2 0 1 0
Annual Report for the Microwave Vision Group
Contents ❚ A STRONG POSITION
5
• Strategic geographic coverage
7
• A transversal organization
7
• Effective synergies
8
• An extensive portfolio of customers and markets
9
• Strengthening of the telecommunications sector
10
• Stabilization in the aerospace and defense industries
11
• Strong global presence
12
• 30% of sales represented by recurring business
13
❚ CONSOLIDATED FINANCIALS
14
• Significant increase in operating income to €3.53M
15
• A sound financial position
16
• A centralized organization
16
❚ A STRATEGY FOCUSED ON DEVELOPMENT
18
• A strategy of differentiation through innovation
19
• Innovation as a driver for growth
20
• Associated markets – a reservoir for growth
20
• Acquisition of complementary businesses
21
and technologies to accelerate growth
❚ APPENDICES • The table of appendices appears at the end of this document
2
23 51
“
T
he challenge for me began in 1996 when the small Paris-based research office started
on a course of industrial development based on a unique technology: multi-probe measurement by electronic scanning. Since then, it has been an exciting ride with continual growth and incredible achievements. This development would not have been possible without the involvement and the dynamism of our teams, the loyalty of our customers and the support of our shareholders for more than two decades.
�
Philippe Garreau, Chairman of Microwave Vision
3
12 sites throughout the world 249 employees â‚Ź43.99M in sales World leader in the antenna test systems market.
4
> A strong position Microwave Vision Group enjoys a strong position which stems not only from continued and sustained growth in its business for over two decades, but also from an ambitious merger between SATIMO and ORBIT/FR. A French company joining forces with an American one in order to become a dominant force in a specialized, international market: this is how in 2008, the Microwave Vision Group was born.
W
ith a presence in Europe, Asia and America, the group holds an advantageous position as a technological and commercial leader, a position that is confirmed year after year. Its sales figure has more than doubled over the last two decades. It was therefore as a market leader in sound financial health that the group returned to the forefront of the scene in 2010, posting an operating income before interest and taxes of €3.5M. The good results posted in 2010 have enabled the group to prepare for the future with R&D benefiting from €4.1M in investments during 2010.
a
15 years of growth
CA en M€
45 40 35 30 25 20 15 10 5 0
1996 97
98
99
00
01
02
03
04
05
06
07
08
09 2010
The Group’s core business T A antenna is a piece of equipment that can receive and/or emit radio waves carrying An information. Characterization of an antenna consists in measuring the quantity of energy emitted by the antenna, to determine in which directions in space this energy is radiated and finally in qualifying the quality of the information carried by the signal emitted. These measurements are crucial in the development and validation of all radio wave communication systems (satellite, radar, GPS, mobile telephones, etc.). Microwave Vision designs systems that enable its customers to realize these three objectives.
5
> A highly specialized team,
with a wealth of diverse experience › Philippe Garreau - Chairman of Microwave Vision Group aged 49: Philippe Garreau has an engineering degree from the SUPELEC1 and began his career at the European Space Agency (ESA) before joining SATIMO in 1992 as an engineer responsible for measuring antennas. He took over the management of SATIMO in 1996 and became chairman of the group in 2008.
Pascal Gigon - Chief Financial Officer of Microwave Vision – aged 53: Previously financial controller at SFIM (Société Française d’Instruments de Mesure – a French company specializing in measurement instruments) for a number of years, Pascal Gigon was then involved in the development of the company Photonetics, a specialist in optical materials, as chief financial officer. He joined SATIMO as chief financial officer in June 2003.
Per Olav Iversen - CEO ORBIT/FR - aged 45: Per Olav Iversen has a degree from UCLA and began his career in an American SME as an antenna engineer. He then joined the European Space Agency (ESA) in its Antenna Division in 1991, and joined SATIMO in April 1998 as technical director. In 1999, he took over the management of the SATIMO site in Atlanta (GA, USA) before becoming head of ORBIT/FR in 2008.
Arnaud Gandois - CEO of SATIMO Industries - aged 38: Arnaud Gandois has an engineering degree from ENSIL2 and began his career at SATIMO in 1996. He rose progressively within the company and today holds the position of CEO after several years as industrial director.
Gianni Barone - Sales Director at Microwave Vision - aged 44: Gianni Barone has a degree from the University of Torvergata (Italy) and from the SupAero3 (masters in aeronautics and electronics). He began his career at the ESA in 1990 and joined Space Engineering in Italy; in 1996 he participated in the launch of Altran’s Italian sites. He joined SATIMO in April 2000 as sales director and manager of the SATIMO Italy site.
Luc Duchesne - Director of Research & Development at SATIMO - aged 41: Luc Duchesne has a degree from the ENSI4 in Angers and from the SupAero (masters in aeronautics and electronics); he joined SATIMO in 2000 as head of the R&D department after having spent 6 years at DASA (Germany).
Lars Foged - Scientific Director at SATIMO - aged 37: Lars Foged gained his degree from the California Institute of Technology in 1990. He started work at the European Space Agency (ESA) in the Antenna Department, then joined Space Engineering in Italy, specializing in the research and design of space antenna. In January 2001 he joined SATIMO as Director of Engineering, then as Scientific Director.
1
Ecole Supérieur d’Electricité – French higher education school of electrical engineering and information sciences Ecole Nationale Supérieure d’Ingénieurs de Limoges – French higher education school of engineering in Limoges 3 École nationale supérieure de l’aéronautique et de l’espace – French national higher education school of aeronautics and space 4 École nationale supérieure de i’ingénierie – French national higher education school of engineering 2
6
Strategic geographic coverage 12 local sites enable greater proximity to new customers and the development of requirements at established sites. They are able to capitalize on the opportunities within a sector and offer global solutions, depending on growth rates specific to the three continents. The presence of local teams also brings about a greater understanding of industrial cultures and enables customers’ interests to be served as effectively as possible. Acting locally, but thinking globally and in line with a single strategic vision, in order to benefit from economies of scale and the resources of a group that has doubled in size: this objective has been the driving force behind the actions of the management team. This at present our day-to-day reality, because for two years now intensive work has been carried out to optimize synergies and take full advantage of the merger between SATIMO and ORBIT/FR.
12 sites 4 production sites A transversal organization To ensure the consistency of the group’s policies, the general management and financial management teams as well as the marketing and communications teams and the purchasing division are grouped under Microwave Vision. SATIMO and ORBIT/FR retained responsibility for the development of their previously successful product ranges: for ORBIT/FR, mechanical scanning products; for SATIMO, electronic scanning products.
7
€1.9M from cross-selling €4.3M in hybrid products sold 2X more joint responses to calls for tender
With regard to production capacities, the group has four principal sites: the San Diego site, which manufactures absorbent foams; the Paris and Brest sites, which produce multi-probe systems; and the Tel Aviv site, which produces large-scale mechanical systems. Two additional sites - Italy (antennas) and Germany (reflectors) – are also involved in the group’s production activities. The subsidiaries in Sweden, Italy, Hong Kong, Japan, the United States and Germany have local access to the equipment and human resources required for the effective provision of support functions and technical engineering in all countries where the systems are installed. After two very challenging years in the area of civil telecommunications, 2010 marks a recovery in the West that is already showing encouraging signs, and strong growth in China and India. Thanks to its extensive territorial presence, Microwave Vision benefits from geographical differences. Its strengths are distributed in close proximity to the markets in which it operates; this has the added advantage of reducing business travel costs.
Effective synergies Cross-selling between the various group entities has continued to experience strong growth. Cross-selling sales amounted to €1.9M in 2010. For each company, products which had been purchased externally before 2008 now generate turnover. In 2010, three new products were launched, bringing together technologies from SATIMO and ORBIT/FR. The joint response to calls for tender increased twofold, and additional sales generated by winning new contracts for these totally new, hybrid products amounted to €4.3M. There is more to come in the future, with the addition to the 2010 catalogue of five new turnkey systems, born of the joint R&D efforts realized by SATIMO and ORBIT/FR.
8
An extensive portfolio of customers and markets Microwave Vision has customers with a presence in the following sectors:
> Aeronautics and defense
• Antennas mounted on satellites, aircraft, ground radar equipment, ballistic missiles, etc.
> Civil telecommunications
• Mobile telephones, including Smartphones, tablets, computers, any small items of equipment involving antennas, rooftop communications dishes, etc.
> Automotive
• Radio antennas, door-opening cards, GPS, systems for measuring tire pressures, telephone antennas, front and back probes, electronic road pricing tags, Bluetooth connections, etc.
