28th Aug 2009 12:04
Emblaze Ltd ("Emblaze" or "the Group") Interim results for six months ended 30 June 2009
Ra'anana, Israel, 28 August 2009: Emblaze Ltd, the technology services group , announces its financial results for the six months ended 30 June 2009. All references to $ are to US Dollars.
Emblaze Group consists of two main operating arms: Growth and Innovation. The Growth arm relates to the stable, mature and operational companies managed under Formula Systems (1985) Ltd. ("Formula"). The Innovation arm relates to the in-house investments made by the Group in technology research and development of future wireless and cellular products.
Financial Highlights:
- Group revenues have increased by approximately 8% in NIS terms asthe vast majority of the Group revenues are generated in NIS. In translationto the reporting currency, US Dollar, revenues in H1 2009 have reached $270.8million, representing a decrease compared with H1 of 2008 ($289.6 million).The reduction in revenue is a result of devaluation of exchange rates, whichaffected the translation of income generated in NIS into US Dollar.
- Operating profit of Growth arm increased to $15.5 million (H1 2008: $14 million). The consolidated operating profit increased to $7.4 million (H1 2008: operating loss of $4.2 million) as a result of lower R&D expenses of the Group's Innovation arm in the first half of 2009.
- Operating expenses reduced to $54.5 million (H1 2008 $75.4 million).
- Net profit of Growth arm attributed to Group shareholders increased to $2.9 million (H1 2008: $2.7 million). The continued investment in the Monolith and other Innovation arm projects resulted in consolidated net loss of $4.35 million (H1 2008: net loss of $10.8 million).
- Group total assets decreased to $594.7 million (31 December 2007: $639.3 million). The decrease is a result of distribution of dividends by Formula, exchange rate affects and investments in the Innovation arm.
- Strong cash position with consolidated cash and short terms investments of $150.4 million.
Operational Highlights:
- Formula continued to perform well with all Growth arm subsidiaries generating positive operating and net profits despite challenging economic conditions.
- The Monolith project is being kept under a veil of strict secrecydue to obvious commercial and trade practices until actual commercial launch.However, Management reports that samples of the Monolith are now being testedby several global operators and that the project is in-line with itsexpectations for potentially gaining orders from operators and being ready formanufacturing by the end of 2009.
- EMOZE continued to expand through further agreements with operators and handset manufacturers.
Naftali Shani, Chairman of Emblaze, stated: "In the first half of2009 our Growth arm continued the prudent cost saving strategy, which wastranslated into a strong cash position. Despite the inevitable impact of aworld wide recession, we are pleased to report all Growth arm subsidiariesgenerated positive operating and net profits despite the global economycrisis. Although second quarter conditions remained challenging, we arebeginning to see signs that the business environment is improving and webelieve we are well positioned to take advantage of that. We also expect theMonolith mobile device to be ready for manufacturing by the end of 2009 andbelieve it has the potential to increase revenues and profits for the Group
in2010."Overview
The contribution of each activity to the Emblaze Group is presented in the table below (selected items)*:
Emblaze Group - Financial Six monthsHighlights ended(unaudited) June 30,US$ in millions 2009 Growth Innovation Activity Arm Total Revenues 268.6 2.2 270.8 Gross profit 60.8 1.2 62 Operating income (loss) 15.5 (8.1) 7.4 Consolidated net income (loss) 13.1 (7.5) 5.6 Net income (loss) attributed to 2.9 (7.3) (4.4)
Group shareholders
* Corporate expenses were allocated to Innovation arm
GROWTH ACTIVITY
The Growth activity of the Group includes Formula and its subsidiaries. Formula is a NASDAQ and TASE listed company principally engaged, through its subsidiaries, in providing software consulting services, developing proprietary software products and providing computer-based business solutions.
The Formula Group revenue for the first half of 2009 totaled $268.6 millioncompared to $287.3 million in the first half of 2008. Most of the decline inrevenue is attributed to the negative impact of the devaluation of the NISagainst the US Dollar. Formula's operating income in the first half of 2009was $16.7 million compared to $15.5 million in the first half of 2008, anincrease of 7.7%. The net income generated from continuing operation in thesix months ended 30 June 2009 was $7.1 million compared to $7.3 million in thesame period of 2008.
