ANNUAL REPORT
AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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1
Neve Ne’eman Ind. Area
4 Ha’harash Street, P.O.B. 7318
4524075 Hod Hasharon
Israel
BATM is
a leader in
real-time
technologies.
We bring high-technology solutions that are
innovative, cost-effective and reliable to our
chosen global sectors of biomedicine and
networking.
BATM’s global footprint
STRATEGIC REPORT
CONTENTS
Strategic Report
Strategic Framework
Performance Highlights
Chairman’s Statement
Chief Executive Offi cer’s Review
Edgility
Stakeholder Engagement
Chief Financial Offi cer’s Review
Key Performance Indicators
Business Model
Sustainability Review
Risk Management
Corporate Governance
Directors’ Biographies
Corporate Governance Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Financial Statements
Independent Auditor’s Report
Consolidated Financial Statements
Notes to the Consolidated
Financial Statements
Other Alternative Measures
Company Information
2
3
4
6
10
12
14
17
18
19
22
24
26
32
35
57
61
65
70
110
112
ANNUAL REPORT & ACCOUNTS 2021
1
STRATEGIC REPORT
Strategic Framework
BATM’s purpose is to deliver high-technology innovations that make
a signifi cant diff erence to the human experience
We deliver
high-technology
solutions
With a focus
on the global
sectors of…
That solve complex
Bio-medical solutions
challenges in mission-
critical, largescale
applications
and
Networking and cyber
security
We serve blue-
chip customers
worldwide
Including enterprises,
governments and
international agencies
While seeking to accelerate
our growth
By establishing partnerships,
collaborations and joint ventures to
maximise resources and enhance our
routes-to-market
And diff erentiate through…
Our intellectual property
The world-leading expertise of our
employees
Innovative, robust, reliable and cost-
eff ective solutions
We build value creation
strategies
From idea, to scale up, to mass-market
success
And maximise the long-term value of
our businesses through organic and
inorganic strategies
To create value for our
stakeholders by…
Growing total shareholder returns
Exceeding our customers’ expectations
Motivating our people
Making a positive contribution to our
communities
2
ANNUAL REPORT & ACCOUNTS 2021
STRATEGIC REPORT
Underlying growth across all
business units
Group revenue
Ongoing operations (adj.)*
Gross margin
Ongoing operations (adj.)*
Gross profit
Ongoing operations (adj.)*
$132.8m
+18.0%
(2020: $112.6m)
Reported
$140.0m
-23.7%
(2020: $183.6m)
37.8%
+140bps
(2020: 36.4%)
Reported
36.5%
+340bps
(2020: 33.1%)
$50.2m
+22.5%
(2020: $41.0m)
Reported
$51.1m
-15.9%
(2020: $60.7m)
Sustained growth for
molecular diagnostics
Growth in COVID-19 and non-
COVID-19 solutions
Launch of Edgility
Won two edge computing
contracts
Established four new
partnerships
Over $18m received in
cyber security contracts
Operating profit
Ongoing operations (adj.)*
EBITDA
Ongoing operations (adj.)*
Cash and financial
assets
BIO-MEDICAL DIVISION
Revenue from ongoing operations (adj.)*
Reported
$67.8m
+26.9%
(2020: $53.4m)
n
o
i
l
l
i
m
$
S
U
120
90
60
30
$11.3m
+339.5%
(2020: $2.6m)
Reported
$24.4m
+71.3%
(2020: $14.2m)
$15.7m
+138.8%
(2020: $6.6m)
Reported
$29.6m
+50.4%
(2020: $19.7m)
2020
2021
NETWORKING AND CYBER DIVISION
Revenue from ongoing operations (adj.)*
n
o
i
l
l
i
m
$
S
U
20
15
10
5
* Adjusted to present the results on an ongoing operations basis by excluding (1) the contribution to
both years from NGSoft, a subsidiary that the Group sold in March 2021, (2) the contribution to 2020
from a significant contract for the supply of ventilators, which was exceptional in nature, and (3) the
amortisation of intangible assets for both years. The term ‘ongoing operations’ in this Strategic Report is
used for comparative purposes only and is not used in the same context as in accounting standards. For
2020
2021
further information see ‘Other Alternative Measures’ on page 110.
ANNUAL REPORT & ACCOUNTS 2021
3
3
Chairman’s
Statement
Dr. Gideon Chitayat
Chairman
I am delighted to present BATM’s Annual Report 2021. It
refl ects another very successful year of progress, which
saw substantial growth from ongoing operations across
all our business units. Exciting new contracts added to our
global base of tier 1 clients and we continued to execute on
our value creation strategies with the sale of our non-core
NGSoft subsidiary, generating a capital gain of $13.0m.
BATM has established solid foundations in core technologies
– backed by strong intellectual property and patents – that
are now at an infl exion point of becoming market disrupters.
Our high-tech and user-friendly solutions to real-world
challenges in the bio-medical and networking spheres,
our innovative technology and robust partnerships make
us, I believe, stronger than ever today. In addition, our
products and ethos continue to make a positive diff erence
to the world at large – as clearly demonstrated in the recent
pandemic and by solutions like our eco-friendly agricultural
and medical waste disposal systems.
PROGRESS ACROSS THE BUSINESS
Both divisions, Bio-medical and Networking & Cyber,
grew signifi cantly
in 2021 from ongoing operations.
In the Bio-medical division, the COVID-19 pandemic
created strong demand for diagnostic instruments and
test kits resulting in signifi cant growth in sales. However,
importantly, we also had increased sales of our diagnostic
products for other disease areas. We are specialists not just
in the diagnosis of COVID-19 but in the molecular biology
of infectious diseases. Pathogens such as tuberculosis (TB)
pose critical health challenges with devastating social and
economic consequences, especially in poorer countries.
In 2021, we began developing a PCR and iso-thermal
method for rapidly and comprehensively diagnosing TB,
backed by the international Stop TB Partnership. We
believe that through this innovative solution, we will be
able to contribute to the eradication of this disease, which
is a leading cause of death but is both preventable and
curable. We are particularly proud of the progress in our
Diagnostics unit – where our investment in recent years
has come to fruition.
In the Networking & Cyber division, substantial contracts
were won by our cyber business. Another highlight was
the launch of our Edgility platform, which we believe will
be a key driver of future growth. Revenue from the unit’s
ongoing operations rose, refl ecting underlying growth in
both units. We launched Edgility in July 2021, which is our
brand of products and services for edge computing based
on our network function virtualisation (NFV) technology.
Two multi-year contracts worth $2.7m followed, along with
several successful proof-of-concepts, which are expected
to translate into further orders in 2022. Alongside this, we
advanced our strategy to grow our market reach through
collaborations, which has continued into the new year.
Other progress included a new tier 1 customer in the
Asia Pacifi c region for our Network Edge carrier ethernet
business, which contributed signifi cantly to the unit’s
growth. In our Cyber unit, we received new cyber security
multi-year contracts worth over $18m from a long-standing
government defence customer. This included an advanced
network security solution containing elements of NFV
protection.
STRATEGY
Our strategy is to deliver growth by focusing on developing
high-technology solutions that solve complex challenges
in mission-critical largescale applications. In doing so, we
seek to diff erentiate through our intellectual property,
4
ANNUAL REPORT & ACCOUNTS 2021
STRATEGIC REPORT
STRATEGIC REPORT
Following our substantial progress in 2021, we began the
current year with strong momentum and a strong backlog.
I look forward with excitement and confi dence and believe
we are on track to deliver signifi cant growth in line with
market expectations in 2022 and value for shareholders
this year and beyond.
including our proprietary algorithms, and the world-leading
expertise of our employees.
In particular, we are focused on being one step ahead
at the leading edge of innovation – primarily in the fi elds
of networking, molecular diagnostics and cyber. All of
our solutions – which we take from idea, to scale up,
to mass-market success – and our business practices
are designed with sustainability and longevity in mind:
addressing the challenges of today and what we believe will
be the demands of the future.
We amplify our resources through establishing strategic
partnerships and are focused on creating shareholder
value through business success as well as value realisation
opportunities, such as the sale of non-core assets to
reinvest in activities that will drive our growth.
OUTLOOK
Looking ahead, we will continue to cultivate growth
and development as well as pursuing opportunities to
accelerate realisation of the value of the IP within our
units through strategic transactions. We believe the threat
of infectious disease will only become greater and so
demand for molecular biology and diagnostic technology
will continue. The burgeoning growth in Internet of Things
applications and new ways of working all require the edge
computing solutions that we provide with Edgility. In
addition, recent geopolitical events have highlighted the
growing need for governments and businesses to fortify
their cybersecurity systems as we enter a new era of cyber
warfare.
A disappointing development was the decision of FTSE
Russell to remove our stock from the FTSE UK Index
Series, after more than twenty years of inclusion. This was
a result of the volume of trading in our stock on the Tel
Aviv Stock Exchange, where we have our secondary listing,
surpassing the threshold set by FTSE Russell. While we
are disappointed by the decision, this will not aff ect our
business performance, the manner in which our stock is
traded or our ability to deliver value for our shareholders.
I would like to thank BATM’s Executive team and employees
for their hard work, commitment and talent, especially
Dr. Zvi Marom, our CEO, and Moti Nagar, our CFO, who
have been instrumental in the business transformation
achieved in 2021. I would also like to thank you, our
valuable shareholders, for your continued support.
ANNUAL REPORT & ACCOUNTS 2021
5
Chief Executive
Offi cer’s Review
Dr. Zvi Marom
Chief Executive Offi cer
This was a remarkable year for BATM. We delivered
substantial underlying growth across all business units,
in particular driven by our Bio-Medical division which
responded to the increased demand for the COVID-19
diagnostics tests developed in the previous year, and the
expanding portfolio of further tests off ering signifi cant
advantages such as speed and ease-of-use.
In our
Networking and Cyber division, we launched our edge
computing and NFV off ering, Edgility, which we expect will
be a key driver of future growth.
Bio-Medical Division
Diagnostics
The Diagnostics unit achieved signifi cant growth in 2021,
with revenue increasing by 37.7%. This growth was driven
by sustained demand for our COVID-19 diagnostic tests as
well as sales of diagnostic instruments (readers) that were
frequently ordered alongside the reagents. However, sales
of our diagnostic products in other (non-COVID-19) disease
areas also grew. To cater for the increased demand, we
expanded the production capacity of our Adaltis facility in
Rome, Italy.
COVID-19 diagnostic tests
We continued to receive strong demand for COVID-19
solutions during 2021, with customers primarily being
public health authorities in Europe, the Middle East
and South East Asia. We also expanded our portfolio of
COVID-19 tests with the launch of:
l a saliva-based PCR test that uses self-collected samples
from the individual spitting into a collector tube rather
than deep swabbing via the nose (nasopharyngeal
swab) or back of the throat (oropharyngeal swab).
This off ers advantages in terms of speed and ease of
sample collection and lab processing and it is more cost
eff ective than the standard PCR swab-based tests. The
test is being produced at our Adaltis facility.
l the RAPiDgen® SARS-CoV-2 Ag lateral fl ow test for
at-home use with an easy-to-use design and that gives
results in 10 minutes. Developed in partnership with
Gamidor Diagnostics (“Gamidor”), it is being marketed
in Europe under the Adaltis brand and produced at
Gamidor’s facility in Israel.
We now have a comprehensive range of tests for
diagnosing COVID-19 that cater for the requirements
of diff erent customers or users and off er advantages
compared with many competing solutions in terms of
speed, accuracy and ease of use. This demonstrates the
key strength of our business, which is the ability to bring
together our expertise and IP, and the right partners, to
develop and deliver innovative and reliable solutions to
address complex challenges.
Progress in other disease areas
Sales of diagnostic products that are not related to
COVID-19 testing also
In
particular, there was growing demand for reagents to
detect HIV (human immunodefi ciency virus), HPC (hepatitis
C) and HPV (human papillomavirus) among others.
increased during the year.
We also progressed our development work. Our new
molecular diagnostics test that is able to test for multiple
respiratory pathogens (that often present with overlapping
symptoms) at the same time continued to advance through
the certifi cation and validation stage and we expect sales
to commence in the current year. By detecting multiple
pathogens on the same test (multiplexing), with a single
patient sample, patients,
laboratories and healthcare
providers benefi t from a reduction in unnecessary testing
and gaining important insights more quickly.
Ador Diagnostics
Our Ador Diagnostics (“Ador”) associate company is focused
on developing the NATlab molecular biology solution that
provides rapid sample-to-answer diagnosis of bacterial, viral
or fungal infections using DNA or RNA sampling.
6
ANNUAL REPORT & ACCOUNTS 2021
During the year, Ador progressed the development of its
innovative diagnostics technology that uses the rolling
circle amplification (“RCA”) method. This offers a number
of advantages over the more prevalent PCR method.
It allows for the multiplexing of a far higher number of
pathogens, and enables test results to be provided in a
significantly shorter timeframe and with greater accuracy.
During the year, clinical trials were successfully completed
of Ador’s RCA-based meningitis panel. We expect sales of
RCA-based testing kits to laboratories to commence in the
current year. Work also continued on incorporating the
RCA method into the NATlab system, with sales to point-of-
care settings expected to commence next year.
Ador, alongside Adaltis, received the backing of the Stop
TB Partnership, an
international alliance comprising
governmental and non-governmental organisations, for a
new method that we have developed (in cooperation with a
leading university in Italy and the University of Heidelberg)
for the rapid and comprehensive diagnosis of tuberculosis
using the RCA process. The testing and validation of
products developed under this programme is taking place,
and we expect commercial-scale testing to start next year,
which is being part-funded under a programme of the Stop
TB Partnership.
Post year end, an additional $10m was invested into Ador,
of which we contributed $4m (bringing our shareholding
to 37.2%). The investment will be used to prepare Ador
for the pre-production stage, register additional patents
(mainly in the US), progress development of more disease
panels and certifications, and increase the cooperation
with international bodies, including the World Health
Organisation.
Eco-Med
On an underlying basis, to exclude the contribution to
the Eco-Med unit in 2020 of the exceptional ventilator
contract, revenue increased by 37.1%. This underlying
growth was based on delivery on contracts for the
installation of our pathogenic waste treatment solutions
based on our Integrated Steriliser and Shredder (“ISS”)
technology, which had been paused during 2020 owing to
government lockdowns and restrictions on travel following
the global pandemic. In particular, we progressed delivery
of a contract to expand and enhance the ISS-based
solution installed at the Hungarian facility of Ceva Animal
Health, a leading developer of animal health products,
and with the installation of our ISS-based solution for
our agri-food conglomerate customer in Taiwan. The
completion of these contracts is expected to occur in the
first half of 2022, subject to government restrictions in
these countries due to COVID-19.
Distribution
Revenue in the Distribution unit increased by 8.9% in 2021
driven by the distribution of several molecular biology
tests and the ongoing demand for COVID-19 reagents
and diagnostic equipment. Post year end, we have begun
providing our distribution activities in Hungary, although
we do not expect this to make a material contribution to
the Distribution unit’s revenue in the near term.
Networking and Cyber Division
Networking
In the Networking unit, revenue from ongoing operations
(excluding the contribution to both years from NGSoft)
increased by 13.4%, which was based on growth in Network
Edge (Carrier Ethernet) sales.
Edgility – Edge Computing and NFV solutions
During the year, we launched our Edgility brand of networking
products and services designed for virtualisation and edge
computing based on our NFV operating system, Edgility OS
(formerly NFVTime). Edgility OS enables telecoms operators
and service providers to deploy their own virtualised
software-based networks. Virtual networks can be a key
element in allowing operators to leverage the benefits
of 5G through edge computing and provide additional
differentiated services to their enterprise customers as well
as reducing the costs, time and carbon footprint involved
with physical networks. The name ‘Edgility’ reflects our
focus on edge computing where data processing takes place
at the network edge, nearer to the end device, to improve
response times and save bandwidth. Edge computing is
fundamental in enabling Internet of Things technologies.
Towards the end of the year, we were awarded two
contracts for Edgility, with an expected aggregate value of
$2.7m over a five-year period, and initial revenue generation
commenced post year end. CEMEX, S.A.B, (NYSE: CX), a
global construction materials company, became the first
enterprise customer for Edgility, which followed an extensive
proof-of-concept during which our R&D team developed and
implemented several bespoke technology features to meet
their requirements. CEMEX intend to use Edgility to enable
seamless managed connections between their thousands
of locations worldwide. The other contract was awarded by
e-Qual, a global Managed Services Provider based in France
that operates in 55 countries, which selected Edgility to
improve the management and orchestration platform for its
managed enterprise services.
Edgility continued to undergo evaluation with leading
network operators and multi-service providers worldwide,
7
Chief Executive Officer’s Review CONTINUED
with successful proof-of-concepts being conducted with
several potential customers and partners. We expect a
number of these to translate to orders in 2022.
To expand the sales and marketing reach, and provide
further routes to market, we established a number of
strategic partnerships, primarily involving Edgility being
pre-integrated with, or pre-installed on, the partner’s
network appliances (with customers that use the Edgility
solution contracting with the us directly). We expect these
partnerships to accelerate the adoption and sales of Edgility.
This includes partnerships with:
l AudioCodes (NASDAQ, TASE: AUDC), a leading provider
of advanced communications software, products and
productivity solutions for the digital workplace, where
Edgility has been made available on AudioCodes’ Mediant
800 uCPE multi-service business router.
and
l albis-elcon, a German-based supplier of networking
1
to
products
telecommunications operators
in Europe and Latin
America, which has integrated Edgility into its recently
launched uSphir solution.
primarily
services
tier
l Stem Connect, which
and
telecommunication customers in the UK, France and
South Africa and will offer Edgility to its customers.
services enterprise
l Post year end, Advantech (TWSE: 2395), a global leader in
industrial IoT, which will provide Edgility pre-installed on a
variety of its universal edge network appliances.
We continue to develop and expand the Edgility product
offering. We completed the enhancement of Edgility
OS to enable certified compatibility with public cloud
environments, such as Amazon Web Services and
Microsoft Azure. This expands the addressable market to
customers that operate cloud-based networks, which is
typically enterprise customers or larger operators with a
multinational footprint, as well as those that lack the internal
resource to run the software in their datacentre. We also
launched new products under the Edgility product suite,
including a Fast SD-WAN & Firewall offering (in partnership
with Clavister) that provides secure network connectivity for
the small office and home office market.
8
Network Edge solutions and services
Revenue
from Network Edge solutions and services
(formerly described as our ‘Carrier Ethernet’ business)
grew as normal business practices increasingly resumed
following the slowdown as a result of COVID-19. There was
revenue growth in all geographic regions where we operate,
primarily based on repeat business from existing clients, but
also some new customers. In particular, we were selected
as the preferred supplier by a tier 1 telecommunications
operator in APAC to provide demarcation units, which made
a significant contribution to the growth in Network Edge
revenue. At year end, we had a significantly higher backlog
in this unit than at the start of the year, although this partly
reflects delivery of some of our orders being delayed into
2022 due to global electronic components shortages.
Cyber
During 2021, we were awarded cyber security contracts
totalling $18m from our long-standing government defence
department customer. This includes a $10m contract for an
advanced solution that combines a unique cyber defence
capability for large volume high speed network traffic with
elements of virtualisation protection developed under our
NFV offering.
We commenced delivery on these contracts during the
year, which resulted in growth in the Cyber unit’s revenue.
However, the vast majority is to be delivered in 2022 and
2023, which partly reflects the impact of global electronic
components shortages that delayed some delivery into
2022.
During the year, we continued our development efforts. In
particular, we are in the process of developing a version
of our cyber security solution aimed beyond the defence
industry, which will expand the addressable market.
Outlook
We entered the new year with a substantially higher
backlog for ongoing operations than at the same point the
prior year and we are continuing to experience sustained
momentum across the business. Accordingly, we remain
on track to deliver significant growth for full year 2022 in
line with market expectations. In particular, we expect
the Bio-Medical division to continue to be the largest
contributor to our revenue, however with an increased
ANNUAL REPORT & ACCOUNTS 2021 OUR VISION AND VALUES
Our vision is to be leaders in high-technology innovations that make a significant difference to the human experience
Innovation
and invention
We harness extraordinary technical
and entrepreneurial talents to bring
leading, disruptive technologies
successfully to market, at scale.
Reliability
Our customers trust us to
deliver mission-critical products.
Our products are built for
reliability and performance at
scale and in challenging
conditions.
Responsibility
Our corporate responsibility
extends through our focus business
areas, to the way we interact
with all our stakeholders and
our impact on the environment
and our communities.
proportion being accounted for by the Networking and
Cyber division, reflecting strong growth in that division.
In the Networking and Cyber division, both units are
expected to achieve significant growth. Both units entered
the year with a strong backlog and have continued to
receive increasing demand for their products and services
as normal business practices resume.
In the Bio-Medical division, demand for our COVID-19
diagnostic products have continued alongside a strong
increase in orders for solutions in other disease areas as
public health organisations return focus to routine care.
The Eco-Med unit expects to complete the delivery of
its existing orders as well as win further contracts for its
agri-waste treatment solution.
Investment case
Large, global addressable markets
BATM operates in the large, global markets of networking, cyber
security, diagnostics and other biomedical solutions; and in sub-
segments on the verge of disruption.
Long-term approach
BATM takes a long-term approach to its investments by assessing
long-range industry trends and building differentiated solutions
backed by IP.
Risk diversification
BATM’s portfolio includes a mix of both established and novel
technologies, and targets a range of sub-segments, customer types
and geographical markets.
At present, we are confident of delivering against our
backlog, but we remain mindful of the potential impact of
global supply chain challenges, particularly related to any
further shortages of electronics components.
Leadership & Expertise
BATM has a highly experienced management team and Board,
with significant expertise in its target markets, and engages
systematically with external, world-leading experts.
In addition, we continue to keep under review potential
value creation opportunities. We have established solid
foundations in core technologies that we believe will be
market disrupters. As these technologies transition and
ramp up to commercialisation, we will consider enhancing
value realisation through strategic transactions, such as
partnerships and disposals.
Accordingly, we remain confident in the prospects of the
business and look forward to delivering shareholder value.
Strong balance sheet
BATM is cash generative and has a strong net cash position,
supporting growth in investment, returns to shareholders and scope
for acquisitions.
Financial growth
BATM targets revenue, margin and EPS growth both organically and
via acquisition; and seeks to maximise shareholder value, where
appropriate, through value realisation opportunities.
9
STRATEGIC REPORT Edgility
Edgility provides customers with a simple and easy-to-use platform to deploy, manage and operate multiple virtual
services/functions on multiple thousands of edge devices at multiple sites. New services (or sites) can be deployed in
a matter of minutes – rather than days – without the need for technical personnel on-site. This smart edge computing
platform comprises two components: Edgility OS, a high-performance and small footprint operating system, and Edgility
Central, a cloud-based management and orchestration (MANO) system.
Key highlights of Edgility’s offering:
l Simple deployment and management of all edge devices and software at multiple thousands of sites worldwide via a single
pane of glass
l Reduced monthly communication costs and increased operational efficiency
l Vendor agnostic: supporting any software application, public clouds on ARM or Intel processors and with any whitebox
device
l Runs on ultra-low-cost hardware devices as well as high-end servers
l Significantly cuts carbon footprint and saves energy costs
10
ANNUAL REPORT & ACCOUNTS 2021 Case study: CEMEX
"We chose Edgility for its superior Management & Orchestration, which provides us with an end-to-end toolset to cost-effectively
deploy and then manage the lifecycle of our edge devices. Edgility provides the flexibility and scalability to expand and adapt to our
fast-changing business requirements, as well as hosting diverse applications on any standard server."
Fernando Garcia -Villaraco Casero, IT Strategy and Architecture Manager - Global at CEMEX
CEMEX is one of the world's leading construction materials companies, manufacturing and distributing cement, ready-mix concrete, and aggregates
in more than 50 countries. With 41,000 employees, CEMEX operations span thousands of sites worldwide.
