REG - MTI Wireless Edge - Final Results and Scrip Dividend Alternative <Origin Href="QuoteRef">MWEE.L</Origin> - Part 2
16/02/2018 07:05
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disposal proceeds and the
carrying amount of the asset is recognized in profit or loss in the period of
the disposal.
V. Cash and cash equivalents
Cash equivalents are considered by the Group to be highly-liquid investments,
including, inter alia, short-term deposits with banks, the maturity of which
do not exceed three months at the time of deposit and which are not
restricted.
W. Provision for warranty
The Group generally offers up to three years warranties on its products. Based
on past experience, the Group does not record any provision for warranty of
its products and services.
X. Share-based payments
Where equity settled share options are awarded to employees, the fair value of
the options calculated at the grant date is charged to the statement of
comprehensive income over the vesting period. Non-market vesting conditions
are taken into account by adjusting the number of equity instruments expected
to vest at each reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of options that
eventually vest. Market vesting conditions are factored into the fair value of
the options granted.
Y. Employee benefits
1. Short-term employee benefits: Short-term employee
benefits are benefits that are expected to be settled wholly before twelve
months after the end of the annual reporting period in which the employees
render the related services. These benefits include salaries, paid annual
leave, paid sick leave, recreation and social security contributions and are
recognized as expenses as the services are rendered. A liability in respect of
a cash bonus or a profit-sharing plan is recognized when the Group has a legal
or constructive obligation to make such payment as a result of past service
rendered by an employee and a reliable estimate of the amount can be made.
2. Post-employment benefits: The plans are normally
financed by contributions to insurance companies and classified as defined
contribution plans or as defined benefit plans.
The Group has defined contribution plans pursuant to Section 14 to the
Severance Pay Law since 2004 under which the Group pays fixed contributions to
a specific fund and will have no legal or constructive obligation to pay
further contributions if the fund does not hold sufficient amounts to pay all
employee benefits relating to employee service in the current and prior
periods. Contributions to the defined contribution plan in respect of
severance or retirement pay are recognized as an expense simultaneously with
receiving the employee's services and no additional provision is required in
the financial statements except for the unpaid contribution. The Group also
operates a defined benefit plan in respect of severance pay pursuant to the
Severance Pay Law. According to the Law, employees are entitled to severance
pay upon dismissal retirement and several other events prescribed by that Law.
The liability for post employment benefits is measured using the projected
unit credit method. The actuarial assumptions include rates of employee
turnover and future salary increases based on the estimated timing of payment.
The amounts are presented based on discounted expected future cash flows using
a discount rate determined by reference to yields on high quality corporate
bonds with a term that matches the estimated term of the benefit plan. In
respect of its severance pay obligation to certain of its employees, the
Company makes deposits into pension funds and insurance companies ("plan
assets"). Plan assets comprise assets held by a Long-term employee benefits
fund or qualifying insurance policies. Plan assets are not available to the
Group's own creditors and cannot be returned directly to the Group. The
liability for employee benefits presented in the statement of financial
position presents the present value of the defined benefit obligation less the
fair value of the plan assets.
Z. Earnings per Share (EPS)
Earnings per share is calculated by dividing the net profit or loss
attributable to owners of the parent by the weighted number of ordinary shares
outstanding during the period. Basic earnings per share only include shares
that were actually outstanding during the period. Potential ordinary shares
(convertible securities such as employee options) are only included in the
computation of diluted earnings per share when their conversion decreases
earnings per share or increases loss per share from continuing operations.
Further, potential ordinary shares that are converted during the period are
included in the diluted earnings per share only until the conversion date, and
since that date they are included in the basic earnings per share. The
Company's share of earnings of investees is included based on the earnings per
share of the investees multiplied by the number of shares held by the Company.
AA. Segment reporting
An operating segment is a component of the Group that meets the following
three criteria:
1. Is engaged in business activities from which it may
earn revenues and incur expenses;
2. Whose operating results are regularly reviewed by
the Group's chief operating decision maker to make decisions about allocated
resources to the segment and assess its performance; and
3. For which separate financial information is
available.
Segment revenue and segment costs include items that are attributable to the
relevant segments and items that can be allocated to segments. Items that
cannot be allocated to segments include the Group's financial income and
expenses and income tax.
BB. New IFRSs in the period prior to their adoption
- IFRS 9 Financial Instruments:
IFRS 9 replaces the multiple classification and measurement models in IAS 39
Financial instruments: Recognition and measurement with a single model that
has initially only two classification categories: amortised cost and fair
value.
Classification of debt assets will be driven by the entity's business model
for managing the financial assets and the contractual cash flow
characteristics of the financial assets. A debt instrument is measured at
amortised cost if: a) the objective of the business model is to hold the
financial asset for the collection of the contractual cash flows, and b) the
contractual cash flows under the instrument solely represent payments of
principal and interest.
All other debt and equity instruments, including investments in complex debt
instruments and equity investments, must be recognised at fair value.
All fair value movements on financial assets are taken through the statement
of profit or loss, except for equity investments that are not held for
trading, which may be recorded in the statement of profit or loss or in
reserves (without subsequent recycling to profit or loss).
For financial liabilities that are measured under the fair value option
entities will need to recognise the part of the fair value change that is due
to changes in the their own credit risk in other comprehensive income rather
than profit or loss. The new hedge accounting rules (released in December
2013) align hedge accounting more closely with common risk management
practices. As a general rule, it will be easier to apply hedge accounting
going forward. The new standard also introduces expanded disclosure
requirements and changes in presentation.
In December 2014, the IASB made further changes to the classification and
measurement rules and also introduced a new impairment model. With these
amendments, IFRS 9 is now complete. The changes introduce:
- a third measurement category (FVOCI) for certain financial assets
that are debt instruments
- a new expected credit loss (ECL) model which involves a
three-stage approach whereby financial assets move through the three stages as
their credit quality changes. The stage dictates how an entity measures
impairment losses and applies the effective interest rate method. A simplified
approach is permitted for
New IFRSs in the period prior to their adoption (cont.)
financial assets that do not have a significant financing component (e.g.
trade receivables). On initial recognition, entities will record a day-1 loss
equal to the 12 month ECL (or lifetime ECL for trade receivables), unless the
assets are considered credit impaired.
IFRS 9 is to be applied for annual periods beginning on January 1, 2018.
IFRS 9 will not have a material impact on the financial statements.
- IFRS 15 -Revenue from Contracts with Customers (hereafter - IFRS
15)
IFRS 15 shall replace other IFRS provisions relating to revenue recognition.
The core principle of IFRS 15 is that an entity will recognize revenue to
depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services.
IFRS 15 sets out a single revenue recognition model, according to which the
entity shall recognize revenue in accordance with the said core principle by
implementing a five-step model framework:
1) Identify the contract(s) with a customer.
2) Identify the performance obligations in the contract.
3) Determine the transaction price.
4) Allocate the transaction price to the performance obligations in the
contract.
5) Recognize revenue when the entity satisfies a performance obligation.
IFRS 15 provides guidance about various issues related to the application of
the said model, including: recognition of revenue from variable consideration
set in the contract, adjustment of the price of transaction set in the
contract in order to reflect the effect of the time value of money and costs
to obtain or fulfill a contract.
IFRS 15 extends the disclosure requirements regarding revenue and requires,
among other things, that entities disclose qualitative and quantitative
information about significant judgments made by management in determining the
amount and timing of the revenue.
The standard shall be applied retrospectively for annual reporting periods
starting on January 1, 2018 or thereafter,
IFRS 9 will not have a material impact on the financial statements.