The company makes measurement scanners which can be applied to more than one requirement. They can be used to: • measure the percentage of energy released into space (the return); • build a 3D image of the fields radiated in all directions in space. Depending on the function of the antenna, this characteristic presents a great deal of variability. A satellite has antennas which are very directional (only covering a given zone) while a mobile phone is equipped with omnidirectional antennas (which radiate energy in all directions, meaning that their smooth functioning is independent of their position); • analyze the quality of the digital information transmitted. This is expressed by an energy threshold, below which the error rate on communications data is too high; • measure the resistance of antennas to multiple-input/multiple-output protocols: MIMO technology. Microwave Vision therefore focuses on three principal markets: aerospace and defense, civil telecommunications and automotive. These activity sectors balance out remarkably well in its product portfolio. This balance is a testament to the large-scale outlets that have facilitated its research programs over recent years. It reinforces the solidity of the business in the face of economic upheaval, which could affect any of the sectors in turn. On top of this, a significant portion of sales (30%) is represented by recurring business, as we will see later; this business is essentially less sensitive to potential crises.
a A portfolio of major customer accounts NASA, CNES, ESA, NOKIA, RENAULT, BMW, BAE, LOCKHEED MARTIN, NORTHROP GRUMMAN, RAYTHEON, QUALCOMM, IAI, INTEL, ERICSSON, EADS, DAIMLERCHRYSLER, BOEING, PANASONIC, HUAWEI, ZTE, SAMSUNG, etc. 9
Strengthening of the telecommunications sector In 2010, with a sales figure up by 53%, the civil telecommunications sector recovered its energy levels. It generated â‚Ź18.8M in sales, representing 43% of the group sales figure, compared to 35% in 2009. As well as the dynamism in investments in telecoms infrastructures (the group is the market leader in measurement of relay antennas), the sector is back in favor with constructors thanks to the rapid rise in the market for smartphones. The rapid growth in the mobile telecommunications equipment market in the USA and Asia is a determining factor (50% of annual growth in sales of smartphones as from March 2009). Microwave Vision is well-positioned in the market for testing these products with high added value: 7 out of the 10 leading smartphone manufacturers already use its measurement systems. The rollout of fourth generation mobile protocols (WiMAX, LTE), integrating MIMO technology, also opens the door to new markets. This led Microwave Vision Group in 2010 to update and launch two new, much-anticipated solutions, dedicated to testing MIMO systems. In addition, in order to be operational, the installed systems must be updated each time a new telecommunications protocol is released. This brings recurring business to the group, which explains the robustness of this activity in 2010.
43 % of sales â‚Ź18.8M
10
Review of 3 sectors in 2010
> Aeronautics and defense
57% of sales €25.1M
• Testing of satellite antennas, radar antennas, mounted antennas (aircraft, drones, tanks, satellites, missiles, etc.) and measurement of radar signatures. • Increase of 11% in 2010
Stabilization in the aerospace and defense industries The aerospace and defense sector continued to advance, resulting in €25.1M in sales for 2010, compared to €22.6M in 2009. The contribution of this sector to group sales continues to dominate, at 57% of the total figure. Against a background of reductions in military expenses in the West, Microwave Vision’s innovative technologies are assets: they improve the equipment’s return on investment. In addition, the evolution of defense systems is tending more towards detection and identification of threats as well as improved, faster communication of results for decision making. Microwaves are at the heart of this type of equipment. The rapid increase in military expenses in the emerging markets has been very noticeable. In the civil aerospace sector there was a marked rise in orders for airliners during the first half of 2010, which benefited the group’s sales figure. The company’s international presence, very strong in Asia and particularly India, has therefore become a strategic asset in meeting these types of demand.
> Automotive • Testing of mounted antennas (radio, GPS, probes, etc.). • Sluggish market in 2010.
> Civil telecommunications • Testing of Smartphones, laptops, netbooks, tablets • Increase of 53% in 2010.
11
Strong global presence - strengthening in Asia In 2010, Microwave Vision achieved its determined objective - namely, a sales figure that is almost perfectly balanced between the three geographical regions (North America, Asia and Europe). Sales for 2010 in each region amounted to 38%, 34% and 28% respectively of total sales. The previous year, in 2009, North America was still clearly the dominant market, representing 44% of total sales compared to 28% in Asia and Europe. With sales up by 26% at €43.99M, these changes reflect a significant rise in sales for Asia (+53%), a rise of a quarter in Europe (27%) and a rise of only 9% for the USA. Sales in North America totalled €16.6M in contracts sold. The growth in sales for Asia and the slowdown in the USA can be explained largely by the shift in US investments towards Asia: sales rose from €9.75M to €14.9M. Finally, sales in Europe stood up well, generating €12.4M in turnover. During 2011, Microwave Vision’s strategy aimed at continuing its international development, particularly in the emerging markets. SATIMO’s strong presence in Europe, Japan and China was reinforced by the acquisition of ORBIT/FR in 2008, with an increase in market share in the United States, Russia and India. Today, the group is positioned in a number of regions experiencing rapid economic growth and is continuing its development by means of targeted sales and marketing activities.
a A strong international presence
Asia
3 34%
12
38% % North America
Europe
28%
30% of sales represented by recurring business
30 % of sales arose from recurring business, such as sales of accessories and maintenance services
30%
of the group’s business is provided by recurring revenue: maintenance and engineering services, software and equipment upgrades, annual calibrations and sales of accessories. The group already has 800 installations worldwide, which all require regular attention in some form.
70 %
of the sales figure is realized by the sale of products at new sites, to newly acquired customers or to customers which are adding to or reinforcing their equipment: for the most part, major standard systems (42%) but also small standard systems (15%) and specialist equipment (13%).
10 % of sales are linked to products combining SATIMO and ORBIT/FR technologies.
13
€3.53M operating income before interest and taxes €0.41M net interest expense €3.45M net income +26% growth in sales
14
> Consolidated financials For 2010, Microwave Vision posted a significant rise in operating income before interest and taxes: €3.53M, representing 8% of the sales figure. Against a background of a steep rise (+26%) in sales, which stands at €43.9M, the improvement in the cost structure has resulted in an operating income before interest and taxes of €3.53M compared to €0.12M in 2009. Operating income amounts to €3.39M. After the impact to the group of the net interest expense (€0.41M), net income amounts to €3.45M and group share of net income to €2.79M.
Significant increase in operating income to €3.53M Operating income before interest and taxes has doubled since 2007, the year before the acquisition of US company ORBIT/FR. Thanks to continued efforts to reduce costs, pool transversal functions and seek synergies between the different regional entities, the group is on course to return to its previous profitability levels. The company’s cost structure is already optimized for higher levels of profitability since the income figure for this year was affected by an exceptional expense of €1.13M, linked
Audited consolidated accounts, M€, IFRS Standards Sales OPERATING INCOME BEFORE INTEREST AND TAXES Operating result Net interest expense
to a once-off charge on a deal signed in 2008. Over one year, the principal expense items were reduced by 7.9% as a percentage of sales. Against a background of growth in activity, employee-related expenses play a major part in this policy of cost reduction: in 2010 they represented 31.3% of sales, compared to 35.3% in 2009. Other external expenses fell by 2.1% (to 18% of sales, compared to 20.1% previously). Finally, purchases consumed fell by 1.8% (this figure was reduced to 39% of sales compared to 40.8% in 2009).
2010
2009
43.99
34.83
3.53
0.12
3.39
-0.28
-0.41
-0.37
Net income
3.45
0.21
GROUP SHARE OF NET INCOME
2.79
-0.18
15
ASSETS in M€, IFRS Standards - Audited consolidated accounts
2010
2009
Non-current assets
20.00
17.73
incl. Goodwill
11.51
11.50
Current assets
26.75
29.65
incl. Cash and cash equivalents TOTAL ASSETS
A sound financial position
3.92
4.61
46.75
47.39
A centralized organization
With net financial debt limited to €0.87M for €34.19M of shareholders’ equity, or a debt ratio of 2.6% (compared to 5.0% in 2009), Microwave Vision has improved its financial position during the course of the financial year, posting a healthy balance sheet structure.
During 2009, the group implemented the Microwave Vision holding structure which today brings together SATIMO Industries and its various wholly owned entities and ORBIT/ FR (NASDAQ: ORFR.OB), which is 61.35% owned.
This sound financial position combined with the improvement in margins during 2010 enables the group to be confident in planning for growth.