Formula consists of established companies, with developed products and services that are delivering revenue and profit as outlined henceforth:
Matrix IT Ltd. (TASE: MTRX)
Overview
Despite the economic slowdown and slow start to the year, Matrix continues to improve its results in the second quarter of 2009 as well as maintain its leading position in the IT Israeli market.
Earnings for the period ended 30 June 2009 amounted to $179.6 million (H12008: $193 million). Matrix generates its income in New Israeli Shekel. Thereduction in revenue is only in translation of the revenues from NIS to USDollar. In NIS, Matrix shows growth of approximately 7.5% in its revenues forH1 2009 compared to H1 2008. Operating profit and net profits for the periodending 30 June 2009 reached $13.3 million (H1 2008: 13.7 million) and $10.6million (H1 2008: 10.5 million), respectively. As at 30 June 2009 Matrix'scash and short-term investment balances amounted to approximately $78.2million.
Operational success
During the second quarter of 2009, Matrix won several projects including the work related to the core systems of three hospitals in Israel, upgrading hardware and software systems of a leading credit card company, projects in finance and security, wide scope testing project for a governmental body, implementing significant system projects in the financial sector, and developing IPHONE designated solutions for financial sector clients.
Matrix Dividend policy
In April 2009, Matrix distributed a dividend in a total of NIS33.6 million(approximately $7.9 million) and in July 2009 distributed additional NIS11.8million (approximately $3.9 million). In June 2009, the board of directors ofMatrix has resolved that pursuant to the required qualifications and legalrequirements, Matrix will commence henceforth a quarterly distribution ofdividend to its shareholders.
Magic Software Enterprises Ltd.
Overview
Magic's revenues for the six months ended 30 June 2009 reduced to $27.4million, down from $31.1 million in the same period of 2008. The reduction inrevenues is mainly due to the downturn in global economic conditions,particularly in Magic's Japanese and US markets. However, Magic succeeded incompensating for the reduction in revenues with improved operationalefficiency and shortened sales cycle. These measures have allowed Magic topresent an increase in its profitability. Operating income for the first halfof 2009 grew to $1.7 million, up from $1.5 million in the first half of 2008.Net income for the first half of 2009 was $1.8 million, up from $1.7 millionin the first half of 2008. Total cash, cash equivalents and short-terminvestments as of 30 June 2009 increased to $37 million compared to $33million at December 31, 2008.
In the second half of 2009, Magic will continue to focus on operational efficiencies and tight control over costs as it waits for business to return to normal seasonal patterns.
Operational success
During the second quarter of 2009, Magic saw signs of improvement within itsUS and Japanese markets as it has won a significant number of new customers,many of which are in the US. In addition, Magic is now implementing more than50 uniPaaS RIA projects with Japanese customers and has won four new Japanesepartners. The uniPaaS application platform continues to be adopted byworldwide customers, including the Norfolk and Norwich University NHS Trust inthe UK. The iBOLT business and process integration suite has new connectorsand adaptors for HL7 (healthcare), Lotus Notes, and the Data Replicator forSalesforce.com. The expanded iBOLT range facilitated project wins in a numberof countries including Austria, the US, and the Netherlands.
Sapiens International Corporation N.V.
Overview
In the second half of 2009, Sapiens continued to improve itsperformance and more than doubled its operational profit from the first halfof 2008, reaching $2.3 million. Its net income for the second half of 2009amounted to $1.9 million, up from a loss of $1.7 million in the second half of2008. Revenue in H1 of 2009 reached $21 million, compared with $21.5 millionin the equivalent period last year. This decrease is primarily due to revenuesbeing deferred in a project that will be off-set in the second half.
Operational success
Sapiens sees growing interest and opportunities for its products suites including the Sapiens INSIGHT for Closed Books platform, the Sapiens INSIGHT for Reinsurance, as well as the Sapiens windows for eMerge applications.
