RNS Number:6632H
Gilat Satcom Limited
13 November 2007
GILAT SATCOM LTD.
INTERIM RESULTS FOR THE 9 MONTHS ENDED 30 SEPTEMBER 2007
The first profitable quarter this year reflects a significant improvement in
Gross margins, operating margins and EBITDA
Gilat Satcom Ltd. ("Gilat" or the "Company"; AIM symbol: GLT), the
telecommunications operator specialising in the developing world, announces
unaudited results for the 9 months ended 30 September 2007.
Key points:
Figures in US$000s Q3 2007 Q2 2007 Q1 2007 9 months ended 9 months ended Year ended
30 Sep. 2007 30 Sep. 2006 31 December
2006
Revenues 9,378 9,038 8,710 27,126 26,590 37,084
Gross profit 2,343 1,917 1,789 6,049 6,872 9,681
Gross margin (%) 25.0 21.2 20.5 22.3 25.8 26.1
Operating profit (loss) 279 (139) (798) (658) 739 1,385
Operating margin (%) 3 (2) (9) (2.4) 2.8 3.7
EBITDA 1,837 1,402 731 3,971 5,001 7,163
Profit (loss) before tax 58 (385) (1,133) (1,460) (137) 252
Financial Highlights
* Third quarter of 2007 is the first profitable quarter this year and
reflects a significant improvement in Gross margins, operating margins and
EBITDA.
* Revenue for the first 9 months of 2007 increased to US$ 27.126
million, compared to US$ 26.590 million in the first 9 months of 2006.
Revenues in the third quarter of 2007 increased to US$ 9.38 million,
compared to US$ 9.0 million and US$ 8.7 million in Q2 and Q1 2007,
respectively.
* Gross profit increased 22.2% in the third quarter to US$ 2.3 million
compared to US$ 1.9 million in the second quarter of 2007. For the first
9 months of 2007, gross profit increased 13.6% to US$ 6.872 million.
* Third quarter results reflected operating profit compared to losses in
previous quarters this year. Operating profit in the third quarter of
2007 was US$ 279 thousand compared to operating loss of US$ 139 thousand
and US$ 798 thousand in the second and first quarter of 2007 and
compared to an operating loss of US $192 thousand in the third quarter
of 2006.
* The improvement in the operational profit is due to the improved gross
margins.
* EBITDA for the third quarter of 2007 increased to US$ 1.837 million
reflecting growth of 31% and 151% compared to US$ 1.402 million and US$
731 thousand in the second and first quarter of 2007, respectively. Our
cash generative business model continues to be strong.
* Net debt (Loans less cash) decreased to US$ 2.6 million compared to US$
5.4 million in December 2006.
CEO statement:
Change of ownership
As previously announced the Eurocom Group has acquired control over the 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 a new CEO were appointed.
Following the change of control in May 2007 Gilat released a bank deposit of US$
3 million, reduced the interest rate on various loans and cancelled the
financial covenants previously agreed with the bank. In addition, On August 29
the board of directors approved to replace another bank loan of US$ 2.6 million
with a loan from Satcom Systems Ltd. The loan from Satcom Systems was granted
and bears the same interest rate and payment schedule as the bank loan, but does
not include any financial covenants.
New business and deals drive gross profit
Third quarter results reflect a significant change in sales, mainly in Gilat's
core business - internet backbone connectivity. Gilat has signed a few major
contracts for the supply of backbone internet connectivity via satellite with
large telcos and ISPs in Africa, which include:
* A new agreement to provide internet backbone connectivity in East Africa for
an annual revenue of approximately US$ 1.4 million
* A new agreement to provide internet backbone connectivity to a new customer
in Asia for an annual revenue of approximately US$ 0.8 million
* Expansion of two agreements with East African customers with an aggregate
quarterly value of US$ 0.4 million, long term agreements with these
customers are under negotiations, which will reflect an annual revenue of
approximately US$ 1.6 million
* Gilat has started installation of its new VSAT over KU service. During the
third quarter approximately 100 new customers have joined this new service.
The new deals and increased revenues this quarter resulted in net profit, first
profitable quarter this year. Most of the new transactions were carried out on
our existing satellite capacity without additional costs and therefore gross
profit increased 22% compared to previous quarter.
Since some of the deals mentioned above were signed during the quarter we expect
to see the full impact of these deals in the next quarter.
We continue to invest in our network and technical services, in order to provide
top quality product and services to our customers and to enhance our operational
efficiency, order to further increase revenues from our current resources and
thus increase our margins.
Gilat's Board of Directors and management are encouraged by the positive signs
reflected in the results for the third quarter and are confident in the success
of the company achieving future goals to the benefit of our shareholders.
