REG - MTI Wireless Edge - Interim Results
15/08/2022 07:15
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RNS Number : 9900V MTI Wireless Edge Limited 15 August 2022
15 August 2022
MTI Wireless Edge Ltd
("MTI", the "Company" or the "Group")
Interim results
MTI Wireless Edge Ltd (AIM: MWE), the technology group focused on
comprehensive communication and radio frequency solutions across multiple
sectors, is pleased to today announce its financial results for the six month
period ended 30 June 2022.
Financial highlights
· Good revenue growth, up by 6% to US$22.7m (H1 2021: US$21.3m)
· Profit from operations, up by 1% to US$2.19m (H1 2021: US$2.175m). In
H1 2022 the Company incurred:
o one off acquisition costs totalling US$0.1m; and
o depreciation of intangible assets charges relating to the acquisition
totaling US$0.1m (note - from 2023 the depreciation charge will be 50% lower)
· EBITDA* up 11% to $2.9m (H1 2021: $2.6m), with all three divisions
contributing positively
· Earnings per share, down by 3% to 0.183 US cents (H1 2021: 1.89 US
cents) due to increased finance costs relating to weakness of the Euro and
Pound against the US Doller (as some of the Group's net cash is held in these
currencies)
· Balance sheet remains strong with net cash at $5.2m as of 30 June
2022 (30 June 2021: $9.7m) after:
o Payment of 2021 dividend of $0.028 per share (2020 dividend: $0.025 per
share) on 31 March 2022
o divesting the Group's Russian business in March 2022;
o acquiring 51% of PSK; and
o providing working capital loans to PSK
Cash Flow from operation was flat reflecting the use of strong balance sheet
with some vendors and PSK's longer debtor terms.
Operational highlights
· Group has delivered another good operational performance across all
three divisions, despite the challenges facing all businesses, in particular
scarcity in supply of microchips and increasing costs. The operation
highlights include:
o MTI Summit having another strong 6 months, with high demand from the
defence sector and a satisfying start from the newly acquired PSK business
o Mottech seeing high demand in many geographical areas and softer in others
but overall, the order book is strong, including a significant backlog,
positioning the division well going forward
o The Antenna division continuing to perform and the 5G market continues to
hold significant potential with new relationships being established with most
of the market leading OEMs in the sector. Military orders are increasing
from both new and existing customers
Moni Borovitz, Chief Executive Officer of MTI Wireless Edge, said:
"This has been a good trading period for the Group, with all divisions making
operational profits. In the context of the challenging trading conditions we
have faced, including the rising inflation and the difficulties in supply
chain (shortage in supply of microchips and shipping costs, which are delaying
the delivery of certain orders), the board is very pleased with the results.
"There are some signs of the supply chain issues easing and, as importantly,
we have a healthy order book going into the second half of the year and
beyond. We have been able to successfully put through a number of price
increases which will ensure we can maintain our target profit margins. As a
result, we feel confident about the outcome for the full year."
Moni Borovitz, Chief Executive Officer, will provide a live investor
presentation relating to the financial results via the Investor Meet Company
(IMC) platform on Monday, 15 August 2022 at 10.00am 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)
*Earnings before interest, tax, depreciation and amortization
For further information please contact:
MTI Wireless Edge Ltd +972 3 900 8900
Moni Borovitz, CEO http://www.mtiwirelessedge.com (http://www.mtiwirelessedge.com)
Allenby Capital Limited (Nomad and Joint Broker) +44 20 3328 5656
Nick Naylor/Alex Brearley/Piers Shimwell (Corporate Finance)
Amrit Nahal/David Johnson (Sales and Corporate Broking)
Shore Capital (Joint Broker) +44 20 7408 4090
Toby Gibbs/John More (Corporate Advisory)
Novella (Financial PR)
Tim Robertson/Safia Colebrook +44 20 3151 7008
Chief Executive's statement
It is pleasing to be able to report a solid set of numbers and a confident
outlook for the current year when there are so many challenges facing all
businesses. I believe we have been able to do this because our three divisions
are all leaders in their respective sectors and the services and expertise
they provide all continue to be in high demand. We have intentionally targeted
markets which are expanding significantly and as a result our sales have grown
and we have been able to pass on, to our customers, most of cost increases
that occur in our supply chain. Our order book, coupled to the pipeline of
opportunities we have, give us good confidence for the remainder of 2022.