CEMEX decided in 2020 to replace CemexNet with virtualised secure SD-WAN functions across all its sites. CEMEX's overriding goal was to gain
control of its network. It sought to reduce the complexity of managing CEMEX’s thousands of edge devices across multiple sites, lower the monthly
operational costs and increase flexibility. Automated deployment and simple management of edge devices were key requirements due to the large
number of sites to be handled by a third-party system integrator.
CEMEX selected Edgility as the operating system and management system for the uCPE edge devices in its new enterprise communications network.
It enables CEMEX to seamlessly upgrade to a flexible, automated, and resilient Enterprise WAN architecture. CEMEX chose Edgility for its advanced
automation and intuitive management capabilities – allowing CEMEX to cost-effectively deploy, maintain and integrate best-of-breed network
functions and applications from multiple software providers across its network.
Case study: e-Qual
"We selected Edgility for its distinctive technological superiority over all the alternatives we examined. Edgility provides a single,
all-in-one solution including all the orchestration tools we require."
Philippe de Lussy, CEO of e-Qual
e-Qual is a France-based managed services provider, offering connectivity, IT, and network management services to mid-sized to large organisations
in the private and public sectors in 55 countries. e-Qual integrates telecom, network, systems, and security solutions, and operates them from a 24/7
service and operations centre.
To streamline and reduce the cost of operations, e-Qual sought a powerful and automated management and orchestration (MANO) system that would
increase operational efficiency while enabling it to provide highly flexible and customised services to its diverse customer base.
e-Qual thoroughly examined various solutions and selected Edgility as its next generation edge compute platform. Ideal for meeting its automation
needs, Edgility provides e-Qual with a unified, multi-tenant platform to deploy and manage multiple applications including complex connectivity-based
services, such as SD-WAN, for its enterprise customers.
Edgility offers a high-performance, small form factor operating system that is being deployed on hundreds of edge devices at e-Qual customers sites,
as well as a robust MANO solution installed at e-Qual's service and operation centre. Edgility's MANO allows e-Qual to manage its entire managed
services operation from a single pane of glass.
ANNUAL REPORT & ACCOUNTS 2021
1111
Stakeholder Engagement
BATM seeks to deliver value to, and build strong, long-term relationships with, its stakeholders
The Board of BATM is committed to acting in a way that would most likely promote the long-term success of the
Company for the benefit of its members as a whole. While the Company is not subject to the UK Companies Act 2006
and, accordingly, is not required to comply with the obligations of Section 172 of that legislation, the Directors are
bound by, and comply with, the Israel Companies Act of 1999, which contains similar obligations.
Customers
Financial Investors
Our customers rely on our technology solutions
and equipment to operate and continue to grow.
We seek to understand their evolving needs,
enabling both BATM and our customers to share
in the value creation.
The Board has a fiduciary duty to promote the
long-term sustainable success of the Group for its
shareholders. Certain companies within the Group
also have external investors, who are often key to
the continued success of the relevant projects.
How we engage
l Client relationship managers dedicated
to key customers and key regions
l Annual customer surveys as part of the
ISO audit and focused on all aspects
of our customer relationships
l Training programmes on our solutions
and products for our customers
l Working to understand growth drivers
in our customers’ markets
How we engage
l Regular dialogue and interaction
l Investor communications, including
reports, presentations and website
l Meetings with institutional shareholders
l NEDs available to meet with shareholders on
request
l Establishment of clear timelines, milestones
and strategic goals
2021 HIGHLIGHTS
2021 HIGHLIGHTS
l 362 new customers won (excluding
consumer customers - as opposed
to businesses or public bodies - by
subsidiaries that serve the public)
l 139 customer training programmes
conducted, with participation of
approximately 230 individuals
l Approximately 25 shareholder meetings or
scheduled calls
l Hosted investor webinars to present FY
2020 and H1 2021 results
12
ANNUAL REPORT & ACCOUNTS 2021 Employees
Communities
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.
How we engage
l A dedicated Human Resources function,
comprising a network of departments at
subsidiary level
l Open and transparent communication
with our workforce
l Annual employee satisfaction surveys
l Personal and career development
l Recognition and rewards
l Code of Conduct
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.
How we engage
l Research and development and testing
products in the diagnosis of infectious
diseases, including COVID-19 and tuberculosis
l Solutions for the safe treatment of pathogenic
waste, particularly in developing economies
l Local initiatives that support community
and charitable organisations
l Active encouragement of employees
to work to further charitable goals
2021 HIGHLIGHTS
2021 HIGHLIGHTS
l Appointed Prof. Varda Shalev to newly-
created 'voice of the workforce' NED role
l Held ‘round table’ discussions between
employees and management in the
Networking unit, with findings presented
to the Board
l Arranging quarterly donations of basic
food products and toys to disadvantaged
families
l Raised $49.5k for charitable causes
13
Chief Financial
Offi cer’s Review
Moti Nagar, CPA
Chief Financial Offi cer
Total Group revenue from ongoing operations1 increased
by 18.0% to $132.8m (2020: $112.6m). This was driven by
signifi cant underlying growth in the Bio-Medical division and
strong growth from ongoing operations in the Networking and
Cyber division. The Bio-Medical division accounted for 84.4%
of revenue from ongoing operations and the Networking and
Cyber division accounted for 15.6%. On a reported basis, total
Group revenue was $140.0m (2020: $183.6m), which refl ects
2021 including a three-month contribution from NGSoft
compared with a full year in 2020 as well as the signifi cant
ventilator contract that we delivered in 2020.
The gross margin for ongoing operations improved to 37.8%
(2020: 36.4%), refl ecting the increased contribution to revenue
from the new molecular biology diagnostic kits and COVID-19
products of the Bio-Medical division that are higher margin.
On a reported basis, gross margin was 36.5% (2020: 33.1%),
with the change primarily refl ecting the reduced contribution
to revenue from the relatively lower margin ICT services as a
result of the sale of NGSoft.
R&D expenses for 2021 were $8.6m for ongoing operations and
$8.7m on a reported basis. This compares with $8.5m from
ongoing operations in 2020 and $10.3m on a reported basis.
Operating profi t from ongoing operations increased by
339.5% to $11.3m compared with $2.6m in 2020. This growth
refl ects the signifi cantly higher revenue and gross profi t
generated by the Diagnostics unit of the Bio-Medical division.
On a reported basis, operating profi t increased by 71.3% to
$24.4m compared with $14.2m in 2020. The growth refl ects
the capital gain from the sale of NGSoft and the contribution
from the Diagnostics unit as described above, partly off set by
the contribution to 2020 from the profi t from the delivery of
the ventilators contract and a full year profi t from NGSoft.
As a result of the increase in operating profi t, EBITDA from
ongoing operations increased by 138.8% to $15.7m (2020:
$6.6m). On a reported basis, EBITDA grew by 50.4% to $29.6m
(2020: $19.7m).
Sales and marketing expenses for ongoing operations
were $18.1m (2020: $16.9m), representing 13.7% of revenue
compared with 15.0% in 2020. On a reported basis, sales and
marketing expenses were $18.3m (2020: $20.2m).
Net fi nance income was $0.6m (2020: expenses of $0.9m),
which primarily refl ects the positive impact of foreign
exchange in 2021.
General and administrative expenses
from ongoing
operations were $11.9m (2020: $13.2m), representing 9.0%
of revenue (2020: 11.7%). On a reported basis, general and
administrative expenses were $12.2m (2020: $15.9m).
The lower percentage of revenue accounted for by sales and
marketing and general and administrative expenses refl ects
the operational gearing of the business, with an increase in
sales not requiring a commensurate increase in expenses, as
well as strong cost discipline.
Profi t before tax (on a reported basis) increased by 87.5% to
$24.9m (2020: $13.3m), refl ecting the growth in the business
and the gain from the sale of NGSoft.
Tax expenses were $9.3m (2020: $1.0m). The increase is
mainly as a result of a tax provision related to the sale of
NGSoft and tax expenses due to the increase in profi t of the
Bio-Medical division. The comparatively low tax expenses of
2020 also refl ect the utilisation of carry forward losses as
well as the recording of a deferred tax asset related to carry
forward losses.
1 Throughout this Chief Financial Offi cer’s Review, ‘ongoing operations’ refers to the reported results adjusted to exclude the contribution to 2021 and
2020 from NGSoft, a subsidiary of the Networking and Cyber division that was sold in March 2021, and the contribution to 2020 from an exceptional
contract in the Bio-Medical division for the supply of critical care ventilators. The term ‘ongoing operations’ is used for comparative purposes only and
is not used in the same context as in accounting standards. For further detail, see 'Other Alternative Measures' on page 110.
14
ANNUAL REPORT & ACCOUNTS 2021
Reported
Adjusted*
$m
Revenue
2021
2020
Change
2021
2020
Change
140.0
183.6
(23.7%)
132.8
112.6
18.0%
Gross margin
36.5%
33.1%
340bps
37.8%
36.4%
140bps
Operating profit
24.4
14.2
71.3%
11.3
2.6
339.5%
* Adjusted to present the results an ongoing operations basis by excluding (1) the contribution to both years from NGSoft, a subsidiary that we sold
in March 2021, (2) the contribution to 2020 from a significant contract for the supply of ventilators, which was exceptional in nature, and (3) the
amortisation of intangible assets for both years.
On a reported basis, profit after tax attributable to the Owners
of the Company increased to $14.3m (2020: $9.8m) resulting
in a significant increase in basic earnings per share to 3.26¢
(2020: 2.22¢).
As at 31 December 2021, inventory was $31.0m (31 December
2020: $33.9m). Trade and other receivables were $34.9m
(31 December 2020: $41.5m), with the decrease due to the
disposal of NGSoft.
Intangible assets and goodwill as at 31 December 2021 were
$16.0m (31 December 2020: $23.7m). The decrease is due to
the sale of NGSoft.
Property, plant and equipment and investment property
was $19.8m (31 December 2020: $18.0m). The increase is
mostly due to investment in the Diagnostics unit to expand
our laboratories to support future growth, which offset the
reduction from the disposal of NGSoft.
The balance of trade and other payables was $47.5m (31
December 2020: $53.6m). The decrease is primarily due to
the sale of NGSoft as well as provisions as at 31 December
2020 for suppliers for the ventilator project that were due to
be paid in Q1 2021.
Cash from operations was $8.7m (2020: $20.1m). After
payments of tax and interest, net cash from operating
activities was $5.6m (2020: $18.5m). The reduction compared
with the prior year is primarily due to payment being made
during 2021 to suppliers related to the ventilator project that
had been delivered during 2020.
Our balance sheet was strengthened with cash and financial
assets of $67.8m as at 31 December 2021 compared with
$64.9m at 30 June 2021 and $53.4m at 31 December 2020.
This is comprised of cash and cash equivalents of $65.3m
(30 June 2021: $62.2m; 31 December 2020: $50.6m) and
financial assets of $2.4m (30 June 2021: $2.7m; 31 December
2020: $2.8m). Financial assets represent cash deposits of
more than three months’ duration, held for trading bonds
and marketable securities. The increase in cash and cash
equivalents compared with the prior year resulted primarily
from the proceeds of the sale of NGSoft in the first quarter of
2021 and the profit of 2021.
Divisional performance
Bio-Medical Division
On an underlying basis, to exclude the contribution to
2020 from the exceptional ventilator contract in the Eco-
Med unit, revenue for the Bio-Medical division increased
by 17.7% to $112.0m (2020: $95.2m), reflecting growth in all
three units. Adjusted gross margin improved significantly
to 36.5% (2020: 34.8%), primarily reflecting the Diagnostics
Bio-Medical Division
Reported
Adjusted*
$m
Revenue
2021
2020
Change
112.0
128.7
(12.9%)
2021
112.0
2020
95.2
Change
17.7%
Gross margin
36.4%
36.3%
10bps
36.5%
34.8%
170bps
Operating profit
16.5
19.2
(13.7%)
17.0
10.1
67.4%
* Adjusted to present the results an ongoing operations basis by excluding (1) the contribution to 2020 from a significant contract for the supply of
ventilators, which was exceptional in nature, and (2) the amortisation of intangible assets for both years.
15
Networking and Cyber Division
Reported
Adjusted*
$m
Revenue
2021
28.0
2020
54.9
Change
(49.0%)
2021
20.7
2020
17.3
Change
19.5%
Gross margin
36.9%
25.5%
1,140bps
45.0%
45.6%
(60)bps
Operating profit/(loss)
7.8
(4.9)
259.0%
(5.6)
(7.6)
25.3%
* Adjusted to present the results an ongoing operations basis by excluding (1) the contribution to both years from NGSoft, a subsidiary that the Group
sold in March 2021, and (2) the amortisation of intangible assets for both years.
unit’s growth in sales and the increased contribution
to revenue from molecular diagnostics and COVID-19
products, which are high-margin. Similarly, there was a
substantial increase the Bio-Medical division’s underlying
operating profit to $17.0m (2020: $10.1m) due to the higher
revenue and improvement in gross margin.
Operating loss from ongoing operations was reduced
to $5.6m (2020: $7.6m) thanks to the higher revenue. A
significant proportion of the operating expenses in the
Networking and Cyber division is related to the investment
in establishing our NFV offering, which we believe will be a
key driver of our future growth.
Networking and Cyber Division
Revenue for the year from ongoing operations in the
Networking and Cyber division (excluding the contribution
to both years from NGSoft) increased by 19.5%, reflecting
growth in the both the Networking and Cyber units as market
conditions increasingly normalised following the impact of
COVID-19. This is demonstrated by revenue from ongoing
operations for the second half of 2021 being 27.4% higher
than the first six months of the year.
There was a slight reduction in gross margin from ongoing
operations due to increased materials costs related to the
global challenges of electronic component shortages. However,
gross margin from ongoing operations was substantially higher
than reported gross margin (which includes NGSoft), owing to
the lower margin nature of the NGSoft business.
On a reported basis, the Networking and Cyber division
recorded an operating profit as a result of the capital gain of
$13.0m from the sale of NGSoft.
Sale of NGSoft
As announced on 19 March 2021, during the year we sold our
NGSoft subsidiary to Aztek Technologies (1984) Ltd., a provider
of ICT cloud services in Israel and a portfolio company of SKY
Fund. NGSoft is a software and digital services company
that provides creative digital and technology solutions. Its
development activities did not include any of our NFV or
cyber solutions. Accordingly, the Board believes that the
best interests of BATM and all shareholders were served as
a result of the disposal, generating a $13.0m capital gain from
the sale of NGSoft.
16
ANNUAL REPORT & ACCOUNTS 2021
Key Performance Indicators
The following key performance indicators (“KPIs”) have been selected as the most appropriate measures of strategy
execution for the Group. We review our KPIs on an ongoing basis to ensure they remain relevant.
Revenue from ongoing operations*
$132.8m +18%
(2020: $112.6m)
Description Revenue reflects the element of
billings generated and recognised during the period
from all operations.
Why it is a KPI Measures our overall performance
at the sales level.
Performance Strong growth reflecting increased
revenue in all business units.
EBITDA from ongoing operations*
$15.7m +139%
(2020: $6.6m)
Description Group earnings before interest, tax,
depreciation and amortisation.
Why it is a KPI Key measure of our effectiveness in
turning revenue into earnings.
Performance Significant growth reflecting the
increased revenue and an improvement in gross
margin, particularly due to the greater contribution
to revenue from higher-margin Diagnostic products.
R&D expenses for ongoing operations*
$8.6m +1%
(2020: $8.5m)
Description Direct expenditures
to
our efforts to develop, design and enhance our
products, services and technologies.
relating
Why it is a KPI Sustained innovation is key to our
strategy and this metric represents our investment
to achieve it.
Performance Continued development of novel
technologies across the Group, with the slight
increase due to increased investment in the Group’s
NFV technology.
Cash from operations
$8.7m –57%
(2020: $20.1m)
Description Amount of money the Group brings in
from its operating activities before the impact of tax
and interest payments.
Why it is a KPI It reflects how much cash is
generated by our core activities that can be used to
maintain or invest in the growth of our business.
Performance Reduction is primarily due to the
timing of payments, namely payment being made in
2021 to suppliers related to the Group's exceptional
ventilator project that had been delivered in 2020.
The Group monitors certain non-financial performance indicators at an operational level. However, none of these are currently considered to be
individually appropriate as a measure of overall strategy execution success.
*Adjusted to present the results on an ongoing operations basis by excluding (1) the contribution to both years from NGSoft, a subsidiary that the Group sold in March
2021, (2) the contribution to 2020 from a significant contract for the supply of ventilators, which was exceptional in nature, and (3) the amortisation of intangible assets for
both years. Management believes that the results from ongoing operations provide a more meaningful indicator of the health of the business.
17
Business Model
Our strategy is powered by our purpose. We bring high-technology solutions that are innovative, cost-effective and reliable,
to our chosen global sectors of networking and biomedicine. We build businesses from idea, to scale up, to mass market
success, through organic and inorganic strategies. We seek to maximise long-term value through our capital allocation and
portfolio management strategies.
Bio-Medical Division
Networking and Cyber
Division
Our business units:
l Diagnostics
l Eco-Med
l Distribution
Our business units:
l Networking
▲ Edgility
▲ Network Edge
l Cyber
l In diagnostics, BATM develops its own equipment
and reagents, with a focus on developing the most
advanced molecular biology technologies
l The Eco-Med unit develops and supplies
innovative solutions to treat pathogenic and
agricultural waste
l BATM also administers tests and distributes
diagnostic equipment and medical supplies of
other leading brands
Revenue model
Revenues are generated from the sale and
distribution of consumables and equipment, and
from providing equipment service & maintenance
Strategic aim
The Bio-Medical division is focused on becoming a
leading provider of molecular diagnostic laboratory
reagents and equipment as well as innovative
products to treat biological pathogenic waste
l The Networking unit services a wide need for
access solutions to mobile, cloud and wireline
infrastructure markets, with a focus on the
network edge. Innovation is focused on edge
computing and Network Function Virtualisation
(NFV)
l In the Cyber unit, BATM provides network
monitoring and encryption solutions for very
high speed, large area networks
Revenue model
Revenues are generated from solutions that combine
integrated hardware and software; and, going
forward, increasingly from the sale of software-only
solutions, including on a licence model, to drive
high gross margins and annual recurring revenue
Strategic aim
The Networking and Cyber division is focused on
becoming the leading provider of edge computing
– including Network Function Virtualisation (NFV)
– technologies while supplying carrier ethernet
and MPLS access solutions for the network edge,
and cyber network monitoring and encryption
18
ANNUAL REPORT & ACCOUNTS 2021 Sustainability Review
Sustainability is at the heart of our business. Through medical
diagnostics, environmental protection and technologies
enabling a smarter world, our solutions are designed to
address societal challenges of today and what we believe will
be the demands of the future. We have built a business to
last and continuously take practical steps to ensure longevity
and the sustainable creation of value for our stakeholders.
At the same time, both through our solutions and our
actions, we are committed to protecting the environment to
preserve our planet for the generations to come.
People
Our people are our greatest asset and vital to sustaining
our success. We have employees in six countries, including
scientists, engineers, sales & marketing personnel and those
in corporate functions. In order to recruit and retain the best
talent, we must ensure that we are an employer of choice
and that our employment policies and practices are sensitive
to our employees’ priorities and requirements.
Engagement
We are committed to maintaining open and transparent
communication with our workforce, and listening to our
people and taking into account their feedback. To support
employee engagement, we have a dedicated human
function comprising a network of human
resources
resources departments at subsidiary level each headed up
by a VP-level executive. During the year, we also appointed
Prof. Varda Shalev, Non-Executive Director, as “voice of the
workforce” to increase the awareness and understanding
of employee views among the Board of Directors. Following
an initial meeting between Prof. Shalev and the Networking
unit's VP Human Resources, a programme of activity is being
developed to facilitate dialogue between the Board and
the workforce, with information feeding into the Board’s
decision-making process and communications back to the
workforce on how the Board has considered and acted on it.
During the year 'round table' discussions were held between
management and the workforce in the Networking unit, with
the findings and results presented to, and discussed by,
the Board. In our Diagnostics unit, we held discussions with
employees in small groups (owing to COVID-19 restrictions
and precautions) and also held at least eight meetings with
the employee unions aimed at sharing information with
employees as well as gaining employee feedback.
A number of our subsidiary companies conduct annual
employee satisfaction survey exercises and these have
recorded consistently high results over the past few years.
The senior management within these businesses regularly
communicate with employees on areas including Group
strategy and progress. Within our Telco Systems subsidiary,
we hold semi-annual or annual ‘roundtable’ discussions for
all employees to meet with the VP Human Resources to
share their views. We also hold an annual employee event
and ad hoc social events designed to engender team spirit.
We prioritise training and development for our workforce,
which we continued during 2021 with much of this activity
occurring online. Within our Networking and Cyber division,
we have numerous training schemes focused on skills
enhancement and the achievement of additional career-
enhancing qualifications, and often supply in excess of two
weeks training per year for individual employees. Another
example is the Distribution unit of the Bio-Medical division,
which provides its employees with hundreds of hours of
product training and skill development during the year.
Diversity
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. As of 31 December 2021, of
the total workforce across the Group 69% of employees were
female and 29% of the total executive management positions
were held by females. We encourage employment for people
drawn from a wide range of socioeconomic backgrounds.
One of our medical diagnostic testing subsidiaries in Israel,
EXECUTIVE MANAGEMENT
TOTAL WORKFORCE
29%
31%
71%
69%
Male
Female
19
Sustainability Review CONTINUED
for example, has approximately 48% of its workforce drawn
from religious and ethnic minorities (a significantly higher
proportion than within the country’s overall population).
Equality
We are committed to providing a working environment in
which all employees feel valued and respected and are able
to contribute to the success of the business. We actively
promote equal opportunities within all of our businesses
and align our approach with international human rights
standards. We educate all new employees on our Code
of Conduct and provide training programmes for all of
our workforce on the prevention of sexual harassment.
We believe our employees should be able to work in an
environment free from discrimination, harassment and
bullying, and that employees, job applicants, customers, and
suppliers should be treated fairly regardless of:
—
race, colour, nationality, ethnic or national origins;
— gender, sexual orientation, marital or family status;
—
— disability, impairment or age.
religious or political beliefs or affiliations;
Health, Safety & Wellbeing
BATM prides itself on providing high levels of standards on
the health and safety of its employees. We have, and adhere
to, health and safety guidelines at all of our subsidiaries.
During 2021, there were no health and safety incidents
reported and we did not receive any regulatory fines or
penalties in relation to health and safety matters.
We also took extra steps to support our workers during the
pandemic. We allowed employees to work from home and
also to work more flexible hours. For those who needed it
for home working, we provided computers, equipment and
office supplies. In addition, we enabled employees to donate
holiday days to members of the workforce that were required
to take an extended leave of absence due to ill health.
Anti-bribery & Corruption
BATM promotes responsible business behaviour including
the adherence to anti-bribery and corruption guidelines
that have been distributed to all employees along with
information about BATM’s whistleblowing mechanism that is
regularly communicated.
professional services firm, Chaikin, Cohen and Rubin.
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.
During 2021, there were no instances of whistleblowing
reports, bribery, corruption or business interruptions as a
result of regulatory activity.
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.
We actively encourage every employee to work to further
charitable goals. During 2021, we:
—
arranged, at least once a quarter, for the collection
and subsequent distribution of baskets of both
basic food products and toys to disadvantaged
families; and
raised $49.5k for charitable causes.
