Orpak Systems Announcements

RNS Number : 0613I Orpak Systems Ltd 13 November 2008  
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13 November 2008 

Orpak Systems Ltd
("Orpak" or "the Company")

Financial results for the third quarter and nine months ended 30 September 2008
 
Orpak Systems Ltd, the leading provider of card-free secure fuel payment systems based on vehicle identification and end-to-end solutions for the automation of fuel stations, announces its financial results for the third quarter and nine months ended 30 September 2008.  

Third Quarter 2008 Highlights
Revenues increased 27% to $19.7m (Q3 2007: $15.5m), representing twenty-first consecutive quarter of growth

Operating profit increased 8% to $3.5m (Q3 2007: $3.2m)

Net profit declined to $1.4m (Q3 2007: $2.2m), primarily due to loss in marketable securities and the weakness of the US dollar. Non GAAP net profit was $1.6m (Q3 2007: $2.3m)

Company's systems were delivered to 200 petrol stations and 100,000 vehicles bringing the total petrol stations equipped to 10,700 and 2.2 million vehicles to date, distributed across 30 countries 

Interim dividend of US$ 2.6 cents (US$ 2.21 cents net) per Ordinary Share to be paid on 10 December 2008 to shareholders on the register of members of Orpak Systems Ltd at the close of business on 21 November 2008. The ordinary shares will go ex-dividend on 19 November 2008

Nine months ended 30 September 2008 Highlights
Revenues increased 27% to $52.4m (2007: $41.2m)

Operating profit increased 17% to $7.2m (2007: $6.2m)

Net profit declined to $4.2m (2007: $6.3m), mainly due to loss in marketable securities and the weakness of the US dollar. Non GAAP net profit was $4.7m (2007: $6.6m) 

Net cash and cash equivalents totaled $33.1m at 30 September 2008 (2007: $27.2m), despite making an acquisition for $3.7m and $2.4m dividend payment for the year 2007

Executed cost cutting plan to restore bottom-line performance and mitigate impact of currency factors on operational efficiency

Revenues in Europe increased by 57% to $42.3m (2007: $26.9m) 

Finalised equipment of 570 BP stations in Turkey with automation and fuel payment systems based on vehicle identification, and began to deliver the first batch of 25,000 vehicle identification units to approximately 65,000 vehicles

Significant progress in opportunities in USA, Europe and Far East
Outlook
Demand for Orpak's products remains strong and the Company continues to benefit from a robust order book, with a high level of repeat business

Firm action taken to stem the decline in net profits caused by the impact of currency movements and challenging financial markets

Post period end, Orpak's subsidiary in Turkey, Turpak, signed an umbrella agreement with global oil company, LUKoil, to equip its network of stations in Turkey with tank automation, site automation and C-store management system 

For full year 2008, the Company expects to continue to gain market share in emerging markets and report solid revenue growth compared with previous year 

Hayim Kohen, Chief Executive of Orpak, said: "We are pleased that this period has seen sustained momentum in revenue growth as demand for our products across all markets remains encouraging. Our response to the challenges of the weakness of the US dollar and financial markets has largely succeeded in mitigating the negative impact. 

Looking ahead, the fourth quarter has begun well with the signing of a new contract with LUKoil in Turkey. It demonstrates our strength in the region, where we already work with other global oil companies such as BP and Shell. Sales continue to increase and our order book remains solid. As a result, we remain confident of delivering further revenue growth in the full year, as well as an improvement in profits in the fourth quarter of 2008."
 
Hayim Kohen, CEO and Hemi Shtral, CFO will be hosting a conference call for investors today at 4pm GMT (11am EDT, 8am PDT). In the US, please dial +1 866 966 5335; In the UK, please dial 0808 109 0700; Outside the US and UK, please dial +44 203 037 9095 

Enquiries:

Orpak Systems Ltd
Hayim Kohen, CEO                          +972 3 577 6868
Hemi Shtral, CFO

Libertas Capital
Sandy Jamieson                                +44 20 7569 9650

Corfin Communications
Harry Chathli, Claire Norbury            +44 20 7977 0020
Note to Editors: 
 
Orpak develops, manufactures and markets end-to-end solutions for the automation of fuel stations and fleet management. Orpak is a market leader in automated refueling systems that incorporate fuel payment based on vehicle identification. Using advanced technologies to meet customer requirements, Orpak's solutions integrate forecourt automation and management, convenience-store management systems, commercial and retail sales solutions, and fuel delivery systems. The Company's solutions are designed to benefit customers through enabling fuel savings, preventing fuel fraud, maximizing loyalty programs and providing other advanced services that increase profitability.
 