3. Revenues
For the year ended December 31,
2017 2016
Revenues arises from: $'000 $'000
Sale of goods 21,271 17,314
Rendering of services 2,492 2,449
Projects 2,613 3,513
26,376 23,276
4. Profit from operations
For the year ended December 31,
2017 2016
This has been arrived at after charging: $'000 $'000
Wages and salaries 9,372 7,962
Depreciation and amortization 637 635
Material and subcontractors 11,825 10,279
Operating lease expense 84 81
Plant, Machinery and Usage 1,015 1,024
Travel and Exhibition 481 474
Advertising and Commissions 383 417
Consultants 406 274
Others 570 647
24,773 21,793
5. Operating segments
1. Segment information
For the year ended December 31, 2017
Antennas Water Solutions Total
$'000
Revenue
External 13,267 13,109 26,376
Total 13,267 13,109 26,376
Segment profit 67 1,536 1,603
Unallocated corporate expenses
Finance income, net 26
Profit before income tax 1,629
Other
Depreciation and amortization 586 51 637
5. Segments (cont.)
1. Segment information (cont.)
For the year ended December 31, 2016
Antennas Water Solutions Total
$'000
Revenue
External 11,427 11,849 23,276
Total 11,427 11,849 23,276
Segment profit (loss) (108) 1,591 1,483
Unallocated corporate expenses
Finance expense, net (277)
Profit before income tax 1,206
Other
Depreciation and amortization 591 44 635
2. Entity wide disclosures External revenue by
location of customers.
For the year ended December 31,
2017 2016
$'000 $'000
Israel 13,889 10,856
North America 4,155 4,299
Europe 4,050 4,038
Africa 1,867 1,819
Asia 1,201 645
Other 1,214 1,619
26,376 23,276
3. Additional information about revenues:
Revenues from major customers each of whom amount to 10% or more of total
revenues reported in the financial statements:
For the year ended December 31,
Revenues 2017 2016
$'000 $'000
Customer A - Antennas segment 2,476 2,424
Others (non-major customers) 23,900 20,852
26,376 23,276
6. Finance expense and income
For the year ended December 31,
2017 2016
$'000 $'000
Finance expense
Interest on bank loans 109 122
Net Foreign exchange loss - 51
Interest and bank fees 107 161
216 334
Finance income
Interest from bank deposits 22 -
Net Foreign exchange gain 220 -
Gains from financial assets classified as held for trading - 57
242 57
(26) 277
7. Income Tax
A. Tax Laws in Israel
1. Amendments to the Law for the Encouragement of
Capital Investments, 1959 (the "Encouragement Law"):
In December 2010, the "Knesset" (Israeli Parliament) passed the Law for
Economic Policy for 2011 and 2012 (Amended Legislation), 2011 ("the
Amendment"), which prescribes, among others, amendments to the Law. The
Amendment became effective as of January 1, 2011. According to the Amendment,
the benefit tracks in the Law were modified and a flat tax rate applies to the
Company's entire preferred income. Commencing from the 2011 tax year, the
Group will be able to opt to apply (the waiver is non-recourse) the Amendment
and from the elected tax year and onwards, it will be subject to the amended
tax rates that are: 2014 and thereafter will be 16% (in development area A -
9%).
The Group applied the Amendment effectively from the 2011 tax year.
2. Tax rates:
On December 29, 2016, the Law Economic Efficiency (Legislative Amendments for
Achieving the Budgetary Goals for 2017-2018) was published in Reshumot (the
Israeli government official gazette), which enacts, among other things, the
following amendments:
- Decreasing the corporate tax rate to 24% in 2017 and to 23% in 2018 and
thereafter (instead of 25%).
- Commencing tax year 2017 and thereafter the tax rate on the income of
preferred enterprises of a qualifying Company in Development Zone A as stated
in the Encouragement of Capital Investment Law, shall decrease to 7.5%
(instead of 9%) and for companies located in zones other than Zone A the rate
shall remain 16%.
- In addition, the tax rate on dividends distributed on January 1, 2014 and
thereafter originating from preferred income under the Encouragement Law will
be raised to 20% (instead of 15%).
7. Income Tax (cont.)
Therefore the applicable corporate tax rate for 2014 and thereafter is 16%.
The real capital gains tax rate and the real betterment tax rate for the years
2014-2015 -26.5% and 25%, 24% in 2016 and 2017 respectively.
B. The principal tax rates applicable to the
subsidiaries whose place of incorporation is outside Israel are:
A company incorporated in India - The statutory tax rate is 36% and the
company was in exempt zone until end of March 2013. Nevertheless in the
absence of taxable income the Indian regulation states that the company had to
pay Minimum Alternate tax rate which is 50% of the tax rate (the 36%) out of
the accounting profit paid as an advanced for future years, if the Company
becomes tax liable.
A company incorporated in Switzerland - The weighted tax rate applicable to a
company operating in Switzerland is about 25% (composed of Federal, Cantonal
and Municipal tax). Provided that the company meets certain conditions, the
weighted tax rate applicable to its income in Switzerland will not exceed 10%.
A company incorporated in South Africa - The statutory tax rate is 28%
A company incorporated in Australia - The statutory tax rate is 30%
A company incorporated in United States of America - The statutory tax rate is
21%.
C. Income tax assessments
The Company has tax assessments considered as final up to and including the
year 2012.
For the year ended December 31,
2017 2017 2016 2016
$'000 $'000 $'000 $'000
Current tax expense
Income tax on profits for the year 402 329
402 329
Deferred tax income
Origination and reversal of temporary differences (82) (107)
(82) (107)
Total tax expense 320 222
The adjustments for the difference between the actual tax charge for the year
and the standard rate of corporation tax in Israel applied to profits for the
year are as follows:
For the year ended December 31,
2017 2016
$'000 $'000
Profit before income tax 1,629 1,206
Tax computed at the corporate rate in Israel of 16% 261 193
Un deductible expenses (Income not subject to tax) 3 20
Taxes resulting from different tax rates applicable to foreign and other 54 40
subsidiaries
Other 2 (31)
Total income tax expense 320 222
8. Earnings per share
Net earnings per share attributable to equity owners of the parent
For the year ended
December 31,
2017 2016
$'000 $'000
Net Earnings used in basic EPS 1,250 936
Net Earnings used in diluted EPS 1,250 936
Weighted average number of shares used in basic EPS 52,866,325 51,687,853
Effects of:
Employee options 442,871 887,740
Weighted average number of shares used in diluted EPS 53,309,196 52,575,593
Basic net EPS (dollars) 0.0236 0.0181
Diluted net EPS (dollars) 0.0234 0.0178
The employee options have been included in the calculation of diluted EPS as
the weighted average share price during the year greater than their exercise
price (i.e. they are in-the-money) and therefore it would be advantageous for
the holders to exercise those options. The total number of options in issue is
disclosed in note 25.
9. Dividends
For the year ended
December 31,
2017 2016
$'000 $'000
Dividend paid 235 568
Scrip dividend 283 -
518 568
On January 12, 2016, following the approval of its shareholders, the Company
adopted a change to its article of association allowing the Company the
ability to pay dividends by way of scrip, meaning the board would be able to
announce a dividend which could be paid in cash or through the issue of new
shares in the Company (the "Scrip Dividend Policy").Under the Scrip Dividend
Policy, shareholders could, in the future, be given the option to elect to
receive dividends in new shares of the Company rather than in cash. The
default arrangement will be for the payment of dividends in cash, and if the
shareholder prefers to receive their dividends in new shares of the Company,
then they would have to make an election. There would be no ability to make
mixed elections and each shareholder would be able to choose either cash or
new shares but not both. The decision to offer shareholders a scrip dividend
alternative for future dividend payments will be at the sole discretion of the
Board.
Dividend of 1 cents (1.1 cents) per ordinary share proposed and paid during
the year relating to the previous year's results. In 2017 a scrip option
offered to shareholders, which was partially accepted.
