ANNUAL REPORT
AND ACCOUNTS
FOR THE YEAR ENDED
31 DECEMBER 2019
CONTENTS
Directors, Secretary & Advisers
Financial & Operational Summary
Strategic Report
Chairman’s Statement
Chief Executive Officer’s Review
Chief Financial Officer’s Review
Corporate Strategy
Principal Risks and Uncertainties
Stakeholder Engagements
Conducting Business Responsibly
Corporate Governance
Directors’ Biographies
Directors’ Report
Corporate Governance Report
Directors’ Remuneration Report
Financial Statements
Independent Auditor’s Report
Consolidated Statements of Profit or Loss
Consolidated Statements of Comprehensive Income
Consolidated Statements of Financial Position
Consolidated Statements of Change in Equity
Consolidated Statements of Cash Flow
Notes to the Consolidated Financial Statements
1
2
4
6
9
11
13
14
20
23
25
28
35
50
55
56
57
58
59
60
DIRECTORS, SECRETARY & ADVISERS
Directors
Dr. Gideon Chitayat – Non-Executive Chairman
Dr. Zvi Marom – Founder & CEO
Moti Nagar – Executive Director & CFO
Harel Locker – Non-Executive Director & Senior Independent Director
Prof. Ari Shamiss – Non-Executive Director
Prof. Varda Shalev – Non-Executive Director
Registered Office
P.O.B. 7318, Neve Ne’eman Ind. Area, 4 Ha’harash Street, 4524075 Hod Hasharon, Israel
Company Number
520042813 – Registered in Israel
Auditors
Brightman Almagor Zohar & Co.
Certified Public Accountants
A Firm in the Deloitte Global Network, 1 Azriely Center, Tel-Aviv, Israel
Financial Adviser & Stockbroker
Shore Capital, Cassini House, 57 St James's Street, London SW1A 1LD, UK
Legal Counsel in Israel
Lipa Meir & Co., Beit Amot Hashkaot, 2 Weitzman Street, Tel-Aviv 64239, Israel
Legal Counsel in UK
Fladgate LLP, 16 Great Queen Street, London WC2B 5DG, UK
Bankers
Bank Hapoalim, 4 Hatzoran, Netanya, Israel
Bank Leumi, 7 Menahem Begin Street, Ramat-Gan, Israel
Company Secretary
Mr. Arthur Moher, Lipa Meir & Co.
Registrar
Link Asset Services, The Registry, 65 Gresham Street, London EC2V 7NQ, UK
Financial PR Consultants
Luther Pendragon, 48 Gracechurch Street, London EC3V 0EJ, UK
BATM | ANNUAL REPORT & ACCOUNTS 2019 1
FINANCIAL & OPERATIONAL SUMMARY
Group revenue
increased to
$123.4m
(2018: $119.6m)
Adj. operating
profit* of
$5.3m
(2018: $2.6m)
Cash and
financial assets of
$44.8m
(31 Dec 2018:
$24.4m)
Gross profit of
$33.1m
(2018: $34.5m)
EBITDA* of
$9.8m
(2018: $4.9m)
Earnings per
share of
0.93¢
(2018: 0.09¢)
Gross margin of
26.9%
(2018: 28.8%)
Cash from
operating
activities of
$7.2m
(2018: $2.6m)
* This report includes Other Alternative Measures. For a reconciliation of these measure to the IFRS please refer to page12
Bio-Medical Division (52% of total revenue)
• Revenue increased to $64.4m (2018: $62.1m)
• Adj. blended gross margin* of 23.8% (2018: 25.0%)
• Diagnostics Unit
■ Signed conditional investment agreement for up to $30m, with first instalment of $14.5m received during the year,
into Ador Diagnostics (“Ador”) and, post period, received first commercial order for Ador’s NATlab solution
Bio-Medical Division (52% of total revenue) continued
■ Awarded $4m contract for agri-waste treatment solution in Taiwan by agri-food conglomerate and, post period,
received a contract from a major poultry processor in the Middle East – representing further geographic
expansion of the customer base
■ Post period, received c. $31m order from a European government for the delivery of 1,000 critical care ventilators
in response to COVID-19
Distribution Unit
■ Doubled the number of NIPT (pre-natal diagnostics) tests provided by the Group’s genetic laboratory in Eastern
Europe
■ Strong growth in provision of cancer diagnostics tests in Israel, and received regulatory approval to offer further
molecular genetics tests with sales commencing during the year
Networking and Cyber Division (48% of total revenue)
•
•
Revenue increased to $59.0m (2018: $57.5m)
Adj. blended gross margin* of 30.9% (2018: 33.6%)
Networking Unit
•
■ Completed delivery under partnership with Arm to expand the Group’s NFVTime ecosystem optimised for Arm
infrastructure and entered proof-of-concept with Tier 1 network operator – with negotiations underway with
several others
■ Commenced revenue generation from sales of the Group’s NFV products
■ Developed new technology to enable significant increase in network traffic when licensing NFVTime on Arm-
based NXP Semiconductors (“NXP”) processors
■ Introduced TM-8104 – a new ultra-high capacity networking platform ready for hyper-cloud connectivity, 5G and
Multi-access Edge Computing (MEC)
■ Commenced sales of the T-Marc R3305 series – BATM’s first solution for multiservice business routing
Cyber Unit
•
■ Revenue in 2019 doubled over 2018 with delivery on previously-awarded contracts and new orders received
during the year
■ Received orders totalling $9.1m during the year, including first order for a combined cyber security and
networking solution
■ Post period, awarded a $4m cyber security contract from the Group’s long-standing government defence
■ Increased sales of new highly-compact metabolism testing analyser, Hemo One
department customer
■ Sustained growth in sales of new molecular biology diagnostics Adaltis product line, and introduced new reagents
■ Post period, launched new COVID-19 diagnostics kit for medical facilities, which has received certification and
production and sales are ramping up. Also entered a collaboration with Novamed Ltd, an Israeli life sciences
company operating in the in-vitro rapid diagnostics market, for the joint development and marketing of a home-use
testing kit for COVID-19
Eco Med Unit
■ Commenced delivery on first agri-waste treatment contract outside of Israel with a major food manufacturing group
in the Philippines, which is expected to be completed by the end of H1 2020
* See table on page 12 - Key Performance Indicators
2 BATM | ANNUAL REPORT & ACCOUNTS 2019
BATM | ANNUAL REPORT & ACCOUNTS 2019 3
STRATEGIC REPORT
CHAIRMAN’S STATEMENT
I am delighted to present our 2019 Annual Report, which
shows how we’ve significantly advanced the execution of
our strategy. We are proud of being a successful, growing
business and of the important contributions we make to
wider society. At a time of global uncertainty, we believe an
important role of business is to seek solutions and create
opportunities. By growing and sustaining a financially-
strong and responsible business over the long-term, guided
by a clear purpose, we can make a positive and significant
impact not just to our clients and our people, but to the
economy and society.
SUCCESSFUL EXECUTION OF STRATEGY
We believe the strategy we adopted in both of our divisions is
proving to be correct. In particular, the COVID-19 pandemic
has demonstrated the value of our solutions that help with
the containment of infectious disease outbreaks – namely,
our NATlab diagnostic system, which can identify human
pathogens with unparalleled speed and accuracy, and our
Eco-Med products for pathogenic waste treatment. At the
same time, the importance of secure, virtual networks has
never been more apparent.
In 2019, we achieved the goals that we set for ourselves
for the year. We delivered growth in revenue to $123.4m
(2018: $119.6m) and adjusted operating profit was $5.3m
(2018: $2.6m). We saw meaningful progression in NFV and
molecular diagnostics – our key future growth markets. We
are also pleased with the solid commercial traction that we
have established in our Eco-Med and Cyber businesses. We
gained new customers and partners, secured new
contracts, expanded into new territories and continued to
establish a leading position in our target markets.
Right: NATlab system
STRATEGIC REPORT
Nagar, our CFO; and our Executive Team for their efforts.
Many thanks to my Board colleagues for their considerable
contribution. We all appreciate the dedication, skills and
professionalism of our employees all over the globe. Above
all, I would like to thank our loyal shareholders for their
ongoing support.
I have served on the Board for almost ten years, five of those
as Chairman, and BATM has progressively delivered on its
strategy in that time. While it hasn’t been without challenges,
we are now in the strongest position that I have seen, which
is also reflected in the share price having increased over
200% in that time. We all are committed to continuing to
create substantial value for our shareholders, and I look
forward to reporting on our progress.
Dr. Gideon Chitayat
Chairman
30 April 2020
CONDUCTING BUSINESS RESPONSIBLY
As noted, providing solutions that benefit society is an
important element of BATM’s strategy. The Board is pleased
with the progress achieved during 2019. A highlight was
the increasing recognition within international markets of
our agri-waste treatment solution that provides the poultry
industry with significant environmental and safety benefits.
We also strengthened our governance of these matters with
the establishment of a Corporate Social Responsibility and
Environment Committee of the Board.
I am excited by, and proud of, the work that BATM is
undertaking to address urgent human medical issues.
Clearly, an important example is BATM’s current contribution
in two key areas to support the worldwide response to
the COVID-19 crisis. Firstly, through the development of
molecular diagnostics kit for medical facility and home
testing use. Secondly, through the manufacture of critical
care ventilators.
I am confident that BATM is well positioned to meet the
challenges of 2020 and generating sustainable long-term
growth across the Bio-Medical and the Networking & Cyber
divisions, which should in turn drive shareholder returns. We
will continue to oversee performance of all our businesses
closely, ensuring that the Group executes its strategy with
financial discipline and with integrity.
STAKEHOLDER ENGAGEMENT
Regular engagement, dialogue with and feedback from
BATM’s material internal and external stakeholders are
important to our success and a core element of our
business model. Understanding stakeholders’ views informs
and assists our decision-making processes and helps drive
progress towards the achievement of our aims, objectives
and strategy. In keeping with the requirements of Section
172 (1) of the UK Companies Act 2006, pages 14 to 19
record BATM’s key stakeholder groups, their material issues
and how we engage with them. Each stakeholder group
requires a tailored engagement approach to foster effective
communication and mutually beneficial relationships.
Finally, I would like to thank Dr. Zvi Marom, our CEO; Mr. Moti
4 BATM l ANNUAL REPORT AND ACCOUNTS 2019
BATM l ANNUAL REPORT AND ACCOUNTS 2019 5
CHIEF EXECUTIVE
OFFICER’S REVIEW
I am pleased to report another good year for BATM as we
delivered increased sales and profit in both of our divisions
along with strong cash generation. This reflects a great
performance in the second half, with revenues 20% higher than
H1 2019, and a particularly robust fourth quarter.
We achieved a number of operational milestones in 2019 that
significantly advanced the execution on our strategy in areas
that we have identified as growth markets. In particular, in
Network Function Virtualisation (“NFV”), we completed delivery
under our agreement with Arm and in molecular biology
diagnostics, we made strong progress in the development
of our NATlab solution under Ador – both of which are now
positioned for commercialisation.
During the year, we also established good momentum with our
Cyber and Eco-Med activities – with both units receiving several
high-value contracts and expanding their customer base.
Now to look at each division in more detail.
Bio-Medical Division
Distribution
Revenues for the Distribution unit increased by 4.5% and
accounted for 81.3% (2018: 80.7%) of the Bio-Medical division’s
revenue in 2019.
In Israel, our Zer Laboratories subsidiary achieved strong
growth in sales of pre-natal diagnostic tests. We received
regulatory approval for Zer Laboratories to be able to offer
further pre-natal genetics screening tests, becoming one of
only two private laboratories in Israel able to provide these
tests, with sales commencing during the year. During 2019,
there was also an increase in the provision of the new genetics
screening tests for the Israeli market that we introduced
following investment to expand the local laboratory to install
the required technology last year. In addition, Pro-Genetics, in
which we hold 49% through Zer Laboratories, achieved good
growth in the distribution of cancer diagnostics tests.
Following the introduction of Non-Invasive Prenatal Testing
(NIPT) diagnostics tests at our genetics laboratory in Eastern
Europe last year, we doubled the sales of such tests in 2019
compared with 2018.
Eco-Med
The Eco-Med unit accounted for approximately 10.1% of
the Bio-Medical division’s revenues in 2019 compared with
8.7% in 2018, which reflects an increase in revenue of 21.1%.
The majority of the growth was due to the completion of the
installation of our agri-waste treatment solution, which is based
on its Integrated Sterilizer and Shredder patented technology
6 BATM | ANNUAL REPORT & ACCOUNTS 2019
(“ISS”), at a bovine slaughterhouse under a previously-won
contract.
We also made significant progress in winning new customers
for our agri-waste treatment solution, including introducing
the product to new geographies. The first international
contract, worth approximately $1.5m and with delivery having
commenced in 2019, was with a poultry processing facility in
the Philippines.
An important customer win was achieved with the award of a
$4m contract by a Taiwanese agri-food conglomerate, whose
business activities span the agri-food supply chain in Taiwan,
mainland China and elsewhere in Asia. The contract, which is
expected to be delivered by the end of 2020, is for three units
of our agri-waste treatment solution for two separate poultry
processing facilities. This solution will be used in the rendering
process to allow the safe treatment of poultry remains to
generate valuable proteins that can be used for the production
of animal nutrition.
Post period, we received our third international contract for our
agri-waste treatment solution, which is worth approximately
$1.3m and is expected to be delivered in 2020. The customer
is a major poultry integrator that produces, processes,
markets and distributes high quality fresh and frozen chicken
to customers throughout the Middle East, where it is based –
representing further geographic expansion of the customer
base for this solution – as well as to several countries in Asia.
We were also delighted that, post period, we received a €29m
(c. $31m) order from a European government to deliver 1,000
ventilators in the coming months to help with the fight against
COVID-19. This ventilator, which is being manufactured by our
Celitron subsidiary in Hungary, is a high-performance ventilator
for ICU environments. It has already received CE certification
with further certifications pending.
Diagnostics
The Diagnostics unit represented approximately 8.6% of Bio-
Medical division revenues in 2019 (2018: 10.6%). As stated
previously, the Diagnostics unit has been undergoing a
re-organisation, which is now almost complete, as it transitions
from ELISA to focus on molecular biology solutions and
products. This has resulted in a temporary reduction in sales,
with 2019 being slightly lower than 2018. However, there was a
return to growth in sales of the Diagnostics unit in the second
half of the year, with H2 2019 revenues increasing over both
H1 2019 and H2 2018 based on diagnostic instrument sales,
with this momentum expected to continue in 2020. In addition,
we continued to invest in our manufacturing facilities in Italy to
increase the efficiency of the production process for systems
STRATEGIC REPORT
and reagents, which is expected to generate substantial
efficiencies in 2020.
will deliver the new NATlab reader and cartridges for the
identification of meningitis in the second half of 2020.
During the year, our new highly compact metabolism testing
analyser, the Hemo One, performed well with sales in multiple
countries across Europe, Asia and South America. We also
continued development work to be able to offer further panels
and cartridge-based testing for this instrument, which has
been based on demand from medical offices as well as major
clients.
Sales increased of our molecular biology diagnostics Adaltis
product line that was launched at the end of 2018, including
commencing selling in Mexico in addition to Europe. We
also extended the range of reagents and entered into new
collaboration agreements with significant distributors in the
molecular biology field in Italy and Mexico, which translated to
initial sales in H2 2019 and is expected to ramp up from 2020.
Post period, we successfully developed a new diagnostics
kit to detect the COVID-19 virus. This kit, which is part of the
MOLgen molecular diagnostics line that was launched at
the end of 2018, has undergone testing by several central
laboratories and hospitals that have now verified its ability to
diagnose COVID-19. The MOLgen COVID-19 kit is designed to
be used with our diagnostic instruments, which offers benefits
of speed and accuracy, but it can also be used with some
competing diagnostic instruments. Initial production of the kit
has commenced at our Adaltis facility, and we are working
with academic and research institutions, mainly in Europe, to
progress the kit to make it at a price point suitable for large-
scale production. The kit, which supports all the Centers for
Disease Control and Prevention recommendations, has already
received interest from customers in several countries.
During the year, strong progress was made in advancing the
NATlab molecular biology solution that is being developed
through Ador, which has undergone extensive lab testing
and partnerships have been established with several leading
research
institutions. NATlab provides rapid sample-to-
answer diagnosis of bacterial, viral or fungal infections, within
approximately 15-90 minutes, using DNA sampling. The unique
system is modular, compact and mobile, and is designed to be
used at the point-of-care as well as in hospital labs. We believe
that NATlab – which has been awarded over 40 global patents,
including in Europe and the US, with more pending – will allow
medical practitioners to provide far quicker and more efficient
treatment.
An important milestone was the signing of a conditional
agreement for an investment of up to $30m, and Ador received
the initial instalment of $14.5m, to provide additional funds for
the commercialisation of NATlab. The second instalment of
$15.5m is expected to be funded by the end of 2020, subject to
certain milestones being achieved and we have made material
progress towards meeting those milestones.
Post period, Ador received its first commercial order for NATlab,
which was from the leading Italian distributor of molecular
biology and genomics products. Under the agreement, Ador
In addition, COVID-19 will be included within the Ador suite of
testing kits as part of its travel panels. Laboratory bench tests
are expected to commence imminently.
Networking and Cyber Division
NFV solutions
Delivery was completed on our joint development agreement
with Arm to develop our NFVTime operating system to enable
an ecosystem of Virtual Network Function ("VNF") services
optimised to run on Arm’s architecture. NFVTime enables a
significant increase in throughput compared with competing
solutions. We have been working with Arm to conduct joint
marketing of the solution that enables carriers to deploy their
own virtualised networks, which can also be a key element in
allowing operators to leverage the benefits offered by 5G.
Together with Arm, we entered into a proof-of-concept for the
joint NFV solution with a Tier 1 network operator in 2019, which
is expected to progress to field trials this year. Negotiations are
also underway with several other network operators in the US
and Europe to undertake proof-of-concept. We commenced
receiving initial revenue from NFVTime sales during the year,
which we expect to ramp as the projects with network operators
progress.
Key Arm-optimised VNF services that we added to the
ecosystem, through integration with our NFVTime uCPE
solution, include Clavister’s virtualised cyber security platform
and Fortinet’s VMware SD-WAN solution.
A key milestone under the agreement with Arm was our
development of a new technology under our long-standing
partnership with NXP that enables a significant increase in
network traffic, without requiring an increase in computing
power. The new technology applies when licensing NFVTime
on NXP’s Layerscape® LS2088A and LS1088A multicore
processors, which are built on Arm core technology. The
solution will enable more efficient and cost-effective customer
premise networking, and support next-generation 5G/MEC use
cases.
ICT and Carrier Ethernet solutions and services
The growth in revenue from ICT solutions and services
was based on increased sales with both existing and new
customers.
We advanced our 5G strategy with the launch of a new ultra-
high capacity networking platform for network edge. The
T-Metro 8104, which is NFV ready, is the industry's first CE2.0
compliant service aggregation and cloud gateway platform
available at 1.2Tb capacity and it is designed to allow network
operators to leverage the transformation enabled by hyper-
cloud connectivity, 5G and MEC. It has a modular design
that, along with having a small form factor and the ability to
be installed outside a telecom cabinet, allows customers to
expand and add capacity and interfaces as required.
BATM | ANNUAL REPORT & ACCOUNTS 2019 7
CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
Also during the year, we introduced the T-Marc R3305 series,
with sales commencing in the fourth quarter. The routers and
integrated access devices support a variety of enterprise-
grade features that can form the foundation of a business’
entire network. This new product represents an expansion
of our offering into routing as part of its strategy to target the
enterprise market.
Cyber
Our cyber security business made excellent progress, with a
strong increase in revenue from previously awarded contracts
and receiving new orders totalling $9.1m during the year, of
which $6.5m was delivered in H2 2019.
We were awarded two further contracts, worth an aggregate
of $6.5m, from the government defence department customer
that we have been supplying with cyber security products and
services since 2017. Post period, we received a $4m follow-on
order, which is expected to be delivered in the second half of
2020, from this customer for the delivery of additional hardware
and software cyber security products as the solution is rolled
out to encompass further employees. Following this latest order,
the total contracted revenue awarded to BATM to date by this
customer for this cyber solution is over $18m.
We were also awarded an initial $2m contract by a branch of a
national armed forces – a new customer – for the provision of
a combined cyber security and networking solution. This is our
first contract for this combined solution.
In addition, we expanded our cyber security offering by
enhancing our T-Sense cyber product, which is a software-
based smart network sensor that is able to discover and
classify network devices, applications, services and activities
over the network, so that it is compatible with Arm architecture
as well as Intel-based platforms. As a result, T-Sense is now
able to leverage the advantages of all major infrastructures,
which expands its addressable market. This enhanced product
is expected to be available to customers this year.
COVID-19 Update
At the end of December 2019, we were alerted to the possibility
of a pandemic outbreak by monitoring information mainly from
China. The effectiveness of our response has been enabled
by the significant investments we have made in advancing
our Bio-Medical division in recent years and our immediate
preparation of all parts of the division for an outbreak. Our Bio-
Medical division is now able to quickly provide solutions that
include diagnostic kits for any new pathogen that appears and
devices like diagnostic instruments, ventilators, pathogenic
waste disposal and more.
8 BATM | ANNUAL REPORT & ACCOUNTS 2019
With the experience gained in the company and our relationships
with leading academic institutions, when we received the
worrying information about a possible outbreak, we were able
to launch a new precise and fast molecular diagnostics kit
to detect COVID-19. Clinical verification and evaluation was
undertaken during February 2020 by leading universities and
hospitals, and we received certification in March 2020. Since
then, production and sales have been ramping up. We are also
in the process of developing various other detection kits, among
them kits for home testing, in partnership with Novamed, which
we expect to complete within the next few months. Finally,
we were honoured to receive our first order of c. $31m from a
European government to provide 1,000 ventilators by the end of
Q3 2020 to support their response to COVID-19.
Our primary facilities in the Bio-Medical division, in Israel,
Italy and Hungary, have remained operational throughout this
period. They are able to produce at a substantial capacity
despite the measures taken to ensure the health and safety of
our employees in those locations as well as several regulatory
limitations and other impacts of lockdown.
In our Networking & Cyber division, our facilities have remained
open in both Israel and the US subject to public health controls.
During Q1 2020, the effect of the outbreak was minimal. As a
result of COVID-19, some customers are temporarily postponing
certain projects and we are currently unable to perform some
activities due to the restrictions on travelling to a customers’
premise or a supplier. Consequently, it is prudent to anticipate
some lost revenue in this division, however it is too early in the
current financial year to determine if this will have any material
impact on the Networking & Cyber division.
As a result of the above, we expect the Bio-Medical division to
perform well and the Networking & Cyber division to experience
a temporary slowdown. Given the uncertainty surrounding the
length and economic severity of the crisis, it is too early to
estimate the financial impact on BATM.
We continue to work hard to ensure our employees are fully
supported in remaining safe, well and able to work. Today,
BATM is well positioned in large markets showing long-term
growth potential and with a set of technologies, services and
solutions to meet its customers' evolving needs. As a result, the
Board believes that, with the actions taken to date in response
to the pandemic along with the further work to be undertaken
to achieve the Group's strategic objectives in 2020, BATM will
continue to deliver shareholder value.
Dr. Zvi Marom
Chief Executive Officer
30 April 2020
STRATEGIC REPORT
CHIEF FINANCIAL
OFFICER’S REVIEW
Total Group revenue for 2019 increased to $123.4m (2018:
$119.6m), reflecting growth in both divisions. On a constant
currency basis, revenue for 2019 would have been $126.5m,
with an immaterial impact on operating profit. The primary
currency fluctuation that impacted the reported revenue was
the weakening of the Moldovan Leu and the Romanian Leu
against the US Dollar. The Bio-Medical division accounted
for 52.2% of total revenue (2018: 51.9%) and 47.8% was
contributed by the Networking and Cyber division (2018:
48.1%). Both divisions had a significantly stronger second half
of the year, with revenue in H2 2019 being higher than H1
2019 – by 13.2% in the Bio-Medical division and by 26.9% in
the Networking and Cyber division.
The blended gross margin for the year was 26.9% (2018:
28.8%). This decrease is due to the increased contribution to
revenue from the Bio-Medical division, which carries a lower
margin than the Networking and Cyber division, as well as a
slight softening in gross margin in both divisions respectively.
We anticipate an improvement in gross margin for 2020.
Sales and marketing expenses were $16.3m (2018: $15.6m),
representing 13.2% of revenue compared with 13.1% in 2018.
The increase is due to the expansion of marketing in the
Networking unit to support the launch of the NFV products
and in the Diagnostics unit for the launch of the molecular
biology products. There was also an increase in sales activity
in the Distribution unit.
General and administrative expenses were $11.8m (2018:
$11.2m), representing 9.5% of revenue compared with 9.4%
in 2018.
Investment in R&D was lower in 2019 than the previous year at
$6.8m (2018: $7.1m), primarily due to the allocation of certain
R&D expenses to cost of revenues.
Adjusted operating profit increased significantly to $5.3m
compared with an adjusted operating profit of $2.6m in 2018.
This includes a capital gain of $3.2m from the part realisation
of our ownership of Ador as part of the investment in that
business. The fair value of our remaining holdings in Ador,
based on the transaction agreement, is $17m. Implementation
of IFRS accounting standards requires the investment to be
measured according to the equity method, which excludes
fair value measurement, therefore only a $3.2m profit was
recorded. In addition, there was a capital gain of $3.4m from
the sale of the Group’s rights in IBC Holdings (compared with
a capital gain in 2018 of $1.6m from the selling of intangible
assets to a joint venture).
We achieved a strong increase in EBITDA, which doubled to
$9.8m (2018: $4.9m).
Net finance income was $0.3m (2018: $0.3m expenses),
which includes $0.3m in expenses relating to interest on lease
liabilities following the implementation of IFRS 16 on 1 January
2019.
Net profit after tax attributable to the owners of the company
increased to $3.9m (2018: $0.4m profit) resulting in a significant
increase in basic earnings per share to 0.93¢ (2018: 0.09¢).
As at 31 December 2019, inventory was $22.7m (30 June 2019:
$23.9m; 31 December 2018: $22.9m). The decrease is due
to the completion of delivery of certain large projects by the
Eco-Med unit during the year, which had been commenced
in the prior year, resulting in the unwinding of the inventory
position. Trade and other receivables increased to $42.8m (30
June 2019: $36.4m; 31 December 2018: $35.0m), which was
mostly due to higher sales in the last quarter of the year.
Intangible assets and goodwill at 31 December 2019 was
$23.7m (30 June 2019: $23.1m; 31 December 2018: $22.6m).
The slight increase is mostly due to a small acquisition of a
software business during the year.
Property, plant and equipment and investment property was
$16.1m (30 June 2019: $16.9m; 31 December 2018: $16.1m).
The balance of trade and other payables was $44.5m (30 June
2019: $32.8m; 31 December 2018: $33.4m). The increase is
mostly due to achieving of better payment terms.
Revenue
H1 2019
$56.2m
Adj. blended gross margin
27.7%
Adj. operating profit
$1.6m
H2 2019
$67.2m
26.8%
$3.7m
FY 2019
$123.4m
27.2%
$5.3m
FY 2018
$119.6m
29.2%
$2.6m
BATM | ANNUAL REPORT & ACCOUNTS 2019 9
STRATEGIC REPORT
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
CORPORATE STRATEGY
Networking & Cyber Division
FY 2019
FY 2018
Revenue
$59.0m
$57.5m
Adj. blended gross margin
30.9%
33.6%
Adj. operating profit
$5.2m
$3.6m
There was an immaterial impact on revenue in the Networking
and Cyber division by currency fluctuations. The reduction in
gross margin in the Networking and Cyber division reflects
a slight decrease in year-on-year sales of carrier Ethernet
products, resulting in an increased contribution to revenue
from ICT services, which carry a lower gross margin.
Listing on TASE
On 11 July 2019, we commenced trading on our Secondary
Listing on the Tel Aviv Stock Exchange (TASE) under the
symbol “BVC”. Our Primary Listing remains on the Premium
Listing Segment of the Official List of the FCA and our
shares continue to trade on the Main Market of the London
Stock Exchange. Shares are fully transferrable and fungible
between the two markets. We did not issue any new shares in
connection with the Secondary Listing.
Moti Nagar
Chief Financial Officer
30 April 2020
Cash generated from operating activities was $7.2m for 2019
compared with $2.6m for the prior year, which is mainly due
to an improvement in working capital and $2.1m resulting from
the implementation of IFRS 16.
Our balance sheet remained strong with effective liquidity of
$44.8m at 31 December 2019 compared with $16.9m at 30
June 2019 and $24.4m at 31 December 2018. The increase in
cash and cash equivalents relates to improvement in working
capital and successfully raising approximately $17.1m net
from new and existing investors.
Divisional Performance
Bio-Medical Division
FY 2019
FY 2018
Revenue
$64.4m
$62.1m
Adj. blended gross margin
23.8%
25.0%
Adj. operating profit/(loss)
$0.1m
$(1.1m)
Revenue for the Bio-Medical division increased by 3.7% to
$64.4m (2018: $62.1m). On a constant currency basis, the
Bio-Medical division revenue growth was 9.2%. Blended
gross margin for the division was lower due to slightly higher
costs in the Eco-Med unit as it delivered the first of its large-
scale solutions. The Bio-Medical division generated an
adjusted operating profit of $0.1m for 2019 compared with a
loss of $1.1m in 2018, which was primarily due to a capital gain
of $3.2m from the part realisation of Ador compared with a
capital gain of $1.6m in 2018 from selling of intangible assets
to a joint venture.