This structure has allowed the group to: • pool common functions (management, finance, sales and marketing, purchasing); • develop industrial synergies, particularly in project management; • Initiate common R&D programs.
a Change in charges for the year 2009/2010 as % of sales
-7.9pt
At the same time as the implementation of a transversal organization, the group has been working on increasing its margins by rationalizing its portfolio of products and seeking economies of scale on purchases.
% of sales
45 40 35 30 25 20
-1.8 pt 40.8%
39.0%
Financial performances are consequently expected to continue to improve in 2011.
-4.0 pt 35.3% 31.3%
-2.1 pt 20.1% 18%
15 10 5 0 Pur Purc Purchases c sess chases cha consumed
Emp Employee-related mploy loyee ee-rel relaaate atedd expenses
Other external Other extern ext ernnal charges 2009
16
2010
A new oven for AEMI, one of the investments made during 2010
17
249 employees 60% degreed professionals 45 staff in R&D 3 new international patents in 2010
18
Photograph taken at Intespace, Toulouse
> A strategy focused on development
The success of SATIMO and that of Microwave Vision Group are built on a simple strategy: products with high added value in growth markets. The growth and the capacity for financing released by this strategy enable the group to capitalize on its technological savoir-faire on associated markets.
I
n 2010, Microwave Vision joined the “OSEO Excellence” network, along with 2,000 French SMEs/SMIs which lead from the front and have the most promising growth prospects. This new OSEO network distinguishes “outstanding entrepreneurs” to enable them to benefit from high visibility. Microwave Vision is proud to have been selected for this exclusive network, which is perfectly in line with its progress and its prospects.
A strategy of differentiation through innovation For more than 15 years, the group has been developing high-tech products that present multiple barriers to entry. In line with this strategy of differentiation through innovation, in 2010 it maintained a high level of research and development, absorbing 9.3% of its sales figure.
a Technological differentiation The emergence of the company rests on a unique technology. This is still, today, superior to that held by the competition. Why is it unique? Its systems measure waves emitted by antennas by means of multi-probe technology, using electronic scanning, which enables digitization of the waves in real time across an entire surface. The competition has had to opt for mono-probe solutions that are much slower and therefore much less profitable.
19
Innovation as a driver for growth
45 staff
Of its 249 employees, 60% have a professional degree. During 2010, 45 worked in R&D. This number was 29 in 2007, before the SATIMOORBIT/FR merger.
in R&D
3 new international patents in 2010
Subsidies and research tax credits totaled €0.71M in 2010. R&D investments in their own right amounted to €4.1M this year, compared to €1.3M in 2007, €2.9M in 2008 and €3.5M in 2009. 2010 was marked not only by the development of new products but also by the resumption of long-term programs in different sectors. In the telecommunications sector in 2010, Microwave Vision launched new antenna measurement instruments on the market, for the new generations of equipment (MIMO, LTE). Two major products StarMIMO and SG-3D – protected by three new patents, have just been added to a portfolio of 16 existing international patents. In the aerospace/defense sector, combined product offerings from the group’s two subsidiaries are already in operational testing onsite.
Associated markets – a reservoir for growth A number of markets that are associated with antennas, for example industrial control (quality control), electromagnetic compatibility (ECM) and dosimetry can be targeted by releasing onto them innovative technologies in which the group already has a great deal of expertise. These three sectors represent a significant opportunity for short-term growth and R&D programs have been reinforced in those areas. In 2011, efforts will be focused on the rollout of non-destructive control systems and on small equipment. In the medium to long term, it is imagery, with outlets in the security and medical sectors, which is already demonstrating tangible prospects for new markets.
1
20
5 years of higher education, i.e. a Masters degree or equivalent.
Acquisition of complementary businesses and technologies to accelerate growth Microwave Vision has realized two acquisitions in the last few years: Antennessa in 2007 and ORBIT/FR in 2008. The group’s management team intends to maintain this policy of investing in companies that can enhance its technological offering in order to accelerate Microwave Vision’s growth and achieve success in new markets.
a Conclusion The financial year 2010 will be remembered as a year of strong growth, improvements in gross margins and a significant increase in operating income before interest and taxes. This excellent progress is the result of increased synergies at group level. Microwave Vision is already forecasting that 2011 will be another year of growth with profitability in double figures. The group has three confirmed objectives in its sights: to increase market share in the field of small dosimetry systems; to consolidate sales of products developed in 2010 (LTE, MIMO, hybrid products); to define the scope of opportunities for external growth.
21
Outdoor test range with ORBIT/FR
positioners
22
Appendices Consolidated annual accounts at December 31, 2010
> Consolidated balance sheet ASSETS (in k€) Goodwill Intangible assets Tangible assets Other financial assets Deferred tax assets NON-CURRENT ASSETS Inventory and work in progress Customers and other receivables Other receivables and current assets Short-term investments Cash and cash equivalents CURRENT ASSETS Assets held for disposal TOTAL ASSETS
SHAREHOLDERS’ EQUITY and LIABILITIES (in k€) Share capital
12/31/2010
12/31/2009
11,510
11,509
238
225
3,374
2,324
205
242
4,679
3,439
20,006
17,739
5,043
4,397
14,632
16,753
3,146
3,836
50
50
3,879
4,615
26,750
29,652
-
-
46,756
47,391
12/31/2010
12/31/2009
711
691
27,722
27,866
2,793
-186
Issue premiums, merger premiums Reserves Consolidated result Minority interests SHAREHOLDERS’ EQUITY Non-current provisions Non-current financial liabilities Deferred tax liabilities
2,969
2,135
34,195
30,505
407
268
4,386
6,166
2
Other non-current liabilities NON-CURRENT LIABILITIES Current financial liabilities
4,795
6,434
419
174
Current provisions Suppliers and related accounts
2,355
5,514
Other liabilities
4,992
4,762
7,766
10,451
-
-
46,756
47,391
Current financial liabilities CURRENT LIABILITIES Liabilities linked to assets held for disposal TOTAL SHARESHOLDERS’ EQUITY AND LIABILITIES
24
> Consolidated Income Statement Consolidated Income Statement (in kâ‚Ź) Sales Other income from operations
12/31/2010
12/31/2009
43,994
34,835
0
2
43,994
34,837
-17,169
-14,212
-850
-390
Employee-related expenses
-13,780
-12,300
Amortization and provisions
-729
-661
-7,933
-7,153
3,533
120
-134
-404
OPERATING RESULT
3,399
-284
Net interest expense
-414
-374
INCOME FROM ORDINARY ACTIVITIES Purchases consumed Duties, taxes and similar payments
Other current operating income and expenses OPERATING INCOME BEFORE INTEREST AND TAXES Other operating income and expenses
Other financial income and expenses FINANCIAL RESULT CURRENT PRE-TAX PROFIT Taxes NET INCOME FROM CONSOLIDATED COMPANIES
191
-91
-223
-465
3,176
-749
282
968
3,458
218
-
-
3,458
218
2,793
-186
665
405
0.7857
-0.05405
0.7624
-0.05405
Appendices
Charge related to stock options
Share of profits from associated companies NET INCOME FROM CONTINUING OPERATIONS Net income from discontinued operations or operations to be discontinued NET INCOME Attributable to: Holders of ordinary share capital in the parent company Minority interests
Group share of net income per share - before dilution (in euros) Net income from discontinued operations or operations to be discontinued per share - after dilution (in euros) Group share of net income per share - after dilution (in euros)
25
> Consolidated cash flow statement (in kâ‚Ź) Consolidated net income (1) +/- Net charges for amortization and provisions (2)
Consolidated 2010
Consolidated 2009
3 458
219
733
678
+/ - Expenses and income calculated linked to stock options and associated items
-
76
-/+ Other income and expenses calculated
-
-
-/+ Capital gains/losses from disposals
0
0
- Dividends (non-consolidated stocks)
0
-2
Cash flow from operating activities after net interest expense and taxes + Net interest expense +/- Tax expenses (including deferred taxes) Cash flow from operating activities before net interest expense and taxes (A)
4,191
971
343
374
-282
-968
4,253
377
- Taxes paid
-346
-164
+/- Variation in WCR linked to operations (3)
-810
4,612
+/- Other flows generated by operations NET CASH FLOW GENERATED BY OPERATIONS (D) - Cash flows paid linked to acquisitions of tangible and intangible assets - Cash flows received linked to disposal of tangible and intangible assets
-
-
3,097
4,825
-1,703
-1,329
101
0
- Cash flows paid linked to acquisitions of financial assets
0
+/- Impact of variations in scope
-75
+/- Variation in loans and advances granted
12
+ Investment subsidies received
-
-
+/- Other cash flows linked to investment operations
-
-
-1,602
-1,392
= NET CASH FLOW LINKED TO INVESTMENT OPERATIONS (E) + Sums received from shareholders as part of capital increases: - Paid by shareholders of the parent company
-404
+ Cash flows received linked to new borrowing - Loan repayments (including finance leases) - Net financial interest paid (including finance leases) +/- Other cash flows linked to financing operations
7 -1,779
-1,859
-337
-374
-6
-
-2,526
-2,226
+ Increase in cash funds = NET CASH FLOW LINKED TO FINANCING OPERATIONS (F) +/- Impact of variations in exchange rates (G)
48
-502
-983
705
OPENING CASH FLOW (I)
4,491
3,787
CLOSING CASH FLOW (J)
3,508
4,491
= VARIATION IN NET CASH FLOW H = (D+ E+ F + G)
26
> Statement of variations in shareholders’ equity (in k€) Shareholders’ equity at December 31, 2009
Share capital
Reserves
Consolidated result
Total group share
Total min. int. share
Total
691
27,865
-187
28,369
2,136,
30,505
-187
+187
Allocation of income Corporate action
20
626
646
646
Financial instruments Payments on shares Corporate actions on control shares Dividends1
-1,035
Net income for the period
-1,035 2,793
2
Exchange gains/losses
-1,035
2,793
665
3,458
439
439
168
,,607
14
14
Variation in scope
Shareholders’ equity at 31 December 2010
711
27,722
2,793
31,226
14 2,969
34,195
Appendices
Other movements
(1) Other movements: A dividend was paid on September 15, 2010. This distribution was taken from shareholders’ equity for a total of €1.035k. (2) Exchange gains/losses linked to the consolidation of subsidiaries for which accounting was carried out in a foreign currency in accordance with the rules set out in paragraph 3, point 5.