10. Property, plant and equipment
Building Machinery & equipment Office furniture & equipment Computer equipment Vehicles Total
$'000 $'000 $'000 $'000 $'000 $'000
Cost:
Balance as of January 1, 2017 5,200 4,902 314 1,500 476 12,392
Acquisitions 5 95 9 45 293 447
Disposals - - - - (214) (214)
Exchange differences - 6 2 5 18 31
Balance as of December 31, 2017 5,205 5,003 325 1,550 573 12,656
Accumulated Depreciation:
Balance as of January 1, 2017 959 4,164 280 1,354 182 6,939
Additions 136 213 17 71 72 509
Disposals - - - - (108) (108)
Exchange differences - 5 1 3 5 14
Balance as of December 31, 2017 1,095 4,382 298 1,428 151 7,354
Net book value as of December 31, 2017 4,110 621 27 122 422 5,302
Building Machinery & equipment Office furniture & equipment Computer equipment Vehicles Total
$'000 $'000 $'000 $'000 $'000 $'000
Cost:
Balance as of January 1, 2016 5,186 4,805 302 1,387 387 12,067
Acquisitions 14 97 8 108 74 301
Exchange differences - - 4 5 15 24
Balance as of December 31, 2016 5,200 4,902 314 1,500 476 12,392
Accumulated Depreciation:
Balance as of January 1, 2016 814 3,924 261 1,289 136 6,424
Additions 145 239 17 65 35 501
Exchange differences - 1 2 - 11 14
Balance as of December 31, 2016 959 4,164 280 1,354 182 6,939
Net book value as of December 31, 2016 4,241 738 34 146 294 5,453
11. Investment Property
Composition and movement of Rental properties:
2017 2016
$'000 $'000
Cost:
Balance at January 1 and December 31 828 828
Accumulated depreciation:
Balance at January 1 198 172
Additions during the year:
Depreciation 21 26
Balance at December 31 219 198
Depreciated cost at December 31 609 630
On December 2011 the Company acquired from its controling shareholder, MTI
Computers & Software Services (1982) Ltd. ("MTI Computers"), the leasehold
interest of its head office located at 11 Hamelacha St., Afek Industrial Park,
Rosh-Ha'Ayin, 48091, Israel (the "Property").
The Company occupies approximately 75 percent of the Property; therefore it
had entered into a lease agreement with MTI Computers (which can sub lease
part of the area) occupying approximately 1,100 square meters of the Property.
The term of the lease is for an initial period of 5 years, with an option to
extend the lease for an additional 5 year period (the "Option Period"). The
rent for the leased area is US$ 10,000 per month throughout the initial period
and will be increased by an amount of 10 percent for the Option Period.
In addition to the monthly rental payments, the tenants will pay to the
Company a monthly management payment of US$ 7,150 per month as a contribution
towards certain expenses (including insurance, the use of the car park,
maintenance services, rates, water and electricity). This amount will be
increased by 3 percent on a yearly basis. Since the acquisition of Mottech and
movement of its facility to the Property the Company entered into an agreement
with Mottech instead of MTI Computers for about 40% of the area used by MTI
Computers and therefore the lease with MTI Computers was reduced to $6,000 per
month and $4,290 per month as a contribution towards certain expenses.
The Group estimates that the fair value does not differ from the carrying
amount as at December 31, 2017 and 2016.
12. Intangible assets
2017 2016
$'000 $'000
Cost:
Balance at January 1 and December 31 483 483
Accumulated depreciation:
Balance at January 1 162 54
Additions during the year:
Amortization charge 109 108
Balance at December 31 271 162
Depreciated cost at December 31 212 321
13. Deferred Tax Assets
Deferred tax is calculated on temporary
differences under the liability method using the tax rate at the year the
deferred tax assets are recovered.
The movement in the deferred tax asset is as
shown below:
2017 2016
$'000 $'000
At January 1 500 393
Charge to other comprehensive income 5 1
Charge to profit or loss 77 106
At December 31 582 500
Deferred tax assets have been recognized in respect of all differences giving
rise to deferred tax assets because it is probable that these assets will be
recovered.
Composition:
31.12.2017 31.12.2016
$'000 $'000
Accrued severance pay 65 58
Other provisions and employee-related obligations 73 70
Research and development expenses deductible over 3 years 171 170
Depreciable intangibles (37) (53)
Carry forward tax losses 310 255
582 500
Deferred tax assets relating to carry forward capital losses of the Group
total approximately $853 and $841 thousand as of December 31, 2017 and 2016
respectively were not recognized in the financial statements because their
utilization in the foreseeable future is not probable.
14. Inventories
31.12.2017 31.12.2016
$'000 $'000
Raw materials and consumables 4,069 3,713
Work-in-progress 81 99
Finished goods and goods for sale 1,131 1,098
5,281 4,910
15. Trade and other receivables
31.12.2017 31.12.2016
$'000 $'000
Trade receivables 8,988 8,159
Other receivables 850 706
9,838 8,865
15. Trade and other receivables (cont.)
Trade receivables:
31.12.2017 31.12.2016
$'000 $'000
Trade receivables (*) 7,030 5,227
Unbilled receivables - Projects 1,762 2,751
Notes receivable 356 315
Allowance for doubtful accounts )160) (134)
8,988 8,159
(*) Trade receivables are non-interest bearing. They are
generally on 60-90 day terms.
As at 31 December 2017 trade receivables of $ 940K (2016 - $535K) were past
due but not impaired.
They relate to the customers with no default history. The aging analysis of
these receivables is as follows:
31.12.2017 31.12.2016
$'000 $'000
Up to 3 months 818 514
3 to 6 months 117 13
6 to 12 months 5 8
940 535
Unbilled receivables:
31.12.2017 31.12.2016
$'000 $'000
Actual completion costs 2,776 3,022
Profit recognised 976 1,608
Billed revenue (1,990) (1,879)
Total Unbilled receivables - Projects 1,762 2,751
Other receivables:
31.12.2017 31.12.2016
$'000 $'000
Prepaid expenses 398 127
Advances to suppliers 102 74
Employees 64 73
Tax authorities - V.A.T 111 86
Other receivables 175 346
850 706
16. Other current financial assets
31.12.2017 31.12.2016
$'000 $'000
Deposits with banks 2,011 -
The deposits are not linked and bears interest
of 2% as of December 31, 2017.
17. Cash and cash equivalents
31.12.2017 31.12.2016
$'000 $'000
In U.S. dollars 2,102 3,514
In NIS 140 300
In South African Rand 161 185
In other currencies 239 429
2,642 4,428
18. Loans from banks
31.12.2017 31.12.2016
$'000 $'000
US Dollars - unlinked 813 1,063
NIS 888 1,343
South African Rand 82 60
Less - current maturities (848) (802)
935 1,664
In 2011 the Company received US$ 2.5 Million loan for the purchase of the
company building in Rosh ha'ayin, Israel, secured by a mortgage on the said
asset. The loan is for 10 years, the repayment on a quarterly basis from April
2011 until January 2021 and bears interest at a fixed rate of 4.9%.
On August 2016, the Company received NIS 100,000 (approximately US$ 29
thousand) loan respectively for purchase of car. The loan is for 4 years with
a monthly repayment starting August 2016 and bears interest of Prime +0.6%
(2.2% as of December 31, 2017). This bank loan is secured by a fixed lien on
the car.
On June 2015 the Company received NIS 8 Million (approximately US$ 2.08
Million) loan for funding the acquisition of Mottech. The loan is for 4 years,
the repayment on a quarterly basis from September 2015 until June 2019 and
bears interest at a fixed rate of 3.5%.
During 2017 Mottech South Africa had entered into loan agreement of
approximately US$ 37 thousand for purchase of cars payable in 60 months on a
monthly basis. Interest rate is linked to the South Africa prime lending rate.
