REG - MTI Wireless Edge - Final Results for 2022
13/03/2023 07:00
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RNS Number : 6511S MTI Wireless Edge Limited 13 March 2023
13 March 2023
MTI Wireless Edge Ltd
("MTI", the "Company" or the "Group")
Final results for 2022
and
Extension of the Company's share repurchase programme
MTI Wireless Edge Ltd (AIM:MWE), the technology group focused on comprehensive
communication and radio frequency solutions across multiple sectors, is
pleased to announce its audited results for the year ended 31 December 2022.
2022 Highlights
A strong financial performance in 2022
· Delivered revenue growth of 7% to US$46.3m (2021: US$43.2m)
· A 12% increase in adjusted EBITDA to US$6.06m (2021: US$5.4m), helped
by the economies of scale from the increasing size of the Group
· Profit from operations increased 4% to US$4.59m (2021: US$4.42m),
including some one off costs related to the acquisition of PSK
· Net profit growth of 4% to US$3.85m (2021: US$3.7m)
· Earnings per share increased by 3% to 4.21 US cents (2021: 4.07 US
cents)
· Net cash of US$8.1m at 31 December 2022 (31 December 2021: US$12.5m),
after significant expenditure (together totalling approximately $7m)
comprising:
o the initial net consideration paid in respect of PSK
o the Group's exit from its Russian operations
o the dividend paid in March 2022
offset by US$3.59m of net cash generated from operating activities.
· Increased final dividend of 7% to 3.0 US cents per share (2021: 2.8
US cents per share)
Sales growth and future growth drivers established across all three divisions
· Antennas - completed a successful year with 3% revenue growth in 2022
and the prospect of increasing revenues in 2023. Sale of commercial antennas
increased with unanticipated demand for legacy fixed wireless access antennas,
combined with increasing sales of the 5G backhaul solutions and the ABS®
antenna solution to counter small mast movements, attracting strong interest
from three tier one customers and several tier two customers.
· Water management - delivered 3% revenue growth with price increases
agreed in 2022 that will improve revenues and profitability in 2023. Water
scarcity remains a fundamental issue, resulting in increasing demand for
Mottech's expanding product range through good organic growth amongst existing
clients and expansion of the customer base into new markets.
· Distribution - another good year with 16% revenue growth driven by
Governments worldwide seeking to increase their investment in defence. A very
successful first year for PSK as part of the Group, with it securing the
Group's most valuable ever contract. Design wins, especially military
solutions, position this division well for another good year in 2023.
Moni Borovitz, Chief Executive Officer of MTI Wireless Edge, said: "We made
good progress this year with all three divisions growing revenue and overall
profits despite challenges in the supply chain and volatile foreign exchange
movements. Our latest acquisition, PSK, has integrated well, recently winning
our largest ever contract. We are seeing compelling opportunities in all
segments of our operations. In particular, the opening of the Indian market
for E-Band 5G backhaul, which represents a substantial opportunity for us over
the medium term.
"Looking ahead, the business continues to be in a strong financial position
with net cash of US$8.1m at the year end. The Group's three divisions are well
established, with experienced, independent leadership teams and all utilising
the Group's core expertise in radio frequency communications technology. The
macro trends for all three remain positive: from the continuing roll-out of 5G
cellular connectivity; to tackling the growing global issue of water scarcity;
and the significant increases in international defence spending. The first two
months of 2023 have been in line with internal expectations and judging from
the pipeline of potential opportunities, the Group is well placed, supported
by a strong financial platform, to continue to seek to expand through a mix of
acquisition-led and organic growth."
Shareholder presentation
Moni Borovitz, Chief Executive Officer, will provide an investor presentation
relating to the Company's financial results for the year ended 31 December
2022 via the Investor Meet Company ("IMC") platform today at 10.00 am UK time.
Investors can sign up for free via:
https://www.investormeetcompany.com/mti-wireless-edge-ltd/register-investor
(https://www.investormeetcompany.com/mti-wireless-edge-ltd/register-investor)
Investors who have already registered on IMC and added to meet the Company,
will be automatically invited to the meeting.
Shareholders should note that the Company will not post hard copies of its
audited annual report and accounts for the year ended 31 December 2022 (the
"Annual Report") to its shareholders. Shareholders who require a hard copy
of the Annual Report may write to the Company at MTI Wireless Edge Ltd
Headquarters, 11 Hamelacha St. Afek Industrial Park, Rosh-Ha'Ayin, Israel
requesting a hard copy. An electronic version of the Annual Report will
shortly be available on the Company's website at the following address:
www.mtiwirelessedge.com (http://www.mtiwirelessedge.com/)
Extension of Company's share repurchase programme
The Company is pleased to announce that it will continue its programme to
conduct market purchases of its ordinary shares of par value 0.01 Israeli
Shekels each (the "Ordinary Shares") in the Company up to a maximum value of
£200,000 (the "Share Repurchase Programme"). The Share Repurchase Programme
commenced on 28 January 2019, was originally in place until no later than 26
July 2019 and was subsequently extended until 31 March 2023. At a recent
meeting, the board of directors of the Company decided to extend the Share
Repurchase Programme until 31 March 2024. The Share Repurchase Programme shall
continue under the same terms and conditions originally announced by the
Company on 13 April 2022.
For further information please contact:
MTI Wireless Edge Ltd +972 3 900 8900
Moni Borovitz, CEO http://www.mtiwirelessedge.com (http://www.mtiwirelessedge.com)
Allenby Capital Limited (Nomad and Joint Broker) +44 20 3328 5656
Nick Naylor/Alex Brearley/Piers Shimwell (Corporate Finance)
Amrit Nahal/David Johnson (Sales and Corporate Broking)
Shore Capital (Joint Broker) +44 20 7408 4090
Toby Gibbs/John More (Corporate Advisory)
Fiona Conroy (Corporate Broking)
Novella (Financial PR) +44 20 3151 7008
Tim Robertson/Safia Colebrook
About MTI Wireless Edge Ltd. ("MTI")
Headquartered in Israel, MTI is a technology group focused on comprehensive
communication and radio frequency solutions across multiple sectors through
three core divisions:
Antenna division
MTI is a world leader in the design, development and production of high
quality, state-of-the-art, and cost-effective antenna solutions including
Smart Antennas, MIMO Antennas and Dual Polarity Antennas for wireless
applications. MTI supplies antennas for both military and commercial markets
from 100 KHz to 174 GHz.
Internationally recognized as a producer of commercial off-the-Shelf and
custom-developed antenna solutions in a broad frequency range, MTI addresses
both commercial and military applications.
MTI supplies directional and omnidirectional antennas for outdoor and indoor
deployments, including smart antennas for 5G backhaul, Broadband access,
public safety, RFID, base station and terminals for the utility market.
Military applications include a wide range of broadband, tactical and
specialized communication antennas, antenna systems and DF arrays installed on
numerous airborne, ground and naval, including submarine, platforms worldwide.
Water Control & Management division
Via its subsidiary, Mottech Water Solutions Ltd ("Mottech"), MTI provides
high-end remote control and monitoring solutions for water and irrigation
applications based on Motorola's IRRInet state-of-the-art control, monitoring
and communication technologies.
As Motorola's global prime-distributor Mottech serves its customers worldwide
through its international subsidiaries and a global network of local
distributors and representatives. With over 25 years of experience in
providing customers with irrigation remote control and management, Mottech's
solutions ensure constant, reliable and accurate water usage, increase crops
quality and yield while reducing operational and maintenance costs providing
fast ROI while helping sustain the environment. Mottech's activities are
focused in the market segments of agriculture, water distribution, municipal
and commercial landscape as well as wastewater and storm-water reuse.
Distribution & Professional Consulting Services division
Via its subsidiary, MTI Summit Electronics Ltd., MTI offers consulting,
representation and marketing services to foreign companies in the field of RF
and Microwave solutions and applications including engineering services
(including design and integration) in the field of aerostat systems and the
ongoing operation of Platform subsystems, SIGINT, RADAR, communication and
observation systems which is performed by the Company. It also specializes in
the development, manufacture and integration of communication systems and
advanced monitoring and control systems for the Government and defence
industry market.
Chairman's statement
I am pleased to report on a successful year in which the Group delivered
growth at all levels. This is especially pleasing, given the business has had
to adapt to changing market conditions, following the commencement of
hostilities in Ukraine and the associated negative global economic impact this
had.
We have further developed the Group's Environmental, Social and Governance
("ESG") policies with the aim of making MTI a truly excellent company to work
for and be associated with. We are committed to building a diverse team and to
ensuring inclusive representation at all levels. The Company's character comes
from the people within the business, and we aim to ensure our workplaces are
educational, open, friendly environments that encourage debate, are inclusive
and diverse, and ultimately enable our people to work harmoniously.
Through Mottech the Company is naturally focused on eradicating hunger with
its systems helping to increase agricultural production through more effective
water usage. In addition, Mottech is focused on clean water and sanitation,
with its water management systems seeking to preserve and re-use water. We
also believe the Company's innovative antenna technology plays a part in
connecting the unconnected, providing easier access to information and
services to rural areas. 5G enables new ways of doing things, such as
receiving a medical consultation online and many other activities which used
to be solely conducted face to face, some of which are yet to be discovered
and all with reduced pollution, by using video and other remote means of
connectivity.
Trading overview
MTI is a well-balanced business, with its three successful divisions all
performing well and delivering on their respective growth strategies. The
Company grew in terms of both sales and profits and it is noteworthy that this
was delivered despite the ongoing impact of the global chip shortage,
representing key components required in nearly all of the products and
solutions sold.
In 2022, the Group took the decision to exit its Russian operations following
the invasion of the Ukraine, but it also expanded through acquisition with the
purchase of PSK WIND Technologies Ltd. ("PSK"), which, to date, has been a
highly successful transaction for the Company.
The Company also continued to invest in innovative new technologies, most
notably in the ongoing development of the new automatic beam steering
("ABS®") antenna solution for the 5G backhaul market. The ABS® antenna
solution is designed to counter small antenna mast movements that distort the
signal, caused by wind and changes in temperature, which was an industry wide
challenge. The ABS® antenna solution has brought significant interest from
three tier one customers and several tier two customers.
Dividend
Reflecting the strength of the Company's trading performance the Board is
pleased to declare a final dividend of US$0.03 per share representing a 7%
increase on the previous year (2022: US$0.028). The dividend will be paid on 6
April 2023 to shareholders on the register at the close of trading on 24 March
2023 (ex-dividend on 23 March 2023). The currency translation into British
Pounds will be made on 27 March 2023 and there will not be a scrip dividend
alternative.
People
The MTI teams around the globe all performed very well in the year,
maintaining very high operational levels and delivering margin progression.
Our teams are working towards agreed targets and exploiting new opportunities
with both existing and new customers.
