REG - MTI Wireless Edge - Results for the nine months to 30 September 2019

MTI Wireless EdgeAnnouncement

25/11/2019 07:45

RNS Number : 4404U
MTI Wireless Edge Limited
25 November 2019
 


Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR)
25 November 2019 
MTI Wireless Edge Ltd
("MTI" or the "Company")
Financial results for the nine months ended 30 September 2019
 
MTI Wireless Edge Ltd (AIM: MWE), the technology group focused on comprehensive communication and radio frequency solutions across multiple sectors, today announces its unaudited results for the nine months ended 30 September 2019.
Highlights
·     Revenues increased by 12% to $29.0m (nine months ended 30 September 2018: $25.9m)
·     Operating profit increased 33% to $2.5m (nine months ended 30 September 2018: $1.9m)
·     Profit before tax increased 44% to $2.43m (nine months ended 30 September 2018: $1.7m)
·     Earnings per share increased 30% to 2.36 US cents (nine months ended 30 September 2018: 1.8 US cents)
·     Shareholder's equity grew during the period to $21.5m (30 September 2018: $19.9m), equivalent to 19 pence per share*
·     Cash flow from operations increased 155% year-on-year to $3.96m (nine months ended 30 September 2018: $1.55m) providing a net cash balance of $6.2m on 30 September 2019
* Converted at 1.28 US Dollar/1 British Pound.
 
Moni Borovitz, CEO of MTI, commented:
"We continued to perform in accordance with our business plan, delivering significant revenue growth and increased profitability, whilst at the same time converting this growth into operating cash flow.
In 2019, we have seen significant growth in the Company's order book across all three of our business divisions, being: the Antenna Division, the Water Control & Management Division and the Distribution & Professional Consulting Services Division.
The integration of the newly acquired (50%) distributor for water management solutions in Australia is going well and has already increased our profitability in the third quarter of 2019.  We are now focused on expanding Mottech's business across the continent and further into China following a substantial contract win in May.
Our Distribution & Professional Consulting Services Division continues to show remarkable revenue growth this year, as projects that we have designed solutions for have started to mature, and we expect to see more design wins convert into revenue in the future.
We are seeing substantial demand for 5G antenna solutions and we continue to make solid progress in the testing of our 5G antenna offering with OEM vendors as mobile operators plan and implement their network upgrades. We believe that this demand for 5G broadband has the potential to provide substantial future growth for our business.
We are very positive about the outlook for the business. Key drivers for the business are showing positive trends, including the demand for efficient water management solutions, increased defence budgets and the demand for broadband, provide us with confidence in meeting our goals of increasing revenue, profits and free cash flow".
 
For further information please contact:
 
MTI Wireless Edge Ltd                                                               +972 3 900 8900
Moni Borovitz, CEO                                      http://www.mtiwirelessedge.com
 
Allenby Capital Limited (Nomad and Joint Broker)            +44 20 3328 5656
Nick Naylor
Alex Brearley
 
Peterhouse Capital Limited (Joint Broker)                           +44 20 7469 0930
Lucy Williams
Eran Zucker
 
Novella (Financial PR)                                                              +44 20 3151 7008
Tim Robertson
Fergus Young
 
 
About MTI Wireless Edge Ltd
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 90 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 WiMAX, Broadband access, public safety, RFID, base stations 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 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, while reducing operational and maintenance costs. 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.
 
 
 
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
 
INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
 




 



Nine month period ended
 September 30,



 



Year ended December 31,





 



2019



 



2018*



 



2018





 



U.S. $ in thousands





 



Unaudited



 


 




 


 


 


 


 


 




Revenues


29,004


 


25,892


 


35,471




Cost of sales



19,537



 



17,153



 



23,420





 


 


 


 


 


 




Gross profit


9,467


 


8,739


 


12,051




Research and development expenses


890


 


813


 


1,090




Distribution expenses


3,118


 


3,102


 


4,277




General and administrative expenses


2,976


 


2,949


 


3,767




Profit from sale of property, plant and equipment



8



 



-



 



(7)





 


 


 


 


 


 




Profit from operations


2,491


 


1,875


 


2,924




Finance expenses


156


 


223


 


288




Finance income



(101)



 



(38)



 



(14)





 


 


 


 


 


 




Profit before income tax


2,436


 


1,690


 


2,650




Tax expenses



358



 



119



 



321





 


