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REG - MTI Wireless Edge - Q1 2022 Financial Results

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RNS Number : 3401M  MTI Wireless Edge Limited  23 May 2022

23 May 2022

MTI Wireless Edge Ltd

("MTI", the "Company" or the "Group")

Q1 2022 Financial Results

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 financial results for the three-month
period ended 31 March 2022.

Financial highlights

·    Good revenue growth, up by 12% to $11.2m (Q1 2021: $9.95m) reflecting
the strength of the Group's long term customer base with over 60% of revenue
being generated from clients for 10 years or more

·    Profit before tax up 8% to $0.97m (Q1 2021: $0.9m) after costs
associated with the acquisition of P.S.K. WIND Technologies Ltd ("PSK")

·    EBITDA* increased by 15% to $1.35m (Q1 2021: $1.18m)

·    Earnings per share increased by 12% to 0.89 US cents (Q1 2021: 0.80
US cents)

·    Continued strong operating cash generation with net cash standing at
$6.5m on 31 March 2022 (31 March 2021: $9.5m), with the majority of the change
reflecting: i) the initial net consideration paid and loan provided in respect
of PSK; ii) the Group's exit from its Russian operations (as described in note
six to the financial statements); and iii) the dividend paid in March 2022 -
together totaling approximately $7m.

Operational highlights by division

Antennas

·    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 Q1 2022, there was further interest from Tier 1 corporations for
our 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.

·    Orders for our 5G backhaul solution remain strong, but fulfilment is
slower due to external issues relating to supply chains at customers (mainly
microchip shortages and the impact of lockdowns in China). RFID revenues
significantly improved whilst military antenna orders were slower as the sales
cycle takes longer, but the opportunities remain significant.

·    Taken together this resulted in slightly lower antenna revenue levels
in Q1 2022 (compared to Q1 2021), but the underlying future potential across
both military and 5G markets remains strong.

Water Control & Management

·    Operates under the Mottech brand and provides wireless control
systems to manage irrigation and water distribution for agriculture, municipal
authorities and commercial entities.

·    Solutions reduce water and power usage, whilst providing customers
with higher revenue from accurate irrigation, leading to more and better
quality crops and plants being grown.

·    Q1 2022 was a steady period with revenues increasing slightly against
Q1 2021 and underlying sales orders bode well for the year with a growing
pipeline of opportunities and the successful introduction of new prices being
accepted in service contracts across the division's customer base.

·    Sales are expected to commence in Q2 2022 under a strategic
partnership agreed in January with Viridix, offering Mottech customers the
RooTense® sensor that measures the water available to the roots of crops.

Distribution & Professional Consulting Services

·    Operates under the MTI Summit Electronics brand and 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.

·    In Q1 2022, MTI Summit enjoyed an excellent period delivering strong
revenue growth, boosted by the addition of new revenues from the acquisition
of PSK. Most importantly, this division has also grown its pipeline of future
orders and opportunities and is well placed for a successful year.

·    In March 2022, the Company confirmed the sale of the Group's business
unit in Russia to the General Manager of the Russian operations.

 

Moni Borovitz, Chief Executive Officer of MTI Wireless Edge, said:

"We are pleased with the trading performance for the first quarter, which
represents a good start to the year and, once again, demonstrates the critical
value of being a diversified business enabling us to continue to grow the
business in challenging times.

"Delivering double digit sales, EBITDA and EPS growth is a creditable
performance in the current market, coming out of the pandemic and managing
increased costs relating to inflation and the supply chain. Cash generation
from operations was again positive, with net cash at $6.5m after paying circa
$4.5m in relation to the acquisition of PSK and last year's dividend. The
business therefore remains in a strong financial position and well placed for
the year.

"The impact on our business from the pandemic has receded but there are still
pockets of disruption, most notably in China, where recent lockdowns have
added to the delays in the production of components and increased pressure
around transportation of goods from China. Inflationary led costs are coming
through the business albeit we have been successful to mitigate these to some
extent by implementing price increases. Overall, we expect these factors to
continue to some degree for the remainder of the year.

"Notwithstanding this, demand across all three divisions for their respective
products and services has increased. The market for defence, in particular, is
growing, with a visible increase in potential orders over the coming 18
months. Our ABS solution for the 5G market has opened up new conversations
with several key Tier 1 & 2 mobile radio manufacturers, strengthening our
relationship with existing customers and potential new ones. This has further
under pinned the potential of the 5G market for us. Mottech remains a leader
in its field and continues to see good demand in many markets, supported by a
strong pipeline of potential future orders. MTI Summit was again the leading
performer in Q1 with a very encouraging contribution from the recently
acquired PSK.