—
In addition, a key tenet of our strategy is the research
and development of solutions to counter the spread and
improve the diagnosis of infectious disease, and BATM’s
management team regularly gives their time as expert
advisors in the field of medical diagnostics. Our products
are designed to be able to be used at the point-of-care in
community healthcare facilities or in small- to medium-sized
laboratories rather than purely in mega labs in a central
location. We achieve this through producing solutions that,
relatively, have a small footprint, are simple to use and are
available at an appropriate price point.
Environment
The whistleblowing procedure
is managed by an
independent administrator who is a partner at an Israeli
We are passionate about protecting the environment, which
is reflected both in our actions as a business and in the
solutions that we produce.
20
ANNUAL REPORT & ACCOUNTS 2021 During 2021, we continued to roll-out measures to reduce
our impact on the environment, including completing:
—
our programme of upgrades to energy and lighting
systems in our plants and offices to lower energy
equivalents; and
the construction of two new diagnostics laboratories
in Italy and Israel, with an emphasis on maximum
efficiency in energy consumption and air purification.
—
—
We also provide environmental guidelines at all of our
operating companies. There were no environmental incidents
and we did not receive any regulatory fines or penalties in
relation to environmental matters during the year.
—
—
We have several solutions, particularly within our Eco-Med
unit, that support environmental sustainability:
—
Our Celitron subsidiary produces solutions for
the safe, effective and environmentally-friendly
treatment of pathogenic waste from food production
or medical and pharmaceutical facilities. These
solutions enable customers to significantly reduce
their environmental impact and also offer the ability
to recover and recycle proteins and lipids
Celitron has delivered its first instrument for the
recovery of high-quality protein and oils from insects.
Insects have great potential to become a sustainable
source of protein.
Our Green Labs subsidiary produces environmental
measuring systems, including solutions for testing
air pollution levels in large manufacturing plants.
Our network function virtualisation solutions reduce
the amount of hardware needed and increase
network efficiency, enabling customers to consume
less energy and reduce the carbon footprint for the
same output.
Recommendations of the Task Force on Climate-related Financial Disclosures
As we describe above, sustainability is at the heart of our business. Both
through our solutions and our actions, we are committed to protecting
the environment to preserve our planet for the generations to come – and
this is core to who we are. However, it is early days in our transition to
formalising our approach and to establishing the framework to address
the recommendations of the Task Force on Climate-related Financial
Disclosures (“TCFD”).
The areas where we have made initial progress against the TCFD
recommendations are as follows:
Governance
— The overall responsibility for assessing and monitoring climate-related
risks and opportunities is that of the Responsible Business Committee
of the Board. For 2022, the Committee intends to increase the
frequency of meetings for this purpose (among others).
— At present, management’s role in assessing and managing climate-
related risks and opportunities is primarily the undertakings of the
CEO in this regard, who feeds into the workings of the Responsible
Business Committee. In addition, the heads of our subsidiaries in the
Eco-Med unit – namely, Celitron and Green Labs – are called upon
to provide their insight based on their significant experience and
expertise in environmental matters.
Strategy
— As described in the introduction to this Sustainability Review, our
solutions are designed to address societal challenges of today and
what we believe will be the demands of the future, which includes as a
result of climate-related changes.
— In particular, it is as a result of this that, in recent years, we have
taken the strategic decision to expand our Eco-Med and related
activity – whether through the acquisition of Green Labs, commencing
the provision of environmental analysis/testing from our labs in the
Distribution unit; expanding into the provision of instruments for the
recovery of insect protein (which has a role in combatting climate
change and also in offering a source of protein that is less vulnerable
to the effects of climate change); and, as announced during 2021,
participating in the Great Green Wall Accelerator. This continues to be
an important element of our strategy.
For the recommendations and principles of the TCFD that we have not
addressed, this primarily reflects the fact that a) BATM is in the process
of formalising and embedding a structured approach to ESG and b) the
requirements regarding TCFD are new this year, which is a year during
which a substantial amount of time was invested in overhauling the
remuneration policy and in undertaking significant corporate transactional
activity, namely the sale of our NGSoft subsidiary.
Nonetheless, we recognise the importance of more consistent climate-
related disclosures by companies and are committed to placing greater
focus on addressing the recommendations of the TCFD this year. To this
end, we are in the process of engaging a specialist adviser to work with
us to develop and implement a plan that would ensure we are taking
climate change properly into account in our planning and operations.
Accordingly, we expect to make strong progress towards addressing the
recommendations of the TCFD during the period to the publication of our
next annual report.
21
Risk Management
Principal Risks and Uncertainties
The risks outlined below are those that the Board considers to be material to the Group. The Board routinely monitors risks
that could materially adversely affect the ability of the Group to achieve its strategic goals and to maintain financial stability,
assisted by the senior management team.
Risk
How we manage the risk
Risk change
Political and
economic
Legal and
compliance
There is a risk of harm to the
business from political unrest
or disruption, particularly in
emerging markets, and from
a deterioration of economic
conditions .
There is a risk that legal and/
or regulatory requirements
are not met, leading to
the loss of licence to operate,
reputational damage or
financial loss.
Business
continuity
There are risks to business
continuity from specific
events, such as natural
disasters and pandemics.
Supply chain
A disruption in the supply of
key raw materials or services
to a manufacturing site could
affect the Group’s ability to
make and deliver products
to customers, leading to
interruption in supply, lost
revenue and damage to
its reputation as a reliable
supply partner. This could
be resulting from market
shortages, disruption due to
global events and physical
climate-related disruption of
upstream supply chains.
The Group’s operations are dispersed over a number
of locations so that should a material adverse political
or economic event arise in one location, the Group can
continue with its operations elsewhere thereby helping
to mitigate the impact on its overall business.
The Group retains very experienced legal advisers of
a high calibre for the Company and main subsidiaries
in the Group who provide ongoing advice and updates
on relevant legal compliance requirements. The Group
monitors the regulation that is relevant to its activities
and, when needed, makes the necessary adjustments
to maintain compliance.
The Group operates in numerous locations and its
manufacturing contractors are also located in multiple
locations, which would help to mitigate the impact of a
business disaster. In addition, the key employees in the
workforce have been positioned such that they are able
to work without interruption by working remotely from
their homes. The Group also keeps a cash cushion to
ensure that unexpected events don’t cause unnecessary
indirect adverse effects beyond the direct outcomes.
The Group has established strong supplier
relationships and collaborates with multiple vendors
globally to broaden the geographical coverage of its
access to available components. The Group requests
that customers provide long-term committed forecasts
and itself provides multi-year forecasts to its contract
manufacturers. In addition, where appropriate,
it reengineers products to enable them to have
replaceable component alternatives. At times when
availability of components is constrained, the Group
seeks alternative sources and to increase inventory
levels of both components and finished goods.
a
_
_
a
22
ANNUAL REPORT & ACCOUNTS 2021 Risk
How we manage the risk
Risk change
Competition
There is a risk that BATM is
unable to build and maintain
competitive advantage in
its focus markets.
Customer and
partners
Research &
Development
(R&D)
There is a risk of harm to
the Group’s revenues as
a result of termination
of business relationships
with material customers or
partners and sales agents.
There is a risk that R&D
programmes overrun or do
not deliver the expected
benefits.
Information
security
(including
cyber security)
There is a risk of information
security, data loss and
corruption, and physical
damage to IT infrastructure.
Foreign
Exchange
There is a risk that the Group’s
currency exposure leads to
financial loss.
The Group is a leading company in those technological
areas in which it operates and aspires to be a dominant
player in each such niche. The Group periodically
evaluates how to improve its efficiency by developing
and producing better quality and performance products
at more attractive prices – thus giving it an advantage
over its competitors.
The Group maintains ongoing dialogue with its customers
and business partners in order to identify ahead of
time any potential problems arising on the part of the
customer and in order to maintain a close relationship
with its customers. The Group also does not have a
significant reliance on one or few customers or partners.
With respect to its R&D, the Group’s strategy has been
to diversify its R&D operations among a variety of
teams, internally and externally (through universities
and hospitals that carry out clinical tests) and by using
different R&D funding sources – thus reducing the R&D
risk. In addition, any significant new R&D projects are
brought to the Board for consideration. Still, the Group
considers certain level of risk as inherent to R&D activity,
and views R&D activity as valuable to the Group despite
that risk.
The Group routinely carries out IT evaluations to ensure
that its IT systems have the latest cyber security tools
and security procedures in place. In addition, BATM
and two of its subsidiaries operating in the networking
and cyber niches are approved suppliers to the Israeli
Ministry of Defense and, as such, are continually
monitored by the MoD and must maintain the highest
level of cyber security.
The Group’s finance department at the corporate level
manages the cash and income in such a way as to
match each company’s or subsidiaries’ revenues to its
expenses and keeps these in the same currency, thereby
reducing currency exposure. When this is not possible,
the Group uses hedging transactions when needed to
protect itself against potential currency risk. However,
by its nature, in the Board’s opinion, it is very difficult
to hedge against currency fluctuations arising from
translation in consolidation in a cost-effective manner.
—
—
a
_
_
Viability Statement
The Directors have assessed the Company and the Group’s
viability over a period of three years. The Directors have
determined that a three-year period is an appropriate
timeframe for assessment because it is aligned to the
Group’s strategic planning process and therefore reflects the
Board’s best estimate of the future viability of the business.
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 above 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 for the three years to 31 December 2024.
In making this statement, the Directors have also made key
assumptions (see note 4 to the financial statements).
23
CORPORATE GOVERNANCE
Directors’ Biographies
Gideon Chitayat
Non-executive Chairman
Zvi Marom
Founder & CEO
Moti Nagar
Executive Director & CFO
Dr. Zvi Marom founded BATM in 1992.
A former fi rst 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 was the Chairman
of the Board of the Israeli Hi-Tech &
Innovation Industries Association of the
Manufacturers’ Association of Israel until
January 2021. He is currently a director
of Shore Capital Group plc. Dr. Marom
was re-elected as a Director of BATM in
December 2021.
Dr. Gideon Chitayat is the Chairman and
CEO of GMBS Ltd, a strategic consulting
fi rm. He served as a Chairman and
Industries,
director of Delta Galil
Milissron Shopping malls,
Paz Oil
Company, Teva Israel Pharmaceutical
Industries, Bank Hapoalim and Israel
Industries. He has provided
Aircraft
consultancy
in business
services
strategy to the board and presidents of
large companies. He served as Adjunct
Professor at Tel Aviv University, Recanati
Business School. Dr. Chitayat holds a
Ph.D. in Business & Applied Economics
from the University of Pennsylvania,
in
Wharton School and a Master’s
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 2021.
24
ANNUAL REPORT & ACCOUNTS 2021
global
corporate
Moti Nagar, CPA joined BATM in 2014.
Previously, Mr. Nagar held several
management positions in Deloitte –
Israel. As Senior Manager at Deloitte
– Israel, he interfaced and handled
relationships with
the engagement
leading
clients,
including companies traded on the
LSE, NASDAQ, TASE and large private
companies primarily in the industrial,
services and energy sectors. Mr.
Nagar also led and supported public
off erings of corporations in Israel and
provided advice on taxation, including
international
taxation. Mr. Nagar
graduated in Business Management and
Accounting and qualifi ed as an Israeli
Certifi ed Accountant
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 company. He
was re-elected as a Director of BATM in
December 2021.
Israel)
(CPA,
CORPORATE GOVERNANCE
STRATEGIC REPORT
Harel Locker
Non-executive Director & Senior
Independent Director
Varda Shalev
Non-executive Director
Harel Locker served as the Director
General of the Israeli Prime Minister’s
Offi ce and head of Prime Minister
economic
Netanyahu’s
Benjamin
headquarters between 2011 and 2015.
Mr. Locker practiced commercial law for
more than 25 years with both Tel Aviv and
Wall Street, New York City, fi rst tier law
fi rms. Mr. Locker was the Chairman of
the Board of Israel Aerospace Industries
Ltd, the leading Israeli aerospace and
defence company, from 2017 to 2021,
and he has been the Chairman of the
Board of Paz Oil Ltd, the leading Israeli
energy company, since 2021. Mr. Locker
was appointed to the Board of BATM in
September 2016 and his second three-
year term, in accordance with Israeli
law, was approved by shareholders in
December 2019.
Prof. Varda Shalev is a specialist in
epidemiology, medical
informatics
and predictive analytics in community
healthcare. She was a founder and
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 Professor at the
Tel Aviv University School of Public
Health and sits on the advisory board
of several med-tech businesses. She
was appointed to the Board of BATM in
November 2018 and her second three-
year term, in accordance with Israeli
law, was approved by shareholders in
December 2021.
ANNUAL REPORT & ACCOUNTS 2021
25
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. 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, with 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 and
which is also traded on the Tel Aviv Stock Exchange.
CORPORATE GOVERNANCE FRAMEWORK
The Board has delegated the daily operational management
of the business to the CEO and CFO, and holds them to
account for their responsibilities. The CEO is supported in
this task by the executive management team. The Board
also operates through a number of committees: Audit,
Remuneration, Nomination and Responsible Business.
THE BOARD
an external director). All the Directors bring a broad and
valuable range of skills and experience to the Group (their
biographical details are set out on pages 24 to 25). The
division of responsibilities between the Chairman, CEO and
other Directors is clearly established, and no individual has
unrestricted powers of decision.
MATTERS RESERVED FOR THE BOARD
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 preparation
and approval of financial statements; distributions (dividends
and buybacks);
long-term objectives and commercial
strategy; appointment, removal and compensation of
senior management; major investments; risk management;
corporate governance; engagement of professional advisers;
political donations;
internal control arrangements; and
additional responsibilities and duties as defined in the Israeli
Companies Law and the Company’s Articles of Association.
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.
During 2021, the Board consisted of the Chairman, two
Executive Directors and three independent Non-executive
Directors (defined as ‘external directors’ under Israeli
law) (Prof. Ari Shamiss stepped down as a Non-executive
Director shortly before the year end, on 28 November
2021, following the conclusion of his three-year term as
BOARD AND COMMITTEE MEETINGS
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
Meeting attendance
Director
Dr. Gideon Chitayat,
Chairman
Dr. Zvi Marom, CEO
Moti Nagar, CFO
Harel Locker, SID
Prof. Varda Shalev, NED
8/8
8/8
8/8
7/8
8/8
Prof. Ari Shamiss, NED
**7/8**
* Attended by invitation
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Responsible
Business
Committee
*4*
*4*
*4*
4/4
4/4
4/4
2*
2*
2*
2/2
2/2
2/2
–
–
–
0/0
0/0
0/0
1/1
–
1/1
0/1
1/1
1/1
** Retired as a Non-executive Director on 28 November 2021
26
ANNUAL REPORT & ACCOUNTS 2021
CORPORATE GOVERNANCE
concerning the state of the business and performance.
The Company Secretary, Mr. Yair Livneh, attends all Board
and Board committee meetings. The Chairman met with
Non-executive Directors, without the Executive Directors
present, during the year.
DIVISION OF RESPONSIBILITIES
The responsibilities of the Chairman, CEO and other Directors
are clearly set out and defined under Israeli Companies Law,
with no individual having unrestricted powers of decision.
The Board has also adopted formal terms of reference
defining the role and duties of the Chairman.
The Chairman is responsible for the leadership of the Board,
while the responsibility for the day-to-day management
of the Group has been delegated to the CEO. The CEO is
supported by the executive management team, which
is responsible for making and implementing operational
decisions and for making recommendations to the Board.
INDEPENDENCE
The Board continues to consider that the Non-executive
Directors, including the Chairman, are independent in
character and judgment and no circumstances or matters
(including any business or other relationship) exist that
could compromise such independence. The interests of the
Directors in the Company and their shareholdings are set
out on page 53.
(including
the
Independent Non-executive Directors
Chairman) form the majority of the Board. The Chairman is
subject to annual re-election by shareholders at the Annual
General Meeting. In accordance with Israeli law, the external
directors – being Harel Locker and Prof. Varda Shalev –
cannot be subject to annual re-election (but the law does
allow for their removal from office if certain conditions are
met). External directors under Israeli law are appointed for
a minimum of one three-year term, which may be extended
by the Company (subject to shareholder approval) for no
more than two additional terms of three years each.
EFFECTIVENESS & EVALUATION
The Board’s members have a wide breadth of experience
in areas relating to the Company’s activities, including in
business development, technology (especially in the bio-
medical and diagnostics areas), entrepreneurship and
risk management. All of the Directors are of a high calibre
and standing. 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 to ensure
it performs its duties effectively. Further biographical details
can be found on pages 24 to 25.
The Nomination Committee is responsible for succession
planning and conducting the process to appoint new Board
members. However, ultimately, the appointment of any new
Director is a matter for the shareholders at a general meeting.
The Board is satisfied that the Chairman and each of the Non-
executive Directors are able to devote sufficient time to the
Company’s business. Non-executive Directors are advised on
appointment of the time required to fulfil their role.
INDUCTION
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 corporate headquarters and the
premises of its main subsidiaries in Israel.
INFORMATION AND SUPPORT
Prior to each Board meeting, the Directors are furnished with
information in a form and quality appropriate for them to
discharge their duties concerning the state of the business
and performance. 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 Secretary, Mr. Yair Livneh, is present at every
Board meeting and Board committee meeting. All of the
Directors have access to Mr. Livneh’s services.
The Directors may take independent professional advice at
the Company’s expense in furtherance of their duties.
ANNUAL REPORT & ACCOUNTS 2021
27
Corporate Governance Report CONTINUED
BOARD COMMITTEES
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, the Board has appointed a Responsible Business
Committee to deal with social, environmental, health and
safety practices, diversity and similar matters with respect
to the way the Company conducts itself. The composition
of the aforementioned committees and an overview of their
activities are as detailed below.
Audit Committee
Members: Harel Locker (Chairman) and Prof. Varda Shalev
The Audit Committee meets at least twice a year. The
membership of the Audit Committee consists of the
Company’s independent Non-executive Directors. Following
Prof. Ari Shamiss’ retirement from the Board on 28 November
2021, Harel Locker assumed the role of Chairman of the Audit
Committee. The Board has considered the requirements
of the UK Corporate Governance Code with respect to
the composition of audit committees and is satisfied that
all members of the Audit Committee have recent and
relevant financial experience and that the Committee as a
whole has competence relevant to the sectors in which the
Group operates.
The Audit Committee has been delegated responsibility
for ensuring the financial performance of the Group is
properly reported on and reviewed and for the monitoring
of the external auditor, the internal auditor and oversight of
internal controls. Further details on the Audit Committee’s
responsibilities and main activities are set out in the Audit
Committee Report on pages 32 to 34.
Remuneration Committee
Members: Prof. Varda Shalev (Chair) and Harel Locker
The Remuneration 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, of specific remuneration packages for
the Chairman of the Company and each of the Executive
Directors (including pension rights and any compensation
payments). The membership of the Remuneration Commit-
tee consists of the Company’s independent Non-executive
Directors.
in
found
the Remuneration Committee’s
Further details on
responsibilities and activities can be
the
Remuneration Committee Report on pages 35 to 36
(within the Directors’ Remuneration Report). Information
on 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 56. The Company’s current remuneration policy
as recommended by the Remuneration Committee was
approved at the Annual General Meeting of the Company on
14 December 2021. The remuneration policy is more fully
explained in the Directors’ Remuneration Report.
Nomination Committee
Members: Prof. Varda Shalev (Chair) and Harel Locker
The membership of the Nomination Committee consists of
the Company’s independent Non-executive Directors.
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.
Prior to the date of expiration of office of a non-executive director
or in cases of early resignation of a director, the Nomination
Committee considers the necessary skills, experience and
expertise required of potential candidates and prepares a list
of potential candidates. Since Israel is a relatively small country,
the Nomination Committee is able 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
28
ANNUAL REPORT & ACCOUNTS 2021
CORPORATE GOVERNANCE
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.
activity is being developed to facilitate dialogue between the
Board and the workforce with information feeding into the
Board’s decision-making process and communications back
to the workforce on how the Board has considered and acted
on it. In addition, during the year “round table” discussions
were held between management and the workforce in the
Networking unit, with the findings and results presented to,
and discussed by, the Board.
Responsible Business Committee
Members: Dr. Gideon Chitayat (Chairman), Moti Nagar,
Harel Locker and Prof. Varda Shalev
RELATIONS WITH SHAREHOLDERS AND
SIGNIFICANT SHAREHOLDERS
The primary role of the Responsible Business Committee is
to assist the Board in:
l understanding the views of key stakeholders in the Company;
l understanding the Company’s impact on community and
environment;
l assessing and monitoring climate-related risks and
opportunities; and
l ensuring that the Board is aware of the processes used
by the Company in engaging with its key stakeholders.
The duties of the Responsible Business Committee pursuant
to its terms of reference are:
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. During 2021, the CEO and CFO attended:
l 10 scheduled meetings with UK-based investors (including
l to assess and monitor culture to ensure alignment with
two group presentations); and
the Company’s purpose, values and strategy;
l to be responsible for interaction and engagement with the
workforce on behalf of the Board, as and when relevant;
l to oversee, monitor and help generate the Company’s
health and safety systems and practices; and
l to help the Board understand the impact of the Company’s
operations on the community and environment.
The Responsible Business Committee met once during the
year where it discussed matters related to human resources,
environmental aspects of the Company’s operation and
other ESG-related issues.
During the year, the Board created the role (with properly
constituted terms of reference) of ‘Voice of the workforce’ to
be fulfilled by a Non-executive Director. Prof. Varda Shalev
was nominated as the first Non-executive Director to fulfil this
role. Following an initial meeting between Prof. Shalev and
the Networking unit’s VP Human Resources, a programme of
l c. 16 scheduled meetings with Israel-based investors (in
addition to at least 15 non-scheduled phone calls).
The Chairman of the Board attended the Annual General
Meeting. There were no other meetings between the Non-
executive Directors and the Company’s shareholders during
2021.
As of 31 December 2021, to the best of the Company’s
knowledge, the following persons or entities had a significant
holding of BATM ordinary shares:
l Dr. Zvi Marom, the Company’s CEO and founder – 21.97%
l Lombard Odier Investment Managers – 26.83%
l Herald Investment Management – 4.17%
l Hargreaves Lansdown – 3.91%
l Interactive Investor – 3.33%
ANNUAL REPORT & ACCOUNTS 2021
29
Corporate Governance Report CONTINUED
CULTURE AND CONFLICTS
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 noted above, the Board enhanced its efforts to monitor
and develop workplace culture with the appointment during
the year of a Non-executive Director, Prof. Varda Shalev, as
‘Voice of the workforce’ in the boardroom.
Throughout 2021, the Company complied with procedures
in place for ensuring that the Board’s powers to authorise
conflict situations operated effectively and this has also
been considered at a committee level where appropriate.
During 2021, no conflicts arose that required the Board to
exercise authority or discretion in relation to such conflicts.
ANNUAL GENERAL MEETING
The 2021 Annual General Meeting (“AGM”) was held on
Tuesday 14 December 2021. In light of the COVID-19
pandemic and related public health guidance and legislation,
the AGM was held as a virtual meeting with shareholders
voting by proxy in advance. The results of voting were
published via the Regulatory News Service and on the
Company’s website at www.batm.com. The Chairman, CEO
and CFO attended the AGM and a facility was made available
for shareholders to submit questions in advance of the
meeting to be answered orally during the meeting.
30
ANNUAL REPORT & ACCOUNTS 2021
CORPORATE GOVERNANCE
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
The Company, as a company with a Premium Listing and therefore subject to Listing Rule 9.8.7R, is subject to the provisions
of the UK Corporate Governance Code (the “Code”) published by the Financial Reporting Council (“FRC”), a copy of which is
available from the FRC’s website at https://www.frc.org.uk. The Board considers that, during 2021, the Company complied
with the provisions set out in the Code with the exception of the matters referred to below.