 


 


 


 


 




Profit



2,078



 



1,571



 



2,329





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 operations



(25)



 



(203)



 



(229)





 


 


 


 


 


 




Total other comprehensive income (loss)



(25)



 



(203)



 



(207)





 


 


 


 


 


 




Total comprehensive income



2,053



 



1,368



 



2,122





 


 


 


 


 


 




Profit attributable to:


 


 


 


 


 




Owners of the parent


2,052


 


1,563


 


2,337




Non-controlling interests



26



 



8



 



(8)





 


 


 


 


 


 




 



2,078



 



1,571



 



2,329





Total comprehensive income (loss) attributable to:


 


 


 


 


 




Owners of the parent


2,027


 


1,360


 


2,130




Non-controlling interests



26



 



8



 



(8)





 



2,053



 



1,368



 



2,122





 


 


 


 


 


 




Earnings per share (dollars)


 


 


 


 


 




Basic



0.0236



 



0.0181



 



0.0270





Diluted



0.0236



 



0.0180



 



0.0269





 


 


 


 


 


 




Weighted average number of shares outstanding


 


 


 


 


 




Basic



87,125,159



 



86,405,168



 



86,565,298





Diluted



87,125,159



 



86,845,032



 



86,986,917





 


 


 


 


 


 




(*) comparative numbers were adjusted to reflect the merger, refer to note 5A.
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 nine month period ended September 30, 2019 (Unaudited):




 



Attributed to owners of the parent



 


 




 



Share capital




Additional paid-in capital



Capital reserve
for share-based
payment

transactions




Translation differences




Retained earnings




Total attributable to owners of the  parent




Non-controlling interest




Total equity





 


U.S. $ in thousands




 


 


 


 


 


 


 


 


 




Balance at January 1, 2019


205


22,388


366


(124)


(2,195)


20,640


375


21,015




 


 


 


 


 


 


 


 


 




Changes during the nine month period
    ended September 30, 2019:


 


 


 


 


 


 


 


 




Comprehensive income


 


 


 


 


 


 


 


 




Profit for the period


-


-


-


-


2,052


2,052


26


2,078




Other comprehensive loss


 


 


 


 


 


 


 


 




Translation differences



-




-




-




(25)




-




(25)




-




(25)





 


 


 


 


 


 


 


 


 




Total comprehensive income (loss) for the period


-


-


-


(25)


2,052


2,027


26


2,053




Dividend


-


-


-


-


(1,306)


(1,306)


-


(1,306)




Non-controlling Interest of newly purchased subsidiary


-


-


-


-


-


-


402


402




Exercise of options to share capital


2


111


(24)


-


-


89


-


89




Issuance of treasury shares (note 5C)


-


18


-


-


-


18


-


18




Share based payment



-




-




6




-




-




6




-




6





 


 


 


 


 


 


 


 


 




Balance at September 30, 2019



207




22,517




348




(149)




(1,449)




21,474




803




22,277





 


 


 


 


 


 


 


 


 




 
The accompanying notes form an integral part of the financial statements.
 
 
 
INTERIM CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY (CONT.)
 
For the nine month period ended September 30, 2018* (Unaudited):




 



Attributed to owners of the parent



 


 




 



Share capital




Additional paid-in capital



Capital reserve
for share-based
payment

transactions




Translation differences




Retained earnings




Total attributable to owners of the  parent




Non-controlling interest




Total equity





 


U.S. $ in thousands




 


 


 


 


 


 


 


 


 




Balance at January 1, 2018


200


21,716


352


105


(2,781)


19,592


383


19,975




 


 


 


 


 


 


 


 


 




Changes during the nine month period
    ended September 30, 2018:


 


 


 


 


 


 


 


 




Comprehensive income


 


 


 


 


 


 


 


 




Profit for the period


-


-


-


-


1,563


1,563


8


1,571




Other comprehensive loss


 


 


 


 


 


 


 


 




Translation differences



-




-




-




(203)




-




(203)




-




(203)





 


 


 


 


 


 


 


 


 




Total comprehensive income (loss) for the period


-


-


-


(203)


1,563


1,360


8


1,368




Dividend


5


672


-


-


(1,773)


(1,096)


-


(1,096)




Share based payment



-




-




11




-




-




11




-




11





 


 


 


 


 


 


 


 


 




Balance at September 30, 2018



205




22,388




363




(98)




(2,991)




19,867




391




20,258





 


 


 


 


 


 


 


 


 




 
 (*) comparative numbers were adjusted to reflect the merger, refer to note 5A.
 