Antenna division
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.
Operationally the Antenna division has performed robustly over the last six
months with sales only slightly lower than 2021. The legacy fixed wireless
broadband access market generated steady revenues, but it is the future
potential of the 5G market for this division that is increasingly exciting. It
is hard to be explicit around timing of revenues, but the division is now
working with 5 out of the 7 leading OEMs in the sector. As the roll-out of 5G
infrastructure gathers pace the potential for our backhaul solution is
significant. Very recently, India completed its 5G auction with a subsequent
flurry of customer enquiries around MTI's Indian based manufacturing
capabilities, this market is often slow to finalise orders and is price
competitive, but the scale is substantial.
As previously reported, alongside the backhaul solution, the Company has
developed a 5G automatic beam steering ("ABS") antenna solution, which ensures
the antenna adapts to any small movements caused by different climate
conditions, including wind or temperature changes. This solution has attracted
the interest of most Tier 1 corporations and is currently under development
with number of these companies and is therefore further establishing our
business within this market.
Military revenues have been slow in the period, mainly due to COVID-19 related
delays (some of our customers had only recently returned to full capacity)
slowing the projects over the period, but new orders and new enquiry levels
are high from both new and existing customers. The conflict in Ukraine has
undoubtedly had a knock on effect on military and defence spending by Western
Governments which will filter through to both this and the distribution and
special consulting services divisions.
With the reputation gained from latest successful projects and the division's
existing backlog and pipeline of opportunities the prospects for our military
antenna business is strong for the remainder of this year and further out.
Water Control & Management division
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 delivered a solid financial performance in H1, growing revenues and
maintaining profits. The global issue of water scarcity and subsequently
conservation of this vital resource continues to gain prominence amongst
commercial enterprises and Governments throughout the world. The OECD has
developed recommendations to help countries improve the sustainability of
agriculture by developing cost-effective agricultural policies. The policies
are anticipated to boost productivity and reduce environmental damage by
incorporating proper irrigation solutions, which is expected to benefit the
market growth over the coming years.
Mottech is well placed to capitalize on the increased market demand. In our
home market of Israel the Company signed a number of long-term agreements
which included material price increases with key municipalities to provide
irrigation services for their green spaces. In other regions, especially in
developed countries, Mottech continued to perform strongly, expanding its
client base and its services to existing clients. As recently announced,
Mottech has secured a series of new contract wins in Italy, totaling Euro
1.0m, to be supplied in the coming weeks.
Overall, Mottech is well placed to deliver a solid result for the year.
Distribution & Professional Consulting Services division
Operating under the MTI Summit Electronics brand, this division exclusively
represents approximately 40 international suppliers of radio
frequency/microwave components and sells these products to Israeli customers.
Expert knowledge of both the international suppliers and customers further
enables MTI to act as a consultant to all parties and assist with devising
complete radio frequency/microwave solutions.
Once again MTI Summit produced the largest increases in sales and
profitability. As mentioned above, the expected military and defence spending
by Western Governments will filter through to this division and demand is high
for continued development of new wireless/RF commercial solutions in Israel.
The acquisition of 51% of PSK in January 2022 has proven to be immediately
successful. The integration is proceeding well and in July 2022 PSK secured
the Group's largest ever contract win (worth up to $10m over the next 7 years)
with the Israeli Ministry of Defence. In the short term, PSK will require
additional working capital to manage its debtor days, but this is expected to
be reduced in time.
The outlook for this division remains very positive with the current order
book and is expected to secure a good outcome for this year and is also
showing good potential longer term.
Outlook
Given the depth of our order book and the ongoing positive dialogue with our
customers across all three divisions we are confident going into the second
half of the year. Our products and expertise are in demand because the needs
across the markets we cover are high. Financially, our balance sheet remains
strong and our cash flow, which slowed during H1 2022, is expected to improve
in the second half of the year. Our profitability will also improve now that
we have absorbed various one off costs associated with the acquisition of PSK
and the disposal of our Russian subsidiary.
Looking ahead we are confident of delivering a successful 2022.
About MTI Wireless Edge Ltd. ("MTI")
Headquartered in Israel, MTI is a technology group focused on comprehensive
communication and radio frequency solutions across multiple sectors through
three core divisions:
Antenna division
MTI is a world leader in the design, development and production of high
quality, state-of-the-art, and cost-effective antenna solutions including
Smart Antennas, MIMO Antennas and Dual Polarity Antennas for wireless
applications. MTI supplies antennas for both military and commercial markets
from 100 KHz to 174 GHz.