Provision
Exception and explanation
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 Israeli Companies Law, which applies to the Group, sets out and
defines the responsibilities and duties of the directors and the CEO. The
Group has not adopted a separate formal schedule of responsibilities for
the CEO.
In accordance with Israeli law, the Group is required to appoint at least
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 and Prof. Varda Shalev are classified as
external directors and cannot be subject to annual re-election (however,
the Israeli Companies Law does provide grounds for removing an external
director from office). All other members of the Board are subject to annual
re-election.
As of June 2021, Dr. Gideon Chitayat, Chairman, has served on the Board
for 11 years – seven 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.
Externally facilitated Board evaluation is not common practice in the
Israeli corporate business environment. The Group continues to consider
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.
Compliance with this provision is not compatible with Israeli law as the
fees for the external directors (as defined under Israeli law) are set in law.
ANNUAL REPORT & ACCOUNTS 2021
31
Audit Committee Report
Dear Shareholder,
I am pleased to present the Audit Committee report for 2021,
having resumed the role of Chairman of the Audit Committee
on 28 November 2021 following the retirement as a Director
of Prof. Ari Shamiss. I trust that this report will provide you
with an insight into our work, the matters handled and the
focus of the Audit Committee’s deliberations during the year.
MEMBERSHIP AND ATTENDANCE
The members of the Audit Committee are:
l Harel Locker (Chairman), Senior Independent (Non-
Executive) Director
l Prof. Varda Shalev, Non-Executive Director
The Audit Committee members are independent Non-
Executive Directors of the Company, with diverse skills
and financial and/or related business experience gained in
senior positions in a range of organisations relevant to the
sectors in which BATM operates. The Board is satisfied that
Mr. Locker as Chairman, has recent and relevant financial
experience, including having been Chairman of the Audit
Committee from his appointment to the Board in 2016 until
22 December 2020 (and, thereafter, remained a member
until resuming the role of Chairman on 28 November
2021). During the year under review, Prof. Shamiss was a
member, and the Chairman, of the Audit Committee until his
retirement from the Board on 28 November 2021.
The Audit 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 Audit 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 Audit 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.
The Company Secretary is secretary to the Audit Committee.
During the year, there were four meetings of the Audit
Committee, which were attended by all members.
GOVERNANCE AND COMPLIANCE
functions and
The Audit Committee adheres to the
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 on a regular basis with the key people involved in the
Company’s governance.
RESPONSIBILITIES AND ACTIVITIES
The Audit Committee’s responsibility is to, among other
things, ensure that the financial information published by
the Group properly presents its activities to stakeholders
in a way that is fair, balanced and understandable; monitor
the scope and results of the external and internal audit;
review whistleblowing procedures; consider compliance with
legal requirements, accounting standards and the Listing
Rules of the Financial Conduct Authority; and advise 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. 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 2021, the Audit Committee’s activities included:
l Examining the Annual Report for the year to 31 December
2020 and the Half-year Report for the six months to 30
June 2021 and discussing them with management and
32
ANNUAL REPORT & ACCOUNTS 2021 the external auditor to assess whether the reports, taken
as a whole, were fair, balanced and understandable prior
to recommending these to the Board for approval.
l Reviewing and challenging areas of significant risk and
judgement and the level of disclosure.
l Challenging the assumptions and analysis produced by
management in relation to the Company’s going concern
basis of preparation, the long-term viability statement
and associated risk assumptions, the accounting policies
and disclosures, the financial reporting issues and the
assumptions and adjustments made.
l Reviewing the findings of the internal audit work and
the follow-ups of reviews done in the previous year and
considering the internal audit work plan for the following
year.
l Reviewing the effectiveness of the Group’s internal
controls and disclosures made in the Annual Report and
Financial Statements.
l Reviewing any material issues of fraud, whistleblowing
and litigation.
INTERNAL AUDIT, INTERNAL CONTROL AND RISK
MANAGEMENT
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. 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
2021 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 (as an example,
during the year under review the Board examined the
Group’s appliance of the recommendations of an internal
auditor’s report on the Company’s ability to perform
and recover in an IT disaster or similar occurrence in its
computer systems). 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 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 Group’s appliance of an internal auditor’s
recommendations regarding an
IT disaster recovery
programme and on pricing in a Hungarian subsidiary.
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:
l 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.
include a comprehensive system
l Information and Communication: The Group operating
procedures
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.
l 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.
33
CORPORATE GOVERNANCE Audit Committee Report CONTINUED
In order to safeguard the independence and objectivity of
the external auditor, the Audit Committee reviews the nature
and extent of the non-audit services supplied, receiving
reports on the balance of audit to non-audit fees. For 2021,
the external auditor provided $48K of non-audit work (2020:
$19K). Fees paid to Deloitte Israel and Co. are set out in note
9 to the financial statements.
Harel Locker
Audit Committee Chairman
13 April 2022
l 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.
EXTERNAL AUDITOR AND INDEPENDENCE
Deloitte Israel and Co., Certified Public Accountants, a Firm in
the Deloitte Global Network, serves as the Group’s auditor.
The Audit Committee as well as the Directors review and
assess on an annual basis, the performance of the external
auditors, their independence and the 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, there is no requirement under Israeli law
and regulations 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, 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. In addition, the Audit Committee has discussed with
the external auditors their independence, and has received
and reviewed written disclosures from the external auditors
regarding independence.
NON-AUDIT SERVICES
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 external auditors’ objectivity and
independence could be compromised; work is only carried
out by the external 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 external 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.
34
ANNUAL REPORT & ACCOUNTS 2021
Directors’ Remuneration Report
REMUNERATION COMMITTEE REPORT
(“Companies Law”), at the Annual General Meeting (“AGM”)
held in December 2021.
Dear Shareholder
The Board
is pleased to present the Remuneration
Committee's Report for the year ended 31 December 2021.
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
The Directors’ Remuneration 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 a majority vote of shareholders, as prescribed
in section 267A (b) of the Israeli Companies Law, 1999
We engaged external experienced consultants in the area
of executive remuneration packages both in Israel and
London to provide independent and objective advice to
assist in developing our Directors’ Remuneration Policy.
We consulted with our largest shareholders to ensure their
views were taken into account. In addition, the policy was
prepared with due consideration for the factors set out in
Provision 40 of the UK Corporate Governance Code (the
“Code”). We were delighted to receive support of 91.92%
on the policy resolution. The newly approved Remuneration
Policy takes effect from the start of the 2022 financial year
and is intended to operate for a period of three years.
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
complies with the requirements of the Code and of the
Companies Act 2006 and related legislation.
DIRECTORS’ REMUNERATION REVIEW FINDINGS
AND OUR NEW POLICY
When compared with other UK-listed businesses,
differences were found between what is considered good
practice in Israel and requirements expected by institutional
shareholders and proxy advisory voting services in the UK.
The previous pay structure differed from UK standards in a
number of areas:
l Base salary was significantly below levels found in
similar-sized UK listed companies (less than half).
l Annual bonuses have been paid in cash. It is common
in UK companies for part of the bonus to be deferred
in shares and therefore, from 1 January 2022, executive
directors’ bonuses will be paid in cash (67%) and
through deferred share awards (33%). Annual bonus
opportunities to date have been a function of the
fixed pay cost to the Company. Going forward, bonus
maximum will be expressed as a percentage of base
salary, which is common in the UK. The CEO’s and CFO's
bonus opportunity for the first award to be granted in
35
CORPORATE GOVERNANCE Directors' Remuneration Report CONTINUED
2022 will be based on performance up to a maximum of
100% of base salary (this is broadly equal to the CEO’s
current bonus opportunity, noting that bonuses have
been paid in cash to date and going forward will be paid
in a mix of cash and deferred shares).
l Long-term incentives have been granted on an ad hoc
basis with the last awards to executive directors being
made in 2018 (CEO) and 2015 (CFO). From 2022, the
intention is to make awards on an annual basis with
such awards vesting after three years. This creates
overlapping three-year cycles, which is common in the
UK. Market value share options that vest after 2 and 3
years have been granted to date. A key finding of the
review was that there is a clear expectation in the UK that
long-term incentives should not vest before three years
and that the award of nil/nominal cost options was far
more common than market value options. From 2022,
awards of nil/nominal cost options that vest after three
years will be made that vest subject to the achievement
of pre-set performance conditions and continued
employment. Vested long-term incentive awards have
not had two-year holding periods attached. Awards
from 2022 will incorporate a two-year holding period
for executive directors to provide further alignment
between executives and shareholders.
l Annual bonuses and share options have been subject
to a binary (achieved or not achieved) target. In line
with good practice in this area, short- and long-term
incentive measures will have a sliding scale of targets
where appropriate.
l No shareholding guideline is currently in place. The
new policy includes a 200% of base salary shareholding
guideline for executive directors that applies during
and post employment regarding long-term incentives
granted and shares purchased from the date this policy
takes effect.
The Remuneration Committee believes these changes will
ensure compliance with good practice in the UK whilst
retaining sufficient competitiveness to attract, retain
and motivate high calibre executives. The revised bonus
and long-term incentive quantum remain modest by UK
standards.
BUSINESS PERFORMANCE AND 2021 INCENTIVE
OUTCOMES
The 12 months to 31 December 2021 was a year of strong
financial, operational and strategic delivery for BATM,
with underlying growth in all of the Company’s business
units in both divisions. In particular, the Diagnostics unit
of the Bio-Medical division performed exceptionally well
– with increased sales of both COVID-19 and non-COVID
products. In the Networking and Cyber division, the
Company launched its edge computing and NFV offering,
Edgility, which the Board expects will be a key driver of
future growth. The Company also continued to execute
on its value creation strategy with the disposal of NGSoft,
which delivered a capital gain of $13m. Accordingly, EBITDA
increased by 50.4% to $29.6m (2020: $19.7m) and, on an
ongoing operations basis1, by 138.8% to $15.7m (2020:
$6.6m). Basic EPS increased by 46.8% to 3.26¢ (2020:
2.22¢) and the Company ended the year with cash and
financial assets of $67.8m (31 December 2020: $53.4m).
The 2021 bonuses were based 80% on an adjusted EBITDA
target and 20% on strategic objectives relating to the sale of
NGSoft and strengthening senior talent in the organisation
through recruitment. As a result of the strong performance
outlined above, the EBITDA thresholds and strategic
objectives were met and therefore a full bonus is due to
the executive directors. In line with the previous policy,
the bonus will be paid in cash. Overall, the Remuneration
Committee believes the incentive outcomes for 2021
are appropriate and are aligned with overall company
performance.
STAKEHOLDER VIEWS & ENGAGEMENT
As noted above, the current Remuneration Policy was
approved by shareholders in December 2021. 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. Varda Shalev
Remuneration Committee Chair
13 April 2022
1Adjusted to exclude (1) the contribution to 2021 and 2020 from NGSoft, which was sold in March 2021, (2) the contribution to 2020 from a significant
contract for the supply of ventilators, which was exceptional in nature, and (3) the amortisation of intangible assets for both years.
36
ANNUAL REPORT & ACCOUNTS 2021 REMUNERATION POLICY
Company and approving the total annual payments
made under such schemes;
This Remuneration Policy sets out the remuneration policy
of BATM Advanced Communications Ltd (hereinafter – the
"Company") for its executive and non-executive directors,
and Officers (as that term is defined in section 1 of the Israeli
Companies Law), which includes the CEO and other senior
executives in the Company that report directly to the CEO of
the BATM Group.
The Directors’ and Officers’ Remuneration Policy (the
“Policy”) was approved by shareholders at the December
2021 Annual General Meeting and took effect from 1
January 2022. The Policy was developed taking into account
the mandatory provisions of the Israeli Companies Law on
directors' and officers' remuneration as well as the principles
of the UK Corporate Governance Code 2018. As a UK-listed
company with a premium listing, the Policy also includes
certain voluntary disclosures as set out in UK company law
under the Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013.
THE REMUNERATION COMMITTEE’S
RESPONSIBILITIES
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 and UK corporate governance
expectations. This is a separate independent Committee
comprised of external independent directors who are
appointed by the shareholders' meeting.
The Committee's responsibilities and duties are:
(1) Recommending
to
the Board
for approval
the
framework or broad policy for the remuneration of
the Company's Chairman of the Board, Chief Executive
Officer, executive directors, non-executive directors
and other senior management and “Officers” (as
designated under Israeli Companies Law);
(2) Recommending appropriate remuneration packages
and service contracts of the Executive Directors and
Officers, and reviewing the ongoing appropriateness
and relevance of the Remuneration Policy;
(3) Recommending and determining the goals for all
performance-related remuneration offered by the
(4) Reviewing the design of all
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; and
long-term
(5) Reviewing the CEO's compensation policies for the
overall management of BATM.
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 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 outstanding executives for key positions.
The remuneration philosophy of the Company is to offer
Executives remuneration which is comprised of a mix of
fixed annual salary and benefits and variable performance
– through annual bonus and/or long-term equity incentives.
The Company undertook an
independent review of
executive remuneration and has sought to create an
appropriate balance that takes into account BATM’s Israeli
origins and the pay expectations for a company listed on
the UK Main Market, in particular the structure of variable
pay and good practice expectations. The Committee
established the following main remuneration objectives:
l 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.
l The mix of the fixed and performance-based variable
to encourage senior
remuneration should serve
Executives to remain with the Company. The Policy's
components are designed to retain talented executives.
A significant element of the Policy is therefore a long-term
equity-based incentive remuneration reward that vest
on a rolling basis over a minimum of three years. As a
way of motivating and retaining executives, the Company
37
CORPORATE GOVERNANCE Directors' Remuneration Report CONTINUED
believes that packages should include a meaningful share
component to further align the interests of the senior
Executives with the interests of the shareholders.
l The overall level of salary, incentives, pension and other
benefits should be competitive (but not excessive) when
compared with other companies of a similar size and
global spread and should be sufficient to attract, retain
and motivate Executive Directors and Officers of superior
calibre in order to deliver long-term success.
l 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.
l The Policy should ensure transparency and accountability
and encourage a high-performing culture in the Company.
CONSIDERATIONS WHEN DETERMINING
REMUNERATION POLICY
In forming our Policy during the course of 2021, and in
planning for its implementation, good practice in both Israel
and the U.K. was a key touchstone. We were careful to take
full account of the remuneration-related provisions in the
UK Corporate Governance Code (the Code) in our design
considerations. With regard to how we sought to comply
with the six factors outlined in Provision 40 of the Code for
example, the following are worth noting in particular:
l Clarity – Our remuneration framework is structured
to support financial delivery and the achievement of
strategic objectives, aligning the interests of Executive
Directors and Officers with those of our shareholders.
Our Policy is transparent and has been clearly articulated
to our shareholders (during prior consultation).
l Simplicity – Our remuneration framework adopts the
typical model found in the UK and is straightforward to
communicate and operate.
l Risk – Our incentives have been structured to ensure
that they are aligned with the Board’s system of risk
management and risk appetite. Inappropriate risk-taking
is discouraged and mitigated through, for example (i) the
operation of arrangements that provide an appropriate
balance of fixed pay to short- and long-term incentive
pay, (ii) the deferral of a proportion of annual bonus into
shares and the operation of a post-vesting holding period
for the LTIP (which replaces the more geared share
option structure operated previously), (iii) the operation
in-employment and post-employment
of significant
shareholding guidelines, and (iv) the operation of robust
recovery and withholding provisions.
l Predictability – Our incentive plans are subject to
individual caps and the Committee has full discretion
to alter the pay-out level or vesting outcome to ensure
payments are appropriately aligned with the underlying
performance of the Company.
l Proportionality – Ensuring Executive Directors and
Officers are not rewarded for failure underscores our
approach to remuneration, e.g. the significant proportion
of our packages is based on long-term performance
targets linked to the KPIs of the Company, through our
ability and openness to the use of discretion to ensure
appropriate outcomes. There is a clear link between
individual awards, delivery of strategy and our long-
term performance. As mentioned above, formulaic
incentive outcomes are reviewed by the Committee and
may be adjusted having consideration to overall Group
performance and wider workforce remuneration policies
and practices.
l Alignment to culture – The Board sets the framework
of KPIs against which we monitor the performance of
the Company and the Committee links the performance
metrics of our incentive arrangements to those KPIs.
We are also keen to foster a culture of share ownership
throughout the Company and operate all-employee share
arrangements in pursuit of this objective.
38
ANNUAL REPORT & ACCOUNTS 2021 DIRECTORS’ & OFFICERS' REMUNERATION POLICY
TABLE
information on how these aspects of remuneration operate.
The Policy was approved by shareholders at the 2021 AGM
and the incentive arrangements set out in this Policy apply
from the financial year commencing 1 January 2022.
The table below sets out the main components of the
Remuneration Policy for executive and non-executive
directors and Officers (as that term is defined in section
1 of the Israeli Companies Law), together with further
The Committee has discretion to amend remuneration and
benefits to the extent described in the table and the written
sections that follow it.
Base Salary
Purpose and link to strategy
To provide competitive fixed remuneration.
To attract and retain Executive Directors and Officers of superior calibre in order
to deliver long-term business success.
Reflects individual experience, achievements, expertise, education, skills, role and
responsibility.
The Committee’s aim is to position salaries around the mid-market level of
companies of a similar size, scale and complexity.
Operation
Normally reviewed annually by the Committee with increases typically effective
from 1 January.
Increases take into account:
l The executive's skills, experience, education, qualifications, achievements,
expertise, role and responsibilities
l Affordability
l Pay increases for the workforce
l Performance
l External market trends
l Internal differentials/relativities
l The value of total remuneration
l The Committee’s judgement
Significant adjustments are infrequent and normally reserved for material changes
in role, a significant increase in the size/complexity of the Group, or where an
individual has been appointed on a low salary with an intention to bring them to
market levels over time and subject to performance.
Other factors which will be taken into account will include pay and conditions
elsewhere in the Group, progression within the role, and competitive salary levels
in UK premium-listed and Israeli publicly-listed companies of a broadly similar size
and complexity.
39
CORPORATE GOVERNANCE Directors' Remuneration Report CONTINUED
Maximum potential value
No prescribed maximum or maximum increase.
The normal approach will be to limit increases to the average level across the
wider workforce, though increases above this level may be awarded subject to
Committee discretion to take account of certain circumstances, such as those
stated under ‘Operation’.
On recruitment or promotion, the Committee will consider previous remuneration
and pay levels for comparable companies (for example, companies of a similar size
and complexity, industry sector or location), when setting salary levels. This may
lead to salary being set at a lower or higher level than for the previous incumbent.
The Committee also takes into account the ratio between the total remuneration
of the applicable Executive Director and/or Officer 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 or evaluated 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.
Although there are no formal performance conditions, any increase in base
salary is only implemented after careful consideration of individual contribution
and performance and having due regard to the factors set out in the ‘Operation’
column of this table.
Performance targets
Benefits
Purpose and link to strategy
To provide competitive fixed remuneration.
Operation
To attract and retain Executive Directors and Officers of superior calibre in order
to deliver long-term business success.
Executive Directors, Officers and all employees in Israel may be entitled to benefits
such as a study fund/Further Education funds, expansion of mandatory benefits
(pension and end-of-work compensation) beyond the salary levels on which they
are mandatory or carry tax benefits, travel-related benefits including a car or car
allowance, use of mobile phone and newspaper. Executives will be eligible for any
other benefits which are introduced for the wider workforce on broadly similar
terms.
Any reasonable business-related expenses (and any tax thereon) can be
reimbursed if determined to be a taxable benefit. The Company may also arrange
for reasonable insurance cover for Executive Directors (see ‘Director and officer
holder insurance’ below).
Executive Directors and Officers may be eligible to participate in future all-
employee share plan operated by the Company, on the same terms as other
eligible employees.
For external and internal appointments or relocations, the Company may pay
certain relocation and/or incidental expenses as appropriate.
40
ANNUAL REPORT & ACCOUNTS 2021
CORPORATE GOVERNANCE
Maximum potential value
Study fund contributions are common in Israel and under this arrangement the
employer deposits 7.5% of base salary to a study fund (payable to the employee
with no tax after 6 years), and deducts 2.5% from the employee’s base salary to be
also deposited to this fund.
It is not possible to calculate in advance the cost of some benefits, and therefore a
maximum potential value is not pre-determined.
Performance targets
Not applicable.
Pension
Purpose and link to strategy
To reward sustained contributions by providing retirement benefits.
Operation
The Company funds contributions to an Executive Director or Officer’s pension as
appropriate through contribution to a pension fund.
Maximum potential value
In line with all employees and in line with mandatory requirements in Israel, BATM
contributes 6.5% of base salary towards pension and is obliged to deduct 6% of
salary from the employee’s base salary and deposit it into the pension fund.
In addition, at the end of employment all Israeli employees (including Executive
Directors and Officers) are entitled to end-of-employment compensation of
1 basic salary for every year of employment (1 month for every 12 months, or
8.333%). Israeli employers are bound to make ongoing deposits of at least 6% of
the employee’s (including Executive Directors and Officers) salary to the pension
fund for end-of-employment compensation.
Performance targets
Not applicable.
Annual Bonus
Purpose and link to strategy
Operation
Rewards the achievement of annual financial and business targets aligned with the
Group’s KPIs.
Deferred element encourages long-term considerations and discourages excessive
risk taking.
Bonus is based on performance in the relevant financial year. Any payment is
discretionary and will be subject to the achievement of performance targets.
Bonus is normally paid in cash, except one-third of any bonus which is deferred into
an award over Company shares for two years. In case of immediate tax obligations
due to award of such shares, and subject to the provisions of the Company's
Share Incentive Plan, the receiver of the shares will be allowed to exercise shares
immediately to the extent needed to finance coverage of tax obligations.
Bonuses are not contractual and are not eligible for inclusion in the calculation of
pension arrangements.
Recovery and withholding provisions apply in cases of specific circumstances (see
‘Recovery of Variable Remuneration’ below).
Dividends or dividend equivalents may accrue on deferred shares.
The bonus scheme will apply from financial year 2022.
Maximum potential value
Capped at 125% of annual base salary.
In the first full financial year of the Policy only (being the year ending 31 December
2022), the bonus opportunity will be set at 100% of salary for the CEO and CFO.
ANNUAL REPORT & ACCOUNTS 2021
41
Directors' Remuneration Report CONTINUED
Performance targets
Long Term Incentive Plan (LTIP)
Purpose and link to strategy
Operation
The Committee sets performance measures and targets that are appropriately
stretching each year, taking into account key strategic and financial priorities and
ensuring there is an appropriate balance between incentivising Executive Directors
and Officers to meet targets, while ensuring they do not drive unacceptable levels
of risk or inappropriate behaviours.
The Remuneration Committee will set bonus criteria at the start of the year which
reflect the short-term financial and strategic objectives of the Group.
For directors and the CEO, the bonus will be based on performance and on
measurable criteria; but bonus of up to 25% of annual salary can be based
on strategic, non-measurable criteria and considering the director's / CEO's
contribution to the Company.
A graduated scale of targets is normally set for each financial measure, with no
pay-out for performance below a threshold level of performance.
The Committee has discretion to amend the overall bonus pay-out should the
outcome not reflect the Committee’s assessment of overall business and/or
individual performance.
Designed to align Executive Directors’ and Officers’ interests with those of
shareholders and to incentivise the delivery of sustainable earnings growth and
superior shareholder returns.
Awards of conditional shares or nil or nominal cost option awards which normally
vest after three years subject to the achievement of performance targets and
continued service.
For Executive Directors, an additional two-year holding period applies after the
end of the three-year vesting period. Sufficient awards may be sold during the
holding period to satisfy any tax liabilities owed.
Recovery and withholding provisions apply in cases of specific circumstances (see
‘Recovery of Variable Remuneration’ below).
Dividend equivalents may be paid for awards to the extent they vest.