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, 2018 *:




 



Attributable to owners of the parent



 


 




 



Share capital




Additional paid-in capital




Capital Reserve from share-based payment transactions




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, 2018


200


21,716


352


105


(2,781)


19,592


383


19,975




 


 


 


 


 


 


 


 


 




Changes during 2018:


 


 


 


 


 


 


 


 




Comprehensive income


 


 


 


 


 


 


 


 




Profit for the year


-


-


-


-


2,337


2,337


(8)


2,329




Other comprehensive income


 


 


 


 


 


 


 


 




Re measurements on defined benefit plans


-


-


-


-


22


22


-


22




Translation differences



-




-




-




(229)




-




(229)




-




(229)





 


 


 


 


 


 


 


 


 




Total comprehensive income (loss) for the year


-


-


-


(229)


2,359


2,130


(8)


2,122




Dividend


5


672


-


-


(1,773)


(1,096)


-


(1,096)




Share based payment



-




-




14




-




-




14




-




14





Balance as at December 31, 2018



205




22,388




366




(124)




(2,195)




20,640




375




21,015





 


 


 


 


 


 


 


 


 




 


 


 


 


 


 


 


 


 



 
 
 
 
 
 
 
 
 
 



 
(*) comparative numbers were adjusted to reflect the merger, refer to note 5A.
 
The accompanying notes form an integral part of the financial statements.
 
 
 
MTI WIRELESS EDGE LTD.
 (An Israeli Corporation)
 
INTERIM CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
 




 



30.09.2019



 



30.09.2018



 



31.12.2018





 



U.S. $ in thousands





 



Unaudited



 


 




ASSETS


 


 


 


 


 




CURRENT ASSETS:


 


 


 


 


 




Cash and cash equivalents


6,732


 


5,348


 


5,401 




Trade and other receivables


9,882


 


11,282


 


9,591




Unbilled revenue


2,111


 


737


 


2,271




Tax receivables


644


 


494


 


153




Inventories



5,510




 




5,363



 



6,005





 


 


 


 


 


 




 



24,879




 




23,224



 



23,421





 


 


 


 


 


 




 


 


 


 


 


 




NON-CURRENT ASSETS:


 


 


 


 


 




Long term prepaid expenses


34


 


34


 


32




Property, plant and equipment


5,293


 


4,244


 


4,245




Deferred tax assets


638


 


495


 


687




Intangible assets



1,129




 




912



 



881





 


 


 


 


 


 




 



7,094




 




5,685



 



5,845





 


 


 


 


 


 




 



 




 




 



 



 





 


 


 


 


 


 




Total assets



31,973




 




28,909



 



29,266





 


 


 


 


 


 




 
The accompanying notes form an integral part of the financial statements.
 
 
 
MTI WIRELESS EDGE LTD.
 (An Israeli Corporation)
 
INTERIM CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
 




 



30.09.2019



 



30.09.2018



 



31.12.2018





 



U.S. $ In thousands





 



Unaudited



 


 




LIABILITIES AND EQUITY


 


 


 


 


 




CURRENT LIABILITIES:


 


 


 


 


 




Current maturities and short term bank credit and loans


299


 


998


 


581




Trade payables


4,941


 


3,860


 


3,998




Other accounts payable


3,015


 


2,511


 


2,532




Tax payables



119



 



18



 



12





 


 


 


 


 


 




 



8,374



 



7,387



 



7,123





 


 


 


 


 


 




NON- CURRENT LIABILITIES:


 


 


 


 


 




Lease liabilities


222


 


-


 


-




Loans from banks, net of current maturities


226


 


511


 


427




Contingent liability


69


 


-


 


-




Employee benefits, net



805



 



753



 



701





 


 


 


 


 


 




 



1,322



 



1,264



 



1,128





 


 


 


 


 


 




Total liabilities



9,696



 



8,651



 



8,251





 


 


 


 


 


 




EQUITY


 


 


 


 


 




Equity attributable to owners of the parent


 


 


 


 


 




Share capital


207


 


205


 


205




Additional paid-in capital


22,517


 


22,388


 


22,388




Capital reserve from share-based payment transactions


348


 


363


 


366




Translation differences


(149)