The Company's products have been delivered to more than 10,700 fuel stations and 2.2 million vehicles in 30 countries across the globe and are distributed through an international network of subsidiaries and partners.
 
Orpak has been ISO-9001 certified since 1995, and the Company's products meet appropriate local safety standards and regulations in markets in which it operates.
 
Orpak (AIM: ORPK) was admitted to AIM in December 2005.
  Financial review

Orpak is pleased to announce strong growth in revenues for the third quarter and nine months ended 30 September 2008, reflecting sustained demand for the Company's products and services in key territories. 

Third quarter revenues increased by 27% to $19.7m (Q3 2007: $15.5m). Operating profit increased by 8% to $3.5m (Q3 2007: $3.2m). Net profit for the third quarter decreased to $1.4m (Q3 2007: $2.2m) primarily due to loss in its marketable securities and the weakness of the US dollar. To counteract this, in the beginning of October, the Company moved all its marketable securities into short-term Israel State's debentures with guaranteed interest. 

Turnover in the nine months to 30 September 2008 rose 27% year-on-year to $52.4m (2007: $41.2m) and operating profit increased by 17% to $7.2m (2007: $6.2m). Net profit decreased to $4.2m (2007: $6.3m) primarily due to volatile financial markets and the impact of a weak US dollar, which depreciated by about 20% against the Israeli shekel since early 2007. 

The Company has taken firm action to address these challenges by reducing operating expenses. These steps have produced encouraging results in the third quarter and the benefits are expected to continue in the next quarter.   
 
Net profit, excluding the provision of expenses for stock option plans and the amortization of intangible assets associated with acquisitions, amounted to $4.7m (2007: $6.6m). 

Fully diluted earnings per share were 12.5 cents (2007: 18.7 cents).

Sales and marketing expenditure amounted to $11.0m compared with $9.5m in 2007 as the Company continued to expand its global sales infrastructure. 

A subsidiary of the Company received tax assessments in respect of 2003-2005, where the subsidiary is required to pay a total amount of about NIS 14 million. On the basis of the strong legal consultation the Company received, the financial statement for the period does not include a provision in respect of the tax assessments.
Operating review

Orpak succeeded in increasing its market share in the territories in which it is established and continued to expand into new areas. During the third quarter, the Company's systems were delivered to 200 petrol stations and 100,000 vehicles bringing the total number of petrol stations equipped to 10,700 and 2.2 million vehicles to date, distributed across 30 countries.

During the nine month period, revenues in Europe increased by 57% to $42.3m (2007: $26.9m), maintaining the region's position as the largest revenue contributor to the Company. The revenue growth reflected the completion of major orders, including contracts with oil companies in several countries in Eastern Europe, which were delivered on time and within budget, thereby consolidating Orpak's position in this region.  

Under a contract with BP, a major global oil company, in the nine month period the Company equipped a network of 570 stations in Turkey with automation and fuel payment systems based on vehicle identification, and began to deliver the first batch of 25,000 vehicle identification units to approximately 65,000 vehicles. These systems allow drivers, in particular of fleet vehicles, to fill-up and pay for their fuel through automatic and card-free payment technology, thereby saving considerable time. These systems also help oil companies to strengthen customer loyalty while improving convenience and fuel cost management for fleet owners and drivers. 

The Company also made good progress in discussions with retail networks in the Netherlands and Belgium, receiving orders from Texaco in Belgium and Gulf in Netherlands to equip 100 retail outlets respectively with its convenience store and station automation systems. 
 
Orpak's presence in India is based on executing orders with two of India's leading and largest petroleum companies - HPCL and IOCL - delivering end-to-end retail management systems and increasing the total number of systems delivered to these customers to 1,438. 

Post period end, the Company's subsidiary in Turkey, Turpak, signed an umbrella agreement with global oil company, LUKoil, to equip its network of stations in Turkey with tank automation, site automation and C-store management system. 