It is expected that the first awards will be made in financial year 2022.
in exceptional
The Committee retains discretion to adjust vesting
circumstances, including but not limited to regard of the overall performance of
the Company or the grantee’s personal performance.
levels
The Committee also retains discretion to adjust provisions of LTIP regarding
acceleration, change of ownership, restructuring and any other circumstances
that justify adjustment of provisions, considering also the provisions of the Share
Incentive Plan.
Any options shall not be exercisable more than ten years after the date of grant.
42
ANNUAL REPORT & ACCOUNTS 2021
CORPORATE GOVERNANCE
Maximum potential value
Performance targets
Executive Directors and Officers may receive an award with a face value of up to
125% of basic salary per annum in any financial year.
For the first award to be granted in 2022, awards to Executive Directors will be
limited to 100% of salary.
The Committee will consider the prevailing share price when deciding on the
number of shares to be awarded as part of any LTIP grant.
A 10% in 10 years’ dilution limit governing the issue of new shares to satisfy all
share scheme operated by the Company will apply.
Performance measures may include, and are not limited to, EPS, absolute or
relative total shareholder return, other financial measures, strategic measures
and/or ESG-related objectives.
The Committee retains discretion to set alternative weightings or performance
measures for awards over the life of the Policy.
For directors and the CEO, the LTIP will be based on performance in long-term
view and on measurable criteria; but LTIP of up to 25% of annual salary can be
based on strategic, non-measurable criteria and considering the director's / CEO's
contribution to the Company.
100% of awards vest for stretch performance, up to 25% of an award vests for
threshold performance and no awards vest below this.
Underpins may apply.
Share Ownership Guidelines
Purpose and link to strategy
To increase alignment between Executive Directors and shareholders.
Operation
Maximum potential value
Nil or nominal cost options which have vested but are yet to be exercised and
deferred bonus awards subject to a time condition only may be considered to
count towards the in-employment shareholding on a notional post-tax basis.
Executive Directors are expected to build up and maintain an in-employment
shareholding worth 200% of salary.
Executive Directors are normally expected to hold shares at a level equal to the
lower of their shareholding at cessation and 200% of annual base salary for two
years post-employment (excluding shares purchased with own funds and any
shares from share plan awards made before the approval of this Policy).
Performance targets
Not applicable.
Non-Executive and Non-External Directors’ Salary and Benefits
Purpose and link to strategy
Israeli publicly listed companies often have Directors that are both Non- Executive
and Non-External, such as the current Chairman. Due to their status and
relationship to the Company, such Directors are distinguished from independent
External Directors (see table below).
Non-Executive and Non-External Directors should be paid in line with the
demands of the roles at a level that attracts high calibre individuals and reflects
their experience and knowledge.
ANNUAL REPORT & ACCOUNTS 2021
43
Directors' Remuneration Report CONTINUED
Operation
Non-Executive and Non-External Directors may receive salary in cash or ordinary
shares for their contribution and efforts for the Company. Salary is typically set
by reference to a proportion of the salary for a full-time Executive Director role
(reflecting the part-time nature of the role).
In addition, the Non-Executive and Non-External Director may receive modest
benefits on the same basis as an Executive Director (as set out in the policy table
above).
There are currently no plans for Non-Executive and Non-External Directors to
participate in the variable remuneration plans offered by the Company to its
Executive Directors and Officers. Any future participation by Non-Executive and
Non-External Directors in the Company’s variable remuneration plans would be
subject to prior approval by the Company’s shareholders.
Maximum potential value
No prescribed maximum or maximum increase.
Salary is normally reviewed annually taking into account factors such as the time
commitment and contribution of the role and market levels in companies of
comparable size and complexity.
Any increases will be informed by taking into account internal benchmarks such as
the salary increase for the general workforce and will have due regard to the same
factors that apply to Executive Directors.
Performance targets
Not applicable.
External Directors’ Fees and Benefits
Purpose and link to strategy
As an Israeli publicly listed company, BATM's Board must include at all times, at least
two external (public) independent non-executive directors (known as ‘External’
Directors) that fulfil the mandatory requirements and hold the qualifications laid
down in the Israeli Companies Law.
External Directors should be paid in line with the demands of the roles at a level
that attracts high calibre individuals and reflects their experience and knowledge.
44
ANNUAL REPORT & ACCOUNTS 2021
CORPORATE GOVERNANCE
Operation
External Directors may receive remuneration in cash or ordinary shares which
includes an annual fixed fee and a per-meeting participation fee, all as prescribed
in the Israeli Companies Regulations ((Rules Regarding Compensation and
Expense Reimbursement of External Directors) 2000 (the "Israeli 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 Israeli
Compensation Regulations.
The Company's remuneration policy with respect to the External Directors is that
it offers each of them the relevant scale of annual fixed fee and "per-meeting"
participation fee specified in the Israeli Compensation Regulations which apply to
the Company.
The External Directors are not eligible to participate in the variable remuneration
plans offered by the Company to its Executive Directors and Officers.
Maximum potential value
No prescribed maximum fee or maximum fee increase.
Fees are normally reviewed annually taking into account factors such as the time
commitment and contribution of the role and market levels in companies of
comparable size and complexity.
Increases will be informed by taking into account internal benchmarks such as the
salary increase for the general workforce and will have due regard to the factors
set out in the ‘Operation’ column of this table.
Performance targets
Not applicable.
Recovery of variable remuneration
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 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 will 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 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 be repaid pursuant to the terms
determined by the Board of Directors.
With regard to LTIP awards, in exceptional circumstances
and/or cases of a restatement of any of the Company's
financial statements, the Committee has the discretion
to reduce future rewards of LTIs to the relevant senior
executive.
Director and office holder insurance
The Israeli Companies Law specifies rules and boundaries
for directors' and officers' liability insurance. Accordingly, it
is common practice for Israeli listed companies to provide
directors and officers with
insurance, and to
include details of director insurance provisions within the
remuneration policy (since such insurance is classed as
remuneration under Israeli law). The following therefore
summarises the ability of the Company to arrange insurance
to Directors and Officers for liabilities incurred during office.
liability
Subject to any applicable law and to the Company's articles
of association, and in accordance with the common practice
in Israeli listed companies, the Committee will be authorised
to approve engagements of the Company in insurance
ANNUAL REPORT & ACCOUNTS 2021
45
Directors' Remuneration Report CONTINUED
policies to cover liability of Directors and Officers in the
Company and in other entities wholly or partly held by the
Company, provided that the total yearly cover within the
insurance policy will not exceed USD 40,000,000 for any
specific year or specific claim. Such policies will be entered
into on normal market terms and will not be such that they
may materially affect the profitability of the Company, its
assets or obligations, and that the insurance premium and
excess will be in common market terms and will not be such
that may materially affect the profitability of the Company, its
assets or obligations, and will be according to offers received
from bodies that are not related to the Company.
opportunity for 2022, i.e. 50% of salary and with the
on-target level of vesting under the LTIP taken to be 50% of
the face value of the 2022 award at grant, i.e. 50% of salary.
l Maximum: full bonus achieved and LTIP vesting in full
i.e. 100% of salary bonus pay-out and LTIP awards to the
value of 100% of salary vesting.
l Share price appreciation of 50% has been assumed for
the LTIP awards under the final ‘Max with growth’ scenario
(but no share price appreciation has been assumed for
the first three sections).
ILLUSTRATION OF THE APPLICATION OF THE
POLICY
SELECTION OF PERFORMANCE MEASURES AND
TARGETS
The balance between fixed and variable ‘at risk’ elements
of remuneration changes with performance. Our Policy
results in a significant proportion of remuneration received
by Executive Directors being dependent on performance.
The chart below illustrates how the Policy would function for
minimum, on target and maximum performance for each
Executive Director.
Assumptions for the Chart below
l Minimum: Comprises fixed pay made up of base salary,
the value of pension and other benefits at the value
included in the single total figure of remuneration table
for 2020.
l On-target: bonus achieved at 50% of the maximum
Annual bonus
The annual bonus arrangements are focused on the
achievement of the Company’s short- and medium-term
financial objectives, with financial measures selected to
closely align the performance of the Executive Director
or Officer with the strategy of the business and with
shareholder value creation. Where non-financial objectives
are set, these are chosen to support the delivery of strategic
milestones and which link to those KPIs of most relevance to
each Director or Officer’s individual responsibilities.
Details of the measures to be used for the 2022 annual
bonus will be determined at the start of the 2022 finan-
cial year and will be disclosed in next year’s remuneration
report.
Long-Term Incentive Plan
The aim of the LTIP is to motivate
Executive Directors and other senior
executives
to achieve performance
superior to the Company’s peers and to
maintain and increase earnings levels
whilst at the same time ensuring that
it is not at the expense of longer-term
shareholder returns.
The Committee will review the choice
of performance measures and
the
appropriateness of the performance
targets prior to each LTIP grant. It is
expected that the first LTIP grant under
this Policy will be in 2022.
46
ANNUAL REPORT & ACCOUNTS 2021
Measurable Targets
Measurable targets / performance metrics for the annual
bonus and / or for LTIP schemes can involve a number of
BATM's KPIs and may include any number of the following:
l Work plan targets
l Budget targets
l Accomplishment of specific projects
l Meeting pre-defined goals of -
Revenue
Profit
EBITDA
Operating profit
Cash from operating activities
Cash flow
Share price
Earnings per share
Return on invested capital
Return on capital employed
Total shareholder return
Absolute total shareholder return
Relative total shareholder return
FLEXIBILITY, DISCRETION AND JUDGEMENT
The Committee operates the annual bonus and LTIP
according to the rules of each respective plan which,
consistent with market practice, include discretion in a
number of respects in relation to the operation of each plan.
Discretions include:
l who participates in the plan, the quantum of an award
and/or payment and the timing of awards and/or
payments
l determining the extent of vesting
CORPORATE GOVERNANCE
l what the weighting, measures and targets should be for
the annual bonus plan and LTIP awards from year to year
l the Committee also retains the ability, within the Policy,
if events occur that cause it to determine that the
conditions set in relation to an annual bonus plan or a
granted LTIP award are no longer appropriate or unable
to fulfil their original intended purpose, to adjust targets
and/or set different measures or weightings for the
applicable annual bonus plan and LTIP awards with, in the
case of LTIP awards held by Executive Directors, adjusted
performance conditions being not materially less difficult
to satisfy than the original conditions would have been
but for the relevant event(s)
l the ability to override formulaic outcomes in line with this
Policy
All assessments of performance are ultimately subject to the
Committee’s judgement and discretion is retained to adjust
payments in appropriate circumstances as outlined in this
Policy. Any discretion exercised (and the rationale) will be
disclosed in the relevant Directors’ & Officers' remuneration
report detailing the payment outcome.
LEGACY ARRANGEMENTS
For the avoidance of doubt, in approving this Policy,
authority is given to the Company to honour any previous
commitments entered into with current or former Directors
and Officers and in scope employees (such as the BATM
Employee Share Option Plan (ESOP) share awards granted
before the approval of this Policy) that remain outstanding.
APPROACH TO RECRUITMENT REMUNERATION
The Committee will take into consideration a number
of factors, including the current pay for other Executive
Directors and Officers, external market forces, skills and
current level of pay at previous employer in determining the
pay on recruitment.
l treatment of awards and/or payments on a change of
control or restructuring of the Group
In terms of additional benefits, the Committee will offer a
package which is set in line with this Policy and the mandatory
pension scheme levels in the Israeli market.
l whether an Executive Director or an Officer is a good/
bad leaver for incentive plan purposes and whether the
proportion of awards that vest do so at the time of leaving
or at the normal vesting date(s)
l how and whether an award may be adjusted in certain
circumstances (e.g. for a rights issue, a corporate
restructuring or for special dividends)
Annual bonus and LTIs will be set in line with this Policy.
Buy-Out awards: Where an individual forfeits outstanding
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
ANNUAL REPORT & ACCOUNTS 2021
47
Directors' Remuneration Report CONTINUED
of recruitment, determined on a case-by-case basis.
Where appropriate, the Committee may choose to apply
performance conditions to any of these awards.
unless the Committee permits (or requires) awards to roll
over into equivalent shares in the acquirer.
SERVICE CONTRACTS, LETTERS OF APPOINTMENT
AND POLICY ON PAYMENTS FOR LOSS OF OFFICE
As part of the incentives under this Policy, the Company is
permitted to approve retirement benefits and termination
arrangements in its employment and services contracts
in order to attract and retain highly skilled professional
executives. The retirement and termination arrangements
may include one or more of the following, as may be
approved by the Committee and the Board (unless the
termination is in circumstances that negate the payment of
severance pay pursuant to applicable law):
l The Company may terminate an Executive Director or
Officer’s employment (as CEO or CFO) with immediate
effect by making a payment in lieu of notice consisting
of basic salary (but excluding any bonus, commission,
benefits or holiday entitlement) during the notice period.
Their office as directors may be terminated by the
Company's shareholders' meeting.
l A pro-rated bonus may be paid subject to performance,
for the period of active service only. Outstanding share
awards may (if at all) vest in accordance with the provisions
of the various scheme rules. Any outstanding deferred
bonus awards will continue on the normal timetable, save
for forfeiture for serious misconduct. Clawback and malus
provisions will also apply. On a change of control, awards
will generally vest on the date of a change of control,
The date of each Executive Director’s contract is:
l Under the LTIP, any outstanding awards will ordinarily
lapse, however in ‘good leaver’ cases the default treatment
is that awards will vest subject to the original performance
condition and time proration and the holding period will
normally continue to apply. For added flexibility, the rules
allow for the Committee to decide not to pro-rate (or pro-
rate to a lesser extent) if it decides it is appropriate to do
so, and to allow vesting to be triggered at the point of
leaving by reference to performance to that date, rather
than waiting until the end of the performance period
if the Committee so decides. On a change of control,
any vesting of awards will be subject to assessment of
performance against the performance conditions and
normally be time pro-rated.
l The Group may pay outplacement and professional legal
fees incurred by executives in finalising their termination
arrangements, where considered appropriate, and may
pay any statutory entitlements or settle compromise
claims in connection with a termination of employment,
where considered in the best interests of the Company.
Outstanding savings/shares under all-employee share
plans would be transferred in accordance with the terms
of the plans.
l The Committee may approve change in engagement type
from service contract to employment or from employment
to service contract, as long as there is no material change
in engagement terms and in the costs for the Company.
Name
Date of service contract
Duration
Dr. Zvi Marom
Current service contract as CEO - from 1.1.2018
– was renewed on 14.12.2021.
Re-elected as director on 14 December 2021.
Service contract – until 31 December 2022.
Re-election as director was for a one-year
term until the next AGM of the Company.
Moti Nagar
Employed as CFO since 2014.
Re-elected as director on 14 December 2021.
Re-election as director was for a one-year
term until the next AGM of the Company.
48
ANNUAL REPORT & ACCOUNTS 2021
CORPORATE GOVERNANCE
CHAIR AND EXTERNAL DIRECTORS
The External Directors are 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 shareholders' meeting, or by the competent
court at the request of a director or shareholder. The Chair's
office as chair may be terminated by the Company's Board,
and as a director by the shareholders' meeting.
For the Chair and each External Director, the effective date
of their latest letter of appointment is:
Name
Date of appointment
Term
Dr. Gideon Chitayat
14 December 2021
One-year until the next AGM of the Company
Harel Locker
5 December 2019
Three years, up for renewal in the 2022 AGM
Prof. Varda Shalev
14 December 2021
Three years
While employees are not formally consulted on the design
of the Directors’ and Officers’ Remuneration Policy, pay
levels and increases across the business are taken into
account when setting Directors’ and Officers’ remuneration.
In February 2021, Varda Shalev was appointed as “voice of
the workforce”. In this role, she will develop a programme to
enable regular dialogue with employees across the business
and report back to the Board to increase our awareness and
understanding of their views, including remuneration.
DIFFERENCES IN PAY POLICY FOR EXECUTIVE
DIRECTORS AND SENIOR EMPLOYEES COMPARED
TO EMPLOYEES MORE GENERALLY
As for the Executive Directors, general practice across the
Group is to recruit employees at competitive market levels of
remuneration, incentives and benefits to attract and retain
employees, accounting for national and regional talent
pools. When considering salary increases for Executive
Directors and Officers, the Committee will take into account
salary increases and pay and employment conditions across
the wider workforce.
EXTERNAL APPOINTMENTS
The Company does not prohibit its Directors from being
appointed as directors in other companies, provided that
such appointment will not create a conflict of interest
between his/her position in the Company and his/her
external appointment. In each such instances, the Company's
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 Directors’ & Officers' remuneration
report contained in the Company's Annual Report.
CONSIDERATION OF SHAREHOLDER VIEWS
The Committee is committed to an ongoing dialogue with
shareholders and welcomes feedback on Directors’ and
Officers' remuneration. The Committee seeks to engage
directly with major shareholders and their representative
bodies on changes to the Policy. The Committee also
considers shareholder feedback received in relation to
the remuneration-related resolutions each year following
the AGM. This, plus any additional feedback received
from time to time (including any updates to shareholders’
remuneration guidelines), is then considered as part of the
Committee’s annual review of remuneration policy and its
implementation.
CONSIDERATION OF EMPLOYMENT CONDITIONS
ELSEWHERE IN THE GROUP
The Committee closely monitors the pay and conditions of
the wider workforce and the design of the Directors’ and
Officers' Remuneration Policy is informed by the policy for
employees across the Group.
ANNUAL REPORT & ACCOUNTS 2021
49
Directors' Remuneration Report CONTINUED
ANNUAL REPORT ON REMUNERATION
specifically invited by the chairman of the Committee in
order to provide relevant information to the Committee.
This section of the Directors’ Remuneration Report describes
the operation of the Remuneration Policy.
REMUNERATION COMMITTEE
Roles and responsibilities
The Remuneration Committee works within its terms of
reference, and in accordance with the functions set forth in
Israeli Companies Law, to make recommendations to the
Board of Directors of the Company and to decide whether to
approve certain transactions and whether to exempt certain
transactions from approval. The Remuneration Committee's
full terms of reference are available on the Company's website.
Remuneration Committee members and meetings
The Remuneration Committee consists of all the Non-
executive Directors (excluding the Chairman of the Board).
The members of the Remuneration Committee during the
year under review were:
l Prof. Varda Shalev (Chair)
l Harel Locker
l Prof. Ari Shamiss (until 28 November 2021)
l As and when the Committee deems
it necessary,
the Committee is provided advice from independent
consultants. During the year the Committee received
advice from FIT Remuneration Consultants LLP (“FIT”) who
assisted the Remuneration Committee in the development
of the Directors’ and Officers' Remuneration Policy and
on implementation related matters. FIT is a signatory to
the Remuneration Consultants’ Code of Conduct and has
confirmed to the Committee that it adheres in all respects
to the terms of the Code. FIT provides no other services
to BATM.
Key activities during the year
The Committee held two meetings during the year to 31
December 2021.
The Remuneration Committee undertook the following
activities in this period:
l Carried out a comprehensive review of executive
independent
receiving advice
from
remuneration,
UK-based remuneration consultants
l Discussed and approved the new remuneration policy,
which was approved by 91.92% of shareholders at the
AGM held on 14 December 2021
The Remuneration Committee receives advice from several
sources, namely:
l Undertook a shareholder consultation exercise to explain
the key terms of the new remuneration policy
l The Chairman of
the
Remuneration Committee meetings by invitation only, and
the Company's Chief Financial Officer, who attends when
the Board, who attends
l Determined the outcome of the 2020 annual bonus
l Set the targets and measures for the 2021 annual bonus
50
ANNUAL REPORT & ACCOUNTS 2021 Single total figure of remuneration (audited)
The tables below set out the single total remuneration figures for each director for 2021 and the prior year.
2021
Executive Directors
Zvi Marom, CEO(1)
Moti Nagar, CFO(2)
Non-executive Directors
Gideon Chitayat
Harel Locker
Varda Shalev
Ari Shamiss(3)
2020
Executive Directors
Zvi Marom, CEO
Moti Nagar, CFO
Non-executive Directors
Gideon Chitayat
Harel Locker
Varda Shalev
Ari Shamiss
Salary/Fees
$’000
Performance Bonus
$’000
Total Remuneration
$’000
584
317
56
58
62
57
438*
158**
–
–
–
–
1,022
475
56
58
62
57
Salary/Fees
$’000
Performance Bonus
$’000
Total Remuneration
$’000
547
297
56
53
62
60
410
149
-
-
-
-
957
446
56
53
62
60
1. The CEO, Dr. Zvi Marom, receives payment via a Service Agreement, which includes a basic annual salary and associated social and pension benefits
according to the aforementioned Service Agreement. His service fee (which is paid in New Israeli Shekels) in 2021 and 2020 was the same, with the
variation in the exact amounts when presented in reporting currency (US$) being based on currency exchange.
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 shares on the London Stock Exchange in the month preceding the shareholders’ approval of
this transaction. Half of the options vested 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 remained in his position at the Company as of the date of each vesting and that the Group achieved a gross profit of
at least $33 million for the previous calendar year in which the vesting date falls. Those conditions were met, and therefore the options were fully
vested.
2. The CFO salary is paid in New Israeli Shekels: the difference in the reported salary (in US$) between 2020 and 2021 is due to currency fluctuation
- the underlying salary remained the same. For 2020 and 2021, the salary includes social and pension benefits as required by Israeli law for all
employees.
3. Ari Shamiss stepped down from the Board during the year, on 28 November 2021.
*
The bonus criteria for the CEO are according to the management service contract between the Company and Nostradamus Technology Services Ltd
that was approved by the shareholders at the EGM held on 6 June 2018 and extended until 31 December 2022 at the AGM held on 14 December
2021, and the award of his bonus for 2021 received approval by the Remuneration Committee and the Board of Directors on 24 February 2022.
** The bonus criteria for the CFO are according to the decisions of the Remuneration Committee and the Board of Directors, and the award of his
bonus for 2021 received approval by the Remuneration Committee and the Board of Directors on 24 February 2022.
As at 31 December 2021, the total liability for payment related to wages for the Executive Directors was $79 thousand (31
December 2020: $73 thousand), which was paid in January 2022 (2020 liability was paid in January 2021).
51
CORPORATE GOVERNANCE
Directors' Remuneration Report CONTINUED
Non-Executive Directors
In determining the remuneration to its Non-executive
Directors (who, in 2021, other than the Chairman, were
all “external directors” under Israeli law), the Group was
required to comply with Israeli law that formulates the
kind and amounts of remuneration and expenses that
an Israeli public company may pay its non-executive
directors. The applicable
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 its external directors. Cash remuneration payable to
Israeli statute
is the
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 equity of the relevant listed company as recorded
in its last audited financial statements. In compliance with
the Compensation Regulations, the Company does not
pay any additional amounts to the external directors. The
Compensation Regulations do not apply to the Chairman
who is not an “external director” in terms of Israeli Law but is
considered an independent director and his remuneration
is set out below.
2021 annual bonus outcome
The maximum annual bonus for Dr. Zvi Marom and Mr. Moti Nagar for 2021 was 75% of annual service fee and 50% of annual
total fixed pay 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
Performance
Measure
Weighting
Threshold
(11.11% Payable)
Max
(100% Payable)
Actual FY21
Achievement
Bonus Outcome
(% Of Total
Bonus)
EBITDA
80%
$4.3m
$8.2m
$29.6m
80%
The other 20% of the bonus was based on personal criteria. The objectives and their achievement are set out in the table
below.
Objectives
Achievements in 2021
Bonus Outcome
(% of Total Bonus)
Successful completion of the sale of
NGSoft
Achieved successful completion of
the NGSoft sale
20%
Recruitment of senior employees to
strengthen the Group's management
Recruited several senior employees,
both at the Group level and in the
individual activities
This resulted in a full bonus pay-out, equal to 75% of the CEO’s annual service fee, being $438k.