At December 31 2017 First Second year Third Fourth year Fifth
year year year and thereafter
$'000
Long-term loan 848 568 273 79 15
19. Employee benefits
A. Composition:
As at December 31
2017 2016
$'000 $'000
Present value of the obligations 1,123 977
Fair value of plan assets (646) (572)
477 405
B. Movement in plan assets:
As at December 31
2017 2016
$'000 $'000
Year begin 572 596
Foreign exchange gain 63 8
Interest income 17 11
Contributions 4 13
Benefit paid (19) (50)
Re measurements gain (loss)
Actuarial profit (loss) from financial assumptions 2 (1)
Return on plan assets (excluding interest) 7 (5)
Year end 646 572
C. Movement in the liability for benefit obligation:
As at December 31
2017 2016
$'000 $'000
Year begin 977 983
Foreign exchange loss 107 15
Interest cost 36 30
Current service cost 37 17
Benefits paid (31) (78)
Re measurements loss (gain)
Actuarial loss (gain) from financial assumptions 35 (16)
Adjustments (experience) (38) 26
Year end 1,123 977
19. Employee benefits (cont.)
Supplementary information
1. The Group's liabilities for severance pay retirement and pension
pursuant to Israeli law and employment agreements are recognized by full - in
part by managers' insurance policies, for which the Group makes monthly
payments and accrued amounts in severance pay funds and the rest by the
liabilities which are included in the financial statements.
2. The amounts funded displayed above include amounts deposited in
severance pay funds with the addition of accrued income. According to the
Severance Pay Law, the aforementioned amounts may not be withdrawn or
mortgaged as long as the employer's obligations have not been fulfilled in
compliance with Israeli law.
3. Principal nominal actuarial assumptions:
As at December 31,
2017 2016
Discount rate on plan liabilities 3.02% 3.31%
Expected increase in pensionable salary 2% 2%
4. Sensitivity test for changes in the expected rate of salary
increase or in the discount rate of the plan assets and liability:
Change in defined benefit obligation
As at December 31,
2017 2016
$'000 $'000
The change as a result of:
Salary increase of 1 % 58 66
Salary decrease of 1 % (49) (54)
The change as a result of:
Increase of 1% in discount rate (47) (50)
Decrease of 1% in discount rate 56 63
Year ended December 31,
2017 2016
$'000 $'000
Expenses in respect of defined contribution plans 352 325
20. Trade and other payables
As at December 31,
2017 2016
$'000 $'000
Trade payables 2,239 2,285
Employees' wages and other related liabilities 1,062 776
Advances from trade receivables 21 28
Accrued expenses 431 534
Government authorities 101 20
Others 707 434
4,561 4,077
21. Current maturities
As at December 31,
Interest rate 2017 2016
as at December 31, 2017
% $'000 $'000
Current maturities In NIS Prime+0.6 7 15
Current maturities In NIS 3.5 577 520
Current maturities In SA ZAR 10 14 17
Current maturities In US $ 4.9 250 250
Total Current maturities and short-term bank loans 848 802
Changes in liabilities arising from financing activities
Reconciliation of the changes in liabilities for which cash flows have been,
or will be classified as financing activities in the statement of cash flows
Loans and borrowings
$'000
At 1 January 2017 2,466
Changes from financing cash flows:
Proceeds from long term loan received from banks 60
Repayment of long-term loans from banks (829)
Total changes from financing cash flows (769)
Effects of foreign exchange 86
At 31 December 2017 1,783
22. Financial instruments - Risk Management
The Group is exposed through its operations to
the following financial risks:
Foreign currency risk
Liquidity risk
Credit risk
Foreign currency risk
Foreign exchange risk arises when Group companies enter into transactions
denominated in a currency other than their functional currency. Management
mitigates that risk by holding some cash and cash equivalents and deposit
accounts in NIS. The company also purchases from time to time some forwards on
the NIS/$ exchange rate to hedge part of the salaries costs. As of December
2017 no such transactions were open.
Since the purchase of Mottech the Group has an additional currency risk due to
its subsidiaries activity.
Liquidity Risk
Liquidity risk is the risk that arises when the maturity of assets and
liabilities does not match. An unmatched position potentially enhances
profitability, but can also increase the risk of insufficient liquid means to
fulfil its immediate obligations. The Group's objective is to maintain a
balance between continuity of funding and flexibility. The Group have
sufficient availability of cash including the short-term investment of cash
surpluses and the raising of loans to meet its obligations by cash management,
subject to Group policies and guidelines.
The table below summarizes the maturity profile of the Group's financial
liabilities based on contractual undiscounted payments (including interest
payments):
December 31, 2017 Less than one year 1 to 2 years 2 to 3 3 to 4 years > 4 Total
years years
$'000
Loans from banks 907 607 300 63 - 1,877
Trade payables 2,239 - - - - 2,239
Payables 1,138 - - - - 1,138
4,284 607 300 63 - 5,254
December 31, 2016 Less than one year 1 to 2 years 2 to 3 3 to 4 years > 4 Total
years years
$'000
Loans from banks 889 862 566 261 64 2,642
Trade payables 2,285 - - - - 2,285
Payables 968 - - - - 968
4,142 862 566 261 64 5,895
Credit risks
Financial instruments which have the potential to expose the Group to credit
risks are mainly deposits accounts, trade receivables and other receivables.
The Group holds cash and cash equivalents and deposit accounts in big banking
institutions in Israel and in the Switzerland, thereby substantially reducing
the risk to suffer credit loss. With respect to trade receivables, the Group
believes that there is no material credit risk which is not provided in light
of Group's policy to assess the credit risk instruments of customers
before entering contracts.
Moreover, the Group evaluates trade receivables on a day to day basis and
adjusts the allowance for doubtful accounts accordingly.
Fair value
The carrying amount of cash and cash equivalents, trade receivables, other
accounts receivable, credit from banks and others, trade payables and other
accounts payable approximate their fair value.
Sensitivity tests relating to changes in market price of listed securities
The Group has performed sensitivity tests of principal market risk factors
that are liable to affect its reported operating results or financial
position. The sensitivity tests present the profit or loss and change in
equity (before tax) in respect of each financial instrument for the relevant
risk variable chosen for that instrument as of each reporting date.
The test of risk factors was determined based on the materiality of the
exposure of the operating results or financial condition of each risk with
reference to the functional currency and assuming that all the other variables
are constant. The sensitivity tests for listed investments with quoted market
price (bid price) were performed on possible changes in these market prices.
The Group is not exposed to cash flow risk due to interest rate since the
long-term loan bares fixed interest.
The following table demonstrates the carrying amount and fair value of the
groups of financial instruments that carrying amounts does not approximate
fair value:
Carrying amount Fair value
2017 2016 2017 2016
Financial liabilities: $'000
Long-term loan with interest (1) 1,783 2,466 1,785 2,456
(1) The fair value of long-term loan received with fixed
interest is based the present value of cash flows using interest rate
currently available for loan with similar terms.
Reconciliation of fair value measurements that are categorized within Level 3
of the fair value hierarchy:
For the year ended December 31,
2017 2016
$'000 $'000
Balance as of January 1 - 92
Profit recognized in Profit or loss: - (92)
Total contingent consideration liability - -
Linkage terms of financial liabilities by groups of financial instruments
pursuant to IAS 39
December 31, 2017:
NIS Unlinked S.A Rand Total
$'000
Financial liabilities measured at amortized cost 888 813 82 1,783
December 31, 2016:
NIS Unlinked S.A Rand Total
$'000
Financial liabilities measured at amortized cost 1,343 1,063 60 2,466
23. Subsidiaries:
The principal subsidiaries of Company, all of which have been consolidated in
these consolidated financial statements, are as follows:
Name Country of incorporation Proportion of ownership interest at 31 December Held by
2017 2016
AdvantCom Sarl Switzerland 100% 100% M.T.I Wireless Edge
Global Wave Technologies PVT Limited India 80% 80% AdvantCom Sarl
Mottech water solutions LTD Israel 100% 100% M.T.I Wireless Edge
Aqua water control solution LTD Israel 100% 100% Mottech water solutions
Mottech Water Management (pty) LTD South Africa 85% 85% Mottech water solutions
Mottech Water Management (pty) LTD Australia 97.5% 97.5% Mottech water solutions
Mottech USA Inc United states 100% 100% Aqua water control solution
24. Share capital
Authorized
2017 2017 2016 2016
Number NIS Number NIS
Ordinary shares of NIS 0.01 each 100,000,000 1,000,000 100,000,000 1,000,000
Issued and fully paid
2017 2017 2016 2016
Number NIS Number NIS
Ordinary shares of NIS 0.01 each at beginning of the year 51,779,490 517,795 51,571,990 515,720
Changes during the year
Scrip dividend 1,022,328 10,223 - -
Exercise of options to share capital 822,500 8,225 207,500 2,075
At end of the year 53,624,318 536,243 51,779,490 517,795
25. Share-based payment
An Option Plan was adopted by the Company at the shareholders meeting held on
July 5, 2013. Under the Plan, all previous plans cancelled and the new plan
entered into effect. The new plan includes total of 2 million options to be
converted to 2 million shares of the Company (approximately 4% of the
company's outstanding shares) at a price of 9.5 pence per share (approximately
15 cents).
