REG - MTI Wireless Edge - Final results for 2023
11/03/2024 07:00
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RNS Number : 2464G MTI Wireless Edge Limited 11 March 2024
MTI Wireless Edge Ltd
("MTI" or the "Group")
Final results for 2023
MTI Wireless Edge Ltd. (AIM: MWE), the technology group focused on
comprehensive communication and radio frequency solutions across multiple
sectors, is pleased to announce its audited results for the year ended 31
December 2023.
2023 Highlights
Strong financial performance and a threefold increase in share buyback
programme
· Revenue of US$45.6m (2022: US$46.3m) on a constant currency basis,
this represents an increase of 2% over last year
· Profit from operations increased 1% to US$4.65m (2022: US$4.59m),
including US$0.2m impairment of goodwill related to the acquisition of PSK
· Profit before tax increased 12% to US$4.84m (2022: US$4.32m)
· Earnings per share increased by 9% to 4.58 US cents (2022: 4.21 US
cents)
· A 2% increase in adjusted EBITDA to US$6.16m (2022: US$6.06m), helped
by the economies of scale from the increasing size of the Group
· Net cash of US$8.1m at 31 December 2023 (31 December 2022: US$8.1m)
· Increased final dividend by 3% to 3.1 US cents per share (2022: 3.0
US cents per share)
· Expansion of buyback programme effective from 12 March 2024 until
March 2025 with increased funding from £200K to a maximum of £700K
Solid performance coupled to strong growth drivers for 2024 and beyond
· Antennas - completed a successful year with 5% revenue growth in 2023
and the prospect of increasing revenues in 2024. Sales of military antennas
increased sharply with demand from both local and international markets, while
commercial antenna sales decreased primarily in legacy fixed wireless access
antennas (after a sharp increase in 2022). Sales of the Group's 5G backhaul
solutions and the ABS® antenna solution to counter small mast movements
continued to attract strong interest from several Tier One customers.
· Water management - revenue reduced by 6% due to slower activity in
some international markets, while price increases and a preferable exchange
rate increased the operating profit of this division by 8% over 2022. Water
scarcity remains a fundamental issue, resulting in increasing demand for
Mottech's expanding product range through good organic growth from existing
clients and expansion of the customer base into new markets.
· Distribution - revenue was level with 2022 but operating profits were
significantly below 2022. As explained within the half-year results, PSK
encountered delays on two projects which led to losses for the year in this
business. One project completed in 2023 and the second should be completed in
H1 2024. PSK has begun 2024 strongly with a good orderbook for the coming
months and the prospects for this division including PSK are promising, with
new business being driven by Governments worldwide seeking to increase their
investment in defence.
Moni Borovitz, Chief Executive Officer of MTI Wireless Edge, said: "We made
good progress this year growing revenue on a constant currency basis, and
growing overall profits despite the challenges in Israel in the last quarter
of the year. We are seeing compelling opportunities in all segments of our
operations. In particular, the increase in defence budgets worldwide and the
opening of the Indian market for E-Band 5G backhaul, which represents a
substantial opportunity for us over the medium term.
"Looking ahead, the business continues to be in a strong financial position
with net cash of US$8.1m at the year end. The Group's three divisions are well
established, with experienced, independent leadership teams and all utilising
the Group's core expertise in radio frequency communications technology. The
macro trends for all three remain positive: from the continuing roll-out of 5G
cellular connectivity; to tackling the growing global issue of water scarcity;
and the significant increases in local and international defence spending.
Despite the current conflict in Israel, we have continued to operate
relatively normally and judging from the pipeline of potential opportunities,
the Group is well placed, to continue to expand through a mix of
acquisition-led and organic growth."
Shareholder presentation
Moni Borovitz, Chief Executive Officer, will provide an investor presentation
relating to the Company's financial results for the year ended 31 December
2023 via the Investor Meet Company ("IMC") platform today at 10.00 am UK time.
Investors can sign up for free via:
https://www.investormeetcompany.com/mti-wireless-edge-ltd/register-investor
(https://www.investormeetcompany.com/mti-wireless-edge-ltd/register-investor)
Investors who have already registered on IMC and added to meet the Company,
will be automatically invited to the meeting.
Shareholders should note that the Company will not post hard copies of its
audited annual report and accounts for the year ended 31 December 2023 (the
"Annual Report") to its shareholders. Shareholders who require a hard copy
of the Annual Report may write to the Company at MTI Wireless Edge Ltd
Headquarters, 11 Hamelacha St. Afek Industrial Park, Rosh-Ha'Ayin, Israel
requesting a hard copy. An electronic version of the Annual Report will
shortly be available on the Company's website at the following address:
www.mtiwirelessedge.com (http://www.mtiwirelessedge.com/)
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)
Guy McDougall/Amrit Nahal (Sales and Corporate Broking)
Shore Capital (Joint Broker) +44 20 7408 4090
Toby Gibbs/Rachel Goldstein
Fiona Conroy (Corporate Broking)
Novella (Financial PR)
Tim Robertson/Safia Colebrook +44 20 3151 7008
About MTI Wireless Edge Ltd. ("MTI")
Headquartered in Israel, MTI is a technology group focused on comprehensive
communication and radio frequency solutions across multiple sectors through
three core divisions:
Antenna division
MTI is internationally recognized as a producer of commercial off-the-Shelf
and custom-developed antenna solutions in a broad frequency range of HF to 170
GHz for commercial, RFID and military applications. MTI continuously invests
in ground breaking technologies, explores new frequencies, and devises
innovative solutions which empower our wireless communication customers with
cutting-edge off-the-shelf and custom-made antennas.
We are at the forefront of technology and innovation, being the first to
introduce Dual Band parabolic antennas, E Band Automatic Beam Steering
antennas, E Band FCC compliant flat antennas, and more.
MTI supplies directional and omnidirectional antennas for outdoor and indoor
deployments, including smart antennas for 5G backhaul, Broadband access,
public safety, RFID, base station and terminals for the utility market.
Military applications include a wide range of broadband, tactical and
specialized communication antennas, antenna systems and DF arrays installed on
numerous airborne, ground and naval, including submarine, platforms worldwide.
Water Control & Management division
Via its subsidiary, Mottech Water Solutions Ltd ("Mottech"), MTI provides
high-end remote control and monitoring solutions for water and irrigation
applications based on Motorola's IRRInet state-of-the-art control, monitoring
and communication technologies.
As Motorola's global prime-distributor Mottech serves its customers worldwide
through its international subsidiaries and a global network of local
distributors and representatives. With over 25 years of experience in
providing customers with irrigation remote control and management, Mottech's
solutions ensure constant, reliable and accurate water usage, increase crops
quality and yield while reducing operational and maintenance costs providing
fast ROI while helping sustain the environment. Mottech's activities are
focused in the market segments of agriculture, water distribution, municipal
and commercial landscape as well as wastewater and storm-water reuse.
Distribution & Professional Consulting Services division
Via its subsidiary, MTI Summit Electronics Ltd., MTI offers consulting,
representation and marketing services to foreign companies in the field of RF
and Microwave solutions and applications including engineering services
(including design and integration) in the field of aerostat systems and the
ongoing operation of Platform subsystems, SIGINT, RADAR, communication and
observation systems which is performed by the Company. It also specializes in
the development, manufacture and integration of communication systems and
advanced monitoring and control systems for the Government and defence
industry market.
Chairman's statement
I am pleased to report on a successful year in which the Group delivered good
progress at all levels. While the economic conditions have been challenging
globally for some time and more recently, conflicts have broken out here in
Israel, the business has adapted and continued to perform well.
The increase in the number of conflicts worldwide in recent years has directly
led to governments expanding defence programmes and spend on defence. There is
a delay in this increased spend filtering through to the sector's supply
chain, but it is now positively impacting MTI's business. This together with
our unique expertise in commercial markets, especially in providing our 5G
backhaul solutions and wireless water management solutions, gives us
confidence in the direction where the Company is headed.
Trading overview
Diversification is a key strength. At any one moment, it is typical for one of
the areas of the business to be particularly strong. In the current
environment, that area for MTI is defence. For obvious reasons which we would
all rather weren't the case, military related orders have been increasing for
some time. NATO countries and the Israeli government are increasing their
defence spend and are expected to continue to do so. This is also the case for
many other countries around the world. As a result, the pipeline of orders for
defence has been increasing in recent years and there are further
opportunities for MTI at varying stages of progression.
Dividend
Reflecting the strength of the Company's trading performance the Board is
pleased to declare a final dividend of US$0.031 per share representing a 3%
increase on the previous year (2023: US$0.03). The dividend will be paid on 11
April 2024 to shareholders on the register at the close of trading on 22 March
2024 (ex-dividend on 21 March 2024). The currency translation into British
Pounds will be made on 25 March 2024 and there will not be a scrip dividend
alternative.
We also decided to increase the Company's share buyback programme effective
from 12 March 2024 and hold the shares purchased for a longer period of time.
The board agreed to increase the funds that can be used under the share
buyback programme from £200K to £700K as we believe strongly in the
prospects of the business.