INNOVATION ARM
Our Innovation arm includes advanced technology companies. While high-risk innature, Emblaze believes in the potential value derived from such activitiesand will seek to mitigate risks by sharing its investment with leading globalindustry partners and close management. The costs associated with ourInnovation arm remain in line with management expectations.
Emblaze Mobile Ltd. ("Emblaze Mobile")
Emblaze Mobile, wholly owned by the Emblaze Group, is a designer of advancedmobile devices. It is engaged in the development of the Monolith, an "all inone" communications device. Samples of the device are being tested by severalglobal operators and management believes Emblaze Mobile is in-line with itsexpectations for potentially gaining orders from operators and being ready formanufacturing by the end of 2009.
EMOZE Ltd. ("EMOZE")
EMOZE, a 95% subsidiary of the Emblaze Group, is a provider of Push email andPIM synchronisation to mobile users based on proprietary technology developedin-house. The company represents realisation of the `mobile office' vision,accessible for all mobile users around the world thanks to its efficiency andlow cost for the mass market. EMOZE provides push email to any ISP emailaccount (pop3/imap), Gmail, Hotmail and Yahoo users as well as push messagingand friend list synchronization to Facebook and soon to other social networks.
During the first six months of 2009, EMOZE continued to expand through agreements with operators for use by subscribers and through agreements with handset manufacturers to offer the EMOZE service directly to users.
EMOZE has launched a unique platform that can push rich content to almost anyhandset, using the EMOZE existing clients for Operating Systems that arecommonly deployed on most handsets. EMOZE is presently capable of deliveringsuch service, and the business potential could be significant for any contentprovider wishing to send its content to many mobile users the same way thatthey are used to doing with desktops and laptops.
ZONE-IP Ltd.
Emblaze VCON Ltd., a wholly owned subsidiary of ZONE-IP Ltd., continues toinvest further in the development of its products. In February 2009, EmblazeVCON announced that it has signed a distribution agreement with EnkayTechnologies (India) Pvt. Ltd ("Enkay") for exclusive distribution of itsvideo conferencing range in India. Enkay commenced distribution of the EmblazeVCON products in India and already placed orders of $300,000.
Emblaze VCON also began distribution of its video conferencing products in South America. First orders came from Argentina with more to come from Brazil & Mexico in the next few months.
On 24 June 2009, ZONE-IP canceled the admission of its shares to trading on the AIM Market.
Outlook
In the first half of 2009 our Growth arm continued the prudent cost saving strategy which was translated into a strong cash position. Despite the inevitable affects of a world wide recession, we are pleased to report all Growth arm subsidiaries generated positive operating and net profits.
Although second quarter conditions remained challenging, we arebeginning to see signs that the business environment is improving and webelieve we are well positioned to take advantage of that. We also expect theMonolith mobile device to be ready for manufacturing by the end of 2009 andbelieve it has the potential to increase revenues and profits for the Group
in2010.Enquiries:Harry Chathli, Alexis Gore +44 (0)20 7977 0026 Corfin Communications About Emblaze
Emblaze Ltd is a group of technology companies addressing both growth and innovation activities thus combining the stability of "bread and butter" mature technology enterprises with "high-risk / high-reward" investments in innovation.
Our Growth arm includes Formula Systems , whichharbors the following subsidiaries: Magic Software Enterprises Ltd. develops, markets and supports composite application developmentand deployment platforms with a service-oriented architecture (SOA), includingapplication integration and business process management (BPM), with existingand legacy systems; Matrix IT Ltd. (TASE: MTRX) is one of Israel's leadingintegration and information technology services companies, active in fourprincipal areas: software solutions and services, software products,infrastructure solutions and hardware products, and training andassimilation.; Sapiens International Corporation N.V. isa provider of IT solutions that modernize business processes to enableinsurance and other companies to quickly adapt to changes; and nextSourceInc., designs, develops and implements web-based, high quality, innovativehuman capital management solutions.
Our Innovation arm includes Emblaze Mobile, a designer of advanced mobile devices; EMOZE, a provider of Push Email and synchronisation technology for mobile devices; and ZONE-IP (Emblaze V CON), a provider of wireless video communications technologies and conferencing solutions for operators and enterprise markets over IP networks.