The vesting period of the options is as follows: 2 years for 50% of the
options, 3 years for additional 25% of the options and 4 years for the rest of
the options. An approval for the replacement of plans was received from the
tax authorities on July 22, 2013, providing the Company, the employees and the
trustee of the plan to submit the documentation required within 60 days from
approval. As part of the grant of this plan an allocation of 280,000, 250,000
and 200,000 options was granted to the CEO, CFO and the Chairman of the board,
respectively.
The weighted average fair value of the options as at the grant date was 2
pence (approximately 3 cents) per option, and was estimated using a Black and
Scholes option pricing model based on the following significant data and
assumptions:
Share price - 7 pence (representing approximately 11 cents)
Exercise price - 9.5 pence (representing approximately 15 cents)
Expected volatility - 25.90%
Risk-free interest rate - 0.8%
And expected average life of options 4.375 years
On May 18, 2016 a new option scheme for key Employees was approved at the
Company's Annual General Meeting. Under the plan, options to purchase 800
thousands ordinary shares were granted (each option to one ordinary share) at
a price of 27 pence per share (approximately 33 cents). This represents
approximately 1.5% of the Company's current issued and voting share capital on
a fully diluted basis. The vesting period of the options shall be as follows:
2 years for 50% of the options, 3 years for additional 25% of the options and
4 years for the reminder of the option.
Unexercised options expire nine years after date of the grant after which they
will be void. Options are forfeited when the employee leaves the Company.
There is no cash settlement of the options. The weighted average fair value of
the options as at the grant date is 6 pence (approximately 9 cents) per
option, and was estimated using a Black and Scholes option pricing model based
on the following significant data and assumptions:
Share price - 19.88 pence (representing approximately 29 cents)
Exercise price - 27 pence (representing approximately 39 cents)
Expected volatility - 45.34%
Risk-free interest rate - 0.85%
And expected average life of options 4.375 years
The volatility measured at the standard deviation of expected share price
returns is based on the historical volatility of the Company. The options were
granted as part of a plan that was adopted in accordance with the provision of
section 102 of the Israeli Income Tax Ordinance.
The expense recognized in the financial statements for employee services
received for the year ended December 31, 2017 and 2016 was US $29,000 and US
$20,000 respectively.
The following table lists the number of share options, the weighted average
exercise prices of share options and modification in employee option plans
during the current year:
2017 2017 2016 2016
weighted average exercise price Number weighted average exercise price Number
$ $
Outstanding at beginning of year 0.23 2,342,500 0.23 1,800,000
Exercised during the year 0.12 (822,500) 0.15 (207,500)
Granted during the year - - 0.39 800,000
Forfeited during the year 0.12 (20,000) 0.15 (50,000)
Outstanding at the end of the year 0.27 1,500,000 0.23 2,342,500
Exercisable at the end of the year 0.15 700,000 0.15 1,142,500
The weighted average remaining contractual life for the share options
outstanding as of December 31, 2017 was 0.67 years (2016 - 2.33 years).
26. Commitments and guarantees
A. Royalty commitments
The Group is committed to pay royalties to the Government of Israel on
proceeds from sales of products in the research and development of which the
Government of Israel participates by way of grants. Under the terms of Group's
funding from Government of Israel, royalties of 2%-3.5% are payable on sales
of products developed from a project so funded, up to 100% of the amount of
the grant received, including amounts received by the Parent Company and its
subsidiaries through July 1, 2000.
The maximum royalty amount payable by the Group at December 31, 2017 is US$
470,000.
No provision is recognized due to the lack of expectation to sale relevant
products in the foreseeable future.
During 2017 the Group did not pay any royalties.
B. Guarantees
The Group has guarantees in favour of customers and government institutes in
the amount of US$ 2,100,000 and US$31,000 respectively. The guarantees are
mainly to guarantee advances received from customers and performance of
contracts signed.
C. Charges
In order to secure the Group's liabilities, real estate properties were
mortgaged and fixed charges were recorded on property and some bank deposits
(see also note 17).
27. Transactions with related parties:
A. Amendment to Service Agreement with controlling
shareholder:
Following the receipt of recommendations of both the remuneration committee
and the board of directors of the company, an amendment to the service
agreement between the Company and the controlling shareholders (via their
management company) was approved by a shareholders' meeting held on July 5,
2013. According to the amendment, the agreement is in place for 3 years
starting July 1, 2013, after which it will be renewed for periods of 3 years
in accordance to the relevant rules and regulations. Nevertheless the
agreement can be terminated by either party by providing 90 days notice. The
agreement includes remuneration (per month) of:
1. 20,000 NIS to Mr. Zvi Borovitz for his service as a chairman of the
board of the company in capacity of at least 25%
- More to follow, for following part double click ID:nRSP0681Fc igation to pay the cash flows in full without material
delay to a third party and has transferred substantially all the risks and
rewards of the asset, or has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control of the
asset.
Financial liabilities: A financial liability is derecognized when it is
extinguished, that is when the obligation is discharged or cancelled or
expires. A financial liability is extinguished when the creditor.
· discharges the liability by paying in cash, other financial assets,
goods or services; or
· is legally released from the liability.
Where an existing financial liability is exchanged with another liability from
the same lender on substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or modification is
accounted for as an extinguishment of the original liability and the
recognition of a new liability. The difference between the carrying amounts of
the existing liability and new liability is recognized in profit or loss.
O. Impairment of financial assets
The Group assesses at the end of each reporting period whether there is any
objective evidence of impairment of a financial asset or group of financial
assets as follows.
Financial assets carried at amortized cost:
There is objective evidence of impairment of loans and receivables if one or
more loss events have occurred after the initial recognition of the asset and
that loss event has an impact on the estimated future cash flows. Evidence of
impairment may include indications that the debtor is experiencing financial
difficulties, including liquidity difficulty and default in interest or
principal payments.
The amount of the loss recorded in profit or loss is measured as the
difference between the asset's carrying amount and the present value of
estimated future cash flows (excluding future credit losses that have not yet
been incurred) discounted at the financial asset's original effective interest
rate (the effective interest rate at initial recognition). The carrying amount
of the asset is reduced through the use of an allowance account. In a
subsequent period, the amount of the impairment loss is reversed if the
recovery of the asset can be related objectively to an event occurring after
the impairment was recognized. The amount of the reversal, which is limited to
the amount of any previous impairment, is recognized in profit or loss.
P. Government grants
grants received from the Israel-U.S. Bi-national Industrial Research and
Development Foundation (henceforth "BIRD") as support for a research and
development projects include an obligation to pay back royalties conditional
on future sales arising from the project. Grants received from BIRD, are
accounted for as forgivable loans, in accordance with IAS 20 (Revised),
pursuant to the provisions of IAS 39. Accordingly, when the liability for the
loan is first recognized, it is measured at fair value using a discount rate
that reflects a market rate of interest. The difference between the amount of
the grants received and the fair value of the liability is accounted for upon
recognition of the liability as a grant and recognized in profit or loss as a
reduction of research and development expenses. After initial recognition, the
liability is measured at amortized cost using the effective interest method.