Mr. Moti Nagar, CFO
Weighting
2021 Target
Achievement in 2021
Bonus Outcome (%
Of Total Bonus)
EBITDA
80%
$25.8m
$29.6m
80%
52
ANNUAL REPORT & ACCOUNTS 2021
The other 20% of the bonus was based on personal criteria. The objectives and their achievement are set out in the table
below.
Objectives
Achievements in 2021
Bonus Outcome
(% of Total Bonus)
Successful completion of the sale of
NGSoft
Achieved successful completion of
the NGSoft sale
20%
Recruitment of senior employees to
strengthen the Group's management
Recruited several senior employees,
both at the Group level and in the
individual activities
This resulted in a full bonus pay-out equal to 50% of the CFO’s total fixed pay, being $158k.
The Committee considered the formulaic outturn in the context of wider Company and individual performance and felt that
the result was warranted. Therefore, no discretion was used to alter the outturn.
The bonus for both directors will be payable in cash.
For the 2022 bonus, payable in 2023, in line with the Directors’ Remuneration Policy approved in December 2021, bonus will
be based on base salary (rather than the annual service fee or total fixed pay), with one-third of any bonus earned deferred
into shares for two years.
Long-term incentive awards granted in 2021
No long-term incentive awards were granted to executive directors in 2021. An award was last made to the CEO in June 2018
and the CFO’s last award was in May 2015.
Share interests
Shares owned
outright
(31/12/21)
Shares owned
outright
(31/12/20)
Awards
unvested and
subject to
performance
conditions as at
31/12/21
Options
unvested and
not subject to
performance
conditions as at
31/12/21
Options
vested but not
exercised as at
31/12/21
Shareholding as
a percentage of
salary/service
fee
Executive Directors
Zvi Marom
96,794,500
96,794,500
Moti Nagar
–
–
Non-Executive Directors
Gideon Chitayat
3,159,000
3,159,000
Harel Locker
Varda Shalev
Ari Shamiss
–
–
–
–
–
–
* Share price on the LSE on 31 December 2021: £0.84.
–
–
–
–
–
–
–
–
–
–
–
–
4,000,000
18,886%*
906,200
0%
–
–
–
–
6,426%*
0%
0%
0%
Zvi Marom’s vested options have an exercise price of £0.2695 and Moti Nagar’s vested options have an exercise price of
£0.1269
53
CORPORATE GOVERNANCE
Directors' Remuneration Report CONTINUED
TSR performance chart
TSR performance
The chart below shows the value of £100 invested in the
Company on 1 January 2012 compared with the value
of £100 invested in the FTSE SmallCap Index at the same
date and the movement in value until 31 December 2021.
We have chosen the FTSE SmallCap Index as it is a widely
recognised index containing companies of a broadly similar
size to BATM.
)
0
0
1
o
t
d
e
s
a
b
e
r
(
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S
l
l
a
t
o
T
700
600
500
400
300
200
100
0
Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2021
BATM Advanced Communications Ltd
FTSE SmallCap
Ratio of CEO pay to average full-time
employee pay
The ratio of CEO pay to average full-time employee pay during
2021 was 11:1 (2020: 10:1) for employees of Israeli companies
in the Group and 34:1 (2020: 26:1) for the whole Group. The
details of CEO pay can be found on page 51. Average full-time
employee pay (for the whole Group), including employees
being paid under service contracts, in 2021 was $29,667 (2020:
$36,638). (Note 11 to the financial statements – ‘Staff costs’ –
does not include employees paid under service contract: this
payment is reflected within general & administrative, research
& development and sales & marketing expenses and cost of
goods).
Relative importance of spend on pay
The table below shows overall spend on employee pay
(including employees on service contracts and the Executive
Directors) across the Group compared with distributions to
shareholders.
2021
($m)
2020
($m)
% change
29.5
39.9
(26.1%)
4.3
–
–
29.6
19.7
50.4%
Employee
remuneration costs
Distribution to
shareholders
Profit (EBITDA on
reported basis)
54
ANNUAL REPORT & ACCOUNTS 2021
Percentage change in directors’ remuneration and employee pay
The table below shows the percentage change in each directors’ remuneration (on an actual currency basis). The prior year
change has also been shown and this will build up over time to cover a rolling five-year period.
Executive Directors
Zvi Marom
Moti Nagar
Non-executive Directors
Gideon Chitayat
Harel Locker*
Varda Shalev*
Ari Shamiss*
Salary/Fee
Benefits
Annual Bonus
2021
2020
2021
2020
2021
2020
0%
0%
0%
4.3%
(4.2%)
(9.9%)
0%
0%
0%
0%
8.8%
5.3%
0%
0%
–
–
–
–
0%
0%
–
–
–
–
0%
0%
–
–
–
–
173%
24%
–
–
–
–
* The number of meetings attended by each director may change from one year to another.
Payments for loss of office and/or payments to former directors (audited)
No payments for loss of office, nor payments to former Directors were made during FY21.
Ari Shamiss was a non-executive director of the Group and stepped down from the Board on 28 November 2021. Ari was paid
his fee until this date and did not receive any payment in lieu of notice.
Statement of shareholding voting
At the AGM that took place on 14 December 2021 there were five remuneration related resolutions:
Votes for
(including
discretionary)
% for
Votes
against
(excluding
withheld)
%
against
Total (excluding
withheld and third-
party discretionary)
Withheld
279,405,938
99.63
1,051,158
0.37
280,457,096
0
156,548,999
91.92
13,754,743
8.08
*188,412,596*
18,108,854
262,716,534
93.67
17,740,561
6.33
280,457,096
266,702,351
95.10
13,754,743
4.90
280,457,096
1
2
177,432,821
96.61
6,229,774
3.39
188,412,596*
4,750,001
Resolution
Approval of the report
of the Remuneration
Committee
Approval of the
Directors’ and Officers'
Remuneration Policy
Approval of the CFO’s
2021 bonus relating to
FY2020 performance
Authorisation for
the Remuneration
Committee to
determine bonus
and LTIP grants for
executive directors
Authorisation for
the Remuneration
Committee to update
employment and
service agreements
* In accordance with Israeli law, shareholders defined as a ‘controlling shareholder’ or as having a ‘personal interest’ are ineligible to vote for certain
resolutions.
55
CORPORATE GOVERNANCE
Directors' Remuneration Report CONTINUED
Implementation of Policy for FY22
Component of Pay
Implementation for FY22
Base salaries
CEO: $382,000
Benefits and pension
Annual bonus
LTIP
CFO: NIS 720,000
The base salaries for Executive Directors remain unchanged.
In line with the Directors’ Remuneration Policy and past practice, the Company
contributes towards pension in line with mandatory requirements in Israel.
No changes to benefit provisions.
The CEO’s and CFO’s bonus opportunity will be 100% of base salary, lower than
the approved 125% of salary maximum under the Directors’ Remuneration Policy.
One third of any bonus earned will be deferred in shares for 2 years.
The 2022 bonus will be subject to Group EBITDA.
The targets are currently commercially sensitive and will be reported next year.
Performance shares with a face value of 100% of salary will be awarded to
executive directors.
The awards granted will be subject to an absolute TSR performance condition:
Total Shareholder Return on
vesting date compared to share
price on date of grant
Vesting percentage of the awards
Less than +15%
+15%
0%
25%
Between +15% and +25%
Pro rata between 25% and 80%
+25%
80%
Between +25% and 50%
Pro rata between 80% and 100%
50% or higher
100%
NED fees
The Chairman and NED fees for FY22 are as follows:
l Chairman fee: $56,000
l External Director base fee: NIS 113,015* ($36,339**)
l External Director per-meeting fee: NIS 4,345* ($1,397**)
* Linked to the Consumer Price Index in Israel.
** According to the 31 December 2021 currency rate of 3.11 NIS per 1 USD.
On behalf of the Board
Prof. Varda Shalev
Chair of the Remuneration Committee
13 April 2022
56
ANNUAL REPORT & ACCOUNTS 2021
Directors’ Report
PRINCIPAL ACTIVITIES
DIRECTORS
BATM is focused on the development, production and
marketing of real-time technologies focusing on two main
application areas: Networking & Cyber and Bio-Medical.
includes products and services
Networking & Cyber
related to edge computing, NFV, carrier ethernet 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
2021. The results of the year are set out in the consolidated
statements of profit or loss. BATM recorded a net profit of
$14.8 million.
RETURNS TO SHAREHOLDERS
The Board considers returns to shareholders to be an
important element of its strategy to deliver shareholder value.
On 17 March 2022, the Group received shareholder approval
for a programme to buy back up to 44,053,412 ordinary
shares of NIS0.01 (“Ordinary Shares”) in the capital of the
Group, representing approximately 10% of the Group’s issued
share capital at that date. As at the date of this annual report,
the Group had purchased 200,000 Ordinary Shares under its
share buyback programme.
BUSINESS AND STRATEGIC REVIEW
The review of the Group’s business operations, including
strategic framework, key performance indicators and principal
risks and uncertainties, are set out in the Strategic Report
section on pages 2 to 23 together with this Directors’ Report.
The Directors who served for the year ended 31 December
2021 and are currently serving (unless otherwise stated) are
as follows:
l Dr. Gideon Chitayat, Non-Executive Chairman
l Dr. Zvi Marom, Executive Director and Chief Executive Officer
l Moti Nagar, CPA, Executive Director and Chief Financial
Officer
l Harel Locker, Non-Executive External Director and Senior
Independent Director (SID)
l Prof. Varda Shalev, Non-Executive External Director
l Prof. Ari Shamiss, Non-Executive External Director (retired
28 November 2021)
CORPORATE GOVERNANCE STATEMENT
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 26 to 31 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 56.
RULES ABOUT APPOINTMENT AND REPLACEMENT
OF DIRECTORS
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
57
CORPORATE GOVERNANCE Directors' Report CONTINUED
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 external directors) shall serve until the next
Annual General Meeting following the Annual General
Meeting at which such director was appointed, or their
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. Such vacancy may also be temporarily
filled by the continuing directors, and any director so
appointed shall hold office until the next annual general
meeting and is eligible for reappointment at that meeting.
“External” directors, as defined by Israeli Companies Law,
are non-executive directors that 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 election and
re-election of external non-executive directors.
Apart from the authority of the General Meeting to remove
a director from office, subject to giving such director a
reasonable opportunity to present their position to the
General Meeting, under the Company’s articles, the office of
a director shall be vacated ipso facto, upon their death, or
if the director is found to be of unsound mind, or becomes
bankrupt or if they become 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 14 December 2021 until the following
AGM. Prof. Varda Shalev, a Non-executive External Director,
was also re-elected for her second three-year term. Their
biographies appear on pages 24 to 25 above.
AMENDMENT OF ARTICLES
Under the Israeli Companies Law, a company may amend its
articles by a simple majority of the shareholders at a General
Meeting. According to the Company’s articles of association,
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, the Group continues
to prepare its financial statements according to the going
concern basis.
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 Standards Board. Israeli company law holds the
Directors responsible for preparing such financial statements
and requires the Directors to approve them.
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
58
ANNUAL REPORT & ACCOUNTS 2021 CORPORATE GOVERNANCE
be achieved by compliance with all applicable International
Financial Reporting Standards.
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties they
face; and
Directors are also required to:
l properly select and apply accounting policies;
l present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
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.
l make an assessment of the Company’s ability to continue
as a going concern and disclose where they consider it
appropriate; and
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:
l 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.
Dr. Gideon Chitayat
Chairman
13 April 2022
The Directors are responsible for keeping proper accounting
records that 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 that comply with the Listing Rules and
the Disclosure and Transparency rules.
in
Israel governing
Legislation
the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
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
ANNUAL REPORT & ACCOUNTS 2021
59
BATM
Consolidated Financial Statements for the year ended 31 December 2021
60
60
ANNUAL REPORT & ACCOUNTS 2021
ANNUAL REPORT & ACCOUNTS 2021 FINANCIAL STATEMENTS
Independent Auditor’s Report 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 financial statements of BATM Advanced Communications Ltd. and its subsidiaries (“the
Group”) set out on pages 65 to 109, which comprise the consolidated statement of financial position as at 31 December
2021, and the consolidated statement of profit and loss, the consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and
notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Group as at 31 December 2021, and its consolidated financial performance and its consolidated
cash flows 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 fulfilled our other ethical responsibilities
in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient 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 significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of
the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
ANNUAL REPORT & ACCOUNTS 2021
61
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 2021, the
Group had goodwill and other intangible assets of $16,033
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.
This determination of an impairment is highly subjective as
significant judgement is required by the management in
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 flow forecast model for each cash-
generating unit and requires the estimation of valuation and
business assumptions, most importantly the discount rate and
growth rate.
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’s 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, including the macroeconomic
impacts resulting from the ongoing COVID-19 pandemic.
Performing stress analysis on key estimates.
Performing discussions, when applicable, with key
management about new significant clients and markets
penetration, new significant contracts and bids, certification
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 financial
statements.
Other Information
Management is responsible for the other information. The
other information comprises the information included
in the annual report, but does not include the financial
statements and our auditor’s report thereon.
Our opinion on the consolidated financial 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 financial
statements, our responsibility
is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the consolidated
financial 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 financial statements
in accordance with IFRSs, and for such internal control
as management determines is necessary to enable the
preparation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
the consolidated financial statements,
In preparing
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
62
ANNUAL REPORT & ACCOUNTS 2021
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Independent Auditor’s Report to the Shareholders
of BATM Advanced Communications Ltd. (CONTINUED)
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 financial reporting process.
Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about
whether the consolidated financial 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 influence the economic
decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with ISAs, we exercise
professional
judgement and maintain professional
skepticism throughout the audit. We also:
l Identify and assess the risks of material misstatement of
the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is sufficient
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.
l 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.
l Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and
related disclosures made by management.
l 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
significant 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
financial 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.
l Evaluate the overall presentation, structure and content
of the consolidated financial statements, including the
disclosures, and whether the consolidated financial
statements represent the underlying transactions and
events in a manner that achieves fair presentation.
l Obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business
activities within the Group to express an opinion on the
consolidated financial 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 significant audit findings, including
any significant deficiencies 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 significance in the audit of the consolidated financial
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,
ANNUAL REPORT & ACCOUNTS 2021
63
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 benefits of such communication.
As required by the Financial Conduct Authority (FCA)
(DTR)
Disclosure Guidance and Transparency Rule
4.1.14R, these financial statements form part of the ESEF-
prepared Annual Financial Report filed on the National
Storage Mechanism of the UK FCA in accordance with
the ESEF Regulatory Technical Standard (‘ESEF RTS’). This
auditor’s report provides no assurance over whether the
annual financial report has been prepared using the single
electronic format specified in the ESEF RTS.
The engagement partner on the audit resulting in this
independent auditor’s report is Efrat Binshtok.
Brightman Almagor Zohar and Co.
Certified Public Accountants
A Firm in the Deloitte Global Network
1 Azrieli Center, Tel Aviv
Israel
13 April 2022
64
ANNUAL REPORT & ACCOUNTS 2021
Consolidated Statements of Profit or Loss
for the year ended 31 December
Revenues
Cost of revenues
Gross profit
Operating expenses
Sales and marketing expenses
General and administrative expenses
Research and development expenses
Other operating expenses (income)
Total operating expenses
Operating profit
Finance income
Finance expenses
Profit before tax
Income tax expenses
Profit for the year before share of loss of a
joint venture and associated companies
Share of loss of a joint venture and associated companies
Profit for the year
Attributable to:
Owners of the Company
Non-controlling interests
Profit for the year
Profit per share (in cents) basic
Profit per share (in cents) diluted
Note
5, 6
7
8
9
10
12
13
14
15
16
16
2021
US$’000
140,038
88,977
51,061
18,290
12,243
8,713
(12,563)
26,683
24,378
1,466
(911)
24,933
(9,337)
15,596
(839)
14,757
14,340
417
14,757
3.26
3.23
2020
US$’000
183,566
122,856
60,710
20,197
15,884
10,258
138
46,477
14,233
820
(1,754)
13,299
(1,043)
12,256
(774)
11,482
9,793
1,689
11,482
2.22
2.21
The accompanying notes are an integral part of these financial statements.
65
ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Income
for the year ended 31 December
Profit for the year
Items that may be reclassified subsequently
to profit or loss:
Disposal of a foreign operation
Exchange differences on translating foreign operations
Items that will not be reclassified subsequently
to profit or loss:
Revaluation of investment
Re-measurement of defined benefit obligation
Total comprehensive income for the year
Attributable to:
Owners of the Company
Non-controlling interests
2021
US$’000
14,757
(522)
(4,880)
9,355
–
162
162
9,517
8,976
541
9,517
2020
US$’000
11,482
–
3,148
14,630
(508)
16
(492)
14,138
13,560
578
14,138
The accompanying notes are an integral part of these financial statements.
66
ANNUAL REPORT & ACCOUNTS 2021
Consolidated Statements of Financial Position
for the year ended 31 December
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets
Inventories
Non-current assets
Property, plant and equipment
Investment property
Right-of-use assets
Goodwill
Other intangible assets
Investment in joint venture and associate
Investments carried at fair value
Deferred tax assets
Total assets
Equity and liabilities
Current liabilities
Short-term bank credit
Trade and other payables
Current maturities of lease liabilities
Tax liabilities
Non-current liabilities
Long-term bank credit
Long-term liabilities
Long-term lease liabilities
Deferred tax liabilities
Retirement benefit obligation
Total liabilities
Equity
Share capital
Share premium account
Reserves
Accumulated deficit
Equity attributable to the:
Owners of the Company
Non-controlling interests
Total equity
Total equity and liabilities
Note
18
17
19
20
21
22
23
24
12
26
27
27
27
27
27
27
26
34
28
2021
US$’000
65,331
34,932
2,432
30,951
133,646
18,107
1,739
6,570
11,385
4,648
12,667
1,027
3,375
59,518
2020
US$’000
50,575
41,467
2,803
33,893
128,738
16,109
1,878
9,607
16,838
6,879
13,271
1,027
5,759
71,368
193,164
200,106
1,634
47,519
2,186
6,548
57,887
1,356
3,888
5,108
170
621
11,143
69,030
1,320
425,840
(19,849)
(279,888)
127,423
(3,289)
124,134
193,164
5,365
53,618
2,244
3,046
64,273
675
6,416
8,440
711
828
17,070
81,343
1,320
425,686
(14,323)
(290,090)
122,593
(3,830)
118,763
200,106
The financial statements were approved by the board of directors and authorised on 13 April 2022. They were signed on its behalf by:
Dr. Z. Marom, CEO
M. Nagar, CFO
The accompanying notes are an integral part of these financial statements.
67
ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
Consolidated Statements of Changes in Equity
for the years ended 31 December 2021 and 2020
Share
Capital
Share
Premium
Account
Translation
Reserve
Other
Reserve
Accumulated
Deficit
Attributable
to Owners of
the Company
Non-
Controlling
Interests
Total
Equity
US$ in thousands
1,320
425,477
(18,070)
(512)
(299,391)
108,824
(4,408)
104,416
–
–
–
–
–
–
–
–
–
–
–
51
158
–
–
–
4,259
4,259
–
–
–
–
–
–
–
–
–
9,793
9,793
1,689
11,482
16
16
(508)
(508)
–
–
16
(508)
–
4,259
(1,111)
3,148
9,301
13,560
578
14,138
–
–
51
158
–
–
51
158
1,320
425,686
(13,811)
(512)
(290,090)
122,593
(3,830)
118,763
–
–
–
–
–
(*)
–
–
–
–
–
–
–
58
96
–
–
(522)
–
(5,004)
(5,526)
-
–
–
–
–
–
–
–
-
–
–
14,340
14,340
417
14,757
–
(522)
162
162
-
–
(522)
162
–
(5,004)
124
(4,880)
14,502
8,976
541
9,517
-
–
58
96
(4,300)
(4,300)
-
–
-
58
96
(4,300)
1,320
425,840
(19,337)
(512)
(279,888)
127,423
(3,289)
124,134
Balance as at
1 January 2020
Profit for the year
Re-measurement
of defined benefit
obligation
Revaluation of
investment –
Exchange differences
on translating foreign
operations
Total comprehensive
income for the year
Exercise of share-
based options by
employees
Recognition of share-
based payments
Balance as at
1 January 2021
Profit for the year
Disposal of a foreign
operation
Re-measurement
of defined benefit
obligation
Exchange differences
on translating foreign
operations
Total comprehensive
income for the year
Exercise of share-
based options by
employees
Recognition of share-
based payments
Dividends
Balance as at
31 December 2021
(*) Less than 1K USD
The accompanying notes are an integral part of these financial statements.
68
ANNUAL REPORT & ACCOUNTS 2021
Consolidated Statements of Cash Flow
for the year ended 31 December
Net cash from operating activities
Investing activities
Interest received
Proceeds on disposal of property, plant and equipment
Proceeds on disposal of deposits
Proceeds on disposal of financial assets carried at fair value
through profit and loss
Purchases of property, plant and equipment
Increase of other intangible assets
Purchases of financial assets carried at fair value through
profit and loss
Purchases of deposits
Investment in joint venture and associated companies
Proceeds from sale of a subsidiary
Net cash from (used in) investing activities
Financing activities
Lease payment
Bank loan repayment
Bank loan received
Proceed on exercise of shares
Note
30
31
22
27
27
Net cash used in financing 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
2021
US$’000
5,592
3
18
315
402
(2,889)
(400)
–
(315)
(727)
18,662
15,069
(2,174)
(13,252)
10,431
58
(4,937)
15,724
50,575
(968)
65,331
2020
US$’000
18,459
101
39
3,122
761
(3,386)
(328)
(2,009)
(314)
(3,467)
–
(5,481)
(2,428)
(13,852)
12,980
51
(3,249)
9,729
40,584
262
50,575
The accompanying notes are an integral part of these financial statements.
69
ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
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 office 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 field of metropolitan area networks and of bio-
medical products, primarily laboratory diagnostics and eco-med equipment. The Bio-Medical division also distributes
products of third parties.
2
Adoption of new and revised International Financial Reporting Standards (IFRSs)
Amendments to IAS 1 – Classification of Liabilities as Current or Non-current
The amendments to IAS 1 affect only the presentation of liabilities as current or non-current in the statement of financial
position and not the amount or timing of recognition of any asset, liability, income or expenses, or the information
disclosed about those items.
The amendments clarify that the classification of liabilities as current or non-current is based on rights that are in
existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an
entity will exercise its right to defer settlement of a liability, explain that rights are in existence if covenants are complied
with at the end of the reporting period, and introduce a definition of ‘settlement’ to make clear that settlement refers
to the transfer to the counterparty of cash, equity instruments, other assets or services.
The amendments will be applied retrospectively for annual periods beginning on or after 1 January 2023, with early
application permitted.
3
Significant Accounting Policies
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS Standards) as issued by the International Accounting Standards Board (IASB).
Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis except for certain properties
and financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as
explained in the accounting policies below.
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 financial 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 financial 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 significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
70
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 l Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
l 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
l Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company and its subsidiaries. Control is achieved when the Company has power over the investee is exposed, or
has rights, to variable returns from its involvement with the investee and has the ability to use its power to affect its
returns.
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. Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated statement of profit or loss and other comprehensive income from the
date the Company gains control until the date when the Company ceases to control the subsidiary.
Profit 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 deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in
line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members
of the Group are eliminated in full on consolidation.
Investments in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate
in the financial 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 identifiable 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 identifiable assets and liabilities over the cost of the investment,
after reassessment, is recognised immediately in profit 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
71
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 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 reclassifies to profit 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 reclassified
to profit or loss on the disposal of the related assets or liabilities.
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 reflect 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.
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 profit
or loss as incurred.