Internationally recognized as a producer of commercial off-the-Shelf and
custom-developed antenna solutions in a broad frequency range, MTI addresses
both commercial and military applications.
MTI supplies directional and omnidirectional antennas for outdoor and indoor
deployments, including smart antennas for 5G backhaul, Broadband access,
public safety, RFID, base station and terminals for the utility market.
Military applications include a wide range of broadband, tactical and
specialized communication antennas, antenna systems and DF arrays installed on
numerous airborne, ground and naval, including submarine, platforms worldwide.
Water Control & Management division
Via its subsidiary, Mottech Water Solutions Ltd ("Mottech"), MTI provides
high-end remote control and monitoring solutions for water and irrigation
applications based on Motorola's IRRInet state-of-the-art control, monitoring
and communication technologies.
As Motorola's global prime-distributor Mottech serves its customers worldwide
through its international subsidiaries and a global network of local
distributors and representatives. With over 25 years of experience in
providing customers with irrigation remote control and management, Mottech's
solutions ensure constant, reliable and accurate water usage, increase crops
quality and yield while reducing operational and maintenance costs providing
fast ROI while helping sustain the environment. Mottech's activities are
focused in the market segments of agriculture, water distribution, municipal
and commercial landscape as well as wastewater and storm-water reuse.
Distribution & Professional Consulting Services division
Via its subsidiary, MTI Summit Electronics Ltd., MTI offers consulting,
representation and marketing services to foreign companies in the field of RF
and Microwave solutions and applications including engineering services
(including design and integration) in the field of aerostat systems and the
ongoing operation of Platform subsystems, SIGINT, RADAR, communication and
observation systems which is performed by the Company. It also specializes in
the development, manufacture and integration of communication systems and
advanced monitoring and control systems for the Government and defence
industry market.
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
Six month period ended Year ended December 31,
June 30,
2022 2021 2021
U.S. $ in thousands
(Except per share data)
Unaudited
Revenues 22,693 21,344 43,184
Cost of sales 15,651 14,658 29,685
Gross profit 7,042 6,686 13,499
Research and development expenses 528 503 965
Distribution expenses 1,815 1,821 3,686
General and administrative expenses 2,501 2,203 4,448
Loss (profit) from sale of property, plant and equipment 8 (16) 25
Profit from operations 2,190 2,175 4,425
Finance expenses 221 140 454
Finance income (72) (14) (67)
Profit before income tax 2,041 2,049 4,038
Tax expenses 364 315 329
Profit 1,677 1,734 3,709
Other comprehensive income (loss) net of tax:
Items that will not be reclassified to profit or loss:
Re-measurement of defined benefit plans - - 22
Items that may be reclassified to profit or loss:
Adjustment arising from translation of financial statements of foreign (345) (61) (19)
operations
Total other comprehensive income (loss) (345) (61) 3
Total comprehensive income 1,272 1,673 3,712
Profit attributable to:
Owners of the parent 1,617 1,671 3,598
Non-controlling interests 60 63 111
1,677 1,734 3,709
Total comprehensive income attributable to:
Owners of the parent 1,212 1,610 3,601
Non-controlling interests 60 63 111
1,272 1,673 3,712
Earnings per share (dollars)
Basic and Diluted (dollars per share) 0.0183 0.0189 0.0407
Weighted average number of shares outstanding
Basic and Diluted (dollars per share) 88,520,113 88,531,224 88,509,740
The accompanying notes form an integral part of the financial statements.
INTERIM CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY
For the six-month period ended June 30, 2022 (Unaudited):
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 interest Total equity
U.S. $ in thousands
Balance at January 1, 2022 209 23,126 172 2,406 25,913 1,098 27,011
Changes during the six-month period ended June 30, 2022:
Comprehensive income
Profit for the period - - - 1,617 1,617 60 1,677
Other comprehensive income
Translation differences - - (345) - (345) - (345)
Total comprehensive income for the period - - (345) 1,617 1,272 1,158 1,332
Acquisition and disposal of treasury shares - 41 - - 41 - 41
Dividend - - - (2,479) (2,479) - (2,479)
Balance at June 30, 2022 209 23,167 (173) 1,544 24,747 1,158 25,905
The accompanying notes form an integral part of the financial statements.
