RNS Number:9483C
Gilat Satcom Limited
29 August 2007
GILAT SATCOM LTD.
INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2007
Gilat Satcom Ltd. ("Gilat"; AIM symbol: GLT), the telecommunications operator
specialising in the developing world, announces unaudited results for the 6
months ended 30 June 2007.
Key points:
+-----------------+--------+---------+------------+------------+------------+
|Figures in | Q1 2007| Q2 2007| 6 months| 6 months| Year ended|
|US$000s | | | ended| ended| 31 December|
| | | |30 June 2007|30 June 2006| 2006|
+-----------------+--------+---------+------------+------------+------------+
|Revenues | 8,710| 9,038| 17,748| 16,760| 37,084|
+-----------------+--------+---------+------------+------------+------------+
|Gross profit | 1,789| 1,917| 3,706| 4,865| 9,681|
+-----------------+--------+---------+------------+------------+------------+
|Gross margin (%) | 20.5| 21.2| 20.9| 29.0| 26.1|
+-----------------+--------+---------+------------+------------+------------+
|Operating profit | (798)| (139)| (937)| 931| 1,385|
|(loss) | | | | | |
+-----------------+--------+---------+------------+------------+------------+
|Operating margin | (9)| (2)| (5.3)| 5.6| 3.7|
|(%) | | | | | |
+-----------------+--------+---------+------------+------------+------------+
|EBITDA | 731| 1,402| 2,133| 3,746| 7,163|
+-----------------+--------+---------+------------+------------+------------+
|Profit (loss) | (1,133)| (385)| (1,518)| 343| 252|
|before tax | | | | | |
+-----------------+--------+---------+------------+------------+------------+
Financial Highlights
*Revenue for the first 6 months of 2007 increased 5.9% compared to the
first 6 months of 2006. Revenues in the second quarter of 2007 were $9.0
million, compared to $8.7 million in Q2 2006 and compared to $8.7 in Q1
2007.
*Gross profit in the second quarter was US$1.9 million compared to $1.8
million in Q1 2007 and to $2.4 million in Q2 2006.
*Operating loss in Q2 2007 was US$141 thousands compared to operating loss
of US$798 thousands in Q1 2007 and compared to operating profit of $271
thousands in Q2 2006.
*EBITDA for the second quarter of 2007 was $1,402 thousands, compared to
$731 thousands in Q1 2007 and compared to $1.7 million in the second quarter
of 2006.
*Net debt (Bank loans less cash) decreased to $3.6 million compared to
$5.4 million in December 2006.
*The first 6 months results reflect management's decision to write-off a
debt owed by a large customer of approximately $1.1 million, whereas the
related expenses have been fully accrued. Out of this amount $762 thousands
are unrecognized revenues related to the first 6 months and additional $359
thousands are a provision for doubtful accounts related to the fourth
quarter of 2006. Management expects no further expenses in connection with
this transaction in future quarters.
*Excluding the effect of the above mentioned debt, revenues for the 6
months were $18.5 million with 24% gross margin and operating profit of $184
thousands.
CEO statement:
As previously announced by the company there has been a change in its ownership,
the Eurocom Group has acquired control over the company (through control over
Satcom Systems, Gilat's parent company). The Eurocom Group is Israel's largest
privately owned communications group with presence in the Israeli and
international markets.
Following the acquisition new board members and new CEO were appointed. Gilat's
management and new board of directors are currently in the process of evaluating
the company business strategy.
Again, following the Acquistion, Gilat released a bank deposit of $3 million,
reduced the interest rate on various loans and cancelled the financial covenants
previously agreed with the bank.
In addition, on 29 August 2007, the board of directors approved the replacement
of another $2.6 million bank loan with a loan from Satcom Systems Ltd. The loan
from Satcom Systems will bear the same interest rate and payment schedule as the
bank loan, but will not include financial covenants.
Gilat's new Board of Directors and management are confident in the success of
the Company and its ability to achieve future goals for the benefit of its
shareholders.
Board Changes
For more information about the Eurocom Group and the new board members, please
see the Company's press announcement from 26 April 2007 and from 22 June 2007.