I would, as always, like to thank our employees for their significant
contribution to the Company during 2022. Our workplaces were less disrupted
than in the COVID pandemic years of 2020 and 2021, but there were still a
number of challenges which all the teams worked hard to overcome.
Outlook
MTI is a growth business operating in growth markets. Our products and
services are in good demand across all three divisions. We continue to invest
in innovation, product development and new companies when the opportunities
arise, whilst always remaining focused on radio frequency communications which
lies at the heart of our success.
2023 has started well for the Company with an increased pipeline of
opportunities across all of our three divisions. We are looking forward to
delivering another year of growth and increased returns for our shareholders.
Zvi Borovitz
Chairman
Chief Executive's review
Introduction
2022 was a successful year for the Company. The Company's business grew
despite uncertainties created by the conflict in Ukraine and the global
shortage in microchips. Each division, under their respective management
teams, made good progress, retaining and expanding their customer bases and
growing their businesses overall. As a result, entering 2023, the Company is
well placed to continue to invest in people, innovation and new products,
alongside generating attractive returns for shareholders.
Financial results
Revenues for the twelve months to 31 December 2022 increased by 7% to US$46.3m
(2021: US$43.2m), a positive performance.
Our gross margin rates remained solid, reflecting the mix of products sold in
different markets. Overall gross margin was slightly improved and gross profit
grew by 8% which showcased the Group's ability to pass most of its price
increases onto customers.
Operating profit increased by 4% to US$4.59m (2021: US$4.43m), which
demonstrated the scalability of our business, after including about $200K of
nonrecurring expenses related to the PSK acquisition. Adjusted EBITDA grew 12%
to US$6.06m (2021: US$5.4m).
Cash flow generated from operations for 2022 was US$3.6m compared to US$6.6m
in 2021 which included the impact on cash due to the disposal of our Russian
operations. This resulted in a net cash balance of approximately US$8.1
million (2021: US$12.5m) after the disposal of Russian operations, payment for
the acquisition of PSK and the dividend payment (altogether around US$7m).
The Company continues to have a share buy-back programme in place. The
objective of this programme is to assist with trading liquidity, by
accumulating shares in treasury through market purchases and then selling
blocks of shares to institutional shareholders, subject to demand and price.
Cash generated from any resales of purchased shares has been reused for
further share purchases, and this policy is planned to continue for as long as
the programme is in place. As at 12 March 2023, 150,000 shares were held in
treasury. As noted above the board recently decided to extend the Share
Repurchase Programme (on the same terms and conditions originally announced by
the Company on 13 April 2022) until 31 March 2024.
Operational review
Over the last 50 years MTI has established its reputation as a global provider
of comprehensive radio frequency solutions across multiple sectors through
three core divisions.
Antennas
This division is a one stop shop for the sale of 'off the shelf' flat and
parabolic antennas, combined with the provision of custom-developed antenna
solutions to a range of commercial and military customers, with a growing
focus on providing 5G backhaul antenna solutions to support mobile phone
operators as they roll-out their 5G networks.
In 2022, revenues from this division increased by 3%, a good result reflecting
increasing demand for the 5G backhaul solution and, slightly unexpectedly, an
increase in demand for legacy antennas for fixed wireless access. Military
sales were relatively subdued but enquiry levels are high and sales in RFID
were in line. Overall, a strong performance.
5G sales continue to grow and now represent over 20% of the antenna business.
The division's backhaul solution has been well proven and is positioned to
generate significant long-term revenues alongside the roll-out of 5G networks
globally by the major mobile phone operators. A process that is still in its
infancy.
2022 saw the opening of the Indian market for E-Band 5G backhaul and, given
the size of the market, this represents a substantial opportunity. MTI is well
positioned in India having an established manufacturing facility in it. In Q4
of 2022, there was intense activity and some good early revenues, however,
order volumes are expected to be sporadic, at least initially, but there is no
doubt regarding the scale of the overall opportunity.
The ABS® antenna solution which ensures the antenna adapts to any small
movements caused by different climate conditions, including wind or
temperature, is making excellent progress. This critical innovation that
solves an industry wide problem has brought MTI to the attention of three tier
one radio manufacturers and several tier two customers, which serve most of
the global mobile operators, including one whom had not previously worked with
the Group. All are in various customisation processes with the ABS® antenna
solution, in advance of production.
Sales of legacy antenna for fixed wireless access had been in natural decline
but, slightly unexpectedly, demand in 2022 increased for the use of these
antennas in Access Wi-Fi solutions serving mainly stadiums, shopping malls and
other high-density areas where thousands of people require mobile connectivity
but can't access their networks due to lack of bandwidth.
Military antenna sales were slower than anticipated but given the very high
enquiry levels and the overall increase in military spending, this is expected
to reverse quite sharply.
Water Control & Management
This division provides wireless control systems to manage irrigation and water
distribution for agriculture, municipal authorities and commercial entities.
It operates under the Mottech brand and utilises part of the hardware
technology from Motorola, integrated with the Company's own proprietary
management software. Our solutions reduce water and power usage, whilst
providing higher revenue from accurate irrigation, leading to more, and higher
quality, crops and plants being grown.
Mottech had another good year, delivering revenue growth of 3%, despite some
adverse currency movements. Profit margins were slightly weaker compared to
prior periods, however, the price increases accepted in 2022 will feed through
into 2023, alongside increased service prices which will ensure profit margin
recovery. Recurring revenues continued to improve and represented 20% of all
income in 2022.
Mottech continues to seek to innovate and expand its services to existing and
new clients. For over 30 years, Mottech has been providing irrigation services
for a number of municipalities in Israel, ensuring efficient water usage
across public parkland and green open spaces. Earlier in 2022, Mottech
expanded its services into a new area for an Israeli municipality, with a
US$0.5 million contract to monitor and partially control over 30 city
fountains under one system which is becoming part of a smart city managing its
operations from one control and monitoring room. Historically the fountains
were operated individually. Fountain management represents a new and natural
extension to Mottech's current services.
The strategic partnership with Viridix continues to develop since being
announced in January 2022. It provides the Autopilot solution that measures
the water available to the roots of plants and therefore enables greater
irrigation precision. This is now beginning to be adopted into cities whereas
historically it was solely focused on agricultural projects.
Water scarcity continues to be a very real global problem and Governments are
increasingly aware of the importance of not wasting this vital resource.
Mottech's solutions can make a substantial difference - often able to save a
farmer or a city up to 30% in water usage, while helping the farmer to grow
more crops at a better level of quality. This level of impact ensures that
demand for Mottech's services will continue to be strong.
Distribution & Professional Consulting Services
Operating under the MTI Summit Electronics brand ("MTI Summit"), this division
exclusively represents approximately 40 international suppliers of radio
frequency/microwave components and sells these products to Israeli customers.
Expert knowledge of both the international suppliers and customers further
enables MTI to act as a consultant to all parties and assist with devising
complete radio frequency/microwave solutions.
2022 was another very strong year for MTI Summit, continuing an excellent
track record of growth and development. Revenues grew by 16% including the
acquisition of PSK in January 2022. The increased profits have come from a
healthy balance between PSK and MTI Summit.
The acquisition of 51% of PSK has been a good investment. The Group was
familiar with the PSK business, having collaborated on numerous projects
together over the last 10 years. PSK specialises in the development,
manufacture and integration of communication systems and advanced monitoring
and control systems for the Government and defence industry market.
Integrating the teams is progressing successfully and since the acquisition
there have been a series of contract wins, including the Group's most valuable
ever contract expected to be worth up to US$10 million over the next up to
seven years. The contract provides service and maintenance support to the
Israeli Ministry of Defence.
The pipeline for MTI Summit and PSK is promising. PSK has a series of tenders
coming up in 2023 for which it is well placed to be successful. Similarly, MTI
Summit has continued to complete a number of design wins for both existing and
new customers, which are likely to generate future sales. For both businesses,
the wider backdrop of increased defence spending by governments globally
creates a strong market environment to operate in.
In March 2022, following the start of the conflict in Ukraine, the Board took
the decision to sell the Company's Russian business unit to that business'
management team.
Outlook
The conflict in Ukraine has led directly to a significant increase in defence
budgets. This increase in spend is yet to come through and with approximately
37% of the Group's sales being defence related, it is likely that this trend
will have a positive impact on the Company's financial performance in 2023.
Overall, MTI remains well positioned across three divisions, with each
division backed by strong macro trends underpinning their future prosperity.
The first two months of 2023 have been in line with internal expectations and
judging from the pipeline of potential opportunities, the Group is well
placed, supported by a strong financial platform, to continue to seek to
expand through a mix of acquisition-led and organic growth.
Moni Borovitz
Chief Executive Officer
M.T.I Wireless Edge Ltd.
Consolidated Statements of Comprehensive Income
For the year ended December 31,
2022 2021
Note $'000 $'000
Revenues 4, 6 46,270 43,184
Cost of sales 31,680 29,685
Gross profit 14,590 13,499
Research and development expenses 1,077 965
Distribution expenses 3,924 3,686
General and administrative expenses 4,998 4,448
Profit from sale of property, plant and equipment 1 25
Profit from operations 5 4,592 4,425
Finance expense 7 385 454
Finance income 7 (110) (67)
Profit before income tax 4,317 4,038
Tax expenses 8 468 329
Profit 3,849 3,709
Other comprehensive income (loss) net of tax:
Items that will not be reclassified to profit or loss:
Remeasurements on defined benefit plans 127 22
Items that may be reclassified to profit or loss:
Adjustment arising from translation of financial statements of foreign (422) (19)
operations
Total other comprehensive income (loss) (295) 3
Total comprehensive income 3,554 3,712
Profit attributable to:
Owners of the parent 3,721 3,598
Non-controlling interest 128 111
3,849 3,709
Total comprehensive income attributable to:
Owners of the parent 3,426 3,601
Non-controlling interest 128 111
3,554 3,712
Earnings per share
Basic and Diluted (dollars per share) 8 0.0421 0.0407
The accompanying notes form an integral part of these financial statements.
M.T.I Wireless Edge Ltd.
Consolidated Statements of Changes in Equity
For the year ended December 31, 2022 :
Attributable to owners of the parent
Share capital Additional paid-in capital Translation differences Retained earnings Total attributable to owners of the parent Non-controlling interests Total equity
U.S. $ in thousands
Balance as at January 1, 2022 209 23,126 172 2,406 25,913 1,098 27,011
Changes during 2022:
Comprehensive income
Profit for the year - - - 3,721 3,721 128 3,849
Other comprehensive income
Re measurements on defined benefit plans - - - 127 127 - 127
Translation differences - - (422) - (422) - (422)
Total comprehensive income (loss) for the year - - (422) 3,848 3,426 128 3,554
Dividend - - - (2,479) (2,479) - (2,479)
Acquisition and disposal of treasury shares (note 26) - (48) - - (48) - (48)
Balance as at December 31, 2022 209 23,078 (250) 3,775 26,812 1,226 28,038
The accompanying notes form an integral part of these financial statements.