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
US$000s nine months ended September Three months ended September
30, 30,
2 0 0 7 2 0 0 6 2 0 0 7 2 0 0 6
Revenues 27,126 26,590 9,378 9,830
Cost of revenues 21,077 19,718 7,035 7,823
Gross profit 6,049 6,872 2,343 2,007
Operating expenses:
Selling and marketing 2,482 2,377 722 842
General and administrative 4,225 3,756 1,342 1,357
Total operating expenses 6,707 6,133 2,064 2,199
Profit (loss) from operations (658) 739 279 (192)
Financial income 145 254 67 88
Financial expenses (947) (1,130) (288) (376)
Profit (loss) before tax (1,460) (137) 58 (480)
Income Tax benefit (expenses) 583 (*) 223 207 (*) 621
Profit (loss) for the period (877) (*) 86 265 (*)141
Basic loss per share (in dollars) (0.050) (*)0.005 0.015 (*)0.008
Diluted loss per share (in dollars) (0.050) (*)0.005 0.015 (*)0.008
Number of shares used in computing 17,692 17,692 17,692 17,692
basic earnings
per share (in thousand)
Number of shares used in computing 17,692 17,743 17,692 17,759
diluted earnings
per share (in thousand)
(*) Restated - see note 2.B
CONSOLIDATED BALANCE SHEETS
US$000s September 30, December 31,
2 0 0 7 2 0 0 6
Unaudited Audited
ASSETS
CURRENT ASSETS
Cash and cash equivalents 6,670 5,916
Short-term deposits 263 248
Trade receivables 598 2,315
Other receivables 668 (*) 803
Inventories 1,230 1,011
Total current assets 9,429 10,293
NON-CURRENT ASSETS
Property and equipment 17,797 20,339
Intangible assets 6,524 7,430
Financial assets available for sale 660 -
Deferred income taxes 2,030 1,130
Other 417 536
Total non-current assets 27,428 29,435
36,857 39,728
LIABILITES AND EQUITY
CURRENT LIABILITIES
Current maturities of long term loans 1,900 2,600
Current maturities of long term leases 627 626
Current maturities of long term loan from shareholder 700 -
Trade accounts payable 4,453 3,863
Other payables and current liabilities 1,061 1,539
Total current liabilities 8,741 8,628
NON-CURRENT LIABILITIES
Long-term credit from banks 5,225 8,925
Obligations under finance leases 6,905 7,080
long term loan from shareholder 1,750 -
Liabilities for severance pay, net 88 70
Total non-current liabilities 13,968 16,075
SHARE HOLDERS' EQUITY
Share capital 39 39
Capital reserves 15,321 15,321
Accumulated deficit (1,212) (*) (335)
Total equity 14,148 15,025
36,857 39,728
(*) Restated - see note 2.A
CONSOLIDATED STATEMENTS OF CASH FLOWS
US$000s nine months ended September 30,
2 0 0 7 2 0 0 6
Cash flows from operating activities:
Net Profit (Loss) for the period (877) (*)86
Adjustments to reconcile net profit to net
cash provided by operating activities:
Depreciation of property and equipment 4,629 4,262
and amortization of intangible assets
Share based payment - 54
Appreciation of finance lease 294 278
Appreciation of bank deposits (15) (42)
Decrease in trade receivables 1,717 136
Decrease in other receivables 300 219
Increase in inventories (219) (557)
Increase in other non current assets (46) -
Increase in trade accounts payable 590 1,010
Increase (Decrease) in other payables and current liabilities (478) 1,176
Increase in deferred income taxes (633) (*)(223)
Increase in liabilities for severance pay, net 18 8
Net cash provided by operating activities 5,280 6,407
Cash flows from investing activities:
Purchases of property and equipment (1,252) (1,070)
Purchases of intangible assets (196) -
Investment in financial assets available for sale (660) -
Repayment of a short-term bank deposit 3,000 -
Investment in short-term bank deposit (3,000) -
Net cash used in investing activities (2,108) (1,070)
Cash flows from financing activities:
Repayment of finance lease (468) -
Repayments of loans from banks (4,400) (21,221)
Receipt of long term loans from bank - 14,845
Receipt of long term loan from shareholder 2,450 -
Net cash used in financing activities (2,418) (6,376)
Increase (decrease) in cash and cash equivalents 754 (1,039)
Cash and cash equivalents at the beginning of the period 5,916 6,987
Cash and cash equivalents at the end of the period 6,670 5,948
(*) 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 consolidated interim financial statements of Gilat Satcom Ltd. ("the
Company"), have been prepared as of September 30, 2007 and for the nine months
then ended. 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 - January 1, 2007
(there were no influence on the Financial Statements).