Changes in the projected cash flows are discounted using the original
effective interest and recorded in profit or loss in accordance with the
provisions of IAS 39.
At the end of each reporting period, the Group evaluates, based on its best
estimate of future sales, whether there is reasonable assurance that the
liability recognized, in whole or in part, will not be repaid. If there is
such reasonable assurance, the appropriate amount of the liability is
derecognized and recorded in profit or loss as an adjustment of research and
development expenses. If the estimate of future sales indicates that there is
no such reasonable assurance, the appropriate amount of the liability that
reflects expected future royalty payments is recognized with a corresponding
adjustment to research and development expenses.
Q. Deferred tax
Deferred taxes are computed in respect of temporary differences between the
carrying amounts of assets and liabilities in the financial statements and the
amounts attributable for tax purposes. Deferred taxes are recognized in other
comprehensive income or directly in equity if the tax relates to those items.
Deferred taxes are measured at the tax rates that are expected to apply in the
period when the temporary differences are reversed in profit or loss, other
comprehensive income or equity, based on tax laws that have been enacted or
substantively enacted at the end of the reporting period. Deferred taxes in
profit or loss represent the changes in the carrying amount of deferred tax
balances during the reporting period, excluding changes attributable to items
recognized in other comprehensive income or directly in equity.
Deferred tax assets are reviewed at the end of each reporting period and
reduced to the extent that it is not probable that they will be utilized. In
addition, temporary differences (such as carryforward losses) for which
deferred tax assets have not been recognized are reassessed and deferred tax
assets are recognized to the extent that their recoverability is probable. Any
resulting reduction or reversal is recognized on "income tax" within the
statement of comprehensive income. Taxes that would apply in the event of the
disposal of investments in investees have not been taken into account, as long
as the disposal of such investments is not expected in the foreseeable future
and the group has control over such disposal. In addition, deferred taxes that
would apply in the event of distribution of dividends have not been taken into
account, if distributions of dividends involve an additional tax liability;
the Group's policy is not to initiate distribution of dividends that triggers
an additional tax liability. All deferred tax assets and liabilities are
presented in the statement of financial position as non-current items.
Deferred tax assets are offset if there is a legally enforceable right to
offset a current tax asset against a current tax liability and the deferred
tax liabilities relate to the same taxpayer and the same taxation authority.
R. Current taxes:
The current tax liability is measured using the tax rates and tax laws that
have been enacted or substantively enacted by the reporting date as well as
adjustments required in connection with the tax liability in respect of
previous years.
S. Inventories
Inventories are measured at the lower of cost and net realizable value. Cost
is calculated according to weighted average model.
T. Property, plant and equipment
Items of property, plant and equipment are initially recognized at cost
including directly attributable costs. Depreciation is calculated on a
straight line basis, over the useful lives of the assets at annual rates as
follows:
Rate of depreciation Mainly %
buildings 3 - 4 % 3.13
Machinery and equipment 6 - 20% 10
Office furniture and equipment 6 - 15 % 6
Computer equipment 10 - 33 % 33
Vehicles 15 %
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the group and the cost
of the item can be measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognised when replaced. All other
repairs and maintenance are charged to profit or loss during the reporting
period in which they are incurred.
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period. An asset's carrying amount
is written down immediately to its recoverable amount if the asset's carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with
carrying amount. These are included in profit or loss.
U. Investment property
An investment property is property (land or a building or both) held by the
owner (lessor under an operating lease) or by the lessee under a finance lease
to earn rentals or for capital appreciation or both rather than for use in the
production or supply of goods or services, for administrative purposes or for
sale in the ordinary course of business.
Investment property is measured initially at cost plus costs directly
attributable to the acquisition. After initial recognition, investment
property is measured at cost, less accumulated depreciation and accumulated
impairment losses and accounted for similarly to property, plant and
equipment measured at cost. Investment property is depreciated on a
straight-line basis at annual rates of 3.13%.
Investment property is derecognized on disposal or when the investment
property ceases to be used and no future economic benefits are expected from
its disposal. The difference between the net disposal proceeds and the
carrying amount of the asset is recognized in profit or loss in the period of
the disposal.
V. Cash and cash equivalents
Cash equivalents are considered by the Group to be highly-liquid investments,
including, inter alia, short-term deposits with banks, the maturity of which
do not exceed three months at the time of deposit and which are not
restricted.
W. Provision for warranty
The Group generally offers up to three years warranties on its products. Based
on past experience, the Group does not record any provision for warranty of
its products and services.
X. Share-based payments
Where equity settled share options are awarded to employees, the fair value of
the options calculated at the grant date is charged to the statement of
comprehensive income over the vesting period. Non-market vesting conditions
are taken into account by adjusting the number of equity instruments expected
to vest at each reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of options that
eventually vest. Market vesting conditions are factored into the fair value of
the options granted.
Y. Employee benefits
1. Short-term employee benefits: Short-term employee benefits are
benefits that are expected to be settled wholly before twelve months after the
end of the annual reporting period in which the employees render the related
services. These benefits include salaries, paid annual leave, paid sick leave,
recreation and social security contributions and are recognized as expenses as
the services are rendered. A liability in respect of a cash bonus or a
profit-sharing plan is recognized when the Group has a legal or constructive
obligation to make such payment as a result of past service rendered by an
employee and a reliable estimate of the amount can be made.
2. Post-employment benefits: The plans are normally financed by
contributions to insurance companies and classified as defined contribution
plans or as defined benefit plans.
The Group has defined contribution plans pursuant to Section 14 to the
Severance Pay Law since 2004 under which the Group pays fixed contributions to
a specific fund and will have no legal or constructive obligation to pay
further contributions if the fund does not hold sufficient amounts to pay all
employee benefits relating to employee service in the current and prior
periods. Contributions to the defined contribution plan in respect of
severance or retirement pay are recognized as an expense simultaneously with
receiving the employee's services and no additional provision is required in
the financial statements except for the unpaid contribution. The Group also
operates a defined benefit plan in respect of severance pay pursuant to the
Severance Pay Law. According to the Law, employees are entitled to severance
pay upon dismissal retirement and several other events prescribed by that Law.
The liability for post employment benefits is measured using the projected
unit credit method. The actuarial assumptions include rates of employee
turnover and future salary increases based on the estimated timing of payment.
The amounts are presented based on discounted expected future cash flows using
a discount rate determined by reference to yields on high quality corporate
bonds with a term that matches the estimated term of the benefit plan. In
respect of its severance pay obligation to certain of its employees, the
Company makes deposits into pension funds and insurance companies ("plan
assets"). Plan assets comprise assets held by a Long-term employee benefits
fund or qualifying insurance policies. Plan assets are not available to the
Group's own creditors and cannot be returned directly to the Group. The
liability for employee benefits presented in the statement of financial
position presents the present value of the defined benefit obligation less the
fair value of the plan assets.
Z. Earnings per Share (EPS)
Earnings per share is calculated by dividing the net profit or loss
attributable to owners of the parent by the weighted number of ordinary shares
outstanding during the period. Basic earnings per share only include shares
that were actually outstanding during the period. Potential ordinary shares
(convertible securities such as employee options) are only included in the
computation of diluted earnings per share when their conversion decreases
earnings per share or increases loss per share from continuing operations.
Further, potential ordinary shares that are converted during the period are
included in the diluted earnings per share only until the conversion date, and
since that date they are included in the basic earnings per share. The
Company's share of earnings of investees is included based on the earnings per
share of the investees multiplied by the number of shares held by the
Company.
AA. Segment reporting
An operating segment is a component of the Group that meets the following
three criteria:
1. Is engaged in business activities from which it may earn
revenues and incur expenses;
2. Whose operating results are regularly reviewed by the Group's
chief operating decision maker to make decisions about allocated resources to
the segment and assess its performance; and
3. For which separate financial information is available.
Segment revenue and segment costs include items that are attributable to the
relevant segments and items that can be allocated to segments. Items that
cannot be allocated to segments include the Group's financial income and
expenses and income tax.