People
The MTI teams around the globe all performed very well during the year,
maintaining very high operational performance levels and delivering margin
progression. I would like to specifically thank our teams in Israel for doing
excellent work during a very challenging year for Israel. The dedication,
solidarity and joint focus helped us navigate successfully through this
difficult period. Our teams are working towards agreed targets and exploiting
new opportunities with both existing and new customers.
Outlook
MTI is a growth business operating in growth markets. Our products and
services are in good demand across all three divisions. We continue to invest
in innovation, product development and new companies when the opportunities
arise, whilst always remaining focused on radio frequency communications which
lies at the heart of our success.
2024 has started well for the Company with an increased pipeline of
opportunities across all of our three divisions. We are looking forward to
delivering another year of growth and increased returns for our shareholders.
Zvi Borovitz
Chairman
Chief Executive's review
Introduction
2023 was a successful year for the Company. The business grew on a constant
currency basis despite uncertainties in the global economy throughout the year
and the conflict in Israel in the last quarter of 2023. Each division, under
their respective management teams, made good progress, retaining and expanding
their customer bases and growing their businesses overall. As a result,
entering 2024, the Company is well placed to continue to invest in people,
innovation and new products, alongside generating attractive returns for
shareholders.
Financial results
Revenues for the twelve months to 31 December 2023 decreased by 1% to US$45.6m
(2022: US$46.3m) mainly due to currency exchange fluctuations and on a
constant currency basis revenues grew by 2%, a positive performance.
Our gross margin rates improved slightly reflecting the mix of products sold
in different markets and the Group's ability to successfully pass price
increases onto customers.
Operating profit in 2023, excluding a one-off impairment of goodwill charged
to general and administrative cost, grew 6% to US$4.84m (2022: US$4.59m),
demonstrating the scalability of our business.
Profit before tax grew 12% to US$4.84m (2022: US$4.32m) reflecting the
strength of our balance sheet and the influence of currency exchange rate
fluctuation. This growth includes financial income as a result of revaluing
the contingent liability relating to the potential deferred consideration for
the PSK acquisition. This led to a strong increase of 9% in earnings per share
to US4.58 cents (2022: US4.21 cents).
Adjusted EBITDA grew 2% to US$6.16m (2022: US$6.06m).
Cash flow generated from operations for 2023 was US$3.6m, similar to 2022 and
in line with our business model to convert most of the operational profit into
operational cash flow. This resulted in a net cash balance of approximately
US$8.1m, similar to that as at 31 December 2022.
The board has agreed to increase the Share Repurchase Programme (on similar
terms and conditions originally announced by the Company on 13 April 2022) by
an additional £500,000 effective from 12 March 2024 and extend it until 31
March 2025. The objective of this programme is to assist with trading
liquidity, by accumulating shares in treasury through market purchases and
then selling, at a later stage, blocks of shares to institutional
shareholders.
Operational review
Over the last 50 years MTI has established its reputation as a global provider
of comprehensive radio frequency solutions across multiple sectors through
three core divisions.
Antennas
This division is a one stop shop for the sale of 'off the shelf' flat and
parabolic antennas, combined with the provision of custom-developed antenna
solutions to a range of commercial and military customers, with a growing
focus on providing 5G backhaul antenna solutions to support mobile phone
operators as they roll-out their 5G networks.
In 2023, revenues from this division increased by 5%, a good result reflecting
a sharp increase in demand for military antennas. There was a moderate
increase in Radio Frequency Identification (RFID), while demand for legacy
antennas for fixed wireless access decreased, after an unexpected increase in
2022. We saw a small decrease in 5G backhaul solutions, as commercial
investments were slower in 2023.
Military antenna sales increased sharply in 2023, reflecting very high enquiry
levels and a significant increase in global military spending. Demand came
from multiple international projects, mainly European orders, involving both
direct engagement with European systems houses and indirect exports of MTI's
solutions via Israeli systems houses selling a full solution worldwide.
Current events around the world suggest that requirements for military
equipment will continue to grow in coming years. In Israel, the recent
conflict has triggered an increase in demand which is likely to lead to higher
stock levels and solutions of all military equipment being maintained by the
government going forward.
5G sales were slightly lower in 2023 compared to 2022 as a result of slower
installation rates in key markets. That said, the expected future demand for
our 5G solutions is unchanged. We continue to believe that our solutions are
ideally positioned to generate significant long-term revenues alongside the
roll-out of 5G networks globally by the major mobile phone operators.
2022 saw the opening of the Indian market for E-Band 5G backhaul and in 2023
shipments were made although, as anticipated, the timing of orders has been
sporadic. MTI is well placed in India with a strong local presence and has
demonstrated the quality and reliability of the MTI solution to key clients.
There is no doubt that once 5G is rolled out in India the requirement for
MTI's products will be substantial.
The ABS®antenna solution which ensures the antenna adapts to any small
movements caused by different climate conditions, including wind or
temperature, continues to make excellent progress and is now entering into
production after successful tests by several key Original Equipment
Manufacturers (OEMs).
Water Control & Management
This division provides wireless control systems to manage irrigation and water
distribution for agriculture, municipal authorities and commercial entities.
It operates under the Mottech brand and utilises part of the hardware
technology from Motorola, integrated with the Company's own proprietary
management software. Our solutions reduce water and power usage, whilst
providing higher revenue from accurate irrigation, leading to more, and higher
quality, crops and plants being grown.
Mottech had another good year, although revenue declined by 6% primarily due
to adverse currency movements. Conversely and arguably more importantly,
currency movements helped improve profit margins, together with price
increases that were accepted at the end of 2022, resulting in Operating Profit
improving by 8%. Recurring revenues continued to improve and represented 20%
of all of the division's income in 2023.
Mottech continues to seek to innovate and expand its services to existing and
new clients. For over 30 years, Mottech has been providing irrigation services
to a number of municipalities in Israel, ensuring efficient water usage across
public parkland and green open spaces. More recently, Mottech has expanded its
services into monitoring and partially controlling urban fountains. The first
such project was completed in Q1 2024, comprising 40 fountains which are now
centrally controlled and monitored, generating significant savings in water
and costs for the municipality, while also adding safety and security features
to the systems. As a result of this project, other large municipalities in
Israel have shown interest in adopting Mottech's solution for fountain
management, suggesting this may well become a valuable future revenue stream.
The strategic partnership with Viridix has continued to develop over the last
year. Viridix is an innovative autopilot solution that measures the water
available to the roots of plants enabling greater irrigation precision.
Alongside new Mottech contracts, the Viridix capability is being adopted in
metropolitan irrigation.
Water scarcity continues to be a very real global problem and Governments are
increasingly aware of the importance of not wasting this vital resource. A
report from 2023 suggested that 'global fresh water demand will outstrip
supply by 40% by 2030*'. This level of challenge underlines the importance of
water conservation and solutions like Mottech's which can make a substantial
difference - often able to save a farmer or a city up to 30% in water usage,
while helping the farmer to grow more crops at a better level of quality.
*UN 2023 Water Conference
Distribution & Professional Consulting Services
Operating under the MTI Summit Electronics brand ("MTI Summit"), this division
exclusively represents approximately 40 international suppliers of radio
frequency/microwave components and sells these products to Israeli customers.
Expert knowledge of both the international suppliers and customers enables MTI
to act as a consultant to all parties and assist with devising complete radio
frequency/microwave solutions.
2023 was a mixed year for MTI Summit, after nine years of delivering
uninterrupted growth, revenues were flat compared to 2022 with operating
profits behind last year due to losses in PSK resulting from two projects that
were delayed. These were isolated incidents as reported at the time of the
half-year results, and the Company's confidence in the prospects of PSK are
unchanged. Reflecting this, PSK entered 2024 with a healthy orderbook and a
good pipeline of future opportunities.
For MTI Summit and PSK, the increased defence spending by governments creates
a strong market environment to operate in. This has already generated
additional revenue from within Israel and will continue to do so, partially
from the Israeli defence forces and partially from international markets via
the Israeli systems houses. To this end, the division continues to complete a
number of design wins for both existing and new customers, which will generate
future sales.
Outlook
The conflict in Ukraine led directly to a significant increase in defence
budgets. This increase in spend started to influence the 2023 results with 44%
of the Group's sales being defence related (2022: 37%). The conflict in Israel
which started on 7 October 2023 will no doubt further strengthen this trend.
Overall, MTI remains well positioned across all three divisions, with each
division backed by strong macro trends underpinning their future prosperity.
The first two months of 2024 have been in line with internal expectations and
judging from the pipeline of potential opportunities, the Group is well
placed, supported by a strong financial platform, to continue to seek to
expand through a mix of acquisition-led and organic growth.
Moni Borovitz
Chief Executive Officer
M.T.I Wireless Edge Ltd.