 


(98)


 


(124)




Retained earnings



(1,449)



 



(2,991)



 



(2,195)





 


 


 


 


 


 




 


21,474


 


19,867


 


20,640




 


 


 


 


 


 




Non-controlling interest



803



 



391



 



375





 


 


 


 


 


 




Total equity



22,277



 



20,258



 



21,015





 


 


 


 


 


 




Total equity and liabilities



31,973



 



28,909



 



29,266





 


 


 


 


 


 



 
 
 
 
 
 
 



 





November 25, 2019




 




 




 





Date of approval of financial statements


Moshe Borovitz
Chief Executive Officer


Elhanan Zeira
Controller


Zvi Borovitz
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
 




 



Nine month period  ended
 September 30,



 



Year ended December 31,





 


 



2019



 



2018*



 



2018





 


 



U.S. $ in thousands





 


 



Unaudited



 


 




Cash Flows from Operating Activities:


 


 


 


 


 


 




Profit for the period


 


2,078


 


1,571


 


2,329




Adjustments for:


 


 


 


 


 


 




Depreciation and amortization


 


735


 


428


 


589




Gain from investments in financial assets


 


-


 


(29)


 


(29)




Gain from sale of property, plant and equipment


 


(8)


 


(3)


 


(7)




Equity settled share-based payment expense


 


6


 


11


 


14




Finance (income) expenses, net


 


(2)


 


(17)


 


(11)




Tax expense (income)


 


358


 


119


 


321




Changes in operating assets and  liabilities:


 


 


 


 


 


 




Decrease (increase) in inventories


 


707


 


37


 


(634)




Decrease (increase) in trade receivables


 


116


 


(357)


 


(58)




Decrease (increase) in other accounts receivables and prepaid expenses


 


(80)


 


247


 


70




Increase (decrease) in trade and other accounts payables


 


689


 


(353)


 


(111)




Increase (decrease) in employee benefits, net


 



104



 



19



 



(11)





 


 


 


 


 


 


 




Cash from operations


 


4,703


 


1,673


 


2,462




 


 


 


 


 


 


 




Interest received


 


28


 


40


 


40




Interest paid


 


(45)


 


(46)


 


(70)




Income tax paid


 



(726)



 



(112)



 



(171)





 


 


 


 


 


 


 




Net cash provided by operating activities


 



3,960



 



1,555



 



2,261





 


 


 


 


 


 


 



 
 
 
 
 
 
 
 



(*) comparative numbers were adjusted to reflect the merger, refer to note 5A.
 
The accompanying notes form an integral part of the financial statements.
 
 
 
INTERIM CONSOLIDATED STATEMENTS OF
CASH FLOWS (cont.)
 




 


 



Nine month period ended
 September 30,



 



Year ended December 31,



 




 


 



2019



 



2018*



 



2018



 




 


 



U.S. $ in thousands



 




 


 



Unaudited



 


 


 




Cash Flows From Investing Activities:


 


 


 


 


 


 


 




Acquisition of subsidiary, net of cash acquired


 


(23)


 


-


 


-


 




Proceeds from sale of investments in financial assets, net


 


-


 


2,040


 


2,040


 




Proceeds from sale of property, plant and equipment


 


8


 


28


 


39


 




Purchase of property, plant and equipment


 



(554)



 



(348)



 



(515)



 




 


 


 


 


 


 


 


 




Net cash provided by (used in) investing activities


 



(569)



 



1,720



 



1,564



 




 


 


 


 


 


 


 


 




 


 


 


 


 


 


 


 




Cash Flows From Financing Activities:


 


 


 


 


 


 


 




Dividend


 


(1,306)


 


(1,773)


 


(1,773)


 




Payments of lease liabilities


 


(385)


 


-


 


-


 




Proceeds from exercise of share options


 


89


 


-


 


-


 




Issuance of treasury shares


 


18


 


-


 


-


 




Share issuance due to the merger


 


-


 


677


 


677


 




Short term loan from banks


 


-


 


264


 


(21)


 




Long term loan received from banks


 


-


 


112


 


120


 




Repayment of long-term loan from banks


 



(483)



 



(668)



 



(878)



 




 


 


 


 


 


 


 


 




Net cash used in financing activities


 



(2,067)



 



(1,388)



 



(1,875)



 




 


 


 


 


 


 


 


 




 


 


 


 


 


