FOR THE YEAR ENDED 31 DECEMBER 2022
ANNUAL REPORT
AND ACCOUNTS
CONTENTS
STRATEGIC REPORT
Highlights
2
Strategic Framework
3
Chairman’s Statement
4
Q&A with the CEO
6
Operational Review
8
Stakeholder Engagement
11
CFO’s Review
13
Key Performance Indicators
16
Business Model
17
Sustainability Review
18
TCFD Report
20
Risk Management
27
CORPORATE GOVERNANCE
Directors’ Biographies
31
Corporate Governance Report
35
Audit Committee Report
42
Directors’ Remuneration Report
45
Directors’ Report
63
FINANCIAL STATEMENTS
Independent Auditor’s Report
67
Consolidated Financial Statements
71
Notes to the Consolidated Financial Statements
76
Other Alternative Measures
121
Company Information
123
12.7%
REVENUE GROWTH FOR
ONGOING OPERATIONS
WHEN EXCLUDING
CONTRIBUTION
FROM EXCEPTIONAL
COVID-19 SALES
$26M
CYBER SECURITY ORDER
FROM GOVERNMENT
DEFENCE CUSTOMER
(SIGNED EARLY JANUARY 2023)
REVENUE
$116.1M
($125.6M ON CONSTANT
CURRENCY BASIS*)
(2021: $132.8M**)
EBITDA
$8.0M
(2021: $15.7M**)
HIGHLIGHTS
MULTI-YEAR
CONTRACT SIGNED
WITH CITYFIBRE
FOR EDGILITY
CONTINUED TO REALISE
INHERENT VALUE
WITHIN BATM WITH
$4.5M
PROPERTY SALE
STRONG BALANCE
SHEET WITH
$44.2M
IN CASH AND CASH
EQUIVALENTS AND SHORT-
TERM INVESTMENT IN
DEPOSITS AND OTHER
SECURITIES AT 31
DECEMBER 2022
* Revenue for ongoing operations for 2022 based on the currency rates
prevailing in 2021
** Adjusted to present the results for 2021 on an ongoing operations basis by
excluding (1) the contribution from NGSoft, a subsidiary the Group sold in
March 2021, and (2) the amortisation of intangible assets
ANNUAL REPORT &
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3
STRATEGIC REPORT
We deliver
high-technology
solutions
That solve complex
challenges in mission-
critical, large-scale
applications
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
And differentiate through…
Our intellectual property
The world-leading expertise of our
employees
Innovative, robust, reliable and cost-
effective solutions
While seeking to accelerate
our growth
By establishing partnerships,
collaborations and joint ventures to
maximise resources and enhance our
routes-to-market
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
We serve blue-
chip customers
worldwide
Including enterprises,
governments and
international agencies
Strategic Framework*
BATM’s purpose is to deliver high-technology innovations that make
a significant difference to the human experience
With a focus
on the global
sectors of…
Bio-medical solutions
and
Networking and cyber
security
STRATEGIC REPORT
* As detailed further in this Strategic Report, since becoming CEO on 1 January 2023, Moti Nagar has been assessing BATM's strategy and preparing a
growth plan, which may result in a change to the strategic framework going forward.
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In 2022, we delivered a solid performance while navigating
substantial global economic change – with the main effects
of the pandemic subsiding, inflationary cost pressures and
significant fluctuations in currency exchange. Against this
backdrop, I am pleased to report a strong performance
in both of our divisions, with Group revenue increasing
by 12.7% for ongoing operations when excluding the
exceptional contribution of sales of COVID-19 products to
both years.
We achieved a key milestone with Edgility, our edge
computing and virtual networking solution, which was
awarded a multi-year contract by a major network provider
in the UK, CityFibre. This is an important validation of
this product. We were thrilled to receive, shortly post
year end, a $26m order for our latest high-performance
cyber security solution, which was from our long-standing
government defence department customer. Our diagnos
-
tics business was strengthened with the launch of new
molecular diagnostics tests and progressing the develop
-
ment of others, including establishing collaborations with
the Stop TB Partnership and BIOASTER to accelerate this
process. We also opened a new state-of-the-art laboratory
in Israel and product assembly rooms in Rome.
Accordingly, while we were not immune to the currency
headwinds and reduced demand for COVID-19 products,
our business was strengthened during the year and we
delivered a solid underlying performance.
LEADERSHIP SUCCESSION
Having founded BATM in 1992, after 30 years, Dr. Zvi Marom
felt it was the natural time to hand over the running of the
Group and, accordingly, from 1 January 2023, he assumed
the role of Non-executive Director. On behalf of the Board,
I would like to thank Zvi for his tireless commitment and
outstanding contribution to the development and success
of BATM. Under his leadership, the team at BATM has
delivered exceptional value creation for shareholders. He
has passed on BATM in a strong financial position and with
a solid platform to push ahead with the commercialisation
of the IP developed within the Group. He remains a highly
valued member of our Board and continues to contribute
to BATM's business.
I am delighted that Zvi’s successor as CEO is Moti Nagar,
who had been our CFO since 1 January 2015 and having
joined BATM in June 2014 as VP Finance. In recent years,
in addition to being the CFO, he had been the de facto
COO of the Group, running the day-to-day operations.
Moti is highly respected by the people in the Group and
our shareholders, and the Board and I look forward to
supporting him as he takes BATM forward on the next
stage of its exciting journey.
We were also pleased to announce, on 1 February 2023,
the appointment of Ran Noy as CFO and as a designated
Director who will become a member of the Board follow-
ing the approval of shareholders (in accordance with
Israeli law). He had already made a valuable contribution
to BATM since joining us as VP Finance in 2021, building on
his experience with other international, public companies,
and we look forward to this continuing.
In addition, we welcomed back Dr. Avigdor Shafferman
as a Non-executive Director during the year. He made
an excellent contribution to our business as an External
Director from 2015-2018 and we are now, again, able to
leverage his wealth of knowledge and experience, particu-
larly within medical markets.
Chairman’s
Statement
Dr. Gideon Chitayat
Chairman
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SUSTAINABILITY
As we have said before, making a positive impact on
individuals, communities, businesses and the environ
-
ment has always been important to BATM. This is reflected
in our choice of target sectors, from eco-friendly solutions
for pathogenic waste treatment and diagnostic solutions
for infectious disease to small footprint network operating
systems, among others.
However, during the year we began a process to gain a
greater understanding of our own environmental impact
and to systematically assess the risks and opportunities
that are presented to our business by climate change.
As part of these efforts, we are putting in place new
frameworks and procedures, which also have application
beyond environmental matters, that will strengthen our
organisation and make it more sustainable. While it is still
relatively early days, I am proud of the progress that we
have made to date, which is detailed in the TCFD Report
on pages 20-26.
SHAREHOLDER RETURNS
The Board considers returns to shareholders to be an
important element of its strategy to deliver shareholder
value. I am pleased that BATM was able to return almost
$6m in aggregate to shareholders during 2022, through
a dividend payment and a share buy-back programme,
while also maintaining a robust balance sheet.
STRATEGY AND OUTLOOK
We started 2023 as a stronger company than we were
prior to the outbreak of the pandemic. We are experi-
encing good momentum across our business and our
backlog is significantly higher than this time last year. We
expect Edgility to achieve even greater success in 2023
while in diagnostics we are ideally placed to capitalise
on the demand for quicker and more accurate testing.
Importantly, we expect revenue growth in all our business
units this year.
Since becoming CEO in January, Moti has been reviewing
BATM's plans in order to set BATM’s strategy, for approval
by the Board, to enable us to achieve sustainable growth.
We are looking to bring a greater focus to our business,
including assessing how resources can be best allocated
to create value and where value should be realised from
what we have today. Our objectives are to continue to
innovate while enhancing our global marketing capabilities
in order to accelerate our future growth. We look forward
to updating shareholders on the outcome of this process
in due course.
I would like to thank our shareholders for their support
and commitment to BATM. With the solid foundations
that we have in place, the Board remains confident in the
prospects of the business and we will do our best to deliver
the substantial value that exists within our Company.
STRATEGIC REPORT
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.
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.
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.
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Q
:
What excites you most about BATM?
What excites me most is BATM’s potential – and that we are
now on the cusp of truly realising that potential. We have
strong products that are ready to be marketed and we
have built up a significant amount of IP, while continuing to
innovate. It is now the time to take this unique technology
and make it a commercial success, capturing market share.
And it is amazing to see how big the markets are that we are
dealing with. The global diagnostics market is worth $104bn;
cyber security and encryption is $10bn; and the market for
carrier ethernet and Edgility is over $70bn. What’s more,
these are some of the most dynamic industries that exist
today – constantly innovating to provide real solutions to
real problems. We have an opportunity to really make our
mark here, so this is a very exciting time for us.
Having become CEO at the start of this year and spending
time visiting our business units, I am also excited by the
enthusiasm and motivation of our people. They are a core
strength of BATM and our success would not be possible
without their drive and commitment. It is great to see that
they share the Board’s ambition.
Q
:
What were the highlights of 2022 for you?
The most important aspect of 2022 was that we moved
beyond COVID-19 and returned to our regular activities
as a much stronger business. Our diagnostics business
had, of course, benefited from the pandemic and in 2022
went back to normality, but it was normality in a completely
different world. At BATM, we have been talking about
infectious disease and molecular diagnostics for many
years – and during the pandemic, the world caught up.
Now every lab has a PCR system and health authorities
understand the threat of infectious disease. The market for
our solutions is much larger.
But it’s not just our diagnostics business. In the Networking
& Cyber division, the pandemic was challenging, but also
educational: we learnt a lot and so emerged stronger
here too. It was a real testament to our strength that in
2022, our revenue in the Networking & Cyber division was
essentially the same as the previous year despite having
sold our NGSoft subsidiary in 2021.
This return to normality in a stronger position was a key
highlight for the year.
A very important milestone in 2022 was the winning of our
first major contract for Edgility. Over the last five years we
Moti Nagar
Chief Executive Officer
Q&A with
the CEO
ANNUAL REPORT &
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7
STRATEGIC REPORT
invested over $35m to create a product from scratch that
was ahead of anything that the market had seen before.
Winning a contract from CityFibre, a leading network
provider in the UK – and which followed the award of a
contract from CEMEX, a multi-billion-dollar organisation,
in late 2021 – demonstrated that we have built the right
product and that the market is ready to adopt it. These are
significant endorsements.
Another key highlight is the $26m, multi-year cyber security
order, which was signed just after year end. This award,
which makes us the sole supplier of this government’s
encryption platform, followed several years of extremely
thorough testing by this customer and reflects the highly
advanced nature and superiority of our solution. This is
another very important milestone.
And of course, to be chosen as CEO of BATM was also a
personal and professional highlight of 2022 for me!
Q
:
What are BATM’s main priorities for 2023?
I am in the process of finalising a new strategy for the
entire BATM Group. This will be launched in the coming
months and then our priority will be to successfully roll it
out. The basis of this new strategy is to bring more focus to
our business. We’re looking to allocate resources in a much
more defined way – focusing on where we have unique IP
and brand presence in large markets, and where we can
really grow. This also involves seeking opportunities to
accelerate our growth in our chosen markets and realising
value from those businesses that don’t fit our vision for the
future of the company.
We also look forward to welcoming further Edgility custom
-
ers this year. In 2022, we established new partnerships to
boost our sales and marketing and expand our routes-to-
market and we engaged with several potential customers
worldwide as well as securing the CityFibre contract. This
year, we plan to build on this to significantly increase our
backlog for Edgility.
Equally, we plan to establish further partnerships across
the business. As we have done in the past, we want to enter
new partnerships and collaborations with large organi
-
sations that will enable us to maximise our resources,
particularly in terms of R&D activities.
As we work towards achieving our full commercial promise,
we also want to generate a new energy in the company –
as one team, one business. We want employees to think
of themselves as part of a global company and to ‘think
big’. Part of this entails increased engagement with our
employees, which is something I also plan to enhance
with our stakeholders as a whole by communicating more
openly and regularly. It might not always be good news,
but we want to be transparent and consistent in our
communications.
Q
:
What are your plans for capital allocation?
We are constantly reviewing how best to allocate the capital
of the Group. Our key priority this year is to support the
growth of the business by providing resources to execute
on our new strategic plan. An important part of this could
be M&A. We have great products so we would not be
buying technology or IP, but we would buy a company with
a strong tier 1 presence in our core markets. A business
that would boost our routes-to-market and immediately
strengthen our marketing capabilities – saving us time
and helping maintain our technological advantage in an
industry where time is of the essence.
Our other priorities include working capital, which is
essential for a growing company. We also continuously
keep under review making returns to our shareholders. We
are always evaluating what is the best use of our capital
in the interests of our business and our shareholders as a
whole.
Q
:
What makes you confident in the future?
I do not underestimate the task ahead of us. However,
we have all the essential ingredients for success – great
people, world-leading IP, capital and the drive to realise our
ambitions.
We have a long track record of delivering great products
and great service, and a history of successful innovation.
More importantly, we are now at the point of finishing our
major investment in R&D: we have the products and are
ready to sell them – and, as 2022 has shown, the market is
ready to accept our solutions.
What’s more, we are operating in growth markets where
there is a real need for our technologies. Our diagnostic
products, for example, continue to provide tools for the
global battle against disease well beyond the pandemic.
And as I said earlier, our target markets are substantial. If
there are already established giants in the market, there is
also plenty of room for companies like BATM with strong
know-how and IP.
I am very confident that this will be the year of change and I
am very excited to be on this journey.
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Operational Review
BATM performed well during the year to 31 December 2022.
Revenue increased by 34.4% from ongoing operations in
the Networking & Cyber division, which offset the contri-
bution to the previous year from NGSoft, a subsidiary that
BATM sold in 2021. BATM also gained good traction for its
Edgility edge computing and virtual networking solution,
which is now poised for rapid commercialisation. In the
Bio-Medical division, there was a reduction in revenue, as
expected, compared with the exceptional performance in
the previous year due to the pandemic. When excluding
the contribution to both years from sales of products
related to COVID-19, the Bio-Medical division revenue grew
by 6.7% - with increased sales more than offsetting the
negative effect of currency fluctuations.
NETWORKING & CYBER DIVISION
Networking
In the Networking unit, revenue on an ongoing operations
basis (excluding the contribution to 2021 from NGSoft)
increased by 20.5%. This reflects higher sales of BATM’s
network edge solutions and services and a material contri
-
bution to growth from Edgility.
Edgility – Edge Computing and Network
Function Virtualisation solutions
BATM achieved a significant milestone during the year with
the signing of a multi-year contract with CityFibre, the UK’s
largest independent carrier-neutral Full Fibre platform, for
the deployment of its Edgility virtual networking and edge
compute solution, which followed an extensive testing
and piloting phase. This is part of CityFibre’s programme
to replace its hardware-based customer premise routing
equipment with a virtualised solution based on small-foot-
print
white-box
appliances
(a
multi-purpose
device)
operated by Edgility. For this initial order, BATM will receive
recurring licence fees for a five-year period plus certain
hardware sales estimated to be worth a total of $3.5m.
BATM expects this order to be followed by a substantial
expansion in deployments as CityFibre rolls out Edgility to
its full network.
BATM also commenced executing, and received its first
revenue, on two contracts for Edgility, which are expected
to have an aggregate value of $2.7m over a five-year period,
that were awarded at the end of 2021. This includes the
first enterprise customer for Edgility, CEMEX, S.A.B, (NYSE:
CX), which is a global construction materials company,
and e-Qual, a global Managed Services Provider based in
France that operates in 55 countries.
Edgility continued to undergo evaluation with leading
network operators, multi-service providers and systems
integrators
worldwide,
including
CityFibre
as
noted
above. Edgility is fast being recognised internationally as
a breakthrough solution and has won several industry
awards. Consequently, the interest in Edgility has seen a
significant increase and BATM is in advanced discussions
with several potential customers having undertaken further
proof-of-concepts in Q4 2022 and in the current year. As at
year end, the total backlog for Edgility was $5.2m.
To expand the sales and marketing reach, and provide
further routes to market, BATM continued to establish
strategic partnerships, which primarily involve Edgility
being pre-integrated with, or pre-installed on, the partner's
network appliances (with customers that use the Edgility
solution contracting with BATM directly). During the year,
this includes establishing partnerships with:
l
Advantech (TWSE: 2395), a global leader in industrial
IoT, which is providing Edgility pre-installed on a variety
of its universal edge network appliances.
l
NEXCOM International Co Ltd (TPEX: 8234), a leading
supplier of network appliances, which offers Edgility
pre-installed on its 5G-ready device designed for the
small-office-home-office
and
mid-range
enterprise
market.
Network Edge solutions and services
Revenue from network edge solutions and services, where
BATM provides carrier ethernet and mobile backhaul
platforms, grew significantly driven by sales price and
volume increases, despite the ongoing impact of global
electronic components shortages causing delays to the
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STRATEGIC REPORT
9
delivery of some orders. This growth was primarily based
on orders from existing customers for BATM’s new 100GE
devices, such as the TM-8104 carrier ethernet aggregation
solution, as well as from the fulfilment in 2022 of carrier
ethernet sales secured in 2021. In addition, BATM launched
a new multipurpose, ultra-high-capacity demarcation
platform, the TM-8106, and has received initial strong
interest.
Cyber
The Cyber unit performed strongly with revenue increasing
by 73.1% year-on-year, primarily reflecting the execution of
contracts awarded in 2021 and with a backlog still to be
delivered in 2023. This was significantly increased, post
period, with the award in January 2023 of a $26m order
from BATM’s long-standing defence department customer
to be delivered over a period of a maximum of five years.
BATM continues to expect to receive more orders from this
customer within this period.
The Cyber unit also continued its development efforts. This
included advancing its previous generation of product to
increase performance and throughput – resulting in the
$26m order in January 2023 – as well as continuing the
development of a version of its cyber security solution
aimed beyond the defence industry, including for the
corporate market, which will significantly expand the
addressable market.
BIO-MEDICAL DIVISION
Diagnostics
Revenue in the Diagnostics unit accounted for 12.8% of the
Bio-Medical division compared with 28.2% in 2021. There
was an increase in revenue from BATM’s range of molecu-
lar diagnostic products that are not related to COVID-19,
which were sold to customers in Europe and the Middle
East. However, this increase was more than offset by lower
demand, as well as a market-wide reduction in prices,
for COVID-19 products as the global pandemic subsided,
alongside a negative impact of the strengthening of the US
dollar against local currencies.
This year BATM continued with its programme to enhance
its diagnostic operations. At its Adaltis subsidiary, this
included steps to optimise the production process. BATM
opened a new state-of-the-art laboratory in Israel, which
is focused on research & development, and new product
assembly rooms in Rome, Italy, to support the activity of
BATM’s associate company, ADOR Diagnostics (“ADOR”),
which is developing the NATlab molecular biology solution.
BATM also continued to progress its development work.
This includes its new molecular diagnostics test for multiple
respiratory pathogens receiving CE certification and being
commercially launched towards the end of the year. BATM
is continuing to develop new kits, such as for sepsis, as well
as collaborating on projects such as to develop a new test
for the diagnosis of tuberculosis as part of its work with the
Stop TB Partnership.
ADOR established the development of its novel isothermal
rolling circle amplification (“RCA”) method for multiplex
pathogens detection. In parallel, work continued on
incorporating it into the NATlab system. The respiratory
panel is planned to be the first commercial application
of this technology.
In addition, ADOR has initiated a new
test for the diagnosis of sexually transmitted infections
in cooperation with BIOASTER, the French Microbiology
Technology Research Institute.