Consolidated Statements of Comprehensive Income
For the year ended December 31,
2023 2022
Note $'000 $'000
Revenues 4, 6 45,634 46,270
Cost of sales 30,963 31,680
Gross profit 14,671 14,590
Research and development expenses 1,047 1,077
Distribution expenses 3,709 3,924
General and administrative expenses 5,278 4,998
Profit from sale of property, plant and equipment 13 1
Profit from operations 5 4,650 4,592
Finance expense 7 342 385
Finance income 7 (527) (110)
Profit before income tax 4,835 4,317
Tax expenses 8 759 468
Profit 4,076 3,849
Other comprehensive income (loss) net of tax:
Items that will not be reclassified to profit or loss:
Remeasurements on defined benefit plans 62 127
Items that may be reclassified to profit or loss:
Adjustment arising from translation of financial statements of foreign (216) (422)
operations
Total other comprehensive (loss) (154) (295)
Total comprehensive income 3,922 3,554
Profit attributable to:
Owners of the parent 4,045 3,721
Non-controlling interest 31 128
4,076 3,849
Total comprehensive income attributable to:
Owners of the parent 3,891 3,426
Non-controlling interest 31 128
3,922 3,554
Earnings per share
Basic and Diluted (dollars per share) 9 0.0458 0.0421
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, 2023 :
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, 2023 209 23,078 (250) 3,775 26,812 1,226 28,038
Changes during 2023:
Comprehensive income
Profit for the year - - - 4,045 4,045 31 4,076
Other comprehensive income (loss)
Re measurements on defined benefit plans - - - 62 62 - 62
Translation differences - - (216) - (216) - (216)
Total comprehensive income (loss) for the year - - (216) 4,107 3,891 31 3,922
Dividend - - - (2,656) (2,656) - (2,656)
Acquisition of minority holdings in subsidiary - - - - - (35) (35)
Acquisition and disposal, net of treasury shares (note 23) * (17) - - (17) - (17)
Balance as at December 31, 2023 209 23,061 (466) 5,226 28,030 1,222 29,252
(*) Less than US$ 1 thousand
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, 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 (loss)
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, net of treasury shares (note 23) - (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 the financial statements.
M.T.I Wireless Edge Ltd.
Consolidated Statements of Financial Position
As at December 31, As at December 31,
2023 2023 2022 2022
Note $'000 $'000 $'000 $'000
ASSETS
Non-current assets :
Property, plant and equipment 11 5,398 5,573
Customer relations 12 1,439 1,597
Goodwill 12 2,068 2,261
Deferred tax assets 13 968 1,163
Long-term prepaid expenses 37 39
Total non-current assets 9,910 10,633
Current assets:
Inventories 14 7,484 7,757
Current tax receivables 381 549
Unbilled revenue 15 4,190 2,204
Trade and other receivables 15 14,284 11,035
Cash and cash equivalents 16 8,454 8,279
Total current assets 34,793 29,824
TOTAL ASSETS 44,703 40,457
LIABILITIES
Non-curent liabilities :
Contingent consideration and Put option liability 3 1,117 1,432
Lease liabilities 11 514 303
Loans from banks, net of current maturities 17 64 98
Employee benefits, net 18 719 752
Total non-current liabilities 2,414 2,585
Current Liabilities:
Current tax payables 283 425
Trade and other payables 19 12,440 9,366
Current maturities and short-term bank credit 20 314 43
Total current liabilities 13,037 9,834
Total liabilities 15,451 12,419
TOTAL NET ASSETS 29,252 28,038
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,
2023 2023 2022 2022
Note $'000 $'000 $'000 $'000
Capital and reserves attributable to 23
owners of the parent
Share capital 209 209
Additional paid-in capital 23,061 23,078
Translation differences (466) (250)
Retained earnings 5,226 3,775
28,030 26,812
Non-controlling interests 1,222 1,226
TOTAL EQUITY 29,252 28,038
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,
2023 2023 2022 2022
$'000 $'000 $'000 $'000
Operating Activities:
Profit for the year 4,076 3,849
Adjustments for:
Depreciation and amortization 1,511 1,466
Loss (Gain) on disposal of property, plant and equipment (13) (1)
Changes in Contingent consideration and Put option liability (315) -
Finance Income, net (5) (82)
Income tax expense 759 468
6,013 5,700
Changes in working capital and provisions
Decrease (increase) in inventories 158 (951)
(Increase) in trade receivables (2,477) (63)
(Increase) decrease in unbilled revenues (1,986) 590
(Increase) in other accounts receivables (897) (1,134)
Increase in trade and other accounts payables 3,228 572
Increase (Decrease) in employee benefits, net 29 (93)
(1,945) (1,079)
Interest received 69 -
Interest paid (59) (52)
Income tax paid (540) (978)
(530) (1,030)
Net cash provided by operating activities 3,538 3,591
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,
2023 2023 2022 2022
$'000 $'000 $'000 $'000
Investing Activities:
Proceeds from sale of property, plant and equipment 62 15
Acquisition of subsidiary, net of cash acquired - (1,427)
Net cash from sale of previously consolidated subsidiaries - (2,785)
Purchase of property, plant and equipment (426) (552)
Net cash used in investing activities (364) (4,749)
Financing Activities:
Dividend (2,656) (2,479)
Payments of lease liabilities (485) (560)
Treasury shares acquired (516) (118)
Treasury shares sold 499 70
Acquisition of the non-controlling interest in subsidiary (35) -
Repayment of long-term loans from banks (247) (39)
Receipt of loans from banks 460 157
Net cash used in financing activities (2,980) (2,969)
Increase (Decrease) in cash and cash equivalents 194 (4,127)
Cash and cash equivalents at the beginning of the year 8,279 12,567
Exchange differences on balances of cash and cash equivalents (19) (161)
Cash and cash equivalents at the end of the year 8,454 8,279
(485)
(560)
Treasury shares acquired
(516)
(118)
Treasury shares sold
499
70
Acquisition of the non-controlling interest in subsidiary
(35)
-
Repayment of long-term loans from banks
(247)
(39)
Receipt of loans from banks
460
157
Net cash used in financing activities
(2,980)
(2,969)
Increase (Decrease) in cash and cash equivalents
194
(4,127)
Cash and cash equivalents at the beginning of the year
8,279
12,567
Exchange differences on balances of cash and cash equivalents
(19)
(161)
Cash and cash equivalents at the end of the year
8,454
8,279
The accompanying notes form an integral part of these financial statements.
M.T.I Wireless Edge Ltd.
Notes forming part of the consolidated financial statements for the year ended
December 31, 2023
1. General description of the Group and its operations
M.T.I Wireless Edge Ltd. (hereafter - the "Company", or collectively with its
subsidiaries, the "Group") is an Israeli corporation. The Company was
incorporated under the Companies Act in Israel on December 30, 1998 and
commenced operations on July 1, 2000. Since March 2006, the Company's shares
have been traded on the AIM market of the London Stock Exchange.
The formal address of the Company is 11 Hamelacha Street, Afek industrial
Park, Rosh-Ha'Ayin, Israel.
The Company and its subsidiaries are engaged in the following areas:
- Development, design, manufacture and marketing of antennas for the
military and civilian sectors.
- A leading provider of remote control solutions for water and
irrigation applications based on Motorola's IRRInet state of the art control,
monitoring and communication technologies.
- Providing consulting, representation and marketing services to
foreign companies in the field of radio frequency (RF) and Microwave,
including engineering services in the field of aerostat systems and system
engineering services, together with the development, manufacture and
integration of communication systems and advanced monitoring and control
systems for the Government and defence industry market.
2. Accounting policies
The principal accounting policies adopted in the preparation of the financial
statements are set out below. The policies have been consistently applied to
all the years presented, unless otherwise stated.
A. Basis of preparation
These consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS). The financial statements
have been prepared under the historical cost convention, except for the
measurement of employee benefit plan assets.
The Company has elected to present the statement of comprehensive income using
the function of expense method.
B. Estimates and assumptions
The preparation of the financial statements requires management to make
estimates and assumptions that have an effect on the application of the
accounting policies and on the reported amounts of assets, liabilities,
revenues and expenses. These estimates and underlying assumptions are reviewed
regularly. Changes in accounting estimates are reported in the period of the
change in estimate and thereafter.
The key assumptions made in the financial statements concerning uncertainties
at the end of the reporting period and the critical estimates used by the
Group that may result in a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are discussed below.
- Deferred tax assets: Deferred tax assets are recognized for
unused carryforward tax losses and deductible temporary differences to the
extent that it is probable that taxable profit will be available against which
the losses can be utilized. Significant management judgment is required to
determine the amount of deferred tax assets that can be recognized, based upon
the estimated timing and the level of future taxable profits together with
future tax planning strategies.
2. Accounting policies (Cont.)
C. Revenue recognition
Revenue from contracts with customers
Revenue from contracts with customers is recognized when control of the goods
or services are transferred to the customer at an amount that reflects the
consideration to which the Company expects to be entitled in exchange for
those goods or services
1. Revenues from Construction Contracts are recognized based on the
percentage of completion to date. The percentage of completion is determined
using the inputs method
The Company elected not to adjust the transaction price for the effects of
financing components in contracts where the period between when the Company
transfers a promised good or a service to the customer and when the customer
pays for it is one year or less.