27
> Notes to the consolidated accounts 1/ Consolidated accounts ➊ About the Group Microwave Vision S.A., the group’s parent company, is a public limited company under French law, with its registered office at 17 avenue de Norvège, 91140 Villebon-sur-Yvette. Microwave Vision Group is made up of two business divisions: • One division for a technology that enables the rapid analysis of electromagnetic fields across a whole line of analysis, or a surface, so that the measurement of the electromagnetic fields is carried out in extremely short timeframes compared to traditional techniques. This equipment is targeted at all industries using antennas (space, avionics or automotive) and at the radiocommunications sector (operators, R&D departments at mobile phone manufacturers, manufacturers of antennas, control laboratories). • One division that designs, manufactures and markets antenna measurement systems (near-field and far-field measurement systems, compact range systems, ranges for measurement of electromagnetic signatures) founded on a technology using mechanical displacement of the measurement probe. These measurement systems are targeted at the defense, aeronautics, wireless communications and automotive industry sectors. Microwave Vision Group also manufactures absorbent materials designed to cover the inside of anechoic chambers that are themselves one of the components of the measurement systems. The company Microwave Vision, the group holding company, was listed on NYSE Alternext on June 30, 2005. The financial year lasts for 12 months, from 01/01/2010 to 12/31/2010.
➋ Group structure chart Microwave Vision S.A. is the group holding company. As well as general management, it carries out the finance, marketing and sales functions for the group. NB : SATIMO Industries has a 10% holding in Metraware, located at the following address: Quartier cime des Vières 84240 CABRIERES D’AIGUES.
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SATIMO
SATIMO
SATIMO
SATIMO
SATIMO
SATIMO
SATIMO INDUSTRIES
Sweden
Hong Kong
Japan
Italy
Atlanta US
France Paris/Brest
Etb 100%
Etb 100%
Etb 100%
Etb 100%
Etb 100%
ORBIT/FR
ORBIT/FR
ORBIT/FR
AEMI
Germany
Israël
Horsham US
San Diego US
Ste 100%
Ste 100%
Ste 100%
Ste 100%
SAS 100%
ORBIT/FR
St S 65% Ste 61 61.65%
Appendices
SATIMO Industries SATIMO is the industrial company of the SATIMO division. It manufactures all the systems for Microwave Vision. This entity is the group’s largest R&D centre. It also ensures the customer support and maintenance functions for requirements from foreign organizations. SATIMO Industries has two sites, one in the Paris region at Villebon-sur-Yvettes and the other in Brest, Brittany. Independent establishments • SATIMO Sweden, based in Göteborg, covers all commercial activities in Europe. • SATIMO Hong Kong, based in Hong Kong, extends the group’s commercial activities to the Asia region. It is also the base for maintenance services for the region. • SATIMO Japon, based in Tokyo, has the same function as the Hong Kong site, but for Japan. • SATIMO US, based in Atlanta, has a commercial role and ensures the maintenance of installed systems for North America. This site has a significant business in provision of services. • SATIMO Italy, based in Rome, is a manufacturing platform for all small antennas. It is also an R&D centre that works in partnership with SATIMO Industries. ORBIT/FR is made up of five entities One holding company, ORBIT/FR, located in Horsham, in the United States, which has no operational role. • ORBIT/FR GmbH, based in Munich, Germany, carries out the marketing of ORBIT/FR’s products in Europe, as well as manufacturing some specific systems. • ORBIT/FR LTD, based in Hadera, Israel, manufactures positioners and masts for the whole group and ensures their distribution for the Asia and Middle East regions. • ORBIT/FR US, located in Horsham, in the United States, is responsible for marketing and distributing ORBIT/FR’s products in the US region. This entity also integrates equipment manufactured in Israel. • AEMI US, based in Santee, in the United States, is the group entity that design and realizes anechoic equipment for all companies within the group, including for SATIMO.
29
➌ Change in consolidation scope At December 31, 2010, with the exception of the Metraware holding (10% of share capital), the assets and liabilities of which are less significant, no company held directly or indirectly, majority-owned or not, was excluded from the scope of consolidation. There was no change in the scope of consolidation during the financial year.
➍ Risk factors In accordance with IAS 1, the potential risks to which the group is exposed are outlined below: • exchange risk In the absence of the group carrying out any exchange rate hedges, all foreign exchange effects are accounted for in the consolidated accounts of Microwave Vision Group.
• commercial risks Given the geographical distribution of sales, particularly in Asia, the implementation of some recovery procedures can be difficult. Particular attention is paid to the assessment of this risk.
2/ Significant events taking place during the financial year Business activity for Microwave Vision Group in 2010 demonstrates significant growth of 26% in the two principal sectors of activity, i.e. civil telecommunications (43%) and defense (57%). Moreover, business activity was better distributed across the international field with 38% of business in North America (up by 9% compared to 2009), 34% in Asia (up by 53% compared to 2009) and 28% in Europe (up by 27% compared to 2009). This activity reflects an vigorous recovery in orders coming from Asia and a slower recovery from Europe, while the United States was already achieving significant activity levels in 2009. The structure of costs linked to the business activity benefited from all the efforts undertaken but nevertheless we observe the impact of one deal, non-recurring, by ORBIT/FR for which the costs of termination turned out to be higher than those forecast. Business activity in 2010 benefited from synergies realized between SATIMO and ORBIT/FR; 10% of the activity arose from hybrid products integrating the technologies of the two companies. Furthermore, the amount of work subcontracted within the group itself showed a clear increase, which contributed a great deal to increasing our added value and optimizing our cost structure.
30
3/ Accounting principles and methods of valuation The financial statements were approved on 21 April 2011 by the Board of Directors and are expressed in thousands of euros (unless otherwise indicated). The consolidated financial statements for the group at December 31, 2010 are established in accordance with the standards and interpretations published by the International Accounting Standards Board (IASB) and adopted by the European Union on December 31, 2008. This standard integrates the international accounting standards (IAS and IFRS), the interpretations of the Standing Interpretations Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC) as published by the IASB on December 31, 2008. This standard is available at: http://ec.europa.eu/internal_market/accounting/ias_fr.htm#adopted-commission. Microwave Vision presents for the third time the consolidated accounts as at December 31, 2010 in accordance with the IFRS standard. The accounts at December 31, 2009 presented for the purposes of comparison were drawn up according to the same conditions.