Roy Hess,
CEO
For further information, please contact:
Gilat Satcom Ltd.: +972 3 925 5015
Liat Helman, CFO
Commitment-IR: +972 9 741 8866
Yael Nevat
Seymour Pierce +44 20 7107 8000
Stuart Lane or John Depasquale
Consolidated Profit & Loss Account
Six months ended 30 June Three months ended 30 June
2 0 0 7 2 0 0 6 2 0 0 7 2 0 0 6
Revenues 17,748 16,760 9,038 8,712
Cost of revenues 14,042 11,895 7,121 6,318
Gross profit 3,706 4,865 1,917 2,394
Operating expenses:
Selling and marketing 1,760 1,535 798 811
General and administrative 2,883 2,399 1,258 1,313
Total operating expenses 4,643 3,934 2,056 2,124
Profit (loss) from (937) 931 (139) 270
operations
Financial income 78 166 62 32
Financial expenses (659) (754) (308) (297)
Profit (loss) before tax (1,518) 343 (385) 5
Income Tax benefit 376 (*) (398) (53) (88)
(expenses)
Loss for the period (1,142) (*) (55) (438) (83)
Basic loss per share (in (0.065) (*) (0.003) (0.025) (0.005)
dollars)
Diluted loss per share (in (0.065) (*) (0.003) (0.025) (0.005)
dollars)
Number of shares used in 17,692 17,692 17,692 17,692
computing basic earnings
per share (in thousand)
Number of shares used in 17,692 17,736 17,692 17,736
computing diluted earnings
per share (in thousand)
(*) Restated - see note
2.B
Consolidated Balance Sheet
30 June 31 December
2 0 0 7 2 0 0 6
Unaudited Audited
ASSETS
CURRENT ASSETS
Cash and cash equivalents 6,355 5,916
Short-term deposits 258 248
Trade receivables 1,038 2,315
Other receivables 1,061 (*) 803
Inventories 1,230 1,011
Total current assets 9,942 10,293
NON-CURRENT ASSETS
Property and equipment 18,752 20,339
Intangible assets 6,803 7,430
Deferred income taxes 1,795 1,130
Other 381 536
Total non-current assets 27,731 29,435
37,673 39,728
LIABILITES AND EQUITY
CURRENT LIABILITIES
Current maturities of long term loans 2,600 2,600
Current maturities of long term leases 627 626
Trade accounts payable 4,829 3,863
Other payables and current liabilities 1,050 1,539
Total current liabilities 9,106 8,628
NON-CURRENT LIABILITIES
Long-term credit from banks 7,625 8,925
Obligations under finance leases 6,970 7,080
Liabilities for severance pay, net 89 70
Total non-current liabilities 14,684 16,075
SHARE HOLDERS' EQUITY
Share capital 39 39
Capital reserves 15,321 15,321
Accumulated deficit (1,477) (*) (335)
Total equity 13,883 15,025
37,673 39,728
(*) Restated - see note 2.A
Consolidated Statement of Cash Flows
Six months ended 30 June
2 0 0 7 2 0 0 6
Cash flows from operating activities:
Loss for the period (1,142) (*) (55)
Adjustments to reconcile net profit to net
cash provided by operating activities:
Depreciation of property and equipment 3,070 2,815
and amortization of intangible assets
Share based payment - 53
Appreciation of finance lease 203 173
Appreciation of bank deposits (10) (4)
Decrease (Increase) in trade receivables 1,277 (844)
Decrease (Increase) in other receivables (92) 385
Increase in inventories (219) (330)
Increase in trade accounts payable 966 1,038
Increase (Decrease) in other payables and current (489) 767
liabilities
Decrease (Increase) in deferred income taxes (398) (*) 71
Increase in liabilities for severance pay, net 19 13
Net cash provided by operating activities 3,185 4,082
Cash flows from investing activities:
Purchases of property and equipment (928) (544)
Purchases of intangible assets (206) -
Repayment of a short-term bank deposit 3,000 -
Investment in short-term bank deposit (3,000) -
Net cash used in investing activities (1,134) (544)
Cash flows from financing activities:
Repayment of finance lease (312) -
Repayments of loans from banks (1,300) (20,506)
Receipt of long term loans from bank - 14,845
Net cash used in financing activities (1,612) (5,661)
Increase (decrease) in cash and cash equivalents 439 (2,123)
Cash and cash equivalents at the beginning of the period 5,916 6,987
Cash and cash equivalents at the end of the period 6,355 4,864
(*) Restated - see note 2.B
Note 1 - Basis of Preparation
The condensed financial statements have been prepared in conformity with
International Accounting Standards (IAS) 34, interim Financial Reporting.
Note 2 - Significant Accounting Policies
The accounting policies adopted are consistent with those followed in the
preparation of the Company's annual Financial Statements for the year ended 31
December 2006.
The Company's consolidated interim financial statements have been prepared for
the six months ended 30 June 2007. These financial statements should be read in
conjunction with the Company's 2006 annual financial statements, including their
accompanying notes.
Adoption of new and revised Standards:
* IAS 1 - Presentation of Financial Statements - Effective from 1 January
2007 (there were no influence on the Financial Statements).
* IFRS 7 - Financial Instruments: Disclosures - Effective from 1 January
2007.(there were no influence on the Financial Statements).
At the date of authorisation of these financial statements, the following
Standards and Interpretations were in issue but not yet effective:
* IFRS 8 - Operating Segments - Effective for annual periods beginning on
or after 1 January 2009.
* IFRIC 11 - IFRS 2 - Group and Treasury Share Transactions - Effective
for annual periods beginning on or after 1 March 2007.
* IFRIC 12 - Service Concession Arrangement - Effective for annual periods
beginning on or after 1 January 2008.
* IAS 23 - Borrowing costs - Effective for annual periods beginning on or
after 1 January 2009.
* IFRS 8 - Operating Segments - Effective for annual periods beginning on
or after 1 January 2009.
Restatement
A. The financial statements as of 31 December 2006 were retroactively adjusted
by way of restatement in order to reflect adjustments to currency appreciation
of related party balance in the year 2005.