2. Revenues from the sale of goods are recognized at the point in time
when control of the asset is transferred to the customer, generally upon
delivery of the equipment.
At the end of each reporting period, the Company updates its estimates of
variable consideration.
D. Functional currency and Foreign currency transactions
The reporting currency of the Group is U.S. Dollars ("dollar"; "USD"), which
is the currency of the primary economic environment in which the Company and
the majority of the Group's subsidiaries operate. For each entity, the Group
determines the functional currency and items included in the financial
statements of each entity are measured using that functional currency.
E. Property, plant and equipment
Items of property, plant and equipment are initially and subsequently
recognized at cost including directly attributable costs. Depreciation is
calculated on a straight line basis, over the useful lives of the assets at
annual rates as follows:
Rate of depreciation Mainly %
Buildings 3 - 4 % 3.13
Machinery and equipment 6 - 20 % 10
Office furniture and equipment 6 - 15 % 6
Computer equipment 10 - 33 % 33
Vehicles 15 % 15
F. Provision for warranty
The Group generally offers up to three year warranties on its products. Based
on past experience, the Group does not record any provision for warranty of
its products and services due to immateriality.
G. Employee benefits
1. Short-term employee benefits: Short-term employee benefits are
benefits that are expected to be settled wholly before twelve months after the
end of the annual reporting period in which the employees render the related
services. These benefits include salaries, paid annual leave, paid sick leave,
recreation and social security contributions and are recognized as expenses as
the services are rendered.
2. Accounting policies (Cont.)
2. Post-employment benefits: The plans are normally financed by
contributions to insurance companies and classified as defined contribution
plans or as defined benefit plans.
The Group has defined contribution plans pursuant to Section 14 of the
Severance Pay Law since 2004 under which the Group pays fixed contributions to
a specific fund and will have no legal or constructive obligation to pay
further contributions if the fund does not hold sufficient amounts to pay all
employee benefits relating to employee service in the current and prior
periods. Contributions to the defined contribution plan in respect of
severance or retirement pay are recognized as an expense simultaneously with
receiving the employee's services and no additional provision is required in
the financial statements except for the unpaid contribution. The Group also
operates a defined benefit plan in respect of severance pay pursuant to the
Severance Pay Law. According to the Law, employees are entitled to severance
pay upon dismissal, retirement and several other events prescribed by that
Law. The liability for post employment benefits is measured using the
projected unit credit method. The actuarial assumptions include rates of
employee turnover and future salary increases based on the estimated timing of
payment. The amounts are presented based on discounted expected future cash
flows using a discount rate determined by reference to yields on high quality
corporate bonds with a term that matches the estimated term of the benefit
plan.
In respect of its severance pay obligation to certain of its employees, the
Company makes deposits into pension funds and insurance companies ("Plan
assets"). Plan assets comprise assets held by a Long-term employee benefits
fund or qualifying insurance policies. Plan assets are not available to the
Group's own creditors and cannot be returned directly to the Group. The
liability for employee benefits presented in the statement of financial
position presents the present value of the defined benefit obligation less the
fair value of the plan assets.
H. Segment reporting
Segment revenue and segment costs include items that are attributable to the
relevant segments and items that can be allocated to segments. Items that
cannot be allocated to segments include the Group's financial income and
expenses and income tax.
3. Acquisition of subsidiary:
On 3 January 2022 the Company, via its wholly-owned subsidiary, MTI Summit
Electronics Ltd. ("MTI Summit"), entered into a share purchase agreement,
which included both a purchase of existing shares in and the making of a new
equity investment into P.S.K. WIND Technologies Ltd. ("PSK"), after which MTI
Summit owns 51% of PSK (the "Acquisition"). The initial consideration for the
Acquisition was approximately US$1.2 million, with an earn out payment,
subject to performance, of up to approximately US$2.56 million. In addition,
MTI Summit has made a loan to PSK of US$0.8 million and is party to an option
agreement in relation to the acquisition of the remaining 49% of PSK.
The initial consideration paid by MTI, to acquire 51% of the equity in PSK,
comprised: a) the purchase of existing shares in PSK for NIS 700,000
(approximately US$225,000); and b) a subscription of NIS 3,000,000
(approximately US$ 972,000) for new shares in PSK. In addition, there is an
earn out mechanism under which further consideration may be payable, as
described in the contingent consideration section below (the "Earn Out").
MTI Summit's loan
3. Acquisition of subsidiary (Cont.):
to PSK of NIS 2,500,000 (approximately US$800,000) is a term loan which is to
be repaid on 1 January 2024 ("Original Loan"). The Original Loan is not
convertible and bears interest of 3.26% per annum.
In addition to the Acquisition, MTI Summit has an option to purchase and the
Shareholders of PSK ("Original Owners") have an option to sell to MTI Summit
the remaining 49% of PSK (the "Option") starting from 2027, subject to the
terms described below.
Cash outflow on the Acquisition totalled to US$ 1,427,000.
Acquisition cost of PSK at the date of Acquisition:
Fair value
$'000
Cash paid 1,197
Contingent consideration liability 56
Put option liability 1,376
Total acquisition cost 2,629
Set forth below are the assets and liabilities of PSK at the date of
Acquisition:
Fair value
$'000
Trade receivables 671
Other receivables 213
Inventories 65
Property, plant and equipment 256
Intangible assets 1,710
Bank loans (230)
Trade payables (522)
Deferred tax liability (394)
Other liabilities (436)
Employee benefits, net (104)
Net identifiable assets 1,229
Goodwill arising on acquisition 1,400
Total purchase cost 2,629
The results of PSK were consolidated into the financial statements of the
Group from the beginning of 2022.
The cost of the Acquisition was allocated to tangible assets, intangible
assets and liabilities which were acquired based on their fair value at the
time of the acquisition. The intangible assets recognized include order
backlog and customer relations in the total amount of US$ 111 thousands and
US$ 1,599 thousands respectively, deferred taxes
in the total amount of US$ 394 thousands and goodwill in the total amount US$
1,400 thousands. The intangible assets associated with customer relations are
amortized over a useful life of up to 15 years.
3. Acquisition of subsidiary (Cont.):
The goodwill arising on Acquisition is attributed to the expected benefits
from the synergies of the combination of the activities of the Company and
PSK. The goodwill recognized is not expected to be deductible for income tax
purposes. All transaction costs have been recorded in General and
administrative expenses.
Contingent consideration:
As part of the purchase agreement with the owners of PSK, it was agreed that
the sellers, who retain a 49% holding in PSK would be entitled to further
consideration to be paid pursuant to an earn out mechanism dependent on PSK's
actual revenues in 2022 and 2024 versus certain agreed targets in each of
those years and is capped at a maximum of NIS 8,000,000 (approximately
US$2.56m), to be paid in cash.
Put Option liability:
MTI Summit has an option to purchase and the vendors of PSK have an option to
sell to MTI Summit the remaining 49% of PSK (the "Option") starting from 2027.
The value of PSK under the Option is to be calculated on the basis of eight
times the average EBITDA level of PSK in 2025 and 2026, with MTI being
required to pay 49% of this value upon exercise. If the Option is to be
exercised at any time after the preparation of PSK's financial results for the
first quarter of 2027, the calculation will be based on PSK's average EBITDA
for the last eight quarters. The Option will remain in place until
exercised.
As at the Acquisition date, the fair value of the contingent consideration was
estimated at US$ 56 thousand and the Option at US$ 1.376 million.
The significant non-observable data used in measuring the fair value of the
liability in respect of the contingent consideration and the Put Option
liability are as follows:
Discount rate: 15.5%
A significant increase (or decrease) in the estimated amount of PSK's pre-tax
income will result in a significant increase (decrease) in the fair value of
the liability in respect of the contingent consideration whereas a significant
increase (decrease) in the discount rate and default risk rate will result in
a decrease (an increase) in the fair value of the liability.
At the end of 2023, MTI Summit and the Original Owners of 49% of PSK signed an
amendment to PSK's share purchase agreement according to which:
a. On 1 January 2024, MTI Summit granted a new loan to PSK (the "New
Loan") totalling NIS 2,260,000 (approximately US$625,000), replacing the
Original Loan. This New Loan bears interest equal to the interest that PSK
pays for short term credit in the bank minus 2% (currently the interest of the
New Loan is 6.9% per annum). The obligations on PSK to secure the repayment of
the New Loan remain unchanged compared to the Original Loan.
b. The Company will provide PSK with guaranties in order for PSK to
receive bank guaranties in favour of customers, related to projects performed
by PSK, with the costs of such guarantees to be borne by PSK.
3. Acquisition of subsidiary (Cont.):
c. The value of PSK under the Option is to be calculated on the basis
of six (rather than eight in the original agreement) times the average EBITDA
level of PSK in 2025 and 2026. All other terms of the option shall remain
unchanged.