There was a slight increase in revenue for the full year
compared with 2018, which reflects a softening in the first half
being mitigated by a strong second half, with revenue in H2
2019 being 26.9% higher than H1 2019 and 14.2% above H2
2018. The growth in the second half was due to increased sales
of ICT networking products and services and cyber solutions.
applications (in particular, for the safe treatment on site
of poultry remains during the rendering process). These
solutions are based on unique patented Integrated Sterilizer
and Shredder ("ISS") technology that has been used and
recommended by the WHO (World Health Organization).
The division is also a distributor of leading brands of other
diagnostic equipment and medical supplies, particularly
within Eastern Europe. This includes providing analytical and
diagnostic tests of third parties, which helps to develop the
market channels for BATM’s own diagnostic solutions and
relationship with tier 1 companies.
Networking & Cyber Division
The Networking & Cyber Division is focused on becoming the
leading provider of Network Function Virtualisation ("NFV"),
Carrier Ethernet and MPLS access solutions, and cyber
network monitoring.
In the Networking unit, the Group is servicing a wide need
for access solutions to the ever-expanding mobile and cloud
markets as well as for the wireline infrastructure. The division is
working closely with customers and partners to define needs in
cloud-based networks, NFV and advanced access solutions.
The Group intends to use its technological leadership to
penetrate tier 1 operators and to develop solutions targeted
at growth areas including 5G, MEC, IoT, Cloud and Enterprise.
In the Cyber unit, the Group is focused on providing network
monitoring solutions and services to large area networks,
principally those utilising 10/40/100GE. The primary target
customers are government organisations in Europe and
Asia-Pacific.
For Networking and Cyber, the business model is based on
selling a solution that combines integrated hardware and
sophisticated software. The Group is expanding its investment
in software-based products, which it expects to result in higher
volume of software licensing revenues in the coming years.
BATM is a leading provider of real-time technologies for
networking solutions and bio-medical systems.
It operates through two divisions: the Bio-Medical division
and the Networking & Cyber division. These two divisions
have been built on the creation of strong intellectual property
backed by strong patents. This is the foundation for the
development of BATM’s market-leading innovative and cost-
effective solutions in the divisions’ respective fields.
Bio-Medical Division
The Bio-Medical Division is focused on becoming a leading
provider of diagnostic laboratory equipment as well as
innovative products to treat biological pathogenic waste in the
medical, agricultural and pharmaceutical industries.
In the field of laboratory diagnostic equipment, the Group
has developed its own equipment and reagents, which
have enabled it to grow in various markets and establish an
expanding customer base.
While continuing to innovate and increase its presence in
traditional markets, the Group is also investing, directly and
through joint ventures, in developing the most advanced
molecular biotechnology.
The diagnostics unit’s current highly reliable, fast and easy to
operate equipment for small diagnostic laboratories are sold
primarily to labs in emerging markets, such as China, Russia,
Mexico, Brazil and others, which have significant potential
for growth. The unit sells instruments as well as associated
reagents and consumables.
Ador, an associated company of BATM’s Bio-Medical Division,
is developing a unique diagnostics solution, combining
molecular diagnostics and rapid tests within the same compact,
mobile and easy-to-use machine (reader). The system uses
microarray cartridges (panels) to enable the rapid sample-to-
answer identification of a specific disease or infection. The
Group believes this will allow medical practitioners to provide
far quicker and more efficient treatment. The Group intends
to target leading hospitals to demonstrate the strength of the
solution and to utilise its extensive partner network for further
marketing. In addition to the significant target market for the
reader, the Group will be able to expand its target market
segments through the development of panels for new disease
areas. Ador is currently developing panels for meningitis,
tropical infectious disease and hospital admitted infectious
disease, and will then expand to others.
The division’s other innovative solutions treat pathogenic
and medical waste in laboratories and hospitals, and in
pharmaceutical manufacturing plants and for agricultural
10 BATM | ANNUAL REPORT & ACCOUNTS 2019
BATM | ANNUAL REPORT & ACCOUNTS 2019 11
CORPORATE STRATEGY CONTINUED
Future Developments
Key Performance Indicators
Management intends to continue to invest significantly in R&D
and sales and marketing activities in order to support the
organic growth of the business.
In addition, management intends to make bolt-on acquisitions
to strengthen its position in the Networking & Cyber Division
and Bio-Medical markets to maintain its leading position.
BATM has several key performance measures used internally
to monitor and challenge performance and to assist in
investment decisions. The most important performance
indicators in the current and prior years are summarised as
follows:
Revenue
Gross profit
Gross margin
Adjusted blended gross margin1
Cash and financial assets
Adjusted operating profit1
EBITDA2
Earnings per share
2019
$123.4m
$33.1m
26.9%
27.2%
$44.8m
$5.3m
$9.8m
0.93¢
2018
$119.6m
$34.5m
28.8%
29.2%
$24.4m
$2.6m
$4.9m
0.09¢
Change %
+3.2
-4.1
-6.6
-6.8
+84
+104
+100
+933
1. Excluding amortisation of intangible assets.
2. 'EBITDA' is used interchangeably with 'adjusted EBITDA' throughout this report.
Other alternative measures
The Group uses adjusted operating profit and EBITDA as key performance measures, which are calculated as per the following
table:
Year ended 31 December
GAAP operating profit
Amortisation of intangible assets
Adjusted operating profit
Depreciation
Depreciation of right-of-use assets
EBITDA
12 BATM l ANNUAL REPORT AND ACCOUNTS 2019
2019
$’000s
4,482
794
5,276
2,101
2,460
9,837
2018
$’000s
1,490
1,143
2,633
2,248
-
4,881
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES
As the Group is involved in the development of new products
and services, it is subject to the development risk inherent
in such activity, including in particular the failure of products
and services in development to proceed to completion and
to the market. This includes the risk of failing key research
and development hurdles such as clinical trials and regulatory
authorisation.
The Group has made several acquisitions. Such growth in the
Group carries increased demand for cash and resources in
the Group’s business, not all of which may be capable of being
adequately serviced. Furthermore, certain acquisitions have
not reached one hundred per cent ownership of the relevant
target companies, in some cases due to local regulatory
requirements as to share ownership and structuring. As a
result, certain companies in the Group have non-controlling
interests, typically held by the local management of the
subsidiaries. Relationships with these non-controlling interests
are frequently key to the continued success of the relevant
business and projects. They carry certain risks, including
those inherent in diversified control in a trading business, for
example that key business decisions favoured by the Group
may not proceed to implementation, and the consequences
of a breakdown of the cooperation between the Group as the
majority holder and the local partner as the minority.
The Group’s diversified business activities include some,
particularly within the Eco-Med and Distribution units, that
are aimed at emerging markets, which have significant
upward potential, yet at the same time are subject to greater
risks than more developed markets, including economic,
currency, political, social, legal and legislative risks. The
Group’s business and, consequently, its financial results and
returns to investors may be adversely affected by a decrease
in demand in such emerging markets, which can typically
be less easy to predict or manage than in more stable and
developed economies. The political and socioeconomic
stability of emerging markets is frequently lower than that
seen in more established markets, and this carries the risk
that the Group’s business and, consequently, its financial
results and returns to investors may be adversely affected by
negative changes in conditions for business and investment,
which may occur more frequently or with more severity than
in more developed markets. BATM has exposure to material
fluctuations in currencies since BATM sells in various different
currency zones including US Dollar, Euro, Romanian Lei and
Moldavian Lei.
The World Health Organization declared COVID-19 a global
emergency on 30 January 2020 with a significant number
of countries declaring lockdown measures. The length and
extent of the economic disruption caused by the outbreak is
highly uncertain and cannot be predicted. The Group’s Bio-
Medical division was awarded a significant contract as a
result of the crisis, but there can be no assurances that this will
be repeated. Accordingly, the financial impact on the Group
cannot be estimated at this time.
BATM l ANNUAL REPORT AND ACCOUNTS 2019 13
STRATEGIC REPORT
STAKEHOLDER ENGAGEMENT
BATM believes that regular engagement with its stakeholders
is fundamental to developing and maintaining a sustainable
business model. Understanding the views and focus areas of
the Group’s stakeholders helps to inform its decision-making
processes and to drive progress towards realising the Group’s
mission. BATM’s mission is to lead the provision of real-time
technologies and solutions for the rapid detection, diagnosis
and treatment of pathogens, genetic disease and cyber
network threats and for network function virtualisation.
BATM has a wide range of stakeholders and looks to actively
engage with each of them. The table below summarises the
key stakeholders and their areas of interest. It outlines how
BATM engages with each group and includes highlights of
the Group’s engagement during 2019 and actions arising
from these activities. Some of this engagement is carried out
directly at Board level, while other engagement occurs during
the course of running the business.
Section 172(1) Statement
Section 172 of the Companies Act 2006 requires each director
of the Company to act in the way he or she considers, in good
faith, would most likely promote the success of the Company
for the benefit of its members as a whole. In this way Section
172 requires a director to have regard, amongst other matters,
to the: likely consequences of any decisions in the long-term;
interests of the Company’s employees; need to foster the
Company’s business relationships with suppliers, customers
and other material stakeholders; impact of the Company’s
the environment;
operations on
desirability of the Company maintaining a reputation for high
standards of business conduct; and need to act fairly between
members of the Company.
local communities and
In discharging its Section 172 duties the Board has considered
the factors set out above and the views of key stakeholders. The
Board acknowledges that some decisions will not necessarily
result in a positive outcome for all of BATM’s stakeholders.
However, by considering the Group’s purpose, mission, values
and commitment to responsible business together with its
strategic priorities and having a process in place for decision-
making, the Board aims to ensure that its decisions are in the
best interests of the business.
Our stakeholders
Why they matter to us
How we engage
What matters to them
2019 highlights & actions arising
Employees
Our people are our greatest asset. In order
to recruit and retain the best talent we
must ensure that we are an employer of
choice and that our employment policies
are sensitive to our employees’ priorities
and requirements.
• A dedicated Human Resources function
• A shared commitment to our goals
• A safe workplace with equality of opportunity and
diversity, and which encourages wellbeing
• Reaching their full potential from career development
comprising a network of human resources
departments at subsidiary level each headed
up by a VP-level executive who in turn reports to
Head Office
• Open and transparent communication with our
workforce
• Listening to our people and taking into account
their feedback
• Annual employee satisfaction surveys
• Personal development reviews
• Recognising and rewarding our people for their
contribution as reflected in our Remuneration
Policy and which includes a bonus scheme and
an Employee Share Option Plan (ESOP) for more
senior personnel
• Encouraging share ownership at all levels
• Code of Conduct for new employees
• During 2019, the Board set up a new Corporate
Social Responsibility and Environment committee
to explore further opportunities for workforce
engagement
• Training programmes for employees in the
Networking & Cyber division focussed on skills
development and the achievement of additional
career-enhancing qualifications and which often
supply in excess of two weeks training per year for
individual employees
• Training programmes for all employees on the
prevention of sexual harassment
• An annual employee event and ad hoc social events
designed to engender team spirit
• Regular senior management communication with
employees on areas including Group strategy and
progress
Customers
Our customers rely on our technology,
solutions and equipment in order to
operate and continue to grow. We look
to understand their evolving needs and
requirements thereby enabling both BATM
and our customers to share in the value
creation.
• Specific client relationship managers dedicated to
• Product or system quality and reliability
• In the Networking & Cyber division, continued
key customers and to key regions
• Annual customer surveys as part of the ISO Audit
and focussed on all aspects of our customer
relationships (including product quality, levels
of customer service and price) and followed by
an action plan to implement enhancements and
improvements
• Training programmes on our solutions and
products for our customers
• Working to understand the growth drivers in our
customers’ markets
• Participation in major exhibitions
• Innovation
• Our understanding of their growth drivers in order that
BATM can better anticipate and meet their evolving
requirements
• Fair contractual terms
collaboration with, and collation of feedback from,
customer groups enabled the development of new
products, including a new ultra-high capacity (1.2
Tb) networking platform ready for 5G
• In the Diagnostics business, customer feedback
contributed to the evolution of product design
and led to the subsequent manufacture of faster
diagnostics machines
• The Eco-Med business worked with customers to
develop customised solutions for the insect protein
food industry
14 BATM l ANNUAL REPORT AND ACCOUNTS 2019
BATM l ANNUAL REPORT AND ACCOUNTS 2019 15
STAKEHOLDER ENGAGEMENT CONTINUED
Our stakeholders
Why they matter to us
How we engage
What matters to them
2019 highlights & actions arising
STRATEGIC REPORT
Communities
We strive to be a responsible corporate
citizen within the local and wider
communities in which we operate by
behaving in a sustainable and socially-
responsible manner and supporting local
businesses and charities.
• BATM’s research and development and testing
products in the diagnosis of infectious diseases
• BATM’s solutions for the safe treatment of
pathogenic waste
• Local initiatives that support community and
charitable organisations
• Active encouragement of every employee to work
to further charitable goals
• Response mechanism to queries concerning the
Group’s operations or products
• BATM should contribute to the social and economic
• A key tenet of Group strategy is the research and
welfare of the local and wider communities in which it
operates
development of solutions to counter the spread and
improve diagnosis of infectious diseases
• BATM’s activities should not cause nuisance, pollution
or disruption
Suppliers
BATM’s supply chain and, with it, the
uninterrupted provision of high-quality,
reliable and responsibly-sourced products
and services are critical to the effective
and continuous conduct of the Group’s
day-to-day business activities.
It is also important that our suppliers
are kept abreast of BATM’s strategy
and evolving requirements so that we
can continue to deliver on our long-term
strategy.
• Contractual terms and payment timings
• BATM’s strategy and development plans
• Tender process details
• Day-to-day dialogue and communications with
the relevant staff
• Product quality and reliability
• Ensuring that BATM’s activities are supported by a
reliable and effective supply chain
• Fair contractual payment terms and timings
16 BATM l ANNUAL REPORT AND ACCOUNTS 2019
BATM l ANNUAL REPORT AND ACCOUNTS 2019 17
• BATM’s management team regularly gives their
time as expert advisors in the field of medical
diagnostics
• Another key part of our strategy is the safe and
effective treatment of pathogenic waste from food
production or medical facilities
• Through its Green Labs subsidiary in Hungary, the
Group produces environmental measuring systems
including solutions for testing air pollution levels
and in large manufacturing plants
• Involvement with local charitable organisations and
hospitals that are designed to help bridge socio-
economic divides
• The donation of used computers to a local school
• At least once a quarter, the Company arranges
for the collection and subsequent distribution of
baskets of both basic food products and toys to
disadvantaged families
• The improvement of recycling procedures at the
Group’s facilities
• A continued programme of upgrades to energy and
lighting systems in the Group’s plants and offices to
lower energy equivalents
• Periodic assessment of, and ongoing discussions
with, major manufacturing suppliers to ensure
continued quality and competitive pricing
• Ongoing surveys in accordance with ISO quality
assurance standards and certificate requirements
• Key suppliers are regularly considered as part of
the ongoing assessment of business continuity
risks
STAKEHOLDER ENGAGEMENT CONTINUED
Our stakeholders
Why they matter to us
How we engage
What matters to them
2019 highlights & actions arising
STRATEGIC REPORT
Industry regulators
BATM is involved with the development of
new products and services and regulatory
authorisation for our products and services is a
key research and development hurdle.
• Regular dialogue and ongoing meetings with
industry regulators to ensure they are aware
of our progress and goals and that we are
compliant at each stage of the process
• Open dialogue and communication
channels
• Compliance with relevant regulations
• Engagement with authorised testing labs for the purposes of
CE certification of our diagnostics and telecommunications
products indicating conformity with health, safety and
protection standards
• Our Zer Laboratories subsidiary engaged with the Ministry of
Health in Israel in order to obtain a special permit to open and
operate a genetic testing lab
The Group’s operations are diverse and as a
result BATM engages with a broad range of
regulatory organisations.
• Periodic audits by the regulators
• The renewal of CE certifications (to
demonstrate conformity with health, safety
and environmental protection standards) for
our products every 5 years
Joint ventures,
strategic
partnerships and
minority interests
The Group has joint ventures and joint
development agreements that provide
significant opportunities for future growth. The
maintenance of optimal working relationships
with our partners remains critical to our
success.
Certain companies within the Group have
minority interests and relationships with these
non-controlling interests are often key to the
continued success of the relevant projects.
• Regular dialogue and interaction with
our partners in the form of, for example,
weekly teleconferences and regular
development team meetings
• Establishment of development timelines
and strategic goals
• Funding requirements
• Research and development progress
• Delivering upon strategy
• Open communication channels
• Further progress with Arm for the joint development of the NFV
solution, with field trials expected to progress during 2020
• A US$14.5 million investment into Ador Diagnostics to fund the
commercialisation of its molecular biology-based solutions
Current and potential
shareholders
The Board has a fiduciary duty to promote the
long-term sustainable success of the Group for
its shareholders.
Shareholders provide important feedback to
the Board and management team.
Media
Stakeholders require up-to-date, timely,
complete and accurate information about the
Group.
• Investor sub-section of the corporate
website
• Results announcements and presentations
• Regular Board-level dialogue and
meetings with institutional shareholders
• Non-executive Directors are available to
meet with shareholders upon request
• Analyst / investor site visits
• Participation in capital markets seminars
and conferences at which the CEO and
Board members are often key speakers
• AGM
• Capital markets days
• Support by professional advisors
• Regular and timely distribution of Group
news and information via the Group’s
corporate website and news distribution
services
• Financial performance, growth drivers,
earnings potential, strategy and capital
allocation
• A rolling programme of meetings, supplemented by ad hoc
meetings, between analysts / institutional investors and the
CEO / CFO throughout the year
• Share price performance
• Analyst and investor visit to medical diagnostics operations in
• Governance and quality of leadership
• Corporate responsibility performance
Rome, Italy in December 2019
• Board review of feedback provided after investor events and
presentations
• In July 2019 the Company commenced trading on the Tel
Aviv Stock Exchange; this secondary listing provides a local
trading platform for Israeli-based institutions, increases the
accessibility of the Company shares, improves liquidity and
gives an additional day of trading (Sunday) for the shares when
the London Stock Exchange is closed for trading
• Accurate and timely news and information
• Timely and regular news releases from the Group concerning
about BATM’s activities
all material aspects of its activities during the year
• Dedicated points of contact for further
information and clarification
• During 2019, BATM engaged a premium public relations firm
in Israel to provide advice and support vis-à-vis the capital
markets in Israel and the Tel Aviv Stock Exchange
• The regular provision of Group updates in the form of investor
videos via financial news portals
18 BATM l ANNUAL REPORT AND ACCOUNTS 2019
BATM l ANNUAL REPORT AND ACCOUNTS 2019 19
CONDUCTING BUSINESS
RESPONSIBLY
Approach
The Group’s approach to corporate responsibility is
governed by national and international business good
practice, the applicable laws and regulations and the
expectations of its material stakeholders. It is managed
both at Group and operating company level through
the setting of certain group-wide policies and codes,
adherence
international management systems
standards and the development and maintenance of local
to
procedures that are tailored to the specific activities of the
operating companies.
Key focus areas
The outlined policies, management systems and
procedures address six key focus areas that comprise the
Group’s corporate responsibility impacts and opportunities.
These are highlighted in the table below.
Environment &
climate change
Occupational
health & safety
Product quality &
safety
Business conduct Communities
Workforce
Greenhouse gas
& atmospheric
emissions
Occupational health
Reliability & product
maintenance
Anti-bribery &
corruption
Good neighbour
commitment
Fair employment
terms & conditions
Management of
water resources
Accident & incident
prevention
Product quality
Regulatory & legal
compliance
Energy use
Provision of healthy
workplaces
Product security &
integrity
Re-use recycling &
waste management
Workforce training &
education
After-sales service
Stakeholder
relations &
transparency
Fair terms &
conditions for
suppliers &
customers
Pro-active local
community
participation
Equal opportunities
Local stakeholder
engagement
Workplace diversity
Employee
volunteering
Approach to
organised labour
Biodiversity
management
Pollution prevention
Quality of raw
materials
Data protection &
information security
Employee training &
development
Governance
Corporate responsibility is addressed at Board level through
the responsibilities that have been allocated to the Audit
Committee and the Corporate Social Responsibility and
Environment Committee. The Audit Committee is responsible
including
for addressing business conduct matters
maintaining whistleblowing policies and procedures and
ensuring that complaints or concerns from employees in the
Group with respect to wrongdoing are properly investigated
and addressed. Further information is recorded below and
on page 32.
The Corporate Social Responsibility and Environment
Committee was formed in 2019 to formalise the Board’s
approach to the remaining key areas of focus and to develop
the Company’s alignment to the UK Corporate Governance
20 BATM l ANNUAL REPORT AND ACCOUNTS 2019
Code. Its responsibilities include monitoring the Company’s
performance in each area, reporting this information to the
Board and making recommendations on how the Company’s
policies, systems and performance should be developed
over time. Further information is recorded on page 33 to 34.
Policy structure
The Company has put in place policies at Group and
operating company level to ensure that its approach to
corporate responsibility adheres to good practice and
applicable laws and regulations. Highlights are recorded
below:
• A Group Code of Conduct that governs employee share
dealings, which outlines how these should be conducted
STRATEGIC REPORT
within the applicable laws and regulations.
• Operating company employment policies that ensure
fair terms and conditions, promote equal opportunity,
prevent discrimination and harassment, outlaw forced
and child labour and promote volunteering, community
involvement and regular communication and dialogue.
• Environmental and health and safety guidelines at
individual operating companies.
• The promotion of
responsible business behaviour
including anti-bribery and corruption guidelines that have
been distributed and communicated to all employees.
These also emphasise the importance of ethical behaviour
through fair dealings with suppliers and customers.
Management systems
Certifications
international management
BATM holds a number of
certifications. For example,
ISO
the Company holds
14001:2015 and ISO 9001:2015 certifications for the design
and manufacturing of data communications products and
ISO 13485:2016 for chemical chemistry. Other subsidiaries
in the Group hold additional ISO certifications. These include
ISO 13485:2016 in the Bio-Medical division and CE marked
approval for the Group’s IVD diagnostics tests. BATM’s
laboratory in Israel holds ISO 27001:2013 and 27799:2016
for operating medical testing laboratories.
The Company has implemented the recommendations of
ROHS (Restriction of Hazardous Substances) in Electrical
and Electronic Equipment Directive (2002/95/EC) and all its
products are fully ROHS certified.
Whistleblowing procedure
Information about BATM’s whistleblowing mechanism is
regularly communicated to all employees. These processes
include the requirement for its operating and contact details
to be published on every bulletin board at all Company sites.
The procedure is managed by an independent administrator
who is a partner at an Israeli professional services
firm, Chaikin, Cohen and Rubin, based in Tel Aviv. The
organisation has a reputation for professional excellence
and is an independent auditor for several listed Israeli
companies.
Employees are encouraged to approach the administrator
by phone or email if they have concerns about possible
wrongdoing including potential or actual breaches of
applicable laws and regulations and fair business conduct.
The approach can be anonymous, if the employee chooses.
The Company has undertaken not to take subsequent
disciplinary action against a complainant unless the report
was subsequently judged to have been made in bad faith or
to be malicious.
On receipt, the details of the report are passed to the
Company’s Internal Auditor for immediate investigation.
The Internal Auditor has the authority to question and
interview any Company employee during the conduct of
the investigation. The recommended outcome with other
relevant recommendations and conclusions is recorded in a
report that is sent to the Chairman of the Audit Committee.
The Internal Auditor may also inform the complainant of
the recommended outcome after seeing advice from the
Company’s General Counsel.
The Audit Committee will then decide on whether to action
the report’s recommendations or to undertake another
course of action.
Performance information
Performance across the business in the six key focus
areas highlighted at the beginning of this Conducting
Business Responsibly section is regularly monitored at both
operating company and Group level. The Corporate Social
Responsibility and Environment Committee aims to lead a
process of internal and external reporting development over
time as part of its responsibilities.
The Board and senior management team view the Group’s
performance in 2019 as satisfactory. Across the Group
highlights included:
• No material environmental or health and safety (including
fatality) incidents
• No incidents of material regulatory fines or penalties in
relation to environmental or health and safety matters
• No instances of product withdrawals or revocations due
to quality issues (except where products had reached the
end of their natural lifespan in the marketplace)
• No instances of whistleblowing reports requiring further
action
• No
incidents of bribery, corruption or business
interruptions as a result of regulatory activity
Workforce
The Group prioritises training and development for its
workforce. For example, the Networking & Cyber division
has numerous training schemes that often supply in excess
of two weeks training per year for individual employees.
Another example is the Group’s Distribution unit of the Bio-
Medical division, which provides its employees with 4,000
hours a year of product training and skill development.
A significant proportion of the Group’s operating companies
BATM l ANNUAL REPORT AND ACCOUNTS 2019 21
CONDUCTING BUSINESS RESPONSIBLY CONTINUED
conduct annual employee satisfaction survey exercises and
these have recorded consistently high results over the past
few years.
The Group actively promotes equal opportunities within all
of its businesses and aligns its approach to international
human rights standards.
BATM strives to provide opportunities for women at all levels
of the business and to increase the proportion of women
working at senior levels over time. 65% of BATM’s employees
were female at the end of 2019.
BATM also aims to provide employment for people drawn
from a wide range of socio-economic backgrounds.
For example, one of BATM’s medical diagnostic testing
subsidiaries in Israel has around 40% of its workforce drawn
from religious and ethnic minorities (a significantly higher
proportion than within the country’s overall population).
Case studies
BATM agri-waste solutions provide poultry
industry environmental and safety benefits
The Group’s expertise in the provision of agri-waste
treatment solutions for the poultry industry has been
increasingly recognised over the last year with the award
of three significant contracts with clients based in the
Philippines, Taiwan and the Middle East. The Group’s
technology enables its customers to conduct the safe
treatment of poultry remains onsite without the use of
hazardous materials, chemicals or the production of
odours. Production outputs can include valuable proteins
that can be applied in a variety of ways including as
agricultural fertiliser. This is a growing area for BATM,
which is creating a new multinational client base for the
Group’s Eco-Med unit.
BATM produces COVID-19 diagnostics kits
BATM’s commitment to the development of medical
technology to address urgent human medical issues was
underlined in early 2020 by its contribution to combating
the worldwide COVID-19 crisis.
BATM developed a kit for COVID-19, as part of its MOLgen
molecular diagnostics line. The kits are being produced at
the Group’s Adaltis facility and shipping has commenced
to medical facility customers based mainly in Europe. The
kit has demonstrated excellent performance and provides
test results in less than one hour.
In addition, BATM entered into a collaboration with
Novamed, an Israeli life sciences company operating
in the in-vitro rapid diagnostics market, for the joint
development and marketing of a rapid testing kit for home
use diagnosing of COVID-19. The new kit, which will allow
people to test a sputum sample and receive the results
within a few minutes, is under development and the parties
anticipate that they will be available in the summer.
CORPORATE GOVERNANCE
DIRECTORS’ BIOGRAPHIES
Gideon Chitayat
Non-executive Chairman
Zvi Marom
Founder & CEO
Moti Nagar
Executive Director & CFO
Dr. Gideon Chitayat is the Chairman and
CEO of GMBS Ltd, a strategic consulting
firm. He served as a Chairman & director
of Delta Galil
Industries, Milissron
Shopping malls, Paz Oil Company, Teva
Israel Pharmaceutical Industries, Bank
Hapoalim and Israel Aircraft Industries.
He has provided consultancy services
in business strategy to the board and
large companies. He
presidents of
served as Adjunct Professor at Tel Aviv
University, Ricanaty Business School.
Dr. Chitayat holds a Ph.D. in Business &
Applied Economics from the University
of Pennsylvania, Wharton School and
a Master’s
in Business & Applied
Economics from the Hebrew University,
Jerusalem. Dr. Chitayat joined the Board
of BATM in June 2010 and was appointed
Chairman in January 2015. He was
re-elected as Director and Chairman of
the Board in December 2019.
Dr. Zvi Marom founded BATM in 1992.
A former first lieutenant in the Israeli
Navy, he graduated with excellence in
Electronics from the Naval Academy
and with excellence from the Advanced
Naval Command Course. He has a
post-graduate degree
in medicine
from the Sackler – Gold Schlagger
School of Medicine, Israel and an MSc
in Industrial Electronics. Dr. Marom is
on the boards of several national and
international academic committees for
computing and communications, and
is the Chairman of the Board of the
Israeli Hi-Tech & Innovation Industries
Association of
the Manufacturers’
Association of Israel. He is currently a
director of Shore Capital Group plc, a
UK company listed in Bermuda, and
receives remuneration for his services.
Dr. Marom was re-elected as a Director
of BATM in December 2019.
joined BATM
in 2014.
Moti Nagar
Previously, Mr. Nagar held several
management positions in Deloitte – Israel.
As Senior Manager at Deloitte – Israel, he
interfaced and handled the engagement
leading corporate
relationships with
global clients,
including companies
traded on the LSE, NASDAQ, TSE and
large private companies primarily in the
industrial, services and energy sectors.
Mr. Nagar also led and supported public
offerings of corporations in Israel and
provided advice on taxation, including
taxation. Mr. Nagar
international
graduated in Business Management and
Accounting and qualified as an Israeli
Certified Accountant (CPA, Israel) in
2008. He also holds an MBA in Financial
Management from Tel Aviv University.
Mr. Nagar does not serve as a director
in any other publicly listed companies.
He was re-elected as a Director of BATM
in December 2019.
22 BATM l ANNUAL REPORT AND ACCOUNTS 2019
BATM l ANNUAL REPORT AND ACCOUNTS 2019 23
DIRECTORS’ BIOGRAPHIES CONTINUED
DIRECTORS’ REPORT
CORPORATE GOVERNANCE
Harel Locker
Non-executive Director & Senior
Independent Director
Harel Locker served as the Director
General of the Israeli Prime Minister’s
Office and head of Prime Minister
Benjamin
economic
Netanyahu’s
headquarters between 2011 and 2015.