Appendices
At December 31, 2009, with the exception of the adoption of new standards and interpretations following obligatory applications on January 1, 2010: • revised IFRS 3 – Business combinations and amended IAS 27 – Consolidated and separate financial statements; • amended IFRS 2 – Intragroup cash-settled share-based payments; • amended IAS 39 – Financial instruments: recognition and measurement; • amended IFRS 5 – Non-current assets held for sale and discontinued operations; • IFRIC 12 – Service concession agreements; • IFRIC 15 – Agreements for the construction of real estate; • IFRIC 16 – Hedges of a net investment in a foreign operation; • IFRIC 17 – Distribution of non-cash assets to owners; • IFRIC 18 – Transfers of assets from customers; • Improvements to the IFRS; This procedure has modified the following standards in particular: - revised IAS 1 – Presentation of financial statements; - IAS 7 – Cash flow statement; - IAS 17 – Leases; - IAS 36 – Impairment of assets; - IAS 38 – Intangible assets; - IAS 39 – Financial instruments: recognition and measurement; • IFRS 8 – Operating segments; • IFRIC 9 – Reassessment of embedded derivatives; • IFRIC 16 – Hedges of a net investment in a foreign operation. These amendments and interpretations are without impact on the consolidated financial statements.
31
With regard to the standards and interpretations adopted by the European Union and for which application was not obligatory on January 1, 2010, Microwave Vision Group has decided not to apply the following standards in advance: • revised IAS 24 – Related party disclosures; • amendment to IAS 32 – Classification of rights issues; • amendment to IFRIC 14 – Assets in defined benefits schemes and minimum funding requirement; • IFRIC 19 – Extinguishing financial liabilities with equity instruments.
➊ Accounting rules and methods In accordance with IFRS 5 “Non-current assets held for sale and discontinued operations», the assets of discontinued operations and operations to be discontinued and the liabilities that are directly associated with them have been reclassified on the balance sheet as “Assets held for disposal” and “Liabilities linked to assets held for disposal”. When the criteria of IFRS 5 are met, income from disposals and the impairment resulting from the valuation of the assets at fair value net of disposal costs are presented on the income statement as “Net income from discontinued operations or operations to be discontinued». The accounting rules and methods applied by the group in the establishment of the consolidated annual accounts at December 31, 2010 are identical to those applied at December 31, 2009. Moreover, the IFRS 1 standard “First Time Adoption of IFRS” relating to the initial application of the international standard sets out the possible options for the retrospective application of the IFRS on the date of transition for the group, April 1, 2007. In this context, the group has adopted the following options: • In the absence of business combinations dating from before April 1, 2007; • The standard IAS 39 was applied retrospectively back to January 1, 2004; • The valuation of the benefits accorded to employees in the framework of remunerations in shares only takes into account the plans granted during January 2007; • Exchange gains/losses were cleared at the start of the financial year 2007; • Research tax credit was calculated in accordance with the legislation in force. It was posted under employee-related expenses, amortization and other external charges in application of tax prorations; • Revenue from commercial contracts is recognized under IAS 37 relating to construction agreements.
➋ Assessments and judgments In drawing up its accounts, the group is required to make assessments and assumptions that affect the book value of some elements on the assets and liabilities balance sheets, income and expenses, as well as information given in some of the notes to the accounts. The group reviews its assessments and estimates regularly in order to draw on past experience and other factors deemed to be relevant with regard to economic conditions. Depending on changes in these assumptions or varying conditions, the amounts appearing in future financial statements could differ from current assessments.
32
The principle assessments and estimates adopted are inherent to: • The valuation and the recoverable amount of goodwill. The assessment of the recoverable value of these assets supposes the determination of future cash flows resulting from the use of the assets. It could therefore be the case that the flows effectively released by these assets differ significantly from initial forecasts; • The valuation of pension commitments; • The determination of provisions for liabilities and charges taking into account the variables that are likely to affect occurrence and the costs of underlying events requiring the provision; • Asset value tests based on prospects of future realizations; • Deferred taxes.
➌ Options adopted for measurement and recognition of assets and liabilities Some international accounting standards set out options for measurement and recognition of assets and liabilities.
Appendices
In this context, the group has adopted the following: • the historical cost method of valuing intangible and tangible assets, and has therefore not opted to reassess them at each closing date; • the option to post at fair value by result in accordance with that proposed by the amendment to IAS 39. In the absence of standards and interpretations applicable to a specific transaction, the group’s management uses its judgment to define and apply the accounting principles and methods that enable the appropriate and reliable information to be obtained such that the financial statements: • present a true and fair view of the group’s financial position and performance and of its cash flows; • reflect the economic reality of transactions; • are objective, prudent and complete in all their significant aspects.
➍ Methods of consolidation The companies controlled by Microwave Vision are consolidated by the full consolidation method. A company is presumed to be controlled when the parent company holds, directly or indirectly, the power to direct its financial and operational policies in such a way as to benefit from its activities. Subsidiaries are included in the scope of consolidation as from the date on which control was effectively transferred to the group; subsidiaries that have been disposed of are excluded from the scope of consolidation as from the date of loss of control. Under the full consolidation method, the consolidated balance sheet records the assets of the consolidating company, with the exception of shares in the consolidated companies, at book value, in which are included all the assets and liabilities of the shareholders’ equity of these companies determined according to the rules of consolidation. All transactions realized between the consolidated companies are removed. The group does not hold any ad hoc entities.
33
➎ Conversion of financial statements from foreign companies The consolidated accounts presented in this appendix have been drawn up in euros. Accounts from foreign companies outside the eurozone are converted in accordance with the following principles: • balance sheet items, with the exception of shareholders’ equity, are converted at the closing rate; • items on the income statement are converted at the average rate for the financial year; • exchange gains/losses resulting from the impact of variations in foreign exchange rates between the opening (and/or the date of acquisition of companies as appropriate) and closing of the financial year are recognized under the item “Exchange gains/losses» and included in shareholders’ equity, until the assets and liabilities and any operations in foreign currencies to which they relate have been sold or cleared. The euro/currency ($, $HK, YEN, SEK) conversion rates adopted are as follows: (in €)
$
$HK
YEN
12/31/2010
12/31/2009
12/31/2010
12/31/2009
Closing rate
1.32520
1.43328
10.3209
Average rate
1.32471
1.39051
10,2774
SEK
12/31/2010
12/31/2009
12/31/2010
12/31/2009
11,1136
108.0497
10.7701
116.1440
130,7190
8.9928
10.3114
130,0390
9.5328
10.6033
Other variation
12/31/2010
4/ Notes to the balance sheet ➊ Goodwill (in k€)
12/31/2009
Increase
Decrease
ORBIT/FR Goodwill
8 050
0
0
0
8 050
ANTENNESSA Goodwill
3 459
0
0
1
3 460
At the time of an acquisition, the assets, liabilities and potential liabilities of the subsidiary are accounted for at their fair value within an allotted timeframe of twelve months and retrospectively back to the date of the acquisition. The cost of the acquisition corresponds to the amount of cash, or cash equivalents, paid to the vendor, increased by the costs directly attributable to the acquisition. Impairment tests are carried out annually, using the discounted cash flow method on the basis of existing operating forecasts over a period of four years at a minimum. Existing forecasts are based on past experience as well as on the outlooks for developments in the market, and take into account the company’s business plan.
34
The current structure of SATIMO Industries no longer allows the Antennessa cash-generating unit (CGU) to be followed. Consequently, the Antennessa goodwill is reallocated to the SATIMO Industries CGU, a new, smaller CGU. The two CGUs followed by the group are now SATIMO Industries and ORBIT/FR. These two units generate independent cash flows. On the basis of existing forecasts and projections of cash flow before tax, the recoverable amount has been determined by applying a discount rate after tax of 12%. The final amount has been valued on the basis of the most recent free cash flow as defined in the company’s business plan (year 2014).
➋ Intangible assets The net value of intangible assets amounts to €238k at December 31, 2010. (in k€)
12/31/2009
Increase
Decrease
12/31/2010
960
166
73
1 053
Amortization
735
148
68
815
Net
225
18
5
238
Gross
Appendices
Software, patents and licenses are accounted for at their acquisition cost. They are amortized over a period of three to five years using the straight-line method. Research costs are accounted for as a charge in the financial year during which they were incurred. Development costs that meet the IAS 38 criteria for registration on the assets side of the balance sheet are included in intangible assets and are amortized over a period of use estimated as not exceeding three years from the date that the products or services were first marketed. Without calling into question SATIMO’s technological advances, the development of transversal research projects with the research teams of the new subsidiary ORBIT/FR means that the company no longer has sufficient visibility on the research and development projects carried out within the group. Thus, the company no longer fully meets the IAS 38 criteria for registration of these costs on the assets sheet. This is because they have been completely revised under new transversal research projects, for which the expenses are impossible to identify.
➌ Tangible assets The net value of tangible assets amounts to €3,374k at December 31, 2010. (in k€) Gross
12/31/2009 5 773
Increase
Decrease
1 536
1 515
12/31/2010 5 794
Amortization
3 449
474
1 503
2 420
Net
2 324
1 062
12
3 374
The assets are recognized at their acquisition cost, increased by incidental costs relating to transport and installation.