In December 2023, the Group performed its annual impairment test of the cash
generating unit (PSK) based on a 'value in use' calculation, using cash flow
projections from financial budgets approved by senior management covering a
five-year period. The pre-tax discount rate applied to cash flow projections
was 23%. The projected cash flows for the period exceeding five years were
estimated using a fixed growth rate of 2%. It was concluded that the fair
value less costs of disposal did not exceed the value in use. As a result of
this analysis, management has recognized an impairment charge of USD 193
thousand in the current year against goodwill. This charge is included in
General administrative expenses.
The Company revalued the Contingent consideration and the Put option
liabilities of PSK, as stated in the balance sheet on 31 December 2023,
resulting in financial income of USD 315 thousand.
4. Revenues
For the year ended December 31,
2023 2022
Revenues arises from: $'000 $'000
Sale of goods * 32,525 34,618
Rendering of services ** 7,178 8,334
Projects ** 5,931 3,318
45,634 46,270
(*) at a point in time
(**) over time
5. Profit from operations
For the year ended December 31,
2023 2022
This has been arrived at after charging: $'000 $'000
Material and subcontractors 21,993 22,424
Wages and salaries 13,498 14,150
Plant, Machinery and Usage 1,557 1,628
Depreciation and amortization 1,511 1,466
Travel and Exhibition 336 326
Advertising and Commissions 710 748
Consultants 505 478
Others 874 458
40,984 41,678
6. Operating segments
The Company and its subsidiaries are engaged in the following segments:
- Development, design, manufacture and marketing of antennas for the
military and civilian sectors.
- A leading provider of remote control solutions for water and
irrigation applications based on Motorola's IRRInet state of the art control,
monitoring and communication technologies.
- Providing consulting, representation and marketing services to
foreign companies in the field of RF and Microwave, including engineering
services in the field of aerostat systems and system engineering services
together with the development, manufacture and integration of communication
systems and advanced monitoring and control systems for the Government and
defence industry market.
1. Segment information
Year ended December 31, 2023
Antennas Water Solutions Distribution & Consultation Eliminations Total
U.S. $ in thousands
Revenues
External 12,237 17,164 16,233 - 45,634
Inter-segment - - 344 (344) -
Total 12,237 17,164 16,577 (344) 45,634
Segment profit 841 1,986 1,552 271 4,650
Finance income, net (185)
Profit before tax 4,835
Tax expenses 759
Profit 4,076
December 31, 2023
Antennas Water Solutions Distribution & Consultation Eliminations Total
U.S. $ in thousands
Segment assets 17,124 12,468 12,711 - 42,303
Unallocated assets 2,400
Segment liabilities 4,952 4,326 5,293 - 14,571
Unallocated liabilities 880
6. Operating Segments (cont.)
Year ended December 31, 2022
Antennas Water Solutions Distribution & Consultation Eliminations 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
Profit before tax 4,317
Tax expenses 468
Profit 3,849
December 31, 2022
Antennas Water Solutions Distribution & Consultation 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
2. Entity wide disclosures of External revenue by location of
customers.
For the year ended December 31,
2023 2022
$'000 $'000
Israel 28,750 29,008
America 4,824 6,489
Europe Middle East & Africa 7,503 6,018
Asia Pacific 4,557 4,755
45,634 46,270
3. Additional information about revenues:
There is one single customer from which revenues amount to 13.6% in 2023 (10%
in 2022) of total revenues reported in the financial statements. This is a
customer for the antenna and distribution & special consulting services
divisions and the credit terms with it are usually end of month + 90 days.
7. Finance expense and income
For the year ended December 31,
2023 2022
$'000 $'000
Finance expense
Net Foreign exchange loss - 108
Leases 32 52
Interest and bank fees 315 225
342 385
Finance income
Net Foreign exchange profit 35 -
Change in contingent consideration and Put Option liability 315 -
Interest from bank deposits 177 110
527 110
(185) 275
8. Tax expenses
A. Tax Laws in Israel
1. Amendments to the Law for the Encouragement of Capital Investments,
1959 (the "Encouragement Law"):
In December 2010, the "Knesset" (Israeli Parliament) passed the Law for
Economic Policy for 2011 and 2012 (Amended Legislation), 2011 ("the
Amendment"), which prescribes, among others, amendments to the Law. The
Amendment became effective as of January 1, 2011. According to the Amendment,
the benefit provisions in the Law were modified and a flat tax rate applies to
the Company's entire preferred income. Commencing from the 2011 tax year, the
Group will be able to opt to apply (the waiver is non-recourse) the Amendment
and from the elected tax year and onwards, it will be subject to the amended
tax rates that are: 2014 and thereafter will be 16% (in development area A -
9%).
The Group applied the Amendment effectively from the 2011 tax year.
On 15 November 2021 an amendment to the Encouragement Law was approved (the
"2021 Amendment"). According to the 2021 Amendment companies that had retained
earnings from exempt income earned before 31 December 2020 can distribute
those earnings with a lower tax rate of 10% to the Company and withholding tax
of 15% to the shareholders.
2. Tax rates:
On December 29, 2016, the Law for Economic Efficiency (Legislative Amendments
for Achieving the Budgetary Goals for 2017-2018) was published in Reshumot
(the Israeli government official gazette), which enacts, among other things,
the following amendments:
- Decreasing the corporate tax rate to 24% in 2017 and to 23% in
2018 and thereafter (instead of 25%).
- Commencing tax year 2017 and thereafter the tax rate on the income of
preferred enterprises of a qualifying Company in Development Zone A as stated
in the Encouragement of Capital Investment
8. Tax expenses (cont.)
Law, shall decrease to 7.5% (instead of 9%) and for companies located in zones
other than Zone A the rate shall remain 16%.
- In addition, the tax rate on dividends distributed on January 1,
2014 and thereafter originating from preferred income under the Encouragement
Law will be raised to 20% (instead of 15%).
Therefore the Company's applicable corporate tax rate for 2014 and thereafter
is 16%.
B. The principal tax rates applicable to the subsidiaries whose place
of incorporation is outside Israel are:
A company incorporated in India - The statutory tax rate is 28% and the
Company was in an exempt zone until end of March 2013 and further in a 50% tax
exempt zone until end of March 2018. Nevertheless from the Tax Year 2011-12,
in the absence of taxable income or tax due on taxable income (calculated as
per normal rates) being less than 18.5% of the Accounting Book Profits during
a particular year, the Indian regulation states that the company has to pay a
Minimum Alternate tax at a rate of 18.5% of the Accounting Book Profits for
that year. Such excess Minimum Alternate Tax paid on book profits over
the Tax due on
Actual Taxable Income (calculated as per normal rates) of each year
is capable of set off against the taxable profits of future years.
A company incorporated in Switzerland - The weighted tax rate applicable to a
company operating in Switzerland is about 25% (composed of Federal, Cantonal
and Municipal tax). Provided that the company meets certain conditions, the
weighted tax rate applicable to its income in Switzerland will not exceed 10%.
A company incorporated in South Africa - the statutory tax rate is 27% (2022:
28%)
A company incorporated in Australia - the statutory tax rate is 30%
A company incorporated in United States of America - the statutory tax rate is
21%.
A Company incorporated in Canada - the statutory tax rate is 25%.
A Company incorporated in China - the statutory tax rate is 25% but for small
entities the tax rate is 10%. To be classified as a small entity all following
should apply (i) Annual taxable income not exceeding 3 million yuan, (ii)
Number of employees not exceeding 300 and (iii) Total assets not exceeding 50
million yuan. The Company meets the criteria of a small entity.
C. Income tax assessments
The Company has tax assessments considered as final up to and including the
year 2018.
For the year ended December 31,
2023 2023 2022 2022
$'000 $'000 $'000 $'000
Current tax expense
Income tax on profits for the year 768 846
Taxes in respect of previous years (204) (209)
564 637
Deferred tax expenses (income) (see note 13)
Origination and reversal of temporary differences 195 (169)
195 (169)
Total tax expenses 759 468
8. Tax expenses (cont.)
The adjustments for the difference between the actual tax charge for the year
and the standard rate of corporation tax in Israel applied to profits for the
year are as follows:
For the year ended December 31,
2023 2022
$'000 $'000
Profit before income tax 4,835 4,317
Tax using the Company's domestic tax rate of 16% 773 691
Non-deductible expenses 53 -
Taxes resulting from different tax rates applicable to foreign and other 55 81
subsidiaries
Utilization of prior year's tax losses for which deferred taxes were not (119) (108)
provided
Adjustments for current income tax of prior years (204) (209)
Other 201 13
Total income tax expense 759 468
9. Earnings per share
Net earnings per share attributable to equity owners of the parent
For the year ended
December 31,
2023 2022
$'000 $'000
Net Earnings used in basic and diluted EPS 4,045 3,721
Weighted average number of shares used in basic and diluted EPS 88,283,490 88,444,356
basic and diluted net EPS (dollars) 0.0458 0.0421
10. Dividends
For the year ended
December 31,
2023 2022
$'000 $'000
Dividend paid 2,656 2,479
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, 2023 5,316 6,763 752 2,547 1,324 1,936 18,638
Acquisitions 10 94 18 135 169 643 1,069
Disposals - - - - (125) (559) (684)
Exchange differences (6) (2) (2) (4) (15) - (29)
Balance as of December 31, 2023 5,320 6,855 768 2,678 1,353 2,020 18,994
Accumulated Depreciation:
Balance as of January 1, 2023 2,644 5,645 652 2,375 606 1,143 13,065
Additions 120 147 26 144 193 530 1,160
Disposals - - - - (76) (547) (623)
Exchange differences - (2) - (2) (2) - (6)
Balance as of December 31, 2023 2,764 5,790 678 2,517 721 1,126 13,596
Net book value as of December 31, 2023 2,556 1,065 90 161 632 894 5,398
Lease liabilities Year ended December 31
2023 2022
$'000 $'000
Interest expense 32 43
Total cash outflow for leases 517 474
Additions to right-of-use assets 643 533
The Company has two types of lease agreements mainly for the (i) premises on
lease at the Cochin Special Economic Zone (CSEZ) in India for 15 years and
(ii) leases of cars in Israel for the use of its employees for up to three
years.