Prior to this, he practiced law for almost
20 years, with wide experience in law
and finance with first tier law firms in
both Tel Aviv and New York. Mr. Locker
is the Chairman of the Board of Israel
Aerospace Industries Ltd, the leading
Israeli corporation in the aerospace
and defence industry. Mr. Locker was
appointed to the Board of BATM in
September 2016 and his first three-
year term expired in September 2019.
He was proposed for re-election by the
Board for a second three-year term, in
accordance with Israeli law, which was
approved by shareholders in December
2019.
Ari Shamiss
Non-executive Director
Varda Shalev
Non-executive Director
Prof. Varda Shalev is a specialist in
epidemiology, medical
informatics
and predictive analytics in community
healthcare. She is a director of the
Morris Kahn & Maccabi Institute for
Health Research and Innovation and
is an active primary care physician.
She has pioneered the development of
multiple disease registries to support
chronic disease management, and
has authored or co-authored over 200
publications in peer-reviewed medical
journals. In addition, she is a faculty
member at
the Tel Aviv University
School of Public Health, sits on the
advisory board of several med-tech
businesses and is a director of the Israel
Advanced Technology Industries. She
was appointed to the Board of BATM in
November 2018 for a three-year period
as an external director in accordance
with Israeli law.
the
Prof. Ari Shamiss is the CEO of Assuta
Medical Centers,
largest private
medical network in Israel, which consists
of eight hospitals and medical centres
with more than $500m in annual revenue.
He is a co-founder of Assuta Life Ventures
(aLivE); is a board member of, and adviser
to, numerous high-tech companies; and
is involved in several global business
projects in healthcare technology and
infrastructure. Prof. Shamiss is certified
in Internal Medicine, Hypertension and
Healthcare Management and he is a
Professor of Medicine and Vice Dean at
Ben Gurion University School of Medicine
in these disciplines, with more than 60
published scientific papers. Previously,
he was a Director of Sheba General
Hospital at Tel Hashomer for 10 years and
was the Surgeon General for the Israel
Air Force (Col. Ret.) and the Director of
its Aeromedical Institute. Prof. Shamiss
holds an MD from the Technion Institute
and an MPA from Harvard University, and
he graduated with excellence from the
US Navy Aerospace Medical Institute.
He was appointed to the Board of BATM
in November 2018 for a three-year period
as an external director in accordance
with Israeli law.
24 BATM l ANNUAL REPORT AND ACCOUNTS 2019
Principal Activities
Corporate Governance Statement
BATM is focused on the development, production and marketing
of real-time technologies focusing on two main application
areas: Networking & Cyber and Bio-Medical. Networking
& Cyber includes products and services related to carrier
ethernet, NFV and cyber network monitoring for large area
networks. Bio-Medical includes medical diagnostic solutions,
bio-waste treatment and sterilisation, and distribution of third
party medical equipment and supplies. BATM has offices in
North America, Israel and Europe.
Financial Statements
The Directors present their report together with the audited
financial statements for the year ended 31 December 2019. The
results of the year are set out in the consolidated statement of
profit or loss. After reporting a $0.8 million amortisation of intan-
gible assets for the year, BATM recorded a profit of $3.3 million.
Dividends
In light of the uncertainty surrounding COVID-19 and the
necessity to preserve funds for, primarily, investment in the
Group’s development of its state-of-the-art Bio-Medical projects,
the Board believes it is prudent not to declare a dividend for
2019. The Board will revisit its dividend policy once the global
situation normalises and it has sufficient clarity of outlook, which
could, depending on the financial position of the Group, include
consideration of declaring an interim dividend for 2020.
Business and Strategic Review
The review of the Group’s business operations, including key
performance indicators, principal risks and uncertainties,
research and development and future developments, are set
out in the Strategic Report section on pages 4 to 22 together
with this Directors’ Report.
Directors
The Directors who served for the year ended 31 December
2019 and are currently serving are as follows:
• Dr. Gideon Chitayat, Non-Executive Chairman
• Dr. Zvi Marom, Executive Director and Chief Executive
Officer
• Moti Nagar, Executive Director and Chief Financial Officer
• Harel Locker, Non-Executive External Director and Senior
Independent Director (SID)
• Prof. Ari Shamiss, Non-Executive External Director
• Prof. Varda Shalev, Non-Executive External Director
The information that fulfils the requirement of the corporate
governance statement in accordance with Rule 7.2 of the
Financial Conduct Authority’s Disclosure and Transparency
Rules can be found in this Directors’ Report and in the
Corporate Governance information on pages 28 to 34 which
is incorporated into the Directors’ Report by reference.
Directors’ Remuneration and Interests
The Directors’ remuneration and interests are set out in the
Directors’ Remuneration Report on pages 35 to 47.
Rules about appointment and replacement of
Directors; Amendment of Articles
Pursuant to the Company’s articles of association and Israeli
Companies Law, directors are elected at the Annual General
Meeting by the vote of the holders of a majority of the voting
power represented at such meeting in person or by proxy
and voting on the election of directors. Appointments to
the Board are subject to a formal, rigorous and transparent
procedure after the Company’s Nomination Committee has
considered each nominee and the Company gives full and
transparent information and background to the shareholders
on each candidate that it wishes to propose for election and/or
re-election to the Board. Each director (except for the public
external appointed directors) shall serve until the next Annual
General Meeting following the Annual General Meeting at
which such director was appointed, or his earlier removal.
The holders of a majority of the voting power represented at a
General Meeting and voting thereon shall be entitled to remove
any director(s) from office, to elect directors in place of the
directors so removed or to fill any vacancy, however created,
in the Board of directors by way of ordinary resolution. Non-
executive public “external” directors, as defined by Israeli
Company Law, are appointed and elected for a mandatory
term of three years, which is renewable for no more than two
further terms of three years each. The appointment of the
external directors must be approved by the shareholders
in general meeting. The Israeli Companies Law defines the
procedures and conditions for re-election of external non-
executive directors at the end of each three-year term, which
are mandatory for the Company.
Apart from the authority of the General Meeting to remove
a director from office, subject to giving such director a
reasonable opportunity to present his position to the General
Meeting, under the Company’s articles, the office of a director
shall be vacated ipso facto, upon his death, or if he be found
BATM | ANNUAL REPORT & ACCOUNTS 2019 25
ANNUAL REPORT & ACCOUNTS 2018 25
DIRECTORS’ REPORT CONTINUED
CORPORATE GOVERNANCE
to be of unsound mind, or becomes bankrupt or if he becomes
prohibited by law from being a director in a public company.
The two Executive Directors, being the CEO, Dr. Zvi Marom,
and the CFO, Mr. Moti Nagar, as well as the Chairman of the
Board, Dr. Gideon Chitayat, were re-elected at the Annual
General Meeting of 5 December 2019 until the following AGM
and will be proposed for re-election at the Annual General
Meeting of 2020. Their biographies appear on page 23 above.
The term of Dr. Marom’s management services contract
will expire on 31 December 2020. The CFO’s employment
contract as well as the Chairman’s engagement contract are
for undefined terms and can be terminated by prior notice
by either party. During the year under review there were no
changes to the significant commitments of the Chairman.
Under the Israeli Companies Law, a company may amend its
articles by a simple majority of the shareholders at a General
Meeting. Any proposed amendments to the articles regarding
modification of rights attached to shares of the Company and/
or dividing the share capital into various classes of shares
requires the approval of the holders of 75% of the issued
shares in the Company.
Going Concern
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group will be able to
operate within the level of available facilities and cash for the
foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the accounts.
Viability Statement
The Directors have assessed the Company and the Group’s
viability over a period of three years. In making their
assessment, the Directors took account of the Company
and the Group’s current financial and operational positions
and contracted capital expenditure. They also assessed the
potential financial and operational impacts, in severe but
plausible scenarios, of the principal risks and uncertainties
set out on page 13 and the likely degree of effectiveness
of current and available mitigating actions. Based on this
assessment, the Directors have a reasonable expectation
that the Company and the Group will be able to continue in
operation and meet all their liabilities as they fall due up to
three years as above.
In making this statement, the Directors have also made key
assumptions (see note 4 to the financial statements).
Statement of Directors’ Responsibilities
the Directors’ Remuneration Report and
The Directors are responsible for preparing the Annual
Report,
the
financial statements in accordance with applicable laws and
regulations. The Directors are required to prepare financial
statements for the Group in accordance with International
Financial Reporting Standards as issued by the International
accounting standard Board (IFRS). Israeli company law
requires the Directors to prepare and approve such financial
statements.
International Accounting Standard 1 requires that financial
statements present fairly for each financial year the Company’s
financial position, financial performance and cash flows. This
requires the faithful representation of the effects of transactions,
other events and conditions in accordance with the definitions
and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards
Board’s ‘Framework for the Preparation and Presentation of
Financial Statements’. In virtually all circumstances, a true
and fair presentation will be achieved by compliance with all
applicable International Financial Reporting Standards.
Directors are also required to:
• properly select and apply accounting policies;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
• make an assessment of the Company’s ability to continue
as a going concern and disclose where they consider it
appropriate; and
• provide additional disclosures when compliance with the
specific requirements in IFRS is insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and
financial performance.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any
time the financial position of the Company, for safeguarding
the assets, for taking reasonable steps for the prevention
and detection of fraud and other irregularities and for the
preparation of a Directors’ Report and Directors’ Remuneration
Report which comply with the Listing Rules and the Disclosure
and Transparency rules.
Each of the Directors confirms to the best of his or her
knowledge:
1. the financial statements, prepared in accordance with
International Financial Reporting Standards, give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included in
the consolidation taken as a whole;
2. the strategic report includes a fair review of the development
and performance of the business and the position of the
Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties they face; and
3. the annual report and financial statements, taken as a
whole, are fair, balanced, and understandable, and provide
the information necessary for shareholders to assess the
Company’s position, performance, business model and
strategy.
Accountability and Audit
Brightman Almagor Zohar & Co. (the Firm), Certified Public
Accountants, a Firm in the Deloitte Global Network, serves as
the Company’s auditor. In accordance with the Firm’s policies,
based on the IESBA Code, the audit engagement partner must
be rotated after no more than seven years of service in that
role. The most recent audit partner rotation occurred in 2018.
The Directors’ Report has been brought for review to the Board
and has been approved in its present form. The Directors’
Report is signed on behalf of the Board by:
Dr. Zvi Marom
Executive Director & CEO
30 April 2020
in
Israel governing
Legislation
dissemination of financial statements may differ
legislation in other jurisdictions.
the preparation and
from
26 BATM | ANNUAL REPORT & ACCOUNTS 2019
BATM | ANNUAL REPORT & ACCOUNTS 2019 27
CORPORATE GOVERNANCE REPORT
The Company is committed to high standards of corporate
governance and the Board is accountable to the Company’s
shareholders for such governance. The Board carefully
reviews all new regulations relating to the principles of good
corporate governance and practice and endeavours to apply
them where applicable. Specifically, during 2019 the Board
took diligent measures to study and receive advice from its
UK legal advisers on the new UK 2018 Corporate Governance
Code (the “Code”) in order to understand the new principles of
good corporate governance under the Code and to organise
itself towards implementation of those principles. The Board
held a special session during 2019 on the new Code at which
the Company's UK legal adviser (Mr. Avram Kelman of the
Fladgate LLP law firm in London) participated. Mr. Kelman had
distributed to all the directors an executive summary of the
new principles under the new Code and gave an overview of
this subject matter to the Board. There was general discussion
and Mr. Kelman answered any questions addressed to him
by members of the Board. It also carefully reviews any
comments received from independent reviewing agencies
and shareholders and communicates with them directly. The
Company believes that the combination of the experience of
its Chairman, Dr. Gideon Chitayat, as well as the experience
and expertise of its external directors provides the Company
with the relevant leadership to address its position as an Israeli
company that is traded on the London Stock Exchange. The
Company, as a company with a Premium Listing and therefore
subject to Listing Rule 9.8.6R, is subject to the provisions of
the Code published by the Financial Reporting Council, a
copy of which is available from the FRC’s website at https://
www.frc.org.uk.
This Corporate Governance Report outlines how the Company
has applied the Main Principles set out in the Code as
amended by the UK Financial Reporting Council in April 2018.
Compliance with the UK Corporate
Governance Code
Throughout the year ended 31 December 2019, and through
to the date of approval of the financial statements, the Board
considers that the Company has complied with the provisions
set out in the Code with the exception of the matters referred
to on page 29. Further explanation of how the Company has
applied the principles and supporting provisions of the Code is
set out below and in the Directors’ Remuneration Report.
The Company’s responsibilities under
Israeli Company
legislation is such that it is obliged to appoint two independent
non-executive directors (defined as “external directors” within
Israeli law), who must be appointed for a minimum of one
28 BATM | ANNUAL REPORT & ACCOUNTS 2019
three-year term, which may be extended by the Company
for no more than two additional terms of three years each.
With the exception of the “external” non-executive directors
who serve for a period of three years in accordance with
Israeli company law, all directors have to be re-elected by
the shareholders at an AGM, if proposed for re-election. The
Israeli Companies Law sets forth the grounds for removing an
external director from office as well as rules for re-election of
the external directors and the Company believes that these
provisions are compatible with the requirements of the Code.
The current independent Non-executive Directors which
qualify as “external directors” under Israeli law are Mr. Harel
Locker (who is also the Senior Independent Director), Prof. Ari
Shamiss and Prof. Varda Shalev. Mr. Locker was re-elected
for a second term of three years at the AGM of 5 December
2019 after his first term expired in September 2019. Profs.
Shamiss and Shalev were appointed for a term of three
years in November 2018. As will be seen below, the various
Committees of the Board are comprised of the external
directors, which guarantees full independence while these
Committees perform their corporate functions in the Company.
The Company continues to consider that the three external
directors currently in office are independent in character and
judgment and no circumstances or matters exist which would
compromise such independence. In addition, the Company
considers that through its maintaining a continual “mix” of
experience, disciplines in business development, technology
the bio-medical and diagnostics areas),
(especially
entrepreneurship and risk management capabilities in the
members of its Board, the Company has applied Principles
A - E and K of the Code.
in
The Board – leadership and effectiveness
The Board, which currently comprises two executive and
four non-executive Directors including the Chairman, is
responsible collectively for the long-term success of the
Company. In compliance with Israeli company legislation the
Board meets at least four times a year in formal session. Prior
to each meeting, the Board is furnished with information in
a form and quality appropriate for it to discharge its duties
concerning the state of the business and performance.
The Israeli Companies Law, which applies to the Company, sets
out and defines the responsibilities and duties of, and areas
of decision for, the Board. These include approval of financial
statements; dividends; Board appointments and removals;
long-term objectives and commercial strategy; changes in
capital structure; appointment, removal and compensation
(continued on page 30)
CORPORATE GOVERNANCE
Provision
Exception and explanation
5 Engagement with the workforce via a director
appointed from the workforce, a formal workforce
advisory panel or a designated non-executive
director.
14 The responsibilities of
the chair, chief
executive, senior independent director, board
and committees should be clear, set out in writing,
agreed by the board and made publicly available.
18 All directors should be subject to annual
re-election.
19 The chair should not remain in post beyond
nine years from the date of their first appointment
to the board.
The Board has not implemented one of the prescribed methods, however,
during the year, it established a CSR Committee with responsibility (among
other matters) for workforce engagement. Further detail on how BATM engages
with its workforce can be found in the ‘Conducting Business Responsibly’
section on pages 20 to 22. In addition, the Group has a VP Human Resources in
each subsidiary, which is responsible for engaging with, and keeping the senior
management informed of matters pertaining to, the workforce. Employees also
have access to the internal auditor to make any complaint of wrongdoing via the
whistleblowing procedure.
The Group has not adopted a formal schedule of responsibilities for the roles of
Chairman and CEO as the Israeli Companies Law, which applies to the Group,
sets out and defines the responsibilities and duties of the directors and the CEO.
Nonetheless, the Group intends to prepare a defined schedule of responsibilities
for consideration and adoption by the Board in 2020.
In accordance with Israeli law, the Group is required to appoint two independent
non-executive directors (defined as “external directors” within Israeli law), who
must be appointed for a minimum of one three-year term. Mr. Harel Locker,
Prof. Ari Shamiss and Prof. Varda Shalev are classified as external directors
and cannot be subject to annual re-election. All other members of the Board
(excluding the “external” non-executive directors) are subject to annual
re-election.
As of June 2019, Dr. Gideon Chitayat, Chairman, has served on the Board
for nine years – five of these as Chairman. Dr. Chitayat was appointed to the
Board as Independent Non-Executive Director and the Board continues to
consider him as independent in character and judgement, and there are no
relationships or circumstances that could affect his judgement. His knowledge
of the business and the understanding of its various components, which is built
on his experience, combined with his independence of mind, enables a critical
review of strategy and operations. In addition, his vast business experience,
expertise and knowledge of directing large business organisations within Israel
is a valuable resource for the Board and the Group as a whole. As a result, the
Board believes that Dr. Chitayat remaining as Chairman is in the best of interests
of the Group and of shareholders.
21 A regular externally facilitated Board evaluation. Currently in the Israeli corporate business environment there are no external
“evaluators” that can provide such a service. The Group is considering methods
for implementing this provision.
34 The remuneration of non-executive directors
should be determined in accordance with the
Articles of Association or, alternatively, by the
board.
In accordance with Israeli law, the Board when approving the nomination of a
new “external” non-executive director determines the remuneration to be paid
within a set range set forth in the Regulations promulgated under the Israeli
Companies Law (that is based on the size of the company and the professional
qualifications or expertise of the nominee director).
BATM | ANNUAL REPORT & ACCOUNTS 2019 29
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE REPORT CONTINUED
Board and committee activities in 2019 were as follows:
Meetings
Attendance
Board of Directors
Audit Committee
Remuneration Committee
Nomination Committee
8*
5
1
–
All Directors attended 100% of the Board meetings during 2019 except for the
absence of Mr. Harel Locker from one Board meeting, due to a last-minute trip
overseas. (* This includes 1 teleconference Board meeting of 24/6/2019)
All Audit Committee members attended 100% of meetings during 2019, except for
the absence of Mr. Harel Locker from one meeting.
All Remuneration Committee members attended the meeting during 2019.
of senior management; major investments including mergers
and acquisitions; risk management; corporate governance;
engagement of professional advisers; political donations;
and internal control arrangements. The ultimate responsibility
for reviewing and approving the annual report and financial
statements, and for ensuring that they present a balanced
assessment of the Company’s position, lies with the Board.
These provisions have been fully complied with. In light of
the Code coming into effect as of the 2019 financial year
and in order to improve good corporate governance and
practice, the Board adopted during 2019 a newly drafted
Terms of Reference of the role and duties of the Board, in
order to better comply with the principles of the Code.
In addition, the Audit Committee as well as the Directors
review and assess on an annual basis, the performance of
the external auditors, their independence, reasonableness
of their audit fees as compared with peer tier 1 accountancy
offices in Israel and make recommendations to be brought
forward to the shareholders’ meeting as to the appointment,
or reappointment, or replacement of the external auditors of
the Group. While the Audit Committee as part of its activity
reviews and monitors the external auditor’s independence
and objectivity (see page 32) there is no requirement under
Israeli law and regulations and it is not common market
practice in Israel to have maximum terms for auditors.
Rotation of external auditors is not accepted practice in the
Israeli market and the Company is not subject to EU audit
regulations that relate to rotation of the external auditors.
However, to facilitate auditor independence, the audit
engagement partner must be rotated after no more than
seven years of service in that role. The most recent audit
partner rotation occurred in 2018.
In accordance with section B.5.1. of the Code, independent
outside counsel is also present at every Board meeting and
Board committee meetings.
The Board carried out a review of its own effectiveness
30 BATM | ANNUAL REPORT & ACCOUNTS 2019
and that of its various committees during the year and
an evaluation of the performance of each member of the
Board. The review was facilitated by the Chairman of the
Board who reviewed the performance of each Director,
his/her knowledge and comprehension of the nature of the
Group’s business, how the Board works together and other
factors relevant to its effectiveness without the Executive
Directors being present at the meeting. The SID (Mr. Harel
Locker) carried out a review of the Chairman’s performance
during the year under review after considering the views
of the Executive Directors within the deliberations of the
Remuneration Committee. In light of the recommendations of
the Code to have an externally facilitated Board evaluation,
the Company is considering methods for implementing this
recommendation. Currently in the Israeli corporate business
environment there are no external “evaluators” that can
provide such a service.
The Board comprises six Directors, four of whom are Non-
executive Directors, under the chairmanship of Dr. Gideon
Chitayat. Under the Israeli Companies Law, the maximum
tenure for external non-executive directors is nine years subject
to stringent and transparent procedures for proposing their
re-election at the Annual General Meeting at the end of each
three year term. In this respect the Company believes that it
complies with the Main Principles of the Code. The Board’s
members have a wide breadth of experience in areas relating
to the Company’s activities and the Non-executive Directors
in particular bring additional expertise to matters affecting
the Company. All of the Directors are of a high calibre and
standing. The biographies of all the members of the Board
are set out on pages 23 to 24. The interests of the Directors
in the Company and their shareholdings are set out on page
45. All of the Non-executive Directors are independent
of management and not involved in any business or other
relationship that could materially interfere with the exercise of
their independent judgment. The Board is of the opinion that
each of its members has the skills, knowledge, aptitude and
experience to perform the functions required of a director of
a listed company and that the Board is comprised of a good
balance of Executive and Non-executive Directors.
The induction of newly elected Directors into office is
the responsibility of the Chairman of the Board. The new
Directors receive a memorandum on the responsibilities and
liabilities of Directors from the Company’s general counsel
as well as presentations on all activities of the Company by
senior members of management and a guided tour of the
Company’s premises.
All Directors are invited to visit the Company premises and
its operating facilities.
The Directors receive periodically a detailed operating
report on the performance of the Company in the relevant
period, including a consolidated statement of financial
position. A fuller report on the trading and quarterly results
of the Company is provided at every Board meeting. Once
per year a budget is discussed and approved by the Board
for the following year. All Directors are properly briefed on
issues arising at Board meetings and any further information
requested by a Director is always made available.
The Company has an experienced Company Secretary,
Mr. Arthur Moher, who is also one of the Company’s legal
advisers and all the Directors have access to Mr. Moher’s
services.
The Directors may take independent professional advice at
the Company’s expense in furtherance of their duties.
With respect to succession of the Board members, it is the
role of the Nomination Committee (see page 33) to identify
succession planning. Non-executive Directors are replaced
regularly in accordance with the requirements of Israeli
legislation in respect of the appointment of qualified external
directors for a three-year period and the ongoing obligation
to replace them regularly as the term of their office expires.
The Board also works to ensure that within the Group
there exists a culture that is free from discrimination and
harassment in any form. The Board ensures that the
Company complies with Israeli legislation known as the
Israeli Equal Rights for People with Disabilities Law, 5748-
1988 to ensure that appropriate consideration is given to
employees with disabilities. The Company is also in full
compliance with Israeli legislation known as the Employment
(Equal Opportunities) Law, 5758-1998, which requires
an employer not to discriminate amongst employees on
account of sex, sexual tendencies, personal status and any
other forms of discrimination. As of 31 December 2019, of
the total workforce across the Group 65% of employees
were female and 25% of the total executive management
positions were held by females. In addition, the Group
encourages employment for people drawn from a wide
range of socioeconomic backgrounds. For example, one
of its medical diagnostic testing subsidiaries in Israel has
approximately 40% of its workforce drawn from religious and
ethnic minorities (a significantly higher proportion than within
the country’s overall population).
Relations with Shareholders and
Significant Shareholders
Communication with shareholders is given high priority. The
half-yearly and annual results are intended to give a detailed
review of the business and developments, and are available
on the Company’s website to all shareholders. Printed copies
of the full Annual Report are made available on request.
The Company’s website (www.batm.com) contains up to
date information on the Company’s activities and published
financial results. The Company solicits regular dialogue
with institutional shareholders (other than during closed
periods) to understand shareholders views. The Board also
uses the Annual General Meeting to communicate with all
shareholders and welcomes their participation. Directors are
available to meet with shareholders at appropriate times. The
Company is committed to having a constructive engagement
with its shareholders.
As of 31 December 2019, to the best of the Company’s
knowledge, the following persons or entities had a significant
holding of BATM ordinary shares:
• Dr. Zvi Marom, the Company’s CEO and founder – 21.98%
• Lombard Odier Investment Managers – 25.55%
• Legal & General Investment Management – 5.27%
• Herald Investment Management – 5.49%
Committees
As required by the provisions of the Israeli Companies Law,
the Board has appointed an Audit Committee, a Remuneration
Committee and a Nomination Committee to deal with
specific aspects of the Company’s affairs and ensures
that each such Committee is fully constituted and operates
as required under the Israeli Companies Law. In addition,
during the year under review, the Board appointed a new
Corporate Social Responsibility & Environment Committee
(“CSR Committee”) to better deal with social, environmental,
health and safety practices, diversity and similar matters with
BATM | ANNUAL REPORT & ACCOUNTS 2019 31
CORPORATE GOVERNANCE REPORT CONTINUED
respect to the way the Company conducts itself, in order
to meet the requirements of the Code. As of 31 December
2019, the composition of the aforementioned Committees are
as detailed below.
Audit Committee
Members: Mr. Harel Locker, Prof. Ari Shamiss and Prof.
Varda Shalev
Chairman: Mr. Harel Locker
The Chairman of the Audit Committee has significant
financial expertise and experience. The Committee’s terms
of reference include, among other things, monitoring the
scope and results of the external audit, the review of interim
and annual results, the involvement of the external auditors
in those processes, review of whistle blowing procedures,
considering compliance with legal requirements, accounting
standards and the Listing Rules of the Financial Conduct
Authority, and for advising the Board on the requirement
to maintain an effective system of internal controls. The
Committee also keeps under review the independence and
objectivity of the Group’s external auditors, value for money
of the audit and the nature, extent and cost- effectiveness
of the non-audit services provided by the auditors (see
note 9 to the financial statements). Pursuant to section 117
(6) of the Israeli Companies Law, the Audit Committee is
responsible to fix procedures and policy for whistleblowing
and to oversee these procedures. In April 2017 the Audit
Committee adopted a whistleblowing procedure and policy
which applies to all employees in the Group. Under the policy,
the internal auditor (which is an independent external service
provider to the Company) was appointed as the Administrator
of the policy authorized to receive and investigate complaints
or concerns from employees in the Group with respect to
wrongdoing. The policy established a “hot line” through
which any employee can approach the Administrator directly
and independently. During the year under review the Audit
Committee received no reports from the Administrator on
whistleblowing complaints from employees in the Group. The
Audit Committee regularly reports to the Board which retains
overall oversight on the proper workings of this procedure in
the Group.
The Committee has discussed with the external auditors
their
independence, and has received and reviewed
written disclosures from the external auditors regarding
independence. Non-audit work is generally put out to tender.
In cases which are significant, the Company engages another
independent firm of accountants to provide consulting work
to avoid the possibility that the auditors’ objectivity and
32 BATM | ANNUAL REPORT & ACCOUNTS 2019
independence could be compromised; work is only carried
out by the auditors in cases where they are best suited to
perform the work, for example, tax compliance. However, from
time to time, the Company will engage the auditors on matters
relating to acquisition accounting and due diligence (the
scope of which is very limited), thus ensuring the continued
objectivity and independence of the external auditors.
The Committee meets at least twice a year, and always
prior to the announcement of interim or annual results. The
external auditors, internal auditor and Chief Financial Officer
are invited to attend all meetings in order to ensure that all
the information required by the Committee is available for it
to operate effectively and the Audit Committee reports back
to the Board. The external auditor communicates with the
members of the Audit Committee during the year, without
executive officers present. The Committee also meets with
representatives of the Company’s external auditors at least
twice per year and raises on a regular basis any issues it
has with the review and/or audit carried out by the external
auditors and comments on specific issues it believes the
auditors should be focusing on.
to
the
The Audit Committee adheres
functions and
requirements prescribed to it by the Israeli Companies Law
and Israeli Regulations as well as to the specific Terms of
Reference adopted by the Board for this committee and takes
account of the relevant provisions of the FCA’s Disclosure
Guidance and Transparency Rules and the Code. The
Chairman of the Audit Committee maintains close contact
with the Company on a regular basis.
Remuneration Committee
Members: Prof. Ari Shamiss, Mr. Harel Locker and Prof.
Varda Shalev
Chairman: Prof. Ari Shamiss
The Company’s Remuneration Committee is constituted in
accordance with the recommendations of the Governance
Code. The Committee consists of three out of the four Non-
executive Directors and excludes the Chairman as is required
under Israeli Company Law. None of the Committee members
have any personal financial interests or conflicts of interests
arising from cross-directorships or day-to-day involvement in
running the business.
None of the Directors play a part in any determination of their
own remuneration.
The Committee has responsibility for making recommendations
to the Board on the Company’s policy on staff remuneration
and for the determination, within agreed terms of reference,
CORPORATE GOVERNANCE
of specific remuneration packages for the Chairman of the
Company and each of the Executive Directors (including
pension rights and any compensation payments).
The primary responsibilities of the Committee are to ensure:
1. That individual pay levels for Executive Directors should
generally be in line with levels of pay for executives in
similar companies with similar performance achievement
and responsibilities.
2. That share option and bonus schemes should be set at a
level that provides sufficient incentive to the executive to
produce results that will reflect and exceed the Board’s
expectations, and be appropriately balanced alongside
fixed-level and more immediate remuneration. Currently as
explained below in the Directors’ Remuneration Report, the
vesting period for share options is over a three-year term.
This period is very customary and recognised in Israeli
industry and changing this to a longer vesting period, such
as a five-year period, would adversely affect the Group's
ability to compete in recruiting experienced and highly
skilled managers and executives. This vesting period (as
part of the Remuneration Policy) is brought for approval by
an independent vote of the shareholders.
