annual report for the microwave vision group · gianni barone - sales director at microwave vision...
TRANSCRIPT
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Annual Report for the Microwave Vision Group
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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 23
• The table of appendices appears at the end 51
of this document
3
T he challenge for me began in 1996 when
the small Paris-based research offi ce 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
“
”
12 sites throughout the world
249 employees
€43.99M in sales
World leader in the antenna test systems market.
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CA en M€
1996 97 98 99 00 01 02 03 04 05 06 07 08 09 2010
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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.
With a presence in Europe, Asia and America, the group holds an advanta-
geous position as a technological and com-mercial leader, a position that is confi rmed year after year. Its sales fi gure has more than doubled over the last two decades. It was therefore as a market leader in sound fi nancial 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 ena-bled the group to prepare for the future with R&D benefi ting from €4.1M in investments during 2010.
15 years of growtha
The Group’s core business An antenna is a piece of equipment that can receive and/or emit radio waves carrying 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 fi nally 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.
TA
› 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 Offi cer of Microwave Vision – aged 53: Previously fi nancial 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 fi nancial offi cer. He joined SATIMO as chief fi nancial offi cer 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 - Scientifi c 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 Scientifi c Director.
1 Ecole Supérieur d’Electricité – French higher education school of electrical engineering and information sciences2 Ecole Nationale Supérieure d’Ingénieurs de Limoges – French higher education school of engineering in Limoges3 École nationale supérieure de l’aéronautique et de l’espace – French national higher education school of aeronautics and space4 École nationale supérieure de i’ingénierie – French national higher education school of engineering
A highly specialized team, with a wealth of diverse experience>
6
7
Strategic geographic coverage
12 local sites enable greater proximity to new customers and the development of requirements at esta-blished sites. They are able to capitalize on the opportunities within a sector and offer global solutions, depending on growth rates specifi c 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 benefi t from econo-mies 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.
A transversal organization
To ensure the consistency of the group’s policies, the general management and fi nancial 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, elec-tronic scanning products.
12 sites
4 production sites
8
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 Germa-ny (refl ectors) – are also involved in the group’s production activities. The subsidiaries in Sweden, Italy, Hong Kong, Japan, the United States and Germany have lo-cal access to the equipment and human resour-ces 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 ci-vil telecommunications, 2010 marks a recovery in the West that is already showing encouraging si-gns, and strong growth in China and India. Thanks to its extensive territorial presence, Microwave Vision benefi ts 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 enti-ties 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, hy-brid products amounted to €4.3M. There is more to come in the future, with the ad-dition to the 2010 catalogue of fi ve new turnkey systems, born of the joint R&D efforts realized by SATIMO and ORBIT/FR.
€1.9M from cross-selling
€4.3M in hybrid products sold
2X more joint responses to calls for tender
An extensive portfolio of customers and markets
Microwave Vision has customers with a presence in the following sectors:
• Antennas mounted on satellites, aircraft, ground radar equipment, ballistic missiles, etc.
• Mobile telephones, including Smartphones, tablets, computers, any small items of equipment involving antennas, rooftop communications dishes, etc.
• 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 fi elds 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 anten-nas (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 automo-tive. 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 signifi cant portion of sales (30%) is represented by re-curring business, as we will see later; this business is essentially less sensitive to potential crises.
> Aeronautics and defense
> Automotive
> Civil telecommunications
A portfolio of major customer
accounts
a
NASA, CNES, ESA, NOKIA,
RENAULT, BMW, BAE,
LOCKHEED MARTIN, NORTHROP
GRUMMAN, RAYTHEON,
QUALCOMM, IAI, INTEL,
ERICSSON, EADS, DAIMLER-
CHRYSLER, BOEING,
PANASONIC, HUAWEI, ZTE,
SAMSUNG, etc.9
10
Strengthening of the telecommunications sector
In 2010, with a sales fi gure up by 53%, the civil telecommunications sector recovered its energy levels. It generated €18.8M in sales, representing 43% of the group sales fi gure, 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 tele-communications protocol is released. This brings recurring business to the group, which explains the robustness of this activity in 2010.
43 % of sales
€18.8M
11
Stabilization in the aerospace and defense
industries
The aerospace and defense sector continued to advan-ce, 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 fi gure.
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 de-tection and identifi cation 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 fi rst half of 2010, which benefi ted the group’s sales fi gure. The company’s international presence, very strong in Asia and particularly India, has therefore become a strategic asset in mee-ting these types of demand.
• Testing of satellite antennas, radar antennas, mounted antennas (aircraft, drones, tanks, satellites, missiles, etc.) and measurement of radar signatures.
• Increase of 11% in 2010
• Testing of mounted antennas (radio, GPS, probes, etc.).
• Sluggish market in 2010.
• Testing of Smartphones, laptops, netbooks, tablets
• Increase of 53% in 2010.
Review of 3 sectors in 2010
> Aeronautics and defense
> Automotive
> Civil telecommunications
57% of sales
€25.1M
12
Strong global presence - strengthening in Asia
In 2010, Microwave Vision achieved its determined objective - namely, a sales fi gure 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, repre-senting 44% of total sales compared to 28% in Asia and Europe.
With sales up by 26% at €43.99M, these changes refl ect a signifi cant 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 conti-nuing its development by means of targeted sales and marketing activities.
34%3Asia
38%%North
America
28%Europe
A strong international presencea
13
30% of sales represented by recurring business
30% of the group’s business is provided by recurring revenue: maintenance and engineering ser-vices, 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 fi gure 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.