December 31, 2023 Less than one year 1 to 2 years 2 to 3 3 to 4 years > 4 Total
years years
$'000
Lease liabilities 366 132 57 11 314 880
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
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, 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
12. Intangible assets
Goodwill from business combination Customer relations * Total
$'000
Cost:
Balance as of December 31, 2023 3,488 2,425 5,913
Accumulated Amortization and impairments:
Balance as of January 1, 2023 1,227 828 2,055
Amortization and impairments charge 193 158 351
Balance as of December 31, 2023 1,420 986 2,406
Net book value as of December 31, 2023 2,068 1,439 3,507
12. Intangible assets (cont.)
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
(*) Customer relations is amortized over an economic useful life of between
6.5 to 10 years.
13. Deferred tax assets
Deferred tax asset is calculated on temporary differences under the liability
method using the tax rates that are expected to apply to the period when the
asset is realised.
The movement in the deferred tax asset is as shown below:
2023 2022
$'000 $'000
At January 1 1,163 994
Charged to profit or loss (195) 169
At December 31 968 1,163
Deferred tax assets have been recognized in respect of all differences giving
rise to deferred tax assets because it is probable that these assets will be
recovered.
Composition:
31.12.2023 31.12.2022
$'000 $'000
Accrued severance pay 103 96
Other provisions and employee-related obligations 113 110
Research and development expenses deductible over 3 years 147 143
Carry forward tax losses 922 1,156
Customer relations - arising from acquisition of P.S.K (317) (342)
968 1,163
Deferred tax assets relating to carry forward capital losses of the Group
total approximately $984 and $1,014 thousand as of 31 December, 2023 and 2022
respectively were not recognized in the financial statements because their
utilization in the foreseeable future is not probable.
14. Inventories
31.12.2023 31.12.2022
$'000 $'000
Raw materials and consumables 5,638 5,621
Work-in-progress 56 173
Finished goods and goods for sale 1,790 1,963
7,484 7,757
15. Trade receivables, other receivables and unbilled revenue
31.12.2023 31.12.2022
$'000 $'000
Trade receivables 12,124 9,735
Unbilled revenue - Projects 4,190 2,204
Other receivables 2,160 1,300
18,474 13,239
Trade receivables:
31.12.2023 31.12.2022
$'000 $'000
Trade receivables (*) 11,858 9,161
Notes receivable 353 666
Allowance for expected credit losses (87) (92)
12,124 9,735
(*) Trade receivables are non-interest bearing. They are generally on
60-120 day terms.
As at 31 December 2023 trade receivables of $320,000 (2022 - $328,000) were
past due but not impaired.
They relate to the customers with no default history.
Unbilled revenue:
31.12.2023 31.12.2022
$'000 $'000
Actual completion costs 4,610 2,756
Revenue recognised 1,954 2,801
Billed revenue (2,374) (3,353)
Total Unbilled receivables - Projects 4,190 2,204
Other receivables:
31.12.2023 31.12.2022
$'000 $'000
Prepaid expenses 1,056 644
Advances to suppliers 818 199
Tax authorities - V.A.T 106 206
Employees 180 251
2,160 1,300
16. Cash and cash equivalents
31.12.2023 31.12.2022
$'000 $'000
In U.S. dollars 4,236 3,224
In other currencies 4,218 5,055
8,454 8,279
17. Loans from banks
31.12.2023 31.12.2022
$'000 $'000
NIS 375 133
South African Rand 3 8
Less - current maturities (314) (43)
64 98
All bank loans are for the purchase of cars and are secured by a fixed lien on
the cars, aside from the use of a short term credit line by PSK.
Mottech South Africa has a loan agreement of approximately US$ 30 thousand for
the purchase of cars for which the reminder will be paid in Q1 2024. The
interest rate is linked to the South Africa prime lending rate.
During 2022 PSK had entered into a loan agreement of approximately US$ 133
thousand for the purchase of cars, which is payable over 36 - 48 months on a
monthly basis. The interest rate is linked to the Prime interest rate.
At December 31 2023 First Second year Third
year year and thereafter
$'000
Long-term loan 314 36 28
18. Employee benefits
A. Composition:
As at December 31
2023 2022
$'000 $'000
Present value of the obligations 1,757 1,660
Fair value of plan assets (1,038) (908)
719 752
B. Movement in plan assets:
2023 2022
$'000 $'000
Year beginning 908 983
Foreign exchange gain (loss) 73 (121)
Interest income 33 22
Contributions 15 13
Benefit paid (9) -
Re measurements gain (loss)
Actuarial gain (loss) from financial assumptions (1) 7
Return on plan assets (excluding interest) 19 4
Year end 1,038 908
C. Movement in the liability for benefit obligation:
2023 2022
$'000 $'000
Year beginning 1,660 1,851
Initially consolidated company - 104
Foreign exchange loss (profit) 48 (196)
Interest cost 105 41
Current service cost 43 37
Benefits paid (48) (58)
Re measurements loss (gain)
Actuarial gain from financial assumptions (12) (120)
Adjustments (experience) (39) 1
Year end 1,757 1,660
Supplementary information
1. The Group's liabilities for severance pay, retirement and pensions
pursuant to Israeli law and employment agreements are recognized in full - in
part by managers' insurance policies, for which the Group makes monthly
payments and accrued amounts in severance pay funds and the rest by the
liabilities which are included in the financial statements.
18. Employee benefits (cont.)
2. The amounts funded displayed above include amounts deposited in
severance pay funds with the addition of accrued income. According to the
Severance Pay Law, the aforementioned amounts may not be withdrawn or
mortgaged as long as the employer's obligations have not been fulfilled in
compliance with Israeli law.
3. Principal nominal actuarial assumptions:
As at December 31,
2023 2022
Discount rate on plan asset 5.20% 5.18%
Expected increase in pensionable salary 2% 2%
4. Sensitivity test for changes in the expected rate of salary increase or
in the discount rate of the plan assets and liability:
Change in defined benefit obligation
As at December 31,
2023 2022
$'000 $'000
The change as a result of:
Salary increases of 1 % 37 54
Salary decreases of 1 % (34) (48)
The change as a result of:
Increase of 1% in discount rate (32) (48)
Decrease of 1% in discount rate 35 54
Year ended December 31,
2023 2022
$'000 $'000
Expenses in respect of defined contribution plans 524 552
19. Trade and other payables
As at December 31,
2023 2022
$'000 $'000
Trade payables 7,882 5,739
Employees' wages and other related liabilities 1,816 1,675
Advances from trade receivables 1,004 348
Accrued expenses 848 909
Government authorities 171 209
Lease liability 366 449
Others 353 37
12,440 9,366
20. Current maturities and short-term bank credit
As at December 31,
Interest rate 2023 2022
as at December 31, 2023
% $'000 $'000
Current maturities In NIS Prime + 0.9 - 2.2 311 38
Current maturities In SA ZAR 9.5 - 11 3 5
Total Current maturities and short-term bank loans 314 43
Changes in liabilities arising from financing activities
Reconciliation of the changes in liabilities for which cash flows have been,
or will be classified as financing activities in the statement of cash flows
Loans and borrowings Lease liabilities
Total
$'000
At 1 January 2023 141 752 893
Changes from financing cash flows:
Payments of lease liabilities - (485) (485)
Receipt loans from banks 460 - 460
Repayment of long-term loans from banks (247) - (247)
Total changes from financing cash flows 354 267 621
Changes in fair value:
New leases - 643 643
Interest expense - 32 32
Interest paid - (32) (32)
Total changes from financing cash flows 354 910 1,264
Effects of foreign exchange 24 (30) (6)
At 31 December 2023 378 880 1,258
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
21. Financial instruments - Risk Management
The Group is exposed through its operations to the
following financial risks:
· Foreign currency risk
· Liquidity risk
· Credit risk
Foreign currency risk
Foreign exchange risk arises when Group companies enter into transactions
denominated in a currency other than their functional currency.