3. That total pay and long-term remuneration will be sufficient
to retain executives who perform.
4. That aggregate pay for all Executive Directors is reasonable
in light of the Company’s size and performance and is
compatible with the Company’s risk policies and systems.
Information of the Company’s policy regarding the setting
of Directors’ remuneration together with the remuneration of
Directors is set out in the Directors’ Remuneration Report on
pages 35 to 47. The Company’s current remuneration policy
as recommended by the Remuneration Committee was
approved at the Annual General Meeting of the Company in
October 2017. The remuneration policy is more fully explained
below in the Directors’ Remuneration Report.
Nomination Committee
Members: Dr. Gideon Chitayat, Prof. Varda Shalev and Prof.
Ari Shamiss
Chairman: Prof. Varda Shalev
In addition to the Company’s diversity policy for existing
employees, the Nomination Committee is specifically tasked
with assessing the process utilised by the Company in relation
to Board appointments and in monitoring diversity during
the recruitment process and in the context of the resulting
appointment made. During the process, the Nomination
Committee prepares a description of the role and capabilities
required for a particular appointment while evaluating the
balance of skills and experience in identifying a candidate
pool and in the recruitment of Board members from such
potential candidates, with consideration given to the balance
of skills, experience, independence and knowledge on the
Board. Board appointments are made on merit set against
objective criteria having due regard, amongst other things, to
the benefits of diversity on the Board, including gender. As
at 31 December 2019, there was one female on the Board
(representing 16.6% of Board membership).
Prior to the date of expiration of office of a non-executive
director or in cases of early resignation of a director, the
Committee considers
the necessary skills, experience,
expertise and gender required of potential candidates and
prepares a list of potential candidates. Since Israel is a
relatively small country, it is quite easy for the Nomination
Committee to obtain recommendations through objective
professional directors in various industries of persons that
could fit the requirements needed by the Company. Once
this is done, a number of appropriate candidates (who have
relevant experience in those lines of business in which the
Company is engaged and the personal qualifications that fit
the Company) are interviewed by the Chairman of the Board.
After the interview, the Nomination Committee presents its
recommendations to the Board which, if deemed necessary,
may expand on the interview and research process in order
to find the optimum candidate for the office of director in the
Company. Generally, no external search consultancy firm is
used or advertisement published by the Company, for the
reasons explained above.
CSR Committee
Members: Dr. Gideon Chitayat, Prof. Varda Shalev and Prof.
Ari Shamiss
Chairman: Dr. Gideon Chitayat
During the year under review, the Board after studying the new
principles set forth in the new Code deemed it appropriate
to appoint this Committee and the Board adopted specific
Terms of Reference for this Committee’s role and duties. The
primary role of the CSR Committee is to assist the Board in:
• Understanding the views of key shareholders in the
Company;
• Understanding the Company’s impact on community and
environment; and
• Ensuring that the Board is aware of the processes used by
the Company in engaging with its key shareholders.
BATM | ANNUAL REPORT & ACCOUNTS 2019 33
improving controls and corporate responsibility and the Board
instructs management to implement the recommendations.
During the year under review, the internal auditor presented
reports to the Audit Committee on the following subject
matters: (a) employees’ salary, recruitment procedures and
assessment of the risks in one of the Company’s main software
house subsidiaries in Israel and (b) the insurance coverage
and risk management of the BATM Group.
The key features of the financial controls of the Company
include a comprehensive system of financial reporting,
budgeting and forecasting, and clearly laid down accounting
policies and procedures. The main elements of internal control
currently include:
• Operating Controls: The identification and mitigation of major
business risks on a daily basis is the responsibility of the
Executive Directors and senior management. Each business
function within the Group maintains controls and procedures,
as directed by senior management, appropriate to its own
business environment while conforming to the Company’s
standards and guidelines. These include procedures and
guidelines to identify, evaluate the likelihood of and mitigate
all types of risks on an ongoing basis.
• Information and Communication: The Group operating
procedures include a comprehensive system for reporting
financial and non-financial information to the Directors.
Financial projections, including revenue and profit forecasts,
are reported on a monthly basis to senior management
compared with corresponding results for previous periods.
The central process for evaluating and managing non-
financial risk is monthly meetings of business functions,
each involving at least one Director, together with periodic
meetings of Executive Directors and senior management.
• Finance Management: The finance department operates
within policies approved by the Directors and the Chief
Financial Officer. Expenditures are tightly controlled with
stringent approvals required based on amount. Duties such
as legal, finance, sales and operations are also strictly
segregated to minimise risk.
• Insurance:
Insurance coverage
is provided externally
and depends on the scale of the risk in question and the
availability of coverage in the external market.
The Duties of the Committee pursuant to its Terms of
Reference are:
• To assess and monitor culture to ensure alignment with the
Company’s purposes, values and strategy;
• To be responsible for interaction and engagement with the
workforce on behalf of the Board, as and when relevant, in
order for the Board to comply with Provision 5 of the Code;
• To oversee and monitor and help generate a Company’s
health and safety systems and practices; and
• To help the Board understand the impact of the Company’s
operations on the community, environment, green-eco
policies. The Committee is obligated to report periodically
to the Board on the Committee’s work and activities.
Conflicts
Throughout 2019 the Company has complied with procedures
in place for ensuring that the Board’s powers to authorise
conflict situations have been operated effectively and this has
also been considered at a committee level where appropriate.
During 2019, no conflicts arose that would require the Board
to exercise authority or discretion in relation to such conflicts.
Risk Management and Internal Control
Risk management is currently reviewed on an ongoing basis by
the Board as a whole. The Company has an ongoing process
for identifying, evaluating and managing the significant risks
faced by the Group that has been in place from 2011 and up
to the date of approval of the Annual Report and Financial
Statements. Principal controls are managed by the Executive
Directors and key employees, including regular review by
management and the Board of the operations and the financial
statements of the Company.
The Board has overall responsibility for ensuring that the
Company maintains adequate systems of internal control
and for determining the nature and extent of principal risks.
The Board confirms that they have carried out during 2019 a
robust assessment of such risks accordingly, including those
that would impact the Company’s business model, future
performance, solvency or liquidity, and have considered
how they are to be mitigated. To this end, in accordance
with the Israeli Companies Law, the Company has appointed
and retains the services of an independent qualified internal
auditor. Each year, the Audit Committee reviews with the
internal auditor potential risks and a proposed plan for their
scope of work. Each year the Audit Committee usually selects
at least two areas of the Company’s operations on which it
requests the internal auditor to focus and prepare an internal
audit report with recommendations. Following the completion
of each report, the internal auditor sends it to all the Directors
and presents their findings to the Audit Committee. The Audit
Committee then reports to the Board on any major findings
together with the internal auditor’s recommendations for
34 BATM | ANNUAL REPORT & ACCOUNTS 2019
CORPORATE GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
REMUNERATION COMMITTEE REPORT
Dear Shareholder
The Board is pleased to present the Remuneration Committee’s
Report for the year ended 31 December 2019.
The main purpose of the Remuneration Committee is to design
appropriate remuneration packages to attract, retain and
motivate senior executives and managers of the experience
and expertise required to run the Company successfully.
The Remuneration Committee reviews and considers the
remuneration of, amongst others, the CEO, CFO, executive
and non-executive directors and other individuals determined
by the Board to be material to the Company’s current and
future prospects.
The Remuneration Committee must ensure that a remuneration
framework is established and implemented that addresses
the need of the Company to attract, retain and motivate such
individuals, while considering and managing business risks
and ensuring the Company’s remuneration policy facilitates,
so far as possible, the Company’s long-term strategy and
performance and ensures its sustainable financial health.
The Remuneration Committee remains focused on ensuring
that the overall remuneration strategy adopted by the Company
remains aligned with the interests of its shareholders. The
Remuneration Committee, when necessary, engages external
executive remuneration advisers to give it guidance regarding
the accepted levels of salary, bonuses and LTIs payable by
similar sized companies listed on the London Stock Exchange
to its CEO, CFO and other senior executives and ensures that
the level of remuneration offered to its senior executives is
both fair and reasonable.
Introduction
This report sets out BATM Advanced Communication’s
executive
remuneration policy and details Directors’
remuneration and benefits for the financial year under review.
The Company is incorporated in Israel, and the Company’s
current Remuneration Policy and Guidelines (“Remuneration
Policy”) came into effect after its approval by the Shareholders’
Meeting by a majority vote as prescribed in section 267A
(b) of the Israeli Companies Law, 1999 (“Companies Law”)
at the Annual General Meeting held in October 2017. The
Companies Law requires that the Remuneration Policy must
be presented to the shareholders for approval at least once
every three years, and therefore the next such approval is
anticipated to be in late 2020. In preparing the Remuneration
Policy for approval, the Company will, again, engage external
experienced consultants in the area of executive remuneration
packages both in Israel and London to provide independent
and objective advice to assist the Company in its endeavours.
The Company will also consult with its largest shareholders
in advance to ensure that shareholder views are taken into
account. In addition, the policy will be prepared with due
consideration for the factors set out in Provision 40 of the UK
Corporate Governance Code (the “Code”).
While the Company is not subject to the Companies Act 2006
or the amendments introduced in relation to the preparation
and approval of directors’ remuneration policies and reports
for listed companies, the Company complies with the Code
and believes that the Company’s remuneration strategy
would comply with the requirements of the Code and of the
Companies Act 2006 and related legislation.
The Reporting Regulations (International Auditing Reporting
Standards) also require the auditors to report to the Company’s
members in the financial statements within this report and
to state whether in their opinion that part of the report has
been properly prepared. The report is therefore divided into
separate sections for audited and unaudited information.
Recruitment Remuneration
is
The Company’s policy on recruitment remuneration
to consider the market conditions and the Company’s
requirements, while ensuring that it complies with the
Remuneration Policy, in determining the appropriate level of
remuneration (including in respect of any buy-out award) in
connection with the appointment of Executive Directors.
Remuneration Committee
The Remuneration Committee works within its terms of
reference to make recommendations to the Board of Directors
of the Company. The Remuneration Committee’s full terms
of reference are available on the Company’s website. The
Remuneration Committee consists of three out of the four
non-executive Directors and excludes the Chairman of the
Board as is required under Israeli Company Law. None of the
Committee members have any personal financial interests,
conflicts of interests arising from cross-directorships or day-
to-day involvement in the running of the business.
None of the Directors plays a part in any determination of his
own remuneration.
The Committee also receives advice from several sources,
namely:
• The Chairman of the Board, who attends the Remuneration
Committee meetings by invitation only, and the Company’s
Chief Financial Officer, who attends when specifically
BATM | ANNUAL REPORT & ACCOUNTS 2019 35
DIRECTORS’ REMUNERATION REPORT CONTINUED
Chairman of the Board, who attended by invitation, and from
the Company Secretary, who attends meetings as Secretary
to the Committee.
Stakeholder Views & Engagement
As noted above, the current Remuneration Policy was
approved by shareholders in October 2017 and the next such
approval is expected in late 2020. The Company intends to
consult with its largest shareholders in advance of preparing
the policy for approval this year to ensure that shareholder
views are taken into account. While the Committee does
not consult directly with employees on the director’s
Remuneration Policy, it does take into consideration salary
increases and remuneration arrangements across the Group
when determining payments for the Executive Directors.
I am pleased to report that, at the Company’s AGM held on
5 December 2019, the shareholders approved (as detailed
in the table below) the Remuneration Committee report for
2018, together with the auditor’s reports on the auditable part
of that report, and the award of an annual bonus to Mr. Moti
Nagar, CFO, in relation to his performance in 2018 (which
was put to shareholders for approval in accordance with
Israeli law). As noted above, we have also taken shareholder
response to the 2019 AGM into account in preparing this
Directors’ Remuneration Report.
On behalf of the Committee, I thank shareholders for their
support and look forward to receiving further support at this
year’s Annual General Meeting.
Prof. Ari Shamiss
Remuneration Committee Chairman
30 April 2020
invited by the chairman of the Committee in order to provide
relevant information to the Committee. No individual takes
part in discussions relating to their own remuneration and
benefits.
• As and when the Committee deems it necessary, the
Committee consults with independent consultants on
executive benefits.
The members of the Remuneration Committee during the
year under review were:
• Prof. Ari Shamiss (Chairman)
• Prof. Varda Shalev
• Harel Locker
Key Remuneration Activities During the Year
During the year under review, the Remuneration Committee
met once and all members were in attendance. The
Committee’s main activities during the year included:
• Agreeing performance against targets for the 2018 annual
bonus awards
• Setting targets for the 2019 annual bonus
• Considering shareholder feedback in respect of the 2019
AGM
that significantly advanced
The Group made tremendous progress during 2019, both
in its financial performance and achieving a number of
operational milestones
the
execution on its strategy. Dr Zvi Marom, CEO, and Mr. Moti
Nagar, CFO, were instrumental in achieving this success
(as discussed further on pages 44 to 45), but it is also
thanks to the efforts of the employee base as a whole and
our ability to attract and retain the right staff. We continue
to believe that our Remuneration Policy and practices are
appropriate for incentivising and rewarding our employees
and our Directors, and are in the best interests of the Group
as a whole. In light of the shareholder feedback in respect
of the 2019 AGM, we have endeavoured to provide greater
disclosure and transparency in this annual report.
During the year, the Committee received advice from the
Resolution
Approval of the
remuneration report
Approval of the CFO
annual bonus
Votes
for
135,077,845
165,974,020
% for
Votes against % against
85
97
24,583,631
5,793,850
15
3
Total votes
cast
Votes withheld
260,785,955
101,124,479
260,785,955
89,018,085
36 BATM | ANNUAL REPORT & ACCOUNTS 2019
REMUNERATION POLICY REPORT
The philosophy and principles of the Company’s Remuneration
Policy are detailed below (unaudited). This Remuneration
Policy was brought for approval to the Annual General Meeting
of the shareholders in October 2017 and was approved by a
large majority at that meeting.
Remuneration philosophy and objectives
The Company believes that the most effective Executive
remuneration policy is one that is designed to reward
achievement, to encourage a high degree of performance and
that aligns Executives’ interests with those of the Company
and its shareholders while ensuring that the Company can
maintain its ability to attract and retain for the long-term
leading employees for key positions. The remuneration
philosophy of the Company is to offer Executives remuneration
that is comprised of a mix of fixed annual salary and variable
performance-based bonuses and/or
long-term equity
incentives.
The Company has established the following main remuneration
objectives for the Company’s Executives:
(1) Remuneration should be related to performance on both
a short-term and long-term basis with a portion of a senior
Executive’s potential annual bonus and long-term equity-
based remuneration conditional on achievement of pre-
determined performance objectives.
(2) The mix of the fixed and performance-based variable
remuneration should serve to encourage senior Executives
to remain with the Company. The Policy’s components
are designed to retain talented executives. A significant
element of the Policy is therefore long-term equity-based
incentive remuneration rewards that vest on a rolling basis
over several years. As part of the retention objective, the
Company believes that remuneration should include a
meaningful share option component to further align the
interests of the senior Executives with the interests of the
shareholders.
(3) Remuneration should be reasonable for the business of
the Company, its location, industry and its long-term, multi-
year approach to achieving sustainable growth.
(4) Remuneration should be designed to encourage initiative
innovation and appropriate levels of risk. It should be
structured to discourage taking excessive short-term risk
without constraining reasonable risk taking. Therefore a
portion of the incentive variable remuneration should be
linked to longer-term Company performance.
CORPORATE GOVERNANCE
(5) The Policy should ensure transparency and accountability
and encourage a high-performing culture in the Company.
The Remuneration Committee and its duties
The BATM Remuneration Committee (the “Committee”)
was established by the Board of Directors of the Company
and operates in accordance with the functions set forth in
the Israeli Companies Law. This is a separate independent
Committee comprised of three external independent directors
who are appointed by the shareholders’ meeting.
The Committee’s responsibilities and duties are:
(1) Recommending for approval to the Board the framework
or broad policy for the remuneration of the Company’s
Chairman of the Board, CEO, Executive Directors and
other senior management and officers.
(2) Recommending appropriate remuneration packages and
service contracts of the senior executives, and reviewing
the
the ongoing appropriateness and relevance of
Remuneration Policy.
(3) Recommending and determining
for all
performance-related
the
Company and approving the total annual payments made
under such schemes.
remuneration offered by
the goals
(4) Reviewing the design of all long-term incentive schemes,
such as options and equity awards and recommending
these for approval by the Board and, if and when required
by law, by the shareholders.
The Committee’s terms of reference are available on the
Company’s website and are available in hard copy on request
from the Company Secretary.
Remuneration Principles
The remuneration of senior executives and officers of the
Company shall consist of all, or part, of the following:
the
(i) fixed remuneration – salary (including pensions and fixed
social benefits on a level consistent with peer companies
and only if these are mandatory or commonly accepted
in the relevant employment market) that is commensurate
with
individual executive’s skills, experience,
education, qualifications and responsibilities. The fixed
annual salary, benefits and pension will be set at a broadly
mid-market level (including with reference to the country
in which an executive principally works), and reviewed
annually taking account of individual responsibilities and
performance. The Remuneration Committee will ensure
that the underlying principles, which form the basis for
BATM | ANNUAL REPORT & ACCOUNTS 2019 37
DIRECTORS’ REMUNERATION REPORT CONTINUED
determining executives’ salaries are consistent with those
on which salary decisions for the rest of the workforce
in the Company are taken. In addition, before making
a recommendation the Committee takes into account
the general salary increase for the broader employee
population when conducting the salary review for the
senior executives. The Committee also takes into account
the ratio between the total remuneration of the applicable
director and/or senior executive and the salary of all other
employees in the Company, especially the ratio between
the total remuneration and the median and average salary
of all such other employees in the Company - this analysis
and ratio will be calculated on a per Division basis and on
a per country basis so as to ensure that the comparison is
made on the same underlying parameters; and
(ii) variable remuneration, which can comprise a mix of:
• Annual bonuses; and
• Long Term (equity-based) Incentives (hereinafter –
“LTIs”) (share options only).
The Board of Directors determines the ceilings for payment of
the fixed remuneration and variable remuneration, so that they
are reasonable and appropriate. The targeted ratio between
the fixed salary remuneration and the variable elements of
remuneration that the Company may offer executives shall be
as per the table below.
The annual salary for the Chairman, CEO and senior executives
shall not exceed the following maximum thresholds:
(a) Non-Executive Chairman: $120,000*
(b) CEO: $520,000
(c) Other senior executives: $300,000
*
This amount is based on a 30% part time position of the Chairman
The total remuneration of senior executives and directors
reviewed annually,
the above
is
considerations and
the relevant person’s
contribution and performance as well as the performance of
the Company and its financial status.
taking
focusing on
into account
In addition to the above, at each such review the Remuneration
Committee may, at its discretion, approve immaterial changes
to all or part of the remuneration package of a senior executive
or officer of up to three salaries (including the amount of the
fixed benefits payable on such salaries) as a reward for his/her
special contribution to the Company in the previous year. With
respect to an immaterial change in the remuneration of the
CEO that is recommended by the Remuneration Committee,
such recommendation will also require the approval of the
Board of Directors of the Company. All instances in which the
Remuneration Committee has used its discretionary powers to
award such a bonus (as, for example, to reward an executive
for his/her special efforts in closing a merger or acquisition for
the Company) will be fully disclosed by the Company in the
relevant annual report.
Measurement criteria for awards of
annual Bonus
The level of the cash payment bonus paid to any executive
director, senior executive or officer (excluding non-executive
independent directors), will be established to link rewards with
the Company’s annual business goals, based on quantifiable
measurements and targets set out at the start of the financial
year by the Remuneration Committee. The criteria on which
the annual bonus is based shall be calculated, as follows:
(i) Consolidated / Division financial measures: adjusted
EBIDTA, measured against the targets of the annual
budget as approved by the Board of Directors for the
relevant year; and
Non-Executive Chairman
Annual Salary or the equivalent thereof
Other fixed benefits *
Annual Bonus**
LTIs (per vesting annum)
100%
30%-40%
None
None
CEO
100%
30%-40%
up to 75%
up to 125%
Senior Executives
100%
30%-40%
up to 50%
up to 100%
The percentages above reflect ratios compared with the annual fixed salary and are the maximum rewards that the Company may pay to the relevant
executives.
The amount of LTIs will be calculated on a linear basis over the period of vesting.
*
”Other fixed benefits” are comprised of mandatory pension scheme required by Israeli labour laws and regulations (6.5% from base salary), and may
also include Further Education Funds, use of company car, use of mobile phone and newspaper, all as commonly given in Israel in peer companies.
The Company only pays pension on the executives’ basic salary (and not on the variable remuneration).
* * Non-Executive Independent Directors are not eligible for annual bonuses.
38 BATM | ANNUAL REPORT & ACCOUNTS 2019
CORPORATE GOVERNANCE
(ii) Personal & operational performance measures:
The criteria shall be determined individually when such
personal criteria are set. A list of personal qualitative goals
will be determined by the Remuneration Committee on a
case-by-case basis.
The weight of the corporate / division financial measures and
personal operational performance measures for considering a
bonus award, shall be as follows:
be deducted from the bonus payable in the next year and
so forth up to three years. Notwithstanding the above, if the
senior executive’s employment relationship with the Company
terminates before the Balance is fully repaid to the Company,
then the Balance shall be deducted from all amounts due
and payable to such senior executive in connection with
such termination of employment and if there is still an unpaid
balance to the Company, then such unpaid balance shall
Consolidated financial measures:
75%-100%
60%-80%
20%-40%
Division financial measures:
–
–
40%-60%
Personal & operational performance:
(non-financial performance criteria)
up to 25%
20%-40%
up to 20%
CEO
CFO
Division Heads
The financial measures are based on defined quantitative
criteria, whereas the personal and operational measures
are based on qualitative criteria. If less than 70% of the
financial measures has been achieved, then no part from the
Consolidated/Division financial annual bonus may be paid;
if however between 70% - 100% of the financial measures
have been achieved, then the relevant executive or senior
officer will be eligible to receive a pro rata portion of the
Consolidated/Division financial annual bonus as determined
by the Remuneration Committee. Annual bonuses may be
withheld in whole or in part if the business has suffered an
exceptional negative event, even if some specific targets
have been met. The Remuneration Committee has overall
discretion to ensure that a payment that is inappropriate in all
the Company’s circumstances is not made.
The maximum aggregate bonus shall be as set forth in the
above table, per executive level.
If there was a mistake in calculation of the annual bonus by
the Company, or if the Company restates any of the financial
data that was used in calculating the bonus (other than a
restatement required due to changes in financial reporting
standards), then the applicable bonus shall be recalculated
using such restated data (the “Restated Bonus”). The balance
between the original bonus and the Restated Bonus, if any,
(the “Balance”) will be repaid to the Company, or paid to
the executive (as the case may be) by deducting or adding
such Balance from the first amounts payable to such senior
executive as a bonus immediately after the completion of
the restatement. To the extent that no bonus will be payable
to such senior executive in that year, then the Balance shall
be repaid pursuant to the terms determined by the Board of
Directors.
In the event of termination of employment of an executive
during the calendar year (except under circumstances
justifying the non-payment of Severance Pay pursuant to
Israeli labour law and precedent of the Labour Courts), the
amount of the bonus shall be calculated and adjusted for the
entire year in accordance with the provisions of this Policy
and thereafter shall be prorated in accordance with the actual
days of employment of the executive by the Company during
the applicable year and paid to the eligible executive in full
together with the first salary that will be paid following the
approval by the Board of Directors of the financial statements
for such applicable year.
Long-Term Incentives
The Company’s long-term Incentive package for the CEO
and other senior executives are designed to support the
Company’s strategy by incentivising the delivery of growth,
increase in profitability, superior shareholder returns and
sustained financial performance. Long-term incentives may be
granted by the Board of Directors through the issue of options
under the Company’s Employee Share Option Plan (“ESOP”).
The Company believes that this mechanism is the preferred
long-term incentive package, as the Company already has
in place ESOPs that have been approved by the relevant
Tax Authorities in Israel and this kind of LTI scheme is more
commonly used and understood by high-level executives in
the Israeli market. The Group does not issue share awards
under its LTI scheme.
BATM | ANNUAL REPORT & ACCOUNTS 2019 39
DIRECTORS’ REMUNERATION REPORT CONTINUED
Any award of long-term incentives by the Remuneration
Committee and the Board of Directors will be made in order
to reward the senior executives for future performance and
building additional value for the shareholders (thus increasing
the price of the share) and to foster a long-term relationship
between the executive and the Company.
(1) The vesting of any LTIs (options) granted by the Board to
a senior executive shall be over time in order to retain the
senior executive in the Company and to incentivise the
executive to increase the value of the Company.
(2) Any LTI (options) granted by the Company to a senior
executive will vest over a three-year period* as follows: 12
months after the Board approval – 0%; 24 months after
the Board Approval – 50%; and 36 months after the Board
Approval – 50%, provided that the senior executive remains
an employee or in the service of the Company on each
date of exercising the LTIs. If the Company terminates the
employment or services contract of an executive who was
awarded options within the first half of the year from the
Board approval, the eligible executive shall not be entitled
to exercise the options granted, unless the termination by
the Company was unjustified; if the Company terminates
the employment or services contract of an executive
who was awarded options within the second half of the
year from the Board approval, the Board of Directors
will determine whether to allow the eligible executive to
exercise the amount of options which vested immediately
prior to the termination date. Any executive that resigns
from his/her position in the Company shall forfeit his/her
right to exercise any non-vested LTIs.
(3) In exceptional circumstances and/or cases of a
restatement of any of the Company’s financial statements,
the Remuneration Committee has the discretion to reduce
future rewards of LTIs to the relevant senior executive. All
grant of options hereunder shall also be subject to the
following:
•
•
•
Options shall not be exercisable more than ten years
after the date of the grant.
The price (“exercise price”) at which options may be
granted shall be a fixed price and not be under the
average market price in the month preceding the date
of the Board approval.
The options may include provisions for acceleration
of vesting in certain events, such as mergers, a
consolidation, a sale of all or substantially all of the
Company’s consolidated assets, or sale of all or
40 BATM | ANNUAL REPORT & ACCOUNTS 2019
substantially all of the issued shares of the Company,
all as stipulated in the Company’s relevant employee
share option plan.
•
Subject to the receipt of all the required approvals, the
exercise of the options may be made by a cashless
mechanism and the exercise price may be adjusted for
dividend distribution.
(4) The Company’s
long-term
incentive schemes, as
applicable to directors and senior executives, provides
that commitments to issue BATM shares must not exceed
(in aggregate across all schemes) 10% of the issued
ordinary share capital (adjusted for share issuance and
cancellation) in any rolling 10-year period.
(5) The maximum levels of variable remuneration and benefits
that the Company may grant to the CEO and other senior
executives in the Company are as set forth above in the
table on page 38.
* The vesting period for share options is over a three-year term, which is
what is customary and recognised in Israeli industry and changing this
to a longer vesting period would adversely affect the Group's ability to
compete in recruiting experienced and highly skilled managers and exec-
utives. This vesting period (as part of the Remuneration Policy) is brought
for approval by an independent vote of the shareholders.
CEO Service Agreement
Following is a brief summary of the main terms & conditions
of the CEO’s Service Contract, which was approved by
shareholders in June 2018, between the Company and
the service management company owned by the CEO, Dr.
Zvi Marom (Nostradamus or the “Service Management
Company”):
Remuneration (“Service Fee”) – base salary of approximately
$382,000 (precise reported amount dependent on currency)
plus all relevant social benefits and taxes on this amount.
Annual Bonus: shall be payable by BATM to the Service
Management company for each of the above three years,
in the event that the BATM Group achieves the adjusted
EBITDA for each year which is set in the annual budget (work
plan) approved by the Board at the beginning of that year
(hereinafter– the “Base adjusted EBITDA”) and subject to the
following:
(a) The adjusted EBITDA for the relevant year is more than
$4.3 million.
(b) For each increase in the actual adjusted EBITDA for the
relevant year of 10% as compared with the Base adjusted
EBITDA, the Service Management Company shall be
entitled to a bonus of 1 month’s Service Fee up to a ceiling
CORPORATE GOVERNANCE
shareholders’ meeting or by the competent court at the
request of a director or shareholder.
Link to strategy
The Board believes that the Remuneration Policy and practices
of BATM support the strategy by enabling the Group to recruit
and retain Executive Directors and senior managers of the
calibre to deliver its strategy. The criteria set for the annual
bonus are also designed to support the achievement of the
Group’s strategic objectives while LTIPs incentivise the delivery
of long-term financial return through the implementation of
sustainable strategic growth. The Chairman’s fee supports
the recruitment and retention of a director of a calibre to lead
an effective board and contribute to the Group’s long-term
success. (Please see above regarding NED fees.)
External appointments for executive directors
of the Company
The Company does not prohibit its executive directors
from being appointed as non-executive directors in other
companies, provided that such appointment will not create a
conflict of interest between his/her position in the Company
and his external appointment. In each such instances, the
Company’s executive director may retain the remuneration
paid to him/her by the other company. The Company provides
a full disclosure on each such instance in its Remuneration
Report contained in the Company’s Annual Report.
Retirement and termination of employment or
services arrangements
in
termination arrangements
As part of the incentives under this Remuneration Policy,
the Company is permitted to approve retirement benefits
its employment and
and
services contracts in order to attract and retain highly skilled
professional executive officers. The retirement and termination
arrangements may include one or more of the following, as
may be approved by the Remuneration Committee and the
Board (unless the termination is in circumstances that negate
the payment of severance pay pursuant to applicable law):
•
Advance Notice of Termination: (i) shall not exceed up to six
monthly base salaries for the CEO; and (ii) shall not exceed
up to four monthly base salaries for other senior executives
(provided, however, that any current employment or
services contracts in effect with senior executives which
contain an Advance Notice of more than six months shall
continue in effect until the relevant contract expires).