35
Amortization is calculated by the straight-line method over the estimated lifecycle of the assets: Fixtures and fittings Equipment and tools Office equipment, IT and furniture
5 to 10 years 3 to 7 years 3 to 10 years
Interest on loans allocated to the construction and acquisition of tangible assets are accounted for in the cost of the asset when they are significant. The group has not adopted residual value for its assets. The majority of industrial assets are destined to be used until the end of their life and as a general rule are not intended to be sold on. Finance leases The total amount of fees remaining to pay on lease contracts and long-term rent contracts amounts to €189,014. Details of leases: Gross value of items
Fees for the financial year
Corresponding provision for amortization
Cumulative amortization
Spectrum analyzer
107,484
9,555
8,957
107,484
0
BNP lease Minolta
43,919
8,778
8,784
8,784
35,135
Name of items (in €)
Loans remaining due
ECS STARLAB
207,000
75,559
75,559
75,559
131,441
TOTAL
358,403
93,892
93,300
191,827
166,576
Leased items have been restated to appear under tangible assets on the assets side of the balance sheet offset by an entry for a loan on the liabilities side, reduced by the leaseholder’s advance payment. Amortization by the straight-line method has been accounted for with reference to the economic life of the item. Simple rental costs are accounted for as a charge in the financial year during which they were incurred.
➍ Non-current financial assets These include non-consolidated equity investments, as well as guarantees. Their value is revised at each closing, and an impairment value is applied if necessary.
➎ Non-current tax assets Deferred taxes are accounted for when temporary differences exist between the taxable base and the consolidated value of assets and liabilities. Deferred tax assets are recognized as soon as it is probable that the company will have a taxable benefit against which it will be able to charge a deductible temporary difference.
36
Tax assets and liabilities are valued using the tax rate and fiscal rules applicable at December 31, 2010, i.e.: France USA Hong Kong Italy
33,33 % 30 % 17 % 27 %
The tax rate in each of these countries is identical to that used during the previous financial year. In line with the presentation of US accounts on NASDAQ, tax credits generated with respect to the period have not been activated for ORBIT/FR. The summary of non-current deferred tax assets is as follows: €341k €2,626k €1,130k €473k €52k €14k €14k €29k
Appendices
Microwave Vision S.A. deficit (foreign establishments) SATIMO Industries deficit ORBIT/FR deficit ORBIT/FR temporary difference Restatement of amortization of research and development costs Temporary difference Restatement Other elements
5/ Current assets ➊ Inventory Stocks of materials and components and inventory of intermediate and finished products are valued at their historical cost (acquisition cost or production cost). Intermediate and finished products also integrate the historical cost of supplies, with labor valued at the average hourly rate. A provision is constituted if the realization value at the close of the financial year is lower than this historical cost. At December 31, stocks and inventory broke down as follows: Raw materials and supplies Intermediate and finished products Provisions for raw materials and supplies have been constituted to the value of
€4,531,706 €563,176 €52,105
37
➋ Customer receivables and associated accounts (in €)
12/31/2009
Variation
December 31, 2010
Gross Value
17,099
-1,941
15,265
Impairment
418
-15
403
Net Value
16,681
14,862
Accounts receivable are valued at their nominal value. The share of invoices to be drawn up in customer accounts amounted to €8,226k at December 31, 2010. The method of valuation of these invoices is described in the paragraph “Sales”. An impairment value is applied if the value of the inventory is lower than the book value when the debt becomes toxic, either due to being placed under judicial review or to commercial litigation. Other than these causes of non-payment, some debts presenting doubts as to their recovery have provisions constituted against them by means of an impairment rate arising from the statistical observation of their risk of non-recovery, the context of each contract and the volumes of debt. With regard to:
• France: €237,217 • Hong Kong: €166,780
➌ Other receivables and current assets (in €)
12/31/2009
12/31/2010
Deferred tax assets
1,047
588
Other receivables
4,588
2,548
Prepaid expenses
121
136
At December 31, 2010 deferred tax assets correspond to tax liabilities on the ORBIT/FR platform.
6/ Shareholders’ equity ➊ Share capital and issue premiums Number of shares Ordinary shares
38
12/31/2009
12/31/2010
3,455,205
3,554,885
➋ Own shares 12/31/2009
12/31/2010
Number of own shares
3,471
3,554
Own shares (in €)
29,434
33,380
At December 31, 2010, the rules in force on the Alternext market permit the holding of own shares in the framework of a liquidity contract. The own shares are recognized at their acquisition cost, as a reduction to shareholders’ equity. The net income from disposal of these shares is charged directly to shareholders’ equity and does not contribute to the income for the financial year.
➌ Potential share capital The inventory of securities giving access to existing share capital at December 31, 2010 can be presented as follows: Equity options
Date of General Meeting
10/31/06
06/16/05
Date of Board of Directors meeting
02/26/07
02/26/07
Number of shares issued
8,000
100,375
Number of beneficiaries
1
14
Exercise price
23,20
23,14
Deadline for exercise
02/26/17
02/26/12
Number of shares in issue at 12/31/2009
8,000
100,375
Number of securities exercised over the period
0
0
Number of shares in issue at 12/31/2010
8,000
100,375
Appendices
Equity warrants
Breakdown of share capital To the best knowledge of the company, the breakdown of share capital is as follows:
Employees Steady private investors Public
Number of shares
% capital
Number of voting rights
710,406
20%
1,311,346
558,299
16%
747,362
2,286,180
64%
2,459,026
On the assumption that the warrants and options were exercised, the impact on the breakdown of share capital would be as follows:
Employees Steady private investors Public
Number of shares
% capital
Number of voting rights
818,781
22.4%
1,419,721
558,299
15.2 %
747,362
2,286,180
62.4%
2,459,026
39
➍ Dividends The company carried out a distribution of dividends during the financial year, amounting to €1,035,068.
➎ Reserves See statement of shareholders’ equity.
Reserves correspond to the share attributable to the group of the cumulative consolidated results from all companies included in the scope of consolidation, net of distributions.
7/ Cash The principal objective of the group in terms of management of its share capital is to ensure that a good rating is maintained with regard to the risk incurred by personal credit and working capital ratios, so as to facilitate its business activity, maximize value for shareholders and enable external growth operations. The group manages the structure of its share capital and carries out adjustments according to changes in economic conditions. It is against this background that, to finance its business, the group manages its share capital by using a ratio equal to net debt divided by shareholders’ equity. The group includes in net debt the financial debts (excluding factoring), cash and cash equivalents, excluding discontinued operations. (en k€)
12/31/10
4,615
3,878
Cash
B
Equivalent instruments
C
Investment securities
50
50
D
Liquidities (A+B+C)
4,665
3,928
E
Short-term financial debts
F
Short-term banking debts
-174
-419
G
Share of medium and long-term debts less than one year
-1,848
-1,811
H
Other short-term financial debts -1,989
-2,230
2,676
1,698
-4,348
-2,509
I
Short-term financial debts (F+G+H)
J
Net financial/excess short-term debt (I-E-D)
K
Banking loans of more than one year
L
Bonds issued
M
Other loans of more than one year
N
Net medium and long-term financial debt (K+L+M)A
-4,348
-2,509
O
Net financial debt (J+N) A+B+C)
-1,642
-811
30,505
34,195
5.4 %
2.4 %
Consolidated shareholders’ equity Net debt ratio on shareholders’ equity
40
12/31/09
A
The group has available the following short-term credit lines; €3,900k €1,500k €6,800k €1100k
Cash credits (bank, Dailly1, MCNE2) Advances on public contracts Securities Miscellaneous
At December 31, 2010, cash credit lines were used up to the order of €402k.
➊ Financial liabilities Changes in financial liabilities (excl. factoring)
(in k€)
1
Type of financial liabilities
6,166
December 31, 2010 Subscription
Bank loans and investments
0
Repayment
4,386
Overdrafts
0
December 31, 2010
-1,367
December 31, 2010
(in k€)
4,386
4,799
Accrued interest amounts to €5k at 12/31/2010.