The Group's policy is to allow the Group's entities to pay liabilities
denominated in their functional currency using the cash flows generated from
the operations of each entity. When the Group's entities have liabilities
denominated in a currency other than their functional currency (and the entity
does not have sufficient cash balances in this currency to settle the
liability) the Group, if possible, transfers cash balances from one entity to
another entity in the Group. The Group's currency risks are as follows:
Most of the Company's revenues are in US dollars or linked to that currency,
and the Company's inputs are mainly linked due to the importation of raw
materials paid for in US Dollars, but the wages and salary expenses (which
constitutes a material input in the Company's operations) are in NIS.
Therefore, there is an exposure to changes in the exchange rate of the NIS
against the Dollar.
Management mitigates that risk by holding some cash and cash equivalents and
deposit accounts in NIS. The Company also purchases from time to time some
forward contracts on the NIS/$ exchange rate to hedge part of the salary
costs. Since the purchase of Mottech the Group has an additional currency risk
due to its subsidiaries' activity.
The following is a sensitivity analysis of a change of 5% as of the date of
the financial position in the NIS exchange rates against the functional
currency, while the rest of the variables remain constant, and their effect on
the pre-tax profit or loss on equity:
Profit (loss) from change Book value Profit (loss) from change
December 31, 2023
NIS exchange rate 0.262 0.276 0.289
Total assets, net ($'000) 217 4,341 (217)
December 31, 2022
NIS exchange rate 0.27 0.284 0.298
Total assets, net ($'000) 280 5,617 (280)
The Company's exposure to changes in foreign currency in all other currencies
is immaterial.
21. Financial instruments - Risk Management (Cont.)
Total Other currencies NIS USD
$'000
As of December 31, 2023
Assets
Current assets:
8,454 2,234 1,983 4,237 Cash and cash equivalents
16,314 579 8,513 7,222 Trade receivables
2,160 159 1,850 151 Other receivables
Liabilities
current liabilities:
314 3 311 - Current maturities and short-term bank credit and loans
7,882 894 4,502 2,486 Trade payables
4,192 870 3,128 194 Other accounts payables
non- current liabilities:
1,117 - 1,117 - Contingent consideration and Put option liability
64 - 64 - Loans from banks, net of current maturities
13,359 1,205 3,224 8,930 Total assets, net
Total Other currencies NIS USD
$'000
As at 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
Liquidity Risk
Liquidity risk is the risk that arises when the maturity of assets and
liabilities does not match. An unmatched position potentially enhances
profitability but can also increase the risk of insufficient liquidity means
to fulfil its immediate obligations. The Group's objective is to maintain a
balance between continuity of funding and flexibility. The Group has
sufficient availability of cash, including the short-term investment of cash
surpluses, and can raise loans to meet its obligations by cash management,
subject to the Group's policies and guidelines.
The table below summarizes the maturity profile of the Group's financial
liabilities based on contractual undiscounted payments (including interest
payments):
21. Financial instruments - Risk Management (Cont.)
December 31, 2023 Less than one year 1 to 2 years 2 to 3 3 to 4 years > 4 Total
years years
$'000
Contingent consideration and Put option liability - 280 - - 837 1,117
Loans from banks 314 36 28 - - 378
Trade payables 7,882 - - - - 7,882
Payables 4,558 - - - - 4,558
12,754 316 28 - 837 13,935
December 31, 2022 Less than one year 1 to 2 years 2 to 3 3 to 4 years > 4 Total
years years
$'000
Contingent consideration and Put option liability - - 58 - 1,372 1,432
Loans from banks 43 41 38 19 - 141
Trade payables 5,739 - - - - 5,739
Payables 3,627 - - - - 3,627
9,409 41 96 19 1,372 10,939
Credit risks
Financial instruments which have the potential to expose the Group to credit
risks are mainly deposit accounts, trade receivables and other receivables.
The Group holds cash and cash equivalents in short term deposit accounts in
banking institutions in Israel that are considered financially sound, thereby
substantially reducing the risk to suffer credit loss.
With respect to trade receivables, the Group believes that there is no
material credit risk which is not mitigated in light of Group's policy to
assess the credit risk of customers before entering contracts. Moreover, the
Group evaluates trade receivables on a timely basis and adjusts the allowance
for expected credit losses accordingly. Since January 2019 the Company has had
an agreement with a credit insurance company to further mitigate this risk.
The aging analysis of these trade-receivable balances by business segment is
as follows:
Past due trade receivables with aging of
December 31, 2023
$'000
Revenues Total trade receivables Not past due < 30 >30
days days
Antennas - other receivables 12,237 7,906 7,759 140 7
Water Solutions - other receivables 17,164 3,229 3,131 54 44
Distribution & Consultation - other receivables 16,577 5,179 5,104 22 53
Intercompany (344) - - - -
Total 45,634 16,314 15,994 216 104
21. Financial instruments - Risk Management (Cont.)
Past due trade receivables with aging of
December 31, 2022
$'000
Revenues Total trade receivables Not past due < 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
Fair value
A. Fair value of financial assets and liabilities:
Fair value measurements using input type
$'000
Level 1 Level 2 Level 3 Total
As of December 31, 2023
Contingent consideration liability (see note 3) - - 280 280
As of December 31, 2022
Contingent consideration liability (see note 3) - - 56 56
Reconciliation of fair value measurements that are categorized within Level 3
of the fair value hierarchy:
2023
$'000
Balance as of January 1 1,432
Contingent consideration liability (see note 3) -
Net loss (profit) recognized in Profit or loss (315)
Balance as of December 31 1,117
B. Financial instruments not measured at fair value:
The carrying amount of cash and cash equivalents, trade receivables, other
accounts receivable, credit from banks and others, trade payables and other
accounts payable approximate their fair value.
The Group is not exposed to cash flow risk due to interest rates since the
long-term loan bears fixed interest.
The following table demonstrates the carrying amount and fair value of the
groups of financial instruments that carrying amounts does not approximate
fair value:
21. Financial instruments - Risk Management (Cont.)
Carrying amount Fair value
2023 2022 2023 2022
Financial liabilities: $'000
Long-term loan with interest (1) 64 98 64 98
(1) The fair value of the long-term loan received with fixed
interest is based on the present value of cash flows using an interest rate
currently available for a loan with similar terms.
Linkage terms of financial liabilities by groups of financial instruments
pursuant to IAS 39
December 31, 2023:
NIS Unlinked S.A Rand Total
$'000
Financial liabilities measured at amortized cost 311 - 3 314
December 31, 2022:
NIS Unlinked S.A Rand Total
$'000
Financial liabilities measured at amortized cost 38 - 5 43
Capital management
The Group's objective is to maintain, as much as is possible, a stable capital
structure. In the opinion of Group's management its current capital structure
is stable. Consistent with others in the industry, the Group monitors capital,
including others also, on the basis of the gearing ratio.
This ratio is calculated as net debt divided by total capital. Net debt is
calculated as total borrowings (including 'current and non-current borrowings'
as shown in the consolidated statement of financial position) less cash and
cash equivalents. Total capital is calculated as 'equity' as shown in the
consolidated statement of financial position plus net debt.
The gearing ratios at 31 December 2023 and 2022 were as follows:
31.12.2023 31.12.2022
$'000
Loans from banks 103 141
bank credit 275 -
Total liabilities 378 141
31.12.2023 31.12.2022
$'000
Share capital 209 209
Additional paid-in capital 23,061 23,078
Retained earnings 5,226 3,775
Capital reserves (466) (250)
Non-controlling interest 1,222 1,226
Total equity 29,252 28,038
Leverage ratio 1.3% 0.5%
21. Financial instruments - Risk Management (Cont.)
The net debt ratios stem from the Board of Directors' decision to continue to
invest in the Company's development, but without the use of excessive
leverage. The Group intends to examine the leverage ratio from time to time
and to define it according to its needs. The increase in the net debt ratio in
2023 derived mainly from the increase in short time credit used by the Company
to finance part of its activity. The Group intends to maintain the leverage
ratio in future periods as well. Beyond that stated above, there were no other
material changes in the objectives, policies or processes of managing the
Group's capital during the year, as well as in the Group's definition of
capital.
22. Subsidiaries:
A. The principal subsidiaries of the Company, all of which have been
consolidated in these consolidated financial statements, are as follows:
Name Country of incorporation Proportion of ownership interest on 31 December Held by
2023 2022
AdvantCom Sarl Switzerland 100% 100% M.T.I Wireless Edge
Global Wave Technologies PVT Limited India 80% 80% AdvantCom Sarl
Ginat Wave India Private ltd. India 100% 49% M.T.I Wireless Edge
MTI Wireless Communication India Pvt. Ltd. India 100% - M.T.I Wireless Edge
Mottech water solutions ltd. Israel 100% 100% M.T.I Wireless Edge
Aqua infrastructure management systems ltd Israel 100% 100% Mottech water solutions
Mottech Water Management (pty) ltd. South Africa 85% 85% Mottech water solutions
Mottech USA Inc. United states 100% 100% Aqua water control solution
Mottech Water Management (Shenzhen) Ltd. China 100% 100% Mottech water solutions ltd.
