REG - MTI Wireless Edge - Half Yearly Report <Origin Href="QuoteRef">MWEE.L</Origin> - Part 1

MTI Wireless EdgeAnnouncement

27/08/2015 07:04

RNS Number : 2186X
MTI Wireless Edge Limited
27 August 2015
27 August 2015
MTI Wireless Edge Ltd 
("MTI" or the "Company")
Financial results for the six months ended 30 June 2015
MTI Wireless Edge Ltd., (MWE) ("MTI" or the "Company"), a market leader in the manufacture of flat panel antennas for fixed wireless broadband, and a wireless irrigation solution provider today announces its unaudited results for the six months ended 30 June 2015.
Highlights
 The results include one month consolidation of our newly acquired wireless irrigation solution provider, Mottech Water Solutions Ltd ("Mottech"). 
 Revenue increased by 13% to US$8m (H1 2014: US$7.1m). 
 Operational profit increased by 150% to US$0.5m (H1 2014: US$0.2m).
 Total comprehensive income doubled to US$0.5m (H1 2014: US$0.25m).
 Dividend of US 0.68 cent per share paid on 2 April 2015.
 Shareholder's equity of US$17.8m (at March 31, 2015: US$17.8m), equivalent to 22.2 pence per share (a 100% premium to the closing mid-price on 26 August).
 Integration of Mottech is progressing well.
Dov Feiner, Chief Executive Officer, commented: 
"I am pleased to announce that during the first half of 2015 the Company continued to increase its revenue and profits. 
The antenna business has continued to grow, and we have recorded growth across the majority of our core product range compared with H1 2014 with the exception of the 80 GHz products. These 80 GHz products have nevertheless continued to gain traction in the market and we remain confident in the long term market opportunity for these multi-gigabit wireless backhaul solutions and their future contribution to the business.
On 10 of June 2015, the Company completed the earnings enhancing acquisition of Mottech and I am especially pleased to report that this has made an immediate profit contribution for the month of June, the last month of the H1 reporting period.
The integration of the Mottech business is proceeding well and we anticipate that the Mottech management office will move to MTI's facilities in September, which will accelerate the integration process and and help us achieve operational efficiencies. We continue to see many opportunities for Mottech's water management services, as well as applying Mottech's remote control and monitoring systems in other markets."
For further information please contact:
MTI Wireless Edge
Dov Feiner, CEO
Moni Borovitz, Financial Director
http://www.mtiwe.com/
+972 3 900 8900
Allenby Capital Limited
Nick Naylor
Alex Price
+44 20 3328 5656
About MTI Wireless Edge
MTI is engaged in the development, production and marketing of High Quality, Low Cost, Flat Panel Antennas for Commercial & for Military applications. Commercial applications such as: WiMAX, Wireless Networking, RFID readers &, Broadband Wireless Access. With over 40 years experience, supplying antennas 100KHz to 90GHz including directional antennas and Omni directional for outdoor and indoor deployments including Smart Antennas for WiMAX, Wi-Fi, Public Safety, RFID and for Base Stations and Terminals - Utility Market. Military applications includes a wide range of broadband, tactical and specialized communications antennas, antenna systems and DF arrays installed on numerous airborne, ground and naval, including submarine, platforms worldwide. 
Via its subsidiary, Mottech Water Solutions Ltd ("Mottech"), MTI is also a leading provider of remote control solutions for water and irrigation applications based on Motorola IRRInet state of the art control, monitoring and communication technologies. Mottech, headquartered in Israel, is the global prime distributor of Motorola for the IRRInet remote control solutions serving its customers worldwide through its subsidiaries and a global network of local distributers and representatives.It utilizes over 25 years of experience in providing its customers with remote control and management systems which ensure constant, reliable and accurate water usage, while reducing operational costs and maintenance costly expenses. Mottech activities are focused in the market segments of agriculture, water distribution, Municipal and Commercial Landscape and Wastewater and Storm water Reuse.
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

Six months 
ended June 30,

Year ended December 31,

2015

2014

2014

U.S. $ in thousands

Unaudited

Audited






Revenues
8,035

7,125

14,341
Cost of sales
5,021

4,360

9,201






Gross profit
3,014

2,765

5,140
Research and development expenses
641

650

1,230
Distribution expenses
942

983

1,815
General and administrative expenses
925

930

1,755






Profit from operations
506

202

340
Finance expense
195

87

281
Finance income
46

66

94






Profit before income tax
357

181

153
Income tax benefit
(43)

(68)

(116)






Profit 
400

249

269
Other comprehensive income (net of tax):





Items that will not to be reclassified to profit or loss:





Re-measurement of defined benefit plans
-

-

(29)

-

-

(29)
Items that will be reclassified to profit or loss:





Adjustment arising from translation of financial statements of foreign operations
101

-

-

101

-

-
Total other comprehensive income (loss)
101

-

(29)






Total comprehensive income 
501

249

240






Profit Attributable to:





Owners of the parent
382

242

247
Non-controlling interest
18

7

22







400

249

269
Total comprehensive income Attributable to:





Owners of the parent
483

242

218
Non-controlling interest
18

7

22







501

249

240






Earnings per share(dollars per share)





Basic andDiluted
0.0074

0.0047

0.0048
Weighted average number of shares outstanding





Basic and Diluted
51,571,990

51,571,990

51,571,990

INTERIM CONSOLIDATEDSTATEMENT OF 
CHANGES IN EQUITY
For the Six months period ended June 30, 2015:

Attributed to owners of the parent


Share capital
Additional paid-in capital

Capital Reserve
for share-based
payment
transactions

Adjustment arising from translation of financial statements of foreign operations
Retained earnings

Total attributable to owners of the parent

Non-controlling interest 

Total equity
U.S. $ in thousands











Balance at January 1, 2015 (Audited)
109
14,945
286
-
2,287
17,627
216
17,843










Changes during the six months 
 ended June 30, 2015 (Unaudited):














comprehensive income














income for the period 
-

-

-

-
382

382

18

400
Other comprehensive income











Translation differences
-

-

-

101
-

101

-

101















Total comprehensive income for the period
-

-

-

101
382

483

18

501
Non-controlling Interest of newly purchased subsidiary
-

-

-
-
-
-
8
8
Dividend paid
-

-

-

-
(351)

(351)

-

(351)
Share based payment 
-
-

13

-
-

13

-

13
Balance at June 30, 2015 (Unaudited)
109
14,945

299

101
2,318

17,772

242

18,014













INTERIM CONSOLIDATEDSTATEMENT OF 
CHANGES IN EQUITY
For the Six months period ended June 30, 2014:

Attributed to owners of the parent


Share capital
Additional paid-in capital

Capital Reserve
for share-based
payment
transactions

Retained earnings

Total attributable to owners of the parent

Non-controlling interest 

Total equity
U.S. $ in thousands










Balance at January 1, 2014 (Audited)
109
14,945
259
2,420
17,733
194
17,927










Changes during the Six months period
 ended June 30, 2014 (Unaudited):













Comprehensive income for the period 
-

-

-

242

242

7

249
Dividend paid
-

-

-

(351)

(351)

-

(351)
Share based payment 
-
-

12

-

12

-

12
Balance at June 30, 2014 (Unaudited)
109
14,945

271

2,311

17,636

201

17,837












The accompanying notes form an integral part of the financial statements.
INTERIM CONSOLIDATEDSTATEMENT OF 
CHANGES IN EQUITY
For the year ended December 31, 2014:

Attributable to owners of the parent


Share capital
Additional paid-in capital

Capital Reserve
for share-based
payment
transactions

Retained earnings

Total attributable to owners of the parent

Non-controlling interest

Total equity
U.S. $ in thousands
 
Audited














Balance at January 1, 2014
109
14,945
259
2,420
17,733
194
17,927
Changes during 2014:













Income for the year
-
-
-
247
247
22
269
Other comprehensive income 
-
-
-
(29)
(29)
-
(29)
Total comprehensive income for the year
-
-
-
218
218
22
240
Dividend paid
-
-
-
(351)
(351)
-
(351)
Share based payment 
-
-
27
-
27
-
27
Balance at December 31, 2014
109
14,945
286
2,287
17,627
216
17,843

INTERIM CONSOLIDATED STATEMENT OF 
FINANCIAL POSITION 

30.6.2015

30.6.2014

31.12.2014

U.S. $ in thousands

Unaudited

Audited
ASSETS





CURRENT ASSETS:





Cash and cash equivalents 
1,957

2,502

2,918
Restricted cash
339

-

-
Other current financial assets
2,529

3,736

3,728
Trade receivables
7,693

5,051

5,012
Other receivables
1,105

844

771
Currenttax receivables
117

152

143
Inventories
4,574
3,133

2,941







18,314
15,418

15,513












NON-CURRENT ASSETS:





Long term prepaid expenses
22

24

12
Property, plant and equipment
5,231

5,312

5,209
Investment property
1,221

1,257

1,240
Deferred tax assets
372

308

368
Intangible assets
483

-

-
Goodwill 
573
406

406







7,902
7,307

7,235














Total assets
26,216
22,725

22,748







30.6.2015

30.6.2014

31.12.2014

U.S. $ In thousands

Unaudited

Audited
LIABILITIES AND EQUITY





CURRENT LIABILITIES:





Current maturities and short term bank credit and loans
812

261

270
Trade payables
2,227

2,001

1,907
Other accounts payables
1,609

811

1,018
Currenttax payables
189

-

-







4,837

3,073

3,195






NON- CURRENTLIABILITIES:





Loans from banks, net of current maturities
2,847

1,465

1,345
Employee benefits
426

350

365
Other liabilities
92

-

-







3,365

1,815

1,710






Total liabilities
8,202

4,888

4,905






EQUITY 





Equity attributable to owners of the parent





Share capital 
109

109

109
Additional paid-in capital
14,945

14,945

14,945
Capital reserve from share-based payment transactions
299

271

286
Translation differences
101

-

-
Retained earnings
2,318

2,311

2,287







17,772

17,636

17,627






Non-controlling interest
242

201

216






Total equity 
18,014

17,837

17,843









Total equity and liabilities
26,216

22,725

22,748






INTERIM CONSOLIDATED STATEMENTS OF 
CASH FLOWS

Six months 
ended June 30,

Year ended December 31,


2015

2014

2014


U.S. $ in thousands


Unaudited

Audited
Cash Flows from Operating Activities:






Profitfor the period

400

249

269
Adjustments for:






Depreciation 

258

223

451
Loss (Gain) from investments in financial assets

79

(5)

(37)
Equity settled share-based payment expense

13

12

27
Finance expenses, net

20

45

87
Income tax benefit

(43)

(68)

(116)
Changes in operating assets and liabilities:






Decrease (increase) in inventories 

6

(42)

150
Decrease (increase) in trade receivables

(631)

308

347
Increase in other accounts receivables and prepaid expenses

(117)

(281)

(196)
Increase (decrease) in trade and other accounts payables

(187)

61

162
Increase in employee benefits, net

27

34

20
Decrease in provisions

-

(112)

(40)
Interest paid

(20)

(45)

(87)
Income taxpaid

(27)

(1)

(4)







Net cash provided by (used in) 
 operating activities

(222)

378

1,033
















Six months 
ended June 30,

Year ended December 31,


2015

2014

2014


U.S. $ in thousands


Unaudited

Audited
Cash Flows From Investing Activities:






Sale of investments in financial assets, net

1,176

2,022

2,053
Acquisition of subsidiary, net of cash acquired

(3,042)

-

-
Increase in restricted cash

(339)

-

-
Purchase of property, plant and equipment

(160)

(108)

(276)







Net cash provided by (used in) 
 investing activities

(2,365)

1,914

1,777














Cash Flows From Financing Activities:






Short term loan paid

-

(301)

(292)
Long term loan received from banks

2,090

-

31
Dividend paid to the owners of the parent

(351)

(351)

(351)
Repayment of long-term loan from banks

(135)

(130)

(272)







Net cash provided by (used in) 
 financing activities

1,604

(782)

(884)














Increase (decrease) in cash and 
cash equivalents during the period 

(983)

1,510

1,926
Cash and cash equivalents
at the beginning of the period 

2,918

992

992
Exchange differences on balances 
of cash and cash equivalents

22

-

-







Cash and cash equivalents
at the end of the period 

1,957

2,502

2,918







Appendix A - Non-cash transactions:


Six months 
ended June 30,

Year ended December 31,


2015

2014

2014


U.S. $ in thousands


Unaudited

Audited







Purchase of property and equipment 
 against trade payables

17

71

11







Appendix B - Acquisition of subsidiary, net of cash acquired:


Six months 
ended June 30,

Year ended December 31,


2015

2014

2014


U.S. $ in thousands


Unaudited

Audited







Working capital (excluding cash and cash equivalents)

2,530

-

-
Property and equipment

95

-

-
Intangible assets

483

-

-
Goodwill

167

-

-
Deferred taxes

(66)

-

-
Non-current liabilities

(67)

-

-







The subsidiaries' assets (excluding cash and cash equivalents) and liabilities at date of acquisition 

3,142

-

-







Non-controlling interests

(8)

-

-
Payables from acquisition of investments in subsidiaries

(92)