The Emblaze Group is traded on the London Stock Exchange since1996. www.Emblaze.comCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands June 30, December 31, 2009 2008 Unaudited AuditedASSETSCURRENT ASSETS:Cash and cash equivalents $ 95,177 $ 122,197Short-term investments and restricteddeposits 55,251 48,377Trade receivables, net 140,804 159,508Other receivables and prepaid expenses 19,482 17,309Inventories 4,582 5,320Assets of discontinued operations 31 31 Total current assets 315,327 352,742 LONG-TERM RECEIVABLES ANDINVESTMENTS 20,631 20,983 SEVERANCE FUND 41,827 39,047 PROPERTY AND EQUIPMENT, NET 13,842 15,716 GOODWILL 151,487 154,757 OTHER ASSETS, NET 51,633 56,022 Total assets $ 594,747 $ 639,267
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
June 30, December 31, 2009 2008 Unaudited Audited LIABILITIES AND SHAREHOLDERS'EQUITYCURRENT LIABILITIES:Trade payables $ 51,267 $ 60,011
Short-term liabilities to banks and others 12,062 13,014 Other payables and accrued expenses
86,401 103,311Liability due to activity acquisition 210 6,954Liabilities of discontinues operations 488 483Convertible debt 4,618 5,157 Total current liabilities 155,046 188,930 LONG-TERM LIABILITIESConvertible and non-convertible Debt 54,958 56,004Liabilities to bank and other 11,546 16,640Deferred tax liability 5,969 6,819Other long term liabilities 1,328 1,216Liability due to activity acquisition 1,187 1,010Accrued severance pay 53,620 51,518 Total long-term liabilities 128,608 133,207 SHAREHOLDERS' EQUITY:Share capital: Ordinary shares of NIS 0.01 par value -Authorized: 200,000,000 shares at December31, 2008 and at June 30, 2009; Issued:140,578,154 shares at December 31, 2008and June 30, 2009; Outstanding: 111,718,432shares at December 31, 2008 and 111,755,932at June 30, 2009 416 416 Additional paid-in capital 469,599 470,716Treasury stock, at cost (75,555) (75,654)Accumulated other comprehensive income 4,795 6,951Accumulated deficit (280,210) (275,855)Total Company's Shareholders' equity 119,045 126,574Non- controlling interest *) 192,048 *) 190,556 Total equity 311,093 317,130 Total liabilities and equity $ 594,747 $ 639,267
*) Reclassified according to FAS 160.
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except share and per share data
Year Six months ended ended December June 30 31 2009 2008 2008 Unaudited Audited Revenues $ 270,779 $ 289,637 $ 595,617Cost of revenues 208,810 218,413 454,126 Gross profit 61,969 71,224 141,491 Operating expenses:Research and development, net 8,196 17,628 33,157Selling and marketing 22,247 26,338 50,153General and administrative 24,086 31,439 59,945 Total Operating Expenses 54,529 75,405 143,255 Operating Income (loss) 7,440 (4,181) (1,764) Financial income (expenses) 2,777 (1,012) (7,097)Other income 107 1,138 (885) Income (loss) before taxes on income 10,324 (4,055) (9,746) Taxes on income 4,766 913 4,339 Income (loss) before non-controllinginterest and equity gains (loss) 5,558
(4,968) (14,085)
Equity losses of affiliated companies, net -
(390) (216)
Income (loss) before non-controlling interestfrom continuing operations 5,558
(5,358) (14,301)
Gain from discontinued operations, net -
3,066 2,862
Consolidated net income (loss) 5,558
(2,292) (11,439)
Less: net income attributable to non-controlling interest *) (9,913)
(8,514) (15,625)
Net loss attributable to Company's shareholders $ (4,355) $ (10,806) $ (27,064)
Basic and diluted loss per share to Company'sshareholders:From continuing operations $ (0.04) $ (0.12) $ (0.27) From discontinued operations - 0.02 0.03 Net loss per share $ (0.04) $ (0.10) $ (0.24) Weighted average number of shares used incomputing basic and diluted earnings (loss)per share 111,755,932
111,476,687 111,522,295
*) Reclassified according to FAS 160.