"Looking ahead, we believe the Company's clear focus on providing radio
frequency solutions coupled to being diversified across several markets
positions us well to continue to grow and expand through a mix of acquisition
led and organic growth."

Moni Borovitz, Chief Executive Officer, will provide a live investor
presentation relating to the financial results for the three-month period
ended 31 March 2022, via the Investor Meet Company ("IMC") platform today at
10.00 am UK time.

Investors can sign up for free via:
https://www.investormeetcompany.com/mti-wireless-edge-ltd/register-investor
(https://www.investormeetcompany.com/mti-wireless-edge-ltd/register-investor)

*Earnings before interest, tax, depreciation and amortisation.

 

 

For further information please contact:

 MTI Wireless Edge Ltd                                         +972 3 900 8900
 Moni Borovitz, CEO                                            http://www.mtiwirelessedge.com (http://www.mtiwirelessedge.com)

 Allenby Capital Limited (Nomad and Joint Broker)              +44 20 3328 5656
 Nick Naylor/Alex Brearley/Piers Shimwell (Corporate Finance)
 Amrit Nahal/David Johnson (Sales and Corporate Broking)

 Shore Capital (Joint Broker)                                  +44 20 7408 4090

 Toby Gibbs/John More (Corporate Advisory)
 Fiona Conroy (Corporate Broking)

 Novella (Financial PR)
 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 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

                                                                         Three month period ended                            Year ended December 31,

                                                                          March 31,
                                                                         2022                      2021                      2021
                                                                         U.S. $ in thousands

                                                                                       (Except per share data)
                                                                         Unaudited

 Revenues                                                                11,176                    9,949                     43,184
 Cost of sales                                                           7,685                     6,783                     29,685

 Gross profit                                                            3,491                     3,166                     13,499
 Research and development expenses                                       272                       283                       965
 Distribution expenses                                                   884                       889                       3,686
 General and administrative expenses                                     1,297                     1,039                     4,448
 Loss (profit) from sale of property, plant and equipment                9                         (4)                       25

 Profit from operations                                                  1,029                     959                       4,425
 Finance expenses                                                        78                        75                        454
 Finance income                                                          (23)                      (15)                      (67)

 Profit before income tax                                                974                       899                       4,038
 Tax expenses                                                            164                       157                       329

 Profit                                                                  810                       742                       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  24                        (113)                     (19)
 operations

 Total other comprehensive income (loss)                                 24                        (113)                     3

 Total comprehensive income                                              834                       629                       3,712

 Profit attributable to:
 Owners of the parent                                                    786                       705                       3,598
 Non-controlling interests                                               24                        37                        111

                                                                         810                       742                       3,709
 Total comprehensive income attributable to:
 Owners of the parent                                                    810                       592                       3,601
 Non-controlling interests                                               24                        37                        111
                                                                         834                       962                       3,712

 Earnings per share (dollars)
 Basic and Diluted (dollars per share)                                   0.0089                    0.0080                    0.0407

 Weighted average number of shares outstanding
 Basic and Diluted (dollars per share)                                   88,501,084                88,538,724                88,509,740

 

The accompanying notes form an integral part of the financial statements.

 

 

 

MTI WIRELESS EDGE LTD.

 (An Israeli Corporation)

 

INTERIM CONSOLIDATED STATEMENTS OF

CHANGES IN EQUITY

 

For the three month period ended March 31, 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 three month period

     ended March 31, 2021:
 Comprehensive income
 Profit for the period                        -              -                           -                        786                786                                           24                        810
 Other comprehensive income
 Translation differences                      -              -                           24                       -                  24                                            -                         24

 Total comprehensive income for the period    -              -                           24                       786                810                                           24                        834
 Acquisition and disposal of treasury shares  -              41                          -                        -                  41                                            -                         41
 Dividend                                     -              -                           -                        (2,479)            (2,479)                                       -                         (2,479)

 Balance at March 31, 2022                    209            23,167                      196                      713                24,285                                        1,122                     25,407

 

The accompanying notes form an integral part of the financial statements.

 

 

 

MTI WIRELESS EDGE LTD.

 (An Israeli Corporation)

 

INTERIM CONSOLIDATED STATEMENTS OF

CHANGES IN EQUITY (CONT.)