-

-
Total

3,042

-

-







Note 1 - General:
Corporate information:
M.T.I Wireless Edge Ltd. (hereafter - the Company) is an Israeli corporation. The Company was incorporated under the Companies Act in Israel on December 30, 1998 as a wholly- owned subsidiary of M.T.I Computers and Software Services (1982) Ltd. (hereafter - the Parent Company) and commenced operations on July 1, 2000.
Since March 2006, the Company's shares have been traded on the AIM Stock Exchange.
The formal address of the company is 11 Hamelacha Street, Afek industrial Park, Rosh-Ha'Ayin, Israel.
The Company is engaged in the development, design, manufacture and marketing of antennas and accessories. Via its subsidiary, Mottech Water solutions, MTI is also a leading provider of remote control solutions for water and irrigation applications based on Motorola IRRInet state of the art control, monitoring and communication technologies
Note 2 - Significant Accounting Policies: 
The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in International Accounting Standard No. 34 ("Interim Financial Reporting").
The interim consolidated financial information set out above does not constitute full year end accounts within the meaning of Israeli Companies Law. It has been prepared on the going concern basis in accordance with the recognition and measurement criteria of the International Financial Reporting Standards (IFRS). Statutory financial information for the financial year ended December 31, 2014 was approved by the board on February 19, 2015. The report of the auditors on those financial statements was unqualified. The interim consolidated financial statements as of June 30, 2015 have not been audited.
The interim consolidated financial information should be read in conjunction with the annual financial statements as of 31 December, 2014 and for the year then ended and with the notes thereto, The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2014 are applied consistently in these interim consolidated financial statements, except for the impact of the adoption of the Standards and Interpretations described below.
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 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 a finite useful life are amortized over their useful life and reviewed for impairment whenever there is an indication that the asset may be impaired. The amortization period and the amortization method for an intangible asset are reviewed at least at each year end.
Note 2 - Significant Accounting Policies (CONT.):
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 life of these assets is reviewed annually to determine whether their indefinite life assessment continues to be supportable. If the events and circumstances do not continue to support the assessment, the change in the useful life assessment from indefinite to finite is accounted for prospectively as a change in accounting estimate and on that date the asset is tested for impairment. Commencing from that date, the asset is amortized systematically over its useful life.
Note 3 - BUSINESS CMBINATIONS:
On April 28, 2015 the Company signed an agreement for the purchase of 100% of the share capital of Mottech Water Solutions ltd ("Mottech"), a provider of wireless control products and services, for a consideration of approximately US$ 4 million (15.5 million New Israeli Shekels) plus an additional contingent payment based on performance which could rich up to about US$ 750 thousand (3 million New Israeli Shekels). The acquisition was completed on June 11, 2015 and funded by long-term bank loan and independent sources. To secure the long-term bank loan the Company recorded a charge on the share capital of Mottech and in addition has undertaken to meet the following financial covenant to be computed on the basis of the separated financial statements of the Company:
 The amount of equity shall not be lower than 40% of total assets of the Company. As of June 30, 2015 the Company meets its obligations.
Mottech is a global distributor and integrator of Motorola's wireless control solutions, which includes a portfolio of radio-enabled sensors and switches managed by control software. Mottech primarily operates in the water management sector and has developed proprietary wireless management solutions for commercial irrigation, municipal water authorities and water distributors. A typical solution reduces costs for the client, for example Mottech provides a commercial farm irrigation system that monitors the local environment, weather and soil sensors in real-time and Mottech's propriety software automatically operates irrigation and fertilizer pump stations to optimize these critical costs for the farm. 
Mottech was set up in May 2014 and acquired its business and assets at the same time from the Israeli court. The assets had been placed in the Israeli court following the previous owner going into administration as result of business failure of a subsidiary which is not part of Mottech or its business today.
The cost of 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 customer relations in the total amount of US$ 417 thousands and goodwill in the total amount US$ 167 thousands. The customer relation is amortized over an economic useful life of up to 10 years.
Note 3 - BUSINESS CMBINATIONS (CONT.):
Acquisition cost of Mottech at the date of acquisition: 


Fair value


$'000


Unaudited



Cash paid

4,003
Contingent consideration liability

92



Total acquisition cost

4,095
Set forth below are the assets and liabilities of Mottech at date of acquisition:


Fair value


$'000


Unaudited



Cash and cash equivalents 

961
Trade receivables

1,991
Other receivables

217
Inventories

1,586
Property, plant and equipment

95
Intangible assets

11
Trade payables

(268)
Other liabilities

(1,071)



Net identifiable assets

3,522
Intangible assets arising on acquisition

573



Total purchase cost

4,095
The result of the company were consolidated into the financial statement of the group commencing May 31, 2015 and from that date Mottech has contributed US$ 152 thousand to the consolidated profit and US$1,093 thousand to the consolidated revenue turnover. If the business combination had taken place at the beginning of the year, the consolidated net profit would have been US$ 32 thousand and the consolidated revenue turnover would have been US$ 12,275 thousand.
Cash outflow/inflow on the acquisition: 