During the year, BATM and its partners invested an
additional $10m into ADOR, of which the Group contrib-
uted $4m (giving BATM a shareholding of 37.2%). The
additional investment contributed to the opening of the
new laboratory and 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 interna-
tional bodies, including the World Health Organisation.
Eco-Med
The Eco-Med unit accounted for 7.6% of the Bio-Medical
division’s revenues in 2022 compared with 7.7% in 2021.
There was good progress in deliveries of BATM’s solution,
the ISS AGRI, for the treatment of pathogenic waste in
agricultural and pharmaceutical settings. This was primar
-
ily under contracts that had previously been secured, but
where completion had been delayed due to pandemic-re-
lated restrictions. BATM completed the delivery of two of
its ISS AGRI contracts and advanced the delivery of two
further contracts. The delivery of the latter two contracts
was impacted by supply chain disruption – with one of
the solutions now undergoing final engineering ahead of
completion and the solution under the other contract soon
to be installed.
BATM also received a €3.6m order for its ISS-based
bio-waste treatment solutions for medical settings, with
delivery commencing in Q4 2022 and due to complete
in 2023. The order was from a new customer, a hospital,
and BATM expects to receive a follow-on order in due
course.
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Distribution
Revenue in the Distribution unit accounted for approxi-
mately 79.7% of the Bio-Medical division’s revenue (2021:
64.1%). On a reported basis, revenue was broadly in line
with the previous year due to the negative currency
impacts, however underlying sales, excluding currency
impact, increased by 6.8%. This underlying growth was
based on a greater volume of regular business as well as an
increase in sales prices and was achieved despite a decline
in COVID-19 related sales. Excluding the contribution to
both years of sales of COVID-19 related products, revenue
in the Distribution unit increased by 10.3%, with greater
sales more than offsetting the currency impact. Towards
the end of the year, BATM gained control of one of its
associated companies.
OUTLOOK
BATM entered 2023 with strong momentum across the
business and a solid backlog to be delivered during the
year. Accordingly, BATM expects to report strong growth
for 2023, reflecting a double-digit percentage increase in
revenue in all units.
In particular, in the Networking & Cyber division, BATM
expects the main contributor to growth to be from sales
of Edgility – including new customers and expansion with
existing customers. In the Cyber unit, BATM is on track for
strong growth based on delivery of its backlog of orders
received prior to 2023 and the commencement of delivery
of the $26m order awarded in January of this year. As
noted, BATM also expects to receive further orders in its
Cyber unit during the year. In addition, the strong revenue
growth in the Networking & Cyber division is expected to
enable the division to generate an operating profit for full
year 2023.
In the Bio-Medical division, BATM expects significant
growth of sales of its diagnostic products in 2023. BATM
is not including in its forecasts the $25m tender, as noted
in its trading update announcement of 8 December 2022,
for COVID-19 testing kits from a potential customer in
Southeast Asia. However, the strong growth anticipated
of BATM’s diagnostic products not related to COVID-19
is expected to deliver a year-on-year increase in the
Diagnostic unit’s revenue. BATM continues to expect
increased revenue in the Distribution and Eco-Med
units.
Since becoming CEO on 1 January 2023, Moti Nagar has
commenced a detailed process of assessing BATM’s
strategy and preparing a plan to accelerate BATM’s sustain-
able growth. BATM will update the market on the outcome
of this undertaking in due course.
BATM has established solid foundations in core technolo
-
gies that it believes will be market disrupters. The Group
is profitable with a very strong balance sheet comprising
both cash and short-term investment in deposits and
other securities of $44.2m as at year end as well as
property and valuable IP. In addition, BATM’s total current
backlog is significantly higher than at the same point last
year. Accordingly, the Board of BATM remains confident in
the prospects for the business and continues to explore all
options to deliver shareholder value.
Innovation
and invention
We harness extraordinary technical
and entrepreneurial talents to bring
leading, disruptive technologies
successfully to market, at scale.
OUR VISION AND VALUES
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.
Our vision is to be leaders in high-technology innovations that make a significant difference to the human experience
Operational Review
CONTINUED
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STRATEGIC REPORT
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
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.
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
Attendance at trade shows
l
Working to understand growth drivers
in our customers’ markets
Financial Investors
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
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
2022 HIGHLIGHTS
l
Over 200 new customers won
l
More than 100 customer training
programmes conducted, with participation
of approximately 1,100 individuals
l
Customer satisfaction surveys*
2022 HIGHLIGHTS
l
Approximately 30 shareholder meetings or
scheduled calls
l
Hosted investor webinars to present FY
2021 and H1 2022 results
ANNUAL REPORT &
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12
Employees
Our people are our greatest asset. In order
to recruit and retain the best talent, we must
ensure that we are an employer of choice and
that our employment policies are sensitive to our
employees’ priorities and requirements.
How we engage
l
A dedicated Human Resources function
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
Communities
We strive to be a responsible corporate citizen
within the local and wider communities in which
we operate, by aiming to behave 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
Encouragement of employees to
work to further charitable goals
2022 HIGHLIGHTS*
l
Held ‘round table’ discussions between
employees and management
l
Off-site teambuilding event
2022 HIGHLIGHTS
l
Activities undertaken for over 30
organisations
l
Charitable donations to a number of
organisations totalling c. $65k
* Examples from across the Group's activities
ANNUAL REPORT &
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13
Having been named as CFO of BATM in February 2023, I am
excited to be taking on this new role at such a pivotal time.
The foundations of our business have been strengthened and
both of our divisions are poised for robust growth in 2023
and beyond. But first, let us review the year to 31 December
2022.
Total Group revenue for the year was $116.1m (2021: $132.8m
for ongoing operations
1
, which excludes the contribution from
NGSoft, a subsidiary that we sold in March 2021), with growth
in the Networking & Cyber division being offset by a reduction
in the Bio-Medical division, primarily reflecting lower sales of
COVID-19 products as well as the impact of the strengthening
of the US dollar. On a constant currency basis, revenue for the
year was $125.6m. Excluding the contribution to both years of
COVID-19 related sales, the revenue for ongoing operations
increased by 12.7% to $107.8m (2021: $95.6m), more than
offsetting the negative currency impact.
Gross margin for the year was 33.0% compared with 37.8%
for ongoing operations for the previous year. This reflects the
contribution to FY 2021 revenue of the high-margin COVID-
19 products. Excluding the contribution of COVID-19 related
products to both years, gross margin for ongoing operations
improved to 32.0% (2021: 29.7%) as increased sales prices
offset the negative impact of currencies and inflation.
Sales and marketing expenses were $17.2m (2021: $18.1m for
ongoing operations; $18.3m on a reported basis to include
NGSoft), representing 14.8% of revenue compared with 13.7%
for ongoing operations in 2021. The decrease in expenses
reflects the costs associated with COVID-19 product sales in
2021, with the reduction being partly offset by price inflation.
General and administrative expenses were $13.0m (2021:
$11.9m for ongoing operations; $12.2m on a reported basis),
representing 11.2% of revenue (2021: 9.0% for ongoing
operations). R&D expenses were $7.0m (2021: $8.6m for
ongoing operations; $8.7m on a reported basis).
Other operating income was $2.4m, which was mainly from
the disposal of one of our properties in the US – generating
a profit of $2.1m. This compares with other operating income
in the previous year of $12.6m, which was mainly attributed to
the profit from the sale of NGSoft.
Adjusted operating profit was $3.7m (2021: $11.3m), with the
reduction primarily due to the lower revenue from COVID-
19 products. On a reported basis, operating profit (which
includes amortisation and, for 2021, the contribution from
NGSoft) was $3.1m compared with $24.4m for 2021, with the
prior year including a capital gain of $13.0m from the sale of
NGSoft.
Chief Financial
Officer’s Review
Adjusted*
Reported
$m
2022
2021
2022
2021
Revenue
116.1
132.8
116.1
140.0
Revenue on a
constant
currency basis**
125.6
-
-
-
Gross margin
33.0%
37.8%
32.7%
36.5%
Operating profit
3.7
11.3
3.1
24.4
* Adjusted to present the results an ongoing operations basis by excluding
from 2021 (1) the contribution from NGSoft, a subsidiary that we sold in
March 2021, and (2) the amortisation of intangible assets.
** Revenue from ongoing operations for 2022 based on the currency
rates prevailing in 2021.
Ran Noy, CPA
Chief Financial Officer
1
Throughout this Chief Financial Officer’s Review, ‘ongoing operations’ refers to the reported results adjusted to exclude the contribution to 2021 from
NGSoft, a subsidiary of the Networking & Cyber division that was sold in March 2021. 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 121.
ANNUAL REPORT &
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14
As a result of the above, EBITDA for 2022 was $8.0m compared
with $15.7m for 2021 for ongoing operations and $29.6m on a
reported basis.
Net finance expense was $1.2m (2021: $0.6m net finance
income). The higher financial expenses were mainly due to the
impact on balance sheet positions of the strengthening of the
US dollar compared with 2021.
We recorded a $0.3m tax expense (2021: $9.3m tax expense).
The tax decrease is a result of an approximately $1m non-cash
tax incentive and lower profit before tax while 2021 included a
non-recurring tax expense related to the NGSoft transaction.
Net profit after tax attributable to equity holders of the parent
was $0.2m (2021: $14.3m) resulting in basic earnings per share
of 0.06¢ (2021: 3.26¢).
As at 31 December 2022, inventory was $34.5m (31 December
2021: $31.0m). Trade and other receivables were $36.5m (31
December 2021: $34.9m).
Intangible assets and goodwill at 31 December 2022 were
$18.5m (31 December 2021: $16.0m).
Property, plant and equipment and investment property
was $15.9m (31 December 2021: $19.8m), with the reduction
primarily due to the disposal of one of our properties.
The balance of trade and other payables was $46.3m (31
December 2021: $47.5m).
Cash used in operations (before interest and tax payments)
was $1.1m compared with cash from operations of $8.7m
in 2021 due to the higher profit in the prior year because of
COVID-19 related sales.
At 31 December 2022, we had cash and cash equivalents and
short-term investment in deposits and other securities of
$44.2m (31 December 2021: $67.8m). Short-term investment
in deposits and other securities represent cash deposits of
more than three months’ duration, held for trading bonds
and marketable securities. The change in cash and cash
equivalents and short-term investment in deposits and other
securities compared with the prior year primarily reflects
dividend payment of $4.3m; buy-back payments of $1.3m; an
additional investment in ADOR of $4m; tax payments relating
to the NGSoft transaction; and the impact of the weakening
of the currencies in which our subsidiaries operate compared
with the US dollar.
Divisional Performance
Networking & Cyber Division
Revenue in the Networking & Cyber division increased
by 34.4% on an ongoing operations basis (excluding the
contribution to 2021 from NGSoft), reflecting robust growth in
both the Networking and the Cyber units. As a result of this
strong underlying performance, we achieved revenue on a
reported basis in line with the previous year despite the sale
of NGSoft.
Gross margin improved in the Networking and Cyber units
respectively. On a blended basis, the division’s gross margin
for ongoing operations was 44.7% compared with 45.0%,
which reflects the change in the division’s revenue mix based
on the relative contribution from the Networking and Cyber
unit respectively. On a reported basis, gross margin increased
substantially due to the lower margin nature of the NGSoft
business included in the previous year.
Operating loss from ongoing operations was reduced to $0.9m
(2021: $5.6m loss) thanks to the higher revenue and gross
profit as well as the contribution from the sale of a property as
described in the Financial Review below. On a reported basis,
the operating loss was $1.2m compared with an operating
profit of $7.8m for 2021 as a result of the exceptional capital
gain of $13.0m from the sale of NGSoft in the prior year.
Adjusted*
Reported
$m
2022
2021
2022
2021
Revenue
27.9
20.7
27.9
28.0
Gross margin
44.7%
45.0%
43.9%
36.9%
Operating
(loss)/profit
(0.9)
(5.6)
(1.2)
7.8
* Adjusted to present the results an ongoing operations basis by excluding
from 2021 (1) the contribution from NGSoft, a subsidiary that we sold in
March 2021, and (2) the amortisation of intangible assets.
Chief Financial Officer’s Review
CONTINUED
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15
STRATEGIC REPORT
Bio-Medical Division
Revenue for the Bio-Medical division was $88.3m (2021:
$112.0m). On a constant currency basis, excluding the impact
of the strengthening of the US dollar against local currencies,
revenue was $97.5m. Revenue in the division was negatively
impacted by the decline in market demand for COVID-19
products; excluding the contribution to both years from
COVID-19 related products, revenue increased by 6.7% from
$74.9m in 2021 to $79.9m in 2022.
Adjusted gross margin for the division was 29.4% (2021: 36.5%),
primarily reflecting the contribution to revenue in 2021 of the
higher-margin COVID-19 products. Excluding COVID-19 related
products, gross margin in the Bio-Medical division increased
from 25.4% in 2021 to 27.6% in 2022. The Bio-Medical division
generated an adjusted operating profit of $4.6m for 2022
compared with $17.0m for the previous year.
Adjusted*
Reported
$m
2022
2021
2022
2021
Revenue
88.3
112.0
88.3
112.0
Revenue on a
constant
currency basis**
97.5
-
-
-
Gross margin
29.4%
36.5%
29.2%
36.4%
Operating profit
4.6
17.0
4.3
16.5
* Adjusted to exclude the amortisation of intangible assets.
** Revenue for 2022 based on the currency rates prevailing in 2021.
ANNUAL REPORT &
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16
Key Performance Indicators
The Group reviews its key performance indicators ("KPIs") on an ongoing basis to ensure they remain relevant. Following
the introduction of the new strategy in the coming months, further KPIs will be selected as the most appropriate measures
of strategy execution for the Group.
Revenue
$116.1m
(2021: $132.8m for ongoing operations*)
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
Growth in the Networking & Cyber division was offset by a reduction in the Bio-Medical division due
to lower sales of COVID-19 products and negative currency impact. On a constant currency basis, revenue for the
year was $125.6m. Excluding sales of COVID-19 products in both years, revenue increased 12.7%.
Cash from/(used in) operations
$(1.1)m
(2021: $8.7m from operations)
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
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
The change is mainly due to the higher profit in the prior year because of COVID-19 related sales.
EBITDA
$8.0m
(2021: $15.7m for ongoing operations*)
Description
Group earnings before interest, tax, depreciation and amortisation.
Why it is a KPI
Measure of our effectiveness in turning revenue into earnings.
Performance
The reduction in EBITDA was primarily due to the higher revenue in the prior year because of
COVID-19 related sales.
*Adjusted to present the results on an ongoing operations basis by excluding the contribution to 2021 from NGSoft, a subsidiary that the Group sold in March 2021.
ANNUAL REPORT &
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17
STRATEGIC REPORT
Our business units:
l
Diagnostics
l
Eco-Med
l
Distribution
Revenue model
Revenues are generated from the sale and
distribution of consumables and equipment, and
from providing equipment service & maintenance
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.
Business Model
Networking & Cyber
Division
Our business units:
l
Networking
▲
Edgility
▲
Network Edge
l
Cyber
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 primarily focused
on edge computing and Network Function
Virtualisation (NFV) with Edgility
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 & 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
Bio-Medical Division
l
In diagnostics, BATM develops 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 medical,
agricultural and pharmaceutical waste
l
BATM also administers tests and distributes
diagnostic equipment and medical supplies of
other leading brands
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
and agricultural pathogenic
waste
ANNUAL REPORT &
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18
Sustainability Review
Sustainability is a key element of the Group’s business and
building a business to last has always been part of its ethos.
Through medical diagnostics, eco-friendly waste treatment
and nutrient recovery systems and technologies enabling
a smarter world, BATM’s solutions are designed to address
the societal challenges of today and what the Group believes
will be the demands of the future. The Group now also
has activities underway to be able to formally assess and
manage the environmental impact of its operations as well
as the challenges, risks and opportunities posed by climate
change. As detailed in the following TCFD Report, the Group
commenced this undertaking towards the end of the year
with implementation having begun in 2023.
PEOPLE
BATM’s people are vital to sustaining success. In order to
recruit and retain the best talent, the Group must ensure
that, across its businesses, it is an employer of choice and
that its employment policies and practices are sensitive to
employees’ priorities and requirements.
BATM has employees in six countries, including scientists,
engineers, sales & marketing personnel and those in
corporate functions, and aims to adhere to certain principles
in terms of employee engagement and employment
practices across the Group.
Engagement
BATM understands the importance of maintaining open and
transparent communication with its workforce, and listening
to its people and taking into account their feedback. To
support employee engagement, the Group has a dedicated
human resources function comprising a network of human
resources departments at subsidiary level each headed up
by a VP-level executive.
The senior management within the Group’s businesses
regularly communicate with employees on areas including
Group strategy and progress. The Group holds periodic
‘roundtable’
discussions
for
employees
to
meet
with
management to share their views, raise any concerns and
make suggestions on how the workflow in their departments
could be improved. The Group also holds off-site team building
events and company celebrations. In 2023, the objective is to
build on these activities to create a consistently high standard
of workforce engagement across the business.
BATM prioritises training and development for its workforce,
which was continued during 2022. The Group has training
schemes focused on product training, skills enhancement
and
the
achievement
of
additional
career-enhancing
qualifications, and often supply in excess of two weeks
training per year for individual employees.
Diversity, Equality & Inclusion
BATM recognises the benefits to its business of supporting
diversity, equality and inclusion for long-term sustainable
success. The Group is 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.
The Group promotes equal opportunities within all of its
businesses and aligns its approach with international human
rights standards. The Group educates all new employees on
its Code of Conduct and provides training programmes for
all of the workforce on the prevention of sexual harassment.
BATM believes its 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:
l
race, colour, nationality, ethnic or national origins;
l
gender, sexual orientation, marital or family status;
l
religious or political beliefs or affiliations;
l
disability, impairment or age.
As detailed further on page 39 of the Corporate Governance
Report, as a company incorporated in Israel, BATM is subject
to the Israeli Law of Equal Opportunity at Work (1988), which
forbids discrimination on the basis of (among others) race,
nationality, state of origin and gender, including in hiring
job candidates. The law states that if an employer asks an
employee or candidate for such details, it will be assumed
that the employer has violated the non-discrimination
provision. The Group operates in compliance with this law.
Health, Safety & Wellbeing
BATM prides itself on providing high levels of standards on
the health and safety of its employees. The Group has, and
adheres to, health and safety guidelines across the Group,
and also has welfare programmes. During 2022, the Group
invested in a more extensive warehouse facility, with improved
ANNUAL REPORT &
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19
STRATEGIC REPORT
working conditions and new facilities for employees such as
showers and changing rooms, and renovated a number of
offices to improve the working environment. The Group also
provides clothing for employees working in manufacturing
areas. There were no health and safety incidents reported and
the Group did not receive any regulatory fines or penalties in
relation to health and safety matters during the year.
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.
The whistleblowing procedure is managed by an independent
administrator who is a partner at an Israeli 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 2022, there were no instances of whistleblowing
reports, bribery, corruption or business interruptions as a
result of regulatory activity.
COMMUNITIES
BATM strives to be a responsible corporate citizen within
the local and wider communities in which it operates by
behaving in a socially responsible manner and supporting
local businesses and charities. While the Company does not
have a formal Group-wide approach, during 2022 activities
were undertaken within the Group to support over 30
organisations. This included raising and donating money
to support a retired employee who has brain cancer and
enable her to relocate to an accessible home.
In addition, a key tenet of BATM’s strategy is the research and
development of solutions to counter the spread and improve
the diagnosis of infectious disease, and the management
team regularly gives their time as expert advisors in the field
of medical diagnostics. The Group’s 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. The
Group achieves this through producing solutions that,
relatively, have a small footprint, are simple to use and are
available at an appropriate price point.