Type
Nominal (in k€)
12/31/2010
A - 1 year
A + 1 year
Antennessa CIC loan
3,000
974
613
361
ORBIT/FR SG CIC OSEO loan
6,000
3,041
1,193
1,848
300
300
50
5
Anvar SODIE Antennessa loan
300 5
Appendices
The principal characteristics of the loans and financial liabilities are detailed in the table below: Rate 4.65% Euribor 3 month + 2.17% 0% 3.50%
➋ Provisions for liabilities and charges (in k€)
12/31/2009
Provision allowance
Write-down
12/31/2010
Provisions for guarantees
151
39
0
190
Total
151
393
0
19017 %
Charges for guarantees are separated out by analysis during each financial year. They include time spent and equipment/materials used to meet the requirements of the guarantee. The amount of the provision is determined by applying the same percentage to the sales figure for the financial year as that observed by applying the guarantee expenses for the financial year to the sales figure from the previous financial year. 1
French finance law Mobilisation de Créance Née sur l’Etranger – Short-term realisation of receivables from overseas. A short-term financing technique for exporters who grant their foreign buyers a certain term of payment. The realisation of the invoice is possible up to 100% of its value. 3 Should this be December 31, 2009? Source has 2010. 2
41
Provisions for liabilities concern probable risks relating to proceedings underway, litigation and court actions in an industrial tribunal, known about at the date of closure of the accounts. These provisions have been valued either on the basis of their resolution during the period or on an amount estimated as prudent by our advisors. In the absence of any litigation of this nature, no provision of this type has been recorded.
➌ Retirement benefits Commitments are valued in accordance with the local legislation in force. Thus, for the commitments relating to Microwave Vision and SATIMO Industries, the assumptions for the constitution of retirement benefits are as follows:
In % - Assumptions
December 31, 2010
Discount rate
3%
Rate of wage increases
3.5%
Retirement age
63 years
There is no investment to cover these commitments to a financial institution. Regarding ORBIT/FR, the amount recorded under this year amounts to €24k. Regarding Microwave Vision and SATIMO Industries, a €7k reversal of the provision has been made that reduces the pension to €110k at the date of 31/12/2010.
8/ Other current liabilities (in k€)
12/31/2009
12/31/2010
Social security and tax liabilities
1,452
1,736
Deferred income
2,103
1,900
418
1,074
Advance payments on orders Miscellaneous TOTAL
42
938
188
4,911
4,898
9/ Notes to the income statement ➊ Sales Sales of products and sales of research studies: The sales figure is accounted for as and when necessary, in accordance with IAS 37 relating to construction contracts. Accrued income (work not invoiced for) and deferred income are recognized on the basis of total estimated sales and the status of each deal (total cost price realized at the close of the financial year compared to the forecast total cost price at the end of the contract) to find the difference between the invoice amount and the sales figure calculated in advance. The amount of income recognized for terminated contracts or contracts underway is posted under Sales. In the event that a loss on termination is forecast, this loss is recorded by means of a provision for liabilities under a deduction of the loss from the advance already recorded. No asset or liability is recorded with respect to sales contracts.
Appendices
Maintenance Maintenance contracts are invoiced on their anniversary date, generally once a year. The income recognized in the accounts is the value of the contract pro rata temporis. Deferred income is recognized for the unexpired part of these contracts.
➋ Current operating expenses The financial year ended December 31, 2010 consolidates the accounts for the entities belonging to SATIMO and those of ORBIT/FR. Purchases consumed decreased, falling from 41% to 39% of sales. The weighting of employee-related expenses decreased, falling from 35.3% to 31.3% of sales. Duties and taxes increased by 1%, rising to 2% of sales this year. Other current income and expenses are primarily made up of subcontracting and purchases of services, travel costs and real estate rental costs. Their weighting dropped from 20.5% of sales to 18%. The changes in these various posts are linked to the immense effort made by all of the group’s teams after the group undertook to realize the maximum savings possible to help it return to profitability. A huge effort has also been made in terms of production costs, but the results of this will not be seen until after the financial year 2012. R&D expenses amounted to €4,101k during 2010. They are essentially made up of employee-related expenses.
43
The research tax credit amounted to €713k at December 31, 2010, compared to €859k at December 31, 2009. This drop arises from the temporary redeployment of some R&D staff to sales projects. This redeployment ceased with the new financial year.
➌ Other operating income and expenses Other operating income and expenses break down as follows: (in k€)
12/31/2009 12 months
12/31/2010 12 months
Microwave Vision Option plan Tax audit Other operating income and expenses
76
0
106
0
19
Earn-out on ORBIT/FR purchase
27 82
ORBIT/FR Redundancy payments Relocation of ORBIT/FR manager Other operating income and expenses Total other operating income and expenses
75
0
105
0
23
25
404
134
➍ Charge related to stock option plans IFRS 2 sets out, inter alia, that all transactions settled in shareholders’ equity instruments must be reflected in the financial statements at the exact time when the corresponding service is rendered. The company has adopted the Black & Scholes model for valuation of these instruments. The Board of Directors did not carry out any options issues during the financial year 2010.
➎ Financial income (in k€) Net interest expense Other financial income and expenses Financial income
12/31/2009
12/31/2010
374
414
2,103
1,900
465
223
The amount for exchange gains/losses posted in the income statement was zero at December 31, 2010. The net interest expense arises primarily from the repayment of interest linked to the loans taken out for the acquisitions of ORBIT/FR and Antennessa.
44
➏ Corporate income tax The parent company of the group, Microwave Vision SA, applies the French tax law which provides for a corporate income tax rate of 33.33% at December 31, 2010. Deferred tax assets and liabilities for the entities are calculated using the anticipated rates for 2011 and 2012. Foreign entities apply the tax rate in force in their country of registration. (in k€)
12/31/2009
12/31/2010
Taxes payable
-164
-346
Deferred taxes
-1,132
-628
The table below shows a reconciliation between the theoretical tax liabilities by applying the tax rate in force in France at December 31, 2010 and the tax liability recognized in the accounts. (in k€) 910
Theoretical corporate income tax rate
33%
Theoretical income tax saving (liability)
242
Effect of differences in tax rates, modifications to fiscal legislation and miscellaneous
34
Ongoing difference
-1
Non-activated tax loss carryforwards generated during the financial year
0
Consumption of non-activated deficits in 2010
183
Activation of 2008 ORBIT/FR deficits
0
R&D expenses
-34 190
Research tax credit for 2010
238
Demonstrated variance
610
Appendices
Profit before tax and minority interests
➐ Earnings per share Group share of net income
Before dilution
After dilution
€2,793k
€2,793k
Number of shares
3,554,885
3,663,260
Net earnings per share
€0.7857
€0.7624
➑ Exchange gains/losses We recorded an exchange gain at 12/31/2010 for the amount of €123,170 and a negative exchange loss of €66,794.
45
10/ Information by sector The first sector level of information for the group is structured by activity and the second by geographical region. The group breaks down its business activity by geographical sectors, in two sectors reflecting the management structure and internal organization according to the nature of the products and services offered. • One sector covering the mono-probe instruments business activity; • One sector for the multi-probe instruments business activity. These activities break down geographically into three regions: • Europe • North America • Asia The company does not have any information system that enables it to break down the results by geographical region.
➊ Income Statement by sector December 31, 2010 (in k€) Sales Operating income before interest and taxes Financial income Net income
31 December 2009 (in k€)
Mono-probe
Consolidated
18,272
25,722
43,994
2,186
1,340
3,526
-140
-83
-223
1,848
1,606
3,454
Multi-probe
Mono-probe
Consolidated
Sales
12,724
22,110
34,834
Operating income before interest and taxes
-1,842
1,962
120
-463
2
-465
-1,828
2,046
218
Financial income Net income
46
Multi-probe
➋ Balance sheet by sector December 31, 2010 (in k€)
Multi-probe
Mono-probe
Consolidated
8,688
10,234
18,922
20,175
7,889
28,064
Non-current assets Current assets Non-current liabilities
5,208
Current liabilities
5,751
1,832
7,583
Multi-probe
Mono-probe
Consolidated
7,679
10,060
17,739
17,907
11,744
29,651
5,032
10,451
12/31/2009
12/31/2010
9,750
8,956
31 December 2009 (in k€) Non-current assets Current assets Non-current liabilities
6,434
Current liabilities
5,419
5,208
6,434
(in k€) Europe North America Asia TOTAL
15,349
18,937
9,736
16,101
34,835
43,994
Appendices
➌ Sales by destination
Sales are broken down according to the location of the entity realizing the sale.