M.T.I Wireless Edge Ltd.
Consolidated Statements of Changes in Equity (Cont.)
For the year ended December 31, 2021 :
Attributable to owners of the parent
Share capital Additional paid-in capital Translation differences Retained earnings Total attributable to owners of the parent Non-controlling interests Total equity
U.S. $ in thousands
Balance as at January 1, 2021 209 23,167 191 999 24,566 987 25,553
Changes during 2021:
Comprehensive income
Profit for the year - - - 3,598 3,598 111 3,709
Other comprehensive income
Re measurements on defined benefit plans - - - 22 22 - 22
Translation differences - - (19) - (19) - (19)
Total comprehensive income (loss) for the year - - (19) 3,620 3,601 111 3,712
Dividend - - - (2,213) (2,213) - (2,213)
Acquisition and disposal of treasury shares (note 26) - (41) - - (41) - (41)
Balance as at December 31, 2021 209 23,126 172 2,406 25,913 1,098 27,011
The accompanying notes form an integral part of the financial statements.
M.T.I Wireless Edge Ltd.
Consolidated Statements of Financial Position
As at December 31, As at December 31,
2022 2022 2021 2021
Note $'000 $'000 $'000 $'000
ASSETS
Non-current assets :
Property, plant and equipment 11 5,573 5,548
Customer relations 12 1,597 861
Goodwill 12 2,261 153
Deferred tax assets 13 1,163 994
Long-term prepaid expenses 39 26
Total non-current assets 10,633 7,582
Current assets:
Inventories 14 7,757 6,849
Current tax receivables 549 518
Unbilled revenue 15 2,204 2,794
Trade and other receivables 15 11,035 10,628
Cash and cash equivalents 16 8,279 12,567
Total current assets 29,824 33,356
TOTAL ASSETS 40,457 40,938
LIABILITIES
Non-curent liabilities :
Contingent consideration 1,432 -
Lease liabilities 11 303 465
Loans from banks, net of current maturities 17 98 8
Employee benefits, net 18 752 868
Total Non-current liabilities 2,585 1,341
Current Liabilities:
Current tax payables 425 322
Trade and other payables 19 9,366 12,241
Current maturities and short-term bank credit 20 43 23
Total current liabilities 9,834 12,586
Total liabilities 12,419 13,927
TOTAL NET ASSETS 28,038 27,011
The accompanying notes form an integral part of these financial statements.
M.T.I Wireless Edge Ltd.
Consolidated Statements of Financial Position (Cont.)
As at December 31, As at December 31,
2022 2022 2021 2021
Note $'000 $'000 $'000 $'000
Capital and reserves attributable to 23
owners of the parent
Share capital 209 209
Additional paid-in capital 23,078 23,126
Translation differences (250) 172
Retained earnings 3,775 2,406
26,812 25,913
Non-controlling interests 1,226 1,098
TOTAL EQUITY 28,038 27,011
The accompanying notes form an integral part of these financial statements.
M.T.I Wireless Edge Ltd.
Consolidated Statements of Cash Flows
For the year ended December 31, For the year ended December 31,
2022 2022 2021 2021
$'000 $'000 $'000 $'000
Operating Activities:
Profit for the year 3,849 3,709
Adjustments for:
Depreciation and amortization 1,466 976
Gain on disposal of property, plant and equipment (1) (25)
Finance expense, net (82) 53
Income tax expense 468 329
5,700 5,042
Changes in working capital and provisions
Increase in inventories (951) (479)
(Increase) decrease in trade receivables (63) 604
Decrease (increase) in unbilled revenues 590 (476)
(Increase) in other accounts receivables (1,134) (448)
Increase in trade and other accounts payables 572 2,803
(Decrease) increase in employee benefits, net (93) 64
(1,079) 2,068
Interest received - 52
Interest paid (52) (88)
Income tax paid (978) (481)
(1,030) (517)
Net cash provided by operating activities 3,591 6,593
The accompanying notes form an integral part of these financial statements.
M.T.I Wireless Edge Ltd.
Consolidated Statements of Cash Flows (Cont.)
For the year ended December 31, For the year ended December 31,
2022 2022 2021 2021
$'000 $'000 $'000 $'000
Investing Activities:
Proceeds from sale of property, plant and equipment 15 153
Acquisition of subsidiary, net of cash acquired (1,427) -
Net cash from sale of previously consolidated subsidiaries (2,785) -
Payment of contingent consideration regarding business acquisition - (54)
Purchase of property, plant and equipment (552) (835)
Net cash used in investing activities (4,749) (736)
Financing Activities:
Dividend (2,479) (2,213)
Payments of lease liabilities (560) (449)
Treasury shares acquired (118) (41)
Treasury shares sold 70 -
Repayment of long-term loans from banks 118 (117)
Net cash used in financing activities (2,969) (2,820)
(Decrease) increase in cash and cash equivalents (4,127) 3,037
Cash and cash equivalents at the beginning of the year 12,567 9,577
Exchange differences on balances of cash and cash equivalents (161) (47)
Cash and cash equivalents at the end of the year 8,279 12,567
(560)
(449)
Treasury shares acquired
(118)
(41)
Treasury shares sold
70
-
Repayment of long-term loans from banks
118
(117)
Net cash used in financing activities
(2,969)
(2,820)
(Decrease) increase in cash and cash equivalents
(4,127)
3,037
Cash and cash equivalents at the beginning of the year
12,567
9,577
Exchange differences on balances of cash and cash equivalents
(161)
(47)
Cash and cash equivalents at the end of the year
8,279
12,567
The accompanying notes form an integral part of these financial statements.
M.T.I Wireless Edge Ltd.
Notes forming part of the consolidated financial statements for the year ended
December 31, 2022
1. General description of the Group and its operations
M.T.I Wireless Edge Ltd. (hereafter - the "Company", or collectively with its
subsidiaries, the "Group") is an Israeli corporation. The Company was
incorporated under the Companies Act in Israel on December 30, 1998 and
commenced operations on July 1, 2000. Since March 2006, the Company's shares
have been traded on the AIM market of the London Stock Exchange.
The formal address of the Company is 11 Hamelacha Street, Afek industrial
Park, Rosh-Ha'Ayin, Israel.
The Company and its subsidiaries are engaged in the following areas:
- Development, design, manufacture and marketing of antennas for the
military and civilian sectors.
- A leading provider of remote control solutions for water and
irrigation applications based on Motorola's IRRInet state of the art control,
monitoring and communication technologies.
- Providing consulting, representation and marketing services to
foreign companies in the field of RF (radio frequency) and Microwave,
including engineering services in the field of aerostat systems and system
engineering services.
- Development, manufacture and integration of communication systems
and advanced monitoring and control systems for the Government and defence
industry market.
2. Accounting policies
The principal accounting policies adopted in the preparation of the financial
statements are set out below. The policies have been consistently applied to
all the years presented, unless otherwise stated.
A. Basis of preparation
These consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS). The financial statements
have been prepared under the historical cost convention, except for the
measurement of employee benefit assets.
The Company has elected to present the statement of comprehensive income using
the function of expense method.
B. Estimates and assumptions
The preparation of the financial statements requires management to make
estimates and assumptions that have an effect on the application of the
accounting policies and on the reported amounts of assets, liabilities,
revenues and expenses. These estimates and underlying assumptions are reviewed
regularly. Changes in accounting estimates are reported in the period of the
change in estimate and thereafter.
The key assumptions made in the financial statements concerning uncertainties
at the end of the reporting period and the critical estimates used by the
Group that may result in a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are discussed below.
- Deferred tax assets: Deferred tax assets are recognized for
unused carryforward tax losses and deductible temporary differences to the
extent that it is probable that taxable profit will be available against which
the losses can be utilized. Significant management judgment is required to
determine the amount of deferred tax assets that can be recognized, based upon
the estimated timing and the level of future taxable profits together with
future tax planning strategies.
2. Accounting policies (Cont.)
C. Revenue recognition
Revenue from contracts with customers
Revenue from contracts with customers is recognized when control of the goods
or services are transferred to the customer at an amount that reflects the
consideration to which the Company expects to be entitled in exchange for
those goods or services
1. Revenues from Construction Contracts are recognized based on the
percentage of completion to date. The percentage of completion is determined
using the inputs method by dividing actual completion costs incurred (based on
estimates of material costs, labor costs, subcontractor performance, and other
factors) to date by the total completion costs anticipated. When a loss from a
contract is anticipated, a provision for the entire loss that is anticipated
is made in the period in which this first becomes evident, as assessed by the
Company's management.
The Company recognizes revenue from construction contracts over time, since
the Company's performance does not create an asset with alternative use to the
Company and the Company has an enforceable right to payment for performance
completed up to that date.
The payment terms for these projects are based on milestones specified in the
contract, which are determined in relation to the rate of progress. The
Company believes that recognising revenue based on costs incurred to satisfy
performance obligations faithfully depicts its performance in construction
contracts. Therefore, when revenue is recognized before a specified milestone
is achieved, the Company recognizes the costs incurred to satisfy the related
performance obligation as unbilled revenue.
Financing components - The Company does not have any contracts where the
period between the transfer of the promised goods or services to the customer
and payment by the customer exceeds one year.
The Company elected not to adjust the transaction price for the effects of
financing components in contracts where the period between when the Company
transfers a promised good or a service to the customer and when the customer
pays for it is one year or less.
2. Revenues from the sale of goods are recognized at the point in time
when control of the asset is transferred to the customer, generally upon
delivery of the equipment.
Volume rebates give rise to variable consideration. The variable consideration
is estimated at contract inception and constrained until the associated
uncertainty is subsequently resolved. The application of the constraint on
variable consideration increases the amount of revenue that will be deferred.
To estimate the variable consideration to which it will be entitled, the
Company applied the 'most likely amount method' for contracts with a single
volume threshold and the 'expected value method' for contracts with more than
one volume threshold. The selected method that best predicts the amount of
variable consideration was primarily driven by the number of volume thresholds
contained in the contract. The Company includes in the transaction price
amounts of variable consideration only to the extent that it is highly
probable that a significant reversal in the amount of cumulative revenue
recognised will not occur when the uncertainty associated with the variable
consideration is subsequently resolved.
2. Accounting policies (Cont.)
At the end of each reporting period, the Company updates its estimates of
variable consideration.
D. Assets and liabilities arising from contracts with customers
Contract assets (presented as "Unbilled revenue ")
A contract asset is the Company's right to consideration in exchange for goods
or services the entity has transferred to a customer that is conditional on
something other than the passage of time
Trade receivables
A receivable represents the Company's right to an amount of consideration that
is unconditional (i.e., only the passage of time is required before payment of
the consideration is due).