ENVIRONMENT
The Group has taken important steps during the year, and
subsequently, towards assessing and managing its impact
on the environment, incorporating climate-related risks
and opportunities into its business planning and reporting
thereon. Developing awareness of environmental guidelines
at operating facilities, upgrading energy and lighting
systems and developing waste management procedures
are examples of some of the initiatives to improve the
Group’s environmental impact that have already been
made. The Group is now developing a more comprehensive
and systematic approach to measuring its environmental
footprint. This activity is detailed in the TCFD Report that
follows.
There were no environmental incidents and the Group did
not receive any regulatory fines or penalties in relation to
environmental matters during the year.
The Group has several solutions that both support
environmental
sustainability
and
drive
business
opportunities, including:
l
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. This technology
can also be used for the recovery of high-quality protein
and oils from insects.
l
Environmental measuring systems, including solutions for
testing air pollution levels in large manufacturing plants.
l
Edgility, the Group’s network function virtualisation
solution, which reduces the amount of hardware needed
and the need for on-site provisioning, enabling customers
to consume less energy and reduce the carbon footprint
for the same output.
ANNUAL REPORT &
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20
TCFD Report
OVERVIEW OF THE TASK FORCE ON CLIMATE
RELATED FINANCIAL DISCLOSURES
ABOUT TCFD
The World Economic Forum has identified climate risks
as the top global risk for negatively impacting a significant
proportion of global GDP, population or natural resources
since 2017. To improve and increase reporting on climate-
related financial information, the Financial Stability Board
(“FSB”) created the Task Force on Climate-related Financial
Disclosures (“TCFD”) in 2015. The TCFD released the disclosure
recommendations in 2017 to help companies provide better
information. They were designed to become a natural part
Figure 1 – The core elements of the Recommended Climate-related Financial
Disclosures, June 2017
Governance
The organisation’s governance around climate-related risks
& opportunities.
Strategy
The actual and potential impacts of climate-related risks and
opportunities on the organisation’s businesses, strategy and
financial planning.
Risk Management
The processes used by the organisation to identify, assess
and manage climate-related risks.
Metrics and Targets
The metrics and targets used to assess and manage relevant
climate-related risks and opportunities.
of companies’ risk assessment and planning process and to
assist in the transition to a low-carbon economy. Multiple
jurisdictions have since aligned mandatory corporate climate
disclosure with the TCFD framework, and this progression is
expected to grow as governments increase efforts to deliver
on their de-carbonisation strategies.
The TCFD disclosure framework is structured around four
thematic areas that are core to how organisations operate:
governance, strategy, risk management and metrics and
targets. There are 11 recommended disclosures under these
four themes, which support the building of transparent and
accurate reporting, the management of risk and a strategic
planning approach that takes into consideration climate-
related issues.
Governance
Strategy
Risk
Management
Metrics
and Targets
ANNUAL REPORT &
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21
STRATEGIC REPORT
TCFD Recommendation
Status
Listing
Governance
a) Describe the board’s oversight of climate-related risks
and opportunities.
Full disclosure
See page 22
b) Describe management’s role in assessing and managing
climate-related risks and opportunities.
Full disclosure
See page 22
Strategy
a) Describe the climate-related risks and opportunities the
organization has identified over the short, medium, and
long term.
In progress
b) Describe the impact of climate related risks and oppor-
tunities on the organization’s businesses, strategy, and
financial planning.
In progress
c) Describe the resilience of the organization’s strategy,
taking into consideration different climate-related scenar
-
ios, including a 2°C or lower scenario.
In progress
Risk Management
a) Describe the organization’s processes for identifying and
assessing climate-related risks.
Full disclosure
See pages 25 and 27
b) Describe the organization’s processes for managing cli-
mate-related risks.
Full disclosure
See pages 25 and 27
c) Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organization’s overall risk management.
In progress
Metrics and Targets
a) Disclose the metrics used by the organization to assess
climate-related risks and opportunities in line with its strat-
egy and risk management process.
In progress
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks.
In progress
c) Describe the targets used by the organization to manage
climate-related risks and opportunities and performance
against targets.
In progress
The table below shows the TCFD eleven recommended climate-related disclosures and the status of each disclosure:
TCFD RECOMMENDATIONS
This TCFD Report follows the structure of the TCFD eleven recommended climate-related disclosures, setting out those in
which the Company is making full disclosures and those for which full disclosures are not being made for 2022, the reasons
for not including them and the plans in place to make these disclosures going forward. We recognise the need to enhance our
processes and reporting and we plan to make significant progress in 2023.
ANNUAL REPORT &
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22
INITIAL CHALLENGES
There have been three key initial challenges in developing
the required processes and resulting management actions
and their integration into the business:
1.
Data:
Relevant data availability is currently limited,
especially in the supply chain
2.
Process:
BATM consists of multiple business divisions
located in multiple jurisdictions, without the necessary
processes fully established and integrated
3.
Proficiency:
Climate proficiency across the business is
inconsistent, and severely lacking in the supply chain
In addressing these challenges the leadership recognises
both the cultural adjustments that are required in the
organisation and also the benefits of implementing strong
frameworks, such as the TCFD, that support engagement
from stakeholders across the business units and multiple
countries, including the use of the BATM Risk and Opportunity
Management (“ROM”) Framework. We also appointed a
group of ESG advisers to address the gaps in aligning our
processes and reporting with TCFD recommendations over
the medium term.
GOVERNANCE
The organisation’s governance around climate-related risks &
opportunities.
In 2022 BATM continued to assess all business risks and
opportunities, including climate-related, primarily through
the leadership of the Executive Directors. All directors
received a Group-wide overview of the Group's activities,
including risks and opportunities, in the CEO's overview in
the quarterly meetings of the Board.
In acknowledgement of the potential scale of the climate-
related risks and opportunities, and its commitment to
address the full TCFD requirements, BATM is strengthening
the related oversight and governance and the engagement of
management across the business. Please see figure 2 below
for the BATM corporate governance framework and also
see the Corporate Governance section (pages 34-41) of this
Annual Report for further details on corporate governance.
BOARD OVERSIGHT
The Responsible Business Committee of the Board of
Directors is one of the four Board Committees and is
responsible for the oversight of climate-related risks and
opportunities. Prior to their meetings, 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. In its meetings during
2022, the Committee discussed climate-related issues and
disclosures, received a review from the CEO on climate-
related risks and opportunities in the Group's activity, and
directed the CEO to appoint a senior manager to lead in
the planning, delivery and reporting on the climate-related
financial disclosures. The CEO appointed Adv. Yair Livneh,
the Company's General Counsel.
The Board has delegated the daily operational management
of the business to the CEO and CFO. With this, the CEO has
the responsibility to communicate any material matters
arising, including climate matters, to the Board.
MANAGEMENT’S ROLE
BATM’s Executive Directors also have roles on the Boards
of the Group’s subsidiaries, giving them great insight across
the business divisions and optimising information flow and
operational decision-making.
In 2022 BATM enhanced its understanding of climate-related
risks and opportunities across the business and engaged
with the leadership of each business unit in completing a
questionnaire on climate-related issues. The management
also formalised risk management processes into the ROM
Framework in which business unit managers oversee and
report progress at division level.
The BATM ROM Framework includes managing a Risk and
Opportunity (“R&O”) Register that integrates climate-related
transitional and physical risks and business opportunities,
following the guidance provided by TCFD framework.
NEXT STEPS
In 2023 the Responsible Business Committee will increase
the number of meetings to at least quarterly. The Group
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R&O Manager will meet with business managers, and these
meetings will strengthen the data and insight collection/
collation process (specifically including climate-related data
and insight), necessary for future risks and opportunities
identification, management and reporting.
A key responsibility for Adv. Yair Livneh is also the delivery of
a climate matters proficiency programme for the Board and
the Company leadership, which commenced in 2022 and will
continue through 2023 and beyond.
Integral to this programme is the building of a comprehensive
climate-related risk and opportunities strategy and roadmap.
This will be completed during 2023 and includes the planning
and implementation of climate-related considerations into
decision-making throughout the organisation.
STRATEGY
The actual and potential impacts of climate-related risks and
opportunities on the organisation’s businesses, strategy, and
financial planning.
Through the intrinsic nature of our main activities, our
purpose
is to deliver high-technology innovations that make a significant
difference to the human experience
in the areas of bio-medicine,
networking and cyber security. Our work through research,
innovation and the distribution and implementation of our
solutions enables a wide variety of organisations around
the globe to enhance their resource and energy efficiency.
The initial steps in understanding the impact derived from
our operations has focused predominantly on initiatives
affecting our people and communities, such as providing a
safe and inclusive work environment. BATM’s integration of
climate-related risks and opportunities management into
the Group's processes is at a relatively early stage, but we
fully acknowledge the importance of increasing our focus
and capabilities in this area.
We have taken important steps in 2022 to enhance our
processes and reporting and in 2023 we are committed
to making further significant progress, including building a
clear roadmap. A key component will be to gain a deeper
understanding as to how our own operating systems can be
adjusted to benefit from more sustainable practices in our
upstream, downstream and day-to-day activities.
A review of our overall risks and opportunities management
approach has resulted in the formalisation of our ROM
Framework, which incorporates the periodical consideration
of climate-related matters as well as timeframes for short-,
medium- and long-term impact, following TCFD guidelines.
The detail of this framework is provided in the Risk
Management section of this report.
The questionnaire on climate-related matters deployed to all
heads of business units in 2022 provided information on the
extent of climate-related risk and opportunity considerations
across the business. (Further assessments will be conducted
throughout 2023.)
We have structured a summary of these considerations
in the TCFD Risks & Opportunities Table (Table 1) on the
following page.
Figure 2 - BATM corporate governance structure
*As defined in Israeli law
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Risk Category
Category Overview
Subcategories
High Level Considerations
Transition Risk
Risks related to the
transition to a low-carbon
economy
Policy and Legal
Including, but not limited
to the following examples:
- Potential fines related to
level of GHG emissions
- Potential increase of
tax liabilities in certain
jurisdictions
- Potential of limiting
success in tenders
due to insufficient
rating in environment
certification
- Potential of increased
energy consumption
due to increased tem-
peratures across various
jurisdictions
- Potential increase in
insurance premiums or
inability to insure assets
Technology
Market
Reputation
Physical Risk
Physical risks driven by
extreme weather events
(e.g. heatwaves, floods,
wildfires)
or
extended periods of
increased temperatures
leading to the develop
-
ment of chronic climate
events (e.g. desertification)
Acute
Including but not limited
to the following examples:
- Potential damage to
infrastructure, closure
of production plant and
business activity interrup-
tion due to wildfires in
certain jurisdictions
- Increase in costs due to
higher energy consump-
tion due to alterations
in global temperature
patterns
Chronic
Opportunity
Opportunities arising as
the business landscape
transitions to a low-carbon
economy
Resource Efficiency
Including but not limited
to the following examples:
- Increased consumer
preference due to poten-
tial reduction in energy
consumption/GHG
emissions
- Analysis of alternative
energy source provision
to improve costs and
reduce environmental
impact at facilities in cer-
tain jurisdictions
Energy Systems
Products and Service
Markets
Resilience
Table 1: Climate-related Risks & Opportunities Table
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Developing awareness of environmental guidelines at
our operating facilities, upgrading our energy and lighting
systems and developing waste management procedures at
some of our locations are examples of initiatives to improve
our environmental impact that have already been made.
In line with the TCFD recommendations, we are continuing
to develop a comprehensive and systematic approach to
measuring our environmental footprint. This will allow us
to regularly refine our plans to mitigate our impact and
effectively address climate-related risks and opportunities
across the full scope of our operations.
NEXT STEPS
Our ROM Framework provides a structured approach
to enhancing our climate matters proficiency across the
organisation and will support key stakeholders in executing
a Materiality Assessment to align climate-related matters as
per the TCFD guidelines.
Combining this with our team’s industry-specific expertise
and regional insight, we expect to effectively embed the
analysis of climate-related risks and opportunities into
the general risk and opportunity register, and to be able
to provide increasingly robust data-based support to the
Executive Directors and the Board.
The ROM Framework also allows for periodical disclosure of
climate-related risks and opportunities. The timely review of
the overall process and the material impact of the exercise
on the different areas in which the organisation operates will
also provide the basis for conducting appropriate Climate
Scenario Analysis to demonstrate the resilience of our
business.
RISK MANAGEMENT
The processes used by the organisation to identify, assess, and
manage climate-related risks.
The identification and assessment of all business risks and
opportunities, including climate-related, continued in 2022
to be led and undertaken primarily through the Executive
Directors, assisted by the senior management team. Specific
actions were taken to address such risks and opportunities.
The Board of Directors, through its Responsible Business
Committee, is responsible for oversight of climate-related
risks and opportunities.
During 2022, the process for identifying and assessing climate
risks and opportunities was broadened with the collection of
data through a business unit leadership questionnaire and
a subsequent consultation process. The repeated collection
of this data is a key step in risk management, as detailed in
the Risk Management section of this Annual Report on page
27 and summarised in the following diagram:
Figure 3: The BATM process for detecting, assessing and managing
all risks and opportunities including climate-related risks
NEXT STEPS
The key next steps in our TCFD programme build on the
initial challenges identified:
l
The identification and establishment of appropriate
consistent climate-related data and reporting for each
of the business units, including full carbon data and
assessments for the relevant reporting periods, to allow
for appropriate metrics and targets to be determined
and information to identify/assess supply chain risks.
l
The full establishment and integration of necessary
processes across the business units including data
collection and collation and the full embedding of the
ROM Framework.
l
Climate proficiency development and deployment
across the business.
METRICS AND TARGETS
Disclose the metrics and targets used to assess and manage
relevant climate-related risks and opportunities where such
information is material.
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GHG INVENTORY
The material impacts from our business are assessed
based on standards and regulations relevant to the multiple
nature of the operations. To strengthen our efforts in
understanding the climate-related risks to our operations,
we recognise the importance of expanding the depth and
breadth of metrics collected and monitored throughout the
Group’s activities and regions, as well as the relevance in
developing performance metrics related to the mitigation of
climate-related risks.
The preliminary investigation resulted in the understanding
that, due to the varying nature of the Group’s activities,
locations and operating processes, a more systematic
approach
to
gathering
the
information
required
is
fundamental to not only produce a complete GHG inventory
encompassing all Scope categories, but to embed the
necessary periodical systems that will allow us to monitor
our emissions, determine trends, analyse potential areas of
risk and identify the opportunities available.
Having initiated the process, at the time of publication
the Group can disclose a preliminary inventory of carbon
emissions for Scopes 1 & 2 (See Table 2), and a systematic
process to expand, monitor and compare data for multiple
reporting periods is being developed. This initiative will be
aligned with the overall strategy review that is currently
under development.
Table 2: BATM Group 2022 Preliminary GHG Inventory
In preparation for establishing performance metrics, we
will be analysing carbon intensity ratio per US$ million in
turnover to assess the impact and progress within each of
our divisions:
As we do not report revenue against BATM HQ, but we have
measured emissions produced (see Table 2), these have
been incorporated proportionately into the intensity figures
for each division.
NEXT STEPS
We have identified the following steps as integral to our
progress in this area:
l
The development of a process for integration of
emissions data to day-to-day operations across the
Group.
l
The development of a comprehensive GHG inventory
that includes relevant Scope 3 categories across the
appropriate reporting periods.
l
The analysis of the data required to set Science Based
Targets (SBTs).
Division
CO
2
Emissions
(tonnes)
Scope 1 & 2
Partial (*)
Distribution
Ratio
HQ
31.52
2.5%
Networking &
Cyber
334.12
26.7%
Bio-Medical
885.25
70.8%
BATM GROUP
1,251
tCO
2
e
(*) The detailed carbon data derives from investigations carried out up
to the time of publication of this report, involving over 100 locations and
representing business activity that accounts for over 90% of our revenue.
We have determined appropriate to disclose our findings thus far and
are committed to continue the progress on assessing our impact in the
coming year.
Turnover
$million
2022
tCO
²
e/$m
Networking &
Cyber
$27.9
2.58
Bio-Medical
$88.3
8.18
Total BATM
Group
$116.1
10.77
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STRATEGIC REPORT
Risk Management
RISK MANAGEMENT PROCESS
The identification and assessment of all business risks,
and the management thereof, continued in 2022 to be led
and undertaken primarily through the Executive Directors,
assisted by the senior management team. This process
included an assessment of the relative importance of each
risk and resulted in a range of specific actions to address
such risks.
To enhance business planning, the BATM leadership
follows a formal corporate cross-functional Risk and
Opportunity
Management
(“ROM”)
Framework,
which
includes management engagement across the business
and related oversight and governance. A key element of the
ROM Framework is an acknowledgement of the potential
scale of climate-related risks and opportunities and BATM’s
commitment to address the full Taskforce on Climate-related
Financial Disclosures (“TCFD”) recommendations.
The ROM Framework incorporates each of the following key
steps:
Detection and Listing
The Group Risk and Opportunity Manager (“GROM”), in
conjunction with the business unit managers, is responsible
for identifying risks and opportunities (“R&O”) that are
material to BATM. The process includes regular meetings
with unit managers and the use of key relevant information
sources. The maintenance of the resulting R&O list is the
responsibility of the GROM.
Assessment
An assessment of each R&O is undertaken by the GROM and
unit managers in conjunction with the CEO. This assessment
is based on impact, probability and timeframe and determine
those risks and opportunities that require the development
of appropriate actions.
Action
The GROM, with the appropriate unit managers, develops
proposed actions that are then finalised in conjunction with
the CEO. The GROM and unit managers are responsible
for ensuring the completion of the actions in the agreed
timeframe.
Monitor and Report
The Company’s internal auditor (as defined under Israeli law)
ensures completion of the agreed actions and the CEO and
GROM report regularly to the Board.
The
process
is
repeated
periodically,
with
dynamic
adjustments to the process itself, if required, and based
on any significant changes in any significant risk and/or
opportunity.
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.
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Risk
How we manage the risk
Risk change
Political and
economic
*
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.
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.
Up
Legal and
compliance*
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.
The Group retains experienced high calibre legal
advisers for the Company and main subsidiaries in the
Group who provide ongoing advice and updates on
relevant legal compliance requirements. The Group
monitors the regulations relevant to its activities and,
when needed, makes the necessary adjustments to
maintain compliance. This includes ensuring compliance
with the latest TCFD requirements, which is being
managed by working with a team of ESG consultants.
No change
Business
continuity*
There are risks to business
continuity from specific
events, such as natural
disasters and pandemics.
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.
In 2022, the Group undertook its first survey with its
business unit leaders to help establish the level of
physical and transitional risks resulting from climate
change. This insight is now being used to enhance the
Group’s business continuity processes and responses.
Down
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 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.
No change
Competition*
There is a risk that BATM is
unable to build and maintain
competitive advantage in its
focus markets. In particular,
there is a risk that compet-
itors with greater financial
resources may develop tech-
nology that is superior to that
of the Group and they may
also adopt more aggressive
pricing models or undertake
more extensive advertising
and marketing campaigns.
The Group operates in large markets, but with a focus
on areas where it can establish a leadership position
through technological expertise and innovation. The
diversification of its end markets reduces its exposure
to a large competitor in any one sector. The Group
ensures that its products remain world-leading
through investment in R&D. It maximises its resources
and enhances its routes-to-market by establishing
partnerships, collaborations and joint ventures.
No change
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STRATEGIC REPORT
Risk
How we manage the risk
Risk change
Customers and
partners*
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.
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.
No change
Research &
Development
(R&D)*
There is a risk that R&D
programmes overrun or do
not deliver the expected
benefits.
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.
Information
security
(including
cyber security)*
There is a risk of information
security, data loss and
corruption, and physical
damage to IT infrastructure.