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 identifiable assets acquired and the liabilities assumed. If, after reassessment,
the net of the acquisition-date amounts of the identifiable 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 profit 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 identifiable net assets. The choice of measurement
basis is made on a transaction-by-transaction basis.
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 benefit 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 first 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 profit or loss. An impairment loss recognised for goodwill is not reversed in
subsequent periods.
72
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 On disposal of an operating unit, the attributable amount of goodwill is included in the determination of the profit or
loss on disposal.
Revenue recognition
The Group recognises revenue from the following major sources:
l Sale of goods – Communication products, bio-medical products such as laboratory diagnostics and sterilisation
eco-med products
l Rendering of services – Related mainly to software services such as training and technical support, laboratory service
and maintenance related products sold
l 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 specific 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 satisfied 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 financial
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.
73
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an
expense immediately.
Leases
The Group as a lessee
At inception of the contract, the Group assesses whether an arrangement is a lease or contains a lease. 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 assets leased for a period of less than 12 months, and also to lease of assets with low economic value.
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 subsequently measured at amortised cost using the effective interest method.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, plus any lease payments
made at or before the commencement day, less any lease incentives received and any initial direct costs.
Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses, and 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 reflects 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 Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified
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.
Foreign currencies
The individual financial 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 financial statements, the
results and financial position of each Group company are expressed in the US dollar, which is the presentation currency
for the consolidated financial statements.
In preparing the financial 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 profit or loss for the period.
For the purpose of presenting consolidated financial 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
fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange
74
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 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 reclassified
from equity to profit 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 Officer (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 flows related to the relevant grant.
The Group policy to designated such loans as financial liabilities measured at amortised cost according to IFRS 9. The
difference between the liability and proceeds are recognised in the research and development expenses.
Employee benefits
Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have
rendered service entitling them to the contributions.
For defined benefit retirement plans, the cost of providing benefits 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 reflected immediately in the statement of financial 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 reflected immediately in retained earnings and will not be reclassified
to profit or loss. Past service cost is recognised in profit 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 defined benefit liability or asset.
Defined benefit costs are categorised as follows:
l service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
l net interest expense or income; and
l remeasurement.
The Group presents the first two components of defined benefit costs in profit or loss under employee benefits
expense. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the consolidated statement of financial position represents the actual
deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present
value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to
the plans.
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the
termination benefit and when the entity recognises any related restructuring costs.
75
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS Short-term and other long-term employee benefits
A liability is recognised for benefits 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 benefits expected to be paid in exchange
for that service.
Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the
benefits expected to be paid in exchange for the related service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated
future cash outflows 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.
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 profit
or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share
premium reserve.
Taxation
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 profit for the year. Taxable profit differs from profit before tax as reported in
the consolidated statement of profit 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 financial statements and the corresponding tax bases used in the computation of taxable profit. 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 profits 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 profit nor the accounting profit.
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 sufficient taxable profits against which to utilise the benefits of the
temporary differences and they are expected to reverse in the foreseeable future.
76
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 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 sufficient taxable profits will be available to allow all or part of the asset to be recovered.
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 reflects 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 profit 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 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 27-33 years.
Transfers from owner-occupied property to investment property are made when the Company ends owner-occupation.
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 financial 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 fittings
Leasehold Improvements
3%-6%
10%-33%
15%-25%
6%-15%
6%-20%
77
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 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 other income or expense.
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.
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:
l the technical feasibility of completing the intangible asset so that it will be available for use or sale;
l the intention to complete the intangible asset and use or sell it;
l the ability to use or sell the intangible asset;
l how the intangible asset will generate probable future economic benefits;
l the availability of adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset; and
l 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 first meets the recognition criteria listed above. Where no internally-generated intangible
asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.
Acquired intangible assets
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).
Amortisation is charged so as to write off the cost of assets over their estimated useful lives, using the straight-line
method, on the following bases:
Customer relationships and backlog
Technology
Other
10%-12.5%
14%-20%
10%
Subsequent to initial recognition, intangible assets are reported at cost less accumulated amortisation and accumulated
impairment losses.
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
78
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation
can be identified, 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 identified.
Intangible assets with indefinite 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 flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows
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 profit or loss, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
Inventory
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 “first-in-first-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 financial liabilities are recognised on the Group’s consolidated statements of financial position
when the Group becomes a party to the contractual provisions of the instrument.
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 profit 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 flows 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 financial assets are recognised and derecognised on a trade date basis.
Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time
frame established by regulation or convention in the marketplace.
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value,
depending on the classification of the financial assets.
79
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS Classification of financial assets
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
l the financial asset is held within a business model whose objective is to hold financial assets in order to collect
contractual cash flows; and
l the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
The majority of financial assets are measured subsequently at fair value through profit 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 financial assets other than purchased or originated credit-impaired financial 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 financial assets, a credit-adjusted effective interest rate
is calculated by discounting the estimated future cash flows, including expected credit losses, to the amortised cost of
the debt instrument on initial recognition.
The amortised cost of a financial asset is the amount at which the financial 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
financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.
The calculation does not revert to the gross basis even if the credit risk of the financial asset subsequently improves so
that the financial asset is no longer credit-impaired.
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 assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or
losses recognised in profit or loss. The net gain or loss recognised in profit or loss is included in the ‘other gains and
losses’ line item. Fair value is determined in the manner described in note 36.
Impairment of financial 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 reflect changes in credit risk since initial recognition of the respective
financial instrument.
The Group recognises lifetime ECL for trade receivables. The expected credit losses on these financial assets are
estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are
specific 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 financial instrument.
80
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of
the contractual arrangements and the definitions of a financial 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.
Financial liabilities
All financial liabilities are measured subsequently at amortised cost using the effective interest method or at FVTPL.
Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate
risks, including foreign exchange forward contracts and options. Further details of derivative financial 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 profit 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 profit 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.
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 based on management estimate of
the expenditure required to settle the obligation at the consolidated statements of financial position date, and are
discounted to present value where the effect is material.
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 significant effect on the amounts recognised in the financial 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 financial position date, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year, are discussed below.
81
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 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 flows
of the CGU and a suitable discount rate in order to calculate present value.
Judgments with respect to deferred tax assets
For the purposes of measuring deferred tax assets arising from loss carry-forwards in different territories, management
is required to use considerable judgment in estimation of the carried forward losses in which it expects to be able to
utilise in the foreseeable future. For additional information in respect of deferred tax assets 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.
Judgments with respect to warranty provision
Warranty provision was made on the basis of management’s estimation and on past experience.
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. An analysis of the Group’s revenues is as follows:
Sales of goods
Services
Construction contracts
Year ended 31 December
2021
$’000s
116,447
15,837
7,754
140,038
2020
$’000s
101,341
35,413
46,812
183,566
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”) and Edge Computing based on the Group’s
NFV operating system, Edgility OS (formerly NFVTime) as well as supply of carrier ethernet and access solutions in its
Network Edge business. In the Cyber unit, the Group provides network monitoring and encryption solutions for very high
speed, large area networks. 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.
82
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 A. Segment revenues and segment results
Year ended 31 December 2021
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
Total
$’000s
Revenues from external customers
Operating profit
Net finance income
Profit before tax
Year ended 31 December 2020
Revenues from external customers
Operating profit
Net finance expense
Profit before tax
27,992
7,844
112,046
16,534
–
–
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
54,884
(4,932)
128,682
19,165
-
-
B. Segment assets, liabilities and other information
As at 31 December 2021
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
74,951
23,904
1,659
2,114
116,474
40,826
3,525
7,961
1,739
4,300
80
-
Assets
Liabilities
Depreciation and amortisation
Additions to non-current assets
As at 31 December 2020
140,038
24,378
555
24,933
Total
$’000s
183,566
14,233
(934)
13,299
Total
$’000s
193,164
69,030
5,264
10,075
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
Total
$’000s
Assets
Liabilities
Depreciation and amortisation
Additions to non-current assets
73,830
30,955
2,403
925
124,398
50,388
2,984
4,672
1,878
200,106
–
88
–
81,343
5,475
5,597
83
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS C. Revenue from major products and services
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 and services
Diagnostic products
Eco-Med products**
2021
$’000s
15,376
12,616
71,832
31,576
8,638
140,038
2020
$’000s
13,552
41,332
65,961
22,962
39,759
183,566
* The decrease in Software services revenue derives mainly from the sale of a Group subsidiary. See note 31 (disposal of subsidiary) for further
details.
** 2020 Eco-Med products revenue includes $33m related to an exceptional ventilators project.
D. Revenue from major sources
Year ended 31 December 2021
Revenues
Sales of goods
Services
Construction contracts
Year ended 31 December 2020
Revenues
Sales of goods
Services
Construction contracts
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
15,376
7,131
5,485
27,992
101,071
8,706
2,269
112,046
–
–
–
–
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
13,552
29,272
12,060
54,884
87,789
6,141
34,752
128,682
–
–
–
–
Total
$’000s
116,447
15,837
7,754
140,038
Total
$’000s
101,341
35,413
46,812
183,566
84
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 E. Geographical segments
The Group operates in three principal geographical areas: United States of America, 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
2021
107,718
22,923
9,397
140,038
2020
126,791
47,671
9,104
183,566
2021
40,302
10,304
4,510
55,116
2020
36,276
23,621
4,685
64,582
7
Cost of revenues
Year ended 31 December
Direct costs – Components and subcontractors
Changes in inventory
Salaries and related benefits
Overhead and depreciation
Other expenses
2021
$’000s
74,136
2,942
7,330
2,726
1,843
88,977
2020
$’000s
110,244
(8,599)
16,666
3,030
1,515
122,856
8
Sales and marketing expenses
Year ended 31 December
Salaries and related benefits
Commissions
Outside services
Advertising and sales promotion
Overhead and depreciation
Travelling and other expenses
2021
$’000s
10,220
2,986
491
941
2,304
1,348
18,290
2020
$’000s
10,870
4,289
435
867
2,149
1,587
20,197
85
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 9
General and administrative expenses
Year ended 31 December
Salaries and related benefits
Professional services(*)
Overhead and depreciation
Other expenses
(*) Including auditors’ remuneration for audit
services
2021
$’000s
5,114
3,506
1,347
2,276
12,243
347
2020
$’000s
6,148
4,888
1,300
3,548
15,884
281
Amounts payable to Deloitte by the Group undertakings in respect of non-audit services in 2021 were $48 thousand (2020:
$19 thousand). In addition, payables in respect of non-audit services to others than the Company’s auditors, for tax and
internal audit services in 2021, were $51 thousand and $19 thousand, respectively (2020: $18 thousand and $11 thousand,
respectively).
10 Research and development expenses
Year ended 31 December
Salaries and related benefits
Components and subcontractors
Overhead and depreciation
Other expenses
Government grants
11 Staff costs
2021
$’000s
4,741
2,863
852
591
(334)
8,713
2020
$’000s
3,882
4,930
938
617
(109)
10,258
The average monthly number of employees in 2021 (including executive directors) was 1,023 (2020: 1,196).
Year ended 31 December
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
2021
$’000s
22,233
3,569
1,603
27,405
2020
$’000s
31,733
4,242
1,591
37,566
86
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 12 Other operating expenses (income)
Year ended 31 December
Profit from sale of a subsidiary(1)
Gain on reduction of holdings in an
associated company
Amortisation of intangible assets
Other
(1) See note 31 in relation to the disposal of a subsidiary
13 Finance income
Interest on bank deposits
Gain on derivative financial instruments
Gain on marketable securities
Foreign exchange differences, net
Other interest income
14 Finance expenses
Loss on derivative financial instruments
Foreign exchange differences, net
Interest on loans and bank fees
Interest on lease liabilities
2021
$’000s
(13,035)
–)
196
276)
(12,563)
2020
$’000s
–
(602)
304)
436)
138)
Year ended 31 December
2021
$’000s
3
–
25
895
543
1,466
2020
$’000s
94
223
81
–
422
820
Year ended 31 December
2021
$’000s
(44)
–
(643)
(224)
(911)
2020
$’000s
–
(684)
(768)
(302)
(1,754)
87
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS 15
Income tax expenses
Current tax
Tax on previous years
Deferred tax (note 26)
Taxation under various laws:
Israel
Year ended 31 December
2021
$’000s
(7,027)
(11)
(2,299)
(9,337)
2020
$’000s
(3,352)
(2)
2,311
(1,043)
The Company is an “industrial company” as defined in the Israeli Law for the Encouragement of Industry (Taxes) 1969.
a. The corporate income tax rate for the years 2020 and 2021 is 23%
b. Encouragement of Capital Investments Law:
a. The corporate tax rate for each company with Preferred Enterprise status for the years 2020 and 2021 is 7.5%.
Including additional tax tracks for Preferred Technological Enterprise (tax rate of 7.5% in Area “A” and tax rate
b.
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.
The Company has Preferred Enterprise status in area A and its Israeli subsidiaries are being assessed according to the
corporate income tax rate.
The Company and its Israeli subsidiaries have tax loss carry-forwards of $131.9 million for which the Group did not
create deferred tax assets. According to the Israeli tax law there is no expiry date to use such losses.
The Company tax assessments for the years up to and including the 2016 tax year are considered as final.
The United States of America
Telco Systems incurred losses for tax purposes. In addition, in accordance with U.S. tax law, Telco Systems elected to
amortise a substantial part of the excess cost paid by the Company in its acquisition over a period of 15 years, which
has resulted in tax loss carry-forwards. According to US law, losses created until 2017 can be carried forward for 20
years. As of 31 December 2021, the total carry-forward losses of Telco Systems amounted to $280.5 million of which
deferred tax asset of $3.1 million have been recognised in respect of such losses to the extent that a sufficient taxable
profit will be available in the foreseeable future.
On 22 December 2017, a Tax Cuts and Jobs Act law was enacted (the “Tax Act”). The Tax Act contains significant changes
to federal corporate taxes, including a permanent reduction of the corporate tax rate from 35% to 21% effective 1
January 2018.
Other jurisdictions
Taxation for other jurisdictions than those mentioned above is calculated at the rates prevailing in the respective
jurisdictions. The corporate income tax rate for subsidiaries with significant sales are: Moldova is 12%, Romania is 16%
and Italy is 24%.
88
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021
The Group has tax loss carry-forwards of $6.2 million in European subsidiaries and the Group did not recognise
deferred tax assets in respect of $5.2 million of such losses.
The income tax expenses for the year can be reconciled to the profit per the consolidated statement of profit or loss
as follows:
Year ended 31 December
Profit before tax
Tax expense at the Israeli statutory corporate income tax rate of 23%
Difference between equity method measurement basis and cost basis for
tax purposes related to disposal of a subsidiary
Differences between statutory tax in Israel (23%) and statutory tax rate for
subsidiaries abroad
Tax losses utilised in current period for which no deferred tax assets have
been recognised
Deferred tax assets recognised
Write-off of deferred tax assets
Tax on previous years
Other
Tax expenses for the year
16 Earnings per share
2021
$’000s
24,933
5,735
1,754
1,449
(154)
(191)
–)
11
733)
9,337)
2020
$’000s
13,299
3,059
–)
(339)
(166)
(4,072)
1,818)
2)
741)
1,043)
The calculation of the basic and diluted earnings per share is based on the following data:
Year ended 31 December
2021
2020
Earnings for the purposes of basic and diluted earnings per share ($'000s)
attributable to Owners of the Company
14,340
9,793
Number of shares
Weighted average number of ordinary shares for the purposes of basic
earnings per share
440,437,960
440,291,783
Effect of dilutive potential ordinary shares:
Share options
3,829,714
3,763,448
Weighted average number of ordinary shares for the purposes of
calculation of diluted earnings per share
444,267,674
444,055,231
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 225,000 (2020: 400,000).
89
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
17 Financial assets
Interest-bearing deposits
Financial assets at FVTPL
The average interest rate of deposits is 0.25% for 2021 and 2020.
18 Trade and other receivables
Trade and other receivables
Trade receivable account
Participation in research and development: Government of Israel
VAT authorities
Tax authorities
Construction contracts (see following table)
Prepaid expenses
Other debtors
Construction contracts
Composition:
Cumulative costs incurred due to works construction contracts
In addition - Recognised profits
Less accounts submitted to project customers
Year ended 31 December
2021
$’000s
158
2,274
2,432
2020
$’000s
157
2,646
2,803
31 December
2021
$’000s
25,451
90
2,226
257
1,474
3,634
1,800
2020
$’000s
24,889
1,101
1,273
126
5,790
6,468
1,820
34,932
41,467
31 December
2021
$’000s
8,493)
2,044)
(9,063)
1,474)
2020
$’000s
15,019)
1,023)
(10,252)
5,790)
The average credit period taken on sales of goods is 66 days (2020: 54 days). No interest is charged on the receivables. An
allowance has been made at 31 December 2021 for estimated irrecoverable amounts from the sale of goods of $3,499
thousand (2020: $3,556 thousand), including a loss allowance for expected credit losses according to IFRS 9. The directors
consider that the carrying amount of trade and other receivables approximates their fair value.
As of 31 December 2021, trade receivable account includes amounts of $6.4 million for which maturity date has expired
(including a receivable in the amount of $0.9 million that is overdue by more than a year), but the Group, based on past
experience and on the credit quality of the debtors and given that most of the debts have been collected by the date of
the approval of this annual report, has not made an allowance for doubtful debts since the Company expects that those
debts are to be collectible.
90
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 Credit risk
The Group’s principal financial assets are cash and cash equivalents, trade and other receivables, deposits and
investments at fair value. The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented
in the consolidated statements of financial position are net of allowances for credit loss.
19
Inventories
Raw materials
Work-in-progress
Finished goods
31 December
2021
$’000s
7,125
2,410
21,416
30,951
2020
$’000s
7,166
3,353
23,374
33,893
During 2021, $2.0 million of slow-moving inventory was impaired and expensed to the Profit or Loss account (2020:
$1.2 million).
20 Property, plant and equipment
($’000s)
Cost
Land and
buildings
Plant and
equipment
Motor
vehicles
Furniture
and
fittings
Leasehold
improvements
Total
At 1 January 2020
9,735)
17,088)
1,982)
4,181)
2,537)
35,523)
Additions
Disposals
Effect of translation adjustment
29)
–)
445)
2,352)
419)
(271)
(323)
565)
5)
351)
(35)
25)
334)
–)
121)
3,485)
(629)
1,161)
At 1 January 2021
10,209)
19,734)
2,083)
4,522)
2,992)
39,540)
Additions
Disposal
Disposal of subsidiary
29)
3,477)
394)
(265)
(229)
103)
(77)
2,036)
(29)
(797)
– )
–)
(1,197)
(11)
–)
Effect of translation adjustment
(519)
(621)
(115)
(88)
(86)
6,039)
(611)
(1,994)
(1,429)
At 31 December 2021
9,708)
21,528)
2,133)
4,460)
3,716)
41,545)
91
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
($’000s)
Accumulated depreciation
Land and
buildings
Plant and
equipment
Motor
vehicles
Furniture
and
fittings
Leasehold
improvements
Total
At 1 January 2020
2,392)
12,352)
1,285)
4,007)
Depreciation expense
Disposals
Effect of translation adjustment
At 1 January 2021
Depreciation expense
Disposals
Disposal of subsidiary
295)
–)
211)
2,898)
299)
–)
–)
1,002)
(154)
260)
247)
(248)
3)
191)
(34)
7)
1,284)
290)
–)
41)
21,320)
2,025)
(436)
522)
13,460)
1,287)
4,171)
1,615)
23,431)
1,332)
228)
(220)
(175)
(512)
–)
74)
(77)
–)
(71))
116)
–)
(338)
(30))
2,049)
(472)
(850)
(720))
Effect of translation adjustment
(232)
(301)
(86)
At 31 December 2021
2,965)
13,759)
1,254)
4,097)
1,363)
23,438)
6,743)
7,311)
7,769)
6,274)
879)
796)
363)
351)
2,353)
1,377)
18,107)
16,109)
Carrying amount
At 31 December 2021
At 31 December 2020
21
Investment property
At 1 January
Depreciation expense
Exchange rate differences
At 31 December
Amounts recognised in the consolidated statements of profit 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
92
2021
$’000s
1,878)
(80)
(59)
1,739)
2020
$’000s
1,899)
(88)
67)
1,878)
31 December
2021
$’000s
24)
(13)
(134)
2020
$’000s
171)
(154)
(34)
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021
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 year end are as
follows:
31 December 2021
31 December 2020
At amortised cost
$’000s
Fair value
$’000s
At amortised cost
$’000s
Fair value
$’000s
1,051
688
1,933
1,237
1,099
779
1,804
1,341
USA
Italy
The fair value in Italy and the USA was determined based on the market comparable approach that reflects 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 specific to the respective properties.
Average market price, taking into account the differences in location and individual factors, such as frontage and size,
between the comparables and the property, was $1,369 per square metre for the property in Italy and $159 per square
foot for the property in the USA.
22 Right-of-use assets
($’000s)
Cost
At 1 January 2020
Additions
Disposals
Effect of translation adjustment
At 31 December 2020
Additions
Disposals
Disposal of subsidiary
Effect of translation adjustment
At 31 December 2021
Plant and
equipment
Buildings
Motor vehicles
Total
–
–
–
–
–
848
–
–
–
848
11,209)
1,301)
–)
330)
12,840)
1,618)
(495)
(4,191)
(110)
9,662)
1,163)
481)
(213)
62)
1,493)
693)
(365)
(547)
(13)
1,261)
12,372)
1,782)
(213)
392)
14,333)
3,159)
(860)
(4,738)
(123)
11,771)
93
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
($’000s)
Accumulated depreciation
At 1 January 2020
Charge for the year
Disposals
Effect of translation adjustment
At 31 December 2020
Charge for the year
Disposals
Disposal of subsidiary
Effect of translation adjustment
At 31 December 2021
Carrying amount
At 31 December 2021
At 31 December 2020
Plant and
equipment
Buildings
Motor vehicles
Total
–
–
–
–
–
128
–
–
–
128
720
–
1,930)
1,950)
–)
58)
3,938)
1,706)
497)
466)
(214)
39)
788)
375)
2,427)
2,416)
(214)
97)
4,726)
2,209)
(285)
(365)
(650)
(175)
(1,071)
(896)
(6)
(7)
4,457)
616)
5,205)
8,902)
645)
705)
(13)
5,201)
6,570)
9,607)
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, respectively.
The maturity analysis of lease liabilities is presented in note 27.
Amounts recognised in profit or loss
2021
$’000s
2020
$’000s
Depreciation expense on right-of-use assets
2,209
2,416
Interest expense on lease liabilities
Expense relating to short-term leases
224
766
302
466
At 31 December 2021, the Group was committed to $0.4 million for short-term leases (2020: $0.3 million). The total cash
outflow for leases amounted to $2,174 thousand (2020: $2,428 thousand).
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 related to the Bio-Medical
segment in the amount of $9,401 thousand (2020: $9,478 thousand) is allocated to 5 CGUs: Eco-Med, Diagnostic,
Distribution, Distributor and provider of genetics tests and Analytical instruments distribution. The goodwill related to
the Networking and Cyber segment amounted to $1,984 thousand (2020: $7,360 thousand).
94
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021
The goodwill is allocated to the following CGUs:
Eco-Med: $2,550 thousand (2020: $2,550 thousand)
Diagnostic: $1,082 thousand (2020: $1,173 thousand)
Distribution: $1,116 thousand (2020: $1,137 thousand)
Distributor and provider of genetics tests: $1,073 thousand (2020: $1,038 thousand)
Analytical instruments distribution: $3,580 thousand (2020: $3,580 thousand)
Networking: $1,984 thousand (2020: $1,984 thousand)
Software services: $0 thousand (2020: $5,376 thousand). Related to NGSoft, which was sold during Q1 2021. See also
note 31 for further information.