Mottech Parkland (pty) Ltd. Australia 50% 50% Mottech water solutions ltd.
Mottech Water Management ltd. Canada 100% 100% Mottech water solutions ltd.
M.T.I Engineering ltd. Israel 100% 100% M.T.I Wireless Edge
Summit electronics ltd. Israel 100% 100% M.T.I Engineering ltd.
M.T.I Summit electronics ltd. Israel 100% 100% M.T.I Wireless Edge
P.S.K Wind Technologies Ltd. Israel 51% 51% M.T.I Summit electronics ltd.
23. Share capital
Authorized
2023 2023 2022 2022
Number NIS Number NIS
Ordinary shares of NIS 0.01 each 100,000,000 1,000,000 100,000,000 1,000,000
Issued and fully paid
2023 2023 2022 2022
Number NIS Number NIS
Ordinary shares of NIS 0.01 each at beginning of the year 88,538,724 885,388 88,538,724 885,388
Changes during the year
Exercise of options to share capital - - - -
At end of the year 88,538,724 885,388 88,538,724 885,388
(*) Please see notes 26 and 27 regarding share-based payments to the
controlling shareholders.
On 24 January 2019, the Company announced a share repurchase program to
conduct market purchases of ordinary shares of par value 0.01 Israeli Shekels
each ("Ordinary Shares") in the Company up to a maximum value of £150,000
(the "Programme"). Thereafter, the board of directors of the Company and the
board of directors of MTI Engineering decided to continue with the Programme
for several further periods. On 13 April 2022, the Company announced that it
would extend the Programme until 31 March 2023, with the Programme having an
increased maximum value of up to £200,000 and with the Programme being
managed by Shore Capital Stockbrokers Limited pursuant to the terms as
announced. On 10 March 2024 the board of directors of the Company and the
board of directors of MTI Engineering decided to extend the Programme
effective from 12 March 2024 until 31 March 2025 and increase the maximum
value of the Programme up to £700,000, with the intention to hold the
Ordinary Shares purchased for a longer period of time. As at 31 December 2023,
220,000 Ordinary Shares were held in treasury under the Programme, and as at
10 March 2024, 470,000 Ordinary Shares were held in treasury under the
Programme.
24. Commitments and guarantees
A. Royalty commitments
(i) The Group is committed to pay royalties to the Government of Israel on
proceeds from the sales of products that have resulted from research and
development activity funded by the Government of Israel by way of grants.
Under the terms of the Group's funding from the Government of Israel,
royalties of 2%-3.5% are payable on sales of products developed from a project
so funded, up to 100% of the amount of the grant received, including amounts
received by the Parent Company and its subsidiaries since July 1, 2000. In
2023 and 2022, the Group received $90,000 and $123,000 respectively, as
additional grants for the development of new products and therefore the
maximum royalty amount payable by the Group as at December 31, 2023, is US$
830,000.
No provision is recognized as the Group does not expect to sell relevant
products in the foreseeable future and in relation to new products a provision
will be created once development is in more advance stages.
During 2023 and 2022 the Group did not pay any royalties.
24. Commitments and guarantees (cont.)
(ii) The Group is committed to pay royalties to the Government of Israel on
proceeds from growth in sales of Mottech's products in China of which the
Government of Israel participates by way of grants. Under the terms of the
Group's funding from the Government of Israel, royalties of 3% from the
increase of sales in China (base year was 2017) shall be paid up to 100% of
the amount of the grant received. Payment of royalties shall begin after
completion of the grant receipt, which occurred in 2020. The maximum royalty
amounts payable by the Group as at December 31, 2023 and 2022 is US$ 217,000.
B. Guarantees
The Group has provided guarantees in favour of customers and government
institutes in the amount of US$ 705,000 and US$ 119,000 respectively. The
guarantees are mainly to guarantee advances received from customers and the
performance of contracts signed.
25. Transactions with related parties:
A. Service Agreement with controlling shareholder:
On 9 March 2022, an amendment to the agreement with Mokirey Aya Management
Ltd. (hereinafter: the "Management Company") was renewed to include
remuneration (per month) of:
1. 56,000 NIS to Mr. Zvi Borovitz for his service as the chairman of the
board of the Company for at least 50% of a standard working week; and
2. 79,000 NIS to Mr. Moni Borovitz for his service as CEO of the Company
for at least 90% of a standard working week.
All amounts are prior to VAT which will be added to the invoices and are
linked to the increase in the consumer price index. In addition to the above,
and in accordance with the remuneration policy adopted by the Company, as
required under rule 20 of the Israeli Companies Law, a bonus scheme was
granted to each of the managers. The bonus scheme states that Zvi Borovitz and
Moni Borovitz will each be entitled to a bonus amounting to 2.5% of the
Company's net profit exceeding US$800,000 per year, prior to any bonuses
granted by the Company. In the case of a loss in a year, the bonus for the
next year will be for a net profit exceeding US$800,000 above the loss made in
the previous year. In addition, Mr. Moni Borovitz shall be entitled to a bonus
equal to three months' management fee, based on the meeting of targets
specified by the remuneration committee at the beginning of each year or per
the remuneration committee's decision to give such for special performance,
plus one month's management fee if the consolidated revenue of the Company
increases by more than 5% from the previous year. A ceiling to the bonuses was
set at eight months management fees for Mr. Moni Borovitz and US$100,000 for
Mr. Zvi Borovitz. The agreement also states that the Company shall reimburse
the Management Company for any expense made in performance of the manager's
duty. The Company shall also provide each of the managers with a car and
phones and will be responsible for all of the related expenses, including all
relevant taxes.
For participation of Mr. Moni Borovitz in the employee share option plan
please see section 26 F and 27 A below.
25. Transactions with related parties (cont.)
B. Transaction with the Parent Group:
The following transactions occurred with the Controlling shareholder and other
related parties:
2023 2022
$'000 $'000
Management Fee 793 823
Compensation of key management personnel of the Group:
2023 2022
$'000 $'000
Short-term employee benefits * 1,274 1,245
* Including Management fees for the CEO, Directors, Executive Management and
other related parties including the Controlling shareholder. Please see notes
26 and 27 regarding share-based payments to the controlling shareholders.
Balances with related parties:
2023 2022
$'000 $'000
Other accounts payables 353 277
26. Significant Events:
A. On 14 March, 2023 at the Company's annual general meeting, Mr.
Michael Yehezkel Karo was elected as an independent non-executive director.
B. On 11 July, 2023 the Company acquired the minority holdings in Ginat
Wave India Private ltd for a non-material amount and now holds 100% of this
company.
C. On 19 July, 2023 the Company completed the registration of its fully
owned subsidiary, MTI Wireless Communication India Private Limited, in India
in order to support local demand in the market.
D. On 7 October, 2023 Israel was attacked by the Hamas terror
organization leading to war in the Gaza region. The war has led to a slowdown
in the Israeli economy and if this war continues for a prolonged period then
it may begin to impact the Company. The wide usage of military reserve
personnel, adverse foreign currency exchange rates and restrictions on access
to certain areas in Israel are risks which may affect the Company if there is
a prolonged period of war. As of the date of this report, and to the best of
the Company's knowledge, the war has not had a significant effect on it. The
Company continues to review the effects of the war on its trading as it
believes that if the war continues for a long period of time then the overall
Israeli economy will be effected, and factors including the lack of available
manpower, interest rates and foreign currency exchange rates may have an
impact on its trading.
E. On 19 November, 2023 the remuneration committee and the board of
directors approved an option plan in relation to the Company's shares ("Option
Plan").
26. Significant Events (cont.)
The Option Plan includes the authority to grant 2,000,000 options (2.2% of the
Company's issued share capital on fully diluted basis) with the following
terms:
1. Each option can be exercised into one ordinary share of the
Company at a price of 40p being 25% above the share price at the date
preceding the announcement of the Option Plan in November 2023.
2. The vesting of the options will be: 50% after two years,
25% after three years and 25% after four years with expiration of the options
being six years after granting.
3. The economic value of the options based on a Black-Scholes
calculation is US$259,000 for the total 2 million options approved by the
board of directors.
27. Subsequent events
A. On 5 January, 2024 following the passing of an extraordinary
shareholders meeting, 600,000 share options were granted to Mr. Moshe (Moni)
Borovitz, the Company's Chief Executive Officer and 100,000 share options were
granted to Mr. Dov Feiner, the General Manager of the Company's Antenna
division as part of the Option Plan.
B. The Board of directors has decided to declare a cash
dividend of 3.1 US cents per share being approximately $2,745,000. This
dividend will be paid on 11 April 2024 to shareholders on the register at the
close of trading on 22 March 2024 (ex-dividend on 21 March 2024). The currency
translation into British Pounds will be made on 25 March 2024 and there will
not be a scrip dividend alternative.
C. The financial statements were authorized for issue by the
board as a whole following their approval on 10 March 2024.
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