The Group routinely carries out proactive measures,
such as IT evaluations, to ensure that its IT systems have
the latest cyber security tools and security procedures in
place. These procedures include implementing security
controls and staff training.
No change
Market risk
There is a risk that changes
in market prices, such as
foreign exchange, inflation
and interest rates, will lead to
financial loss.
The Group’s finance department at the corporate
level manages and monitors market conditions and
exposure. Most of the cash, income and expenses in
each company or subsidiary is held in a way to reduce
the Group’s exposure to currency fluctuations. When
this is not possible, the Group uses hedging transactions
when needed to protect itself against potential currency
risk. However, this is only done to a certain extent as
the Board believes it is very difficult to hedge against
currency fluctuations arising from translation in
consolidation in a cost-effective manner.
The Group also monitors the impact of the inflation and
adjusts sales prices to maintain its margins. The Group’s
exposure to interest rate risk is low as it has relatively
low bank debt. However, due to the impact of changes in
interest rates on the financial markets, the Group closely
monitors possible indirect impacts.
* Risk categories that are considered to have elements related to climate change. For further information, please see the
‘Strategy’ and ‘Risk Management’ sections of the TCFD Report on pages 23 to 25.
No change
Up
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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 2025.
In making this statement, the Directors have also made key
assumptions (see note 4 to the financial statements).
Risk Management
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CORPORATE GOVERNANCE
Directors’ Biographies
Moti Nagar
Executive Director & CEO
Moti Nagar was appointed CEO
effective 1 January 2023, having
been
the
Group’s
CFO
since
2015. Over the final three years
of his tenure as CFO, Mr. Nagar
also served as the de facto COO.
During his time at BATM, Mr. Nagar
has been instrumental in driving the business’ growth,
including leading several M&A transactions and the
Group’s IPO on TASE. He was re-elected as a Director of
BATM in December 2022.
Prior to BATM, Mr. Nagar held several senior positions at
Deloitte, which he joined in 2005. As a Senior Manager, Mr.
Nagar was responsible for handling the accounts of leading
corporate clients in Israel and overseas, with companies
traded on the LSE, NASDAQ and TASE as well as private
businesses operating in a range of sectors.
Mr. Nagar graduated in Business Management and
Accounting and qualified as an Israeli Certified Public
Accountant (CPA, Israel) in 2008. He also holds an MBA in
Financial Management from Tel Aviv University.
Skills and experience
Mr. Nagar brings to the role of CEO business
management and accounting skills and experience he
gathered from his years as CFO at BATM and as an audit
partner to international companies. As CEO of BATM his
core skills include:
l
Business leadership and management
l
International business operations and strategy
l
Business finance
l
M&A experience
l
Stakeholder and shareholder management
l
Forward thinking and calculated risk management
Committee membership
CORPORATE GOVERNANCE
Gideon Chitayat
Non-executive Chairman
Dr. Gideon Chitayat is the Chairman
and CEO of GMBS Ltd, a strategic
consulting firm. He served as a
Chairman of Delta Galil Industries
and as a director of Milissron
Shopping malls, Paz Oil Company,
Teva
Israel
Pharmaceutical
Industries, Bank Hapoalim and Israel Aircraft Industries.
He has provided consultancy services in business strategy
to the board and 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,
Wharton School and a Master’s in Business & Applied
Economics from the Hebrew University, Jerusalem. Dr.
Chitayat joined the Board of BATM in June 2010 and was
appointed Chairman in January 2015. He was re-elected
as a Director of the Board in December 2022.
Skills and experience
Dr. Chitayat has extensive experience in providing
strategic business advice to Boards and executives
across a wide range of sectors including high-tech and
healthcare. He also has vast and in-depth knowledge
of the business of the Company. Other relevant key
skills include:
l
Board management
l
Strategy formulation
l
Financial expertise
l
Corporate governance
l
Shareholder and stakeholder engagement
l
Performance monitoring
Committee membership
N
RB
RB
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Zvi Marom
Founder &
Non-executive Director
Dr. Zvi Marom founded BATM
in 1992 and served as CEO until
January
2023.
A
former
first
lieutenant
in
the
Israeli
Navy,
he
graduated
with
excellence
from the officers course of 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 Electronics. Dr. Marom was
the Chairman of the Hi-Tech Union of the Manufacturers’
Association of Israel until January 2021, and he now serves
as the head of its quantum forum. He is Chairman of ADOR
Diagnostics, an associate company of BATM, and a director
of Shore Capital Group plc. Dr. Marom was re-elected as a
Director of BATM in December 2022.
Skills and experience
As the founder of the Company and its CEO for
many years, Dr. Marom has vast relevant business
experience and in-depth knowledge of the Group, its
markets and various stakeholders, and holds important
organisational memory.
Committee membership
Harel Locker
Non-executive Director & Senior
Independent Director
Harel Locker served as the Director
General
of
the
Israeli
Prime
Minister’s Office and head of Prime
Minister
Benjamin
Netanyahu’s
economic 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, first tier law
firms. 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 third three-
year term, in accordance with Israeli law, was approved by
shareholders in December 2022.
Skills and experience
Mr. Locker brings to the Board broad business and
managerial skills based on his vast experience, as well as
in-depth understanding of the dynamics of government
authorities.
Committee membership
A
R
N
RB
Directors’ Biographies
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CORPORATE GOVERNANCE
Avigdor Shafferman
Non-executive Director
Dr. Avigdor Shafferman had an
established career at the Israel
Institute for Biological Research,
a leading governmental applied
research institute specialising in the
fields of biology, medicinal chemistry
and environmental sciences, where
he worked for almost 40 years. He is a recipient of several
prestigious scientific awards and author of over 200 scientific
papers. Most recently, from 1995 until his retirement in
2013, he was General Director of the organisation. Other
roles have included serving as a visiting professor in the
University of California, San Diego at the biology department
as well as a visiting senior research scientist at various leading
research institutions in the United States in various medical
areas, including vaccines. Dr. Shafferman holds a Ph.D. in
physical chemistry from the Hebrew University of Jerusalem.
He was re-elected as a Director of BATM in December 2022.
Skills and experience
Dr. Shafferman is an influential scientist with experience
in top-management and international cooperation.
His skills span applied medical research, vaccine
development and environmental science, which is
highly relevant for supporting BATM’s developmental
diagnostic activities.
Committee membership
Varda Shalev
Non-executive Director
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. She is a
Managing Partner of Team8 Health, a medtech-focused
venture capital company. 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.
Skills and experience
Prof. Shalev brings 30 years’ experience in medicine,
including clinical research, healthcare information
technology
and
epidemiology.
Her
industry
and
clinical knowledge is complemented by business
acumen, having established and grown a number of
organisations, making Prof. Shalev a valuable addition to
the Group as it develops its bio-medical product offering
and markets.
Committee membership
A
R
N
RB
A
R
N
RB
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34
Committee Key
■
Audit Committee
■
Remuneration Committee
■
Nomination Committee
■
Responsible Business Committee
■
Committee Chair
Ran Noy
CFO
Ran Noy has been the CFO of BATM
since 1 February 2023*, having
served as VP Finance since joining
the Group in 2021.
Prior to BATM, Mr. Noy spent 10
years in the finance department at
ADAMA Ltd., a global agri-chem business that delivered sales
of $5bn in 2021. Latterly as Financial Reporting Manager,
he was responsible for ADAMA’s financial reporting to the
Shenzhen Stock Exchange and the Tel-Aviv Stock Exchange.
He was also instrumental in ADAMA’s listing on the Shenzhen
Stock Exchange via the reverse takeover of a subsidiary of
ChemChina and was responsible for the financial integration
of that business. Mr. Noy is an Israeli Certified Public
Accountant who began his career as an auditor at EY Israel.
Skills and experience
Mr. Noy has skills and experience in developing and
managing financial systems and in financial management
of international businesses with multiple subsidiaries.
His skills include:
l
Financial management
l
Business management
l
Financial reporting
l
M&A and IPOs
l
Financial integration
l
System implementation
Committee membership
*
Mr. Noy will be appointed to the Board subject to shareholder
approval at a general meeting, in accordance with BATM’s
articles of association and Israeli Companies Law
Directors’ Biographies
CONTINUED
ANNUAL REPORT &
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35
CORPORATE GOVERNANCE
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 Non-
executive 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 Board also operates through
several committees: Audit, Remuneration, Nomination and
Responsible Business. The Executive Directors serve as
directors in the Group's subsidiaries. The Board receives a
Group-wide overview of the Group’s activities, including risks
and opportunities, in the CEO’s overview in the quarterly
meetings of the Board. The Board of the Group is able to
validate the information that it receives from the Executive
Directors via the internal auditor (as defined under Israeli
law) and the external auditors' audit of the annual and
interim reports. (See figure 2 in the TCFD Report on page 23
for BATM's corporate governance structure.)
In 2022, BATM continued to assess business risks
and opportunities primarily through the leadership of
the Executive Directors, while also formalising its risk
management processes as described further in the Risk
Management report on page 27.
THE BOARD
During 2022, the Board consisted of the Chairman, two
Executive Directors (Zvi Marom, CEO, and Moti Nagar, CFO)
and three independent Non-executive Directors (with Dr.
Avigdor Shafferman being appointed on 12 April 2022), two
of which are defined as ‘external directors’ under Israeli
law. Since 1 January 2023, there has been one Executive
Director on the Board – the CEO, Moti Nagar. Ran Noy, CFO,
will be appointed to the Board in due course subject to
shareholder approval at a general meeting, in accordance
with BATM’s Articles of Association and Israeli Companies
Law. All the Directors bring a broad and valuable range
of skills and experience to the Group (their biographical
details are set out on pages 31 to 34). 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
Meeting attendance
Director
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Responsible
Business
Committee
Dr. Gideon Chitayat,
Chairman
10/10
-
-
-
2/2
2/2
Dr. Zvi Marom, CEO (in
2022)
10/10
-
-
-
-
-
Moti Nagar, CFO (in
2022)
10/10
-
-
-
-
2/2
Harel Locker, SID
8/10
6/7
4/6
1/2
1/2
Prof. Varda Shalev, NED
10/10
7/7
6/6
2/2
2/2
Dr. Avigdor
Shafferman, NED*
6/7
6/7
4/4
5/5
1/1
2/2
* Appointed as a Non-executive Director on 12 April 2022
ANNUAL REPORT &
ACCOUNTS 2022
36
and
buy-backs);
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.
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
concerning the state of the business and performance.
The Company Secretary, 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
and the Company's Articles of Association, with no individual
having unrestricted powers of decision.
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
Mr. Locker, Prof. Shalev and Dr. Shafferman qualify as
"Independent Directors" as this term is defined in the
Israeli Companies Law. The Board considers that the
aforementioned directors in addition to Dr. Gideon Chitayat
are independent in accordance with the UK Corporate
Governance Code, being independent in character and
judgment. The interests of the Directors in the Company
and their shareholdings are set out on page 59.
All
directors
are
subject
to
annual
re-election
by
shareholders at the Annual General Meeting, except the
external directors – being Harel Locker and Prof. Varda
Shalev – who, in accordance with Israeli law, 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.
BOARD & EXECUTIVE MANAGEMENT DIVERISTY
The Group operates open and inclusive hiring and staff
management
practices,
and
encourages
employment
of people drawn from a wide range of socioeconomic
backgrounds. The Board evaluates and reviews its structure,
size and composition on a continual basis, including its balance
of skills, knowledge, experience and diversity, while factoring
in the Group’s strategy, risk appetite and future development.
As at 31 December 2022, gender representation on BATM’s
board and executive management team was as shown in
the table below.
EFFECTIVENESS & EVALUATION
The Board’s members have a wide breadth of experience
in areas relating to the Company’s activities, including in
Board & executive management diveristy
Number of
board members
Percentage
of the
board
Number in
executive
management
Percentage of
executive
management
Male
5
83
32
73
Female
1
17
12
27
Corporate Governance Report
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37
CORPORATE GOVERNANCE
leadership, management, business development, technology
(especially in the bio-medical and diagnostics areas), finance,
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 (with the CFO, Mr. Noy, as a
Director designate) and Non-executive Directors to ensure
it performs its duties effectively. Further biographical details
can be found on pages 31 to 34.
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.
Non-executive Directors are advised on appointment of
the time required to fulfil their role. The Company’s two
External Directors, as defined under Israeli law, being
Harel Locker and Varda Shalev, have significant additional
appointments, which is customary in Israel owing to the fixed
nature of remuneration and tenure of External Directors. In
addition, the Board considers their broader involvement in
the business community to be of benefit to BATM and it is
satisfied that the Chairman and each of the Non-executive
Directors, including the External Directors, are able to devote
sufficient time to the Company’s business.
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 periodically
receive 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 quarterly 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, 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.
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), Prof. Varda Shalev and
Dr. Avigdor Shafferman
The Audit Committee meets at least four times a year.
The membership of the Audit Committee consists of the
Company’s
independent
Non-executive
Directors.
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 Company 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 42 to 44.
ANNUAL REPORT &
ACCOUNTS 2022
38
Remuneration Committee
Members:
Prof. Varda Shalev (Chair), Harel Locker and Dr.
Avigdor Shafferman
The Remuneration Committee has responsibility for making
recommendations to the Board on the Company’s policy
on staff remuneration and is authorised to decide whether
to approve remuneration of Office Holders (as designated
under Israeli Companies Law), including the Chairman of
the Company and Executive Directors (including pension
rights and any compensation payments). The membership
of the Remuneration Committee consists of the Company’s
independent Non-executive Directors.
Further
details
on
the
Remuneration
Committee’s
responsibilities
and
activities
can
be
found
in
the
Remuneration Committee Report on pages 45 to 47
(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
45 to 62. 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:
Dr. Gideon Chitayat (Chairman), Prof. Varda
Shalev, Harel Locker and Dr. Avigdor Shafferman
The membership of the Nomination Committee consists of
the Company’s independent Non-executive Directors. In line
with the Committee's terms of reference, the Chairman of
the Board acts as chairman of the Committee. During the
year, the Nomination Committee met on two occasions
where it discussed, and recommended to the Board, the
appointment of Dr. Avigdor Shafferman as a Non-executive
Director and of Moti Nagar as CEO, having previously been
CFO, with Dr. Zvi Marom becoming a Non-executive Director.
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
considers the role and capabilities required for a particular
appointment, with consideration given to the balance of skills,
experience, independence and knowledge on the Board. Board
appointments are made on merit, having due regard, amongst
other things, to the benefits of diversity on the Board. The
Nomination Committee considers the skills, experience and
expertise of a potential candidate against the needs of the
Company, and presents its recommendations to the Board.
Responsible Business Committee
Members:
Dr. Gideon Chitayat (Chairman), Moti Nagar,
Harel Locker, Prof. Varda Shalev and Dr. Avigdor Shafferman
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:
l
to assess and monitor culture to ensure alignment with
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 twice during the
year where it discussed the requirements of the Financial
Conduct Authority (“FCA”) that premium listed companies
make disclosures aligned with the recommendations of
the Task Force on Climate-related Financial Disclosures
(“TCFD”). In particular, it resolved that the CEO would appoint
a manager in the Company to promote compliance, and
who may be assisted by a consulting firm, and who would
prepare a report to the Board providing further detail on the
matter. The Committee received a review from the CEO on
climate-related risks and opportunities in the Group's activity,
and (post year-end) the Board received a report on climate-
related financial disclosures. Subsequently, the Group has
significantly enhanced its processes to be able to improve
its reporting on climate-related matters and to integrate the
TCFD framework into future business planning, as described
further in the TCFD Report on pages 20 to 26.
Corporate Governance Report
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ANNUAL REPORT &
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39
CORPORATE GOVERNANCE
The committee also resolved during the year to extend
Prof. Varda Shalev’s appointment as ‘voice of the workforce’
until the end of 2023, and that she would continue to hold
meetings with employees and attend management and
employee roundtable meetings, with a view to strengthening
the relationship between the Board of directors and the
Group’s employees, and to represent the positions of the
employees on the Board.
RELATIONS WITH SHAREHOLDERS AND
SIGNIFICANT SHAREHOLDERS
Communication with shareholders is given high priority. The
half-yearly and annual results are intended to give a detailed
review of the business and developments, and are available
on the Company’s website to all shareholders. Printed copies
of the full Annual Report are made available on request.
The Company’s website (www.batm.com) contains up to
date information on the Company’s activities and published
financial results. The Company solicits regular dialogue with
institutional shareholders (other than during closed periods)
to understand shareholders views. The Board also uses the
Annual General Meeting to communicate with all shareholders
and welcomes their participation. Directors are available to
meet with shareholders at appropriate times. The Company
is committed to having a constructive engagement with its
shareholders. During 2022, the CEO and CFO attended:
l
14 scheduled meetings with UK-based investors (including
four group meetings/presentations); and
l
c. 18 scheduled meetings with Israel-based investors (in
addition to at least 20 non-scheduled phone calls).
The Chairman of the Board attended the Annual General
Meeting. He also met with certain significant shareholders
during the year without the Executive Directors present.
As of 31 December 2022, to the best of the Company’s
knowledge, the following persons or entities had a significant
holding of BATM ordinary shares:
l
Lombard Odier Investment Managers – 28.90%
l
Dr. Zvi Marom, Non-executive Director and founder – 22.20%
l
Hargreaves Lansdown – 4.66%
l
Herald Investment Management – 4.21%
l
Interactive Investor – 3.40%
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 Law of Equal Opportunity at
Work, 1988, which requires an employer not to discriminate
amongst employees on account of sex, sexual tendencies,
personal status and various other forms of discrimination.
During the year, Prof. Varda Shalev engaged with the
workforce at the Networking unit (via the human resources
manager) to learn about employees' needs and requests
and brought her findings to the Board in her role as ‘voice
of the workforce’. Moti Nagar also had such discussions with
managers in other units.
Throughout 2022, 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 2022, no conflicts arose that required the Board to
exercise authority or discretion in relation to such conflicts.
ANNUAL GENERAL MEETING
The 2022 Annual General Meeting (“AGM”) was held on
Wednesday 21 December 2022. The results of voting were
published via the Regulatory News Service and on the
Company’s website at www.batm.com. The Chairman and
CFO attended the AGM in person and the CEO attended
virtually, with a facility also being made available for
shareholders to attend remotely and ask questions.
ANNUAL REPORT &
ACCOUNTS 2022
40
Board leadership and company purpose
Strategic Framework
Page 3
Chairman’s Statement
Pages 4-5
Q&A with the CEO
Pages 6-7
Corporate Governance Report
Pages 35-41
Stakeholder Engagement
Pages 11-12
Division of responsibilities
Matters reserved for the Board and Board and Committee Meetings
Pages 35-36
Division of Responsibilities
Page 36
Board Committees
Pages 37-39
Composition, succession and evaluation
Directors’ Biographies
Pages 31-34
The Board
Page 35
Effectiveness & Evaluation
Pages 36-37
Nomination Committee
Page 38
Audit, risk and internal control
Audit Committee Report
Pages 42-44
Risk Management
Pages 27-30
Remuneration
Directors’ Remuneration Report
Pages 45-62
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 principles
and 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.
Details of how the principles of the Code have been applied can be found throughout the Corporate Governance section and
the Strategic Report as follows:
Corporate Governance Report
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ANNUAL REPORT &
ACCOUNTS 2022
41
CORPORATE GOVERNANCE
Provision
Exception and explanation
18
All directors should be subject to
annual re-election.
In accordance with Israeli law, the Company 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.
19
The chair should not remain in post
beyond nine years from the date of
their first appointment to the board.