BB. New IFRSs inthe period prior to their adoption
- IFRS 9 Financial Instruments:
IFRS 9 replaces the multiple classification and measurement models in IAS 39
Financial instruments: Recognition and measurement with a single model that
has initially only two classification categories: amortised cost and fair
value.
Classification of debt assets will be driven by the entity's business model
for managing the financial assets and the contractual cash flow
characteristics of the financial assets. A debt instrument is measured at
amortised cost if: a) the objective of the business model is to hold the
financial asset for the collection of the contractual cash flows, and b) the
contractual cash flows under the instrument solely represent payments of
principal and interest.
All other debt and equity instruments, including investments in complex debt
instruments and equity investments, must be recognised at fair value.
All fair value movements on financial assets are taken through the statement
of profit or loss, except for equity investments that are not held for
trading, which may be recorded in the statement of profit or loss or in
reserves (without subsequent recycling to profit or loss).
For financial liabilities that are measured under the fair value option
entities will need to recognise the part of the fair value change that is due
to changes in the their own credit risk in other comprehensive income rather
than profit or loss. The new hedge accounting rules (released in December
2013) align hedge accounting more closely with common risk management
practices. As a general rule, it will be easier to apply hedge accounting
going forward. The new standard also introduces expanded disclosure
requirements and changes in presentation.
In December 2014, the IASB made further changes to the classification and
measurement rules and also introduced a new impairment model. With these
amendments, IFRS 9 is now complete. The changes introduce:
- a third measurement category (FVOCI) for certain financial assets that
are debt instruments
- a new expected credit loss (ECL) model which involves a three-stage
approach whereby financial assets move through the three stages as their
credit quality changes. The stage dictates how an entity measures impairment
losses and applies the effective interest rate method. A simplified approach
is permitted for
New IFRSs in the period prior to their adoption (cont.)
financial assets that do not have a significant financing component (e.g.
trade receivables). On initial recognition, entities will record a day-1 loss
equal to the 12 month ECL (or lifetime ECL for trade receivables), unless the
assets are considered credit impaired.
IFRS 9 is to be applied for annual periods beginning on January 1, 2018.
IFRS 9 will not have a material impact on the financial statements.
- IFRS 15 -Revenue from Contracts with Customers (hereafter - IFRS 15)
IFRS 15 shall replace other IFRS provisions relating to revenue recognition.
The core principle of IFRS 15 is that an entity will recognize revenue to
depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services.
IFRS 15 sets out a single revenue recognition model, according to which the
entity shall recognize revenue in accordance with the said core principle by
implementing a five-step model framework:
1) Identify the contract(s) with a customer.
2) Identify the performance obligations in the contract.
3) Determine the transaction price.
4) Allocate the transaction price to the performance obligations in the
contract.
5) Recognize revenue when the entity satisfies a performance obligation.
IFRS 15 provides guidance about various issues related to the application of
the said model, including: recognition of revenue from variable consideration
set in the contract, adjustment of the price of transaction set in the
contract in order to reflect the effect of the time value of money and costs
to obtain or fulfill a contract.
IFRS 15 extends the disclosure requirements regarding revenue and requires,
among other things, that entities disclose qualitative and quantitative
information about significant judgments made by management in determining the
amount and timing of the revenue.
The standard shall be applied retrospectively for annual reporting periods
starting on January 1, 2018 or thereafter,
IFRS 9 will not have a material impact on the financial statements.
3. Revenues
For the year ended December 31,
2017 2016
Revenues arises from: $'000 $'000
Sale of goods 21,271 17,314
Rendering of services 2,492 2,449
Projects 2,613 3,513
26,376 23,276
4. Profit from operations
For the year ended December 31,
2017 2016
This has been arrived at after charging: $'000 $'000
Wages and salaries 9,372 7,962
Depreciation and amortization 637 635
Material and subcontractors 11,825 10,279
Operating lease expense 84 81
Plant, Machinery and Usage 1,015 1,024
Travel and Exhibition 481 474
Advertising and Commissions 383 417
Consultants 406 274
Others 570 647
24,773 21,793
5. Operating segments
1. Segment information
For the year ended December 31, 2017
Antennas Water Solutions Total
$'000
Revenue
External 13,267 13,109 26,376
Total 13,267 13,109 26,376
Segment profit 67 1,536 1,603
Unallocated corporate expenses
Finance income, net 26
Profit before income tax 1,629
Other
Depreciation and amortization 586 51 637
5. Segments (cont.)
1. Segment information (cont.)
For the year ended December 31, 2016
Antennas Water Solutions Total
$'000
Revenue
External 11,427 11,849 23,276
Total 11,427 11,849 23,276
Segment profit (loss) (108) 1,591 1,483
Unallocated corporate expenses
Finance expense, net (277)
Profit before income tax 1,206
Other
Depreciation and amortization 591 44 635
2. Entity wide disclosures External revenue by location of
customers.
For the year ended December 31,
2017 2016
$'000 $'000
Israel 13,889 10,856
North America 4,155 4,299
Europe 4,050 4,038
Africa 1,867 1,819
Asia 1,201 645
Other 1,214 1,619
26,376 23,276
3. Additional information about revenues:
Revenues from major customers each of whom amount to 10% or more of total
revenues reported in the financial statements:
For the year ended December 31,
Revenues 2017 2016
$'000 $'000
Customer A - Antennas segment 2,476 2,424
Others (non-major customers) 23,900 20,852
26,376 23,276
6. Finance expense and income
For the year ended December 31,
2017 2016
$'000 $'000
Finance expense
Interest on bank loans 109 122
Net Foreign exchange loss - 51
Interest and bank fees 107 161
216 334
Finance income
Interest from bank deposits 22 -
Net Foreign exchange gain 220 -
Gains from financial assets classified as held for trading - 57
242 57
(26) 277
7. Income Tax
A. Tax Laws in Israel
1. Amendments to the Law for the Encouragement of Capital
Investments, 1959 (the "Encouragement Law"):
In December 2010, the "Knesset" (Israeli Parliament) passed the Law for
Economic Policy for 2011 and 2012 (Amended Legislation), 2011 ("the
Amendment"), which prescribes, among others, amendments to the Law. The
Amendment became effective as of January 1, 2011. According to the Amendment,
the benefit tracks in the Law were modified and a flat tax rate applies to the
Company's entire preferred income. Commencing from the 2011 tax year, the
Group will be able to opt to apply (the waiver is non-recourse) the Amendment
and from the elected tax year and onwards, it will be subject to the amended
tax rates that are: 2014 and thereafter will be 16% (in development area A -
9%).
The Group applied the Amendment effectively from the 2011 tax year.
2. Tax rates:
On December 29, 2016, the Law Economic Efficiency (Legislative Amendments for
Achieving the Budgetary Goals for 2017-2018) was published in Reshumot (the
Israeli government official gazette), which enacts, among other things, the
following amendments:
- Decreasing the corporate tax rate to 24% in 2017 and to 23% in 2018 and
thereafter (instead of 25%).
- Commencing tax year 2017 and thereafter the tax rate on the income of
preferred enterprises of a qualifying Company in Development Zone A as stated
in the Encouragement of Capital Investment Law, shall decrease to 7.5%
(instead of 9%) and for companies located in zones other than Zone A the rate
shall remain 16%.
- In addition, the tax rate on dividends distributed on January 1, 2014 and
thereafter originating from preferred income under the Encouragement Law will
be raised to 20% (instead of 15%).
7. Income Tax (cont.)
Therefore the applicable corporate tax rate for 2014 and thereafter is 16%.
The real capital gains tax rate and the real betterment tax rate for the years
2014-2015 -26.5% and 25%, 24% in 2016 and 2017 respectively.
B. The principal tax rates applicable to the subsidiaries whose
place of incorporation is outside Israel are:
A company incorporated in India - The statutory tax rate is 36% and the
company was in exempt zone until end of March 2013. Nevertheless in the
absence of taxable income the Indian regulation states that the company had to
pay Minimum Alternate tax rate which is 50% of the tax rate (the 36%) out of
the accounting profit paid as an advanced for future years, if the Company
becomes tax liable.