The recoverable amounts of the CGUs are determined from value in use calculations except for 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 10.5% - 15.5% 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 flow forecasts derived from the most recent financial budget approved by management and
extrapolates indefinite cash flows based on estimated growth rates. For the purposes of this calculation management
have used revenue growth rates for the Networking CGU of 35%, 19%, 35%, 35%, 35% for years 1-5 respectively and
0% thereafter, for the Eco-Med CGU 23% for year 1, 10% for years 2-5 and 1% thereafter, for the Distribution CGU 8%
for year 1, 15% for years 2-5 and 5% thereafter, for the Distributor and provider of genetics tests CGU 8% for year 1, 5%
for years 2-5 and 1% thereafter, and for the Analytical instruments distribution CGU 13% for year 1, 9% for years 2-5
and 1% thereafter.
The average operating expenses have been assumed to grow for the Networking CGU at 39%, 27%, 34%, 24%, 25% for
years 1-5 respectively and then assumed to remain constant thereafter, and for the Eco-Med, Distribution, Distributor
and provider of genetics tests and Analytical instruments distribution CGUs at 5%, 8%, 8%, 9%, 9% for years 1-5
respectively and then assumed to remain constant thereafter. The average cost of goods sold has been assumed to
grow for the Networking CGU at 6%, (2%), 1%, 13%, 14% for years 1-5 respectively and then assumed to remain constant
thereafter, and for the Eco-Med, Distribution, Distributor and provider of genetics tests and Analytical instruments
distribution CGUs 10%, 13%, 14%, 14%, 14% for years 1-5 respectively and 4% thereafter. The rates used above reflect
historical rates achieved and expected levels for 2022 but then are adjusted for subsequent years.
The recoverable amount of the Diagnostic CGU is determined based on fair value, which accordingly no impairment
was required.
Sensitivity of the recoverable amount to changes in the key assumptions
The recoverable amount of the Distributor and provider of genetics tests activity is higher than the carrying amount in
the amount of $0.9 million. Reduction of 2% growth rate taken into account in calculating the value in use of the activity
will result in a decrease of $0.8 million recoverable amount of the activity and no goodwill impairment will be recorded.
Increase of 3% in pre-tax discount rate taken into account in calculating the value in use of the activity will result in a
decrease of $0.86 million recoverable amount of the activity and no goodwill impairment will be recorded. The changes
in assumptions fo the sensitivity analysis will lead to changes in other assumptions used in the calculation of value in use.
95
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS Balance at 1 January
Additions in the year
Disposal of a subsidiary (*)
Foreign exchange difference
Balance at 31 December
(*) see note 31.
24 Other intangible assets
Cost
At 1 January 2020
Additions(*)
Disposals
Effect of translation adjustments
As at 1 January 2021
Additions(*)
Disposals
Disposal of subsidiary
Effect of translation adjustments
At 31 December 2021
Accumulated amortisation
At 1 January 2020
Amortisation expense
Disposal
Effect of translation adjustments
At 1 January 2021
Amortisation expense
Disposal
Disposal of subsidiary
Effect of translation adjustments
At 31 December 2021
Carrying amount
At 31 December 2021
At 31 December 2020
2021
$’000s
16,838)
–)
(5,185)
(268)
11,385)
2020
$’000s
16,804)
–)
(504)
538)
16,838)
Customer Relationships
and Backlog
$’000s
Technology
$’000s
Other
$’000s
Total
$’000s
16,420)
17,180)
2,694)
36,294)
–)
–)
716)
17,136)
–)
–)
(4,896)
(535)
11,705)
328)
–)
562)
18,070)
400)
(1,264)
(199)
(451)
16,556)
–)
–)
142)
2,836)
477)
–)
(1,554)
(54)
1,705)
328)
–)
1,420)
38,042)
877)
(1,264)
(6,649)
(1,040)
29,966)
15,818)
11,302)
2,233)
29,353)
154)
–)
659)
463)
–)
328)
101)
–)
105)
718)
–)
1,092)
16,631)
12,093)
2,439)
31,163)
43)
–)
(4,504)
(513)
11,657)
48)
505)
547)
(106)
(91)
(233)
12,210)
4,346)
5,977)
126)
–)
(1,086)
(28)
1,451)
254)
397)
716)
(106)
(5,681)
(774)
25,318)
4,648)
6,879)
(*) Includes capitalised development costs according to IAS 38.
96
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021
25 Subsidiaries
A list of the significant direct and indirect investments in subsidiaries, including the country of incorporation, and percent
of ownership interest as at 31 December 2021 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
Telecommunication
United States of America
100%
Distribution
Eco-Med
Distribution
Diagnostics
Diagnostics
Cyber
Distribution
Distribution
Romania
Hungary
Moldova
Italy
Italy
Israel
Hungary
Israel
100%
75%
51%
100%
100%
67%
100%
100%
Date of
acquisition
April 2000
June 2007
February 2008
July 2008
February 2009
November 2009
April 2012
January 2016
January 2017
26 Deferred tax
Deferred tax assets
The following are deferred tax assets recognised by the Group and movements thereon during the current and prior
reporting period (see also note 15).
Retirement benefit
obligations
$’000s
Losses carried
forward
$’000s
Other(*)
$’000s
At 1 January 2020
Change for the period
Effect of translation adjustments
At 1 January 2021
36)
(36)
–)
–)
Change for the period
–)
Effect of translation adjustments
–)
At 31 December 2021
–)
3,168)
2,415)
176)
5,759)
(2,280)
(104)
3,375)
30)
(29)
(1)
–)
–)
–)
–)
Total
$’000s
3,234)
2,350)
175)
5,759)
(2,280)
(104)
3,375)
The Company incurred tax losses in certain jurisdictions, to which deferred tax assets relate, to the extent that it is
expected that future taxable profit will be available and can be utilised against them. The deferred tax assets were
analysed based on forecasted operations and existing agreements and backlog. The Company expects that taxable
profits will be available, as a result of an increasing demand, new products and expansion to new markets.
97
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
Deferred tax liabilities
At 1 January 2020
Change for the period
Effect of translation adjustments
At 1 January 2021
Change for the period
Effect of translation adjustments
Disposal of a subsidiary
At 31 December 2021
Intangible
assets
$’000s
Tangible assets
and other
$’000s
98)
(15)
7)
90)
(16)
(1)
–)
73)
528)
54)
39)
621)
35)
(19)
(540)
97)
Total
$’000s
626)
39)
46)
711)
19)
(20)
(540)
170)
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 amount to: $12,873 thousand as of 31 December 2021 (31 December 2020: $15,386 thousand).
27 Financial and other liabilities
Trade and other payables
Trade creditors
Salary accruals
VAT and other tax
Dividend payables
Provision
Other creditors and accruals
31 December
2021
$’000s
20,701
7,195
4,336
4,300
–
10,987
47,519
2020
$’000s
22,373
8,511
3,515
–
2,059
17,160
53,618
Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The
average credit period taken for trade purchases was 59 days (2020: 58 days). The directors consider that the carrying
amount of trade payables approximates to their fair value.
Long-term bank credit
Long-term bank credit
98
31 December
2021
$’000s
1,356
1,356
2020
$’000s
675
675
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 Long-term liabilities
Liability to the office of the chief scientist
Government institutions and other
31 December
2021
$’000s
2,685
1,203
3,888
2020
$’000s
3,269
3,147
6,416
Changes in financial liabilities where the cash flows in respect thereof are classified as to financing activities
2021
Short term
Long term
2020
Short term
Long term
Open
balance
$’000s
Cash flow from (used in)
finance activities, net
$’000s
Foreign exchange
differences
$’000s
5,365
675
6,040
Open
balance
$’000s
5,915
762
6,677
(3,565)
744)
(2,821)
(166)
(63)
(229)
Cash flow used in
finance activities, net
$’000s
Foreign exchange
differences
$’000s
(830)
(42)
(872)
280)
(45)
235)
Close
balance
$’000s
1,634
1,356
2,990
Close
balance
$’000s
5,365
675
6,040
Disclosure required by IFRS 16
Maturity analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
31/12/2021
$’000s
31/12/2020
$’000s
2,186
1,682
1,240
1,047
741
398
7,294
2,244
2,116
1,489
1,082
1,006
2,747
10,684
99
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
28 Share capital
Authorised:
Issued and fully paid:
Ordinary shares of NIS 0.01 each (number of shares)
2021
1,000,000,000
440,534,124
2020
1,000,000,000
440,434,124
The Company has one class of ordinary shares which carry no right to fixed income.
During the year, 100,000 options were exercised by an employee (see also note 33). During 2020, 155,050 options were
exercised by 20 employees.
29 Dividends and buyback
On 14 December 2021, the shareholders approved the distribution of a dividend of 0.74 pence (sterling) per ordinary
share, amounting to a total payout of $4.3 million. The amount was fully paid during the first quarter of 2022.
For information about the Company buyback programme, see note 37 – Post balance sheet events.
30 Note to the cash flow statement
Year ended 31 December
Operating profit 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
2021
$’000s
24,378)
716)
4,548)
(229)
Profit from sale of a subsidiary
(13,035)
Capital gain on reduce of holdings in associated company
Stock options granted to employees
Increase (decrease) in retirement benefit obligation
Increase (decrease) in provisions
Operating cash flow before movements in working capital
Decrease (increase) in inventories
Decrease (increase) in receivables
Increase (decrease) in payables
Effects of exchange rate changes on the balance sheet
Cash from operations
Income taxes paid
Income taxes received
Interest paid
Net cash from operating activities
–)
96)
(10)
(1,803)
14,661
3,031)
(2,052)
(5,352)
(1,616)
8,672)
(2,383)
–)
(697)
5,592)
2020
$’000s
14,233)
718)
4,757)
31)
–)
(602)
158)
96)
2,114)
21,505)
(11,198)
916)
7,111)
1,729)
20,063)
(637)
3)
(970)
18,459)
100
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 31 Disposal of subsidiary
On 19 March 2021, the Group entered into a sale agreement to dispose of NG Soft Ltd. (“NGSoft (to Aztek Technologies
(1984) Ltd., a provider of ICT cloud services in Israel and a portfolio company of SKY Fund (the “Buyer”). NGSoft is a
software and digital services company that provides creative digital and technology solutions.
NGSoft
Net assets disposed
Property, plant and equipment
Right of use
Other intangible assets
Net working capital
Lease liability
Current tax liability
Deferred tax liability
Goodwill
Net assets disposed of
Disposal of a foreign operation translation reserve
Gain on disposal
Total consideration
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents, net
Cash and cash equivalents disposed
2021
US$ in thousands
1,144)
3,667)
968)
73)
(3,764)
(584)
(540)
5,185)
6,149)
(522)
13,035)
18,662)
20,903)
(2,241)
18,662)
32 Guarantees and liens
The Group provided from time to time bank guarantees due to advances from customers.
The Company registered several liens in favour of banks.
33 Share-based payments
Equity-settled share option scheme
In November 2021, the Company approved a Share Incentive Plan (hereinafter: “the 2021 Plan”), under which the Company
can grant options or restricted share units or allot shares (including restricted shares), according to the procedures,
terms and conditions specified in the Share Incentive Plan. Options granted prior to the 2021 Plan are subject to the
101
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS terms and conditions under which they were granted. As of the balance sheet date, the Company had not made any
grants under the 2021 Plan.
Details of the share options outstanding during the year are as follows:
2021
2020
Number
of share
options
Weighted average
exercise price
(in GBP)
Outstanding at beginning of year
5,756,200
Granted during the year
225,000
Forfeited during the year
Exercise during the year
(250,000)
(100,000)
Outstanding at the end of the year
5,631,200
Exercisable at the end of the year
5,247,867
0.2867
1.0502
0.5976
0.4340
0.3008
0.2505
Number
of share
options
5,575,395
400,000
(64,145)
(155,050)
5,756,200
3,056,200
Weighted average
exercise price
(in GBP)
0.2613
0.6385
0.3701
0.2475
0.2867
0.2360
The outstanding options at 31 December 2021 had a weighted average exercise price of 0.3008 GBP, and a weighted
average remaining contractual life of 6.3 years. On 21 February 2021, 225,000 options were granted for an estimated fair
value of $200 thousand which were calculated according to the Black-Scholes model. On 21 May, 2020, 400,000 options
were granted for an estimated fair value of $249 thousand which were calculated according to the Black-Scholes model.
The inputs into the Black-Scholes model for the options granted are as follows:
Weighted average share price (GBP)
Weighted average exercise price (GBP)
Expected volatility
Expected life
Risk-free rate
Expected dividends
2021
1.05
1.05
82%
3
1.3%
0%
2020
0.92
0.64
67%
3
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 $96 thousand and $158 thousand related to equity-settled share-based
payment transactions in 2021 and 2020, respectively.
34 Retirement benefit obligation
Defined contribution plans
The Group operates defined contribution retirement benefit 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.
102
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021
Total expenses related to the contribution retirement benefit schemes are: $453 thousand in the year 2021 (2020:
$1,112 thousand).
The employees of the Group’s subsidiaries in the United States are members of a state-managed retirement benefit
scheme operated by the government of the Unites States. The subsidiary contributes a specified percentage of payroll
costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the
retirement benefit scheme is to make the specified contributions.
Defined benefit plans
The Group operates defined benefit 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 benefits equivalent to years of service multiplied by 8.33% of final salary on either
attainment of a retirement age of 67 (men) and 65 (women) or redundancy. No other post-retirement benefits are
provided to these employees.
In Italy each employee is entitled to have a severance payment as soon as they end employment under one of the
conditions specified below 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 defined benefit obligation were carried
out at 16 January 2022 by Alexey Trakshinsky, FILAA on behalf of Elior Weissberg Ltd., a member of the Institute of
Actuaries regarding the employees in Israel. The present value of the defined benefit, 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 inflation rate
Employee turnover rate
2021
2.15%
1-4%
2.56%
8%
2020
2.10%
1-4%
1.40%
8%
Amounts recognised in comprehensive income in respect of these defined benefit plans are as follows:
Service cost:
Current service cost
Net interest expenses
Components of defined benefit costs recognised in profit or loss
2021
$’000s
193
11
204
2020
$’000s
215
12
227
103
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS Re-measurement on the net defined benefit liability:
Return on plan assets (excluding amounts included in net interest
expense)
2021
$’000s
80
Actuarial gains and losses arising from changes in financial assumptions
15
Actuarial gains and losses arising from other
Components of defined benefit costs recognised in other comprehensive
67
162
2020
$’000s
4))
2)
(21)
(15)
The amount included in the consolidated statements of financial position arising from the entity’s obligation in respect
of its defined benefit plans is as follows:
Present value of funded defined benefit obligation
Fair value of plan assets
Net liability
2021
$’000s
2,044
(1,423)
621
2020
$’000s
2,574
(1,746)
828
Movements in the present value of the defined benefit obligation in the current period were as follows:
Opening defined benefit obligation
Current service cost
Interest cost
Remeasurement (gains)/losses arising from changes in financial
assumptions
Benefits paid
Disposal of a subsidiary
Exchange rate differences
Closing defined benefit obligation
2021
$’000s
2,574)
193)
37)
(75)
(552)
(76)
(57)
2,044)
2020
$’000s
2,445)
215)
41)
19)
(247)
–)
101)
2,574)
104
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021
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
Benefits paid
Disposal of a subsidiary
Exchange rate differences
Closing fair value of plan assets
35 Related party transactions
Remuneration of key management personnel
Short- and long-term employee benefits
Shared-based payment
2021
$’000s
1,746)
26)
88 )
52)
(449)
(71)
31 )
1,423))
2021
$’000s
1,912
–
1,912
2020
$’000s
1,730)
28)
4)
51)
(190)
–)
123)
1,746)
2020
$’000s
2,378
84
2,462
Transactions with associated companies
During the year, the Group provided various services to an associated company for an amount of $1,162 thousand.
36 Financial Instruments
(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, benefits 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 defined 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) Significant accounting policies
Details of the significant 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 financial asset,
financial liability and equity instrument are disclosed in note 3 to the financial statements.
105
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
(c) Categories of financial instruments
Financial assets
Cash and cash equivalents*
Fair value through profit or loss
Fair value through OCI
Receivables
Financial liabilities
At amortised cost
Fair value through profit or loss
Financial assets
Cash and cash equivalents*
Fair value through profit or loss
Fair value through OCI
Receivables
Financial liabilities
At amortised cost
Fair value through profit or loss
2021
$’000s
65,331
2,935
524
28,815
56,142
47
2020
$’000s
50,575
3,306
524
40,068
57,353
–
* Cash and cash equivalents comprises $2.4 million deposits up to three months and $62.9 million cash (2020: $11.6 million deposits up to three
months and $39.0 million cash).
The majority of the assets included in fair value through profit or loss section measurements are level 1 fair value
measurements, defined as those derived from quoted prices (unadjusted) in active markets for identical assets.
(d) Financial risk management objectives
The Group’s Finance function provides services to the business, coordinates access to domestic and international
financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk
reports that analyse exposure 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 flow 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 financial 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 financial derivatives and non-
derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is
reviewed by the internal auditors on a continuous basis.
106
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 (e) Market risk
The Group’s activities expose it primarily to the financial 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 financial 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, which derive mostly from existing monetary assets and liabilities.
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
fluctuations 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:
NIS
EUR
RON
MDL
GBP
Other
Liabilities
Assets
2021
$’000s
9,650
24,332
4,826
2,737
388
2,240
2020
$’000s
14,873
26,559
4,300
1,983
323
4,810
2021
$’000s
26,400
33,212
11,711
3,862
3,764
2,067
2020
$’000s
21,034
32,680
8,871
3,532
441
1,019
Foreign currency sensitivity
The Group is mainly exposed to EUR, NIS, GBP, RON and MDL.
The following table details the Group’s sensitivity to a 10% change in USD against the respective foreign currencies
in 2021. The 10% 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 financial year and held constant throughout the reporting period. A positive number indicates
an increase in profit or loss and other equity where the USD weakens against the respective currency. If the USD were
to strengthen by the same percentage against the respective currency there would be a similar but reverse impact on
the profit or loss and equity as presented in the tables below.
107
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
Profit or loss
NIS Impact
EUR Impact
GBP Impact
Equity
NIS Impact
EUR Impact
MDL Impact
GBP Impact
RON Impact
Other currencies Impact
2021
$’000s
1,724
396
362
2021
$’000s
(49)
492)
112)
(24)
689)
(17)
2020
$’000s
417
(151)
29
2020
$’000s
199)
763)
155)
(17)
457)
(379)
The Group’s main exposure derives from its cash, receivables and payables at year end..
The Company engages in financial instruments contracts such as forward contracts, call and put options and structured
instruments in order to manage foreign currencies exposure as needed.
During the year, the Company engaged in three financial instruments, which resulted in $44 thousand recorded as
finance expenses (2020: five financial instruments, which resulted in $223 thousand recorded as finance income).
(g) Interest rate risk management
The Group is exposed to interest rate risk because entities in the Group may borrow funds at both fixed and floating
interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate
borrowings. The Group’s exposure to interest rate on financial assets and financial liabilities are detailed in the following
table (refer to section h). The exposure to floating 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 flows, and by matching the maturity profiles of financial assets and
liabilities.
108
Notes to the Consolidated Financial Statements (continued)for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021 Financial liabilities
Weighted average
effective interest
rate
31 December 2021
Non-interest bearing
Bank loans interest
bearing (*)
Lease liabilities
31 December 2020
Non-interest bearing
Bank loans interest
bearing (*)
Lease liabilities
%
–
4.20
2.05
–
3.12
2.92
0-3 months
3 months to
1 year
1-5 years
$’000s
$’000s
$’000s
Total
$’000s
42,646
552
546
43,744
47,695
736
561
48,992
450
1,082
1,640
3,172
405
4,629
1,683
6,717
4,692
47,788
1,356
2,990
5,108
11,156
7,294
58,072
6,325
54,425
675
6,040
8,440
15,440
10,684
71,149
(*) Part of the bank loans are linked to a fix rate plus Euribor.
The future bank loan interest to be paid is $128 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 significant.
(j) Fair value of financial instruments carried at amortised cost
The fair value of the financial instruments of the Group carried at amortised cost is not considered to be materially
different from the stated amortised cost.
37 Post balance sheet events
(a)
In January 2022, the Group and its partners in Ador invested an additional amount of $10m, of which the Group
contributed $4m. Following this additional investment, the Group’s shareholding in Ador is 37.21% (compared with
36.7% in December 2020).
(b) On 17 March 2022, the Group received shareholder approval for a share buyback programme. As at the date of this
report, the Group had purchased 200,000 ordinary shares.
109
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2021ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS
Other Alternative Measures
Income statement adjustments
The Group has made reference in the annual report to a number of adjustments regarding (1) the contribution to both years
from NGSoft, a subsidiary that the Group sold in March 2021; (2) the contribution to 2020 from a significant contract for the
supply of ventilators; and (3) adjustments related to the amortisation of intangible assets. These adjustments are outlined below:
Year ended 31 December
2021 (Unaudited)
Reported
results
Adjustments to
exclude NGSoft and
ventilator contract
Amortisation
of intangible
assets
Adjusted results
(ongoing
operations)
US$ thousands
Revenues
Gross profit
Gross margin (%)
Sales and marketing expenses
General and administrative
expenses
Research and development
expenses
Other operating expenses
(income)
140,038
51,061
36.5%
18,290
12,243
7,262
1,235
17.0%
144
358
8,713
–
(12,563)
(12,994)
Operating profit
EBITDA
24,378
29,642
13,727
13,956
–
(414)
–
–
–
106
154
(674)
–
132,776
50,240
37.8%
18,146
11,885
8,607
277
11,325
15,686
Year ended 31 December
2020 (Unaudited)
Reported
results
Adjustments to
exclude NGSoft and
ventilator contract
Amortisation
of intangible
assets
Adjusted results
(ongoing
operations)
US$ thousands
Revenues
Gross profit
Gross margin (%)
Sales and marketing expenses
General and administrative
expenses
Research and development
expenses
Other operating expenses
(income)
Operating profit
EBITDA
183,566
60,710
33.1%
20,197
15,884
10,258
138
14,233
19,708
70,997
20,105
28.3%
3,304
2,680
1,747
159
12,215
13,140
The above does not form part of the audited financial statements.
110
ANNUAL REPORT & ACCOUNTS 2021
-
(414)
-
-
-
-
145
(559)
-
112,569
41,019
36.4%
16,893
13,204
8,511
(166)
2,577
6,568
EBITDA measurement
The Group uses EBITDA as a performance measure, which is calculated as follows:
Reported
Adjusted
Year ended 31 December
Year ended 31 December
2021
(Unaudited)
2020
(Unaudited)
2021
(Unaudited)
2020
(Unaudited)
Operating profit
Amortisation of Intangible assets
Depreciation
EBITDA
24,378
716
4,548
29,642
14,233
718
4,757
19,708
The above does not form part of the audited financial statements.
11,325
–
4,361
15,686
2,577
–
3,991
6,568
111
ANNUAL REPORT & ACCOUNTS 2021FINANCIAL STATEMENTS Company Information
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
Company Secretary
Mr. Yair Livneh
Auditors
Deloitte Israel & Co.
1 Azriely Center,
Tel-Aviv, Israel
Financial Adviser & Stockbroker
Shore Capital
Cassini House,
57 St James's Street,
London SW1A 1LD, UK
Registrar
Link Group
10th Floor, Central Square,
29 Wellington Street,
Leeds LS1 4DL, UK
Financial PR Consultants
Luther Pendragon
48 Gracechurch Street,
London EC3V 0EJ, UK
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
112
ANNUAL REPORT & ACCOUNTS 2021 ANNUAL REPORT
AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2021
B
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2
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1
Neve Ne’eman Ind. Area
4 Ha’harash Street, P.O.B. 7318
4524075 Hod Hasharon
Israel