•
Adjusted Payments: A senior executive may be entitled
to adjustment payments as follows: (i) up to a maximum
BATM | ANNUAL REPORT & ACCOUNTS 2019 41
of nine monthly Service Fees (should the actual adjusted
EBITDA for the relevant year be 90% or more of the Base
adjusted EBITDA). Two out of the nine monthly Service
Fees, if payable, will be based on personal performance
criteria of the CEO as reviewed by the Board.
Long Term Incentives:
The CEO was granted, in June 2018, four million options to
purchase BATM ordinary shares. The options are exercisable
at a price of 26.95 pence per share, being the average price of
the Company’s share on the FTSE in the month preceding the
shareholders’ approval of this transaction. Half of the options
will vest at the end of 24 months from the grant date and the
other half at the end of 36 months from the grant date, provided
that Dr. Marom remains in his position at the Company as of
the date of each vesting and that the Group has achieved a
gross profit of at least $33 million for the previous calendar
year in which the vesting date falls.
Remuneration to Non-executive
independent Directors (“NEDs”)
As an Israeli publicly listed company, BATM’s Board must
include at all times, at least two external (public) independent
non-executive directors that fulfill the mandatory requirements
and hold the qualifications laid down in the Israeli Companies
Law. Such directors may receive cash remuneration that
includes an annual fixed fee and a per-meeting participation
fee as well as equity-based compensation, all as prescribed
in the Israeli Companies Regulations ((Rules Regarding
Compensation and Expense Reimbursement of External
Directors) 2000 (the “Compensation Regulations”)), as an
incentive for their contribution and efforts for the Company. In
addition, the Company may reimburse said directors for their
reasonable expenses incurred in connection with attending
meetings of the Board of Directors and of any Committees
of the Board, all in accordance with the Compensation
Regulations. The Company’s remuneration policy with
respect to NEDS is that it offers each of them the relevant
scale of annual fixed fee and “per-meeting” participation fee
specified in the Compensation Regulations that apply to the
Company.
NEDs are not eligible to participate in the variable remuneration
plans offered by the Company to its executives and officers.
NEDs are also not entitled to notice periods of termination
as their position under the Israeli Companies Law is set for a
defined term of three years following their appointment by the
shareholders’ meeting. Their office may only be terminated
for cause in special circumstances by the Company’s
CORPORATE GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
of six months for the CEO; and (ii) up to a maximum of
four months for other senior executives, provided that any
overlap between the Advance Notice period during which
the senior executive is not working will be accounted for
the purpose of calculating the total adjustment payment
and deducted therefrom. The adjustment payments will be
based on the employment term of each senior executive
with the Company.
The level of adjusted payments to be offered to specific
executives will be discussed by
the Remuneration
Committee that will provide its recommendations to the
Board, after considering the following:
• The executive is committed to work in the Company for
at least two years.
• Throughout his/her term of employment he/she has made
a significant contribution to advancing the Company’s
business.
• The executive is not leaving the Company under
circumstances justifying the non-payment of severance
pay (as recognised under Israeli labour law and
precedent) and upon termination of employment he/she
will sign on a release in favour of the Company against
all claims.
• The recommendation of the CEO (or the Chairman in the
case of the termination of employment of the CEO) as to
the level of severance payment.
• The Company’s performance throughout the period of
his/ her employment by the Company.
• If the Executive resigns from the Company during the
calendar year for which he would have been entitled
to an annual bonus, the Remuneration Committee has
the discretion to decide whether and to what extent
that executive should be eligible to receive the bonus
(whether in part, in full, or not at all).
Recruitment policy
The Remuneration Committee will take into consideration a
number of factors, including the current pay for other executive
directors, external market forces, skills and current level of pay
at previous employer in determining the pay on recruitment.
In terms of additional benefits, the Committee will offer a
package that is set in line with this Remuneration Policy and
the mandatory pension scheme levels in the Israeli market.
Annual bonus and LTIs will be set in line with this Remuneration
Policy.
Buy-Out awards: where an individual forfeits outstanding
42 BATM | ANNUAL REPORT & ACCOUNTS 2019
variable opportunities or contractual rights at a previous
employer as a result of his/her recruitment by the Company,
the Committee may offer compensatory payments or buy-
out awards, dependent on the individual circumstances of
recruitment, determined on a case-by-case basis. Where
appropriate, the Committee may choose to apply performance
conditions to any of these awards.
ANNUAL REPORT ON REMUNERATION
In determining the remuneration to its Non-executive Directors
(who, other than the Chairman, as regarded as “external
directors” under Israeli law), the Group is required to comply
with Israeli law that formulates the kind and amounts of
remuneration and expenses that an Israeli public company
may pay to its non-executive directors. The applicable Israeli
statute is the Israeli Companies Regulations (Rules Regarding
Compensation and Expense Reimbursement of External
Directors) 2000 (the “Compensation Regulations”), which
prescribes the level of remuneration that a publicly listed
company may pay to its external directors. Cash remuneration
payable to the external director is comprised of two fees: (i) an
annual fixed fee; and (ii) a per-meeting participation fee. The
figures set forth in the Compensation Regulations for these
elements are based on the size of the company calculated
by the shareholders’ equity of the relevant listed company
as recorded in its last audited financial statements. BATM is
in the highest level of company under these Compensation
Regulations and accordingly the amounts payable to the
three external directors currently in office (who are considered
as directors holding expertise qualifications under
the
Compensation Regulations) for 2019 were as follows:
• A n annual fixed fee of NIS 147,095 (c. £32,260).
•
•
•
A per meeting participation fee of NIS 5,655 per meeting
attended by the external director (c. £1,240).
For any teleconference meeting that the external director
participates in – 60% of the above fee.
For signing on a Written Resolution of a board meeting,
without a physical meeting having been held - 50% of the
above fee.
fully with
The Company complies
the Compensation
Regulations and does not pay any additional amounts to the
three non-executive directors. The Compensation Regulations
do not apply to the Chairman who is not considered an
“external director” in terms of Israeli Law but is considered an
independent director and his remuneration is set out below.
Audited information
The table of Directors’ remuneration is set out below.
Table A – Emoluments of the Directors with comparatives
2019
Salary
$’000
Social Benefits
$’000
Pension
Benefits
$’000
Performance Bonus
$’000
2019 Total
$’000
Executive Directors
Zvi Marom, CEO (1)
Moti Nagar, CFO (2)
Non-executive Directors
Gideon Chitayat
Harel Locker
Ari Shamiss
Varda Shalev
503
253
56
53
57
57
–
21
–
–
–
–
–
13
–
–
–
–
150(*)
120(**)
–
–
–
–
653
407
56
53
57
57
2018
Salary
$’000
Social Benefits
$’000
Pension
Benefits
$’000
Performance Bonus
$’000
2018 Total
$’000
Executive Directors
Zvi Marom, CEO (1)
Moti Nagar, CFO (2)
Non-executive Directors
Gideon Chitayat
Harel Locker
Ari Shamiss (3)
Varda Shalev (3)
Orna Pollack (4)
Avigdor Shafferman (4)
516
244
56
43
6
4
33
10
–
24
–
–
–
–
–
–
–
11
–
–
–
–
–
–
96
80
–
–
–
–
–
–
612
359
56
43
6
4
33
10
(1) The CEO, Dr. Zvi Marom, receives payment via a Service Agreement, which includes a basic annual salary and associated social and pension benefits
according to his employment agreement. His service fee in 2018 and 2019 was the same, which comprised an annual base salary of approximately
$382,000 (2018: $382,000) and social and pension benefits of approximately $120,000 (2018: $120,000), with the variation in the exact amounts when
presented in reporting currency (US$) being based on currency exchange.
(2) The CFO salary is paid in New Israeli Shekels: the difference in the reported salary (in US$) between 2018 and 2019 is due to currency fluctuation – the
underlying salary remained the same.
(3) Prof. Shamiss and Prof. Shalev joined as directors effective 28 November 2018 so the amounts appearing in the table are pro rata for the one month
and two days they were in office during 2018.
(4) Dr. Shafferman and Mrs. Pollack’s terms of office as external directors expired in February and September 2018 respectively.
(*) The bonus criteria for the CEO was approved by the shareholders at the EGM held on 6 June 2018 and the award of his bonus for 2019 received
approval by the Board of Directors on 27 February 2020.
(**) The CFO bonus for 2019 is subject to approval by shareholders at the next AGM.
As at 31 December 2019, the total liability for payment related to wages for the Executive Directors was $51,000 (31 December
2018: $48,000), which was paid in January 2020 (2018 liability was paid in January 2019).
BATM | ANNUAL REPORT & ACCOUNTS 2019 43
CORPORATE GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Target
Delivery
2019 annual bonus
The maximum annual bonus for Dr. Zvi Marom and Mr. Moti Nagar for 2019 was 75% of annual service fee and 50% of annual
salary respectively. The annual bonus is based on a mix of quantitative financial criteria and qualitative personal and operational
criteria as described below.
Dr. Zvi Marom, CEO
Financial criteria (75%-100% of total bonus)
2019 EBITDA target
% of this part of the bonus payable
on achieving that target
2019 actual EBITDA
Target
Maximum
$4.3m
$8.2m
Personal criteria (up to 25% of total bonus)
11.11%
100%
$9.8m
Target
Delivery
Strategic advancement of both divisions
• Key strategic milestone achieved in the Bio-Medical
division with the signing of a conditional investment
agreement for up to $30m into Ador to advance the
development of its molecular diagnostics solution
• Successful completion of delivery under NFV partnership
with Arm and entered joint proof-of-concepts with tier 1
operators
The CEO, Dr. Marom, met the financial and personal criteria set for him for 2019, entitling him to the maximum bonus award.
The Remuneration Committee exercised its discretion in awarding Dr. Marom a bonus of $150,000 (i.e. below the maximum) in
consideration for the business’ current focus on re-investing to advance the commercialisation of its new products. This decision
was supported by Dr. Marom.
Mr. Moti Nagar, CFO
Financial criteria (60%-80% of total bonus)
EBITDA
Cash from operating
activities
2019 target
$4.3m
>$2.6m
Personal criteria (20%-40% of total bonus)
Target
Investment Agreement for Ador
% of this part of the bonus payable
on achieving that target
2019 actual
50%
50%
Delivery
$9.8m
$7.2m
• Led negotiations for signing of a conditional investment
agreement for up to $30m, with first instalment of $14.5m
received into Ador during 2019
Fundraising for the Company
• Successful fundraising of £14.1m gross in June 2019
Secondary listing on Tel Aviv Stock Exchange (TASE),
including gaining a significant institutional Israeli shareholder
• Listed on TASE in July 2019 and became a constituent
of the TA-125, TA-90, TA-SME150, TA-Rimon, TA Global
BlueTech, TA-Technology, TA Tech – Elite and TA-AllShare
indices in September 2019
• A tier 1 Israeli institutional investor, became a significant
shareholder in BATM
Sale of the Company’s rights in IBC
• Negotiated sale of the Company’s rights in IBC to Cellcom,
generating a capital gain of $3.4m
The CFO, Mr. Nagar, met the financial and personal criteria set for him for 2019, entitling him to the maximum bonus award.
The Remuneration Committee exercised its discretion in awarding Mr. Nagar a bonus of $120,000 (i.e. below the maximum) in
consideration for the business’ current focus on re-investing to advance the commercialisation of its new products. This decision
was supported by Mr. Nagar. In accordance with Israeli law, Mr. Nagar’s bonus remains subject to shareholder approval.
Share options
No options were granted during the year to the Directors. During 2019, the CFO sold 3,000,000 shares which were exercised
from options. The total proceeds for the Company from this transactions was GBP 381 thousand.
Details of Executive Director options held, granted, vested, exercised or lapsed during the year are as follows:
As at 1 Jan
19
Granted
Vested
Exercised
Lapsed As at 31 Dec 19
Zvi Marom
4,000,000
Moti Nagar
3,906,200
-
-
-
-
-
3,000,000
-
-
4,000,000
906,200
Exercise
price(*)
0.2695
0.1269
Expiry date
5 June 2028
4 May 2025
(*) The exercise price per share calculated by average price of the Company’s shares on the FTSE during the month preceding the Board approval of the
option grant.
Directors’ shareholdings
While the Company does not require any Director to hold shares in the Company, the interests of the Directors and their immediate
families, both beneficial and non-beneficial, in the ordinary shares of the Company as at 31 December 2019 and 2018 were as
follows:
2019
Ordinary Shares
2018
Ordinary Shares
Executive Directors
Zvi Marom
Moti Nagar
96,794,500
96,694,500
–
–
Non-executive Directors
Gideon Chitayat
3,159,000
3,000,000
Harel Locker
Ari Shamiss
Varda Shalev
Orna Pollack
Avigdor Shafferman
–
–
–
–
–
–
–
–
–
–
44 BATM | ANNUAL REPORT & ACCOUNTS 2019
BATM | ANNUAL REPORT & ACCOUNTS 2019 45
DIRECTORS’ REMUNERATION REPORT CONTINUED
Implementation of the
Remuneration Policy in 2020
Salaries
Dr. Marom’s service fee (which includes salary, pension
and benefits), will not be changed in 2020. This includes a
salary of approximately $382,000. Mr. Nagar’s base salary
of approximately $253,000 will not be changed in 2020. Any
variations in the reported amount will be due to the currency
fluctuations.
Information not subject to Audit
Percentage change in pay
The table below shows the percentage change between 2018
and 2019 in the value of salary, benefits and annual bonus (on
an actual currency basis) for the Directors compared with the
average full-time employee of the Company.
Salary
Benefits
Performance
Bonus
Pension and benefits
Executive Directors
As above, Dr. Marom’s service fee in 2020 is unchanged, which
includes pension and benefits of approximately $120,000. Mr.
Nagar’s pension is determined by Israeli law, with the amount
currently unchanged from 2019.
Zvi Marom
Moti Nagar
0%
0%
Annual bonus
Non-executive Directors
The maximum annual bonus for 2020 will continue to be capped
at 75% of annual service fee for Dr. Marom and 50% of annual
salary for Mr. Nagar. The weighting will continue as up to 100%
of bonus being based on financial criteria for Dr. Marom and
60%-80% of bonus being based on financial criteria for Mr.
Nagar with 20%-40% based on personal criteria.
Gideon Chitayat
Harel Locker (1)
0%
23%
Ari Shamiss (2)
850%
Varda Shalev (2)
1,325%
0%
0%
–
–
–
–
56%
50%*
–
–
–
–
The bonus targets are deemed to be commercially sensitive
and have not been disclosed prospectively. The performance
targets set and actual performance against those targets will
be provided on a retrospective basis in next year’s Directors’
Remuneration Report.
Non-Executive Director fees
The fees for the Chairman are currently unchanged in 2020.
In accordance with Israeli law, the remuneration to be paid
to “external” Non-Executive Directors is within a set range
set forth in the Regulations promulgated under the Israeli
Companies Law (that is based on the size of the company
and the professional qualifications or expertise of the nominee
director). As at the date of this report, the fees are unchanged
in 2020 and remain as disclosed on page 42.
Employees
Average FTE
9%
10%
13%
(1) Mr. Locker participated in more meetings during 2019
(2) Prof. Shamiss and Prof. Shalev joined as directors effective 28 November
2018 and so only received payment for the one month and two days they
were in office during 2018 compared with the full year in 2019.
(*) The CFO bonus for 2019 is subject to approval by shareholders at the
next AGM.
CORPORATE GOVERNANCE
Relative importance of spend on pay
Total shareholder return
The table below shows overall spend on employee pay across
the Group compared with distributions to shareholders.
2019
($m)
2018
($m)
% change
33.7
33.5
–
–
0.4
–
Employee
remuneration
costs
Distribution
shareholders
to
Notice periods
No employee has a notice period of more than 12 months. The
notice period for the Directors (excluding “external” directors)
is up to six months. The external Non-Executive Directors are
not entitled to notice periods as their position under the Israeli
Companies Law is set for a defined term of three years following
their appointment by the shareholders’ meeting. Their office
may only be terminated for cause in special circumstances
by the Company’s shareholders’ meeting or by the competent
court at the request of a director or shareholder.
BATM Advanced Communications Ltd FTSE SMALL CAP INDEX
The following graph shows BATM’s share price performance on
the London Stock Exchange over the last five years compared
with the FTSE SmallCap Index, which has been chosen
because it includes companies of a broadly comparable size
to BATM. The Group has not declared a dividend over the last
five financial years. Under Israeli law, a company may only
declare a dividend if it has generated accrued profit over the
previous two years, provided that there is no concern that the
distribution will prevent the company from meeting its current
and future undertakings when they become due. In light of
the uncertainty surrounding COVID-19 and the necessity to
preserve funds for, primarily investment in the development
of the Group’s state-of-the-art Bio-Medical projects, the Board
believes it is prudent not to declare a dividend for 2019 at this
time. The Board will revisit its dividend policy when the global
situation normalises and it has sufficient clarity of outlook,
which could include, depending on the financial position of the
Group, consideration of declaring an interim dividend for 2020.
%
300
250
200
150
100
50
0
46 BATM | ANNUAL REPORT & ACCOUNTS 2019
BATM | ANNUAL REPORT & ACCOUNTS 2019 47
July
2015
January
2016
July
2016
January
2017
July
2017
January
2018
July
2018
January
2019
July
2019
January
2020
FINANCIAL STATEMENTS
BATM
Consolidated Financial Statements
for the year ended 31 December 2019
48 ANNUAL REPORT & ACCOUNTS 2018
BATM | ANNUAL REPORT AND ACCOUNTS 2019 49
Independent Auditor’s Report to the Shareholders
of BATM Advanced Communications Ltd.
To the Shareholders of BATM Advanced Communications Ltd.
Neve Ne’eman Ind. Area
4, Ha’harash Street, P.O.B. 7318
4524075 Hod Hasharon, Israel
Opinion
We have audited the consolidated fi nancial statements of BATM Advanced Communications Ltd. and its subsidiaries (“the
Group”) set out on pages 55 to 110, which comprise the consolidated statement of fi nancial position as at 31 December
2019, and the consolidated statement of profi t and loss, the consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash fl ows for the year then ended, and
notes to the consolidated fi nancial statements, including a summary of signifi cant accounting policies.
In our opinion, the accompanying consolidated fi nancial statements present fairly, in all material respects, the consolidated
fi nancial position of the Group as at 31 December 2019, and its consolidated fi nancial performance and its consolidated
cash fl ows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report. We are independent of the Group in accordance with the International Ethics Standards Board
for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfi lled our other ethical
responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is suffi cient
and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most signifi cance in our audit of the
consolidated fi nancial statements of the current period. These matters were addressed in the context of our audit of the
consolidated fi nancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Impairment of goodwill and other intangible
assets
As detailed in Notes 23 and 24, as at 31 December 2019, the Group
had goodwill and other intangible assets of $23,745 thousand.
Goodwill and other intangible assets arise as a result of acquisitions
by the Group. Management conducted their annual impairment
test to assess the recoverability of the goodwill and consider
whether there are indicators of impairment with respect to other
intangible assets. In order to establish whether an impairment
exists, fair value less costs to sell or the value in use is determined
and compared to the net book value of cash-generating unit to
which the goodwill is allocated and other intangible assets.
judgement
This determination of an impairment is highly subjective as
in
is required by
signifi cant
determining the cash-generating units and the fair value less costs
to sell or the value in use as appropriate. The value in use is based
on the cash fl ow forecast model for each cash-generating unit and
requires the estimation of valuation and business assumptions,
most importantly the discount rate and growth rate.
the management
Construction contracts
Where the outcome of a construction contract can be estimated
reliably, revenues are recognized over time by the Group in
reference to the contract’s stage of completion at the date of
the consolidated statements of fi nancial position. This is mainly
measured by the proportion of the contract costs incurred for work
performed to date divided by the estimated total contract costs. The
management consider the input method as an appropriate measure
of the progress towards complete satisfaction of these performance
obligations.
Total revenues and expenses recognized for the year ended 31
December 2019, amounted to $14,682 thousand and $13,135
thousand, respectively.
Estimating the Stage of Completion demands signifi cant judgement
by the management to determine the exact percentage of project
completion. This estimation is based mainly on engineering
determination or time consumed in relation to total forecasted
time needs together with the estimations of cost to complete the
contracts.
We focused our testing of the impairment of goodwill and other
intangible assets on the key assumptions made by the directors.
Our audit procedures included:
•
•
•
Evaluating whether the model used to calculate the fair value less
costs to sell and value in use of the individual cash-generating units
complies with the requirements of IAS 36: Impairment of Assets.
Using our internal valuation specialists when applicable to assess
the appropriateness of management’s estimations applied in the
discount rates used in the value in use calculations.
Challenging management assumptions applied and inputs in
the respective models by comparing it to historical information,
market researches when available, contractual arrangements and
approved budgets; search for available contradictory information.
• Performing stress analysis on key estimates.
•
Performing discussions, when applicable, with key management
about new signifi cant clients and markets penetration, new
signifi cant contracts and bids, certifi cation status of new products.
Findings
We found the models and assumptions applied in the goodwill
impairment assessments
to be appropriate. We considered
the disclosure of the goodwill and other intangible assets to be
appropriate for purposes of the consolidated fi nancial statements.
• Examination of the Stage of Completion (“SOC”) used by
developing an independent estimation on contracts that are
using time spent or cost as a basis for the completion stage.
• Performing post balance sheet examination procedures.
• Examination of the reasonability of the estimated costs to
complete used for the determination of the stage of completion.
• Comparing the completion percentage arrived to previous
periods when applicable.
• Assessment of management’s ability to provide accurate
estimations by comparing management’s estimates to actual
results for a sample of completed projects.
Findings
The results of our testing were satisfactory and we found the
judgements used in determining the estimation to be appropriate.
50 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 51
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
fi nancial statements of the current period and are
therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that
a matter should not be communicated in our report
because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest
benefi ts of such communication.
The engagement partner on the audit resulting in this
independent auditor’s report is Efrat Binshtok.
Brightman Almagor Zohar and Co., Efrat Binshtok
Certifi ed Public Accountants
A Firm in the Deloitte Global Network
1 Azrieli Center, Tel Aviv
Israel
30 April 2020
Independent Auditor’s Report to the Shareholders
of BATM Advanced Communications Ltd. (continued)
Other Information
Management is responsible for the other information.
The other
information
included in the annual report, but does not include the
fi nancial statements and our auditor’s report thereon.
information comprises
the
Our opinion on the consolidated fi nancial statements
does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated
fi nancial statements, our responsibility is to read the
other information and, in doing so, consider whether
the other information is materially inconsistent with the
consolidated fi nancial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this
other information, we are required to report that fact. We
have nothing to report in this regard.
Responsibilities of Management and Those
Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair
presentation of the consolidated fi nancial statements
in accordance with IFRSs, and for such internal control
as management determines is necessary to enable
the preparation of consolidated fi nancial statements
that are free from material misstatement, whether due
to fraud or error.
In preparing the consolidated fi nancial statements,
management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and
using the going concern basis of accounting unless
management either intends to liquidate the Group or
to cease operations, or has no realistic alternative but
to do so.
Those charged with governance are responsible for
overseeing the Group’s fi nancial reporting process.
Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements
Our objectives are to obtain reasonable assurance
about whether the consolidated fi nancial statements as
a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to infl uence the
economic decisions of users taken on the basis of
these consolidated fi nancial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement
of the consolidated fi nancial statements, whether due
to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence
that is suffi cient and appropriate to provide a basis
for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or
the override of internal control.
• Obtain an understanding of internal control relevant
to the audit in order to design audit procedures
that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by management.
• Conclude on the appropriateness of management’s
use of the going concern basis of accounting and,
based on the audit evidence obtained, whether
a material uncertainty exists related to events or
conditions that may cast signifi cant doubt on the
Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to
the related disclosures in the consolidated fi nancial
statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and
content of the consolidated fi nancial statements,
the
including
the disclosures, and whether
consolidated fi nancial statements represent
the
underlying transactions and events in a manner that
achieves fair presentation.
• Obtain suffi cient appropriate audit evidence
regarding the fi nancial information of the entities or
business activities within the Group to express an
opinion on the consolidated fi nancial statements.
We are responsible for the direction, supervision and
performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance
regarding, among other matters, the planned scope
and timing of the audit and signifi cant audit fi ndings,
including any signifi cant defi ciencies in internal control
that we identify during our audit.
We also provide those charged with governance
with a statement that we have complied with relevant
ethical requirements regarding independence, and
to communicate with them all relationships and other
matters that may reasonably be thought to bear on
our independence, and where applicable, related
safeguards.
From the matters communicated with those charged
with governance, we determine those matters that were
of most signifi cance in the audit of the consolidated
52 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 53
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Consolidated Statements of Profi t or Loss
for the year ended 31 December
for the year ended 31 December 2019
Revenues
Cost of revenues
Gross profi t
Operating expenses
Sales and marketing expenses
General and administrative expenses
Research and development expenses
Other operating income
Total operating expenses
Operating profi t
Finance income
Finance expenses
Profi t before tax
Income tax expense
Profi t for the year before share of loss of a
joint venture and associated companies
Share of loss of a joint venture and associated companies
Profi t (loss) for the year
Attributable to:
Owners of the Company
Non-controlling interests
Profi t (loss) for the year
Profi t per share (in cents) basic
Profi t per share (in cents) diluted
Note
5, 6
7
8
9
10
12
13
14
15
16
16
2019
US$’000
123,396
90,251
33,145
16,307
11,753
6,772
(6,169)
28,663
4,482
1,612
(1,316)
4,778
(475)
4,303
(1,033)
3,270
3,917
(647)
3,270
0.93
0.92
2018
US$’000
119,561
85,097
34,464
15,635
11,226
7,116
(1,003)
32,974
1,490
653
(935)
1,208
(623)
585
(908)
(323)
358
(681)
(323)
0.09
0.09
54 BATM | ANNUAL REPORT AND ACCOUNTS 2019
54 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 55
The accompanying notes are an integral part of these fi nancial statements.
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Financial Position
for the year ended 31 December
for the year ended 31 December 2019
for the year ended 31 December
for the year ended 31 December 2019
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
2019
US$’000
2018
US$’000
Note
2019
US$’000
2018
US$’000
Profi t (loss) for the year
3,270
(323)
Items that may be reclassifi ed subsequently
to profi t or loss:
Exchange differences on translating foreign operations
Items that will not be reclassifi ed subsequently
to profi t or loss:
Re-measurement of defi ned benefi t obligation
Total comprehensive income (loss) for the year
Attributable to:
Owners of the Company
Non-controlling interests
398
3,668
(44)
3,624
3,664
(40)
3,624
(2,546)
(2,869)
(51)
(2,920)
(2,509)
(411)
(2,920)
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets
Inventories
Non-current assets
Property, plant and equipment
Investment property
Right of-use assets
Goodwill
Other intangible assets
Investment in joint venture and associates
Investments carried at fair value
Deferred tax assets
Total assets
Equity and liabilities
Current liabilities
Short-term bank credit
Trade and other payables
Current maturities of lease liabilities
Tax liabilities
Non-current liabilities
Long-term bank credit
Long-term liabilities
Long-term lease liabilities
Deferred tax liabilities
Retirement benefi t obligation
Total liabilities
Equity
Share capital
Share premium account
Reserves
Accumulated defi cit
Equity attributable to the:
Owners of the Company
Non-controlling interests
Total equity
Total equity and liabilities
18
17
19
20
21
22
23
24
12
29
26
27
27
27
27
27
27
26
34
28
40,584
42,784
4,254
22,672
110,294
14,203
1,899
9,945
16,804
6,941
9,497
1,013
3,234
63,536
20,811
35,010
3,577
22,860
82,258
14,076
2,004
–
16,343
6,278
4,210
1,060
2,655
46,626
173,830
128,884
5,915
44,459
2,070
313
52,757
762
6,215
8,339
626
715
16,657
69,414
1,320
425,477
(18,582)
(299,391)
108,824
(4,408)
104,416
173,830
5,369
33,413
–
173
38,955
486
5,631
–
228
576
6,921
45,876
1,217
407,796
(18,373)
(303,264)
87,376
(4,368)
83,008
128,884
The accompanying notes are an integral part of these fi nancial statements.
The accompanying notes are an integral part of these fi nancial statements.