Currently, LUKoil has a network of 80 petrol stations and has recently acquired an additional network of 550 stations of Akpet, the Turkish gas station operator. Under the terms of the agreement, Orpak will commence the supply, installation and commissioning of its management system in 80 petrol stations, which is expected to be complete by the middle of 2009. Orpak will be paid $1.5m in stages for fulfilling the terms of the contract.
Dividend

In line with the Group's policy, the Directors have declared an interim dividend of NIS 0.10 per Ordinary Share in respect of the nine months ended 30 September 2008. This amount will be converted to US dollars per the exchange rate on the date the dividend is paid. For convenience, as of today, the above-mentioned dividend is equivalent to US$0.026 per Ordinary Share. 
 
The dividend will be paid on 10 December 2008, to shareholders on the register of members of Orpak Systems Ltd at the close of business on 21 November 2008. The ordinary shares will go ex-dividend on 19 November 2008.

The Total interim dividend amounts to NIS 3.4m (which, as mentioned above, is equivalent to US$ 0.9m).

Net cash and cash equivalents totaled $33.1m at 30 September 2008 (2007: $27.2m). This was despite making cash payments of $6.1m - $3.7m in acquisition costs and $2.4m for final dividend payment.
Outlook

Demand for Orpak's products remains strong and the Company continues to benefit from a robust order book, with a high level of repeat business. The Company has also taken firm action to stem the decline in net profits caused by the impact of currency movements and challenging financial markets. These steps have already produced encouraging results in the current quarter and the benefits are expected to continue in the next quarter.  

With a strong pipeline of new business and a successful start to the final quarter of 2008 with the signing of a new contract with LUKoil, Orpak remains on track to deliver solid revenue growth in the fourth quarter and full year 2008. As a result, the Board looks to the future with confidence and to delivering shareholder value.

 
Interim Condensed Consolidated Income Statements for the

Nine month period ended September 30
Three month period ended September 30
Year ended December 31

2008
2007
2008
2007
2007

$ thousands
$ thousands
$ thousands
$ thousands
$ thousands

Unaudited
Unaudited
Unaudited
Unaudited
Audited
Revenues from sales and services
 52,388 
 41,226 
 19,720 
 15,476 
 58,044 
Cost of sales and services
 28,734 
19,968 
 10,397 
6,827 
 28,140 
Gross profit
 23,654 
 21,258 
 9,323 
 8,649 
 29,904 
Research and development costs
 2,731 
 3,322 
 922 
 1,066 
 4,374 
Selling and marketing costs
 11,014 
 9,475 
 3,955 
 3,478 
 12,727 
General and administrative expenses
 2,730 
 2,290 
 981 
 935 
 3,182 
Other expenses
 22 
 1 
 22 
 1 
 3 
Other income 
(21)
(76)
 - 
(5)
(81)
Results from operating activities
 7,178 
 6,246 
 3,443 
 3,174 
 9,699 
Financing expense
(2,673)
(715)
(1,733)
(649)
(1,403)
Financing income
 494 
 1,742 
 - 
 - 
 2,020 
Net financing income (expense)
(2,179)
 1,027 
(1,733)
(649)
 617 
Profit before income tax
 4,999 
 7,273 
 1,710 
 2,525 
 10,316 
Income tax (expense) 
(480)
 (706)
(121)
 (246)
(876)
Profit for the period
 4,519 
 6,567 
 1,589 
 2,279 
 9,440 
Attributable to:

Equity holders of the Parent 
 4,240 
 6,338 
 1,360 
 2,174 
 8,978 
Minority interest
 279 
 229 
 229 
 105 
 462 
Profit for the period
 4,519 
 6,567 
 1,589 
 2,279 
 9,440 
Earnings per share (in  U.S. dollars)

Basic 
0.126
0.188
0.040
0.065
 0.266 
Diluted
0.125
0.187
0.040
0.064
 0.264 

  
Interim Condensed Consolidated Balance Sheets as at
September 30
December 31
2008
2007
2007
$ thousands
$ thousands
$ thousands
Unaudited
Unaudited
Audited
Assets