E. Basis of consolidation
The Group controls an investee if and only if the Group has:
- Power over the investee (i.e. existing rights that give it the
current ability to direct the relevant activities of the investee).
- Exposure, or rights, to variable returns from its involvement with
the investee, and
- The ability to use its power over the investee to affect its
returns.
When the Group has less than a majority of the voting or similar rights of an
investee, the Group considers all relevant facts and circumstances in
assessing whether it has power over the investee, including: the contractual
arrangement with the other vote holders of the investee, the Group's potential
voting rights.
The Group re-assesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control
over the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are
attributed to the equity holders of the parent and to the non-controlling
interests, even if this results in the non-controlling interests having a
deficit balance. All intra-group assets and liabilities, income, expenses and
cash flows relating to transactions between members of the Group are
eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control,
is accounted for as an equity transaction. If the Group loses control over a
subsidiary, it: (i) derecognises the assets (including goodwill) and
liabilities of the subsidiary, the carrying amount of any non-controlling
interests and the cumulative translation differences recorded in equity: (ii)
Recognises the consideration received at fair value, recognises any investment
retained at fair value of and recognises any surplus or deficit in profit or
loss; (iii) reclassifies the parent's share of components previously
recognised in OCI to profit or loss or retained earnings, as appropriate, as
would be required if the Company had directly disposed of the related assets
or liabilities.
F. Consolidated financial statements
Where relevant, the accounting policies in the financial statements of the
subsidiaries are adjusted to conform with the policies applied in the
financial statements of the Group.
2. Accounting policies (Cont.)
G. Goodwill
Goodwill represents the excess of the cost of a business combination over the
interest in the fair value of identifiable assets, liabilities and contingent
liabilities acquired. Cost of a business combination comprises the fair values
of assets given, liabilities assumed and equity instruments issued. Any costs
of acquisition are charged to profit or loss (if the costs of acquisition are
related to the issue of debt or equity, they are charged to equity or
liability respectively). Goodwill is recognized as an intangible asset with
any impairment in carrying value being charged to profit or loss. Goodwill is
not systematically amortized and the Company reviews goodwill for impairment
once a year or more frequently if events or changes in circumstances indicate
that there may be an impairment.
H. Intangible assets
Separately acquired intangible assets are measured on initial recognition at
cost including directly attributable costs. Intangible assets acquired in a
business combination are measured on initial recognition at fair value at the
acquisition date. Expenditures relating to internally generated intangible
assets, excluding capitalized development costs, are recognized in profit or
loss when incurred. Intangible assets with finite useful lives are amortized
over their useful lives and reviewed for impairment whenever there is an
indication that the intangible asset may be impaired. The amortization period
and the amortization method for an intangible asset are reviewed at least at
each year end. Intangible assets with indefinite useful lives are not
systematically amortized and are tested for impairment annually or whenever
there is an indication that the intangible asset may be impaired. The useful
lives of these assets are reviewed annually to determine whether such
assessment continues to be supportable. If the events and circumstances do not
continue to support the assessment, the change in the useful lives assessment
from indefinite to finite is accounted for prospectively as a change in
accounting estimate and on that date the intangible asset is tested for
impairment.
I. Impairment of non-financial assets
Impairment tests on goodwill and indefinite useful lives assets are undertaken
annually on December 31 or sooner when there are indicators of impairment.
Other non-financial assets (excluding Inventories) are subject to impairment
tests whenever events or changes in circumstances indicate that their carrying
amount may not be recoverable. Where the carrying value of the non-financial
asset exceeds its recoverable amount (i.e. the higher of value in use and fair
value less costs to dispose), the asset is written down and an impairment
charge is recognized accordingly in the profit or loss. Where it is not
possible to estimate the recoverable amount of an individual asset, the
impairment test is performed on the asset's cash-generating unit level (i.e.
the smallest group of assets to which the asset belongs that generates cash
inflow that are largely independent of cash inflows from other assets).
Goodwill is allocated at initial recognition to each of the Group's
cash-generating units that are expected to benefit from the synergies of the
business combination giving rise to the goodwill. An impairment loss is
recognized if the recoverable amount of the cash-generating unit (or group of
cash-generating units) is lower than the carrying amount of the
cash-generating unit (or group of cash-generating units). Any impairment loss
is allocated first to goodwill. Impairment losses allocated to goodwill cannot
be reversed in subsequent periods.
2. Accounting policies (Cont.)
An impairment loss allocated to an asset, other than goodwill, is reversed
only if there have been changes in the estimates used to determine the asset's
recoverable amount since the last impairment loss was recognized. A reversal
of an impairment loss, as above, is limited to the lower of the carrying
amount of the asset that would have been determined (net of depreciation or
amortization) had no impairment loss been recognized for the asset in prior
years and the assets recoverable amount. The reversal of an impairment loss of
an asset is recognized in profit or loss. Impairment charges are included in
the general and administrative expenses line item in the statement of
comprehensive income. During the 2021 and 2022 financial years no impairment
charges of non-financial assets were recognized.
J. Functional currency and Foreign currency transactions
The reporting currency of the Group is U.S. Dollars ("dollar"; "USD"), which
is the currency of the primary economic environment in which the Company and
the majority of the Group's subsidiaries operate. For each entity, the Group
determines the functional currency and items included in the financial
statements of each entity are measured using that functional currency.
Transactions in foreign currencies are initially recorded by the Group's
entities at their respective functional currency spot rates at the date the
transaction first qualifies for recognition. Monetary assets and liabilities
denominated in foreign currencies are translated at the functional currency
spot rates of exchange at the reporting date. Differences arising on
settlement or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates at the dates of the initial
transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value is
determined.
On consolidation, the assets and liabilities of foreign operations are
translated into Dollars at the rate of exchange prevailing at the reporting
date and their statements of profit or loss are translated at average exchange
rates (unless this average is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the rate on the dates of the transactions). The
exchange differences arising on translation for consolidation are recognised
in OCI as 'Adjustment arising from translation of financial statements of
foreign operations'. On disposal of a foreign operation, the component of OCI
relating to that particular foreign operation is reclassified to profit or
loss.
K. Fair value measurement
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place
either:
A. In the principal market for the asset or liability, or
B. In the absence of a principal market, in the most advantageous market
for the asset or liability.
The principal or the most advantageous market must be accessible by the Group.
2. Accounting policies (Cont.)
The fair value of an asset or a liability is measured using the assumptions
that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market
participant's ability to generate economic benefits by using the asset in its
highest and best use or by selling it to another market participant that would
use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances
and for which sufficient data are available to measure fair value, maximizing
the use of relevant observable inputs and minimizing the use of unobservable
inputs.
Classification by fair value hierarchy:
Assets and liabilities presented in the statement of financial position at
fair value are grouped into classes with similar characteristics using the
following fair value hierarchy which is determined based on the source of
input used in measuring fair value:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable
either directly or indirectly.
Level 3 - Inputs that are not based on observable market data (valuation techniques
which use inputs that are not based on observable market data).
L. Financial instruments:
1. Financial assets
The Group classifies its financial assets based on the business model for
managing the financial asset and its contractual cash flow characteristics.
The Company's accounting policy for the relevant category is as follows:
Amortized cost
These assets arise principally from the provision of goods and services to
customers (e.g. trade receivables), but also incorporate other types of
financial assets where the objective is to hold these assets in order to
collect contractual cash flows and the contractual cash flows are solely
payments of principal and interest. They are initially recognized at fair
value plus transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortized cost using the
effective interest rate method, less provision for impairment.
Impairment provisions for trade receivables are recognized based on the
simplified approach within IFRS 9 using a provision in the determination of
the lifetime expected credit losses. During this process the probability of
the non-payment of the trade receivables is assessed. This probability is then
multiplied by the amount of the expected loss arising from default to
determine the lifetime expected credit loss for the trade receivables. For
trade receivables, which are reported net, such provisions are recorded in a
separate provision account with the loss being recognized within general and
administrative expenses in the consolidated statement of comprehensive income.
On confirmation that the trade receivable will not be collectable, the gross
carrying value of the asset is written off against the associated provision.
2. Accounting policies (Cont.)
2. Financial Liabilities
The Group classifies its financial liabilities based on the business model for
managing the financial liabilities and its contractual cash flow
characteristics. The Company's accounting policy for the relevant category is
as follows
Other financial liabilities include the following items:
Bank borrowings are initially recognised at fair value net of any transaction
costs directly attributable to the issue of the instrument. Such
interest-bearing liabilities are subsequently measured at amortised cost using
the effective interest rate method, which ensures that any interest expense
over the period to repayment is at a constant rate on the balance of the
liability carried in the consolidated statement of financial position. For the
purposes of each financial liability, interest expense includes initial
transaction costs and any premium payable on redemption, as well as any
interest or coupon payable while the liability is outstanding.
- Trade payables and other short-term monetary liabilities, which are
initially recognised at fair value and subsequently carried at amortised cost
using the effective interest method.
3. De-recognition:
Financial assets - The Company derecognizes a financial asset when the
contractual rights to the cash flows from the financial asset expire or it
transfers the rights to receive the contractual cash flows.
Financial Liabilities - The Company derecognizes a financial liability when
its contractual obligations are discharged or cancelled, or expire.
M. Government grants
Grants received from the Israel-U.S. Bi-national Industrial Research and
Development Foundation (henceforth "BIRD") and the Israeli Innovation
Authority (henceforth "IIA") 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 and IIA, are
accounted for as forgivable loans, in accordance with IAS 20 (Revised),
pursuant to the provisions of IFRS 9. 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 rate and recorded in profit or loss in accordance with the
provisions of IFRS 9.
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.
2. Accounting policies (Cont.)
N. 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 profit
or loss, except when they relate to items recognized in other comprehensive
income or directly in equity.
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 or deferred tax
arising on business combinations.
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 in "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 liabilities 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.
O. 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.
P. Inventories
Inventories are measured at the lower of cost and net realizable value. Cost
is calculated according to a weighted average model.
2. Accounting policies (Cont.)
Q. 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 % 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.
R. 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.
S. Provision for warranty
The Group generally offers up to three year warranties on its products. Based
on past experience, the Group does not record any provision for warranty of
its products and services due to immateriality.
T. 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.
2. Accounting policies (Cont.)
U. 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 of the
Severance Pay Law since 2004 under which the Group pays fixed contributions to
a specific fund and will have no legal or constructive obligation to pay
further contributions if the fund does not hold sufficient amounts to pay all
employee benefits relating to employee service in the current and prior
periods. Contributions to the defined contribution plan in respect of
severance or retirement pay are recognized as an expense simultaneously with
receiving the employee's services and no additional provision is required in
the financial statements except for the unpaid contribution. The Group also
operates a defined benefit plan in respect of severance pay pursuant to the
Severance Pay Law. According to the Law, employees are entitled to severance
pay upon dismissal, retirement and several other events prescribed by that
Law. The liability for post employment benefits is measured using the
projected unit credit method. The actuarial assumptions include rates of
employee turnover and future salary increases based on the estimated timing of
payment. The amounts are presented based on discounted expected future cash
flows using a discount rate determined by reference to yields on high quality
corporate bonds with a term that matches the estimated term of the benefit
plan.