56 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 57
The fi nancial statements were approved by the board of directors and authorised on 30 April 2020. They were signed on its behalf by:
Dr. Z. Marom, CEO
M. Nagar, CFO
Consolidated Statements of Changes in Equity
for the years ended 31 December 2019 and 2018
for the year ended 31 December 2019
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Consolidated Statements of Cash Flow
for the year ended 31 December
for the year ended 31 December 2019
Share
Capital
Share
Premium
Account
Translation
Reserve
Other
Reserve
Accumulated
Defi cit
Attributable
to owners of
the company
Non-
Controlling
Interests
Total
Equity
US$ in thousands
Net cash from operating activities
Note
30
2019
US$’000
7,166
Balance as at
1 January 2018
1,216
407,688
(15,045)
(512)
(303,571)
89,776
(3,957)
85,819
1,217
407,796
(17,861)
(512)
(303,264)
87,376
(4,368)
83,008
Profi t (loss) for the year
–
Re-measurement
of defi ned benefi t
obligation
Exchange differences
on translating foreign
operations
Total comprehensive
loss for the year
Exercise of share-
based options by
employees
Recognition of share-
based payments
Balance as at
1 January 2019
Profi t (loss) for the
year
Re-measurement
of defi ned benefi t
obligation
Exchange differences
on translating foreign
operations
–
–
–
1
–
–
–
–
Total comprehensive
income (loss) for the year –
Issue of share capital
93
16,981
Exercise of share-
based options by
employees
Recognition of share-
based payments
Balance as at
31 December 2019
10
–
595
105
–
–
–
–
50
58
–
–
(2,816)
(2,816)
–
–
–
–
–
–
–
–
358
358
(681)
(323)
(51)
(51)
–
(51)
–
(2,816)
270
(2,546)
307
(2,509)
(411)
(2,920)
–
–
51
58
–
–
51
58
–
–
–
–
–
–
(209)
(209)
–
–
–
–
–
–
–
–
–
–
3,917
3,917
(647)
3,270
(44)
(44)
–
(44)
–
(209)
607
398
3,873
–
–
–
3,664
17,074
(40)
3,624
–
17,074
605
105
–
–
605
105
1,320
425,477
(18,070)
(512)
(299,391)
108,824
(4,408)
104,416
Investing activities
Interest received
Proceeds on disposal of property, plant and equipment
Tax paid on disposal of property, plant and equipment
Proceeds on disposal of deposits
Proceeds on disposal of fi nancial assets carried at fair value
through profi t and loss
Proceeds on sale of investment
Loans repay (granted)
Purchases of property, plant and equipment
Increase of other intangible assets
Purchases of fi nancial assets carried at fair value through
profi t and loss
Increase in fi nancial assets carried at fair value
Purchases of deposits
Investment in joint venture
Investment in associated company
Acquisition of subsidiaries
Net cash from (used in) investing activities
Financing activities
Lease payment
Bank loan repayment
Bank loan received
Proceed on issue of share capital, net
Proceed on exercise of shares
Net cash from (used in) fi nancing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balance of cash
held in foreign currencies
Cash and cash equivalents at the end of the year
31
22
27
27
205
113
(19)
3,234
–
3,430
–
(686)
(1,523)
(760)
–
(3,112)
(1,952)
(575)
(937)
(2,582)
(2,361)
(9,922)
10,086
17,074
605
15,482
20,066
20,811
(293)
40,584
2018
US$’000
2,607
219
6,507
(1,913)
4,579
2,391
–
133
(1,692)
(1,894)
(840)
(321)
(4,004)
(1,616)
(80)
(633)
836
–
(9,956)
9,596
–
51
(309)
3,134
18,182
(505)
20,811
The accompanying notes are an integral part of these fi nancial statements.
The accompanying notes are an integral part of these fi nancial statements.
58 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 59
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
1. General Information
BATM Advanced Communications Ltd. (“the Company”) is a company incorporated in Israel under the Israeli Companies
Law. The address of the registered offi ce is POB 7318, Nave Ne’eman Ind. Area 4, Ha’harash Street, 4524075 Hod
Hasharon, Israel. The Company and its subsidiaries (“the Group”) are engaged in the research and development,
production and marketing of data communication products in the fi eld of Metropolitan area networks and is operating in
the Bio-Medical market. The Bio-Medical division of the Group is engaged in the research and development, production,
marketing and distribution of Bio-Medical products, primarily laboratory diagnostics and sterilisation equipment.
for the year ended 31 December 2019
Applying IFRS 16, for all leases (except as noted below), the Group:
(a) Recognises right-of-use assets and lease liabilities in the consolidated statement of fi nancial position, initially
measured at the present value of the future lease payments;
(b) Recognises depreciation of right-of-use assets and interest on lease liabilities in profi t or loss;
(c) Separates the total amount of cash paid into a principal portion (presented within fi nancing activities) and interest
(presented within operating activities) in the consolidated statement of cash fl ows.
2
Adoption of new and revised International Financial Reporting Standards (IFRSs)
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36.
2.1 New and amended IFRS standards that are eff ective for the current year
In the current year, the Group has applied a number of new and amended to IFRSs issued by the International Accounting
Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2019.
IFRS 16 Leases
Impact of initial application of IFRS 16 Leases
IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces signifi cant changes
to lessee accounting by removing the distinction between operating and fi nance lease and requiring the recognition
of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases
of low value assets. In contrast to lessee accounting, the requirements for lessor accounting have remained largely
unchanged. Details of these new requirements are described in note 3. The impact of the adoption of IFRS 16 on the
Group’s consolidated fi nancial statements is described below.
The date of initial application of IFRS 16 for the Group is 1 January 2019.
For short-term leases (lease term of 12 months or less), the Group has opted to recognise a lease expense on a straight-
line basis as permitted by IFRS 16.
Impact on Lessor Accounting
IFRS 16 does not change substantially how a lessor accounts for leases. Under IFRS 16, a lessor continues to classify
leases as either fi nance leases or operating leases and account for those two types of leases differently.
However, IFRS 16 has changed and expanded the disclosures required, in particular with regard to how a lessor manages
the risks arising from its residual interest in leased assets.
Financial impact of initial application of IFRS 16
The weighted average lessees incremental borrowing rate applied to lease liabilities recognised in the statement of
fi nancial position on 1 January 2019 is 3.12%.
As at 31 December 2018, the Group has non-cancellable operating lease commitments, mainly lease of real estates, of
approximately $13.7 million.
The Group has chosen the modifi ed retrospectively application of IFRS 16 in accordance with IFRS 16:C5(b). Consequently,
the Group did not restate comparative information.
The opening balance indicates that $0.3 million of these arrangements relate to short-term leases.
Impact of the new defi nition of a lease
The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract
is or contains a lease. Accordingly, the defi nition of a lease in accordance with IAS 17 and IFRIC 4 will continue to be
applied to those contracts entered or modifi ed before 1 January 2019.
The change in defi nition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract
contains a lease on the basis of whether the customer has the right to control the use of an identifi ed asset for a period of
time in exchange for consideration. This is in contrast to the focus on ‘risks and rewards’ in IAS 17 and IFRIC 4.
The Group applies the defi nition of a lease and related guidance set out in IFRS 16 to all contracts entered into or
changed on or after 1 January 2019. In preparation for the fi rst-time application of IFRS 16, the Group has carried out an
implementation project. The project has shown that the new defi nition in IFRS 16 will not signifi cantly change the scope
of contracts that meet the defi nition of a lease for the Group.
Impact on Lessee Accounting
Former operating leases
IFRS 16 changes how the Group accounts for leases previously classifi ed as operating leases under IAS 17, which were
off balance sheet.
The opening balance indicates that $13.4 million of these arrangements relate to leases other than short-term leases, and
hence the Group will recognise a right-of-use asset of $11.8 million and a corresponding lease liability of $11.8 million in
respect of all these leases.
There is also an impact to the income statement, resulting in an increase to operating profi t through the operating lease
expense being removed and replaced with a smaller depreciation charge. This impact resulted in increase in operating
profi t. There is an interest expense under the new accounting, that was not have occurred under IAS 17, which resulted
in decrease in the profi t before tax. There is not an impact to total cash fl ows; however there is an increase in cash fl ows
from operating activities, and a corresponding decrease in cash fl ows from fi nancing activities.
IFRIC 23 – Uncertainty over Income Tax Treatments
The Group has adopted IFRIC 23 for the fi rst time in the current year. IFRIC 23 sets out how to determine the accounting
tax position when there is uncertainty over income tax treatments. The Interpretation requires the Group to:
• determine whether uncertain tax positions are assessed separately or as a group; and
•
assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used,
by an entity in its income tax fi lings:
60 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 61
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
–
–
If yes, the Group should determine its accounting tax position consistently with the tax treatment used or planned to
be used in its income tax fi lings.
3
Signifi cant Accounting Policies
Statement of compliance
If no, the Group should refl ect the effect of uncertainty in determining its accounting tax position using either the most
likely amount or the expected value method.
The consolidated fi nancial statements have been prepared in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board (IASB).
The application of IFRIC 23 has had no signifi cant impact on the Group’s consolidated fi nancial statements.
Basis of preparation
2.2 New and revised IFRSs in issue but not yet eff ective
The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:
The consolidated fi nancial statements have been prepared on the historical cost basis except for certain properties
and fi nancial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as
explained in the accounting policies below.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Amendments to IFRS 3
Defi nition of a business1
Amendments to IAS 1 and IAS 8
Defi nition of material1
1 Effective for annual periods beginning on or after 1 January 2020, with earlier application permitted.
Amendments to IFRS 3 Defi nition of a business
The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of
activities and assets to qualify as a business. To be considered a business an acquired set of activities and assets must
include, at a minimum, an input and a substantive process that together signifi cantly contribute to the ability to create
outputs.
The amendments introduce an optional concentration test that permits a simplifi ed assessment of whether an acquired
set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and
assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single
identifi able asset or group of similar assets.
The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition
date is on or after the fi rst annual reporting period beginning on or after 1 January 2020, with early application permitted.
Amendments to IAS 1 and IAS 8 Defi nition of material
The amendments are intended to make the defi nition of material in IAS 1 easier to understand and are not intended to alter
the underlying concept of materiality in IFRS Standards. The concept of ‘obscuring’ material information with immaterial
information has been included as part of the new defi nition.
The threshold for materiality infl uencing users has been changed from ‘could infl uence’ to ‘could reasonably be expected
to infl uence’.
The defi nition of material in IAS 8 has been replaced by a reference to the defi nition of material in IAS 1. In addition, the
IASB amended other Standards and the Conceptual Framework that contain a defi nition of material or refer to the term
‘material’ to ensure consistency.
The amendments are applied prospectively for annual periods beginning on or after 1 January 2020, with earlier
application permitted.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether that price is directly observable or estimated
using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the
characteristics of the asset or liability if market participants would take those characteristics into account when pricing the
asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated
fi nancial statements is determined on such a basis, except for share-based payment transactions that are within the
scope of IFRS 2, leasing transactions that are within the scope of IFRS 16, and measurements that have some similarities
to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.
In addition, for fi nancial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are observable and the signifi cance of the inputs to the fair
value measurement in its entirety, which are described as follows:
•
•
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
Basis of consolidation
The consolidated fi nancial statements incorporate the fi nancial statements of the Company and entities (including
structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
• has power over the investee;
•
• has the ability to use its power to affect its returns.
is exposed, or has rights, to variable returns from its involvement with the investee; and
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifi cally, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated statement of profi t or loss and other comprehensive income from the date
the Company gains control until the date when the Company ceases to control the subsidiary.
62 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 63
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
Profi t or loss and each component of other comprehensive income are attributed to the owners of the Company and to
the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and
to the non-controlling interests even if this results in the non-controlling interests having a defi cit balance.
When necessary, adjustments are made to the fi nancial statements of subsidiaries to bring their accounting policies in
line with the Group’s accounting policies.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets
transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued
by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profi t or loss as
incurred.
All intragroup assets and liabilities, equity, income, expenses and cash fl ows relating to transactions between members
of the Group are eliminated in full on consolidation.
At the acquisition date, the identifi ed assets acquired and the liabilities assumed are recognised at their fair value, except
that:
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Investments in associates and joint ventures
An associate is an entity over which the Group has signifi cant infl uence. Signifi cant infl uence is the power to participate
in the fi nancial and operating policy decisions of the investee but without control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists
only when decisions about the relevant activities require unanimous consent of the parties sharing control.
An investment in an associate or a joint venture is accounted for using the equity method from the date on which the
investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any
excess of the cost of the investment over the Group’s share of the net fair value of the identifi able assets and liabilities
of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess
of the Group’s share of the net fair value of the identifi able assets and liabilities over the cost of the investment, after
reassessment, is recognised immediately in profi t or loss in the period in which the investment is acquired.
The requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss with
respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the
investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset
by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount,
Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment
loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently
increases.
When the Group reduces its ownership interest in an associate or a joint venture, but continues to use the equity method,
the Group reclassifi es to profi t or loss the proportion of the gain or loss that had previously been recognised in other
comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassifi ed to profi t or
loss on the disposal of the related assets or liabilities.
When a Group entity transacts with an associate or a joint venture of the Group, profi ts and losses resulting from the
transactions with the associate or joint venture are recognised in the Group’s consolidated fi nancial statements only to
the extent of interests in the associate or joint venture that are not related to the Group.
Changes in the Group’s ownership interests in existing subsidiaries
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries
are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests
are adjusted to refl ect the changes in their relative interests in the subsidiaries. Any difference between the amount by
which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised
directly in equity and attributed to owners of the Company.
•
•
•
deferred tax assets or liabilities, and assets or liabilities related to employee benefi t arrangements are recognised and
measured in accordance with IAS 12 Income Taxes and IAS 19 respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured
in accordance with IFRS 2 at the acquisition date; and
assets (or disposal groups) that are classifi ed as held for sale in accordance with IFRS 5 Non-current Assets Held for
Sale and Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests
in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the
acquisition-date amounts of the identifi able assets acquired and the liabilities assumed. If, after reassessment, the net of the
acquisition-date amounts of the identifi able assets acquired and liabilities assumed exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held
interest in the acquiree (if any), the excess is recognised immediately in profi t or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the
entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’
proportionate share of the recognised amounts of the acquiree’s identifi able net assets. The choice of measurement basis
is made on a transaction-by-transaction basis.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from
a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and
included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent
consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments
against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during
the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that
existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement
period adjustments depends on how the contingent consideration is classifi ed. Contingent consideration that is classifi ed
as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity.
Contingent consideration that is classifi ed as an asset or a liability is remeasured at subsequent reporting dates in accordance
with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain
or loss being recognised in profi t or loss.
When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured
to its acquisition-date fair value and the resulting gain or loss, if any, is recognised in profi t or loss. Amounts arising from
interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income
are reclassifi ed to profi t or loss where such treatment would be appropriate if that interest were disposed of.
64 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 65
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to refl ect
new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have
affected the amounts recognised at that date.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business
less accumulated impairment losses, if any. Goodwill is not amortised but is reviewed for impairment at least annually.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of
cash-generating units) that is expected to benefi t from the synergies of the combination. A cash-generating unit to which
goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit
may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment
loss is allocated fi rst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of
the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised
directly in profi t or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
Non-current assets held for sale
Non-current assets and disposal groups are classifi ed as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or
disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary
for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale,
which should be expected to qualify for recognition as a completed sale within one year from the date of classifi cation.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that
subsidiary are classifi ed as held for sale when the criteria described above are met, regardless of whether the Group will
retain a non-controlling interest in its former subsidiary after the sale.
Non-current assets (and disposal groups) classifi ed as held for sale are measured at the lower of their previous carrying
amount and fair value less costs to sell.
Revenue recognition
The Group recognises revenue from the following major sources:
•
•
Sale of goods - Communication products, Bio-Medical products such as laboratory diagnostics and sterilisation Eco-
Med products
Rendering of services - Software services such as training, technical support and maintenance related to the communication
products, mobile & web solutions, UI, UX design, branding, graphical design, drivers & embedded solutions
• Construction contracts
Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer
and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a
product or service to a customer.
Sale of goods
For sales of goods, revenue is recognised when control of the goods has transferred, being when the goods have been
shipped to the customer’s specifi c location (delivery). Following delivery, the customer has full discretion over the manner
of distribution and price to sell the goods, has the primary responsibility when onselling the goods and bears the risks of
obsolescence and loss in relation to the goods.
A receivable is recognised by the Group when the goods are delivered to the customer as this represents the point in time
at which the right to consideration becomes unconditional, as only the passage of time is required before payment is due.
Rendering of services
The Group provides a service of installation of various software products for specialised business operations.
Such services are recognised as a performance obligation satisfi ed over time. Revenue is recognised for these installation
services based on the stage of completion of the contract. The management have assessed that the stage of completion
determined as the proportion of the total time expected to install that has elapsed at the end of the reporting period is an
appropriate measure of progress towards complete satisfaction of these performance obligations under IFRS 15.
Construction contracts
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised over time by
reference to the stage of completion of the contract activity at the date of the consolidated statements of fi nancial position.
This is normally measured by the proportion that contract costs incurred for work performed to date bear to the estimated
total contract costs except where this would not be representative of the stage of completion or engineering completion.
The management consider that this input method is an appropriate measure of the progress towards complete satisfaction
of these performance obligations under IFRS 15. Variations in contract work, claims and incentive payments are included
to the extent that they have been agreed with the customer.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent
of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period
in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an
expense immediately.
Dividend and interest income
Dividend income from investments is recognised when the shareholder’s right to receive payment has been established
(provided that it is probable that the economic benefi ts will fl ow to the Group and the amount of income can be measured
reliably).
Leases
The Group has applied IFRS 16 using the cumulative catch-up approach and therefore comparative information has
not been restated and is presented under IAS 17. The details of accounting policies under both IAS 17 and IFRS 16 are
presented separately below.
Policies applicable from 1 January 2019
The Group as a lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-
of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except
for short-term leases (defi ned as leases with a lease term of 12 months or less). For these leases, the Group recognises
the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic
basis is more representative of the time pattern in which economic benefi ts from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its
incremental borrowing rate.
The lease liability is presented as a separate line in the consolidated statement of fi nancial position.
66 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 67
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
The lease liability is subsequently measured by increasing the carrying amount to refl ect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to refl ect the lease payments made.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at
or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently
measured at cost less accumulated depreciation and impairment losses.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability.
The aggregate benefi t of incentives is recognised as a reduction of rental expense on a straight-line basis, except where
another systematic basis is more representative of the time pattern in which economic benefi ts from the leased asset are
consumed.
Foreign currencies
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a
lease transfers ownership of the underlying asset or the cost of the right-of-use asset refl ects that the Group expects to
exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The
depreciation starts at the commencement date of the lease.
The individual fi nancial statements of each Group company are prepared in the currency of the primary economic
environment in which it operates (its functional currency). For the purpose of the consolidated fi nancial statements, the
results and fi nancial position of each Group company are expressed in the US dollar, which is the presentation currency
for the consolidated fi nancial statements.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
The right-of-use assets are presented as a separate line in the consolidated statement of fi nancial position.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identifi ed impairment
loss.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any
lease and associated non-lease components as a single arrangement. The Group has used this practical expedient.
The Group as lessor
The Group enters into lease agreements as a lessor with respect to some of its investment properties.
Leases for which the Group is a lessor are classifi ed as fi nance or operating leases. Whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee, the contract is classifi ed as a fi nance lease. All
other leases are classifi ed as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct
costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and
recognised on a straight-line basis over the lease term.
Policies applicable prior to 1 January 2019
Leases are classifi ed as fi nance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classifi ed as operating leases.
The Group as lessor
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct
costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and
recognised on a straight-line basis over the lease term.
The Group as lessee
Assets held under fi nance leases are initially recognised as assets of the Group at their fair value at the inception of the
lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included
in the consolidated statement of fi nancial position as a fi nance lease obligation.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefi ts from the leased asset are
consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they
are incurred.
In preparing the fi nancial statement of the individual companies, transactions in currencies other than the entity’s functional
currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At the end
of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are retranslated at
the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are
included in profi t or loss for the period.
For the purpose of presenting consolidated fi nancial statements, the assets and liabilities of the Group’s foreign
operations (operations in foreign currencies) are translated at exchange rates prevailing at the end of each reporting
period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates
fl uctuate signifi cantly during that period, in which case the exchange rates at the date of transactions are used. Exchange
differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to non-
controlling interests as appropriate) within the Group’s translation reserve. Such translation reserves are reclassifi ed from
equity to profi t or loss in the period in which the foreign operation is disposed.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities
of the foreign operation and translated at the closing rate. Exchange differences arising are recognised in other
comprehensive income and accumulated in equity.
Government grants
Government grants are assistance from government in the form of transfers of resources to an entity in return for past or
future compliance with certain conditions relating to the operating activities of the entity.
Forgivable loans are loans where the lender (Israeli Chief Scientist Offi cer (ISO)) undertakes to waive repayment under
certain prescribed conditions. In a case where a government grant takes the form of a forgivable loan, a liability is
recognised in regards to this loan at fair value, based on estimations of future cash fl ows arising from the relevant grant.
It is the Group’s policy to designate all such loans as fi nancial liabilities measured at amortised cost according to IFRS 9.
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions
attached to them and that the grants will be received.
Government grants are recognised in profi t or loss on a systematic basis over the periods in which the Group recognises
as expenses the related costs for which the grants are intended to compensate.
68 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 69
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
Government grants towards research and development costs are netted against related expenses over the periods
necessary to match them with the related costs.
Employee benefi ts
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis
over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding
increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original estimates, if any, is recognised in profi t or loss such that the
cumulative expense refl ects the revised estimate, with a corresponding adjustment to the share premium reserve.
Retirement benefi t costs and termination benefi ts
Payments to defi ned contribution retirement benefi t plans are recognised as an expense when employees have rendered
service entitling them to the contributions.
Taxation
For defi ned benefi t retirement plans, the cost of providing benefi ts is determined using the projected unit credit method,
with actuarial valuations being carried out at the end of each annual reporting period.
Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and
the return on plan assets (excluding interest), is refl ected immediately in the statement of fi nancial position with a charge
or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in
other comprehensive income is refl ected immediately in retained earnings and will not be reclassifi ed to profi t or loss.
Past service cost is recognised in profi t or loss in the period of a plan amendment. Net interest is calculated by applying
the discount rate at the beginning of the period to the net defi ned benefi t liability or asset. Defi ned benefi t costs are
categorised as follows:
•
service cost (including current service cost, past service cost, as well as gains and losses on curtailments and
settlements);
• net interest expense or income; and
•
remeasurement.
The Group presents the fi rst two components of defi ned benefi t costs in profi t or loss in the line item employee benefi ts
expense. Curtailment gains and losses are accounted for as past service costs.
The retirement benefi t obligation recognised in the consolidated statement of fi nancial position represents the actual defi cit
or surplus in the Group’s defi ned benefi t plans. Any surplus resulting from this calculation is limited to the present value of
any economic benefi ts available in the form of refunds from the plans or reductions in future contributions to the plans.
The income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from profi t before tax as reported in
the consolidated statement of profi t or loss because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
consolidated fi nancial statements and the corresponding tax bases used in the computation of taxable profi t. Deferred
tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised
for all deductible temporary differences to the extent that it is probable that taxable profi ts will be available against which
those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the taxable profi t nor the accounting profi t.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries
and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets
arising from deductible temporary differences associated with such investments and interests are only recognised to the
extent that it is probable that there will be suffi cient taxable profi ts against which to utilise the benefi ts of the temporary
differences and they are expected to reverse in the foreseeable future.
A liability for a termination benefi t is recognised at the earlier of when the entity can no longer withdraw the offer of the
termination benefi t and when the entity recognises any related restructuring costs.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent
that it is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.
Short-term and other long-term employee benefi ts
A liability is recognised for benefi ts accruing to employees in respect of wages and salaries, annual leave and sick leave
in the period the related service is rendered at the undiscounted amount of the benefi ts expected to be paid in exchange
for that service.
Liabilities recognised in respect of short-term employee benefi ts are measured at the undiscounted amount of the benefi ts
expected to be paid in exchange for the related service.
Liabilities recognised in respect of other long-term employee benefi ts are measured at the present value of the estimated future
cash outfl ows expected to be made by the Group in respect of services provided by employees up to the reporting date.
Share-based payments arrangements
Share-based payment transactions of the Company
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value
of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-
based transactions are set out in note 33.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the
liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted
by the end of the reporting period. The measurement of deferred tax liabilities and assets refl ects the tax consequences
that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognised in profi t or loss, except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other
comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting
for a business combination, the tax effect is included in the accounting for the business combination.
Investment Property
Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are
measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are
measured at cost.
70 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 71
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
All of the Group’s property interests held under operating leases to earn rentals or for capital appreciation purposes are
accounted for as investment properties and are measured using the cost model.
Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the straight-line method
between 10%-33%.
Transfers from owner-occupied property to investment property are made when the Company ends owner-occupation.
Acquired intangible assets
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are
stated in the consolidated statements of fi nancial position on a historical cost basis, being the historical cost at the date
of acquisition, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
Properties in the course of construction for production, administrative purposes, or for purposes not yet determined, are
carried at cost, less any recognised impairment loss. Cost includes professional fees. Depreciation of these assets, on
the same basis as other property assets, commences when the assets are ready for their intended use.
Freehold land is not depreciated. Fixtures and equipment are stated at cost less accumulated depreciation and any
recognised impairment loss.
Depreciation is charged so as to write off the cost of assets, other than land over their estimated useful lives, using the
straight-line method, on the following bases:
Buildings
Plant and equipment
Motor Vehicles
Furniture and fi ttings
Leasehold Improvements
3%-4%
10%-33%
15%-20%
6%-15%
7%-20%
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in income.
Research and development expenditure
Internally-generated intangible assets – research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Acquired intangible assets are measured initially at purchase cost and are amortised on a straight-line basis over their
estimated useful lives.
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at
their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets
acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment
losses, on the same basis as intangible assets that are acquired separately.
Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is
not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identifi ed,
corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest
group of cash-generating units for which a reasonable and consistent allocation basis can be identifi ed.
Intangible assets with indefi nite useful lives and intangible assets not yet available for use are tested for impairment at
least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market
assessments of the time value of money and the risks specifi c to the asset for which the estimates of future cash fl ows
have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised immediately in profi t or loss, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
An internally-generated intangible asset arising from development (or from the development phase of an internal project)
is recognised if, and only if, all of the following have been demonstrated:
Inventory
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
•
•
•
• how the intangible asset will generate probable future economic benefi ts;
•
the availability of adequate technical, fi nancial and other resources to complete the development and to use or sell
the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
•
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the
date when the intangible asset fi rst meets the recognition criteria listed above. Where no internally-generated intangible
asset can be recognised, development expenditure is recognised in profi t or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation
and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable
direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and
condition. Cost is determined on the “fi rst-in–fi rst-out” basis. Net realisable value represents the estimated selling price
less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Financial instruments
Financial assets and fi nancial liabilities are recognised on the Group’s consolidated statements of fi nancial position when
the Group becomes a party to the contractual provisions of the instrument.
72 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 73
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
Trade and other receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost
using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in
profi t or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the
difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the
effective interest rate computed at initial recognition.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments
that are readily convertible to a known amount of cash.
Financial assets and investments
All regular way purchases or sales of fi nancial assets are recognised and derecognised on a trade date basis.
for the year ended 31 December 2019
The amortised cost of a fi nancial asset is the amount at which the fi nancial asset is measured at initial recognition minus
the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between
that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a fi nancial
asset is the amortised cost of a fi nancial asset before adjusting for any loss allowance.
Interest income is recognised using the effective interest method for debt instruments measured subsequently at
amortised cost and at FVTOCI. For fi nancial assets other than purchased or originated credit-impaired fi nancial assets,
interest income is calculated by applying the effective interest rate to the gross carrying amount of a fi nancial asset,
except for fi nancial assets that have subsequently become credit-impaired. For fi nancial assets that have subsequently
become credit-impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the
fi nancial asset. If, in subsequent reporting periods, the credit risk on the credit-impaired fi nancial instrument improves so
that the fi nancial asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate
to the gross carrying amount of the fi nancial asset.
For purchased or originated credit-impaired fi nancial assets, the Group recognises interest income by applying the
credit-adjusted effective interest rate to the amortised cost of the fi nancial asset from initial recognition.
Regular way purchases or sales are purchases or sales of fi nancial assets that require delivery of assets within the time
frame established by regulation or convention in the marketplace.
The calculation does not revert to the gross basis even if the credit risk of the fi nancial asset subsequently improves so
that the fi nancial asset is no longer credit-impaired.
All recognised fi nancial assets are measured subsequently in their entirety at either amortised cost or fair value, depending
on the classifi cation of the fi nancial assets.
Classifi cation of fi nancial assets
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
•
•
the fi nancial asset is held within a business model whose objective is to hold fi nancial assets in order to collect
contractual cash fl ows; and
the contractual terms of the fi nancial asset give rise on specifi ed dates to cash fl ows that are solely payments of
principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive
income (FVTOCI):
•
•
the fi nancial asset is held within a business model whose objective is achieved by both collecting contractual cash
fl ows and selling the fi nancial assets; and
the contractual terms of the fi nancial asset give rise on specifi ed dates to cash fl ows that are solely payments of
principal and interest on the principal amount outstanding.
The majority of fi nancial assets are measured subsequently at fair value through profi t or loss (FVTPL).
Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest
income over the relevant period.
For fi nancial assets other than purchased or originated credit-impaired fi nancial assets (i.e. assets that are credit-impaired
on initial recognition), the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all
fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums
or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a
shorter period, to the gross carrying amount of the debt instrument on initial recognition. For purchased or originated credit-
impaired fi nancial assets, a credit-adjusted effective interest rate is calculated by discounting the estimated future cash
fl ows, including expected credit losses, to the amortised cost of the debt instrument on initial recognition.
Debt instruments classifi ed as at FVTOCI
The debt instruments held by the Group are classifi ed as at FVTOCI. The debt instruments are initially measured at fair
value plus transaction costs.
Subsequently, changes in the carrying amount of these corporate bonds as a result of foreign exchange gains and
losses, impairment gains or losses, and interest income calculated using the effective interest method are recognised
in profi t or loss. The amounts that are recognised in profi t or loss are the same as the amounts that would have been
recognised in profi t or loss if these debt instruments had been measured at amortised cost. All other changes in the
carrying amount of these debt instruments are recognised in other comprehensive income and accumulated under the
heading of investments revaluation reserve. When these debt instruments are derecognised, the cumulative gains or
losses previously recognised in other comprehensive income are reclassifi ed to profi t or loss.
Equity instruments designated as at FVTOCI
On initial recognition, the Group may make an irrevocable election (on an instrument by instrument basis) to designate
investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held
for trading or if it is contingent consideration recognised by an acquirer in a business combination.
A fi nancial asset is held for trading if:
•
•
•
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identifi ed fi nancial instruments that the Group manages together and
has evidence of a recent actual pattern of short-term profi t-taking; or
it is a derivative (except for a derivative that is a fi nancial guarantee contract or a designated and effective hedging
instrument).
Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs.
Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other
comprehensive income and accumulated in the investments revaluation reserve. The cumulative gain or loss is not be
reclassifi ed to profi t or loss on disposal of the equity investments, instead, it is transferred to retained earnings.
74 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 75
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are measured at FVTPL.
Financial liabilities
All fi nancial liabilities are measured subsequently at amortised cost using the effective interest method or at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or
losses recognised in profi t or loss. The net gain or loss recognised in profi t or loss is included in the ‘other gains and
losses’ line item. Fair value is determined in the manner described in note 36.
Financial liabilities at FVTPL
Financial liabilities are classifi ed as at FVTPL when the fi nancial liability is (i) contingent consideration of an acquirer in a
business combination, (ii) held for trading, or (iii) it is designated as at FVTPL.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Foreign exchange gains and losses
The carrying amount of fi nancial assets that are denominated in a foreign currency is determined in that foreign currency
and translated at the spot rate at the end of each reporting period.
Impairment of fi nancial assets
The Group recognises a loss allowance for expected credit losses on trade receivables. The amount of expected credit
losses is updated at each reporting date to refl ect changes in credit risk since initial recognition of the respective fi nancial
instrument.
The Group recognises lifetime ECL for trade receivables. The expected credit losses on these fi nancial assets are
estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are
specifi c to the debtors, general economic conditions and an assessment of both the current as well as the forecast
direction of conditions at the reporting date, including time value of money where appropriate.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life
of a fi nancial instrument. In contrast, 12 month ECL represents the portion of lifetime ECL that is expected to result from
default events on a fi nancial instrument that are possible within 12 months after the reporting date.
Derecognition of fi nancial assets
The Group derecognises a fi nancial asset only when the contractual rights to the cash fl ows from the asset expire, or
when it transfers the fi nancial asset and substantially all the risks and rewards of ownership of the asset to another entity.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control
the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it
may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred fi nancial asset,
the Group continues to recognise the fi nancial asset and also recognises a collateralised borrowing for the proceeds
received.
On derecognition of a fi nancial asset measured at amortised cost, the difference between the asset’s carrying amount
and the sum of the consideration received and receivable is recognised in profi t or loss. In addition, on derecognition
of an investment in a debt instrument classifi ed as at FVTOCI, the cumulative gain or loss previously accumulated in
the investments revaluation reserve is reclassifi ed to profi t or loss. In contrast, on derecognition of an investment in
equity instrument which the Group has elected on initial recognition to measure at FVTOCI, the cumulative gain or loss
previously accumulated in the investments revaluation reserve is not reclassifi ed to profi t or loss, but is transferred to
retained earnings.
Financial liabilities and equity instruments
Classifi cation as debt or equity
Debt and equity instruments are classifi ed as either fi nancial liabilities or as equity in accordance with the substance of
the contractual arrangements and the defi nitions of a fi nancial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.
A fi nancial liability is classifi ed as held for trading if:
•
•
•
it has been acquired principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identifi ed fi nancial instruments that the Group manages together and
has a recent actual pattern of short-term profi t-taking; or
it is a derivative, except for a derivative that is a fi nancial guarantee contract or a designated and effective hedging
instrument.
A fi nancial liability other than a fi nancial liability held for trading or contingent consideration of an acquirer in a business
combination may be designated as at FVTPL upon initial recognition if:
•
•
•
such designation eliminates or signifi cantly reduces a measurement or recognition inconsistency that would otherwise
arise; or
the fi nancial liability forms part of a group of fi nancial assets or fi nancial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or
investment strategy, and information about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and IFRS 9 permits the entire combined
contract to be designated as at FVTPL.
Foreign exchange gains and losses
For fi nancial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each
reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments.
Derivative fi nancial instruments
The Group enters into a variety of derivative fi nancial instruments to manage its exposure to interest rate and foreign
exchange rate risks, including foreign exchange forward contracts, interest rate swaps and cross currency swaps. Further
details of derivative fi nancial instruments are disclosed in note 36.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently
remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profi t or loss
immediately.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance
charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an
accrual basis in profi t or loss account using the effective interest method and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they arise.
Trade and other payables
Trade and other payables and other fi nancial liabilities are subsequently measured at amortised cost using the effective
interest method.
76 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 77
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
The effective interest method is a method of calculating the amortised cost of a fi nancial liability and of allocating interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of the fi nancial liability, or (where appropriate) a shorter
period, to the net carrying amount on initial recognition.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the
Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure
required to settle the obligation at the consolidated statements of fi nancial position date, and are discounted to present
value where the effect is material.
Provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date
of sale of the relevant products, at the directors’ best estimate of the expenditure required to settle the Group’s obligation.
4
Critical Accounting Judgments and Key Sources of Estimation Uncertainty
Critical judgments in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, which are described in note 3, management has made the
following judgments that have the most signifi cant effect on the amounts recognised in the fi nancial statements (apart
from those involving estimations, which are dealt with below):
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the consolidated statements
of fi nancial position date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next fi nancial year, are discussed below.
Impairment of intangible assets and goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units (CGU)
to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash fl ows of
the CGU and a suitable discount rate in order to calculate present value. The carrying amount of intangible assets and
goodwill at the consolidated statement of fi nancial position date was $23.7 million (2018: $22.6 million), see note 23 and
note 24.
Judgments with respect to deferred tax assets
For the purposes of measuring deferred tax assets arising from loss carry-forwards in different territories, management’s
estimation that it will be able to utilise them in the foreseeable future, see note 15.
Judgments with respect to construction contracts
The Company accounts for its revenue in accordance with IFRS 15 revenue from contracts with customers, which requires
estimates to be made for contract costs and revenues. Revenue is recognised using the percentage of completion method
based on the ratio of contract costs incurred to total estimated contract costs or engineering completion percentage.
Estimating total direct labour costs and the engineering status is subjective and requires the use of management’s best
judgments based on the information available at that time. Total revenues and expenses recognised for the year ended
31 December 2019 amounted to $14,682 thousand and $13,135 thousand, respectively.
5
Revenues
The Group derives its revenue from contracts with customers for the transfer of goods at a point in time and services and
Construction Contracts over time in the following major product lines.
An analysis of the Group’s revenues is as follows:
Year ended 31 December
Sales of goods
Services
Construction Contracts
2019
$’000s
74,387
34,327
14,682
123,396
2018
$’000s
77,794
28,181
13,586
119,561
6
Business and Geographical Segments
Business segments
Information reported to the chief operating decision maker (CEO of the Company) for the purposes of resource allocation
and assessment of segment performance focuses on the types of goods or services delivered or provided, and in
respect of two major operating segments – Networking and Cyber Division and Bio-Medical Division. These divisions are
the basis on which the Group reports its primary segment information. The principal products and services of each of
these divisions are as follows: Networking and Cyber Division mostly includes the research and development, production
and marketing of data communication products, such as Network Function Virtualisation (“NFV”) in the fi eld of local and
wide area networks and premises management systems. Sales for this segment are global. The Bio-Medical Division
is engaged in the research and development, production, marketing and distribution of medical products, primarily
laboratory diagnostic equipment and sterilisation equipment. Sales for this segment are primarily in Europe.
The accounting policies of the reportable segments are the same as the Group’s accounting policies. Adjusted operating
profi t is the measure reported to the Group Chief executive for the purpose of assessment of the segment performance.
A. Segment revenues and segment results
Year ended 31 December 2019
Revenues
Adjusted operating profi t (*)
Reconciliation – Other operating
expenses
Operating profi t
Net fi nance income
Profi t before tax
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
58,960
5,144
64,436
132
–
–
Total
$’000s
123,396
5,276
(794)
4,482
296
4,778
78 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 79
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
Year ended 31 December 2018
C. Revenue from major products and services
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Revenues
Adjusted operating profi t (loss)(*)
Reconciliation - Other operating
expenses
Operating profi t
Net fi nance expense
Profi t before tax
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
57,451
3,579
62,104
(1,114)
6
168
Total
$’000s
119,561
2,633
(1,143)
1,490
(282)
1,208
(*) Excluding amortisation of intangible assets see note 24, including other operating income see note 12
Revenue reported above represents revenue generated from external customers. There were immaterial inter-segment
sales in the year.
B. Segment assets, liabilities and other information
As at 31 December 2019
Assets
Liabilities
Depreciation and amortisation (*)
Additions to non-current assets
As at 31 December 2018
Assets
Liabilities
Depreciation and amortisation (*)
Additions to non-current assets
(*) See also note 30
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
88,799
35,540
2,563
1,579
83,132
33,874
2,706
1,421
1,899
–
86
–
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
56,846
19,808
1,317
1,160
70,034
26,068
2,074
2,603
2,004
–
–
–
Total
$’000s
173,830
69,414
5,355
3,000
Total
$’000s
128,884
45,876
3,391
3,763
The following is an analysis of the Group’s revenue from operations from its major products and services.
Year ended 31 December
Networking and cyber products
Software services
Distribution of medical products
Diagnostic products
Eco-Med products
2019
$’000s
21,507
37,452
52,378
5,535
6,524
123,396
2018
$’000s
24,405
33,052
50,129
6,589
5,386
119,561
D. Revenue from major product lines
Year ended 31 December 2019
Revenues
Sales of goods
Services
Construction Contracts
Year ended 31 December 2018
Revenues
Sales of goods
Services
Construction Contracts
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
18,167
29,045
11,748
58,960
56,220
5,282
2,934
64,436
–
–
–
–
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
20,898
23,770
12,783
57,451
56,896
4,405
803
62,104
–
6
–
6
Total
$’000s
74,387
34,327
14,682
123,396
Total
$’000s
77,794
28,181
13,586
119,561
80 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 81
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
E. Geographical segments
The Group operates in three principal geographical areas – United States of America (USA), Israel and Europe.
The Group’s revenue from external customers and information about its segment assets by geographical location
are presented by the location of operations and are detailed below:
$’000s
Area A
Area B
Area C
Total
Revenue from external customers
Non-current assets
2019
59,595
53,035
10,766
2018
58,748
49,043
11,770
123,396
119,561
2019
29,802
24,511
4,976
59,289
2018
21,714
16,035
5,162
42,911
for the year ended 31 December 2019
9
General and administrative expenses
Year ended 31 December
Salaries and related benefi ts
Professional services(*)
Overhead and depreciation
Other expenses
(*) Including
Auditors’ remuneration for audit services
2019
$’000s
4,722
3,340
1,289
2,402
11,753
295
2018
$’000s
4,515
3,416
1,294
2,001
11,226
288
7
Cost of revenues
Year ended 31 December
Amounts payable to Deloitte by the Company and its subsidiaries’ undertakings in respect of non-audit services in 2019
were $20,000 (2018: $3,000). In addition, payables in respect of non-audit services to others than the Company’s auditors,
for tax and internal audit services in 2019, were $8,000 and $23,000, respectively (2018: $8,000 and $8,000, respectively).
Direct costs- Components and subcontractors
Changes in inventory
Salaries and related benefi ts
Overhead and depreciation
Other expenses
2019
$’000s
69,852
(703)
16,565
3,055
1,482
90,251
8
Sales and marketing expenses
Year ended 31 December
Salaries and related benefi ts
Commissions
Outside services
Advertising and sales promotion
Overhead and depreciation
Travelling and other expenses
2019
$’000s
9,484
1,084
586
1,096
2,036
2,021
16,307
2018
$’000s
65,057
(713)
16,261
2,896
1,596
85,097
2018
$’000s
9,078
1,025
478
949
2,205
1,900
15,635
10 Research and development expenses
Salaries and related benefi ts
Components and subcontractors
Overhead and depreciation
Other expenses
Government grants
11 Staff costs
Year ended 31 December
2019
$’000s
2,916
3,089
1,082
533
(848)
6,772
2018
$’000s
3,693
2,535
1,067
708
(887)
7,116
The average monthly number of employees in 2019 (including executive directors) was 1,138 (2018: 1,054).
Year ended 31 December
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
2019
$’000s
28,227
4,153
1,307
33,687
2018
$’000s
27,575
4,742
1,230
33,547
82 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 83
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
12 Other operating expenses (income)
14 Finance expense
Year ended 31 December
Year ended 31 December
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Gain on reduce of holdings in associated company(1)
Gain on sale of investment(2)
Amortisation of intangible assets
Capital gain on sale of tangible and intangible assets (3)
Revaluation of investment
2019
$’000s
(3,161)
(3,380)
372
–
–
(6,169)
2018
$’000s
–
–
744
(1,582)
(165)
(1,003)
(1) On 4 April 2019, the Group signed an agreement for an investment of up to $30m to provide additional funds for the commercialisation of
NATlab. The majority of this investment – up to $25m – is to be provided by leading medical investors from the US and Puma Brandenburg
Investments Ltd. The investment is being made in two tranches into a new company that owns 100% of Ador. An initial $14.5m was funded in
April 2019 and a further $15.5m is expected by the end of 2020, subject to certain milestones being achieved. Following the initial investment,
the new company has a valuation of $45m and BATM has an ownership interest of 38.2%.
(2) On 31 July 2019 the group and its consortium partners having signed an agreement with Cellcom Israel Ltd to sell all the rights of the group
in IBC Holdings. BATM has received NIS12m ($3.4m) for its rights in IBC.
(3) In 2018 a capital gain from selling of intangible assets to a joint venture is included.
13 Finance income
Year ended 31 December
Interest on bank deposits
Gain on derivative fi nancial instruments
Gain on marketable securities
Foreign exchange differences, net
Other interest income
2019
$’000s
200
–
113
564
735
1,612
2018
$’000s
131
444
–
–
78
653
Loss on derivative fi nancial instruments
Foreign exchange differences, net
Interest on loans and bank fees
Loss on marketable securities
Interest on lease liabilities
Other
15
Income (expense) tax benefi ts
Current tax
Tax on previous years
Deferred tax (note 26)
Taxation under various laws:
Israel
2019
$’000s
(245)
–
(802)
–
(269)
–
(1,316)
2018
$’000s
–
(315)
(537)
(47)
–
(36)
(935)
Year ended 31 December
2019
$’000s
(652)
(19)
196
(475)
2018
$’000s
(519)
(9)
(95)
(623)
The Company is an “industrial company” as defi ned in the Israeli Law for the Encouragement of Industry (Taxes) 1969.
a. The corporate income tax rate for the years 2018 and 2019 is 23%
b. Encouragement of Capital Investments Law:
a. The corporate tax rate for each company with a Preferred Enterprise for the years 2018 and 2019 is 7.5%.
b.
Including additional tax tracks for Preferred Technological Enterprise (tax rate of 7.5% in Area “A” and tax rate of
12% in Area “Other”) and for special Preferred Technological Enterprise (tax rate of 6%).
Determining relieves of the threshold conditions to enter the track of “Special Preferred Enterprise” relevant for
huge companies entitle (tax rates of 5% in Area “A” or 8% in the Area “Other”).
c.
84 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 85
The Company has a Preferred Enterprise status in area A and its Israeli subsidiaries are being assessed according to the
corporate income tax rate.
During 2013, approval was received from the tax authorities in Israel regarding the merger for tax purposes of the
subsidiary Vigilant with the Company. Following the merger, $21 million losses were attributed to the Company and
increased the tax loss carry-forwards. As part of the merger approval, there were limitations for utilisation of these losses
in the future. Legally Vigilant was merged into the Company during 2014 and no longer exists.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
The Company and its Israeli subsidiaries have tax loss carry-forwards of $96.9 million of which $94.1 million the Group
did not create deferred tax assets in respect of such losses. According to the Israeli law there is no expiry date to use
such losses.
16 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
The Company tax assessments for the years up to and including the 2014 tax year are considered as fi nal.
The United States of America
Telco Systems incurred losses for tax purposes. In addition, in accordance with U.S. tax law, Telco Systems made an
election to amortise a substantial part of the excess cost paid by the Company in its acquisition over a period of 15 years.
This has resulted in tax loss carry-forwards which may expire before having been utilised. Accordingly, the future use of
part of this benefi t is uncertain. Other US subsidiaries are assessed for tax purposes on a consolidated basis with Telco
Systems. Deferred tax assets of $1.5 million have been recognised in respect of such losses. The amount of carry-forward
losses is $278.5 million. According to US law, losses created until 2017 can be carried forward for 20 years. Accordingly,
the fi rst portion of the tax losses in the US subsidiary will expire in 2021.
On 22 December 2017, the President of the United States of America signed into law the Tax Cuts and Jobs Act (the
“Tax Act”). The Tax Act contains signifi cant changes to federal corporate taxes, including a permanent reduction of the
corporate tax rate from 35% to 21% effective 1 January 2018. The reduction in the federal corporate tax rate required a
one-time revaluation of certain tax-related assets and liabilities. As a result of the revaluation of its deferred tax assets and
liabilities at 31 December 2017, the Company recorded a one-time tax expense of approximately $1.0 million. In addition,
based on the Act only 80 percent of taxable income created from 1 January 2018 may be used to offset future income.
Other jurisdictions
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The Group has tax loss
carry-forwards of $27.4 million in European subsidiaries of which $20.0 million the Group did not recognise deferred tax
assets in respect of such losses. $5.8 million tax loss carry-forwards out of the $20 million above according to the tax
law in the territory these losses related to will be expired during the years 2020-2025. The corporate income tax rate in
Moldova is 12% and in Italy is 24%.
The income tax (benefi t)/expense for the year can be reconciled to the profi t per the consolidated statement of profi t or
loss as follows:
Year ended 31 December
2019
2018
Earnings for the purposes of basic and diluted earnings per share ($’000s)
attributable to Owners of the Company
3,917
358
Number of shares
Weighted average number of ordinary shares for the purposes of basic
earnings per share
421,141,507
403,353,149
Effect of dilutive potential ordinary shares:
Share options
3,955,104
2,896,875
Weighted average number of ordinary shares for the purposes of diluted
earnings per share
425,096,611
406,250,024
The number of Share Options that could potentially dilute basic earnings per share in the future, but were not included in
the calculation of diluted earnings per share because they are antidilutive for the year is 450,000 (2018: 82,304).
17 Financial assets
Interest-bearing deposits
Financial assets at FVTPL
Year ended 31 December
2019
$’000s
2,964
1,290
4,254
2018
$’000s
1,580
1,997
3,577
The average interest rate of deposits is 1.99% and 3.11% in 2019 and 2018 respectively.
Year ended 31 December
18 Trade and other receivables
Profi t before tax:
Tax expense at the Israeli corporate income tax rate of 23%
Reduced income tax rate
Tax losses which no deferred tax assets have been recognised
Tax losses utilised in current period which no deferred tax assets have been
recognised in prior periods
Initial recognition of deferred tax assets
Tax on previous years
Other differences
Tax expenses for the year
86 BATM | ANNUAL REPORT AND ACCOUNTS 2019
2019
$’000s
4,778
1,099
152
40
(869)
(196)
19
230
475
2018
$’000s
1,208
278
(191)
616
–
(102)
9
13
623
Trade and other receivables
Trade receivable account
Participation in research and development: Government of Israel
VAT authorities
Tax authorities
Construction contracts*
Prepaid expenses
Other debtors
31 December
2019
$’000s
29,218
1,094
845
336
4,909
4,892
1,490
42,784
2018
$’000s
21,871
1,177
637
582
5,486
3,827
1,430
35,010
BATM | ANNUAL REPORT AND ACCOUNTS 2019 87
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
31 December
20 Property, plant and equipment ($’000s)
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
4,909
5,486
Effect of translation adjustment
Construction contracts
Composition:
Cumulative costs incurred due to works construction contracts
In addition – Recognised profi ts
2019
$’000s
11,617
3,992
2018
$’000s
14,051
3,462
Less accounts submitted to project customers
(10,700)
(12,027)
The average credit period taken on sales of goods is 66 days (2018: 76 days). No interest is charged on the receivables.
An allowance has been made at 31 December 2019 for estimated irrecoverable amounts from the sale of goods of
$2,396 thousand, (2018: $2,154 thousand) including general allowance according to IFRS 9. This allowance has been
determined by reference to past default experience. The directors consider that the carrying amount of trade and other
receivables approximates their fair value.
As of 31 December 2019, trade receivable account includes amounts of $7.3 million, which maturity date has expired
(including a receivable in the amount of $1.6 million that is overdue for more than a year), but the Group, based on past
experience and on the credit quality of the debtors, and since most of the debts have been collected until the date of the
annual report release, has not made an allowance for doubtful debts since the Company expects that those debts are to
be collectible.
Credit risk
The Group’s principal fi nancial assets are bank balances and cash, trade and other receivables and investments. The
Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the consolidated statements
of fi nancial position are net of allowances for doubtful receivables. An allowance for impairment is made where there
is an identifi ed loss event, which, based on previous experience, is evidence of a reduction in the recoverability of the
cash fl ows. The Group has no signifi cant concentration of credit risk, with exposure spread over a large number of
counterparties and customers.
Land and
buildings(*)
Plant and
equipment
Motor
vehicles
Furniture
and fi ttings
Leasehold
improvements
Total
Cost
At 1 January 2018
8,925
15,766
1,936
4,204
2,591
Additions
Disposals
–
(236)
(169)
1,421
(603)
(241)
238
(211)
(29)
103
(9)
(65)
58
(122)
(40)
At 31 December 2018
8,520
16,343
1,934
4,233
2,487
Additions
Disposals
Effect of translation adjustment
Acquisition of subsidiaries
At 31 December 2019
Accumulated depreciation
10
(20)
27
1,198
9,735
860
(268)
53
100
82
81
(102)
(247)
6
62
14
100
23
–
8
19
17,088
1,982
4,181
2,537
At 1 January 2018
1,778
11,171
Depreciation expense
292
1,008
881
251
3,841
163
Disposals
(59)
(474)
(161)
(1)
Effect of translation adjustment
(44)
(174)
(14)
(60)
At 31 December 2018
Depreciation expense
Disposals
Effect of translation adjustment
Acquisition of subsidiaries
1,967
354
(1)
19
53
11,531
744
(108)
112
73
957
344
(66)
9
41
3,943
188
(218)
38
56
1,031
150
(122)
(16)
1,043
231
–
10
–
33,422
1,820
(1,181)
(544)
33,517
1,056
(637)
108
1,479
35,523
18,702
1,864
(817)
(308)
19,441
1,861
(393)
188
223
19
Inventories
Raw materials
Work-in-progress
Finished goods
31 December
At 31 December 2019
2,392
12,352
1,285
4,007
1,284
21,320
2019
$’000s
4,544
2,917
15,211
22,672
2018
$’000s
5,435
2,612
14,813
22,860
Carrying amount
At 31 December 2019
At 31 December 2018
(*) see note 21
7,343
6,553
4,736
4,812
697
977
174
290
1,253
1,444
14,203
14,076
During 2019, $0.3 million of slow moving inventory was impaired, and expensed to the Profi t and Loss account (2018:
$0.2 million).
88 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 89
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
21
Investment property
22 Leases (Group as a lessee)
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
At 1 January
Addition to investment property
Depreciation expense
Exchange rate differences
At 31 December
2019
$’000s
2,004
–
(86)
(19)
1,899
2018
$’000s
1,951
177
(88)
(36)
2,004
Right-of-use assets
Cost
At 1 January 2019
Additions
Disposals
Buildings
Motor vehicles
Total
10,778
1,004
94
187
–
(71)
11,782
281
(71)
380
Effect of translation adjustment
337
43
– The useful lives used; between 27-33 years.
At 31 December 2019
11,209
1,163
12,372
Amounts recognised in the consolidated statements of profi t or loss
Rental income from investment property
Operating expenses related to income from investment property
Operating expenses related to investment property which produced no income
31 December
2019
$’000s
206
(201)
(11)
2018
$’000s
200
(197)
(4)
Additional Information
Fair value disclosures for investment properties measured using the cost model
Details of the Group’s freehold land and buildings and information about the fair value hierarchy as at 31 December 2019
are as follows:
31 December 2019
31 December 2018
At amortised cost
$’000s
Fair value level 3
$’000s
At amortised cost
$’000s
Fair value level 3
$’000s
USA
Italy
1,156
743
1,547
1,227
1,214
790
1,482
1,251
The fair value was in Italy and in USA determined based on the market comparable approach that refl ects recent
transaction prices for similar properties, where the market rentals of all lettable units of the properties are assessed by
reference to the rentals achieved in the lettable units as well as other lettings of similar properties in the neighbourhood.
The capitalisation rate adopted is made by reference to the yield rates observed by the valuers for similar properties in the
locality and adjusted based on the valuers’ knowledge of the factors specifi c to the respective properties.
Average price market, taking into account the differences in location, and individual factors, such as frontage and size,
between the comparables and the property, at an average price of $1,178 per square metre for the property in Italy and
an average price of $125 per square foot for the property in USA.
Accumulated depreciation
At 1 January 2019
Charge for the year
Disposals
Effect of translation adjustment
At 31 December 2019
Carrying amount
At 31 December 2019
Buildings
Motor vehicles
Total
–
–
1,923
537
–
7
(43)
3
1,930
497
–
2,460
(43)
10
2,427
9,279
666
9,945
The Group leases several assets including buildings and motor vehicles. The average lease term of buildings and motor
vehicles from the implementation date, 1 January 2019, is 7.7 and 2.5 years, accordingly.
The maturity analysis of lease liabilities is presented in note 27.
Amounts recognised in profi t and loss
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
At 31 December 2019, the Group is committed to $0.2 million for short-term leases.
The total cash outfl ow for leases amount to $2,361 thousand.
2019
$’000s
2,460
269
279
90 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 91
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
23 Goodwill
The Group tests annually goodwill for impairment or more frequently if there are indications that goodwill might be
impaired. The Group has two reportable business segments and goodwill is associated with CGUs within the Bio-Medical
segment or CGUs within the Networking and Cyber segment. The goodwill regarding Bio-Medical at the amount of
$9,819 thousand (2018: $9,791 thousand) has been divided into 5 CGUs: Eco-Med, Diagnostic, Distribution, Distributor
and provider of genetics tests and Analytical instruments distribution. The goodwill regarding Networking and Cyber
segment at the amount of $6,985 thousand (2018: $6,552 thousand) has been divided into 2 CGUs: Telecommunications
and Software services.
for the year ended 31 December 2019
Sensitivity of the recoverable amount to changes in the key assumptions
The recoverable amount of the Eco-Med activity is higher than the carrying amount in the amount of $3.6 million. Reduction
of 6% growth rate taken into account in calculating the value in use of the activity will result in a decrease of $3.4 million
recoverable amount of the activity and no goodwill impairment will be recorded. Decrease in growth rate as stated will
lead to changes in other assumptions used in the calculation of value in use. Increase of 4% in pre-tax discount rate taken
into account in calculating the value in use of the activity will result in a decrease of $3.3 million recoverable amount of the
activity and no goodwill impairment will be recorded.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
The goodwill is allocated to the following CGUs:
Eco-Med: $2,550 thousand (2018: $2,550 thousand)
Diagnostic: $1,577 thousand (2018: $1,598 thousand)
Distribution: $1,146 thousand (2018: $1,173 thousand)
Distributor and provider of genetics tests: $966 thousand (2018: $890 thousand)
Analytical instruments distribution: $3,580 thousand (2018: $3,580 thousand)
Telecommunications: $1,984 thousand (2018: $1,984 thousand)
Software services: $5,001 thousand (2018: $4,568 thousand)
The recoverable amounts of the CGUs are determined from value in use calculations except of the Diagnostic CGU. The
key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected
changes to selling prices and direct costs during the period. Pre-tax discount rates of between 8.8% - 15.1% have been
used. Changes in selling prices and direct costs are based on recent history and expectations of future changes in the
market.
The Group prepares cash fl ow forecasts derived from the most recent fi nancial budget approved by management and
extrapolates indefi nite cash fl ows based on estimated growth rates. For the purposes of this calculation management have
used revenue growth rates of 36% for year 1 and 10% for years 2-5, and then 1% thereafter, for the Telecommunications
CGU and 7% for year 1 and 5% for years 2-5, and then 1% thereafter , for the Software services CGU and 34% for year
1 and 10% for years 2-5, and then 1% thereafter for the Eco-Med CGU and 13% for year 1 and 10% for years 2-5, and
then 1% thereafter for the Distribution CGU and 42% for year 1 and 15% for years 2-5, and then 1% thereafter for the
Distributor and provider of genetics tests CGU and 6% for year 1 and 9% for years 2-5, and then 1% thereafter for the
Analytical instruments distribution CGU.
The average fi xed expenses have been assumed to grow at 13%, 5%, 5%, 4%, 4% for years 1-5 respectively, and then 2%
thereafter in the Telecommunications and Software services CGU and (5)%, 5%, 5%, 5%, 5% for years 1-5 respectively,
and then have been assumed to remain constant thereafter for Eco-Med, Distribution, Distributor and provider of genetics
tests and Analytical instruments distribution CGUs. The average variable expenses (directly linked to sales) have been
assumed to grow at 13%, 4%, 6%, 6%, 6% for years 1-5 respectively, and then 1% thereafter for the Telecommunications
and Software services CGUs, and 10%, 8%, 10%, 10%, 10% for years 1-5 respectively, and then 1% thereafter for the
Eco-Med, Distribution, Distributor and provider of genetics tests and Analytical instruments distribution CGUs. The rates
used above refl ect historical rates achieved and expected levels for 2020 but then are adjusted for subsequent years.
The recoverable amount of the diagnostics unit is determined based on the conditional agreement and according to it no
impairment was required (see also note 12(1)).
Balance at 1 January
Additions in the year (*)
Disposal in the year
Foreign exchange difference
Balance at 31 December
(*) see note 31.