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands Accumulated other Total compre- compre- Additional Treasury hensive Non- hensive Share paid-in stock, at income
Accumulated controlling Total income
capital capital cost (loss) deficit interest *) equity (loss) Balance as of December31, 2007 416 $ 470,891 (76,433) $ 4,993 $ (248,791) $ 208,602 $ 359,678 $ -Dividend tonon-controlling interestshareholder's (19,553) (19,553) -Issuance of shares uponexercise ofstock options (803) 803 (3,609) (3,609) -Purchase of treasurystock (24) - (24) -Tax benefits related toexercise ofoptions in a subsidiary 58 57 115 -Share based compensationexpenses 570 263 833 -Comprehensive loss: - -Realized gains andunrealized lossesfrom available for salesmarketable -Securities net (961) (394) (1,355) (961)Foreign currencytranslationadjustment 2,919 384 3,303 2,919Net loss (27,064) 4,806 (22,258) (22,258) Balance as of December31,2008 416 $ 470,716 $ (75,654) $ 6,951 $ (275,855) $ 190,556 $ 317,130 $ (20,310) Total comprehensive loss Decrease in subsidiariesholdingdue to sale of shares (843) 1,214 371Dividend tonon-controlling interestshareholders (5,877) (5,877)Tax benefits related toexercise ofoptions in a subsidiary (318) (310) (628)Exercised options (99) 99 592 592Share based compensationexpenses 143 755 898Non-controlling interestinvestmentin subsidiaries - - - - - - -Comprehensive loss:Realized gains fromavailable-for-sale marketablesecurities, net - - (45) - (1,070) (1,115) (1,115)Foreign currencytranslationadjustments - - - (2,111) - (3,725) (5,836) (5,836)Net loss - (4,355) 9,913 5,558 5,558 Balance as of June 30,2009(unaudited) 416 469,599 (75,555) 4,795 (280,210) 192,048 311,093 $ (1,393) Total comprehensive loss
*) Reclassified according to FAS 160.
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands Six months Year ended ended December June 30, 31, 2009 2008 2008 UnauditedCash flows from operating activities:Net loss $ (4,355) $ (10,806) $
(27,063)
Less: gain from discontinued operations - (3,066)
(2,862)
Loss from continuing operations (4,355) (13,872)
(29,925)
Depreciation and amortization 7,566 7,129
14,632
Capital gain from sale of intangibleassets - -
(1,616)
Amortization of marketable debtsecurities premiums and accretionof discounts, net 141 (16)
608
Share based compensation expenses 945 381
570
Share based compensation expenses ofsubsidiaries 143 1,215
1,768
Net loss (gain) on sales of marketablesecurities and changes inaccrued interest, net (1,653) (1,962)
6,016
Impairment of investment in marketablesecurities and others - 912
2,970
Equity losses, net 390
216
Revaluation of long term loans anddeposits, net (119) (45)
(129)
Other income and capital losses, net - 172
65
Non-controlling interests in gains (losses)of subsidiaries 9,913 8,514
15,625
Decrease (increase) in trade receivables,other receivables and prepaid expensesand inventories 17,368 11,748
(1,581)
Increase (decrease) in trade payables, otherpayables and accrued expenses , accruedseverance pay, net and other long termliabilities (14,846) (1,144)
13,361
Changes in deferred tax, net 511 309
(2,218)
Liability to option to non-controllinginterest payment (371) -
-
Change in value of put options andderivatives (1,933) - 727Other (26) - - Net cash provided by operating activitiesfrom continuing operations 13,325 13,731
21,089
Net cash used in operating activities fromdiscontinued operations - (2,556)
(2,170)
Net cash provided by (used in) operatingactivities 13,325 11,175
18,919
Cash flows from investing activities:Purchase of property and equipment, net (1,389) (2,218) (4,310)Proceed from sale of intangible assets - -
1,622
Proceeds from sale of property and equipment 443 567
1,011
Proceeds from short-term bank depositsand short and long restricted deposits (509) (3,193)
(1,570)
Purchase (proceed) of trade marketablesecurities 1,399 (7,872)
(7,249)
Proceeds from maturity of short-termmarketable securities 3,292 1,053Investment in long-term marketablesecurities (4,996) -
(250)
Proceeds from sales, calls and maturityof marketable securities 8,665 13,022