In respect of its severance pay obligation to certain of its employees, the
Company makes deposits into pension funds and insurance companies ("plan
assets"). Plan assets comprise assets held by a Long-term employee benefits
fund or qualifying insurance policies. Plan assets are not available to the
Group's own creditors and cannot be returned directly to the Group. The
liability for employee benefits presented in the statement of financial
position presents the present value of the defined benefit obligation less the
fair value of the plan assets.
V. 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 proportion
of the shares in the investee held by the Company.
2. Accounting policies (Cont.)
W. 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.
X. Leases
Right-of-use assets:
The Group recognizes right-of-use assets at the commencement date of the lease
(i.e., the date the underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated depreciation and any
accumulated impairment losses, and adjusted for any re-measurement of lease
liabilities. The cost of right-of-use assets comprises the amount of the
initial measurement of the lease liability; lease payments made at or before
the commencement date less any lease incentives received; and initial direct
costs incurred. The recognized right-of-use assets are depreciated on a
straight-line basis over the shorter of its estimated useful life and the
lease term. Right-of-use assets are subject to impairment. The right-of-use
assets are presented within property, plant and equipment.
Lease liabilities:
At the commencement date of the lease, the Group recognizes lease liabilities
measured at the present value of lease payments to be made over the lease
term. The lease payments include fixed payments (including in substance fixed
payments) less any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a
purchase option that is reasonably certain to be exercised by the Group and
payments of penalties for terminating a lease, if the lease term reflects the
Group exercising the option to terminate.
The variable lease payments that do not depend on an index or a rate are
recognized as expenses in the period on which the event or condition that
triggers the payment occurs.
Lease term:
The Group determines the lease term as the non-cancellable term of the lease,
together with any periods covered by an option to extend the lease if it is
reasonably certain to be exercised, or any periods covered by an option to
terminate the lease, if it is reasonably certain not to be exercised.
2. Accounting policies (Cont.)
Depreciation of a right-of-use asset:
Subsequent to the inception of the lease, a right-of-use asset is measured
using the cost method, less accumulated depreciation and accumulated
impairment losses, and is adjusted for re-measurements of the lease liability.
Depreciation is measured using the straight-line method over the useful life
or contractual lease term, whichever ends earlier. Lessees will also be
required to re-measure the lease liability upon the occurrence of certain
events (e.g., a change in the lease term, a change in future lease payments
resulting from a change in an index or rate used to determine those payments).
The lessee will recognize the amount of the re-measurement of the lease
liability as an adjustment to the right-of-use asset, until the carrying
amount is reduced to zero.
3. Acquisition of subsidiary:
On 3 January 2022 the Company, via its wholly-owned subsidiary, MTI Summit
Electronics Ltd. ("MTI Summit"), entered into a share purchase agreement,
which included both a purchase of existing shares in and the making of a new
equity investment into P.S.K. WIND Technologies Ltd. ("PSK"), after which MTI
Summit owns 51% of PSK (the "Acquisition"). The initial consideration for the
Acquisition was approximately US$1.2 million, with an earn out payment,
subject to performance, of up to approximately US$2.56 million. In addition,
MTI Summit has made a loan to PSK of US$0.8 million and is party to an option
agreement in relation to the acquisition of the remaining 49% of PSK.
The initial consideration paid by MTI, to acquire 51% of the equity in PSK,
comprised: a) the purchase of existing shares in PSK for NIS 700,000
(approximately US$225,000); and b) a subscription of NIS 3,000,000
(approximately US$ 972,000) for new shares in PSK. In addition, there is an
earn out mechanism under which further consideration may be payable, as
described in the contingent consideration section below (the "Earn Out").
MTI Summit's loan to PSK of NIS 2,500,000 (approximately US$800,000) is a term
loan which is to be repaid on 1 January 2024. The loan is not convertible and
bears interest of 3.26% per annum.
In addition to the Acquisition, MTI Summit has an option to purchase and the
vendors of PSK have an option to sell to MTI Summit the remaining 49% of PSK
(the "Option") starting from 2027, subject to the terms described below.
Cash outflow on the Acquisition totalled to US$ 1,427,000.
Acquisition cost of PSK at the date of Acquisition:
Fair value
$'000
Unaudited
Cash paid 1,197
Contingent consideration liability 56
Put option liability 1,376
Total acquisition cost 2,629
3. Acquisition of subsidiary (Cont.):
Set forth below are the assets and liabilities of PSK at the date of
Acquisition:
Fair value
$'000
Unaudited
Trade receivables 671
Other receivables 213
Inventories 65
Property, plant and equipment 256
Intangible assets 1,710
Bank loans (230)
Trade payables (522)
Deferred tax liability (394)
Other liabilities (436)
Employee benefits, net (104)
Net identifiable assets 1,229
Goodwill arising on acquisition 1,400
Total purchase cost 2,629
The results of PSK were consolidated into the financial statements of the
Group from the beginning of the year.
The cost of the Acquisition was allocated to tangible assets, intangible
assets and liabilities which were acquired based on their fair value at the
time of the acquisition. The intangible assets recognized include order
backlog and customer relations in the total amount of US$ 111 thousands and
US$ 1,599 thousands respectively, deferred taxes in the total amount of US$
394 thousands and goodwill in the total amount US$ 1,400 thousands. The
intangible assets associated with customer relations are amortized over a
useful life of up to 15 years.
The goodwill arising on Acquisition is attributed to the expected benefits
from the synergies of the combination of the activities of the Company and
PSK. The goodwill recognized is not expected to be deductible for income tax
purposes.
All transaction costs have been recorded in General and administrative
expenses.
Contingent consideration:
As part of the purchase agreement with the owners of PSK, it was agreed that
the sellers, who retain a 49% holding in PSK would be entitled to further
consideration to be paid pursuant to an earn out mechanism dependent on PSK's
actual revenues in 2022 and 2024 versus certain agreed targets in each of
those years and is capped at a maximum of NIS 8,000,000 (approximately
US$2.56m), to be paid in cash.
3. Acquisition of subsidiary (Cont.):
Put Option liability:
MTI Summit has an option to purchase and the vendors of PSK have an option to
sell to MTI Summit the remaining 49% of PSK (the "Option") starting from 2027.
The value of PSK under the Option is to be calculated on the basis of eight
times the average EBITDA level of PSK in 2025 and 2026, with MTI being
required to pay 49% of this value upon exercise. If the Option is to be
exercised at any time after the preparation of PSK's financial results for the
first quarter of 2027, the calculation will be based on PSK's average EBITDA
for the last eight quarters. The Option will remain in place until
exercised.
As at the Acquisition date, the fair value of the contingent consideration was
estimated at US$ 56 thousand and the Option at US$ 1.376 million.
The significant non-observable data used in measuring the fair value of the
liability in respect of the contingent consideration and the Put Option
liability are as follows:
Discount rate: 15.5%
A significant increase (or decrease) in the estimated amount of the acquired
company's pre-tax income will result in a significant increase (decrease) in
the fair value of the liability in respect of the contingent consideration
whereas a significant increase (decrease) in the discount rate and default
risk rate will result in a decrease (an increase) in the fair value of the
liability.
4. Revenues
For the year ended December 31,
2022 2021
Revenues arises from: $'000 $'000
Sale of goods * 34,618 35,308
Rendering of services ** 8,334 5,729
Projects ** 3,318 2,147
46,270 43,184
(*) at a point in time
(**) over time
5. Profit from operations
For the year ended December 31,
2022 2021
This has been arrived at after charging: $'000 $'000
Material and subcontractors 22,424 21,559
Wages and salaries 14,150 13,123
Plant, Machinery and Usage 1,628 1,359
Depreciation and amortization 1,466 976
Travel and Exhibition 326 270
Advertising and Commissions 748 464
Consultants 478 568
Others 458 440
41,678 38,759
6. Operating segments
The Company and its subsidiaries are engaged in the following segments:
- Development, design, manufacture and marketing of antennas for the
military and civilian sectors.
- A leading provider of remote control solutions for water and
irrigation applications based on Motorola's IRRInet state of the art control,
monitoring and communication technologies.
- Providing consulting, representation and marketing services to
foreign companies in the field of RF and Microwave, including engineering
services in the field of aerostat systems and system engineering services
together with the development, manufacture and integration of communication
systems and advanced monitoring and control systems for the Government and
defence industry market.
1. Segment information
Year ended December 31, 2022
Antennas Water Solutions Distribution & Consultation Adjustment & Elimination Total
U.S. $ in thousands
Revenues
External 11,627 18,196 16,447 - 46,270
Inter-segment - - 215 (215) -
Total 11,627 18,196 16,662 (215) 46,270
Segment profit 337 1,838 2,321 96 4,592
Finance expense, net 275
Tax expenses 468
Profit 3,849
6. Operating Segments (cont.)
December 31, 2022
Antennas Water Solutions Distribution & Consultation Adjustment & Elimination Total
U.S. $ in thousands
Segment assets 14,848 11,834 11,272 - 37,954
Unallocated assets 2,503
Segment liabilities 2,627 3,881 5,098 - 11,606
Unallocated liabilities 813
Year ended December 31, 2021
Antennas Water Solutions Distribution & Consultation Adjustment & Elimination Total
U.S. $ in thousands
Revenues
External 11,294 17,606 14,284 - 43,184
Inter-segment - - 174 (174) -
Total 11,294 17,606 14,458 (174) 43,184
Segment profit 282 2,074 1,845 224 4,425
Finance expense, net 387
Tax expenses 329
Profit 3,709
December 31, 2021
Antennas Water Solutions Distribution & Consultation Adjustment & Elimination Total
U.S. $ in thousands
Segment assets 14,399 11,100 11,999 - 37,498
Unallocated assets 3,440
Segment liabilities 3,090 3,626 6,282 - 12,998
Unallocated liabilities 929
2. Entity wide disclosures of External revenue by location of
customers.
For the year ended December 31,
2022 2021
$'000 $'000
Israel 29,008 24,342
America 6,489 5,551
Europe Middle East & Africa 6,018 9,266
Asia Pacific 4,755 4,025
46,270 43,184
6. Operating Segments (cont.)
3. Additional information about revenues:
There is one single customer from which revenues amount to 10% in 2022 (12% in
2021) of total revenues reported in the financial statements. This is a
customer for the antenna and distribution & special consulting services
divisions and the credit terms with it are usually end of month + 90 days.