 

For the three month period ended March 31, 2021 (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, 2021                        209            23,167                      191                      999                24,566                                        987                       25,553

 Changes during the three month period

     ended March 31, 2021:
 Comprehensive income
 Profit for the period                             -              -                           -                        705                705                                           37                        742
 Other comprehensive income
 Translation differences                           -              -                           (113)                    -                  (113)                                         -                         (113)

 Total comprehensive income (loss) for the period  -              -                           (113)                    705                592                                           37                        622
 Dividend                                          -              -                           -                        (2,213)            (2,213)                                       -                         (2,213)

 Balance at March 31, 2021                         209            23,167                      78                       (509)              22,945                                        1,024                     23,969

 

The accompanying notes form an integral part of the financial statements.

 

 

 

MTI WIRELESS EDGE LTD.

 (An Israeli Corporation)

 

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

 

                                31.03.2022        31.03.2021        31.12.2021
                                U.S. $ in thousands
                                Unaudited
 ASSETS
 CURRENT ASSETS:
 Cash and cash equivalents      6,517             9,585             12,567
 Trade and other receivables    11,201            9,244             10,628
 Unbilled revenue               3,542             2,389             2,794
 Current tax receivables        281               489               518
 Inventories                    6,622             5,631             6,849

                                28,163            27,338            33,356

 NON-CURRENT ASSETS:
 Long term prepaid expenses     43                27                26
 Property, plant and equipment  5,710             5,312             5,548
 Deferred tax assets            1,123             689               994
 Intangible assets              4,057             1,053             1,014

                                10,933            7,081             7,582

 Total assets                   39,096            34,419            40,938

 

The accompanying notes form an integral part of the financial statements.

 

 

 

INTERIM CONSOLIDATED STATEMENTS OF

FINANCIAL POSITION

                                                          31.03.2022        31.03.2021              31.12.2021
                                                          U.S. $ In thousands
                                                          Unaudited
 LIABILITIES AND EQUITY
 CURRENT LIABILITIES:
 Current maturities and short term bank credit and loans  11                36                23
 Trade payables                                           6,167             4,157             5,346
 Other accounts payable                                   4,367             4,762             6,895
 Current tax payables                                     374               142               322

                                                          10,919            9,097             12,586

 NON- CURRENT LIABILITIES:
 Contingent consideration                                 1,432             49                -
 Lease liabilities                                        360               464               465
 Loans from banks, net of current maturities              15                30                8
 Employee benefits, net                                   963               810               868

                                                          2,770             1,353             1,341

 Total liabilities                                        13,689            10,450            13,927

 EQUITY
 Equity attributable to owners of the parent
 Share capital                                            209               209               209
 Additional paid-in capital                               23,167            23,167            23,126
 Translation differences                                  196               78                172
 Retained earnings                                        713               (509)             2,406

                                                          24,285            22,945            25,913

 Non-controlling interest                                 1,122             1,024             1,098

 Total equity                                             25,407            23,969            27,011

 Total equity and liabilities                             39,096            34,419            40,938

 

 May 22, 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.

 

 

 

MTI WIRELESS EDGE LTD.

(An Israeli Corporation)

 

INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

 

                                                               Three month period ended                     Year ended December 31,

                                                                March 31,
                                                               2022                  2021             2021
                                                               U.S. $ in thousands
                                                               Unaudited
 Cash Flows from Operating Activities:
 Profit for the period                                         810                   742              3,709
 Adjustments for:
 Depreciation and amortization                                 327                   221              976
 Loss (Gain) from sale of property, plant and equipment        4                     13               (25)
 Finance (income) expenses, net                                (9)                   (24)             53
 Tax expenses                                                  164                   157              329
 Changes in operating assets and  liabilities:
 Decrease (increase) in inventories                            291                   729              (479)
 Decrease in trade receivables                                 262                   1,457            604
 Increase in other accounts receivables                        (355)                 (112)            (448)
 Increase in unbilled revenues                                 (748)                 (71)             (476)
 Increase (decrease) in trade and other accounts payables      593                   (369)            2,803
 Increase (decrease) in employee benefits, net                 (9)                   (16)             64

 Cash from operations                                          1,330                 2,727            7,110

 Interest received                                             -                     5                52
 Interest paid                                                 (11)                  (10)             (88)
 Income tax paid                                               (407)                 (155)            (481)

 Net cash provided by operating activities                     912                   2,567            6,593

 

The accompanying notes form an integral part of the financial statements.

 

 

 

 INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS (cont.)