 


 


 




Increase in cash and
cash equivalents during the period 


 


1,324


 


1,887


 


1,950


 




Cash and cash equivalents
 at the beginning of the period


 


5,401


 


3,508


 


3,508


 




Exchange differences on balances of cash and cash equivalents


 



7



 



(47)



 



(57)



 




 


 


 


 


 


 


 


 




Cash and cash equivalents
 at the end of the period


 



6,732



 



5,348



 



5,401



 




 


 


 


 


 


 


 


 




 


 


 


 


 


 


 


 



 
 
 
 
 
 
 
 
 
 
 
 



 (*) comparative numbers were adjusted to reflect the merger, refer to note 5A.
 
The accompanying notes form an integral part of the financial statements.
 
 
 
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
NOTES TO THE 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.
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, 2018 was approved by the board on March 10, 2019. The report of the auditors on those financial statements was unqualified.
The interim consolidated financial statements as of September 30, 2019 have not been audited.
The interim consolidated financial information should be read in conjunction with the annual financial statements as of December 31, 2018 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, 2018 are applied consistently in these interim consolidated financial statements. Except for the adoption of new standards effective as of 1 January 2019.
 
New IFRSs adopted in the period
-     IFRS 16 Leases
The Group has adopted IFRS 16 retrospectively from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening balance sheet on 1 January 2019.
The main impact of adopting the standard early is the elimination of existing requirement on lessees to classify leases as operating lease (off-balance sheet) or finance lease, and they are now required to use a single accounting model for all leases, similarly to how finance leases are currently accounted for. In agreements where the Group is the Lessee, it applies IFRS 16 using a single accounting model under which it recognizes a right-of-use asset and a lease liability upon inception of the lease contract. It does so for all leases in which the Group has right to control the use of identified assets for a period of time in exchange for consideration. Accordingly, the Group recognizes depreciation and depreciation charges on the right-of-use asset and tests the need for recognizing impairment of the right-of-use asset in compliance with IAS 36 "Impairment of Assets", and also recognizes finance expenses in relation to a lease liability. Therefore, beginning on first-time adoption, rent expenses relating to properties rented under operating leases, are now presented as assets that are depreciated through depreciation and depreciation assets.
For all leases, the Group applied the transitional provisions such that it initially recognized a liability at the commencement day at an amount equal to the present value of the lease payments during the lease, discounted using the effective interest rate as of that date, and concurrently recognized a right-of-use asset at an amount identical to the liability. As a result, the standard had no impact on equity and the retained earnings of the Group as at initial application. 
As part of the initial application, the Group elected to adopt the following practical expedients, as permitted by the standard:
a. The use of a single discount rate for a portfolio of leases with similar characteristics;
b. Not separating lease and non-lease components of a contract, and instead accounting for all components as a single lease;
c. Excluding initial direct costs from the measurement of the right-of-use asset as at initial application;
d. Use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease;
 
New IFRSs adopted in the period (cont.) 
The following new significant accounting policy for agreements in which the Group is the lessee was applied beginning on 1 January 2019 following initial application of the standard: 
Right-of-use assets: 
The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets incurred, and lease payments made at or before the commencement date less any lease incentives received. The cost of right-of-use assets comprises the amount of the initial measurement of the lease liability; lease payments made at or before the commencement date less any lease incentives received; and initial direct costs incurred. The recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment. The right-of-use assets are presented within property, plant and equipment.
Lease liabilities:
At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate.
The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.
Lease term:
The term of a lease is determined as the non-cancellable period for which a lessee has the right to use an underlying asset, together with both periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.
Depreciation of a right-of-use asset: 
Subsequent to the inception of the lease, a right-of-use asset is measured using the cost method, less accumulated depreciation and accumulated impairment losses, and is adjusted for re-measurements of the lease liability. Depreciation is measured using the straight-line method over the useful life or contractual lease term, whichever ends earlier.
Lessees will be also required to re-measure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will recognize the amount of the re-measurement of the lease liability as an adjustment to the right-of-use asset, until the carrying amount is reduced to zero.
The following table presents a summary of the impact on the interim consolidated statement of financial position as of 1 January 2019, assuming that the previous accounting policy of the Group for leases would have continued in that period.
 