7. Finance expense and income
For the year ended December 31,
2022 2021
$'000 $'000
Finance expense
Net Foreign exchange loss 108 205
Leases 52 43
Interest and bank fees 225 206
385 454
Finance income
Interest from bank deposits 110 67
275 387
8. Tax expenses
A. Tax Laws in Israel
1. Amendments to the Law for the Encouragement of Capital Investments, 1959
(the "Encouragement Law"):
In December 2010, the "Knesset" (Israeli Parliament) passed the Law for
Economic Policy for 2011 and 2012 (Amended Legislation), 2011 ("the
Amendment"), which prescribes, among others, amendments to the Law. The
Amendment became effective as of January 1, 2011. According to the Amendment,
the benefit provisions in the Law were modified and a flat tax rate applies to
the Company's entire preferred income. Commencing from the 2011 tax year, the
Group will be able to opt to apply (the waiver is non-recourse) the Amendment
and from the elected tax year and onwards, it will be subject to the amended
tax rates that are: 2014 and thereafter will be 16% (in development area A -
9%).
The Group applied the Amendment effectively from the 2011 tax year.
On 15 November 2021 an amendment to the Encouragement Law was approved (the
"2021 Amendment"). According to the 2021 Amendment companies that had retained
earnings from exempt income earned before 31 December 2020 can distribute
those earnings with a lower tax rate of 10% to the Company and withholding tax
of 15% to the shareholders. As of the date of the financial report the Company
has such retained earnings totalling approximately 1.2m NIS ($0.34m USD).
8. Tax expenses (cont.)
2. Tax rates:
On December 29, 2016, the Law for Economic Efficiency (Legislative Amendments
for Achieving the Budgetary Goals for 2017-2018) was published in Reshumot
(the Israeli government official gazette), which enacts, among other things,
the following amendments:
- Decreasing the corporate tax rate to 24% in 2017 and to 23% in
2018 and thereafter (instead of 25%).
- Commencing tax year 2017 and thereafter the tax rate on the income of
preferred enterprises of a qualifying Company in Development Zone A as stated
in the Encouragement of Capital Investment
Law, shall decrease to 7.5% (instead of 9%) and for companies located in zones
other than Zone A the rate shall remain 16%.
- In addition, the tax rate on dividends distributed on January 1,
2014 and thereafter originating from preferred income under the Encouragement
Law will be raised to 20% (instead of 15%).
Therefore the applicable corporate tax rate for 2014 and thereafter is 16%.
B. The principal tax rates applicable to the subsidiaries whose place of
incorporation is outside Israel are:
A company incorporated in India - The statutory tax rate is 28% and the
Company was in an exempt zone until end of March 2013 and further in a 50% tax
exempt zone until end of March 2018. Nevertheless from the Tax Year 2011-12,
in the absence of taxable income or tax due on taxable income (calculated as
per normal rates) being less than 18.5% of the Accounting Book Profits during
a particular year, the Indian regulation states that the company has to pay a
Minimum Alternate tax at a rate of 18.5% of the Accounting Book Profits for
that year. Such excess Minimum Alternate Tax paid on book profits over
the Tax due on Actual Taxable Income (calculated as per normal rates) of each
year is capable of set off against the taxable profits of future years.
A company incorporated in Switzerland - The weighted tax rate applicable to a
company operating in Switzerland is about 25% (composed of Federal, Cantonal
and Municipal tax). Provided that the company meets certain conditions, the
weighted tax rate applicable to its income in Switzerland will not exceed 10%.
A company incorporated in South Africa - the statutory tax rate is 28%
A company incorporated in Australia - the statutory tax rate is 30%
A company incorporated in United States of America - the statutory tax rate is
21%.
A Company incorporated in Canada - the statutory tax rate is 25%.
A Company incorporated in China - the statutory tax rate is 25% but for small
entities the tax rate is 10%. To be classified as a small entity all following
should apply (i) Annual taxable income not exceeding 3 million yuan, (ii)
Number of employees not exceeding 300 and (iii) Total assets not exceeding 50
million yuan. The Company meets the criteria of a small entity.
C. Income tax assessments
The Company has tax assessments considered as final up to and including the
year 2017.
8. Tax expenses (cont.)
For the year ended December 31,
2022 2022 2021 2021
$'000 $'000 $'000 $'000
Current tax expense
Income tax on profits for the year 846 722
Taxes in respect of previous years (209) (95)
637 627
Deferred tax income (see note 13)
Origination and reversal of temporary differences (169) (298)
(169) (298)
Total tax expenses 468 329
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,
2022 2021
$'000 $'000
Profit before income tax 4,317 4,038
Tax using the Company's domestic tax rate of 16% 691 646
Non-deductible expenses - 6
Taxes resulting from different tax rates applicable to foreign and other 81 94
subsidiaries
Utilization of prior year's tax losses for which deferred taxes were not (108) (322)
provided
Adjustments for current income tax of prior years (209) (95)
Other 13 -
Total income tax expense 468 329
9. Earnings per share
Net earnings per share attributable to equity owners of the parent
For the year ended
December 31,
2022 2021
$'000 $'000
Net Earnings used in basic and diluted EPS 3,721 3,589
Weighted average number of shares used in basic and diluted EPS 88,444,356 88,509,740
basic and diluted net EPS (dollars) 0.0421 0.0407
10. Dividends
For the year ended
December 31,
2022 2021
$'000 $'000
Dividend paid 2,479 2,213
11. Property, plant and equipment
Building Machinery & Office Computer equipment Vehicles Right of use asset Total
equipment
furniture & equipment
$'000
Cost:
Balance as of January 1, 2022 5,216 6,570 701 2,428 1,157 1,695 17,767
Initially consolidated company 89 92 27 - 48 - 256
Acquisitions 25 114 35 136 242 533 1,085
Disposals - - - - (27) (292) (319)
Exchange differences (14) (13) (11) (17) (96) - (151)
Balance as of December 31, 2022 5,316 6,763 752 2,547 1,324 1,936 18,638
Accumulated Depreciation:
Balance as of January 1, 2022 2,524 5,456 633 2,296 446 863 12,218
Additions 122 198 24 88 197 572 1,201
Disposals - - - - (13) (292) (305)
Exchange differences (2) (9) (5) (9) (24) - (49)
Balance as of December 31, 2022 2,644 5,645 652 2,375 606 1,143 13,065
Net book value as of December 31, 2022 2,672 1,118 100 172 718 793 5,573
Lease liabilities Year ended December 31
2022 2021
$'000 $'000
Interest expense 52 43
Total cash outflow for leases 612 474
Additions to right-of-use assets 533 957
December 31, 2022 Less than one year 1 to 2 years 2 to 3 3 to 4 years > 4 Total
years years
$'000
Lease liabilities 449 259 44 - - 752
December 31, 2021 Less than one year 1 to 2 years 2 to 3 3 to 4 years > 4 Total
years years
$'000
Lease liabilities 440 335 130 - - 905
11. Property, plant and equipment (cont.)
Building Machinery & Office Computer equipment Vehicles Right of use asset Total
equipment
furniture & equipment
$'000
Cost:
Balance as of January 1, 2021 5,070 6,323 688 2,386 1,032 1,203 16,702
Acquisitions 164 245 14 41 389 957 1,792
Disposals - - - - (258) (465) (723)
Exchange differences - 2 (1) 1 (6) - (4)
Balance as of December 31, 2021 5,216 6,570 701 2,428 1,157 1,695 17,767
Accumulated Depreciation:
Balance as of January 1, 2021 2,421 5,267 614 2,264 436 882 11,884
Additions 103 187 21 32 135 447 925
Disposals - - - - (130) (465) (595)
Exchange differences - 2 (2) - 5 - 5
Balance as of December 31, 2021 2,524 5,456 633 2,296 446 864 12,219
Net book value as of December 31, 2021 2,692 1,114 68 132 711 831 5,548
12. Intangible assets
Goodwill from business combination Customer relations * Total
$'000
Cost:
Balance as of January 1, 2022 2,088 715 2,803
Acquired through business combinations 1,400 1,710 3,110
Balance as of December 31, 2022 3,488 2,425 5,913
Accumulated Amortization:
Balance as of January 1, 2022 1,227 562 1,789
Amortization charge - 266 266
Balance as of December 31, 2022 1,227 828 2,055
Net book value as of December 31, 2022 2,261 1,597 3,858
$'000
Cost:
Balance as of December 31, 2021 2,088 715 2,803
Accumulated Amortization:
Balance as of January 1, 2021 1,227 511 1,738
Amortization charge - 51 51
Balance as of December 31, 2021 1,227 562 1,789
Net book value as of December 31, 2021 861 153 1,014
(*) Customer relations is amortized over an economic useful life of between
6.5 to 10 years.
13. Deferred tax assets
Deferred tax asset is calculated on temporary differences under the liability
method using the tax rates that are expected to apply to the period when the
asset is realised.
The movement in the deferred tax asset is as shown below:
2022 2021
$'000 $'000
At January 1 994 696
Charged to other comprehensive income - -
Charged to profit or loss 169 298
At December 31 1,163 994
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:
31.12.2022 31.12.2021
$'000 $'000
Accrued severance pay 96 87
Other provisions and employee-related obligations 110 152
Research and development expenses deductible over 3 years 143 163
Carry forward tax losses 1,156 592
Customer relations - arising from acquisition of P.S.K (342) -
1,163 994
Deferred tax assets relating to carry forward capital losses of the Group
total approximately $1,014 and $1,171 thousand as of December 31, 2022 and
2021 respectively were not recognized in the financial statements because
their utilization in the foreseeable future is not probable.
14. Inventories
31.12.2022 31.12.2021
$'000 $'000
Raw materials and consumables 5,621 5,177
Work-in-progress 173 112
Finished goods and goods for sale 1,963 1,560
7,757 6,849
15. Trade receivables, other receivables and unbilled revenue
31.12.2022 31.12.2021
$'000 $'000
Trade receivables 9,735 9,310
Unbilled revenue - Projects 2,204 2,794
Other receivables 1,300 1,318
13,239 13,422
15. Trade receivables, other receivables and unbilled revenue (Cont.)
Trade receivables:
31.12.2022 31.12.2021
$'000 $'000
Trade receivables (*) 9,161 8,707
Notes receivable 666 701
Allowance for expected credit losses (92) (98)
9,735 9,310
(*) Trade receivables are non-interest bearing. They are generally on
60-120 day terms.
As at 31 December 2022 trade receivables of $328,000 (2021 - $108,000) were
past due but not impaired.
They relate to the customers with no default history.