INTERIM CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY (CONT.)
For the six-month period ended June 30, 2021 (Unaudited):
Attributed to owners of the parent
Share capital Additional paid-in capital Capital reserve Translation differences Retained earnings Total attributable to owners of the parent Non-controlling interest Total equity
for share-based
payment
transactions
U.S. $ in thousands
Balance at January 1, 2021 209 23,167 - 191 999 24,566 987 25,553
Changes during the six- month period ended June 30, 2021:
Comprehensive income
Profit for the period - - - - 1,671 1,671 63 1,734
Other comprehensive loss
Translation differences - - - (61) - (61) - (61)
Total comprehensive income (loss) for the period - - - (61) 1,671 1,610 63 1,673
Profit from acquisition of treasury shares (note 7B) - 5 - - - 5 - 5
Dividend - - - - (2,213) (2,213) - (2,213)
Balance at June 30, 2021 209 23,172 - 130 457 23,968 1,050 25,018
The accompanying notes form an integral part of the financial statements.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONT.)
For the year ended December 31, 2021 :
Attributable to owners of the parent
Share capital Additional paid-in capital Translation differences Retained earnings Total attributable to owners of the parent Non-controlling interests Total equity
U.S. $ in thousands
Balance as at January 1, 2021 209 23,167 191 999 24,566 987 25,553
Changes during 2021:
Comprehensive income
Profit for the year - - - 3,598 3,598 111 3,709
Other comprehensive income
Re measurements on defined benefit plans - - - 22 22 - 22
Translation differences - - (19) - (19) - (19)
Total comprehensive income (loss) for the year - - (19) 3,620 3,601 111 3,712
Dividend - - - (2,213) (2,213) - (2,213)
Acquisition and disposal of treasury shares - (41) - - (41) - (41)
Balance as at December 31, 2021 209 23,126 172 2,406 25,913 1,098 27,011
The accompanying notes form an integral part of the financial statements.
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
INTERIM CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
30.06.2022 30.06.2021 31.12.2021
U.S. $ in thousands
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 5,368 9,717 12,567
Trade and other receivables 11,497 11,634 10,628
Unbilled revenue 3,535 2,488 2,794
Current tax receivables 462 454 518
Inventories 6,457 5,972 6,849
27,319 30,265 33,356
NON-CURRENT ASSETS:
Long term prepaid expenses 44 37 26
Property, plant and equipment 5,989 5,612 5,548
Deferred tax assets 1,140 715 994
Intangible assets 3,989 1,040 1,014
11,162 7,404 7,582
Total assets 38,481 37,669 40,938
The accompanying notes form an integral part of the financial statements.
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
INTERIM CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
30.06.2022 30.06.2021 31.12.2021
U.S. $ In thousands
Unaudited
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities and short term bank credit and loans 179 20 23
Trade payables 5,703 6,075 5,346
Other accounts payable 3,443 4,906 6,895
Current tax payables 440 224 322
9,765 11,225 12,586
NON- CURRENT LIABILITIES:
Contingent consideration 1,432 66 -
Lease liabilities 512 495 465
Loans from banks, net of current maturities 8 27 8
Employee benefits, net 859 838 868
2,811 1,426 1,341
Total liabilities 12,576 12,651 13,927
EQUITY
Equity attributable to owners of the parent
Share capital 209 209 209
Additional paid-in capital 23,167 23,172 23,126
Translation differences (173) 130 172
Retained earnings 1,544 457 2,406
24,747 23,968 25,913
Non-controlling interest 1,158 1,050 1,098
Total equity 25,905 25,018 27,011
Total equity and liabilities 38,481 37,669 40,938
August 14, 2022
Date of approval of financial statements Moshe Borovitz Elhanan Zeira Zvi Borovitz
Chief Executive Officer Controller Non-executive Chairman of the Board
The accompanying notes form an integral part of the financial statements.