Current assets

Cash and cash equivalents

 15,014 
 8,265 
 9,061 
Marketable securities

 17,554 
 18,970 
 19,780 
Trade receivables

 10,249 
 13,846 
 19,889 
Other receivables

 2,820 
 2,469 
 1,429 
Inventories

 8,974 
 8,977 
 10,487 

Total current assets

 54,611 
 52,527 
 60,646 

Non-current assets

Held to maturity investments

 2,463 
 - 
 - 
Deferred income tax assets

 524 
140 
 562 
Employee benefits

 171 
110 
 105 

 3,158 
 250 
 667 

Property and equipment, net

 3,079 
 2,699 
 2,915 

Intangible assets

 19,037 
 4,330 
 14,857 

Total non-current assets

 25,274 
 7,279 
 18,439 

Total assets

 79,885 
 59,806 
 79,085 
  Interim Consolidated Balance Sheets as at 

September 30
December 31
2008
2007
2007
$ thousands
$ thousands
$ thousands
Unaudited
Unaudited
Audited
Liabilities and equity

Current liabilities
Overdraft and current maturities of long-term loan

 1,952 
 113 
 388 
Trade payables

 5,835 
 5,841 
 6,918 
Other payables

 12,709 
12,029 
 19,989 

Total current liabilities

 20,496 
 17,983 
 27,295 
Non-Current liabilities
Long-term loans from banks

 - 
 28  
 - 
Deferred tax liabilities

 2,031 
 511 
 1,776 
Employee benefits

 276 
 210 
 213 
Other long-term liabilities

 5,145 
 1,767 
 5,749 

Total non-current liabilities

 7,452 
 2,516 
 7,738 

Total liabilities

 27,948 
 20,499 
 35,033 

Equity
Share capital

 179 
 179 
 179 
Share premium

 21,705 
 21,694 
 21,705 
Treasury shares

(501)
(501)
(501)
Translation reserve

 7,156 
(140)
 1,631 
Retained earnings

 22,395 
 17,698 
 20,400 

Total equity attributable to equity holders of the parent

 50,934 
 38,930 
 43,414 

Minority interest

 1,003 
 377 
 638 

Total equity

 51,937 
 39,307 
 44,052 

Total liabilities and equity

 79,885 
 59,806 
 79,085 

Interim Statement of Changes in Equity
Attributable to equity holders of the Parent
Share
capital
Share
premium
Treasury
shares
Retained
earnings
Translation
reserve

Minority 
interest
Total
Total equity

$ thousands
$ thousands
$ thousands
$ thousands
$ thousands
$ thousands
$ thousands
$ thousands
For the nine month period ended September 30, 2008
Balance as at January 1, 2008 (Audited)
 179 
 21,705 
(501)
 20,400 
 1,631 
 43,414 
 638 
 44,052 
Changes during 2008:
Profit for the period (Unaudited)
 - 
 - 
 - 
 4,240 
 - 
 4,240 
 279 
 4,519 
Adjustments arising from translation of 
 financial statements for the period (Unaudited)
 - 
 - 
 - 
 - 
 5,525 
 5,525 
 86 
 5,611 
Total recognized income and expense for the period
 - 
 - 
 - 
 4,240 
 5,525 
 9,765 
 365 
 10,130 
Dividend to equity holders (Unaudited)
 - 
 - 
 - 
(2,383)
 - 
(2,383)
 - 
(2,383)
Share based payment settled in shares (Unaudited)
 - 
 - 
 - 
 138 
 - 
 138 
 - 
 138 
Balance as at September 30, 2008 (Unaudited)
 179 
 21,705 
(501)
 22,395 
 7,156 
 50,934 
 1,003 
 51,937 

For the nine month period ended September 30, 2007
Balance as at January 1, 2007 (Audited)
 179 
 21,648 
(501)
 12,120 
(1,983)
 31,463 
 179 
 31,642 
Changes during 2007:
Profit for the period (Unaudited)
 - 
 - 
 - 
6,338 
 - 
 6,338 
 229 
 6,567 
Adjustments arising from translation of 
 financial statements for the period (Unaudited)
 - 
 - 
 - 
 - 
 1,843 
 1,843 
 22 
 1,865 
Total recognized income and expense for the period
 - 
 - 
 - 
 6,338 
 1,843 
 8,181 
 251 
 8,432 
Acquisition of additional rights in subsidiary
 - 
 - 
 - 
 - 
 - 
 - 
(53)
(53)
Exercise of share-based payment (unaudited)
-
 46 
 - 
 - 
 - 
 46 
 - 
 46 
Dividend to equity holders (Unaudited)
 - 
 - 
 - 
(1,006)
 - 
(1,006)
 - 
(1,006)
Share-based payment settled in shares (Unaudited)
 - 
 - 
 - 
 246 
 - 
 246 
 - 
 246 
Balance as at September 30, 2007 (Unaudited)
 179 
 21,694 
(501)
 17,698 
(140)
 38,930 
 377 
 39,307 

