Electronics Line 3000 Announces FY 2007 Results

(PresseBox) ( Petah Tikva (Israel), )
Revenues for 2007 at $34.4 Million
- Operating Profit of $48,000, Excluding a $6.2 Million Write-Off of
Intangible Assets
- Successful Introduction of iConnect Product Line Marks Turning Point for Future Growth

Electronics Line 3000 Ltd. ("the Company") (XETRA: ELN), today announced its results for the financial year ended December 31st 2007.

Financial Highlights

- Revenues for 2007 were $34.4 million, compared to $42.4 million for 2006, due to the fact that in 2007 new solutions were introduced to the market which required a longer than expected sales cycles, while demand for the Company's existing product lines fell below that of 2006.

- Gross Margin for 2007 was 39%, compared to 40% in 2006.

- Operating Results for 2007 showed a loss of $6.1 million, compared to a $2.7 million profit in 2006. However, the loss included an operating profit of $48,000 before a one-time extraordinary impairment of intangible assets of $6.2 million*. Excluding this impairment, the Company posted an operating profit of $48,000.

- The Net Loss for 2007 was $7.3 million ($1.1 million loss before impairment), compared to a net profit of $1.4 million for 2006.

- Basic and Diluted Loss per Share for 2007 was $0.72 ($0.10 before impairment), compared to earnings per share of $1.40 for 2006.

Cash Flow provided by operating activities, before working capital changes, was $1.1 million for 2007, compared to $4.6 million in 2006. The cash flow resulting from operating activities was used for investments in non-current and current assets and for loan repayments.

- EBITDA for 2007 was $1.3 million, compared to $4.3 million in 2006.

*The Board of Directors and Management have decided to change accounting policies related to the treatment of research and development costs. While in the past research and development expenses were amortized over a ten-year period, going forward most of these will be expensed immediately to the P&L account, subject to compliance with the International Accounting Policy (IFRS). This change, approved by the Company's auditors, has been implemented to better reflect rapid technological developments that would otherwise require an ongoing re-evaluation of the Company's intellectual property. Furthermore, the Company wishes to be more conservative in such a volatile economic environment and provide better transparency regarding its operating performance. As a result, the Company has accelerated the amortization of accrued and capitalized R&D expenses, resulting in a one-time write-off of $6.2 million for 2007.


Although results for 2007 were below initial expectations, during the past year the Company has established a solid foundation on which to build future growth.

A major factor causing the decline in 2007 profitability (8%) was the significant depreciation of the U.S. Dollar against the New Israeli Shekel over the past year. Though the majority of the Company's revenues are in U.S. Dollars, most of its salary and operational costs in Israel are in New Israeli Shekels, resulting in eroded profitability. The Company has now established certain hedging policies to protect itself against similar situations going forward.

During 2007, the Company underwent a strategic transition, becoming a provider of integrated security and control solutions while developing a strong value proposition for large-scale business partners. This shift from working with traditional security distribution channels to a new focus on prominent service providers and value-added resellers, initially caused a slowdown in the sales process, but proved itself later in the year, during the fourth quarter, with the signing of a major contract of over $5 million with a leading Scandinavian security provider.

Based on the Company's new channel strategy and latest solutions, Electronics Line 3000 acquired 17 new customers in 2007 and expanded its sales activities to several new geographical regions, including Finland, Germany, Austria and Greece, thereby decreasing its dependency on a limited number of customers. Moreover, despite the decrease of revenues in 2007, the Company still achieved an operating profit before impairment charges.

In the year under review, the Company completed the development and successful launch of infinite Prime Broadband, the Ethernet-based solution of the award-winning infinite(TM) product line, resulting in several orders and significant interest from the market.

The Company also reached a major milestone by completing the development of its new product line, iConnect, which is now being launched. This is the Company's most advanced solution to date, incorporating comprehensive security, control and remote management functionality with advanced GPRS-based communications. This solution is being well received by the market and Management expects that this positive response will translate into increased orders in the near future.

Additionally, the Company has strengthened its R&D team with highly qualified staff, which will allow the Company to continuously develop new solutions and remain at the forefront of the market, quickly reacting to emerging market demands.

Mr. Amir Hayek, President and CEO commented: "We have used the past year to implement a number of significant changes that, collectively, will provide the foundation for future accelerated growth. We have altered our distribution channel focus and, furthermore, developed and launched new state-of-the-art products with a wider market appeal. The Company is in the midst of opening new markets with a more comprehensive and compelling product offering. We are already experiencing the success of our transformation strategy with the closing of important contracts towards the end of Q4 2007. We expect this positive trend to mark a turning point for future growth".

Mr. Bob Marbut, Executive Chairman of the Board of Directors added, "Although we are somewhat disappointed with the 2007 revenues, we are encouraged by the impressive implementation of the Company's new marketing and product strategy, in accordance with our transition plan. We believe that this will begin to bear fruit during 2008".

The Company will be hosting a conference call to discuss its 2007 earnings. It will take place on Tuesday, March 11, at 14:00 p.m. (CET Frankfurt time). Please use one of the following dial-in-numbers:

Germany +49 69 2222 2221
USA +1 718 354 1362
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