As of June 2022, Dr. Gideon Chitayat, Chairman, has served on the Board
for 12 years - eight 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. 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. He plays an important role
in facilitating succession planning, particularly, during the year, with the
transition from Dr. Zvi Marom to Moti Nagar as CEO (effective 1 January
2023). 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 Company as a whole. As a result, the Board
believes that Dr. Chitayat remaining as Chairman is in the best of interests
of the Company 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 Company continues to consider
methods for implementing this provision.
The Board considers that, during 2022, the Company complied with the provisions set out in the Code with the exception of
the matters referred to below:
ANNUAL REPORT &
ACCOUNTS 2022
42
Audit Committee Report
Dear Shareholder,
I am pleased to present the Audit Committee report for
2022. 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 ("external director" as this term is
defined in Israeli Companies Law)
l
Prof. Varda Shalev, Non-executive Director ("external
director")
l
Dr. Avigdor Shafferman, Non-executive Director
("independent director" as this term is defined in Israeli
Companies Law)
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, Dr. Avigdor Shafferman joined
the Audit Committee on his appointment to the Board on 12
April 2022.
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 seven meetings of the Audit
Committee, which were attended by all members except the
absence of Harel Locker for one meeting (which was chaired
by Dr. Avigdor Shafferman).
GOVERNANCE AND COMPLIANCE
The Audit Committee adheres to the functions and
requirements prescribed to it by the Israeli Companies
Law and Israeli Regulations as well as to the specific Terms
of Reference adopted by the Board for this committee and
takes account of the relevant provisions of the Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority ("FCA") and the UK Corporate Governance 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 FCA; 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.
ANNUAL REPORT &
ACCOUNTS 2022
43
STRATEGIC REPORT
In 2022, the Audit Committee’s activities included:
l
Examining the Annual Report for the year to 31 December
2021 and the Half-year Report for the six months to 30
June 2022 and discussing them with management and
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, including regular
review by management and the Board of the operations
and the financial statements of the Company. As noted
in the Risk Management section on page 27, in 2022 the
BATM leadership formalised its risk management processes
into a corporate cross-functional Risk and Opportunity
Management Framework.
The Executive Directors, as part of the Board, have 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 2022, a robust assessment
of such risks accordingly, including those that would impact
the Company’s business model, future performance,
solvency or liquidity, and have considered how they are
to be mitigated. To this end, in accordance with the Israeli
Companies Law, the Company has appointed and retains
the services of an independent qualified internal auditor.
Each year, the Audit Committee reviews with the internal
auditor potential risks and a proposed plan for their scope
of work. Each year the Audit Committee usually selects
at least two areas of the Company’s operations on which
it requests the internal auditor to focus and prepare an
internal audit report with recommendations. Following the
completion of each report, the internal auditor sends it to
all the Directors and presents their findings to the Audit
Committee. The Audit Committee then reports to the Board
on any major findings together with the internal auditor’s
recommendations for 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 application of recommendations
regarding information system resilience and the Company's
data restoration plan.
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.
l
Information and Communication: The Group operating
procedures
include
a
comprehensive
system
for
reporting financial and non-financial information to the
Directors. Financial projections, including revenue and
ANNUAL REPORT &
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profit forecasts, are typically reported on a monthly basis
to senior management compared with corresponding
results for previous periods. To date, the central process
for evaluating and managing non-financial risk is meetings
of business functions, each involving at least one Executive
Director.
l
Finance Management: The finance department operates
within procedures 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 segregated to minimise risk.
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
2022. 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 limited),
thus ensuring the continued objectivity and independence
of the external auditors.
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 2022,
the external auditor provided $63K of non-audit work (2021:
$48K). Fees paid to Deloitte Israel and Co. are set out in note
9 to the financial statements.
Harel Locker
Audit Committee Chairman
4 April 2023
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CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT
Dear Shareholder
The Board is pleased to present the Remuneration
Committee's Report for the year ended 31 December 2022.
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 long-term
incentives ("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 Communications' 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 (the "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
(“Companies Law”), at the Annual General Meeting (“AGM”)
held in December 2021.
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 91.92% support on
the policy resolution. The Policy has been effective 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.
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 for approval to the Board 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;
Directors’ Remuneration Report
ANNUAL REPORT &
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(3)
Recommending and determining the goals for all
performance-related remuneration offered by the
Company and approving the total annual payments
made under such schemes;
(4)
Reviewing the design of all long-term incentive
schemes, such as options and equity awards and
recommending these for approval by the Board and,
if and when required by law, by the shareholders; and
(5)
Reviewing the CEO's compensation policies for Office
Holders (as defined in the Israeli Companies Law).
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.
KEY ACTIVITIES DURING THE YEAR
There were six meetings of the Committee during the
year to 31 December 2022. The Committee undertook the
following activities in this period:
l
Approving the remuneration package for the new CEO
(effective 1 January 2023)
l
Approving alterations to the remuneration packages for
the Chairman and Dr. Zvi Marom (effective 1 January
2023)
l
Approving the remuneration of Dr. Avigdor Shafferman,
who was appointed as a director during the year
l
Approving the grant of long-term incentive awards to
directors and employees
l
Approving the exemption and indemnification of current
and future directors and office holders of the Company
l
Determining the outcome of the 2021 annual bonus
l
Setting the targets and measures for the 2022 annual
bonus
Approving alterations to remuneration packages
A key activity that was completed during the year was
approving new remuneration packages for Dr. Zvi Marom
and Moti Nagar who, from 1 January 2023, became a Non-
executive Director and the CEO of the Group, respectively
(having previously been CEO and CFO). The details of the
packages, which were approved by shareholders on 21
December 2022 with an approval rating of over 92% and
became effective 1 January 2023, can be found in the Annual
Report on Remuneration section below. With regards to Dr.
Marom, we took into account his knowledge of the Group,
its markets and various stakeholders, his abilities and
experience, and the organisational memory he holds. With
regards to Mr. Nagar, we examined market standards in
Israel and the UK to determine an adequate remuneration
level for the role of CEO in the Company. The base salary and
annual bonus do not deviate from standard levels for CEOs
of comparable companies in the UK and Israel, and the long-
term incentive is in line with market views as to the benefits to
shareholders from significant shareholding by management.
We also restructured the remuneration package of Dr.
Chitayat, which became effective 1 January 2023 and
was approved by shareholders on 21 December 2022. In
doing so, we took into account his contributions to the
Company, his leadership, experience and knowledge of
the Company, his effectiveness in leading the Board and
his commitment to the success of the Company, his vast
business experience and his high level of responsibility and
accountability, as well as the fact that his remuneration
had not been updated for many years. We also took into
account the fact that there is a market practice in Israel of
granting shares to a chairman who does not have an active
managerial role in the company.
BUSINESS PERFORMANCE AND 2022 INCENTIVE
OUTCOMES
As discussed further in the Strategic Report, in the twelve
months to 31 December 2022, there was robust underlying
performance across the Group. In the Networking & Cyber
unit, revenue from ongoing operations increased by 34.4%.
We achieved key milestones with the award of a contract by
a major network provider in the UK, CityFibre, for Edgility
and a cyber security order (received shortly post year-end)
for $26m. In the Bio-Medical Division, there was a solid
performance when excluding the contribution to both years
from COVID-19 related products – with revenue increasing
6.7% on that basis. However, the division was impacted by
currency headwinds and the subsiding of the pandemic
reducing demand for COVID-19 products. Accordingly,
while the underlying business was strengthened, EBITDA
was $8.0m (2021: $15.7m
1
), basic EPS was 0.06¢ (2021:
3.26¢) and the Company ended the year with cash and cash
1
Adjusted to present the results on an ongoing operations basis by excluding (1) the contribution to 2021 from NGSoft, a subsidiary that BATM sold
in March 2021, and (2) the amortisation of intangible assets.
Directors' Remuneration Report
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CORPORATE GOVERNANCE
equivalents and short-term investment in deposits and
other securities of $44.2m (31 December 2021: $67.8m).
The 2022 bonus weightings were 75% of bonus to be
based on an adjusted EBITDA target and 25% on personal
and strategic criteria. As further described in the Annual
Remuneration Report below, the thresholds for the
personal and strategic criteria were met, but those for
EBITDA were not. As a result, the Executive Directors were
due a partial bonus pay-out, however, Dr. Marom and Mr.
Nagar proposed to waive their right to receive additional
variable remuneration. This was accepted by Remuneration
Committee and, accordingly, no bonus will be paid to the
Executive Directors for 2022.
STAKEHOLDER VIEWS & ENGAGEMENT
During the year, we consulted with our largest shareholders
(via the Chairman) to ensure their views were taken into
account in determining the remuneration of the new CEO
and amendments to other packages as described above.
At the AGM in 2022, we proposed eight remuneration-
related resolutions, which were all passed with an approval
rating of over 92% (further detail is provided in the Annual
Report on Remuneration section below). 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
4 April 2023
REMUNERATION POLICY
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 BATM.
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.
This section summarises the key elements of the Policy.
The full Policy is available on the Company’s website and
was provided in full in the Company’s annual report for the
year ended 31 December 2021.
ANNUAL REPORT &
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48
DIRECTORS’ & OFFICERS' REMUNERATION POLICY
TABLE
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
information on how these aspects of remuneration operate.
The Remuneration Committee (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.
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CORPORATE GOVERNANCE
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’ above.
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.
Performance targets
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’ row
of this table.
Benefits
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.
Operation
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.
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.
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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
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.
Operation
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.
Dividends or dividend equivalents may accrue on deferred shares.
Maximum potential value
Capped at 125% of annual base salary.
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Performance targets
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.
Long Term Incentive Plan (LTIP)
Purpose and link to strategy
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.
Operation
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.
The Committee retains discretion to adjust vesting levels in exceptional
circumstances, including but not limited to regard of the overall performance of
the Company or the grantee’s personal performance.
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.
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Maximum potential value
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.
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 targets
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
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.
Maximum potential value
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 the 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.
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.
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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 is limited participation by Non-executive and Non-External Directors in the
variable remuneration plans offered by the Company to its Executive Directors
and Officers. Any participation by Non-executive and Non-External Directors in
the Company’s variable remuneration plans is 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.
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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’ row of this table.
Performance targets
Not applicable.
SELECTION OF PERFORMANCE MEASURES AND
TARGETS
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 annual bonus will
be determined at the start of the financial year and disclosed
in the remuneration report the next year.
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.
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 -
T
Revenue
T
Profit
T
EBITDA
T
Operating profit
T
Cash from operating activities
T
Free cash flow
T
Share price
T
Earnings per share
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CORPORATE GOVERNANCE
T
Return on invested capital
T
Return on capital employed
T
Total shareholder return
T
Absolute total shareholder return
T
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
l
treatment of awards and/or payments on a change of
control or restructuring of the Group
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)
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.
ANNUAL REPORT &
ACCOUNTS 2022
56
ANNUAL REPORT ON REMUNERATION
This section of the Directors’ Remuneration Report
provides
details of the remuneration earned by the Directors in the
year ended 31 December 2022 and how the Remuneration
Policy will operate for the year ending 31 December 2023.
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
Dr. Avigdor Shafferman (following his appointment to the
Board in April 2022)
The Remuneration Committee receives advice from several
sources, namely:
l
The Chairman of the Board and the Executive Directors,
who attend the Remuneration Committee meetings when
specifically invited by the chairman of the Committee in
order to provide relevant information to the Committee.
l
As and when the Committee deems it necessary,
the Committee is provided advice from independent
consultants.
Key activities during the year
The Committee held six meetings during the year to 31
December 2022.
As noted in the Remuneration Committee Report, the key
activities undertaken during the year included approving
new and amended remuneration packages for the CEO,
Chairman and Dr. Zvi Marom, and determining annual
bonus targets and outcomes.
2022
Salary/Fees
$’000
Performance Bonus
$’000
Total Remuneration
$’000
Executive Directors
Zvi Marom, CEO
(1)
573
-
(3)
573
Moti Nagar, CFO
(2)
307
-
(3)
307
Non-executive Directors
Gideon Chitayat
56
–
56
Harel Locker
52
–
52
Varda Shalev
54
–
54
Avigdor Shafferman
(4)
38
–
38
Single total figure of remuneration
The tables below set out the single total remuneration figures for each director for 2022 and the prior year.
Directors' Remuneration Report
CONTINUED
ANNUAL REPORT &
ACCOUNTS 2022
57
CORPORATE GOVERNANCE
2021
Salary/Fees
$’000
Performance Bonus
$’000
Total Remuneration
$’000
Executive Directors
Zvi Marom, CEO
584
438
1,022
Moti Nagar, CFO
317
158
475
Non-executive Directors
Gideon Chitayat
56
-
56
Harel Locker
58
-
58
Varda Shalev
62
-
62
Ari Shamiss
(5)
57
-
57
1.
Dr. Zvi Marom’s tenure as CEO finished on 31 December 2022, when he became a Non-executive Director. As CEO, Dr. Marom received payment
via a Service Agreement, which included a basic annual salary and associated social and pension benefits according to the aforementioned Service
Agreement. Dr. Zvi Marom’s tenure as CEO finished on 31 December 2022, when he became a Non-executive Director. As CEO, Dr. Marom received
payment via a Service Agreement, which included a basic annual salary and associated social and pension benefits according to the aforemen-
tioned Service Agreement. The amounts do not include early notice provision.
2.
Moti Nagar was CFO until 1 January 2023, when he assumed the role of CEO. His salary is paid in New Israeli Shekels and includes social and pen
-
sion benefits as required by Israeli law for all employees. His salary in both years was the same: the difference in reporting currency (US$) is due to
currency exchange.
3.
Dr. Marom and Mr. Nagar proposed to waive their right to additional variable remuneration for 2022, which was accepted by the Remuneration
Committee.
4.
Avigdor Shafferman was appointed to the Board on 12 April 2022.
5.
Ari Shamiss stepped down from the Board on 28 November 2021.
As at 31 December 2022, the total liability for payment related to wages for the Executive Directors was $64 thousand (31
December 2021: $79 thousand), which was paid in January 2023 (2021 liability was paid in January 2022).
Non-executive Directors
In determining the remuneration to its Non-executive
Directors (who, in 2022, other than the Chairman and
Avigdor Shafferman, 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
external directors. The applicable Israeli statute is the Israeli
Companies Regulations (Rules Regarding Compensation
and Expense Reimbursement of External Directors) 2000
(the “Compensation Regulations”), which prescribes the
level of remuneration that a publicly listed company may
pay its external directors. Cash remuneration payable to
the external director is comprised of two fees: (i) an annual
fixed fee; and (ii) a per-meeting participation fee. The
figures set forth in the Compensation Regulations for these
elements are based on the size of the company calculated
by the 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,
Dr. Zvi Marom (who became a non-executive director
in 2023) or Avigdor Shafferman who are not “external
directors” in terms of Israeli Law. However, the Company is
obligated, under Israeli law, to have at least three members
on the Remuneration Committee and they must all receive
remuneration according to the rules regarding remuneration
of external directors. Accordingly, Avigdor Shafferman, as
one of the three members of the Committee, receives the
same remuneration fees as the external directors. The
remuneration of the Chairman and Dr. Marom is set out
below.
ANNUAL REPORT &
ACCOUNTS 2022
58
2022 annual bonus outcome
The maximum annual bonus for Dr. Zvi Marom and Mr. Moti Nagar for 2022 was 100% of base salary. The annual bonus is
based on a mix of quantitative financial criteria and qualitative personal and operational criteria as described below.
At the start of the year, the Board had set the following targets and thresholds for both Dr. Marom and Mr. Nagar.
Performance
Measure
Weighting
Threshold
(25% Payable)
Max
(100% Payable)
Actual FY22
Achievement
Bonus Outcome
(% Of Total
Bonus)
EBITDA
75%
$13.7m
$17.1m
$8.0m
0%
The other 25% of the bonus was based on personal criteria. The objectives and their achievement are set out in the table
below.
Objectives
Achievements in 2022
Bonus Outcome
(% of Total Bonus)
Stabilise Group units for post-COVID era
Achieved growth across the Group in
non-COVID related business
The Board also took into consideration
the undertaking of a successful
succession process in transitioning the
role of Group CEO
25%
This resulted in Dr. Marom and Mr. Nagar being due a partial bonus pay-out, equal to 25% of their annual base salaries.
However, Dr. Marom and Mr. Nagar proposed to waive their right to additional variable remuneration for 2022, which was
accepted by the Remuneration Committee.
Long-term incentive awards granted in 2022
Moti Nagar, who was the CFO in 2022, was granted, on 12 April 2022, 537,109 restricted share units (“RSUs”) under the Group’s
Global Share Incentive Plan (2021). The RSUs vest on the third anniversary of the grant date subject to total shareholder
return (“TSR”) performance over the three-year period as follows:
TSR on vesting date compared to
share price on date of grant
Vesting percentage of the RSUs
Less than +15%
0%
+15%
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%
Directors' Remuneration Report
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ANNUAL REPORT &
ACCOUNTS 2022
59
CORPORATE GOVERNANCE
If, and to the extent that, these RSUs vest, the resulting ordinary shares will be subject to a two-year holding period, however,
sufficient awards may be sold during the holding period to satisfy any tax liabilities owed.
No other long-term incentive awards were granted to directors during 2022.
Share interests
Shares owned
outright
(31/12/22)
Shares owned
outright
(31/12/21)
Awards
unvested and
subject to
performance
conditions as at
31/12/22
Options
unvested and
not subject to
performance
conditions as at
31/12/22
Options
vested but not
exercised as at
31/12/22
Shareholding as
a percentage of
salary/service
fee
Executive Directors*
Zvi Marom
96,794,500
96,794,500
-
-
4,000,000
5,577%**
Moti Nagar
-
-
537,109
-
906,200
0%
Non-executive Directors
Gideon Chitayat
3,159,000
3,159,000
-
-
-
1,862%**
Harel Locker
-
-
-
-
-
0%
Varda Shalev
-
-
-
-
-
0%
Avigdor
Shafferman
-
-
-
-
-
0%
* For the year ended 31 December 2022
** According to the share price on the LSE on 31 December 2022 of £0.274 and the currency rate on 31 December 2022 of £0.83 per $1.00
Dr. 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.
Ratio of CEO pay to average full-time
employee pay
The ratio of CEO pay to average full-time employee pay during
2022 was 6:1 (2021: 11:1) for employees of Israeli companies
in the Group and 24:1 (2021: 34:1) for the whole Group. The
details of CEO pay can be found on page 57. Average full-time
employee pay (for the whole Group), including employees
being paid under service contracts, in 2022
was $27,847 (2021:
$29,667). (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.
* Includes a dividend payment of $4.3m that was declared for 2021 and
paid to shareholders on 5 January 2022 and a share buy-back totalling
$1.3m.
2022
($m)
2021
($m)
% change
Employee
remuneration costs
25.7
29.5
(12.8)%
Distribution to
shareholders
5.6*
-
-
Profit (EBITDA on
reported basis)
8.0
29.6
(72.9)%
ANNUAL REPORT &
ACCOUNTS 2022
60
Percentage change in directors’ remuneration
The table below shows the percentage change in each directors’ remuneration (on an actual currency basis). The prior two
years' change has also been shown and this will build up over time to cover a rolling five-year period.
Salary/Fee
Benefits
Annual Bonus
2022
2021
2020
2022
2021
2020
2022
2021
2020
Executive Directors
Zvi Marom
0%
0%
0%
0%
0%
0%
(100%)
0%
173%
Moti Nagar
0%
0%
0%
0%
0%
0%
(100%)
0%
24%
Non-executive Directors*
Gideon Chitayat
0%
0%
0%
–
–
–
–
–
–
Harel Locker
(6.8%)
4.3%
0%
–
–
–
–
–
–
Varda Shalev
(10%)
(4.2%)
8.8%
–
–
–
–
–
–
Avigdor Shafferman**
–
–
–
–
–
–
–
–
–
* The number of meetings attended by each director may change from one year to another.