24 Other intangible assets
Cost
At 1 January 2018
Classifi cation from other receivables in 2017
Additions (*)
Effect of translation adjustments
At 31 December 2018
Additions (*)
Disposals
Effect of translation adjustments
At 31 December 2019
2019
$’000s
16,343
58
(10)
413
16,804
2018
$’000s
16,817
_
_
(474)
16,343
Customer Relationships
and Backlog
$’000s
Technology
$’000s
Other
$’000s
Total
$’000s
16,502
–
–
(491)
16,011
522
(263)
150
3,056
34,252
14,694
524
984
–
–
(285)
(117)
15,917
1,083
–
180
2,939
–
–
(245)
524
984
(893)
34,867
1,605
(263)
85
16,420
17,180
2,694
36,294
92 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 93
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
9,714
2,313
28,125
The following are deferred tax assets recognised by the Group and movements thereon during the current and prior
reporting period (see also note 15).
26 Deferred tax
Deferred tax assets
for the year ended 31 December 2019
for the year ended 31 December 2019
24 Other intangible assets (continued)
Accumulated amortisation
At 1 January 2018
Effect of translation adjustments
Amortisation expense
At 31 December 2018
Effect of translation adjustments
Amortisation expense
Disposals
At 31 December 2019
Carrying amount
At 31 December 2019
At 31 December 2018
16,098
(496)
177
(123)
890
15,779
10,481
52
119
(132)
250
571
–
(60)
76
2,329
(200)
104
–
(679)
1,143
28,589
102
794
(132)
15,818
11,302
2,233
29,353
602
232
5,878
5,436
461
610
6,941
6,278
(*) Includes capitalised development costs (NFV and diagnostics) according to IAS 38.
Other intangible assets are amortised on a straight-line basis over their estimated useful lives.
Amortisation by categories:
Customer Relationships and Backlog: mainly 7 to 10 years
Technology: 3 to 11 years
Other: mainly 10 years
25 Subsidiaries
A list of the signifi cant direct and indirect investments in subsidiaries, including the country of incorporation, and percent
of ownership interest as at 31 December 2019 is presented below.
Subsidiary
Principal
activity
Country of
incorporation
Ownership
interest
Entity A
Entity B
Entity C
Entity D
Entity E
Entity F
Entity G
Entity H
Entity I
Entity J
Telecommunication
United States of America
100%
Distribution
Software
Sterilisation
Distribution
Diagnostics
Diagnostics
Cyber
Distribution
Distribution
Romania
Israel
Hungary
Moldova
Italy
Italy
Israel
Hungary
Israel
100%
100%
75%
51%
100%
100%
67%
100%
100%
Date of
acquisition
April 2000
June 2007
October 2007
February 2008
July 2008
February 2009
November 2009
April 2012
January 2016
January 2017
Retirement benefi t
obligations
$’000s
Losses carried
forward
$’000s
Other(*)
$’000s
At 1 January 2018
Credit (charge) to income
27
8
Effect of translation adjustments
(3)
At 31 December 2018
Credit (charge) to income
Effect of translation adjustments
At 31 December 2019
32
3
1
36
(*) Including goodwill and other temporary differences
3,299
(621)
(87)
2,591
562
15
3,168
(417)
451
(2)
32
1
(3)
30
Total
$’000s
2,909
(162)
(92)
2,655
566
13
3,234
The Company incurred current tax losses in certain jurisdictions, to which deferred tax assets relate, to the extent that
it is expected that future taxable profi t will be available and can be utilised against them. The deferred tax assets are
mainly attributed to profi table companies or to companies that have current losses but a history of profi table operations.
The deferred tax assets were also analysed based on forecasted operations and existing agreements and backlog. The
Company expects that taxable profi ts will be available, as a result of an increasing demand, new products and expansion
to new markets.
Deferred tax liabilities
At 1 January 2018
Credit to income
Effect of translation adjustments
At 31 December 2018
Credit to income
Effect of translation adjustments
At 31 December 2019
Losses carried
forward
$’000s
Intangible
assets
$’000s
Tangible assets
and other
$’000s
Total
$’000s
–
(346)
–
(346)
364
(18)
–
276
(133)
(12)
131
(40)
7
98
60
412
(29)
443
46
39
528
336
(67)
(41)
228
370
28
626
The following are unrecognised taxable temporary differences associated with investments and interests: Taxable
temporary differences in relation to investments in subsidiaries for which deferred tax liabilities have not been recognised
are attributable to: 31 December 2019 $19,258 thousand (31 December 2018: $16,484 thousand).
94 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 95
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
for the year ended 31 December 2019
27 Financial liabilities and other
Trade and other payables
Trade creditors
Salary accruals
VAT and other tax
Liability to the offi ce of the chief scientist
Liability on acquisition of a subsidiary *
Provision
Other creditors and accruals **
31 December
2019
$’000s
20,450
6,774
2,342
335
434
360
13,764
44,459
2018
$’000s
13,720
6,693
1,488
498
633
133
10,248
33,413
Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The
average credit period taken for trade purchases is 64 days (2018: 77 days). The directors consider that the carrying
amount of trade payables approximates to their fair value.
* See also note 31
** Including a liability to a related party, amounts to $122 thousand that was repaid at the beginning of 2020.
Changes in fi nancial liabilities where the cash fl ows in respect thereof are classifi ed as cash fl ows from fi nancing
activities
for the year ended 31 December 2019
Open
balance
$’000s
Cash fl ow from
fi nance activities
$’000s
Business
combination
$’000s
Foreign exchange
diff erences
$’000s
Close
balance
$’000s
5,369
486
5,855
Open
balance
$’000s
5,324
910
6,234
517
(353)
164
134
635
769
(105)
(6)
(111)
Cash fl ow from
fi nance activities
$’000s
Business
combination
$’000s
Foreign exchange
diff erences
$’000s
44
(404)
(360)
–
–
–
1
(20)
(19)
5,915
762
6,677
Close
balance
$’000s
5,369
486
5,855
2019
Short term
Long term
2018
Short term
Long term
Lease liabilities
Analysed as:
Non-current
Current
Long-term bank credit
Long-term bank credit
Long-term liabilities
Liability to the offi ce of the chief scientist (1)
Liability on acquisition of a subsidiary
Government institutions and other
31 December
2019
$’000s
762
762
2018
$’000s
486
486
Disclosure required by IFRS 16
31 December
Maturity analysis
2019
$’000s
3,330
8
2,877
6,215
2018
$’000s
3,136
94
2,401
5,631
Year 2020
Year 2021
Year 2022
Year 2023
Year 2024
Onwards*
31/12/2019
$’000s
8,339
2,070
10,409
31/12/2019
$’000s
2,070
1,519
1,276
1,144
991
3,409
10,409
(1) This liability (hybrid instrument containing embedded derivative) is designated at FVTPL according to relevant accounting policy (see also note
36(k)).
* Include options
All lease obligations are denominated in currency contracts.
96 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 97
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
for the year ended 31 December 2019
Disclosure required by IAS 17
Amounts payable under operating leases:
Within one year
In the second to fi fth years inclusive
After fi ve years
Minimum lease payments
31/12/2018
$’000s
2,387
3,998
132
6,517
Operating lease payments represent rentals payable by the Group for certain of its offi ce properties. Leases are negotiated
for an average term of 5 years and rentals are fi xed for an average of 5 years.
All lease obligations are denominated in currency contracts.
28 Share capital
Authorised:
Issued and fully paid:
Ordinary shares of NIS 0.01 each (number of shares)
2019
2018
1,000,000,000
440,279,074
1,000,000,000
403,600,820
The Company has one class of ordinary shares which carry no right to fi xed income.
The Company has raised, in aggregate, net proceeds of US$17.1 million at a price of 42.5 pence per New Ordinary
Share. Pursuant to the Fundraise, a total of 33,283,254 New Ordinary Shares were issued, representing 7.6 per cent of
the Company’s enlarged share capital. The Issue Price represents a discount of 5.6 per cent to the mid-market closing
price of the Company’s Ordinary Shares on the London Stock Exchange on 24 June 2019.
Listing on TASE
On 11 July 2019, the Group’s shares commenced trading on its Secondary Listing on the Tel Aviv Stock Exchange under
the symbol “BVC”. The Group maintains its Primary Listing on the Premium Listing Segment of the Offi cial List of the FCA
and its shares continue to trade on the Main Market of the London Stock Exchange. Shares are fully transferrable and
fungible between the two markets. BATM has not issued any new shares in connection with the Secondary Listing.
During the year 3,395,000 options were exercised by three employees and a Director (see also note 33), during 2018
300,000 options were exercised by two employees.
29
Investments
Investments and loan carried at FVTPL
During 2013 the Company made an investment of $3.5m into a consortium for the construction of a new nationwide fi ber
optic infrastructure network in Israel named Israel Broadband Company (2013) Ltd (Hereinafter - “IBC”). During 2015, as
part of the consortium agreement in IBC, the Company has transferred an additional NIS 25m ($6.5m) upon IBC’s call
for the additional investment, comprising NIS 6.25m ($1.6m) as an additional equity investment in IBC and NIS 18.75m
($4.9m) as a shareholder loan.
In 31 December 2014 fi nancial reports, the IBC investment was re-appraised by an external valuator and increased the fair
value of the available-for-sale fi nancial assets in amount of $0.5m, the increase registered in the other comprehensive income.
98 BATM | ANNUAL REPORT AND ACCOUNTS 2019
for the year ended 31 December 2019
As at 31 December 2015, the Company prepared, with the assistance of an independent external valuator, assessing the
recoverable amount of the investment in IBC. The Company recognised an impairment loss in the fi nancial statement in
the amount of $9.6m comprising: $4.7m impairment loss of the investment in IBC and $4.9m impairment loss of the loan
to IBC, which included in the consolidated statement of profi t or loss as fi nancial expenses and decreased the fair value
of the available-for-sale fi nancial assets in the other comprehensive income in amount of $0.5m.
In 2016 and 2017 the Company examined the value of the investment in IBC and found there was no change in the fair
value compared with the end of 2015.
As of 1 January 2018, the date of initial application of IFRS 9, the Company’s management decides to designate all its
investments in IBC, which constitutes an investment in a capital instrument, as a FVTPL.
In August 2018, Cellcom Israel Ltd (“Cellcom”), a leading telecommunications group, has entered a memorandum of
understanding (the “Agreement”) with the members of IBC, to acquire the consortium’s stake in IBC.
In July 2019 the Company signed an agreement with Cellcom to acquire its rights in IBC in amount of NIS12m (c. $3.4m).
30 Note to the cash fl ow statement
Year ended 31 December
Operating profi t from operations
Adjustments for:
Amortisation of intangible assets
Depreciation of property, plant and equipment and investment property
Capital loss (gain) of property, plant and equipment and other*
Revaluation of investment
Gain on sale of investment
Capital gain on reduce of holdings in associated company
Stock options granted to employees
Increase (decrease) in retirement benefi t obligation
Increase (decrease) in provisions
Decrease in inventory
Decrease (increase) in receivables
Increase (decrease) in payables
Effects of exchange rate changes on the balance sheet
Income taxes paid
Income taxes received
Interest paid
Net cash from operating activities
* Included in other operating expenses
2019
$’000s
4,482
794
4,561
31
–
(3,380)
(3,161)
105
121
298
1,387
(7,896)
11,361
(264)
(410)
10
(873)
2018
$’000s
1,490
1,143
2,248
(1,585)
(165)
–
–
58
(153)
(47)
353
4,824
(3,579)
(990)
(419)
2
(573)
7,166
2,607
BATM | ANNUAL REPORT AND ACCOUNTS 2019 99
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
31 Business combinations
During the year, the Group acquired 51% of Remedium for a consideration of $0.3 million.
32 Guarantees and liens
The Group provided from time to time bank guarantees due to advances from customers.
for the year ended 31 December 2019
This transaction has been accounted for by the purchase method of accounting.
The Company registered several liens in favour of banks.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
REMEDIUM
Net assets acquired
Property, plant and equipment
Net working capital
Short-term bank credit
Long term liabilities
Non-controlling interest
Gain from bargain purchase
Total consideration
Satisfi ed by:
Cash
Consideration recorded as a contingent liability
Net cash outfl ow arising on acquisition
Cash consideration
Cash and cash equivalents acquired
2019
US$ in thousands
1,257
607
(134)
(635)
1,095
(543)
(248)
304
304
–
304
316
(12)
304
33 Share-based payments
Equity-settled share option scheme
The Company has a share option scheme for all employees of the Group. Options are usually exercisable at a price equal
to the average quoted market price of the Company’s shares on the date of grant. The vesting period is between three to
fi ve years. Unexercised options expire ten years from the date of grant. Options are forfeited when the employee leaves
the Group. Options to certain management employees are exercisable at a price equal to the average quoted market
price of the Company’s shares over the 30 days before the date of grant.
Details of the share options outstanding during the year are as follows:
2019
2018
Number
of share
options
Weighted average
exercise price
Outstanding at beginning of year
8,906,598
Granted during the year
450,000
Forfeited during the year
Exercise during the year
Outstanding at the end of the year
Exercisable at the end of the year
(386,203)
(3,395,000)
5,575,395
1,125,395
0.2035
0.4487
0.2313
0.1378
0.2613
0.1575
Number
of share
options
6,320,303
4,000,000
(1,113,705)
(300,000)
8,906,598
4,806,595
Weighted average
exercise price
(in GBP)
0.1985
0.2695
0.4197
0.1817
0.2035
0.1495
The options outstanding at 31 December 2019 had a weighted average exercise price of 0.2613 GBP, and a weighted
average remaining contractual life of 7.87 years. 450,000 options were granted on 23 May, 15 August and 28 November.
The aggregate of the estimated fair values of the options granted on this date according to the Black-Scholes model is
$76,000. In 2018, options were granted on 6 June. The aggregate of the estimated fair values of the options granted on
this date is $223,000.
Remedium contributed $1,939 thousand revenue and loss of $217 thousand to the Group’s profi t before tax for the period
between the date of acquisition and 31 December 2019.
The inputs into the Black-Scholes model are as follows:
At the end of 2018 - The group acquired the major assets of mass alert platform company, the company estimates that
the total consideration will be up to $614k subject to certain milestones being achieved, of which $208 thousand already
paid during 2019 and $434 thousand recorded as a conditional liability which will be paid within one to two years subject
to the progress of milestones being achieved. The Company has completed the purchase price allocation to the assets,
liabilities and contingent liabilities.
GREEN LAB
In January 2016 the Group acquired 100% of the issued share capital of Green Lab for a consideration of $3,813 thousand
payable in cash of $1,913 thousand on acquisition and $1,900 thousand over a three-year period -$633 thousand at the
beginning of each year starting on January 2017. During the year, the Company paid the last portion of the liability. Green
Lab is one of the leading distributors of analytical instruments for environmental and industrial sectors. Green Lab has
exclusive relationships in Hungary with some of the most prominent operators in the industry.
Weighted average share price (GBP)
Weighted average exercise price (GBP)
Expected volatility
Expected life
Risk-free rate
Expected dividends
2019
0.28
0.29
27-36
3-5
0.9%
0%
2018
0.26
0.26
32-90
3-5
1.1%
0%
100 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 101
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
The inputs into the Black-Scholes model for the options granted in 2019 are as follows:
Weighted average share price (GBP)
Weighted average exercise price (GBP)
Expected volatility
Expected life
Risk-free rate
Expected dividends
2019
0.45
0.45
27-36
5
1.3%
0%
Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous
3 years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects
of non- transferability, exercise restrictions, and behavioural considerations.
The Group recognised total expenses of $105,000 and $58,000 related to equity-settled share-based payment
transactions in 2019 and 2018, respectively.
34 Retirement benefi t obligation
Defi ned contribution plans
The Group operates defi ned contribution retirement benefi t schemes for all qualifying employees in Israel. The assets
of the schemes are held separately from those of the Group in funds under the control of trustees. Where there are
employees who leave the schemes prior to vesting fully in the contributions, the contributions payable by the Group are
reduced by the amount of forfeited contributions.
The employees of the Group’s subsidiaries in the United States are members of a state-managed retirement benefi t
scheme operated by the government of the Unites States. The subsidiary contributes a specifi ed percentage of payroll
costs to the retirement benefi t scheme to fund the benefi ts. The only obligation of the Group with respect to the retirement
benefi t scheme is to make the specifi ed contributions.
Defi ned benefi t plans
The Group operates defi ned benefi t schemes for qualifying employees of the Company and its subsidiaries in Israel and
in Italy.
In Israel this scheme provides severance pay provision as required by Israeli law. Under the plans, the employees are
entitled to post-employment benefi ts equivalent to years of service multiplied by 8.33% of fi nal salary on either attainment
of a retirement age of 67 (men) and 64 (women) or redundancy. No other post-retirement benefi ts are provided to these
employees.
In Italy each employee is entitled to have a severance payment as soon as he ends the employment under one of the
conditions specifi ed below as except those who decide to choose private insurance during the employment. Principal
conditions to release the liability are: 1. Full retirement age 2. Accumulation of minimal working years 3. Termination of
employment by the employer 4. Death of employee 5. Occurrence of employee’s disability.
The most recent actuarial valuations of plan assets and the present value of the defi ned benefi t obligation were carried
out at 26 January 2020 by Elior Weissberg, FILAA on behalf of Elior Weissberg Ltd. a member of the Institute of Actuaries
regarding the employees in Israel. The present value of the defi ned benefi t, obligation, the related current service cost
and past service cost were measured using the projected unit credit method. The discount rate was based on high quality
corporate bonds.
The principal assumptions used for the purposes of the actuarial valuations were as follows:
Discount rate(s)
Expected rate(s) of salary increase
Expected infl ation rate
Employee turnover rate
2019
3.72%
1-4%
1.36%
8%
2018
2.97%
1-4%
1.57%
8%
Amounts recognised in comprehensive income in respect of these defi ned benefi t plans are as follows:
Service cost:
Current service cost
Net interest expenses
Components of defi ned benefi t costs recognised in profi t or loss
Return on plan assets (excluding amounts included in net interest
expense)
Actuarial gains and losses arising from changes in fi nancial assumptions
Actuarial gains and losses arising from other
Components of defi ned benefi t costs recognised in other comprehensive
2019
$’000s
216
27
243
2019
$’000s
(30)
64
8
42
2018
$’000s
173
19
192
2018
$’000s
127
(12)
(64)
51
The amount included in the consolidated statements of fi nancial position arising from the entity’s obligation in respect of
its defi ned benefi t plans is as follows:
Present value of funded defi ned benefi t obligation
Fair value of plan assets
Net liability
2019
$’000s
2,445
(1,730)
715
2018
$’000s
2,152
(1,576)
576
Total expenses related to the contribution retirement benefi t schemes are: $1,056 thousand in the year 2019 (2018: $979
thousand).
Re-measurement on the net defi ned benefi t liability:
102 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 103
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
Movements in the present value of the defi ned benefi t obligation in the current period were as follows:
36 Financial Instruments
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Opening defi ned benefi t obligation
Current service cost
Interest cost
Remeasurement (gains)/losses arising from changes in fi nancial
assumptions
Benefi ts paid
Exchange rate differences
Closing defi ned benefi t obligation
2019
$’000s
2,152
216
69
91
(229)
146
2,445
Movements in the present value of the plan assets in the current period were as follows:
Opening fair value of plan assets
Interest income
Remeasurements gains/(losses) return on plan assets (excluding
amounts included in net interest expense)
Contributions from the employer
Benefi ts paid
Exchange rate differences
Closing fair value of plan assets
35 Related party transactions
Remuneration of key management personnel
Short- and long-term employee benefi ts
Shared-based payment
2019
$’000s
1,576
42
49
75
(146)
134
1,730
2019
$’000s
1,630
93
1,723
2018
$’000s
2,652
173
58
(82)
(388)
(261)
2,152
2018
$’000s
1,970
39
(136)
108
(268)
(137)
1,576
2018
$’000s
1,521
46
1,567
Transactions with associated companies
During the year the company provided various services to an associated company in amount of $124 thousands.
(a) Capital risk management
Management’s policy is to maintain a strong capital base in order to preserve the ability of the Group to continue operating
so that it may provide a return on capital to its shareholders, benefi ts to other holders of interests in the Group such as
credit providers and employees of the Group, and sustain future development of the business. Management of the Group
monitors return on capital, defi ned as the total amount of equity attributable to the shareholders of the Group and also the
amount of dividends distributed to the ordinary shareholders.
The Group’s management reviews the capital structure on a periodic basis. As a part of this review the management
considers the cost of capital and the risks associated with each class of capital. Based on management’s recommendations,
the Group will balance its overall capital structure through the payment of dividends. The Group’s overall strategy remains
unchanged from 2006.
(b) Signifi cant accounting policies
Details of the signifi cant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of fi nancial asset,
fi nancial liability and equity instrument are disclosed in note 3 to the fi nancial statements.
(c) Categories of fi nancial instruments
Financial assets
Cash and cash equivalents*
Fair value through profi t or loss
Fair value through OCI
Receivables
Financial liabilities
At amortised cost
Fair value through profi t or loss
Financial assets
Cash and cash equivalents*
Fair value through profi t or loss
Fair value through OCI
Receivables
Financial liabilities
At amortised cost
Fair value through profi t or loss
2019
$’000s
40,584
4,758
509
41,532
51,766
8
2018
$’000s
20,811
4,128
509
32,049
40,150
727
104 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 105
* cash and cash equivalents comprises $11.5 million deposits up to three months and $29.1 million cash (2018: $4.0 million deposits up to three
months and $16.8 million cash).
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
for the year ended 31 December 2019
The majority of the assets included in fair value through profi t or loss section measurements are level 1 fair value meas-
urements, defi ned as those derived from quoted prices (unadjusted) in active markets for identical assets.
Foreign currency sensitivity
The Group is mainly exposed to Euro, NIS, GBP and MDL.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
All fair value through profi t or loss liabilities measurements are level 3 fair value measurements, derived from net present
value of royalties liability based on estimated future revenues.
(d) Financial risk management objectives
The Group’s Finance function provides services to the business, coordinates access to domestic and international fi nan-
cial markets, monitors and manages the fi nancial risks relating to the operations of the Group through internal risk reports
which analyses exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair
value interest rate risk and price risk), credit risk, liquidity risk and cash fl ow interest rate risk.
The Group seeks to minimise the effects of these risks by using derivatives only for economic hedging and does not
apply hedge accounting. The use of fi nancial derivatives is governed by the Group’s policies approved by the board of
directors, which provide - principles on foreign exchange risk, interest rate risk, credit risk, the use of fi nancial derivatives
and non- derivative fi nancial instruments, and the investment of excess liquidity. Compliance with policies and exposure
limits is reviewed by the internal auditors on a continuous basis.
(e) Market risk
The Group’s activities expose it primarily to the fi nancial risks of changes in foreign currency exchange rates (refer to
section f) and interest rates (refer to section g). The Group enters into a variety of derivative fi nancial instruments to
manage its exposure to interest rate and foreign currency risk, including: structured deposits, call options and forward
foreign exchange contracts to hedge the exchange rate risk arising on the export of telecommunications equipment to
the United States.
There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the
risk.
(f) Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate
fl uctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign
exchange contracts.
The Company does not implement hedge accounting.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the
reporting date is as follows:
New Israeli Shekel
Euro
MDL
GBP
Other
Liabilities
Assets
2019
$’000s
10,014
18,512
2,784
263
7,725
2018
$’000s
9,860
16,815
2,588
222
2,921
2019
$’000s
23,475
9,213
4,157
10,914
5,164
2018
$’000s
15,860
8,912
4,409
89
5,980
The following table details the Group’s sensitivity to a 10 percent change in US$ against the respective foreign currencies
in 2019 (2018: 10 percent). The 10 percent is the rate used when reporting foreign currency risk internally to key
management personnel and represents management’s assessment of the possible change in foreign exchange rates.
The sensitivity analysis of the Group’s exposure to foreign currency risk at the reporting date has been determined based
on the change taking place at the beginning of the fi nancial year and held constant throughout the reporting period. A
positive number indicates an increase in profi t or loss and other equity where the US$ weakens against the respective
currency. If the US$ were to strengthen by the same percentage against the respective currency there would be a similar
but reverse impact on the profi t or loss and equity as presented in the tables below.
Profi t or loss
NIS Impact
Euro Impact
GBP Impact
Equity
NIS Impact
Euro Impact
MDL Impact
GBP Impact
Other currencies Impact
2019
$’000s
620
(164)
1,081
2019
$’000s
726
(766)
137
(16)
(256)
2018
$’000s
196
(175)
5
2018
$’000s
404
(615)
182
(19)
306
This is mainly attributable to the exposure outstanding US$ receivables and payables at year end in the Group.
The Company engaged in fi nancial instruments contract such as forward contracts, call and put options and structured
instruments in order to manage foreign currencies exposure.
During the year the Company engaged in four fi nancial instruments which resulted in $245 thousand recorded as fi nance
expenses (2018: three fi nancial instruments which resulted in $444 thousand recorded as fi nance income).
(g) Interest rate risk management
The Group is exposed to interest rate risk because entities in the Group borrow funds at both fi xed and fl oating interest
rates. The risk is managed by the Group by maintaining an appropriate mix between fi xed and fl oating rate borrowings.
The Group’s exposure to interest rate on fi nancial assets and fi nancial liabilities are detailed below (refer to section h). The
exposure to fl oating rate loans is not material.
(h) Liquidity risk management
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities,
by continuously monitoring forecast and actual cash fl ows, and by matching the maturity profi les of fi nancial assets and
liabilities.
106 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 107
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
for the year ended 31 December 2019
Financial liabilities
31 December 2019
Non-interest bearing
Bank loans interest
bearing (*)
Lease liabilities
31 December 2018
Non-interest bearing
Bank loans interest
bearing (*)
Weighted average
eff ective interest rate
0-3 months
3 months to
1 year
1-5 years
Total
%
–
3.64
3.12
–
2.75
$’000s
$’000s
$’000s
$’000s
41,424
1,070
518
43,012
30,660
2,259
32,919
388
5,038
1,552
6,978
577
3,028
3,605
6,482
48,294
569
6,677
8,339
15,390
10,409
65,380
5,959
37,196
486
5,773
6,445
42,969
(*) Part of the bank loans are linked to a fi x rate plus Euribor.
The future bank loan interest to be paid is $234 thousand.
(i) Finance liabilities
Loans from banks are measured at amortised cost using the effective interest method. The difference between the fair
value of the loans and their book value is not signifi cant.
(j) Fair value of fi nancial instruments carried at amortised cost
The fair value of the fi nancial instruments of the Group carried at amortised cost is not considered to be materially different
from the stated amortised cost.
(k) Fair value measurements recognised in the consolidated statement of fi nancial position
The following table provides an analysis of fi nancial instruments that are measured subsequent to initial recognition at fair
value, grouped into Level 3 based on the degree to which their fair value is observable:
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the liabilities that are
not based on observable market data (unobservable inputs).
Reconciliation of Level 3 fair value measurements of fi nancial liabilities – Government grants
Fair value through profi t or loss
31 December
for the year ended 31 December 2019
Opening balance
Losses (Gains) in profi t or loss(*)
Received
Paid
Closing balance
(*) Mainly in R&D
2019
$’000s
3,634
(433)
803
(339)
3,665
2018
$’000s
3,514
502
124
(506)
3,634
The liability was measured using the discounted cash fl ow (DCF) method. The discount rate used to measure the liability
is 15.99%.If the discount rate decreased by 1% the liability will increase by $132 thousand.
The assumptions the Company take into consideration for the calculation of the fair value measurements of the Government
grants liabilities are based on two parameters:
1.
Future forecast revenues for the next fi ve years, for each year the forecast of the percentage of royalty-bearing
revenues.
2. Capitalised interest based on economic parameters in the market such as WACC and CAPM.
Reconciliation of Level 3 fair value measurements of Investments carried at fair value - IBC
31 December
Opening balance
Translation differences
Proceed on sale of investment
Gain on sale of investment
Closing balance
37 Non-cash transactions
2019
$’000s
47
3
(3,430)
3,380
–
2018
$’000s
51
(4)
–
–
47
In 2016 the acquisition of Green Lab was for a total consideration of $3.8m payable over a three-year period of which:
$1.9m was paid in 2016, $0.6m was paid in 2017, $0.6m was paid in 2018 and the remaining $0.7m was paid in 2019.
108 BATM | ANNUAL REPORT AND ACCOUNTS 2019
BATM | ANNUAL REPORT AND ACCOUNTS 2019 109
ANNUAL REPORT & ACCOUNTS 2018 109
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2019
38 Post balance sheet events
In early 2020, the existence of SARS-CoV-2 (COVID-19) was confi rmed which has since spread across a signifi cant number
of countries, leading to disruption to businesses and economic activity, which has been refl ected in recent fl uctuations in
global stock markets. The Group considers the emergence and spread of COVID-19 to be a non-adjusting post balance
sheet event. The Bio-Medical division has continued to perform well. In particular, in April 2020, the Group was awarded
a €29 million order from a European government to deliver 1,000 ventilators (see details below). The Networking & Cyber
division was minimally impacted in the fi rst quarter of 2020 and, whilst it has subsequently experienced some temporary
postponements in certain projects, which the Group prudently anticipates could result in some lost revenue in this division,
it is too early in the current fi nancial year to determine whether there will be any material impact on the Networking &
Cyber division. Given the inherent uncertainties surrounding the length and economic severity of the pandemic, it is not
practicable at this time to determine the exact impact of COVID-19 on the Group or to provide a quantitative estimate of
the impact.
As noted, in April 2020 the Group received a €29 million (c. $31 million) order for the delivery of 1,000 critical care
mechanical ventilators to a European government. The Group has received an upfront fee of €7.25 million and expects
the balance to be paid on completion of delivery in the third quarter of 2020. Production is commencing immediately at
the Group’s Celitron subsidiary in Hungary.
110 BATM | ANNUAL REPORT AND ACCOUNTS 2019
Neve Ne’eman Ind. Area
4 Ha’harash Street, P.O.B. 7318
4524075 Hod Hasharon
Israel