A company incorporated in Switzerland - The weighted tax rate applicable to a
company operating in Switzerland is about 25% (composed of Federal, Cantonal
and Municipal tax). Provided that the company meets certain conditions, the
weighted tax rate applicable to its income in Switzerland will not exceed
10%.
A company incorporated in South Africa - The statutory tax rate is 28%
A company incorporated in Australia - The statutory tax rate is 30%
A company incorporated in United States of America - The statutory tax rate is
21%.
C. Income tax assessments
The Company has tax assessments considered as final up to and including the
year 2012.
For the year ended December 31,
2017 2017 2016 2016
$'000 $'000 $'000 $'000
Current tax expense
Income tax on profits for the year 402 329
402 329
Deferred tax income
Origination and reversal of temporary differences (82) (107)
(82) (107)
Total tax expense 320 222
The adjustments for the difference between the actual tax charge for the year
and the standard rate of corporation tax in Israel applied to profits for the
year are as follows:
For the year ended December 31,
2017 2016
$'000 $'000
Profit before income tax 1,629 1,206
Tax computed at the corporate rate in Israel of 16% 261 193
Un deductible expenses (Income not subject to tax) 3 20
Taxes resulting from different tax rates applicable to foreign and other subsidiaries 54 40
Other 2 (31)
Total income tax expense 320 222
8. Earnings per share
Net earnings per share attributable to equity owners of the parent
For the year ended December 31,
2017 2016
$'000 $'000
Net Earnings used in basic EPS 1,250 936
Net Earnings used in diluted EPS 1,250 936
Weighted average number of shares used in basic EPS 52,866,325 51,687,853
Effects of:
Employee options 442,871 887,740
Weighted average number of shares used in diluted EPS 53,309,196 52,575,593
Basic net EPS (dollars) 0.0236 0.0181
Diluted net EPS (dollars) 0.0234 0.0178
The employee options have been included in the calculation of diluted EPS as
the weighted average share price during the year greater than their exercise
price (i.e. they are in-the-money) and therefore it would be advantageous for
the holders to exercise those options. The total number of options in issue is
disclosed in note 25.
9. Dividends
For the year ended December 31,
2017 2016
$'000 $'000
Dividend paid 235 568
Scrip dividend 283 -
518 568
On January 12, 2016, following the approval of its shareholders, the Company
adopted a change to its article of association allowing the Company the
ability to pay dividends by way of scrip, meaning the board would be able to
announce a dividend which could be paid in cash or through the issue of new
shares in the Company (the "Scrip Dividend Policy").Under the Scrip Dividend
Policy, shareholders could, in the future, be given the option to elect to
receive dividends in new shares of the Company rather than in cash. The
default arrangement will be for the payment of dividends in cash, and if the
shareholder prefers to receive their dividends in new shares of the Company,
then they would have to make an election. There would be no ability to make
mixed elections and each shareholder would be able to choose either cash or
new shares but not both. The decision to offer shareholders a scrip dividend
alternative for future dividend payments will be at the sole discretion of the
Board.
Dividend of 1 cents (1.1 cents) per ordinary share proposed and paid during
the year relating to the previous year's results. In 2017 a scrip option
offered to shareholders, which was partially accepted.
10. Property, plant and equipment
Building Machinery & Office Computer equipment Vehicles Total
equipment furniture & equipment
$'000 $'000 $'000 $'000 $'000 $'000
Cost:
Balance as of January 1, 2017 5,200 4,902 314 1,500 476 12,392
Acquisitions 5 95 9 45 293 447
Disposals - - - - (214) (214)
Exchange differences - 6 2 5 18 31
Balance as of December 31, 2017 5,205 5,003 325 1,550 573 12,656
Accumulated Depreciation:
Balance as of January 1, 2017 959 4,164 280 1,354 182 6,939
Additions 136 213 17 71 72 509
Disposals - - - - (108) (108)
Exchange differences - 5 1 3 5 14
Balance as of December 31, 2017 1,095 4,382 298 1,428 151 7,354
Net book value as of December 31, 2017 4,110 621 27 122 422 5,302
Building Machinery & Office Computer equipment Vehicles Total
equipment furniture & equipment
$'000 $'000 $'000 $'000 $'000 $'000
Cost:
Balance as of January 1, 2016 5,186 4,805 302 1,387 387 12,067
Acquisitions 14 97 8 108 74 301
Exchange differences - - 4 5 15 24
Balance as of December 31, 2016 5,200 4,902 314 1,500 476 12,392
Accumulated Depreciation:
Balance as of January 1, 2016 814 3,924 261 1,289 136 6,424
Additions 145 239 17 65 35 501
Exchange differences - 1 2 - 11 14
Balance as of December 31, 2016 959 4,164 280 1,354 182 6,939
Net book value as of December 31, 2016 4,241 738 34 146 294 5,453
11. Investment Property
Composition and movement of Rental properties:
2017 2016
$'000 $'000
Cost:
Balance at January 1 and December 31 828 828
Accumulated depreciation:
Balance at January 1 198 172
Additions during the year:
Depreciation 21 26
Balance at December 31 219 198
Depreciated cost at December 31 609 630
On December 2011 the Company acquired from its controling shareholder, MTI
Computers & Software Services (1982) Ltd. ("MTI Computers"), the leasehold
interest of its head office located at 11 Hamelacha St., Afek Industrial Park,
Rosh-Ha'Ayin, 48091, Israel (the "Property").
The Company occupies approximately 75 percent of the Property; therefore it
had entered into a lease agreement with MTI Computers (which can sub lease
part of the area) occupying approximately 1,100 square meters of the Property.
The term of the lease is for an initial period of 5 years, with an option to
extend the lease for an additional 5 year period (the "Option Period"). The
rent for the leased area is US$ 10,000 per month throughout the initial period
and will be increased by an amount of 10 percent for the Option Period.
In addition to the monthly rental payments, the tenants will pay to the
Company a monthly management payment of US$ 7,150 per month as a contribution
towards certain expenses (including insurance, the use of the car park,
maintenance services, rates, water and electricity). This amount will be
increased by 3 percent on a yearly basis. Since the acquisition of Mottech and
movement of its facility to the Property the Company entered into an agreement
with Mottech instead of MTI Computers for about 40% of the area used by MTI
Computers and therefore the lease with MTI Computers was reduced to $6,000 per
month and $4,290 per month as a contribution towards certain expenses.
The Group estimates that the fair value does not differ from the carrying
amount as at December 31, 2017 and 2016.
12. Intangible assets
2017 2016
$'000 $'000
Cost:
Balance at January 1 and December 31 483 483
Accumulated depreciation:
Balance at January 1 162 54
Additions during the year:
Amortization charge 109 108
Balance at December 31 271 162
Depreciated cost at December 31 212 321
13. Deferred Tax Assets
Deferred tax is calculated on temporary differences under the liability method
using the tax rate at the year the deferred tax assets are recovered.
The movement in the deferred tax asset is as shown below:
2017 2016
$'000 $'000
At January 1 500 393
Charge to other comprehensive income 5 1
Charge to profit or loss 77 106
At December 31 582 500
Deferred tax assets have been recognized in respect of all differences giving
rise to deferred tax assets because it is probable that these assets will be
recovered.
Composition:
31.12.2017 31.12.2016
$'000 $'000
Accrued severance pay 65 58
Other provisions and employee-related obligations 73 70
Research and development expenses deductible over 3 years 171 170
Depreciable intangibles (37) (53)
Carry forward tax losses 310 255
582 500
Deferred tax assets relating to carry forward capital losses of the Group
total approximately $853 and $841 thousand as of December 31, 2017 and 2016
respectively were not recognized in the financial statements because their
utilization in the foreseeable future is not probable.
14. Inventories
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