* IFRS 7 - Financial Instruments: Disclosures - Effective - January 1, 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.
Restatement
A. The financial statements as of December 31, 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 restatements on the financial statements as of December 31,
2006 are as follows:
As of December 31, 2006
US$000s As Previously Effect of Reported in
Reported Restatement these Financial
Statements
Balance sheet:
Other receivables 946 (143) 803
Accumulated deficit (192) (143) (335)
As of January 1, 2006
As Previously Effect of Reported in
Reported Restatement these Financial
Statements
Balance sheet:
Accumulated deficit (569) (143) (712)
B. The financial statements as of September 30, 2006 were retroactively
adjusted by way of restatement in order to reflect adjustments to Income tax
expenses for the nine months ended September 30, 2006.
The effect of the restatements on the financial statements as of September 30,
2006 are as follows:
nine months ended September 30, 2006
US$000s As Previously Effect of Reported in
Reported Restatement these Financial
Statements
Income statements:
Income tax expenses 695 (472) 223
Profit for the period 558 (472) 86
Basic loss per share (in dollars) 0.032 (0.027) 0.005
Diluted loss per share (in dollars) 0.031 (0.026) 0.005
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 September 2007 4.013
30 September 2006 4.302
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:
Nine months ended September 30, 2007:
US$000s VSAT Private Internet International
Network Backbone Voice
Services Connectivity Services Total
REVENUE
External sales 2,074 20,825 4,227 27,126
RESULT
Segment result 731 2,493 457
Nine months ended September 30, 2006:
US$000s VSAT Private Internet International
Network Backbone Voice
Services Connectivity Services Total
REVENUE
External sales 2,109 19,495 4,986 26,590
RESULT
Segment result 470 3,945 166
Note 5 - Other Information
a. In connection with note 12 to the annual financial statement.
In April the Israeli Minister of Communications has notified the company that it
is contemplating on fining the company and the Company has began an
administrative process in which the minister will hear out the Company's claims.
According to law, the maximum fine applicable is US$ 70 thousand. The company
cannot asses at this point what will be the final amount to be paid, if at all.
b. In January the company's subsidiary Gilat Satcom Nigeria Ltd. Was
granted license from the Nigerian Communication Commission for consideration US$
214 thousand. The license is for a period of 10 years and it will be amortized
over its estimated useful life. This license will allow Gilat Satcom Nigeria to
operate as a local satellite communication services provider and to provide
services to a wider range of customers.
c. On February 2007 one of the managers of the company, was granted
options exercisable to company's shares in the amount of 176,923 options. The
options, each to purchase one Ordinary share par value of NIS 0.01 of the
Company at an exercise price per share of 120p. Subject to his continued
employment with the Company, 44% are fully vested at the grant date and
additional 7% will become vested at the end of each calendar quarter, until the
end of 2008. All terms and conditions including price adjustments and dividend
adjustments are according to the company's share option plan. The fair value of
the options granted to the manager is $10 thousand (computed based on the
following data: share price 40p, expected volatility: 45%, risk free rate - 5%).
d. The income statement for the nine months ended September 30, 2007
reflects a provision for doubtful account of US$ 359 thousand from a certain
customer. In addition, the Company did not recognize additional revenues of
approximately US$ 942 thousand from the same customer.
e. In May 2007 the company has decided to invest and purchase bandwidth
capacity in the Eastern Africa Submarine Cable System project ("Eassy") through
the Western Indian Ocean Cable Company Limited ("WIOCC") established by various
parties and financed by global Development Financial Institutions. The
investment will be made through Gilat Satcom Nigeria Ltd. (its 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
percent 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 the WIOCC's board of directors.
On August 2007 the Company invested the sum of US$ 660 thousand in WIOCC's share
capital and another US$ 650 thousand was executed after the balance sheet date
and designated for investment in bandwidth capacity. The balance of US$ 1
million will be payable between 2010-2012.
f. In connection with note 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 US$ 3 million and reduce the interest rate on the loans.
Furthermore, on August 2007 the bank agreed to cancel the financial covenants
that were agreed between the company and the bank in the past.
g. On August 29 the board of directors approved to replace a bank loan of
US$ 2.6 million with a loan from Satcom Systems Ltd- the controlling shareholder
of the company. The loan from Satcom Systems was granted and bears the same
interest rate and payment schedule as the bank loan but does not include
financial covenants.
h. In connection with note 13 h to the annual financial statement.
On June 2007 the Service Agreement between the Company and its former CEO was
terminated, and 550,000 options have expired.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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