16,999
Proceeds from long-term bank depositsand restricted deposits - 2,561
-
Capitalization of software developmentand other costs of subsidiaries (3,366) (3,800)
(6,683)
Purchase of non-controlling interest insubsidiaries (20) (8,300)
(16,983)
Proceed from sales of previously heldsubsidiary 43 - -
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands Six months ended Year ended June 30, December 31, 2009 2008 2008 Unaudited
Proceeds from realization of investment - 15,400
-
Proceed from sales of subsidiary's operations - -
170
Investment in long term bank deposits net (13,534) -
-
Investment in and loans to affiliated andother companies - -
(1,157)
Payment to former stockholders of subsidiaryinrespect to a purchase liability - -
(5,973)
Cash paid for the acquisition of subsidiariesthereof , net of cash acquired (6,455) (11,830)
(13,633)
Payment to formally stockholders ofconsolidatedcompany on behalf of purchase liability - (5,081)Other investments (269) (138)
(756)
Net cash used in investing activities fromcontinuingoperations (16,696) (9,829)
(38,762)
Net cash provided by investing activitiesfromdiscontinued operations 9,745
25,081
Net (cash used) in investing activities (16,696) (84)
(13,681)
Cash flows from financing activities:Exercise of stock options in subsidiaries (1,195) 632
876
Dividend to non-controlling interestshareholdersin subsidiaries (17,950) (10,683)
(10,683)
Short-term borrowing and bank credit, net 1,496 (17,033)
(20,928)
Repayment of long-term loans in subsidiaries (4,283) (6,118)
(10,855)
Receipt (repayment) of short-term loans insubsidiaries (1,250) 27
(628)
Deposits - SWAP deal in a subsidiary 1,026 1,193
Repayment of convertible debt in a subsidiary (402) (2,035)
(18,128)
Proceeds from sale of subsidiaries shares 921 -
-
Purchase of non- controlling interest (992)Purchase of treasury stock
(24)
Net cash (used) in financing activities (22,629) (34,017)
(60,370)
Effect of exchange rate on cash of continuingoperations (1,020) 11,255
2,481
Decrease in cash and cash equivalents fromcontinuing operations $ (27,020) $ (18,860) $ (75,562)Increased (decrease) in cash and cashequivalentsfrom discontinued operations (1) 7,189
22,911
Cash and cash equivalents from continuingoperations at the beginning of the period 122,197 172,456
172,456
Cash and cash equivalents from discontinuedoperations at the beginning of the period 1 2,393
2,393
Cash and cash equivalents from continuingoperations at the end of the period $ 95,177 $ 163,176
$ 122,197
Cash and cash equivalents from discontinuedoperations at the end of the period - 2
1
The accompanying notes are an integral part of the financial statements.
NOTE 1:- GENERAL
Emblaze Ltd. ("Emblaze" or "the Company") is an Israeli corporation. The Company's shares are traded on the London Stock Exchange ("LSE") under the symbol BLZ. The Company operates in two principal business segments, namely Growth and Innovation. The Growth segment relates to the development, production and marketing of information technology ("IT") solutions and services. The Innovation segment relates to research and development of technology for advanced wireless and cellular solutions and products.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2008, are applied consistently in these financial statements.
b. Reclassification:
Certain reclassifications were made to prior years' financial statements to conform to the current year's presentation.
NOTE 3:- UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesfor interim financial information. Accordingly, they do not include all theinformation and footnotes required by accounting principles generally acceptedin the United States for complete financial statements. In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for a fair presentation have been included. Operatingresults for the six-month period ended June 30, 2009 are not necessarilyindicative of the results that may be expected for the year ended December 31,2009. - - - - - - - - - - - - - - - - - - - -
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