Re-measurement of defined benefit obligation 162 16
162 (492)
Total comprehensive income for the year 9,517 14,138
Attributable to:
8,976
Owners of the Company 13,560
Non-controlling interests 541 578
9,517 14,138
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
31 December
2021 2020
US$ in thousands
Unaudited Audited
Current assets
Cash and cash equivalents 65,331 50,575
Trade and other receivables 34,932 41,467
Financial assets 2,432 2,803
Inventories 30,951 33,893
133,646 128,738
Non-current assets
Property, plant and equipment 18,107 16,109
Investment property 1,739 1,878
Right of-use assets 6,570 9,607
Goodwill 11,385 16,838
Other intangible assets 4,648 6,879
Investment in joint venture and associate 12,667 13,271
Investments carried at fair value 1,027 1,027
Deferred tax assets 3,375 5,759
59,518 71,368
Total assets 193,164 200,106
Current liabilities
Short-term bank credit 1,634 5,365
Trade and other 47,519 53,618
payables
Current maturities of lease liabilities 2,186 2,244
Tax liabilities 6,548 3,046
57,887 64,273
Non-current liabilities
Long-term bank credit 1,356 675
Long-term liabilities 3,888 6,416
Long-term lease liabilities 5,108 8,440
Deferred tax liabilities 170 711
Retirement benefit obligation 621 828
11,143 17,070
Total liabilities 69,030 81,343
Equity
Share capital 1,320 1,320
Share premium account 425,840 425,686
Reserves (19,849) (14,323)
Accumulated deficit (279,888) (290,090)
Equity attributable to the:
Owners of the Company 127,423 122,593
Non-controlling interests (3,289) (3,830)
Total equity 124,134 118,763
Total equity and liabilities 193,164 200,106
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Year ended 31 December 2021 (Unaudited)
Share Premium Account Attributable to Owners of the Company Non-Controlling Interests
Share Capital Translation Reserve Other Accumulated Total
Reserve Deficit Equity
US$ in thousands
Balance as at 1 January 2021 1,320 425,686 (13,811) (512) (290,090) 122,593 (3,830) 118,763
Profit for the year - - - - 14,340 14,340 417 14,757
Disposal of a foreign operation - - (522) - - (522) - (522)
Re-measurement of defined benefit obligation - - - - 162 162 - 162
Exchange differences on translating foreign operations - - (5,004) - - (5,004) 124 (4,880)
Total comprehensive income for the year - - (5,526) - 14,502 8,976 541 9,517
Exercise of share-based options by employees (*) 58 - - - 58 - 58
Recognition of share-based payments
- 96 - - - 96 - 96
Dividends - - - - (4,300) (4,300) - (4,300)
Balance as at 31 December 2021 1,320 425,840 (19,337) (512) (279,888) 127,423 (3,289) 124,134
(*) Less than 1K USD
Year ended 31 December 2020 (Audited)
Share Premium Account Attributable to Owners of the Company Non-Controlling Interests
Share Capital Translation Reserve Other Accumulated Total
Reserve Deficit Equity
US$ in thousands
Balance as at 1 January 2020 1,320 425,477 (18,070) (512) (299,391) 108,824 (4,408) 104,416
Profit for the year - - - - 9,793 9,793 1,689 11,482
Re-measurement of defined benefit obligation - - - - 16 16 - 16
revaluation of investment - - - - (508) (508) - (508)
Exchange differences on translating foreign operations - - 4,259 - - 4,259 (1,111) 3,148
Total comprehensive income for the year - - 4,259 - 9,301 13,560 578 14,138
Exercise of share-based options by employees -
- 51 - - 51 - 51
Recognition of share-based payments
- 158 - - - 158 - 158
Balance as at 31 December 2020 1,320 425,686 (13,811) (512) (290,090) 122,593 (3,830) 118,763
BATM ADVANCED COMMUNICATIONS LTD.
CONSOLIDATED STATEMENT OF CASH FLOW
Year ended 31 December
2021 2020
Unaudited Audited
US$ in thousands
Net cash from operating activities (Appendix A) 5,592 18,459
Investing activities
Interest received 3 101
Proceeds on disposal of property, plant and equipment 18 39
Proceeds on disposal of deposits 315 3,122
Proceeds on disposal of financial assets carried at fair value
through profit and loss
402 761
Purchases of property, plant and equipment (2,889) (3,386)
Increase of other intangible assets (400) (328)
Purchases of financial assets carried at fair value through profit and loss - (2,009)
Purchases of deposits (315) (314)
Investment in joint venture and associated companies (727) (3,467)
Proceeds from sale of a subsidiary (Appendix B) 18,662 -____
Net cash from (used in) investing activities 15,069 (5,481)
Financing activities
Lease payment (2,174) (2,428)
Bank loan repayment (13,252) (13,852)
Bank loan received 10,431 12,980
Proceed on exercise of shares ___58 ___51
Net cash used in financing activities (4,937) (3,249)
Net increase in cash and cash equivalents 15,724 9,729
Cash and cash equivalents at the beginning of the year 50,575 40,584
Effects of exchange rate changes on the balance
of cash held in foreign currencies
(968) 262
Cash and cash equivalents at the end of the year 65,331 50,575
BATM ADVANCED COMMUNICATIONS LTD.