INTERIM CONSOLIDATED STATEMENTS OF
CASH FLOWS
Six month period ended Year ended December 31,
June 30,
2022 2021 2021
U.S. $ in thousands
Unaudited
Cash Flows from Operating Activities:
Profit for the period 1,677 1,734 3,709
Adjustments for:
Depreciation and amortization 734 454 976
Loss (Gain) from sale of property, plant and equipment 8 (16) (25)
Finance (income) expenses, net (80) (14) 53
Tax expenses 364 315 329
Changes in operating assets and liabilities:
Decrease (increase) in inventories 270 412 (479)
Decrease(increase) in trade receivables (634) (709) 604
Decrease (increase) in other accounts receivables (133) (170) (448)
Increase in unbilled revenues (741) (301) (476)
Increase (decrease) in trade and other accounts payables (659) 1,645 2,803
Increase (decrease) in employee benefits, net (113) 12 64
Cash from operations 693 3,362 7,110
Interest received - 2 52
Interest paid (29) (19) (88)
Income tax paid (627) (220) (481)
Net cash provided by operating activities 37 3,125 6,593
The accompanying notes form an integral part of the financial statements.
INTERIM CONSOLIDATED STATEMENTS OF
CASH FLOWS (cont.)
Six month period ended Year ended December 31,
June 30,
2022 2021 2021
U.S. $ in thousands
Unaudited
Cash Flows From Investing Activities:
Proceeds from sale of property, plant and equipment - 28 153
Acquisition of subsidiary, net of cash acquired (1,427) - -
Net cash from sale of previously consolidated subsidiaries (2,785) - -
Change (payment) of contingent consideration regarding business acquisition - 12 (54)
Purchase of property, plant and equipment (324) (488) (835)
Net cash used in investing activities (4,536) (448) (736)
Cash Flows From Financing Activities:
Dividend (2,479) (2,213) (2,213)
Payments of lease liabilities (293) (214) (449)
Sort-term loans and credit line received from banks 157
Treasury shares acquired - 5 (41)
Treasury shares sold 41 - -
Repayment of long-term loans from banks - (82) (117)
Net cash used in financing activities (2,574) (2,504) (2,820)
(Decrease)/Increase in cash and cash equivalents during the period (7,073) 173 3,037
Cash and cash equivalents at the beginning of the period 12,567 9,577 9,577
Exchange differences on balances of cash and cash equivalents (126) (33) (47)
Cash and cash equivalents at the end of the period 5,368 9,717 12,567
The accompanying notes form an integral part of the financial statements.
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General:
Corporate information:
M.T.I Wireless Edge Ltd. (hereafter - the "Company", or collectively with its
subsidiaries, the "Group") is an Israeli corporation. The Company was
incorporated under the Companies Act in Israel on December 30, 1998, and
commenced operations on July 1, 2000. Since March 2006, the Company's shares
have been traded on the AIM market of the London Stock Exchange.
The formal address of the Company is 11 Hamelacha Street, Afek industrial
Park, Rosh-Ha'Ayin, Israel.
The Company and its subsidiaries are engaged in the following areas:
- Development, design, manufacture and marketing of antennas for the
military and civilian sectors.
- A leading provider of remote control solutions for water and
irrigation applications based on Motorola's IRRInet state of the art control,
monitoring and communication technologies.
- Providing consulting, representation and marketing services to
foreign companies in the field of RF and Microwave, including engineering
services in the field of aerostat systems and system engineering services.
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, 2021 was approved by the board on March 6, 2022. The report of
the auditors on those financial statements was unqualified.
The interim consolidated financial statements as of June 30, 2022 have not
been audited.
The interim consolidated financial information should be read in conjunction
with the annual financial statements as of December 31, 2021 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,
2021 are applied consistently in these interim consolidated financial
statements.
Note 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 includes 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 will own 51% of PSK (the "Acquisition"). The initial consideration for
the Acquisition is 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,
comprises: a) the purchase of existing shares in PSK for NIS 700,000
(approximately US$225,000); and b) a subscription of NIS 3,000,000
(approximately US$ 972,000) for new shares in PSK. In addition, there is an
earn out mechanism under which further consideration may be payable, as
described in the contingent consideration section below (the "Earn Out").
MTI Summit's loan to PSK of NIS 2,500,000 (approximately US$800,000) is a term
loan which is to be repaid on 1 January 2024. The loan is not convertible and
bears interest of 3.26% per annum.
In addition to the Acquisition, MTI Summit has an option to purchase and the
vendors of PSK have an option to sell to MTI Summit the remaining 49% of PSK
(the "Option") starting from 2027, subject to the terms described below.
Cash outflow on the acquisition totalled to US$ 1,427,000.