The impact on the interim consolidated statement of financial position as of January 1, 2019 (Unaudited):




 



Under
previous
policy




The change




Under
IFRS 16





 



U.S. $ in thousands





Non-current assets:


 


 


 




Property, plant and equipment


4,245


920


5,165




 


 


 


 




Current liabilities:


 


 


 




Other accounts payable


2,532


452


2,984




 


 


 


 




Non-current liabilities:


 


 


 




Lease liabilities


-


468


468




 


 


 


 




 
Upon initial adoption, the Group measured the right-of-use assets in an amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognized. Lease liabilities were measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application. There was no impact on retained earnings upon initial adoption of the standard.  
The following is a reconciliation of the Company's liabilities in respect of operating leases disclosed in the financial statements as of December 31, 2018, discounted at the incremental interest rate on the initial implementation date and lease commitments recognized on 1 January 2019 (Unaudited):




 



U.S. $ in thousands





 


 




Operating lease commitments as of December 31, 2018



970





 


 




Weighted average incremental borrowing rate as of January 1, 2019


4.8%




 


 




Discounted operating lease commitments



920





 


 




Lease liabilities as of January 1, 2019



920





 


 




 
Note 3 - REVENUES:




 


 



Nine month period  ended 
    September 30,



 



Year ended December 31,



 




 


 



2019



 



2018



 



2018





 


 



U.S. $ in thousands





 


 



Unaudited



 


 




Revenues arise from:


 


 


 


 


 


 




Sale of goods


 


23,803


 


20,162


 


27,734




Rendering of services


 


3,161


 


3,130


 


4,209




Projects


 



2,040



 



2,600



 



3,528





 


 



29,004



 



25,892



 



35,471





 


 


 


 


 


 


 



 
 
 
 
 
 
 
 
 



 
 
Note 4 - operating SEGMENTS:
The following tables present revenue and profit information regarding the Group's operating segments for the nine month period ended September 30, 2019 and 2018 respectively and for the year ended December 31, 2018.
Nine month period ended September 30, 2019 (Unaudited)




 



Antennas




Water Solutions




Distribution & Consultation




Adjustment & Elimination




Total





 


U.S. $ in thousands




Revenues


 


 


 


 


 




External


8,903


11,979


8,122


-


29,004




Internal



-




-




118




(118)




-





 


 


 


 


 


 




Total


8,903


11,979


8,240


(118)


29,004




 


 


 


 


 


 




 


 


 


 


 


 




Segment profit (loss)



317




1,170




867




137




2,491





 


 


 


 


 


 




Finance expense, net


 


 


 


 


55




Tax expenses


 


 


 


 



358





 


 


 


 


 


 




Profit


 


 


 


 



2,078





 


 


 


 


 


 




 




 



Antennas




Water Solutions




Distribution & Consultation




Adjustment & Elimination




Total





 



U.S. $ in thousands





 


 


 


 


 


 




Segment assets



13,700




9,481




5,076




-




28,257





 


 


 


 


 


 




Unallocated assets


 


 


 


3,716



3,716





 


 


 


 


 


 




Segment liabilities



3,030




1,913




2,717




-




7,660





 


 


 


 


 


 




Unallocated liabilities


 


 


 


 



2,036





 


 


 


 


 


 




 
Nine month period ended September 30, 2018 (Unaudited)




 



Antennas




Water Solutions




Distribution & Consultation




Adjustment & elimination




Total





 


U.S. $ in thousands




Revenues


 


 


 


 


 




External


9,360


10,567


5,965


-


25,892




Internal



-




-




189




(189)




-





 


 


 


 


 


 




Total



9,360




10,567




6,154




(189)




25,892





 


 


 


 


 


 




 


 


 


 


 


 




Segment profit



403




971




445




56




1,875





 


 


 


 


 


 




Finance expense, net


 


 


 


 


185




Tax expenses (income)


 


 


 


 



119





 


 


 


 


 


 




Profit


 


 


 


 



1,571





 


 


 


 


 


 




 




 



Antennas




Water Solutions




Distribution & Consultation




Adjustment & Elimination




Total





 



U.S. $ in thousands





 


 


 


 


 


 




Segment assets



14,251




8,444




3,824




-




26,519





 


 


 


 


 


 




Unallocated assets


 


 


 


 



2,390





 


 


 


 


 


 




Segment liabilities



3,607




1,989




2,156




-




7,752





 


 


 


 


 


 




Unallocated liabilities


 


 


 


 



899





 