APPENDICES TO CONSOLIDATED STATEMENT OF CASH FLOW
APPENDIX A
RECONCILIATION OF OPERATING PROFIT FOR THE YEAR TO NET CASH FROM OPERATING
ACTIVITIES
Year ended 31 December
2021 2020
Unaudited Audited
$'000 $'000
Operating profit from operations 24,378 14,233
Adjustments for:
Amortisation of intangible assets 716 718
Depreciation of property, plant and equipment and investment property 4,548 4,757
Capital loss (gain) of property, plant and equipment (229) 31
Profit from sale of a subsidiary (13,035) -
Capital gain on reduce of holdings in associated company - (602)
Stock options granted to employees 96 158
Increase (decrease) in retirement benefit obligation (10) 96
Increase (decrease) in (1,803) 2,114
provisions
Operating cash flow before movements in working capital 14,661 21,505
Decrease (increase) in inventory 3,031 (11,198)
Decrease (increase) in receivables (2,052) 916
Increase (decrease) in payables (5,352) 7,111
Effects of exchange rate changes on the balance sheet (1,616) 1,729
Cash from operations 8,672 20,063
Income taxes (2,383) (637)
paid
Income taxes - 3
received
Interest paid (697) (970)
Net cash from operating activities 5,592 18,459
APPENDIX B
DISPOSAL OF SUBSIDIARY - NGSoft
On 19 March 2021, the Group entered into a sale agreement to dispose of NG
Soft Ltd. ("NGSoft (to Aztek Technologies (1984) Ltd., a provider of ICT cloud
services in Israel and a portfolio company of SKY Fund (the "Buyer"). NGSoft
is a software and digital services company that provides creative digital and
technology solutions.
Year ended 31 December
2021
$'000
Unaudited
Net assets disposed
Property, plant and equipment 1,144
Right of use 3,667
Other intangible assets 968
Net working capital 73
Lease liability (3,764)
Current tax liability (584)
Deferred tax liability (540)
Goodwill 5,185
Net assets disposed of 6,149
Disposal of a foreign operation (522)
Gain on disposal 13,035
Total consideration 18,662
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents, net 20,903
Cash and cash equivalents disposed (2,241)
18,662
BATM ADVANCED COMMUNICATIONS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General
The final results, together with the relevant notes, for the year ended 31
December 2021 and the comparative 2020 information will be presented in the
full Annual Report in accordance with International Financial Reporting
Standards ("IFRS").
Note 2 - Profit per share
Profit per share is based on the weighted average number of shares in issue
for the period of 440,437,960 (2020: 440,291,783). The number used for the
calculation of the diluted profit per share for the period (which includes the
effect of dilutive stock option plans) is 444,267,674 shares (2020:
444,055,231).
Note 3 - Other alternative measures
1. Income statement adjustments - including (1) the contribution to both
years from NGSoft, a subsidiary that the Group sold in March 2021, (2) the
contribution to 2020 from a significant contract for the supply of
ventilators, and (3) adjustments related to the amortisation of intangible
assets.
Year ended 31 December 2021 (Unaudited( Reported results Adjustments to exclude NGSoft and ventilator contract Amortisation of intangible assets Adjusted results (ongoing operations)
US$ thousands
Revenues 140,038 7,262 - 132,776
Gross profit 51,061 1,235 (414) 50,240
Gross margin (%) 36.5% 17.0% - 37.8%
Sales and marketing expenses 18,290 144 - 18,146
General and administrative expenses 12,243 358 - 11,885
Research and development expenses 8,713 - 106 8,607
Other operating expenses (income) (12,563) (12,994) 154 277
Operating profit 24,378 13,727 (674) 11,325
EBITDA 29,642 13,956 - 15,686
Year ended 31 December 2020
(Unaudited)
Reported results Adjustments to exclude NGSoft and ventilator contract Amortisation of intangible assets Adjusted results (ongoing operations)
US$ thousands
Revenues 183,566 70,997 - 112,569
Gross profit 60,710 20,105 (414) 41,019
Gross margin (%) 33.1% 28.3% - 36.4%
Sales and marketing expenses 20,197 3,304 - 16,893
General and administrative expenses 15,884 2,680 - 13,204
Research and development expenses 10,258 1,747 - 8,511
Other operating expenses (income) 138 159 145 (166)
Operating profit 14,233 12,215 (559) 2,577
EBITDA 19,708 13,140 - 6,568
2. EBITDA measurement
Reported Adjusted
Year ended 31 December Year ended 31 December
US$ in thousands 2021 2020 2021 2020
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Operating profit 24,378 14,233 11,325 2,577
Amortisation of Intangible assets 716 718 - -
Depreciation 4,548 4,757 4,361 3,991
EBITDA 29,642 19,708 15,686 6,568
Note 4 - Segments
Business Segment
Year ended 31 December 2021 (Unaudited)
Networking and Cyber Bio-Medical Unallocated Total
$'000 $'000 $'000 $'000
Revenues 27,992 112,046 - 140,038
Operating profit 7,844 16,534 - 24,378
Net finance income 555
Profit before tax 24,933
Year ended 31 December 2020 (Audited)
Networking and Cyber Bio-Medical Unallocated Total
$'000 $'000 $'000 $'000
Revenues 54,884 128,682 - 183,566
Operating profit (4,932) 19,165 - 14,233
Net finance expenses (934)
Profit before tax 13,299
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