** Appointed to the Board on 12 April 2022.
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 FY22.
Directors' Remuneration Report
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ANNUAL REPORT &
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61
CORPORATE GOVERNANCE
Statement of shareholding voting
At the AGM that took place on 21 December 2022 there were eight remuneration-related resolutions:
Resolution
Votes for
(including
discretionary*)
% for**
Votes
against
(excluding
withheld)
%
against**
Total (exclud-
ing withheld
and third-party
discretionary*)
Withheld
Approval of the report
of the Remuneration
Committee
280,405,094
95.81
12,251,806
4.19
292,656,900
30,500
Approval of the remu-
neration of Moti Nagar
as CEO
270,426,472
92.39
22,260,150
7.61
292,686,622***
778
Approval of the
remuneration of Dr.
Zvi Marom as a Non-
executive Director
189,833,914
96.91
6,058,486
3.09
195,892,400***
4,750,500
Approval of the
remuneration of
Gideon Chitayat as
Chairman
267,267,472
92.31
22,260,428
7.69
289,527,900***
3,159,500
Approval of an
amendment to
the Company’s
articles regarding
the exemption and
indemnification of
directors and office
holders
290,004,340
99.51
1,432,560
0.49
291,436,900
500
Approval of the
exemption and
commitment to
indemnify Dr. Zvi
Marom
183,606,844
93.73
12,281,806
6.27
195,888,650***
4,754,250
Approval of the
exemption and
commitment to
indemnify Moti Nagar
280,401,344
95.80
12,281,806
4.20
292,683,150***
4,250
Approval of the
exemption and
commitment to
indemnify all other
current and future
directors and office
holders
277,242,344
95.76
12,281,806
4.20
289,524,150***
3,163,250
* There were no discretionary votes cast.
** Excludes withheld votes.
*** In accordance with Israeli law, shareholders defined as a ‘controlling shareholder’ or as having a ‘personal interest’ are ineligible to vote for certain
resolutions.
ANNUAL REPORT &
ACCOUNTS 2022
62
Implementation of Policy for FY23
Component of Pay
Implementation for FY23
Base salaries
CEO: NIS 1,800,000
CFO: NIS 624,000
Benefits and pension
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.
Annual bonus
The CEO’s and CFO’s bonus opportunity will be 67% and 50% of base salary
respectively.
The 2023 bonus will be subject to Group revenue and/or EBITDA.
The targets are currently commercially sensitive and will be reported in next
year's annual report.
LTIP
A one-time grant of options to the new CEO and to the Chairman in accordance
with their remuneration packages approved by shareholders on 21 December
2022.
NED fees
The Chairman and NED fees for FY23 are as follows:
l
Chairman fee: $100,000
l
Non-executive Director* and External Director base fee: NIS 113,015**
($32,107***)
l
Non-executive Director* and External Director per-meeting fee: NIS 4,345**
($1,234***)
* From 1 January 2023, Dr. Zvi Marom became a Non-executive Director (having been CEO up to that point). As noted in the circular for the Group’s
2022 AGM, for the period from 1 January 2023 to 30 June 2023 Dr. Marom will continue to be remunerated (via Nostredamus Technology Services Ltd)
under his previous service agreement. From 1 July 2023, Dr. Marom’s remuneration will be equal to the remuneration paid to the External Directors
alongside a consulting agreement of $40,000 per annum.
** Linked to the consumer price index in Israel.
*** According to the 31 December 2022 currency rate of 3.52 NIS per 1 USD.
On behalf of the Board
Prof. Varda Shalev
Chair of the Remuneration Committee
4 April 2023
Directors' Remuneration Report
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ANNUAL REPORT &
ACCOUNTS 2022
63
CORPORATE GOVERNANCE
Directors’ Report
PRINCIPAL ACTIVITIES
BATM is focused on the development, production and
marketing of real-time technologies focusing on two main
application areas: Networking & Cyber and Bio-Medical.
Networking & Cyber includes products and services related
to edge computing, NFV, carrier ethernet and cyber network
monitoring and network encryption for large area networks.
Bio-Medical includes medical diagnostic solutions, bio-
waste treatment and sterilisation, and distribution of third-
party medical equipment, supplies and administration of
diagnostic testing. 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
2022. The results of the year are set out in the consolidated
statements of profit or loss. BATM recorded a net profit of
$0.9 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 Company 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 Company, representing approximately 10% of the
Company’s issued share capital at that date. During the year,
the Company repurchased 4,495,000 Ordinary Shares under
its share buy-back 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 3 to 30 together with this Directors’ Report.
DIRECTORS
The Directors who served for the year ended 31 December
2022 and are currently serving (unless otherwise stated) are
as follows:
l
Dr. Gideon Chitayat, Non-executive Chairman
l
Moti Nagar, CPA, Executive Director and Chief Executive
Officer*
l
Dr. Zvi Marom, Founder and Non-executive Director**
l
Harel Locker, Non-executive External Director and Senior
Independent Director ("SID")
l
Prof. Varda Shalev, Non-executive External Director
l
Dr. Avigdor Shafferman, Non-executive Director***
* During the year under review, Moti Nagar served as an Executive
Director and Chief Financial Officer. He became the Chief Executive
Officer on 1 January 2023.
** During the year under review, Dr. Zvi Marom served as an Executive
Director and Chief Executive Officer. He became a Non-executive
Director on 1 January 2023.
*** Dr. Avigdor Shafferman was appointed on 12 April 2022.
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 35 to 41 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 45 to 62.
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
ANNUAL REPORT &
ACCOUNTS 2022
64
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 Executive Director, the CEO, Mr. Moti Nagar; the Chairman
of the Board, Dr. Gideon Chitayat; and Non-executive
Directors Dr. Zvi Marom and Dr. Avigdor Shafferman, were
re-elected at the Annual General Meeting of 21 December
2022 until the following AGM. Mr. Harel Locker, a Non-
executive External Director, was also re-elected for his third
three-year term. Their biographies appear on pages 31 to
34 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 Company continues
to prepare its financial statements according to the going
concern basis.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual
Report,
the
Directors’
Remuneration
Report
and
the
financial statements in accordance with applicable laws and
regulations. The Directors are required to prepare financial
statements for the Company 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
be achieved by compliance with all applicable International
Directors' Report
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ANNUAL REPORT &
ACCOUNTS 2022
65
CORPORATE GOVERNANCE
Financial Reporting Standards.
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;
l
make an assessment of the Company’s ability to continue
as a going concern and disclose where they consider it
appropriate; and
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.
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.
Legislation
in
Israel
governing
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
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties they
face; and
3.
the annual report and financial statements, taken as
a whole, are fair, balanced, and understandable, and
provide the information necessary for shareholders to
assess the Company’s position, performance, business
model and strategy.
The Directors’ Report has been brought for review to the
Board and has been approved in its present form.
The Directors’ Report is signed on behalf of the Board by:
Dr. Gideon Chitayat
Chairman
4 April 2023
ANNUAL REPORT &
ACCOUNTS 2022
BATM
Consolidated Financial Statements for the year ended 31 December 2022
ANNUAL REPORT &
ACCOUNTS 2022
67
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 71 to 120, which comprise the consolidated statement of financial position as at 31 December
2022, 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 2022, 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.
Independent Auditor’s Report to the Shareholders
of BATM Advanced Communications Ltd.
FINANCIAL STATEMENTS
ANNUAL REPORT &
ACCOUNTS 2022
68
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 2022, the
Group had goodwill and other intangible assets of $18,531
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, 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 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 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.
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.
In
preparing
the
consolidated
financial
statements,
management is responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going
ANNUAL REPORT &
ACCOUNTS 2022
69
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
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,
Independent Auditor’s Report to the Shareholders
of BATM Advanced Communications Ltd.
(CONTINUED)
ANNUAL REPORT &
ACCOUNTS 2022
70
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)
Disclosure
Guidance
and
Transparency
Rule
(DTR)
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 Elad Cazaz.
Brightman Almagor Zohar and Co.
Certified Public Accountants
A Firm in the Deloitte Global Network
1 Azrieli Center, Tel Aviv
Israel
4 April 2023
ANNUAL REPORT &
ACCOUNTS 2022
71
FINANCIAL STATEMENTS
2022
2021
Note
US$’000
US$’000
Revenues
5, 6
Cost of revenues
7
Gross profit
Operating expenses
Sales and marketing expenses
8
General and administrative expenses
9
Research and development expenses
10
Other operating income
12
(2,428 )
(12,563 )
Total operating expenses
Operating profit
Finance income
13
Finance expenses
14
(2,011 )
(911 )
Profit before tax
Income tax expenses
15
(339 )
(9,337 )
Profit for the year before share of loss of a
joint venture and associated companies
Share of loss of a joint venture and associated companies
(686 )
(839 )
Profit for the year
Attributable to:
Owners of the Company
Non-controlling interests
Profit for the year
Earnings per share (in cents) basic
16
Earnings per share (in cents) diluted
16
Consolidated Statements of Profit or Loss
The accompanying notes are an integral part of these financial statements.
for the year ended 31 December
ANNUAL REPORT &
ACCOUNTS 2022
72
2022
2021
US$’000
US$’000
Profit for the year
Items that may be reclassified subsequently
to profit or loss:
Disposal of a foreign operation
(522 )
Exchange differences on translating foreign operations
(5,810 )
(4,880 )
(5,810 )
(5,402 )
Items that will not be reclassified subsequently
to profit or loss:
Re-measurement of defined benefit obligation
Total other comprehensive loss for the year
(5,745 )
(5,240 )
Total comprehensive income (loss) for the year
(4,875 )
Attributable to:
Owners of the Company
(5,727 )
Non-controlling interests
(4,875 )
Consolidated Statements of Comprehensive Income
The accompanying notes are an integral part of these financial statements.
for the year ended 31 December
ANNUAL REPORT &
ACCOUNTS 2022
73
FINANCIAL STATEMENTS
2022
2021
Note
US$’000
US$’000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
18
Short-term investment in deposits and other securities
17
Inventories
19
Non-current assets
Property, plant and equipment
20
Investment property
21
Right-of-use assets
22
Goodwill
23
Other intangible assets
24
Investment in joint venture and associate
12
Investments carried at fair value
Deferred tax assets
26
Total assets
Equity and liabilities
Current liabilities
Short-term bank credit
27
Trade and other payables
27
Current maturities of lease liabilities
27
Tax liabilities
Non-current liabilities
Long-term bank credit
27
Long-term liabilities
27
Long-term lease liabilities
27
Deferred tax liabilities
26
Retirement benefit obligation
35
Total liabilities
Equity
Share capital
28
Share premium account
Reserves
(32,812 )
(19,849 )
Accumulated deficit
(279,579 )
(279,888 )
Equity attributable to the:
Owners of the Company
Non-controlling interests
(1,066 )
(3,289 )
Total equity
Total equity and liabilities
The financial statements were approved by the board of directors and authorised on 4 April 2023. They were signed on its behalf by:
M. Nagar, CEO
R.Noy, CFO
Consolidated Statements of Financial Position
The accompanying notes are an integral part of these financial statements.
for the year ended 31 December
ANNUAL REPORT &
ACCOUNTS 2022
74
Consolidated Statements of Changes in Equity
The accompanying notes are an integral part of these financial statements.
Share
Capital
Share
Premium
Account
Translation
Reserve
Other
Reserve
Accumulated
Deficit
Attributable
to Owners of
the Company
Non-
Controlling
Interests
Total
Equity
US$ in thousands
Balance as at
1 January 2021
(13,811 )
(512 )
(290,090 )
(3,830 )
Profit for the year
Disposal of a
foreign operation
(522 )
(522 )
(522 )
Re-measurement of
defined benefit
obligation
Exchange differences
on translating foreign
operations
(5,004 )
(5,004 )
(4,880 )
Total comprehensive
income (loss) for
the year
(5,526 )
Exercise of share-based
options by employees
(*)
Recognition of share-
based payments
Dividends
(4,300 )
(4,300 )
(4,300 )
Balance as at
1 January 2022
(19,337 )
(512 )
(279,888 )
(3,289 )
Profit for the year
Re-measurement
of defined benefit
obligation
Exchange differences
on translating foreign
operations
(6,036 )
(6,036 )
(5,810 )
Total comprehensive
income (loss) for
the year
(6,036 )
(5,727 )
(4,875 )
Dividend paid to non-
controlling interest
(681 )
(681 )
Share buy-back
(1,325 )
(1,325 )
(1,325 )
Recognition of share-
based payments
Transaction with non-
controlling interests
(666 )
(4,936 )
(5,602 )
(3,550 )
Balance as at
31 December 2022
(26,039 )
(6,773 )
(279,579 )
(1,066 )
for the years ended 31 December 2022 and 2021
(*) Less than 1K USD
ANNUAL REPORT &
ACCOUNTS 2022
75
FINANCIAL STATEMENTS
2022
2021
Note
US$’000
US$’000
Net cash from (used in) operating activities
30
(2,784 )
Investing activities
Purchases of property, plant and equipment
(2,414 )
(2,889 )
Increase of other intangible assets
(2,054 )
(400 )
Investment in joint venture and associated companies
(4,386 )
(727 )
Proceeds on disposal of property, plant and equipment
Investment in subsidiary
(550 )
Proceeds from sale of a subsidiary
32
Tax payment related to disposal of a subsidiary
(4,953 )
Proceeds on disposal of deposits and securities
Purchases of deposits and securities
(11,733 )
(315 )
Other
31
Net cash from (used in) investing activities
(16,342 )
Financing activities
Lease payment
22
(2,192 )
(2,174 )
Bank loan repayment
27
(11,017 )
(13,252 )
Bank loan received
27
Dividend paid
(4,300 )
Dividend paid to NCI
(681 )
Share buy-back
(1,325 )
Proceed on exercise of share-based payments
Net cash used in financing activities
(7,050 )
(4,937 )
Net increase (decrease) in cash and cash equivalents
(26,176 )
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balance of cash
held in foreign currencies
(3,999 )
(968 )
Cash and cash equivalents at the end of the year
Consolidated Statements of Cash Flow
The accompanying notes are an integral part of these financial statements.
for the year ended 31 December
Notes to the Consolidated Financial Statements
for the year ended 31 December 2022
ANNUAL REPORT &
ACCOUNTS 2022
76
General Information
Law. The address of the registered office is POB 7318, Nave Ne’eman Ind. Area 4, Ha’harash Street, 4524075 Hod
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
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 published in January 2020 (2020 amendments) 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.
In October 2022 the IASB published additional amendments (2022 amendments) specify that only covenants that an
entity is required to comply with on or before the end of the reporting period affect the entity’s right to defer settlement
of a liability for at least twelve months after the reporting date (and therefore must be considered in assessing the
classification of the liability as current or non-current). Such covenants affect whether the right exists at the end of the
reporting period, even if compliance with the covenant is assessed only after the reporting date.
However, if the entity’s right to defer settlement of a liability is subject to the entity complying with covenants within
twelve months after the reporting period, an entity discloses information that enables users of financial statements to
understand the risk of the liabilities becoming repayable within twelve months after the reporting period.
The 2022 and 2020 amendments are applied retrospectively for annual reporting periods beginning on or after 1
January 2024. Earlier application of the amendments is permitted. If an entity applies the 2022 amendments for an
earlier period, it is also required to apply the 2020 amendments early.
Amendments to IAS 1 – Disclosure of Accounting Policies
The amendments change the requirements in IAS 1 with regard to disclosure of accounting policies. The amendments
replace all instances of the term ‘significant accounting policies’ with ‘material accounting policy information’. Accounting
policy information is material if, when considered together with other information included in an entity’s financial
statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial
statements make on the basis of those financial statements.
The supporting paragraphs in IAS 1 are also amended to clarify that accounting policy information that relates to
immaterial transactions, other events or conditions is immaterial and need not be disclosed. Accounting policy
information may be material because of the nature of the related transactions, other events or conditions, even if the
amounts are immaterial. However, not all accounting policy information relating to material transactions, other events
or conditions is itself material.
The IASB has also developed guidance and examples to explain and demonstrate the application of the ‘four-step
materiality process’ described in IFRS Practice Statement 2.
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
The amendments to IAS 1 are effective for annual periods beginning on or after 1 January 2023, with earlier application
permitted and are applied prospectively. The amendments to IFRS Practice Statement 2 do not contain an effective
date or transition requirements.
Amendments to IAS 8 – Definition of Accounting Estimates
The amendments replace the definition of a change in accounting estimates with a definition of accounting estimates.
Under the new definition, accounting estimates are ‘monetary amounts in financial statements that are subject to
measurement uncertainty’.
The definition of a change in accounting estimates was deleted. However, the IASB retained the concept of changes in
accounting estimates in the Standard with the following clarifications:
l
A change in accounting estimate that results from new information or new developments is not the correction of an
error
l
The effects of a change in an input or a measurement technique used to develop an accounting estimate are changes
in accounting estimates if they do not result from the correction of prior period errors
The amendments are effective for annual periods beginning on or after 1 January 2023 to changes in accounting
policies and changes in accounting estimates that occur on or after the beginning of that period, with earlier application
permitted.
Amendments to IFRS 3 – Reference to the Conceptual Framework
The Group has adopted the amendments to IFRS 3 Business Combinations for the first time in the current year. The
amendments update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework. They
also add to IFRS 3 a requirement that, for obligations within the scope of IAS 37 Provisions, Contingent Liabilities and
Contingent Assets, an acquirer applies IAS 37 to determine whether at the acquisition date a present obligation exists
as a result of past events. For a levy that would be within the scope of IFRIC 21 Levies, the acquirer applies IFRIC 21 to
determine whether the obligating event that gives rise to a liability to pay the levy has occurred by the acquisition date.
Amendments to IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single
Transaction
The amendments introduce a further exception from the initial recognition exemption. Under the amendments, an
entity does not apply the initial recognition exemption for transactions that give rise to equal taxable and deductible
temporary differences.
Depending on the applicable tax law, equal taxable and deductible temporary differences may arise on initial recognition
of an asset and liability in a transaction that is not a business combination and affects neither accounting nor taxable
profit. For example, this may arise upon recognition of a lease liability and the corresponding right-of-use asset applying
IFRS 16 at the commencement date of a lease.
Following the amendments to IAS 12, an entity is required to recognise the related deferred tax asset and liability, with
the recognition of any deferred tax asset being subject to the recoverability criteria in IAS 12.
The IASB also adds an illustrative example to IAS 12 that explains how the amendments are applied.
The amendments apply to transactions that occur on or after the beginning of the earliest comparative period
presented. In addition, at the beginning of the earliest comparative period an entity recognises:
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
l
A deferred tax asset (to the extent that it is probable that taxable profit will be available against which the deductible
temporary difference can be utilised) and a deferred tax liability for all deductible and taxable temporary differences
associated with:
–
Right-of-use assets and lease liabilities
–
Decommissioning, restoration and similar liabilities and the corresponding amounts recognised as part of the cost
of the related asset
l
The cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained
earnings (or other component of equity, as appropriate) at that date
The amendments are effective for annual reporting periods beginning on or after 1 January 2023, with earlier application
permitted.
The directors of the Company anticipate that the application of these amendments have no significant impact on the
Significant Accounting Policies
The consolidated financial statements have been prepared in accordance with International Financial Reporting
The consolidated financial statements have been prepared on a 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:
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
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
l
Level 3 inputs are unobservable inputs for the asset or liability.
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
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
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.
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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
Changes in the Group’s ownership interests in existing subsidiaries
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
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 value 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.