Unbilled revenue:
31.12.2022 31.12.2021
$'000 $'000
Actual completion costs 2,756 5,000
Revenue recognised 2,801 1,750
Billed revenue (3,353) (3,956)
Total Unbilled receivables - Projects 2,204 2,794
Other receivables:
31.12.2022 31.12.2021
$'000 $'000
Prepaid expenses 644 826
Advances to suppliers 199 128
Tax authorities - V.A.T 206 226
Employees 251 138
1,300 1,318
16. Cash and cash equivalents
31.12.2022 31.12.2021
$'000 $'000
In U.S. dollars 3,224 6,460
In other currencies 5,055 6,107
8,279 12,567
17. Loans from banks
31.12.2022 31.12.2021
$'000 $'000
US Dollars - unlinked - -
NIS 133 14
South African Rand 8 17
Less - current maturities (43) (23)
98 8
In 2011 the Company received a US$ 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, with repayment on a quarterly basis from
April 2011 until January 2021 and bears interest at a fixed rate of 4.9%.
During 2018 two additional loans for purchases of cars were taken, which total
NIS 320,000 (approximately US$ 85 thousand). These loans are for 4 years with
a monthly repayment and bear interest of Prime +0.4% (2.15% as of December 31,
2020). All bank loans for the purchase of cars are secured by a fixed lien on
the car.
During 2017 Mottech South Africa entered into a loan agreement of
approximately US$ 37 thousand for the purchase of cars payable over 60 months
on a monthly basis. The interest rate is linked to the South Africa prime
lending rate.
During 2018 Mottech South Africa had entered into a loan agreement of
approximately US$ 30 thousand for the purchase of cars, which is payable over
36 - 48 months on a monthly basis. The interest rate is linked to the South
Africa prime lending rate.
During 2022 PSK had entered into a loan agreement of approximately US$ 133
thousand for the purchase of cars, which is payable over 36 - 48 months on a
monthly basis. The interest rate is linked to the Prime interest rate.
At December 31 2022 First Second year Third
year year and thereafter
$'000
Long-term loan 43 41 57
18. Employee benefits
A. Composition:
As at December 31
2022 2021
$'000 $'000
Present value of the obligations 1,660 1,851
Fair value of plan assets (908) (983)
752 868
B. Movement in plan assets:
2022 2021
$'000 $'000
Year beginning 983 930
Foreign exchange gain (loss) (121) 31
Interest income 22 15
Contributions 13 14
Benefit paid - (16)
Re measurements gain (loss)
Actuarial gain (loss) from financial assumptions 7 1
Return on plan assets (excluding interest) 4 8
Year end 908 983
C. Movement in the liability for benefit obligation:
2022 2021
$'000 $'000
Year beginning 1,851 1,756
Initially consolidated company 104 -
Foreign exchange loss (profit) (196) 46
Interest cost 41 49
Current service cost 37 42
Benefits paid (58) (25)
Re measurements loss (gain)
Actuarial loss (gain) from financial assumptions (120) (61)
Adjustments (experience) 1 (1)
Year end 1,660 1,851
Supplementary information
1. The Group's liabilities for severance pay, retirement and pensions
pursuant to Israeli law and employment agreements are recognized in full - in
part by managers' insurance policies, for which the Group makes monthly
payments and accrued amounts in severance pay funds and the rest by the
liabilities which are included in the financial statements.
2.
18. Employee benefits (cont.)
3. 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.
4. Principal nominal actuarial assumptions:
As at December 31,
2022 2021
Discount rate on plan liabilities 5.18% 2.15%
Expected increase in pensionable salary 2% 2%
5. 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,
2022 2021
$'000 $'000
The change as a result of:
Salary increases of 1 % 54 65
Salary decreases of 1 % (48) (58)
The change as a result of:
Increase of 1% in discount rate (48) (56)
Decrease of 1% in discount rate 54 64
Year ended December 31,
2022 2021
$'000 $'000
Expenses in respect of defined contribution plans 552 489
19. Trade and other payables
As at December 31,
2022 2021
$'000 $'000
Trade payables 5,739 5,346
Employees' wages and other related liabilities 1,675 1,895
Advances from trade receivables 348 3,404
Accrued expenses 909 819
Government authorities 209 158
Lease liability 449 440
Others 37 179
9,366 12,241
20. Current maturities and short-term bank credit
As at December 31,
Interest rate 2022 2021
as at December 31, 2022
% $'000 $'000
Current maturities In NIS Prime + 0.9 38 14
Current maturities In SA ZAR 9.5 - 11 5 9
Total Current maturities and short-term bank loans 43 23
Changes in liabilities arising from financing activities
Reconciliation of the changes in liabilities for which cash flows have been,
or will be classified as financing activities in the statement of cash flows
Loans and borrowings Lease liabilities
Total
$'000
At 1 January 2022 31 905 936
Changes from financing cash flows:
Payments of lease liabilities - (560) (560)
Receipt of long-term loans from banks 141 - 141
Repayment of long-term loans from banks (39) - (39)
Total changes from financing cash flows 133 345 478
Changes in fair value:
New leases - 533 533
Interest expense - 52 52
Interest paid - (52) (52)
Total changes from financing cash flows 133 878 1,011
Effects of foreign exchange 8 (126) (118)
At 31 December 2022 141 752 893
20. Current maturities and short-term bank credit (Cont.)
Loans and borrowings Lease liabilities
Total
$'000
At 1 January 2021 142 386 528
Changes from financing cash flows:
Payments of lease liabilities - (449) (449)
Repayment of long-term loans from banks (117) - (117)
Total changes from financing cash flows 25 (63) (38)
Changes in fair value:
New leases - 957 957
Leases cancelled before maturity - (1) (1)
Interest expense - 48 48
Interest paid - (48) (48)
Total changes from financing cash flows 25 893 918
Effects of foreign exchange 6 12 18
At 31 December 2021 31 905 936
21. Financial instruments - Risk Management
The Group is exposed through its operations to the following
financial risks:
· Foreign currency risk
· Liquidity risk
· Credit risk
Foreign currency risk
Foreign exchange risk arises when Group companies enter into transactions
denominated in a currency other than their functional currency.
The Group's policy is to allow the Group's entities to pay liabilities
denominated in their functional currency using the cash flows generated from
the operations of each entity. When the Group's entities have liabilities
denominated in a currency other than their functional currency (and the entity
does not have sufficient cash balances in this currency to settle the
liability) the Group, if possible, transfers cash balances in one entity to
another entity in the Group. The Group's currency risks are as follows:
Most of the Company's revenues are in US dollars or linked to that currency,
and the Company's inputs are mainly linked due to the importation of raw
materials paid for in US Dollars, but the wages and salary expenses (which
constitutes a material input in the Company's operations) are in NIS.
Therefore, there is an exposure to changes in the exchange rate of the NIS
against the Dollar.
Management mitigates that risk by holding some cash and cash equivalents and
deposit accounts in NIS. The Company also purchases from time to time some
forward contracts on the NIS/$ exchange rate to hedge part of the salary
costs. As of December 31, 2022 no such transactions were open. Since the
purchase of Mottech the Group has an additional currency risk due to its
subsidiaries' activity.
21. Financial instruments - Risk Management (Cont.)
The following is a sensitivity analysis of a change of 5% as of the date of
the financial position in the NIS exchange rates against the functional
currency, while the rest of the variables remain constant, and their effect on
the pre-tax profit or loss on equity:
Profit (loss) from change Book value Profit (loss) from change
December 31, 2022
NIS exchange rate 0.27 0.284 0.298
Total assets, net 280 5,617 (280)
December 31, 2021
NIS exchange rate 0.327 0.311 0.295
Total assets, net 100 1,992 (100)
The Company's exposure to changes in foreign currency in all other currencies
is immaterial.
Total Other currencies NIS USD
As of December 31, 2022
Assets
Current assets:
8,279 1,972 3,083 3,224 Cash and cash equivalents
11,939 639 6,668 4,632 Trade receivables
1,300 22 1,126 152 Other receivables
Liabilities
current liabilities:
43 5 38 - Current maturities and short-term bank credit and loans
5,739 1,115 3,048 1,576 Trade payables
3,178 881 2,079 218 Other accounts payables
non- current liabilities:
98 3 95 - Loans from banks, net of current maturities
12,640 629 5,617 6,214 Total assets, net
21. Financial instruments - Risk Management (Cont.)
Total Other currencies NIS USD
As at December 31, 2021
Assets
Current assets:
12,567 5,167 940 6,460 Cash and cash equivalents
12,104 619 5,919 5,526 Trade receivables
1,318 11 1,069 238 Other receivables
Liabilities
current liabilities:
23 9 14 - Current maturities and short-term bank credit and loans
5,346 1,192 2,835 1,319 Trade payables
6,895 3,372 3,127 396 Other accounts payables
non- current liabilities:
8 8 - - Loans from banks, net of current maturities
13,717 1,216 1,992 10,509 Total assets, net
Liquidity Risk
Liquidity risk is the risk that arises when the maturity of assets and
liabilities does not match. An unmatched position potentially enhances
profitability but can also increase the risk of insufficient liquidity means
to fulfil its immediate obligations. The Group's objective is to maintain a
balance between continuity of funding and flexibility. The Group 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, 2022 Less than one year 1 to 2 years 2 to 3 3 to 4 years > 4 Total
years years
$'000
Loans from banks 43 41 38 19 - 141
Trade payables 5,739 - - - - 5,739
Payables 3,627 - - - - 3,627
9,409 41 38 19 - 9,507
December 31, 2021 Less than one year 1 to 2 years 2 to 3 3 to 4 years > 4 Total
years years
$'000
Loans from banks 23 6 2 - - 31
Trade payables 5,346 - - - - 5,346
Payables 6,895 - - - - 6,895
12,264 6 2 - - 12,272
Credit risks
Financial instruments which have the potential to expose the Group to credit
risks are mainly deposit accounts, trade receivables and other receivables.
The Group holds cash and cash equivalents in short term deposit accounts in
banking institutions in Israel that are considered financially sound, thereby
substantially reducing the risk to suffer credit loss.
21. Financial instruments - Risk Management (Cont.)
With respect to trade receivables, the Group believes that there is no
material credit risk which is not mitigated in light of Group's policy to
assess the credit risk of customers before entering contracts. Moreover, the
Group evaluates trade receivables on a timely basis and adjusts the allowance
for expected credit losses accordingly. Since January 2019 the Company has had
an agreement with a credit insurance company to further mitigate this risk.