11/ Related party disclosures ➊ Identification of related parties There are no associated companies or joint ventures. The principal directors at Microwave Vision are: • Philippe Garreau (Chief Executive Officer) • Arnaud Gandois (Deputy Managing Director) • Luc Duchesne (Deputy Managing Director) • Gianni Barone (Sales Director) • Pascal Gigon (Chief Financial Officer) carries out his function via the GFC structure • Eric Beaumont (Strategy Director)
47
➋ Agreements In the framework of the agreement for provision of assistance and services between Microwave Vision S.A. and its subsidiaries, Microwave Vision S.A. invoices its subsidiaries for an amount based on the annual budget for all costs relating to its functional management duties. With respect to the financial year 2010, the sums invoiced relating to this agreement amount to €2,594k With regard to internal services provided, these are eliminated in the consolidation process. The same applies for the cash agreement with SATIMO Industries, the interest of which is neutralized in consolidation.
Relationships with the principal directors > Corporate officers’ fees: Chairman of the Board of Directors and Deputy Managing Directors These fees amount to €411,614 with respect to their employment contracts. No directors’ fees are payable to members of the Board of Directors. In terms of corporate officers’ fees, we can specify that Mr. Philippe Garreau receives a short-term company car benefit for an annual amount of €3,240. All other categories of post-employment benefit, other long-term benefits, retirement benefits and miscellaneous payments in shares are not applicable by the company. > Equity options and equity warrants schemes Equity options and equity warrants schemes concern the management team and key personnel within the company. The principal characteristics of the 8,000 equity warrants issued by the Board of Directors at its meeting on February 17, 2007: • each equity warrant gives the right to subscription to one ordinary share of the company Microwave Vision with nominal value of €0.20; • unit issue price of equity warrants: €2.32; • unit strike price: €23.20; • deadline for exercise: February 26, 2017. The principal characteristics of the 100,375 equity options issued by the Board of Directors at its meeting on February 17, 2007: • each equity option gives the right to subscription to one ordinary share of the company Microwave Vision with nominal value of €0.20; • unit strike price: €23.14; • deadline for exercise: 26 February 2012.
48
12/ Other information ➊ Management of financial risks Exposure to interest rate risk The group is exposed to foreign exchange risk and interest rate risk. The group’s principal financial instruments are made up of bank loans, overdrafts with banks, and cash. The group also holds financial assets and liabilities such as commercial debts and liabilities that are generated by its business activities. The group’s policy is to deal on the financial markets only for temporary investment purposes, without risk to its surplus cash resources. Exposure to foreign exchange risk The group does not hedge against its foreign exchange risk.
➋ Off-balance sheet commitments
Appendices
Collateral of business assets located in Villebon-sur-Yvette (91140), 17 avenue de Norvège, amounting to €3,000k in the first instance, granted to the CIC, and collateral of business assets located in Villebonsur-Yvette (91140), 17 avenue de Norvège, for the amount of €6,000k in the second instance, to Société Générale, the CIC and OSEO Financement for the amount of €1,000k
➌ Individual Right to Training (DIF1) With respect to the individual right to training, the number of hours available but not used amounted to 7,473 as at December 31, 2010.
➍ Auditors’ fees With respect to the financial year 2010, the group paid €193,609 to its statutory auditors.
➎ Average workforce by category at December 31, 2010 Executives Non-executives Total
1
165 68 233
Droit Individuel à la Formation
49
➏ Profit-sharing scheme The amount of the profit-sharing scheme with respect to the year 2010 stands at €177,002 and is recognized in the accounts closed at December 31, 2010.
➐ Capital increase carried out during the financial year 2010 A capital increase was carried out on September 15, 2010 with respect to the distribution of dividends agreed by the General Meeting of June 24, 2010 and the opportunity offered to shareholders to opt for payment in new shares. The company share capital was increased by the amount of €19,936 with the creation of 99,680 new shares and thus rose from €691,041 to €710,977. The unit strike price of the share was fixed at €6.48, i.e. an issue premium per share of €6.28 and a total issue premium of €625,990.40.
50
List of Appendices ❚ CONSOLIDATED BALANCE SHEET
24
❚ CONSOLIDATED INCOME STATEMENT
25
❚ CONSOLIDATED CASH FLOW STATEMENT
26
❚ STATEMENT OF VARIATIONS
IN SHAREHOLDERS’ EQUITY
27
❚ NOTES TO THE CONSOLIDATED
ACCOUNTS 28 1/ CONSOLIDATED ACCOUNTS
28
• About the Group
28
• Group structure chart
28
• Change in consolidation scope • Risk factors
30 30
7/ CASH
40
• Financial liabilities
41
• Provisions for liabilities and charges
41
• Retirement benefits
42
8/ OTHER CURRENT LIABILITIES
42
9/ NOTES TO THE INCOME STATEMENT
43
• Sales
43
• Current operating expenses
43
• Other operating income and expenses
44
• Charge related to stock option plans
44
• Financial income
44
• Corporate income tax
45
• Earnings per share
45
• Exchange gains/losses
45
2/ SIGNIFICANT EVENTS TAKING PLACE DURING 30
3/ ACCOUNTING PRINCIPLES AND VALUATION METHODS
31
• Accounting rules and methods
32
• Assessments and judgments
32
• Options adopted for measurement and recognition of assets and liabilities • Methods of consolidation
33 33
46
• Balance sheet by sector
47
• Sales by destination
47
11/ RELATED PARTY DISCLOSURES
47
• Identification of related parties
47
• Agreements
48
Relationships with the principal directors
34
48
Chairman of the Board of Directors and Managing Directors
4/ NOTES TO THE BALANCE SHEET
46
• Income Statement by sector
- Corporate officers’ fees:
• Conversion of financial statements from foreign companies
10/ INFORMATION BY SECTOR
34
• Goodwill
34
• Intangible assets
35
• Tangible assets
35
• Non-current financial assets
36
• Non-current tax assets
36
- Equity options and equity warrants schemes 12/ OTHER INFORMATION
48 48 49
• Management of financial risks
49
- Exposure to interest rate risk
49
- Exposure to foreign exchange risk • Off-balance sheet commitments
49 49
5/ CURRENT ASSETS
37
• Individual Right to Training (DIF)
49
• Inventory
37
• Auditors’ fees
49
• Customer receivables and associated accounts 38
• Average workforce by category
49
• Other receivables and current assets
38
• Profit-sharing scheme
50
38
• Capital increase carried out during
6/ SHAREHOLDERS’ EQUITY • Share capital and issue premiums
38
• Own shares
39
• Potential share capital
39
- Breakdown of share capital
Appendices
THE FINANCIAL YEAR
the financial year 2010
51
39
• Dividends
40
• Reserves
40
51
microwave vision - highlights
microwave vision on the stock market
> Market leader in antenna measurement
> Listing • Listed since 06/29/2005 on Alternext (ticker ALMIC) • Price at 06/01/2011: €10.98 • Market capitalization at 06/01/2011: €39M • Average daily volume (01//01/2011 – 06/01/2011): 2694 shares/day • Dividend per share paid on 08/16/2010: €0.30 (4.1% return compared to opening price on 08/16/2010)
> 249 employees, of which 60% are engineers qualified to Bac+5 level (2009) > €43.99M in 2010, an increase of 26% compared to 2009 > 15 years of continued growth > 12 sites across 3 continents > 19 international patents > A portfolio of major customer accounts: NASA, CNES, ESA, NOKIA, RENAULT, LOCKHEED MARTIN, NORTHROP GRUMMAN, RAYTHEON, QUALCOMM, BMW, BAE, IAI, INTEL, ERICSSON, EADS, BOEING, DAIMLER-CHRYSLER, PANASONIC, HUAWEI, ZTE, SAMSUNG > Oséo label “Entreprise Innovante1” Member of the OSEO Excellence network since 2010
> Share capital • 3,554,885 shares • 4,517,734 exercisable voting rights • more than 1000 shareholders (TPI 07/10/2009) • Shareholders’ equity: €34.19M (€30.50M in 2009) > Financial Calendar • 05/23/2011: Board of Directors meeting for Q1 2011 • 06/23/2011: General Meeting • 10/03/2011: Closure of half-yearly accounts > Audit: NFinance Securities and Gilbert Dupont
Innovating company
Individual 15%
Contact:
Employees 20%
CEO: Philippe Garreau MD SATIMO Industries: Arnaud Gandois MD ORBIT/FR: Per Iversen Chief Financial Officer: Pascal Gigon > Tel.: +33 1 69 29 02 47 > email: contactfinance@lists.microwavevision.com > Address: Microwave Vision, 17 avenue de Norvège,
91140 Villebon-sur-Yvette
Investors 65%
❚ Breakdown of shares
Microwave Vision’s global presence
© Microwave Vision 2011
Graphic design: www.ateliermaupoux.com - Conception éditoriale : agence C3M - © pictures: all rights reserved, photo de couverture en bas : avec l’aimable autorisation d’Alenia Aeronautica.
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