 


 


 


 


 




 
Year ended December 31, 2018




 



Antennas




Water Solutions




Distribution & Consultation




Adjustment & Elimination




Total





 



U.S. $ in thousands





Revenues


 


 


 


 


 




External


12,670


14,298


8,503


-


35,471




Inter-segment



-




-




238




(238)




-





 


 


 


 


 


 




Total



12,670




14,298




8,741




(238)




35,471





 


 


 


 


 


 




 


 


 


 


 


 




Segment profit



630




1,395




728




171




2,924





 


 


 


 


 


 




Finance expense, net


 


 


 


 


274




Tax expenses


 


 


 


 



321





 


 


 


 


 


 




Profit


 


 


 


 



2,329





 


 


 


 


 


 




 
 
Year ended December 31, 2018




 



Antennas




Water Solutions




Distribution & Consultation




Adjustment & Elimination




Total





 



U.S. $ in thousands





 


 


 


 


 


 




Segment assets



13,800




8,772




3,232




-




25,804





 


 


 


 


 


 




Unallocated assets


 


 


 


 



3,462





 


 


 


 


 


 




Segment liabilities



3,651




2,025




1,953




-




7,629





 


 


 


 


 


 




Unallocated liabilities


 


 


 


 



622





 


 


 


 


 


 




 
 