$'000


Unaudited



 Cash and cash equivalents acquired 
 at the acquisition date

961
Cash paid

(4,003)



Net cash

(3,042)
Note 3 - BUSINESS CMBINATIONS (CONT.):
Goodwill: 


$'000


Unaudited



Balance at January1, 2015 (audited)

406
additions

167



Balance at June 30, 2015

573
The goodwill arising on acquisition is attributed to the expected benefits from the synergies of the combination of the activities of the Company and the acquiree. 
The goodwill recognized is expected to be deductible for income tax purposes.
Contingent consideration:
As part of the purchase agreement with the previous owner of Mottech, it was agreed that the previous owner would be entitled to an additional contingent consideration ("the contingent consideration"). The Group will pay the contingent consideration to the previous owner based on calculation:
Up to US$ 720 thousand, if the acquired Company's accumulated revenue in 2016 - 2017 exceeds US$ 25.8 Million (100 million New Israeli Shekels) ("the revenue target").
As of the acquisition date, the fair value of the contingent consideration was estimated at US$ 92 thousand. The fair value was determined using the Monte-Carlo method.
The significant non-observable data used in measuring the fair value of the liability in respect of a contingent consideration are as follows:
Discount rate: 12.8%
A significant increase 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.
Note 4 - operating SEGMENTS:
Following the acquisition of the new operation the Group's chief operating decision maker examines operating segments differently from the past and therefore commencing the current financial statements the following table's present revenue and profit information regarding the Group's operating segments for the six months ended June 30, 2015 and 2014, respectively and for the year ended December 31, 2014.
Six monthsended June 30, 2015 (Unaudited)








Antennas*

Water Solutions**

Total


 $'000
Revenue






External

6,942

1,093

8,035







Total

6,942

1,093

8,035














Segment income 

325

181

506














Finance expense, net





(149)







Profit before income tax





357







Other






Depreciation and other non-cash expenses

256

2

258







(*) Reclassified.
(**) Results for one month ending on June 30, 2105.
Six monthsended June 30, 2014 (Unaudited)








Antennas*

Water Solutions

Total


 $'000
Revenue






External

7,125

-

7,125







Total

7,125

-

7,125














Segment income 

202

-

202














Finance expense, net





(21)







Profit before income tax





181







Other






Depreciation and other non-cash expenses

223

-

223







(*) Reclassified.
Note 4- operating SEGMENTS (CONT.):
Yearended December 31, 2014 (audited)








Antennas*

Water Solutions

Total


 $'000
Revenue






External

14,341

-

14,341







Total

14,341
-
14,341














Segment income 

311

-

311







Unallocated corporate expenses






Unallocated income





29







Finance expense, net





(187)







Profit before income tax





153







Other






Depreciation 

451

-

451







(*) Reclassified.
Note 5 -TRANSACTIONS AND BALANCES WITH RELATED PARTIES: 
The Parent Company and other related parties provide certain services to the Group as follows:


Six monthsended 
 June 30,

Year ended December 31,


2015

2014

2014


$'000


Unaudited

Audited
Purchased Goods

86

152

301 
Management Fee

191

201

387 
Services Fee

106

104

208 
Leaseincome

(60)

(60)

(120)
Compensation of key management personnel of the Group:


Six monthsended 
 June 30,

Year ended December 31,


2015

2014

2014


$'000


Unaudited

Audited
Short-term employee benefits *)

355

366

717







*) Including Management fees for the CEO, Directors Executive Management and other related parties
All Transactions are made at market value. 
Note 5 -TRANSACTIONS AND BALANCES WITH RELATED PARTIES (CONT.):
Balances with related parties:

As at

30.6.2015

30.6.2014

31.12.2014

$'000

Unaudited

Audited
Related parties
9

44

25






Note 6 - SIGNIFICANT EVENTS:
a. On April 2, 2015 the company paid a dividend of 0.68 cents per share totaling approximately $351,000.
b. To secure guarantees that the bank gave to the subsidiaries customers it recorded a charge of approximately US$ 339 thousand on some of subsidiaries bank deposits. 
Note 7 - SUBSEQUENT EVENTS:
On July 2, 2015 the Group concluded an agreement with its former employee who filed a suit against it (as described in Note 25 C in the annual financial statements of the Company as of December 31, 2014). The provision recognized in the 2014 financial statements was sufficient.
 

This information is provided by RNS
The company news service from the London Stock Exchange
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