Acquisition cost of PSK at the date of Acquisition:
Fair value
$'000
Unaudited
Cash paid 1,197
Contingent consideration liability 56
Put options liability 1,376
Total acquisition cost 2,629
Note 3 - Acquisition of subsidiary (cont'):
Set forth below are the assets and liabilities of PSK at the date of
Acquisition:
Fair value
$'000
Unaudited
Trade receivables 671
Other receivables 213
Inventories 65
Property, plant and equipment 256
Intangible assets 1,710
Bank loans (230)
Trade payables (522)
Deferred tax liability (394)
Other liabilities (436)
Employee benefits, net (104)
Net identifiable assets 1,229
Goodwill arising on acquisition 1,400
Total purchase cost 2,629
The results of PSK were consolidated into the financial statement of the Group
from the beginning of the year.
The cost of acquisition was allocated to tangible assets, intangible assets
and liabilities which were acquired based on their fair value at the time of
the acquisition. The intangible assets recognized include backlog and customer
relations in the total amount of US$ 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 customer relation is
amortized over an useful life of up to 15 years.
The goodwill arising on Acquisition is attributed to the expected benefits
from the synergies of the combination of the activities of the Company and
PSK. The goodwill recognized is not expected to be deductible for income tax
purposes.
All transaction costs 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$2.56m), to be paid in cash.
Note 3 - Acquisition of subsidiary (cont'):
Put Option liability:
MTI Summit has an option to purchase and the vendors of PSK have an option to
sell to MTI Summit the remaining 49% of PSK (the "Option") starting from 2027.
The value of PSK under the Option is to be calculated on the basis of eight
times the average EBITDA level of PSK in 2025 and 2026, with MTI being
required to pay 49% of this value upon exercise. If the Option is to be
exercised at any time after the preparation of PSK's financial results for the
first quarter of 2027, the calculation will be based on PSK's average EBITDA
for the last eight quarters. The Option will remain in place until
exercised.
As at the Acquisition date, the fair value of the contingent consideration was
estimated at US$ 56 thousand and the Option at US$ 1.376 million.
The significant non-observable data used in measuring the fair value of the
liability in respect of the contingent consideration and the Put Option
liability are as follows:
Discount rate: 15.5%
A significant increase (or decrease) in the estimated amount of the acquired
company's pre-tax income will result in a significant increase (decrease) in
the fair value of the liability in respect of the contingent consideration
whereas a significant increase (decrease) in the discount rate and default
risk rate will result in a decrease (an increase) in the fair value of the
liability.
Note 4 - REVENUES:
Six month period ended Year ended December 31,
June 30,
2022 2021 2021
U.S. $ in thousands
Unaudited
Revenues arise from:
Sale of goods* 17,486 17,238 35,308
Rendering of services** 3,498 2,876 5,729
Projects** 1,709 1,230 2,147
22,693 21,344 43,184
(*) at the point in time
(**) over time
Note 5 - operating SEGMENTS:
The following tables present revenue and profit information regarding the
Group's operating segments for the six month period ended June 30, 2022 and
2021 respectively and for the year ended December 31, 2021.
Six month period ended June 30, 2022 (Unaudited):
Antennas Water Solutions Distribution & Consultation Services Adjustment & Elimination Total
U.S. $ in thousands
Revenues
External 5,678 8,825 8,190 - 22,693
Internal - - 209 (209) -
Total 5,678 8,825 8,399 (209) 22,693
Segment profit 95 864 1,144 87 2,190
Finance expense, net 149
Tax expenses 364
Profit 1,677
As of 30 June 2022:
Antennas Water Solutions Distribution & Consultation Services Adjustment & Elimination Total
U.S. $ in thousands
Segment assets 14,414 10,717 10,538 - 35,669
Unallocated assets 2,812
Segment liabilities 2,241 3,520 6,294 - 12,055
Unallocated liabilities 521
Six month period ended June 30, 2021 (Unaudited):
Antennas Water Solutions Distribution & Consultation Services Adjustment & Elimination Total
U.S. $ in thousands
Revenues
External 5,772 8,601 6,971 - 21,344
Internal - - 59 (59) -
Total 5,772 8,601 7,030 (59) 21,344
Segment profit 246 866 913 150 2,175
Finance expense, net 126
Tax expenses 315
Profit 1,734
Note 5 - operating SEGMENTS (CONT.):
As of 30 June, 2021:
Antennas Water Solutions Distribution & Consultation Services Adjustment & Elimination Total
U.S. $ in thousands
Segment assets 14,866 10,890 9,068 - 34,824
Unallocated assets 2,845
Segment liabilities 3,226 4,411 4,089 - 11,726
Unallocated liabilities 925
Year ended December 31, 2021
Antennas Water Solutions Distribution & Consultation Services Adjustment & Elimination Total
U.S. $ in thousands
Revenues
External 11,294 17,606 14,284 - 43,184
Inter-segment - - 174 (174) -
Total 11,294 17,606 14,458 (174) 43,184
Segment profit 282 2,074 1,845 224 4,425
Finance expense, net 387
Tax expenses 329
Profit 3,709
31 December, 2021:
Antennas Water Solutions Distribution & Consultation Services Adjustment & Elimination Total
U.S. $ in thousands
Segment assets 14,399 11,100 11,999 - 37,498
Unallocated assets 3,440
Segment liabilities 3,090 3,626 6,282 - 12,998
Unallocated liabilities 929
Note 6 - sale of previously consolidated subsidiaries:
On 22 March 2022, the Company announced that it had disposed of its Russian
operations and sold its entire holding in M.T.I Summit SPB ltd. ("SPB") for a
de minimis amount, with this sale not having any significant profit/loss
impact on the Company.