When the consideration transferred by the Group in a business combination includes a contingent consideration
arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the
consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify
as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill.
Measurement period adjustments are adjustments that arise from additional information obtained during the
‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that
existed at the acquisition date.
When a business combination is achieved in stages, the Group’s previously held interests (including joint operations) in
the acquired entity are remeasured to its acquisition-date fair value and the resulting gain or loss, if any, is recognised
in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been
recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate
if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to
reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known,
would have affected the amounts recognised as of that date.
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
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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.
On disposal of an operating unit, the attributable amount of goodwill is included in the determination of the profit or
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.
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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 posi-
tion. This is normally measured by the proportion that contract costs incurred for work performed to date compare to
the estimated total contract costs except where this would not be representative of the stage of completion or engineer-
ing completion. The management consider that this input method is an appropriate measure of the progress towards
complete satisfaction of these performance obligations under IFRS 15. Variations in contract work, claims and incentive
payments are included to the extent that they have been agreed with the customer.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent
of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period
in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an
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
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.
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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
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
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
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
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:
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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
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 ben-
efits 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
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
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.
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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.
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
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.
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,
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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
3%-6%
Plant and equipment
10%-33%
Motor vehicles
15%-25%
Furniture and fittings
6%-15%
Leasehold Improvements
6%-20%
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
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
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:
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Customer relationships and backlog
10%-12.5%
Technology
14%-20%
Other
10%
Subsequent to initial recognition, intangible assets are reported at cost less accumulated amortisation and accumulated
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation
can be 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
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
Financial assets and financial liabilities are recognised on the Group’s consolidated statements of financial position
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 to recognise expected lifetime credit losses are
recognised in profit or loss at the end of the reporting period. 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
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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,
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 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
The Group recognises a loss allowance for expected credit losses on trade receivables. The amount of expected credit
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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
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
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
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
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
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
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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.
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
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
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:
Year ended 31 December
2022
$’000s
2021
$’000s
Sales of goods
95,344
116,447
Services
13,191
15,837
Construction contracts
7,588
7,754
116,123
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 and Edge Computing based on the Group’s
Edgility Software Suite, which provides operation and management capabilities for edge devices, 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.
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
A.
Segment revenues and segment results
Year ended 31 December 2022
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
Total
$’000s
Revenues from external customers
27,864
88,259
–
116,123
Operating profit/(loss)
(1,152)
4,286
–
3,134
Net finance expenses
(1,239)
Profit before tax
1,895
Year ended 31 December 2021
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
Total
$’000s
Revenues from external customers
27,992
112,046
-
140,038
Operating profit
7,844
16,534
-
24,378
Net finance income
555
Profit before tax
24,933
B.
Segment assets, liabilities and other information
As at 31 December 2022
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
Total
$’000s
Assets
64,271
110,288
622
175,181
Liabilities
21,031
38,802
1,347
61,180
Depreciation and amortisation
1,408
3,426
57
4,891
Additions to non-current assets
2,851
4,250
-
7,101
As at 31 December 2021
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
Total
$’000s
Assets
74,951
116,474
1,739
193,164
Liabilities
23,904
40,826
4,300
69,030
Depreciation and amortisation
1,659
3,525
80
5,264
Additions to non-current assets
2,114
7,961
–
10,075
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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
2022
$’000s
2021
$’000s
Networking and cyber products
18,898
15,376
Software services*
8,966
12,616
Distribution of medical products and services
70,272
71,832
Diagnostic products
11,307
31,576
Eco-Med products
6,680
8,638
116,123
140,038
* The decrease in Software services revenue derives mainly from the sale of a Group subsidiary. See note 32 (disposal of subsidiary) for further
details.
D. Revenue from major sources
Year ended 31 December 2022
Revenues
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
Total
$’000s
Sales of goods
18,872
76,472
–
95,344
Services
3,529
9,662
–
13,191
Construction contracts
5,463
2,125
–
7,588
27,864
88,259
–
116,123
Year ended 31 December 2021
Revenues
Networking and Cyber
$’000s
Bio-Medical
$’000s
Unallocated
$’000s
Total
$’000s
Sales of goods
15,376
101,071
–
116,447
Services
7,131
8,706
–
15,837
Construction contracts
5,485
2,269
–
7,754
27,992
112,046
–
140,038
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
The Group operates in three principal geographical areas: the 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
Revenue from external customers
Non-current assets
2022
2021
2022
2021
Area A
82,052
107,718
40,897
40,302
Area B
22,272
22,923
12,372
10,304
Area C
11,799
9,397
2,207
4,510
Total
116,123
140,038
55,476
Cost of revenues
Year ended 31 December
2022
$’000s
2021
$’000s
Direct costs – Components and subcontractors
74,665
74,136
Changes in inventory
(3,510)
2,942
Salaries and related benefits
3,220
7,330
Overhead and depreciation
2,388
2,726
Other expenses
1,402
1,843
78,165
Sales and marketing expenses
Year ended 31 December
2022
$’000s
2021
$’000s
Salaries and related benefits
10,804
10,220
Commissions
977
2,986
Outside services
457
491
Advertising and sales promotion
826
941
Overhead and depreciation
2,457
2,304
Travelling and other expenses
1,688
1,348
17,209
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
General and administrative expenses
Year ended 31 December
2022
$’000s
2021
$’000s
Salaries and related benefits
6,289
5,114
Professional services(*)
2,818
3,506
Overhead and depreciation
1,678
1,347
Other expenses
2,233
2,276
13,018
12,243
(*) Including auditors’ remuneration for audit
services
353
347
Amounts payable to Deloitte by the Group undertakings in respect of non-audit services in 2022 were $63 thousand (2021:
$48 thousand). In addition, payables in respect of non-audit services to other than the Company’s auditors, for tax and
internal audit services in 2022, were $24 thousand and $13 thousand, respectively (2021: $51 thousand and $19 thousand,
Research and development expenses
Year ended 31 December
2022
$’000s
2021
$’000s
Salaries and related benefits
4,284
4,741
Components and subcontractors
1,705
2,863
Overhead and depreciation
866
852
Other expenses
442
591
Government grants
(272)
(334)
7,025
Staff costs
The average monthly number of employees in 2022 (including executive directors) was 949 (2021:1,023).
Year ended 31 December
2022
$’000s
2021
$’000s
Their aggregate remuneration comprised:
Wages and salaries
20,216
22,233
Social security costs
3,225
3,569
Other pension costs
1,156
1,603
24,597
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Other operating income
Year ended 31 December
2022
$’000s
2021
$’000s
Gain from disposal of property
(2,021)
–
Gain from business combination achieved in
stages over an associated company
(1)
(404)
–
Gain from revaluation of investment carried at fair
value
(193)
–
)
Amortisation of intangible assets
143
196
)
Profit from sale of a subsidiary
(2)
–
(13,035)
)
Other
47
276
(2,428)
(12,563)
(1)
See note 31 in relation to business combination achieved in stages
(2)
Finance income
Year ended 31 December
2022
$’000s
2021
$’000s
Interest on bank deposits and other
729
571
Gain on derivative financial instruments
43
–
Foreign exchange differences, net
–
895
772
Finance expenses
Year ended 31 December
2022
$’000s
2021
$’000s
Interest on loans and bank fees
(593)
(643)
Interest on liabilities
(740)
(224)
Foreign exchange differences, net
(456)
–
Loss on financial assets at FVTPL
(222)
–
Loss on derivative financial instruments
–
(44)
(2,011)
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Income tax expenses
Year ended 31 December
2022
$’000s
2021
$’000s
Current tax
(430)
(7,027)
Tax on previous years
53
(11)
Deferred tax (note 26)
38
(2,299)
(339)
(9,337)
Taxation under various laws:
Israel
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 2021 and 2022 is 23%
b.
Encouragement of Capital Investments Law:
a. The corporate tax rate for each company with Preferred Enterprise status for the years 2021 and 2022 is 7.5%.
b.
Including additional tax tracks for Preferred Technological Enterprise (tax rate of 7.5% in Area “A” and tax rate of 12%
in Area “Other”) and for special Preferred Technological Enterprise (tax rate of 6%).
c.
Determining relief of the threshold conditions to enter the track of “Special Preferred Enterprise” relevant for huge
companies (tax rates of 5% in Area “A” or 8% in the Area “Other”).
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 $123.4 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 2017 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 2022, the total carry-forward losses of Telco Systems amounted to $250.7 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%.
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
The Group has tax loss carry-forwards of $6.5 million in European subsidiaries and the Group did not recognise
deferred tax assets in respect of $5.5 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
2022
$’000s
2021
$’000s
Profit before tax
1,895
24,933
Tax expense at the Israeli statutory corporate income tax rate of 23%
437
5,735
Difference between equity method measurement basis and cost basis for
tax purposes
315
1,754
Differences between statutory tax in Israel (23%) and subsidiaries tax rate
418
1,449
Tax losses utilised in current period for which no deferred tax assets have
been recognised
(774)
(154)
Deferred tax assets recognised
(24)
(191)
Tax on previous years
(53)
11
Other
2
20
733
)
Tax expenses for the year
339
)
Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Year ended 31 December
2022
2021
Earnings for the purposes of basic and diluted earnings per share ($'000s)
attributable to Owners of the Company
244
14,340
Number of shares
Weighted average number of ordinary shares for the purposes of basic
earnings per share
440,167,097
440,437,960
Effect of dilutive potential ordinary shares
2,190,019
3,829,714
Weighted average number of ordinary shares for the purposes of
calculation of diluted earnings per share
442,357,116
444,267,674
The number of dilutive instruments 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 1,778,220 (2021:
225,000).
The weighted average number of ordinary shares for the purposes of basic earnings per share for 2022 is taking into
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Short-term investment in deposits and other securities
Year ended 31 December
2022
$’000s
2021
$’000s
Interest-bearing deposits
1,182
158
Financial assets at FVTPL
7,829
2,274
9,011
2,432
Trade and other receivables
31 December
Trade and other receivables
2022
$’000s
2021
$’000s
Trade receivable account
25,606
25,451
Participation in research and development: Government of Israel
79
90
VAT authorities
2,360
2,226
Tax authorities
156
257
Construction contracts (see following table)
2,159
1,474
Prepaid expenses
4,581
3,634
Other debtors
1,554
1,800
36,495
34,932
Construction contracts
31 December
2022
$’000s
2021
$’000s
Composition:
Cumulative costs incurred due to works construction contracts
13,795
)
8,493
)
In addition - Recognised profits
3,474
)
2,044
)
Less accounts submitted to project customers
(15,110)
(9,063)
2,159
1,474
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
No interest is charged on the receivables. An allowance has been made at 31 December 2022 for estimated irrecoverable
amounts from the sale of goods of $3,085 thousand (2021: $3,499 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 2022, trade receivable account includes amounts of $5.2 million for which the maturity date has
expired (including a receivable in the amount of $1.2 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 collectible.
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
Inventories
31 December
2022
$’000s
2021
$’000s
Raw materials
6,552
7,125
Work-in-progress
4,727
2,410
Finished goods
23,182
21,416
34,461
30,951
During 2022, $0.2 million of slow-moving inventory was impaired and expensed to the profit or loss account (2021: $2.0
Property, plant and equipment
($’000s)
Land and
buildings
Plant and
equipment
Motor
vehicles
Furniture
and
fittings
Leasehold
improvements
Total
Cost
At 1 January 2021
10,209
19,734
2,083
4,522
2,992
39,540
Additions
29
3,477
394
103
2,036
6,039
Disposals
(11)
(265)
(229)
(77)
(29)
(611)
Disposal of subsidiary
–
(797)
–
–
(1,197)
(1,994)
Effect of translation adjustment
(519)
(621)
(115)
(88)
(86)
(1,429)
At 1 January 2022
9,708
21,528
2,133
4,460
3,716
41,545
Additions
37
1,264
346
90
463
2,200
Disposal
(2,478)
(558)
(43)
(439)
(193)
(3,711)
Business combination
-
42
-
3
-
45
Effect of translation adjustment
(477)
(695)
(201)
(204)
(196)
(1,773)
At 31 December 2022
6,790
21,581
2,235
3,910
3,790
38,306
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
($’000s)
Land and
buildings
Plant and
equipment
Motor
vehicles
Furniture
and
fittings
Leasehold
improvements
Total
Accumulated depreciation
At 1 January 2021
2,898
13,460
1,287
4,171
1,615
23,431
Depreciation expense
299
1,332
228
74
116
2,049
Disposals
–
(220)
(175)
(77)
–
(472)
Disposal of subsidiary
–
(512)
–
–
(338)
(850)
Effect of translation adjustment
(232)
(301)
(86)
(71)
(30)
(720)
At 1 January 2022
2,965
13,759
1,254
4,097
1,363
23,438
Depreciation expense
258
1,157
178
174
284
2,051
Disposals
(970)
(418)
(43)
(330)
-
(1,761)
Business combination
-
20
-
2
-
22
Effect of translation adjustment
(194)
(293)
(118)
(123)
(25)
(753)
At 31 December 2022
2,059
14,225
1,271
3,820
1,622
22,997
Carrying amount
At 31 December 2022
4,731
7,356
964
90
2,168
15,309
At 31 December 2021
6,743
7,769
879
363
2,353
Investment property
2022
$’000s
2021
$’000s
At 1 January
1,739
)
1,878
)
Disposals
(1,022)
-
Depreciation expense
(58)
(80)
Exchange rate differences
(39)
(59)
)
At 31 December
620
1,739
Amounts recognised in the consolidated statements of profit or loss
31 December
2022
$’000s
2021
$’000s
Rental income from investment property
29
24
Operating expenses related to income from investment property
(12)
(13)
Operating expenses related to investment property which produced no income
(93)
(134)
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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 2022
31 December 2021
At amortised cost
$’000s
Fair value
$’000s
At amortised cost
$’000s
Fair value
$’000s
Italy
620
1,166
688
1,237
USA
-
-
1,051
1,933
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.
During 2022, the Group sold its properties in the USA, which generated a profit of $2.1 million.
Average market price, taking into account the differences in location and individual factors, such as frontage and size,
Right-of-use assets
($’000s)
Plant and
equipment
Buildings
Motor vehicles
Total
Cost
At 1 January 2021
-
12,840
1,493
14,333
Additions
848
1,618
693
3,159
Disposals
–
(495)
(365)
(860)
Disposal of subsidiary
–
(4,191)
(547)
(4,738)
Effect of translation adjustment
–
(110)
(13)
(123)
At 31 December 2021
848
9,662
1,261
11,771
Additions
286
957
175
1,418
Disposals
(77)
(669)
(216)
(962)
Effect of translation adjustment
(44)
(144)
(38)
(226)
At 31 December 2022
1,013
9,806
1,182
12,001
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
($’000s)
Plant and
equipment
Buildings
Motor vehicles
Total
Accumulated depreciation
At 1 January 2021
–
3,938
788
4,726
Charge for the year
128
1,706
375
2,209
Disposals
–
(285)
(365)
(650)
Disposal of subsidiary
–
(896)
(175)
(1,071)
Effect of translation adjustment
–
(6)
(7)
(13)
At 31 December 2021
128
4,457
616
5,201
Charge for the year
228
1,685
312
2,225
Disposals
(44)
(484)
(216)
(744)
Effect of translation adjustment
(6)
(129)
(7)
(142)
At 31 December 2022
306
5,529
705
6,540
Carrying amount
At 31 December 2022
707
4,277
477
5,461
At 31 December 2021
720
5,205
645
6,570
The Group leases several assets including buildings and motor vehicles. The average lease term of buildings and motor
vehicles is approximately 5 and 3 years, respectively.
The maturity analysis of lease liabilities is presented in note 27.
Amounts recognised in profit or loss
2022
$’000s
2021
$’000s
Depreciation expense on right-of-use assets
2,225
2,209
Interest expense on lease liabilities
192
224
Expense relating to short-term leases
893
766
At 31 December 2022, the Group was committed to $0.7 million for short-term leases (2021: $0.4 million). The total cash
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 $10,599 thousand (2021: $9,401 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 (2021: $1,984 thousand).
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
The goodwill is allocated to the following CGUs:
Eco-Med: $2,550 thousand (2021: $2,550 thousand)
Diagnostic: $1,020 thousand (2021: $1,082 thousand)
Distribution: $1,073 thousand (2021: $1,116 thousand)
Distributor and provider of genetics tests: $2,376 thousand (2021: $1,073 thousand)
Analytical instruments distribution: $3,580 thousand (2021: $3,580 thousand)
Networking: $1,984 thousand (2021: $1,984 thousand)
The recoverable amounts of the CGUs are determined from value-in-use calculations. The key assumptions for the
value-in-use calculations are those regarding the discount rates, growth rates and expected related expenses during
the period. Pre-tax discount rates of between 9.9% - 16.3% have been used. Changes in expenses are based on recent
history and expectations of future changes in the market.
For the purpose of the goodwill impairment test, 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 28%
average growth per year for 1-5 years and 0% thereafter; for the Diagnostic CGU of 17% average growth per year for
1-5 years and 0% thereafter; for the Eco-Med CGU of 28% average growth per year for 1-5 years and 1% thereafter; for
the Distribution CGU of 13% average growth per year for 1-5 years and 5% thereafter; for the Distributor and provider
of genetics tests CGU of 7% average growth per year for 1-5 years and 1% thereafter; and for the Analytical instruments
distribution CGU of 15% average growth per year for 1-5 years and 1% thereafter.
The average operating expenses have been assumed to grow for the Networking CGU at 24% average growth per year
for 1-5 and then assumed to remain constant thereafter, and for the Diagnostic, Eco-Med, Distribution, Distributor and
provider of genetics tests and Analytical instruments distribution CGUs at 8% average growth per year for 1-5 and then
assumed to remain constant thereafter. The average cost of goods sold has been assumed to grow for the Networking
CGU at 11% average growth per year for 1-5 and then assumed to remain constant thereafter, and for the Diagnostic
,Eco-Med, Distribution, Distributor and provider of genetics tests and Analytical instruments distribution CGUs at 15%
average growth per year for 1-5 and 4% thereafter.
Sensitivity of the recoverable amount to changes in the key assumptions
The recoverable amount of the Analytical instruments distribution activity is higher than the carrying amount in the
amount of $2.0 million. Reduction of 2% growth rate taken into account in calculating the value-in-use of the activity
will result in a decrease of $0.9 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 $1.1 million recoverable amount of the activity and no goodwill impairment will be recorded. The changes in
assumptions for the sensitivity analysis will lead to changes in other assumptions used in the calculation of value-in-use.
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
2022
$’000s
2021
$’000s
Balance at 1 January
11,385
16,838
Business combination
(1)
1,429
–
Disposal of a subsidiary
(2)
-
(5,185)
Foreign exchange difference
(231)
(268)
Balance at 31 December
12,583
(1)
see note 31
(2)
see note 32
Other intangible assets
Customer Relationships
and Backlog
$’000s
Technology
$’000s
Other
$’000s
Total
$’000s
Cost
At 1 January 2021
17,136
18,070
2,836
38,042
Additions(*)
–
400
477
877
Disposals
–
(1,264)
–
(1,264)
Disposal of subsidiary
(4,896)
(199)
(1,554)
(6,649)
Effect of translation adjustments
(535)
(451)
(54)
(1,040)
As at 1 January 2022
11,705
16,556
1,705
29,966
Additions(*)
-
2,054
-
2,054
Disposals
-
(62)
-
(62)
Effect of translation adjustments
(320)
(290)
(68)
(678)
At 31 December 2022
11,385
18,258
1,637
31,280
Accumulated amortisation
At 1 January 2021
16,631
12,093
2,439
31,163
Amortisation expense
43
547
126
716
Disposal
–
(106)
–
(106)
Disposal of subsidiary
(4,504)
(91)
(1,086)
(5,681)
Effect of translation adjustments
(513)
(233)
(28)
(774)
At 1 January 2022
11,657
12,210
1,451
25,318
Amortisation expense
10
427
121
558
Disposal
-
-
-
-
Effect of translation adjustments
(321)
(173)
(50)
(544)
At 31 December 2022
11,346
12,464
1,522
25,332
Carrying amount
At 31 December 2022
39
5,794
115
5,948
At 31 December 2021
48
4,346
254
4,648
(*)
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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 2022 is presented below.