Note 5 - SIGNIFICANT EVENTS:
A.  Merger
During March 2018 the Company announced that it was in preliminary discussions with its majority shareholder, MTI Computers & Software Services (1982) Ltd ("MTIC"), regarding a potential merger between the two companies. MTIC, whose shares were listed on the Tel Aviv Stock Exchange, at that point held 53.2% of the Company's issued ordinary shares. Following the announcement in March 2018, on 1 May , 2018 the Company announced that it had entered into a merger agreement (the "Merger Agreement") with its majority shareholder, MTIC and the Company together being the "Merging Companies", according to which, and in accordance with the provisions of Sections 350-351 of the Israeli Companies Law, 5759-1999 (the "Companies Law"), as a court approved scheme of arrangement between the Company, MTIC and their shareholders (the "Scheme of Arrangement"), MTIC was to be merged into the Company in a statutory merger, so that MTIC would be dissolved and all of its activities, assets and liabilities, subject to certain qualifications, would be transferred to the Company in consideration for the allotment of new ordinary shares of the Company and the transfer of MTIC's existing holdings in the Company, to all of MTIC's shareholders (the "Merger").
The Merger did not constitute a business combination within the scope of IFRS 3 and accordingly is treated by the Company in the financial statements as a pooling of interest. According to this method, the Company prepared its financial statements in order to reflect as if the Merger was in effect as of the establishment of the Company, while making the adjustments as follows:
The capital balance of the transferred activities was classified in the statement of changes in equity as part of the additional paid-in capital. Dividend distribution to the owners prior to the date of the merger were classified to the statement of changes in equity as retained earnings.
As consideration for the Merger, the Company allocated to the shareholders of MTIC 31,600,436 new ordinary shares in the Company, subject to a Conversion Ratio Mechanism (as defined below). In addition, MTIC's existing holdings in the Company were also transferred to all of the shareholders in MTIC, pro rata to their holdings of shares in MTIC.
On the date of record for the Merger the Company allocated to the shareholders of MTIC (the "Date of Record for the Merger" and the "Shareholders of MTIC" respectively) 31,600,436 new ordinary shares in the Company, according to the Conversion Ratio (as defined below) as of the date of the Merger Agreement, subject to the Conversion Ratio Mechanism (as defined below) (the "Allotted Shares") and transferred them, together with MTIC's Holdings in the Company (the "Sold Shares"), to all of the shareholders in MTIC, pro rata to their holdings of shares in MTIC on the Date of Record for the Merger, according to the Conversion Ratio. 
With respect to the Merger Agreement, the "Conversion Ratio" - a ratio of 5.2689055 Sold Shares for each share in MTIC as of the date of entry into the Merger Agreement, was determined according to a valuation of the business activities of MTIC and the Company, on the basis of the consolidated and audited financial statements for the year ended 31 December 2017 of each company as valued by an independent appraiser (the "Appraiser"), was subject to updates, as necessary, according to the Conversion Ratio Mechanism (as defined below). According to the aforesaid valuation, which constituted part of the Merger Agreement (the "Valuation"), the equity ratio as of 31 December 2017, between the value of MTIC excluding MTIC's holdings in the Company (approximately US$ 10.7 million as of 31 December 2017) when compared with the value of the Company (approximately US $ 18.8 million as at 31 December 2017) was approximately 1.75: in favor of the Company.
The Merger was completed on 20 August 2018.  Following completion of the Merger, the Conversion Ratio was not adjusted in accordance with the Conversion Ratio Mechanism (5.26891) and none of the options granted by the Company were exercised, and accordingly on completion of the Merger, the issued share capital of the Company was 87,038,724 ordinary shares.
B.   On 11 March 2019, the Board of directors declared a cash dividend of 1.5 US cents per share, representing approximately $1,306,000 in total. This dividend was paid on 5 April 2019 to shareholders on the register at the close of trading on 22 March 2019.
C.   On 24 January 2019 the Company announced a share repurchase programme 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"). The Programme is managed by Peterhouse Capital Limited ("Peterhouse Capital"). The Company has entered into an arrangement with Peterhouse Capital in relation to the Programme, where Peterhouse Capital will make the trading decisions concerning the timing of the market purchases of Ordinary Shares independently of and uninfluenced by the Company, with such trading decisions being in line with the terms of the Programme. Purchases may continue during any prohibited periods of the Company, as defined by the Market Abuse Regulation 596/2014/EU ("MAR"), which may fall during the term of the Programme.  The Company reserves the right to bring a halt to the Programme under circumstances that it deems to be appropriate, provided that it is permissible for this to occur in compliance with MAR.
The Programme commenced on 28 January 2019 and was to continue until no later than 26 July 2019. Ordinary Shares acquired as a result of the Programme will be held by MTI Engineering and in accordance with the Israeli Companies Law, 1999 will not have any voting rights. An objective of the Programme is that Ordinary Shares acquired by MTI Engineering will be resold, provided that this occurs under circumstances that the Board of MTI deems to be appropriate and in compliance with MAR. Cash generated from any eventual resales of Ordinary Shares acquired by MTI Engineering under the Programme will be credited to a share dealing account held with a third party, which will be under the direction of Peterhouse Capital and such cash may be used by Peterhouse Capital to make future purchases of Ordinary Shares under the Programme. On 30 May 2019, MTI Engineering sold  entire holding that it had accumulated up until that date through the Programme, at a price of 23.5 pence per share generating a profit of $21,000, which was recorded in additional paid-in-capital. The funds received from the sale were returned into the share dealing account held with a third party, which will be under the direction of Peterhouse Capital and such cash may be used by Peterhouse Capital to make future purchases of Ordinary Shares under the Programme.
On 24 July 2019, the Company announced that the board of directors of the Company and the board of directors of MTI Engineering had decided to continue with the Programme for another six months until 26 January 2020. On 21 August 2019, MTI Engineering again sold the entire holding that it had accumulated up until that date through the Programme (after purchasing Ordinary Shares in July and August 2019), at a price of 22.2 pence per share, generating a loss of $3,000, which was recorded in additional paid-in-capital. During September 2019, the Company announced that MTI Engineering had purchased 300,000 Ordinary Shares under the Programme and as at the date of this report, a total of 300,000 Ordinary Shares are held by MTI Engineering under the Programme.
D.  During April 2019, the Company's Chairman and the Chief Executive Officer, exercised options over 450,000 shares in exchange for a total consideration of approximately $56,000.
E.   On 24 June 2019 the Company announced that Mottech Water Solution Ltd ("Mottech"), has entered into a share purchase agreement to acquire 50% of Parkland Australia Pty Ltd ("Parkland Australia"), a value added reseller of Mottech's solutions in Australia, for a consideration of up to 0.8m Australian dollars ("AUD") (approximately US$0.55m).  0.6m AUD (US$0.41m) of the consideration have been paid upon closing and the reminder in two tranches by July 2020 and July 2021 based on the financial performance of Parkland Australia in FY 2020 and FY 2021 (ending 30 June 2020 and 2021 respectively) (the "Acquisition"). The Acquisition was completed on 30 July 2019. The consideration for the acquisition of Parkland Australia is not viewed as a material expenditure for the Company.
F.   During July 2019, employees of the Company exercised options over 250,000 Ordinary Shares in exchange for a total consideration of approximately $33,000.
 
-ENDS-
 




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