The effect of the sale on the financial position of the Group is as follows:
$'000
Unaudited
Other receivables (417)
Inventories (6)
Current tax receivables (10)
Cash and cash equivalents (2,785)
Other trade payables 3,218
Net assets and liabilities -
Consideration received, satisfied in cash -
Cash and cash equivalents disposed of (2,785)
Net cash outflows (2,785)
Note 7 - SIGNIFICANT EVENTS:
A. On 6 March 2022, the Board of directors declared a cash dividend of 2.8
US cents per share, representing approximately $2,479,000, in total. This
dividend was paid on 31 March 2022 to shareholders on the register at the
close of trading on 18 March 2022.
B. On 24 January 2019, the Company announced a share repurchase program to
conduct market purchases of ordinary shares of par value 0.01 Israeli Shekels
each ("Ordinary Shares") in the Company up to a maximum value of £150,000
(the "Programme"). Thereafter, the board of directors of the Company and the
board of directors of MTI Engineering decided to continue with the Programme
for several further periods. On 13 April 2022, the Company announced that it
would extend the Programme until 31 March 2023, with the Programme having an
increased maximum value of up to £200,000 and with the Programme being
managed by Shore Capital Stockbrokers Limited pursuant to the terms as
announced. As at 30 June 2022, no Ordinary Shares were held in treasury under
the Programme.
C. On 9 March 2022 at an extraordinary shareholders meeting, Mr. Luke
Ahern was elected as an external director for three year term. At the same
meeting approval for the extension of an updated Remuneration Policy for a
period of three years or for a longer period, to the extent prescribed in the
provisions of the Israeli Companies Law, was granted as well as the extension
of an updated management services agreement (the "Management Services
Agreement"), between the Company and Mokirei Aya Management (2003) Ltd. (the
"Management Company") for the provision of the services of the Chairman and
CEO of the Company for a further three years or for a longer period, to the
extent prescribed in the provisions of the Israeli Companies Law with effect
from 1 March 2022.
D. Outbreak of COVID-19 and Business Continuity - In December 2019, the
COVID-19 pandemic broke out in China, and the virus has spread to many
countries around the world. In January 2020, the World Health Organization
announced the outbreak of the Coronavirus as a global health emergency, and in
March 2020, the World Health Organization declared the pandemic to be a global
pandemic. In 2021 and until the date of this report the Company was able to
maintain good levels of operation using remote working procedures where
appropriate and a sufficient level of production in its production facilities
while assuring the health of its employees. Since March 2022 most of the
Group's operations have returned to a normal level of activity but aspects of
the Group's supply chain are still working slower, and the Company's industry
has been affected on the operational level, along with the rest of the world
economy as it faces the risk of a global recession where the ability to
predict the timing of a recovery is uncertain. In particular, shipment costs
are higher and availability of shipping is lower, some of the components or
other parts (used by the Company or its vendors or its customers) are still
under shortage and this can effect the ability to supply part of the demand.
This uncertainty of the level of the global economic slowdown, its duration
and its medium to long term effects creates challenges, but the Company
believes that if there is no further deterioration in the situation, its
financial strength and business stability will allow it to navigate through
this.
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