Year ended December 31, 2007
Balance as at January 1, 2007 (Audited)
 179 
 21,648 
(501)
 12,120 
(1,983)
 31,463 
 179 
 31,642 
Changes during 2007:
Profit for the year (Audited)
 - 
 - 
 - 
 8,978 
 - 
 8,978 
 462 
 9,440 
Adjustments arising from translation of 
 financial statements for the year (Audited)
 - 
 - 
 - 
 - 
 3,614 
 3,614 
 50 
 3,664 
Total recognized income and expense for the period
 - 
 - 
 - 
 8,978 
 3,614 
 12,592 
 512 
 13,104 
Acquisition of additional rights in subsidiary
 - 
 - 
 - 
 - 
 - 
 - 
(53)
(53)
Exercise of share based payment (Audited)
- 
 57 
 - 
 - 
 - 
 57 
 - 
 57 
Dividend to equity holders (Audited)
 - 
 - 
 - 
(1,006)
 - 
(1,006)
 - 
(1,006)
Share based payment settled in shares (Audited)
 - 
 - 
 - 
 308 
 - 
 308 
 - 
 308 
Balance as at December 31, 2007
 179 
 21,705 
(501)
 20,400 
 1,631 
 43,414 
 638 
 44,052 
 
Interim Statement of Changes in Equity

Attributable to equity holders of the Parent
Share
capital
Share
premium
Treasury
shares
Retained
earnings
Translation
reserve 

Minority
interest
Total
Total equity

$ thousands
$ thousands
$ thousands
$ thousands
$ thousands
$ thousands
$ thousands
$ thousands
For the three month period ended September 30, 2008
 179 
 21,705 
(501)
 20,996 
 8,144 
 50,523 
 633 
 51,156 
Balance as at July 1, 2008 (Unaudited)
Changes during 2008:
Profit for the period (Unaudited)
 - 
 - 
 - 
 1,360 
 - 
 1,360 
 229 
 1,589 
Adjustments arising from translation of 
 financial statements for the period (Unaudited)
 - 
 - 
 - 
 - 
(988)
(988)
 141 
(847)
Total recognized income and expense for the
 period
 - 
 - 
 - 
 1,360 
(988)
 372 
 370 
 742 
Share based payment settled in shares (Unaudited)
 - 
 - 
 - 
 39 
 - 
 39 
 - 
 39 
Balance as at September 30, 2008 (Unaudited)
 179 
 21,705 
(501)
 22,395 
 7,156 
 50,934 
 1,003 
 51,937 

For the three month period ended September 30, 2007
Balance as at July 1, 2007 (Unaudited)
 179 
 21,694 
(501)
 15,451 
(2,271)
 34,552 
 254 
 34,806 
Changes during 2007:
Profit for the period (Unaudited)
 - 
 - 
 - 
2,174 
 - 
 2,174 
 105 
 2,279 
Adjustments arising from translation of 
 financial statements for the period (Unaudited)
 - 
 - 
 - 
 - 
 2,131 
 2,131 
 18 
 2,149 

Total recognized income and expense for the period
 - 
 - 
 - 
 2,174 
 2,131 
 4,305 
 123 
 4,428  
Share-based payment settled in shares (Unaudited)
 - 
 - 
 - 
 73 
 - 
 73 
 - 
 73 
Balance as at September 30, 2007 (Unaudited)
 179 
 21,694 
(501)
 17,698 
(140)
 38,930 
 377 
 39,307 
Interim Consolidated Statements of Cash Flows for the

Nine month period ended September 30
Three month period ended September 30
Year ended
December 31
2008
2007
2008
2007
2007