 

                                                                                     Three month period ended               Year ended December 31,

                                                                                      March 31,
                                                                                     2022                  2021             2021
                                                                                     U.S. $ in thousands
                                                                                     Unaudited
 Cash Flows From Investing Activities:
 Proceeds from sale of property, plant and equipment                                 -                     23               153
 Acquisition of subsidiary, net of cash acquired                                     (1,427)               -                -
 Net cash from sale of previously consolidated subsidiaries                          (2,785)
 Payment of contingent consideration regarding business acquisition                  -                     -                (54)
 Purchase of property, plant and equipment                                           (181)                 (151)            (835)

 Net cash used in investing activities                                               (4,393)               (128)            (736)

 Cash Flows From Financing Activities:
 Dividend                                                                            (2,479)               (2,213)          (2,213)
 Payments of lease liabilities                                                       (123)                 (103)            (449)
 Treasury shares acquired                                                            -                     -                (41)
 Treasury shares sold                                                                41                    -                -
 Repayment of long-term loans from banks                                             (4)                   (82)             (117)

 Net cash used in financing activities                                               (2,565)               (2,398)          (2,820)

 (Decrease)/Increase in cash and                                                     (6,046)               41               3,037

 cash equivalents during the period
 Cash and cash equivalents                                                           12,567                9,577            9,577

  at the beginning of the period
 Exchange differences on balances of cash and cash equivalents                       (4)                   (33)             (47)

 Cash and cash equivalents                                                           6,517                 9,585            12,567

  at the end of the period

 

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.

In these financial statements, the Company included the results of its
aerostat system division in its representation and consulting services
division, as it deems this appropriate given the nature of the consulting
services provided in both segments and the respective size of these segments.

 

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 March 31, 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$0.95m) 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/inflow on the Acquisition:

                                                  $'000
                                                  Unaudited

     Cash and cash equivalents acquired           1,037

           at the acquisition date
     Bank credit                                  (1,267)
 Cash paid                                        (1,197)

 Net cash                                         (1,427)

 

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

 Cash and cash equivalents            1,037
 Trade receivables                    671
 Other receivables                    213
 Inventories                          65
 Property, plant and equipment        256
 Intangible assets                    1,710
 Bank loans                           (1,267)
 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.

Goodwill:

                                            $'000
                                            Unaudited

 Balance at January 1, 2022 (audited)       861
 additions                                  1,400

 Balance at 31 March, 2022                  2,261

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.

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:

                              Three month period  ended                Year ended December 31,

                                  March 31,
                              2022                    2021                           2021
                              U.S. $ in thousands
                              Unaudited
 Revenues arise from:
 Sale of goods*               9.135                   7,879                          35,308
 Rendering of services**      1,713                   1,444                          5,729
 Projects**                   328                     626                            2,147
                              11,176                  9,949                          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 three month period ended March 31, 2022 and
2021 respectively and for the year ended December 31, 2021.

Three month period ended March 31, 2022 (Unaudited):

                        Antennas  Water Solutions  Distribution & Consultation Services      Adjustment & Elimination      Total
                        U.S. $ in thousands
 Revenues
 External               2,728     4,258            4,190                                     -                             11,176
 Internal               -         -                49                                        (49)                          -

 Total                  2,728     4,258            4,239                                     (49)                          11,176

 Segment profit (loss)  (132)     396              742                                       25                            1,031

 Finance expense, net                                                                                                      63
 Tax expenses                                                                                                              164

 Profit                                                                                                                    804

 

31 March 2022:

                          Antennas  Water Solutions  Distribution & Consultation Services      Adjustment & Elimination      Total
                          U.S. $ in thousands

 Segment assets           13,770    11,892           12,020                                    -                             37,682

 Unallocated assets                                                                                                          3,419

 Segment liabilities      3,558     4,804            6,193                                     -                             14,555

 Unallocated liabilities                                                                                                     1,145

 

Three month period ended March 31, 2021 (Unaudited):

 

                       Antennas  Water Solutions  Distribution & Consultation Services      Adjustment & Elimination      Total
                       U.S. $ in thousands
 Revenues
 External              2,802     4,161            2,986                                     -                             9,949
 Internal              -         -                23                                        (23)                          -

 Total                 2,802     4,161            3,009                                     (23)                          9,949

 Segment profit        63        396              393                                       107                           959

 Finance expense, net                                                                                                     60
 Tax expenses                                                                                                             157

 Profit                                                                                                                   742

 

Note 5 - operating SEGMENTS (CONT.):

31 March, 2021:

 

                          Antennas  Water Solutions  Distribution & Consultation Services      Adjustment & Elimination      Total
                          U.S. $ in thousands

 Segment assets           14,863    9,030            7,861                                     -                             31,754

 Unallocated assets                                                                                                          2,665

 Segment liabilities      2,936     2,976            3,702                                                                   9,614

 Unallocated liabilities                                                                                                     836

 

 

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 31 March 2022, no Ordinary Shares were held in treasury under
the Programme.

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.

C.   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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