Subsidiary
Principal
activity
Country of
incorporation
Ownership
interest
Date of
acquisition
Entity A
Telecommunication
United States of America
100%
April 2000
Entity B
Distribution
Romania
100%
June 2007
Entity C
Eco-Med
Hungary
100%
February 2008
Entity D
Distribution
Moldova
51%
July 2008
Entity E
Diagnostics
Italy
96%
February 2009
Entity F
Diagnostics
Italy
96%
November 2009
Entity G
Cyber
Israel
67%
April 2012
Entity H
Distribution
Hungary
100%
January 2016
Entity I
Distribution
Israel
100%
January 2017
The most significant NCIs (49%) are related to entity D. The profit and loss allocated to the NCI for 2022 amounts to $331
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
Total
$’000s
At 1 January 2021
–
5,759
–
5,759
Change for the period
–
(2,280)
–
(2,280)
Effect of translation adjustments
–
(104)
–
(104)
At 1 January 2022
–
3,375
–
3,375
Change for the period
–
–
–
–
Effect of translation adjustments
–
(13)
–
(13)
At 31 December 2022
–
3,362
–
3,362
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.
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Deferred tax liabilities
Intangible
assets
$’000s
Tangible assets
and other
$’000s
Total
$’000s
At 1 January 2021
90
621
711
Change for the period
(16)
35
19
Effect of translation adjustments
(1)
(19)
(20)
Disposal of a subsidiary
–
(540)
(540)
At 1 January 2022
73
97
170
Change for the period
(14)
(24)
(38)
Effect of translation adjustments
(5)
(7)
(12)
At 31 December 2022
54
66
120
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
Financial and other liabilities
31 December
2022
$’000s
2021
$’000s
Trade creditors
20,990
20,701
Salary accruals
6,708
7,195
VAT and other tax
3,013
4,336
Dividend payables
-
4,300
Provision
221
–
Liability for acquisition
3,779
-
Other creditors and accruals
11,545
10,987
46,256
47,519
Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The
Long-term bank credit
31 December
2022
$’000s
2021
$’000s
Long-term bank credit
2,000
1,356
2,000
1,356
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
31 December
2022
$’000s
2021
$’000s
Liability to the office of the chief scientist
2,845
2,685
Government institutions and other
627
1,203
3,472
Changes in financial liabilities where the cash flows in respect thereof are classified as to financing activities
2022
Open
balance
$’000s
Cash flow from finance
activities, net
$’000s
Foreign exchange
differences
$’000s
Close
balance
$’000s
Short term
1,634
609
(8)
2,235
Long term
1,356
839
(195)
2,000
2,990
1,448
(203)
4,235
2021
Open
balance
$’000s
Cash flow from (used in)
finance activities, net
$’000s
Foreign exchange
differences
$’000s
Close
balance
$’000s
Short term
5,365
(3,565)
(166)
1,634
Long term
675
744
(63)
1,356
6,040
(2,821)
(229)
2,990
Lease liabilities
2022
2021
$’000s
$’000s
Balance as at 1 January
7,294
10,684
Cash payments
(2,384)
(2,393)
Other
1,421
2,801
Foreign exchange impact
(589)
(34)
Disposal of subsidiary
-
(3,764)
Balance as at 31 December
5,742
7,294
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
31 December
2022
$’000s
2021
$’000s
Maturity analysis
Year 1
1,984
2,186
Year 2
1,475
1,682
Year 3
1,102
1,240
Year 4
758
1,047
Year 5
416
741
Onwards
7
398
5,742
Share capital
Ordinary shares of NIS 0.01 each (number of shares)
2022
2021
Authorised:
1,000,000,000
1,000,000,000
Issued and fully paid:
440,534,124
440,534,124
The Company has one class of ordinary shares which carry no right to fixed income.
During the year, the Company purchased a total of 4,495,000 shares (the “Buy-back Programme”- see also note 29). In
addition, three share-based grants were made (see also note 33). During 2021, 100,000 options were exercised by an
Dividends and buyback
On 14 December 2021, the Company’s shareholders approved the distribution of a dividend of GBP 0.74 per ordinary
share, amounting to a total payout of $4.3 million. The amount was fully paid during the first quarter of 2022.
On 17 March 2022, the general meeting of shareholders of the Group approved a buy-back programme. During the year,
the Company purchased a total of 4,495,000 ordinary shares for a total of $1,325 thousand (net of transaction costs) for
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Note to the cash flow statement
Year ended 31 December
2022
$’000s
2021
$’000s
Operating profit from operations
3,134
24,378
Adjustments for:
Amortisation of intangible assets
557
716
Depreciation of property, plant and equipment and investment property
4,334
4,548
Capital gain of property, plant and equipment
(2,021)
(229)
Profit from sale of a subsidiary
-
(13,035)
Gain from revaluation of investment carried at fair value
(192)
–
Gain from business combination achieved in stages over an associated
company
(404)
-
Share-based payments
298
96
Increase (decrease) in retirement benefit obligation
23
(10)
Increase (decrease) in provisions
105
(1,803)
Operating cash flow before movements in working capital
5,834
14,661
Decrease (increase) in inventories
(3,258)
3,031
Increase in receivables
(803)
(2,052)
Decrease in payables
(1,291)
(5,352)
Effects of exchange rate changes on the balance sheet
(1,556)
(1,616)
Cash from operations
(1,074)
8,672
Income taxes paid
(985)
(2,383)
Interest paid
(725)
(697)
Net cash from (used in) operating activities
(2,784)
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Business combination achieved in stages over an associated company
Towards the end of the year, the Group gained control of one of its associated companies. As a result, the Group
recorded a capital gain of $404 thousand.
2022
US$ in thousands
Net assets acquired
Current assets
523
Cash
29
Property, plant and equipment
22
Current liabilities
(514)
60
Goodwill
1,429
)
Total consideration
1,489
)
Satisfied by:
Disposal of investment in associated company
775
Liability of acquisition
714
Total consideration
1,489
Net cash inflow arising on business combination:
Cash and cash equivalents acquired
29
As at the date of approval of these financial statements, the Group had not yet completed the initial accounting treatment
for the acquisition of the associated company, including the estimation of the fair value of the acquired assets and the
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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. NGSoft is a software and
digital services company that provides creative digital and technology solutions.
NGSoft
2021
US$ in thousands
Net assets disposed
Property, plant and equipment
1,144
)
Right of use
3,667
)
Other intangible assets
968
)
Net working capital
73
)
Lease liability
(3,764)
Current tax liability
(584)
Deferred tax liability
(540)
Goodwill
5,185
)
Net assets disposed of
6,149
)
Disposal of a foreign operation translation reserve
(522)
Gain on disposal
13,035
)
Total consideration
18,662
)
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents, net
20,903
)
Cash and cash equivalents disposed
(2,241)
)
Guarantees and liens
The Group provided from time-to-time bank guarantees due to advances from customers. The Company registered
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Share-based payments
Equity-settled share option scheme
In November 2021, the Company approved a Global 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 2021 Plan. Options granted prior to the 2021 Plan are subject to the
terms and conditions under which they were granted.
Details of the share options outstanding during the year are as follows:
2022
2021
Number
of share
options
Weighted average
exercise price
(in GBP)
Number
of share
options
Weighted average
exercise price
(in GBP)
Outstanding at beginning of year
5,631,200
0.3008
5,756,200
0.2867
Granted during the year
-
-
225,000
1.0502
Forfeited during the year
(150,000)
0.4196
(250,000)
0.5976
Exercised during the year
-
-
(100,000)
0.4340
Outstanding at the end of the year
5,481,200
0.2976
5,631,200
0.3008
Exercisable at the end of the year
5,264,534
0.2718
5,247,867
0.2505
The outstanding options at 31 December 2022 had a weighted average exercise price of 0.2976 GBP, and a weighted
average remaining contractual life of 5.2 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.
The inputs into the Black-Scholes model for the options granted are as follows:
2021
Weighted average share price (GBP)
1.05
Weighted average exercise price (GBP)
1.05
Expected volatility
82%
Expected life
3
Risk-free rate
1.3%
Expected dividends
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.
Subsequent to the balance sheet date, on 1 January 2023, the Company granted options over ordinary shares of 0.01
NIS each in the capital of the Company with an exercise price of 25.49 pence to the chairman and CEO of the Company,
in an amount of 1,229,369 options (fully vest on the first anniversary of the grant date) and 16,433,937 options (one-
third of the options will vest on each of the first, second and third anniversaries of the grant date) respectively.
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Details of the restricted share units (“RSUs”) outstanding during the year are as follows:
Number of RSUs
2022
Outstanding at beginning of year
-
Granted during the year
2,190,359
Forfeited during the year
-
Awarded during the year
-
Outstanding at the end of the year
2,190,359
During the year, three share-based grants were made. In April, the Company granted to an executive officer 537,109
RSUs under the Group’s 2021 Plan. The RSUs vest on the third anniversary of the grant date subject to total shareholder
return (“TSR”) performance over the three-year period as follows:
TSR on vesting date compared to
share price on date of grant
Vesting percentage of the RSUs
Less than +15%
0%
+15%
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%
The fair value of the grant is $224 thousand and was calculated using the Bionomic model as follows:
2022
Weighted average share price (GBP)
0.50
Expected volatility
57%
Expected life
3
Risk-free rate
1.5%
Expected dividends
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 and behavioural considerations.
In July and September, the Company granted 1,653,250 RSUs to four employees, with vesting periods of two to three
years and subject to performance conditions. The total fair value of this grant of RSUs to four employees amounts to
$700 thousand, based on the Company’s average closing share price over the 30 trading days preceding the grant date.
The Group recognised total expenses of $298 thousand and $96 thousand related to equity-settled share-based
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
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.
Total expenses related to the contribution retirement benefit schemes are: $515 thousand in the year 2022 (2021: $453
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 United 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 severance payment at the end of employment. In 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 on 7 February 2023 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:
2022
2021
Discount rate(s)
2.22%
2.15%
Expected rate(s) of salary increase
3-4%
1-4%
Expected inflation rate
2.71%
2.56%
Employee turnover rate
8%
8%
Amounts recognised in comprehensive income in respect of these defined benefit plans are as follows:
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Service cost:
2022
$’000s
2021
$’000s
Current service cost
150
193
Net interest expenses
3
11
Components of defined benefit costs recognised in profit or loss
153
204
Re-measurement on the net defined benefit liability:
2022
$’000s
2021
$’000s
Return on plan assets (excluding amounts included in net interest
expense)
(5)
80
Actuarial gains and losses arising from changes in financial assumptions
42
15
Actuarial gains and losses arising from other
28
67
Components of defined benefit costs recognised in other comprehensive
income
65
162
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:
2022
$’000s
2021
$’000s
Present value of funded defined benefit obligation
1,665
2,044
Fair value of plan assets
(1,128)
(1,423)
Net liability
537
621
Movements in the present value of the defined benefit obligation in the current period were as follows:
2022
$’000s
2021
$’000s
Opening defined benefit obligation
2,044
2,574
Current service cost
150
193
Interest cost
31
37
Remeasurement gains arising from changes in financial assumptions
(87)
(75)
Benefits paid
(284)
(552)
Disposal of a subsidiary
-
(76)
Exchange rate differences
(189)
(57)
Closing defined benefit obligation
1,665
2,044
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Movements in the present value of the plan assets in the current period were as follows:
2022
$’000s
2021
$’000s
Opening fair value of plan assets
1,423
1,746
Interest income
28
26
Remeasurements gains/(losses) return on plan assets (excluding
amounts included in net interest expense)
(22)
88
Contributions from the employer
39
52
Benefits paid
(180)
(449)
Disposal of a subsidiary
-
(71)
Exchange rate differences
(160)
31
Closing fair value of plan assets
1,128
Related party transactions
2022
$’000s
2021
$’000s
Short- and long-term employee benefits
1,845
1,912
Shared-based payment
56
–
1,901
Subsequent to the balance sheet date, Dr. Marom and Mr. Nagar proposed to waive their right to receive additional
variable remuneration, accordingly, their 2022 bonus will not be paid.
Financial Instruments
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
(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.
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
(c) Categories of financial instruments
2022
$’000s
Financial assets
Cash and cash equivalents*
35,156
Fair value through profit or loss**
9,707
Fair value through OCI**
524
Receivables
29,392
Financial liabilities
At amortised cost
55,843
2021
$’000s
Financial assets
Cash and cash equivalents*
65,331
Fair value through profit or loss
2,935
Fair value through OCI
524
Receivables
28,815
Financial liabilities
At amortised cost
56,142
Fair value through profit or loss
47
* Cash and cash equivalents comprises $2.4 million deposits up to three months and $32.8 million cash (2021: $2.4 million deposits up to three months
and $62.9 million cash).
** The amounts include ‘Short-term investment in deposits and other securities’ and ‘Investments carried at fair value’ in the amounts of $9,011 thousand
and $1,220 thousand respectively.
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.
The Group’s finance function provides services to the business, coordinates access to domestic and international finan-
cial 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,
interest rate and inflation 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
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (refer to sec-
tion 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. However, due to recent changes and market volatility, the group is monitoring closely its exposure and possible
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:
Liabilities
Assets
2022
$’000s
2021
$’000s
2022
$’000s
2021
$’000s
EUR
23,396
24,332
20,909
33,212
NIS
5,595
9,650
11,572
26,400
RON
5,252
4,826
10,026
11,711
MDL
2,765
2,737
4,682
3,862
GBP
360
388
133
3,764
Other
4,939
2,240
1,822
2,067
Foreign currency sensitivity
The Group is mainly exposed to EUR, NIS, MDL, RON and GBP.
The following table details the Group’s sensitivity to a 10% change in USD against the respective foreign currencies
in 2022. 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.
Profit or loss
2022
$’000s
2021
$’000s
NIS Impact
783
1,724
EUR Impact
104
396
GBP Impact
(2)
362
Equity
2022
$’000s
2021
$’000s
NIS Impact
(185)
(49)
EUR Impact
(352)
492
MDL Impact
192
112
GBP Impact
(21)
(24)
RON Impact
477
689
Other Currencies Impact
(312)
(17)
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 hedge transactions, which resulted in $43 thousand recorded as finance
(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.
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
Notes to the Consolidated Financial Statements
(continued)
ANNUAL REPORT &
ACCOUNTS 2022
Financial liabilities
Weighted average
effective interest
rate
0-3 months
3 months to
1 year
1-5 years
Total
%
$’000s
$’000s
$’000s
$’000s
31 December 2022
Non-interest bearing
bank loans
-
42,396
725
4,703
47,824
Bank loans interest
bearing(*)
5.21
403
1,832
2,000
4,235
Lease liabilities
2.64
496
1,488
3,758
5,742
43,295
4,045
10,461
57,801
31 December 2021
Non-interest bearing
bank loans
–
42,646
450
4,692
47,788
Bank loans interest
bearing(*)
4.20
552
1,082
1,356
2,990
Lease liabilities
2.05
546
1,640
5,108
7,294
43,744
3,172
11,156
58,072
(*)
Part of the bank loans are linked to a fix rate plus Euribor.
The future bank loan interest to be paid is $202 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.
The fair value of the financial instruments of the Group carried at amortised cost is not considered to be materially
Post balance sheet events
(a)
In January 2023, the Group won a $26 million multi-year government defence order for its latest high-performance
cyber security solution.
(b)
On 1 January 2023, Moti Nagar assumed the role of Chief Executive Officer of BATM, having been Chief Financial
Officer since 2015. On 1 February 2023, Ran Noy was appointed Chief Financial Officer of BATM, having been VP
ANNUAL REPORT &
ACCOUNTS 2022
121
FINANCIAL STATEMENTS
Other Alternative Measures
Income statement adjustments
The Group has made reference in the annual report to a number of adjustments regarding (1) the contribution to 2021 from
NGSoft, a subsidiary that the Group sold in March 2021, and (2) adjustments related to the amortisation of intangible assets.
These adjustments are outlined below:
Year ended 31 December 2022
(Unaudited)
Reported
results
Amortisation of
intangible assets
Adjusted
results
US$ thousands
Gross profit
37,958
(414)
38,372
Gross margin (%)
32.7%
-
33.0%
Other operating expenses (income)
(2,428)
143
(2,571)
Operating profit
3,134
(557)
3,691
Year ended 31 December
2021 (Unaudited)
Reported
results
Adjustments to
exclude NGSoft
Amortisation
of intangible
assets
Adjusted results
(ongoing
operations)
US$ thousands
Revenues
140,038
7,262
–
132,776
Gross profit
51,061
1,235
(414)
50,240
Gross margin (%)
36.5%
17.0%
–
37.8%
Sales and marketing expenses
18,290
144
–
18,146
General and administrative
expenses
12,243
358
–
11,885
Research and development
expenses
8,713
–
106
8,607
Other operating expenses
(income)
(12,563)
(12,994)
154
277
Operating profit
24,378
13,727
(674)
11,325
EBITDA
29,642
13,956
–
15,686
The above does not form part of the audited financial statements.
ANNUAL REPORT &
ACCOUNTS 2022
122
EBITDA measurement
The Group uses EBITDA as a performance measure, which is calculated as follows:
Reported
Year ended 31 December
Adjusted
Year ended 31 December
2022
(Unaudited)
2021
(Unaudited)
2022
(Unaudited)
2021
(Unaudited)
Operating profit
3,134
24,378
3,691
11,325
Amortisation of intangible assets
557
716
-
–
Depreciation
4,334
4,548
4,334
4,361
EBITDA
8,025
29,642
8,025
15,686
The above does not form part of the audited financial statements.
ANNUAL REPORT &
ACCOUNTS 2022
123
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
Legal Counsel in UK
Fladgate LLP
16 Great Queen Street,
London WC2B 5DG, UK
Registrar
Link Group
10th Floor, Central Square,
29 Wellington Street,
Leeds LS1 4DL, UK
Financial PR Consultants
Gracechurch Group
48 Gracechurch Street,
London EC3V 0EJ, UK
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.
For more information visit:
www.batm.com
@BATMLtd
@BATM
@BATMgroup
Forward-looking statements
This document contains forward-looking statements. Those statements reflect the current opinions, evaluations
and estimations of the Group’s management, and are based on the current data regarding the Group’s business
as is detailed in this document and in the Group’s periodical, interim and immediate reports. The Group does
not undertake any obligation or make any representation that actual results and events will be in line with those
statements, and stresses that they may differ materially from those statements, due to changes in the Group’s
business, market, competition, demand for the Group’s products or services, general economic factors or other
factors that can influence the Group’s business and results, due to the risk factors that are detailed in the Group’s
Annual Report, and due to information and factors that are currently unknown to the Group’s management and
that, if known, would affect the management’s opinions, evaluations or estimations. The Group will report the
actual results and events according to its legal, accounting and regulatory obligations, and does not undertake any
other obligation to report them or their deviations from the forward-looking statements, or to update any of the
forward-looking statements in this document or to report that it is not valid anymore.
Neve Ne’eman Ind. Area
4 Ha’harash Street, P.O.B. 7318
4524075 Hod Hasharon
Israel