The aging analysis of these trade-receivable balances by business segment is
as follows:
Past due trade receivables with aging of
December 31, 2022
Revenues Total trade receivables Neither past due nor impaired < 30 >30
days days
Antennas - other receivables 11,627 5,570 5,394 175 1
Water Solutions - other receivables 18,196 3,645 3,567 54 24
Distribution & Consultation - other receivables 16,662 2,724 2,650 58 16
Intercompany (215) - - - -
Total 46,270 11,939 11,611 287 41
Past due trade receivables with aging of
December 31, 2021
Revenues Total trade receivables Neither past due nor impaired < 30 >30
days days
Antennas - other receivables 11,294 4,884 4,852 12 20
Water Solutions - other receivables 17,606 3,311 3,277 22 12
Distribution & Consultation - other receivables 14,458 3,909 3,867 32 10
Intercompany (174) - - - -
Total 43,184 12,104 11,996 66 42
Fair value
A. Fair value of financial assets and liabilities:
Fair value measurements using input type
U.S. $ in thousands
Level 1 Level 2 Level 3 Total
As of December 31, 2022
Put option liability (see note 3) - - 1,376 1,376
Contingent consideration liability (see note 3) - - 56 56
- - 1,432 1,432
21. Financial instruments - Risk Management (Cont.)
Reconciliation of fair value measurements that are categorized within Level 3
of the fair value hierarchy:
2022
U.S. $ in thousands
Balance as of January 1 -
Put option liability (see note 3) 1,376
Contingent consideration liability (see note 3) 56
Net loss recognized in Profit or loss -
Balance as of December 31 1,432
B. Financial instruments not measured at fair value:
The carrying amount of cash and cash equivalents, trade receivables, other
accounts receivable, credit from banks and others, trade payables and other
accounts payable approximate their fair value.
The Group is not exposed to cash flow risk due to interest rates since the
long-term loan bears fixed interest.
The following table demonstrates the carrying amount and fair value of the
groups of financial instruments that carrying amounts does not approximate
fair value:
Carrying amount Fair value
2022 2021 2022 2021
Financial liabilities: $'000
Long-term loan with interest (1) 98 8 98 8
(1) The fair value of the long-term loan received with fixed
interest is based on the present value of cash flows using an interest rate
currently available for a loan with similar terms.
Linkage terms of financial liabilities by groups of financial instruments
pursuant to IAS 39
December 31, 2022:
NIS Unlinked S.A Rand Total
$'000
Financial liabilities measured at amortized cost 38 - 5 43
December 31, 2021:
NIS Unlinked S.A Rand Total
$'000
Financial liabilities measured at amortized cost 14 - 17 31
Capital management
The Group's objective is to maintain, as much as is possible, a stable capital
structure. In the opinion of Group's management its current capital structure
is stable. Consistent with others in the industry, the Group monitors capital,
including others also, on the basis of the gearing ratio.
This ratio is calculated as net debt divided by total capital. Net debt is
calculated as total borrowings (including 'current and non-current borrowings'
as shown in the consolidated statement of financial position) less cash and
cash equivalents. Total capital is calculated as 'equity' as shown in the
consolidated statement of financial position plus net debt.
21. Financial instruments - Risk Management (Cont.)
The gearing ratios at 31 December 2022 and 2021 were as follows:
31.12.2022 31.12.2021
Loans from banks 141 31
bank credit - -
Total liabilities 141 31
31.12.2022 31.12.2021
Share capital 209 209
Additional paid-in capital 23,078 23,126
Retained earnings 3,775 2,406
Capital reserves (250) 172
Non-controlling interest 1,226 1,098
Total equity 28,038 27,011
Leverage ratio 0.5% 0.1%
The net debt ratios stem from the Board of Directors' decision to continue to
invest in the Company's development, but without the use of excessive
leverage. The Group intends to examine the leverage ratio from time to time
and to define it according to its needs. The decrease in the net debt ratio in
2022 derived mainly from the increase in the Company's equity as a result of
the Company's profits. The Group intends to maintain the leverage ratio in
future periods as well. Beyond that stated above, there were no other material
changes in the objectives, policies or processes of managing the Group's
capital during the year, as well as in the Group's definition of capital.
22. Subsidiaries:
A. The principal subsidiaries of the Company, all of which have been
consolidated in these consolidated financial statements, are as follows:
Name Country of incorporation Proportion of ownership interest on 31 December Held by
2022 2021
AdvantCom Sarl Switzerland 100% 100% M.T.I Wireless Edge
Global Wave Technologies PVT Limited India 80% 80% AdvantCom Sarl
Ginat Wave India Private ltd. India 49% 49% M.T.I Wireless Edge
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 USA Inc. United states 100% 100% Aqua water control solution
M.T.I Engineering ltd. Israel 100% 100% M.T.I Wireless Edge
Summit electronics ltd. Israel 100% 100% M.T.I Engineering ltd.
M.T.I Summit electronics ltd. Israel 100% 100% M.T.I Wireless Edge
M.T.I Summit SPB ltd. (*) Russia - 99.9% M.T.I Summit electronics ltd.
Mottech Water Management (Shenzhen) Ltd. China 100% 60% Mottech water solutions ltd.
Mottech Parkland (pty) Ltd. Australia 50% 50% Mottech water solutions ltd.
Mottech Water Management ltd. Canada 100% - Mottech water solutions ltd.
P.S.K Wind Technologies Ltd. Israel 51% - M.T.I Summit electronics ltd.
(*) On 22 March 2022, the Company announced that it had disposed of its
Russian operations and sold its entire holding in M.T.I Summit SPB ltd.
("SPB") for a de minimis amount, with this sale not having any significant
profit/loss impact on the Company.
The effect of the sale on the financial position of the Group is as follows:
$'000
Unaudited
Other receivables (417)
Inventories (6)
Current tax receivables (10)
Cash and cash equivalents (2,785)
Other trade payables 3,218
Net assets and liabilities -
Consideration received, satisfied in cash -
Cash and cash equivalents disposed of (2,785)
Net cash outflows (2,785)
23. Share capital
Authorized
2022 2022 2021 2021
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
2022 2022 2021 2021
Number NIS Number NIS
Ordinary shares of NIS 0.01 each at beginning of the year 88,538,724 885,388 88,538,724 885,388
Changes during the year
Exercise of options to share capital - - - -
At end of the year 88,538,724 885,388 88,538,724 885,388
24. Commitments and guarantees
A. Royalty commitments
(i) 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 the
Group's funding from the Government of Israel, royalties of 2%-3.5% are
payable on sales of products developed from a project so funded, up to 100% of
the amount of the grant received, including amounts received by the Parent
Company and its subsidiaries through July 1, 2000. In 2021 and 2022 the Group
received $147,000 and $123,000 respectfully, as additional grants for
development of new products and therefore the maximum royalty amount payable
by the Group on December 31, 2022, is US$ 740,000.
No provision is recognized due to the lack of expectation to sell relevant
products in the foreseeable future and for new developments a provision will
be created once development is in more advance stages.
During 2022 the Group did not pay any royalties.
(ii) The Group is committed to pay royalties to the Government of Israel on
proceeds from growth in sales of Mottech's products in China of which the
Government of Israel participates by way of grants. Under the terms of the
Group's funding from the Government of Israel, royalties of 3% from the
increase of sales in China (base year was 2017) shall be paid up to 100% of
the amount of the grant received. Payment of royalties shall begin after
completion of the grant receipt, which occurred in 2020. The maximum royalty
amounts payable by the Group at December 31, 2022 is US$ 217,000.
B. Guarantees
The Group has provided guarantees in favour of customers and government
institutes in the amount of US$ 660,000 and US$ 55,000 respectively. The
guarantees are mainly to guarantee advances received from customers and
performance of contracts signed.
25. Transactions with related parties:
A. Service Agreement with controlling shareholder:
On 9 March 2022, an amendment to the agreement with Mokirey Aya Management
Ltd. (hereinafter: the "Management Company") was renewed to include
remuneration (per month) of:
1. 56,000 NIS to Mr. Zvi Borovitz for his service as a chairman of the
board of the Company in capacity of at least 50% of a standard working week
and
2. 79,000 NIS to Mr. Moni Borovitz for his service as CEO of the Company
in capacity of at least 90% of a standard working week.
All amounts are prior to VAT which will be added to the invoices and are
linked to the increase in the consumer price index. In addition to the above,
and in accordance with the remuneration policy adopted by the Company, as
required under rule 20 to the Israeli Companies Law, a bonus scheme was
granted to each of the managers. The bonus scheme states that Zvi Borovitz and
Moni Borovitz will be entitled (each one of them) to a bonus amounting to 2.5%
of the Company's net profit exceeding US$800,000 per year, prior to any
bonuses granted in the Company. In the case of a loss in a year the bonus for
the next year will be for a net profit exceeding US$800,000 above the loss
made in the previous year. In addition, Mr. Moni Borovitz shall be entitled to
a bonus equal to three months' management fee, based on the meeting of targets
specified by the remuneration committee at the beginning of each year or per
the remuneration committee's decision to give such for special performance,
plus one month's management fee if the consolidated revenue of the Company
increases by more than 5% from the previous year. A ceiling to the bonuses was
set at eight months management fees for Mr. Moni Borovitz and US$100,000 for
Mr. Zvi Borovitz. The agreement also states that the Company shall reimburse
the Management Company for any expense made in performance of the manager's
duty. The Company shall also provide each of the managers with a car and
phones and will be responsible for all its related expenses, including all
relevant taxes.
B. Transaction with the Parent Group:
The following transactions occurred with the Controlling shareholder and other
related parties:
2022 2021
$'000 $'000
Management Fee 823 819
Compensation of key management personnel of the Group:
2022 2021
$'000 $'000
Short-term employee benefits * 1,245 1,262
* Including Management fees for the CEO, Directors, Executive Management and
other related parties including the Controlling shareholder.
Balances with related parties:
2022 2021
$'000 $'000
Other accounts payables 277 299
26. Significant Events:
A. On 24 January 2019, the Company announced a share repurchase program to
conduct market purchases of ordinary shares of par value 0.01 Israeli Shekels
each ("Ordinary Shares") in the Company up to a maximum value of £150,000
(the "Programme"). Thereafter, the board of directors of the Company and the
board of directors of MTI Engineering decided to continue with the Programme
for several further periods. On 13 April 2022, the Company announced that it
would extend the Programme until 31 March 2023, with the Programme having an
increased maximum value of up to £200,000 and with the Programme being
managed by Shore Capital Stockbrokers Limited pursuant to the terms as
announced. As at 31 December 2022, 150,000 Ordinary Shares were held in
treasury under the Programme.
B. On 9 March 2022 at an extraordinary shareholders meeting, Mr. Luke
Ahern was elected as an external director for three year term. At the same
meeting approval for the extension of an updated Remuneration Policy for a
period of three years or for a longer period, to the extent prescribed in the
provisions of the Israeli Companies Law, was granted.
27. Subsequent events
A. The Board of directors has decided to declare a cash dividend of
3 US cents per share being approximately $2,656,000. This dividend will be
paid on 6 April 2023 to shareholders on the register at the close of trading
on 24 March 2023 (ex-dividend on 23 March 2023).
B. The financial statements were authorized for issue by the board
as a whole following their approval on 12 March 2023.
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