The effect of the restatement on the financial statements as of 31 December 2006
is as follows:
As of 31 December 2006
As Effect of Reported in
Previously Restatement these
Reported Financial
Statements
Balance sheet:
Other receivables 946 (143) 803
Accumulated deficit (192) (143) (335)
As of 1 January 2006
As Effect of Reported in
Previously Restatement these
Reported Financial
Statements
Balance sheet:
Accumulated deficit (569) (143) (712)
B. The financial statements as of 30 June 2006 were retroactively adjusted by
way of restatement in order to reflect adjustments to income tax expenses for
the six months ended 30 June 2006.
The effect of the restatement on the financial statements as of 30 June 2006 is
as follows:
Six months ended 30 June 2006
As Effect of Reported in
Previously Restatement these
Reported Financial
Statements
Balance sheet:
Income tax expenses (69) (329) (398)
Profit (loss) for the period 274 (329) (55)
Basic loss per share (in dollars) 0.015 (0.018) (0.003)
Diluted loss per share (in dollars) 0.015 (0.018) (0.003)
Note 3 - Exchange rates and linkage basis:
Assets and liabilities in or linked to the Israeli currency, New Israeli Shekel
("NIS"), are included in the financial statements according to the
representative exchange rate as published by the Bank of Israel at the balance
sheet date.
Data regarding exchange rates of NIS in relation to U.S. dollar are as follows:
Exchange rate
of one U.S.
dollar
30 June 2007 4.249
30 June 2006 4.440
31 December 2006 4.225
Note 4 - Business Segments
The communication services provided by the Company are divided into three main
communication sectors: VSAT private network services, Internet backbone
connectivity and International voice services.
Segment information about these businesses is presented below:
Six months ended 30 June 2007:
VSAT
Private Internet International
Network Backbone Voice
Services Connectivity Services Total
REVENUE
External sales 1,424 13,526 2,798 17,748
RESULT
Segment result 517 1,168 326
Six months ended June 30, 2006:
VSAT
Private Internet International
Network Backbone Voice
Services Connectivity Services Total
REVENUE
External sales 1,402 12,858 2,500 16,760
RESULT
Segment result 248 3,165 (25)
Note 5 - Other Information
In connection with note 12 to the annual financial statement:
a. In April 2007, the Israeli Minister of Communications notified the Company
that it intends to fine the Company and the Company has began an administrative
process in which the Minister will hear the Company's representations. According
to law, the maximum fine applicable is $70,000. The Company cannot asses at this
point what the final amount to be paid, if any, will be.
b. In January 2007, Gilat Satcom Nigeria Ltd (the Company's subsidiary) was
granted a licence by the Nigerian Communication Commission for a consideration
of $214,000. The licence is for a period of 10 years and it will be amortized
over its estimated useful life. This license will allow Gilat Satcom Nigeria Ltd
to operate as a local satellite communication services provider and to provide
services to a wider range of customers.
c. In February 2007, one of the managers of the Company was granted 176,923
options over unissued shares in the capital of the Company. Each option grants
the right to purchase one Ordinary share of NIS 0.01 in the capital of the
Company at an exercise price of 120p. Subject to his continued employment with
the Company, 44% are fully vested at the date of grant and an additional 7% will
vest at the end of each calendar quarter, until the end of 2008. All terms and
conditions including price adjustments and dividend adjustments are in
accordance with the Company's share option plan. The fair value of the options
granted to the manager is $10,000 (calculated using the following data: share
price 40p, expected volatility: 45%, risk free rate: 5%).
d. The income statement for the 6 months ended 30 June 2007 reflects a provision
for doubtful debts of $359,000. In addition, the Company did not recognise
additional revenues of approximately $762,000 from the same customer.
e. In May 2007, the Company decided to invest and purchase bandwidth capacity in
the Eastern Africa Submarine Cable System project ("Eassy") through Western
Indian Ocean Cable Company Limited ("WIOCC") which has been established by
various parties and financed by global Development Financial Institutions. The
investment will be made through Gilat Satcom Nigeria Ltd, the Company's wholly
owned subsidiary. As one of the investing parties in this project, Gilat will
purchase long-term bandwidth capacity enabling it to increase its penetration of
the East African market for broadband internet services.
Gilat intends to invest approximately US$2.3 million in the project. Gilat's
investment will entitle it to ownership of approximately three and a half per
cent. Of WIOCC's share capital. In addition, Gilat's investment will give it
access to bandwidth capacity which may be used for broadband internet
connectivity or other communication applications for the lifetime of the cable
(which is expected to be at least 15 years), together with participation in the
management of the project through a place on WIOCC's board of directors. An
initial investment of US$1.3 million is due during the coming year and the
balance of US$1 million will be payable between 2009 and2011.
f. In connection with notes 12 i and 12 j to the annual financial statement:
following the change of control in the Company in May 2007, the bank agreed to
release a deposit of $3 million and reduce the interest rate on the loans.
Furthermore, in August 2007 the bank agreed to cancel the financial covenants
that had been agreed between the Company and the bank.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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