$ thousands
$ thousands
$ thousands
$ thousands
$ thousands

Unaudited
Audited
Unaudited
Unaudited
Audited
Operating activities

Profit for the period
 4,519 
 6,567 
 1,589 
 2,279 
 9,440 
Depreciation
 776 
 510 
 263 
 220 
 766 
Amortization
 403 
 - 
 134 
 - 
 - 
Gain (loss) from sale of 

 property and equipment, net
(12)
(74)
 4 
(4)
(81)
Decrease (Increase) in value

 of marketable securities, net
 2,320 
(545)
 1,690 
 441 
(551)
Decrease in value of long-term

 liabilities
(1,118)
 - 
 25 
- 
 - 
Income tax expense
 480 
706 
 121 
246 
 876 
Financing income
(541)
(488)
(167)
(130)
(606)
Share based payments
 138 
 246 
 39 
 73 
 308 

 6,965 
 6,922 
 3,698 
 3,125 
 10,152 
Changes in working capital:

Decrease (increase) in trade

 receivables 
 11,752 
(828)
(1,412)
(291)
(5,984)
(Increase) decrease in other

 receivables 
(1,248)
 60 
 302 
(171)
 322 
Decrease (increase) in inventories
 2,742 
(1,497)
 833 
(947)
(2,584)
(Decrease) increase in

 trade payables
(1,887)
 243 
(64)
(990)
 992 
(Decrease) increase in other

 payables
(7,143)
(669)
(1,464)
 2,719 
 3,763 
Changes in employee benefits
(16)
100 
 38 
45 
 105 

 4,200 
(2,591)
(1,767)
 365 
(3,386)
Income tax paid
(380)
(345)
(144)
(214)
(495)
Net cash provided by 

 operating activities
 10,785 
 3,986 
 1,787 
 3,276 
 6,271 
Investing activities

Long-term loan paid from

 (granted to ) Rapac group

 companies
 107 
(626)
(164)
(526)
(236)
Acquisition of property

 and equipment
(647)
(1,015)
(120)
(179)
(1,356)
Acquisition of other

 intangible assets
(1,398)
(1,055)
(460)
(364)
(1,559)
Investments in marketable

 securities, net
(155)
(52)
(718)
(194)
(27)
Proceeds from sale of

 property and equipment
 77 
 153 
 44 
 4 
 177 
Payment for investment in 

 a subsidiary
(3,705)
 - 
 - 
 - 
 - 
Investment in company 

 Consolidated for the first time
 - 
(908)
 - 
 - 
(2,656)
Interest received
 541 
 488 
 167 
 130 
 606 
Net cash used in investing

 activities
(5,180)
(3,015)
(1,251)
(1,129)
(5,051)
  
Interim Consolidated Statements of Cash Flows for the (cont'd)

 
Nine month period ended September 30
Three month period ended September 30
Year ended
December 31
2008
2007
 2,008 
2007
2007

$ thousands
$ thousands
$ thousands
$ thousands
$ thousands

Unaudited
Audited
Unaudited
Audited
Audited
Financing activities

Exercise of share based payment
 - 
 46 
 - 
 - 
 57 
Dividend paid
(2,383)
(1,006)
 - 
 - 
(1,006)
Payment of long term loan
 - 
- 
 - 
 - 
(28)
Receipt of loan from

 Rapac group companies
 - 
(102)
(75)
- 
(102)
Acquisition of additional

 rights in subsidiary
 - 
(46)
- 
 - 
(71)
Interest bearing loans

 and borrowings, net
 1,964 
 - 
 27 
 1 
 - 
Long-term financing lease
(71)
(13)
(36)
(13)
2 
Net cash (used in) provided

 by financing activities
(490)
(1,121)
(84)
(12)
(1,148)
Net increase (decrease) in cash 

 and cash equivalents
 5,115 
(150)
 452 
 2,135 
 72 
Cash and cash equivalents

 at beginning of period
 8,673 
 7,870 
 14,850 
 5,594 
 7,870 
Translation differences in

 respect of cash balances
 1,225 
 432 
(289)
 423 
 731 
Cash and cash equivalents

 at end of period
 15,013 
 8,152 
 15,013 
 8,152 
 8,673 

This information is provided by RNSThe company news service from the London Stock Exchange  END  QRTDGBDBXUBGGID