30 % of sales arose from recurring business, such as sales of accessories and maintenance services
€3.53M operating income before interest and taxes
€0.41M net interest expense
€3.45M net income
+26% growth in sales
14
15
Consolidated fi nancials>For 2010, Microwave Vision posted a signifi cant rise in operating income before interest and taxes: €3.53M, representing 8% of the sales fi gure. 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.
Signifi cant 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 syner-gies between the different regional entities, the group is on course to return to its pre-vious profi tability levels.
The company’s cost structure is already optimized for higher levels of profi tability since the income fi gure for this year was affected by an exceptional expense of €1.13M, linked
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, com-pared to 35.3% in 2009.
Other external expenses fell by 2.1% (to 18% of sales, compared to 20.1% previously). Fi-nally, purchases consumed fell by 1.8% (this fi gure was reduced to 39% of sales compa-red to 40.8% in 2009).
Audited consolidated accounts, M€, IFRS Standards 2010 2009
Sales 43.99 34.83
OPERATING INCOME BEFORE INTEREST AND TAXES 3.53 0.12
Operating result 3.39 -0.28
Net interest expense -0.41 -0.37
Net income 3.45 0.21
GROUP SHARE OF NET INCOME 2.79 -0.18
A sound fi nancial position
With net fi nancial 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 fi nancial position during the course of the fi nancial year, posting a healthy balance sheet structure.
This sound fi nancial position combined with the improvement in margins during 2010 ena-bles the group to be confi dent in planning for growth.
A centralized organization
During 2009, the group implemented the Microwave Vision holding structure which to-day brings together SATIMO Industries and its various wholly owned entities and ORBIT/FR (NASDAQ: ORFR.OB), which is 61.35% owned. This structure has allowed the group to: • pool common functions (management, fi nance, sales and marketing, purchasing); • develop industrial synergies, particularly in project management;• Initiate common R&D programs.
At the same time as the implementation of a transversal organization, the group has been working on increasing its margins by rationali-zing its portfolio of products and seeking eco-nomies of scale on purchases.
Financial performances are consequently expected to continue to improve in 2011.
ASSETS in M€, IFRS Standards - Audited consolidated accounts 2010 2009
Non-current assets
incl. Goodwill
20.00
11.51
17.73
11.50
Current assets
incl. Cash and cash equivalents
26.75
3.92
29.65
4.61
TOTAL ASSETS 46.75 47.39
% of sales
-1.8 pt
-4.0 pt
-2.1 pt
Other external charges
Employee-related expenses
Purchases consumed
0
5
10
15
2025
30
35
40
45
PurPurcc ss chachasesses Empmployloy ateatedd eeee-relrelaa OthOtherer nnalal extexternern
18%20.1%
31.3%
35.3%
39.0%40.8%
2009 2010
Change in charges for the year
2009/2010 as % of sales a
-7.9pt
16
17
A new oven for AEMI, one of the investments made during 2010
249 employees
60% degreed professionals
45 staff in R&D
3 new international patents in 2010
18 Photograph taken at Intespace, Toulouse
19
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 fi nancing released by this strategy enable the group to capitalize on its technological savoir-faire on associated markets.
In 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 pros-pects. This new OSEO network distinguishes “outstanding entrepreneurs” to enable them to benefi t from high visibility. Microwave Vi-sion 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 stra-tegy of differentiation through innovation, in 2010 it maintained a high level of research and development, absorbing 9.3% of its sa-les fi gure.
Technological
differentiation
a
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 profi table.
20
45 staff in R&D
3 new international patents in 2010
Innovation as a driver for growth
Of its 249 employees, 60% have a professional degree. During 2010, 45 worked in R&D. This number was 29 in 2007, before the SATIMO-ORBIT/FR merger.
Subsidies and research tax credits totaled €0.71M in 2010. R&D in-vestments 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 laun-ched 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 signifi cant 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 5 years of higher education, i.e. a Masters degree or equivalent.
21
Acquisition of complementary
businesses and technologies
to accelerate growth
Microwave Vision has realized two acquisitions in the last few years: Antennessa in 2007 and OR-BIT/FR in 2008. The group’s management team intends to maintain this policy of investing in com-panies that can enhance its technological offering in order to accelerate Microwave Vision’s growth and achieve success in new markets.
Conclusiona
The fi nancial year 2010 will be remembered as a year of strong growth, improvements in gross margins and a signifi cant 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 profi tability in double fi gures. The group has three confi rmed objectives in its sights: to increase market share in the fi eld of small dosimetry systems; to consolidate sales of products developed in 2010 (LTE, MIMO, hybrid products); to defi ne the scope of opportunities for external growth.
22
Outdoor test range
with ORBIT/FR
positioners
AppendicesConsolidated annual accounts
at December 31, 2010
24
Consolidated balance sheet >
ASSETS (in k€) 12/31/2010 12/31/2009
Goodwill 11,510 11,509
Intangible assets 238 225
Tangible assets 3,374 2,324
Other fi nancial assets 205 242
Deferred tax assets 4,679 3,439
NON-CURRENT ASSETS 20,006 17,739
Inventory and work in progress 5,043 4,397
Customers and other receivables 14,632 16,753
Other receivables and current assets 3,146 3,836
Short-term investments 50 50
Cash and cash equivalents 3,879 4,615
CURRENT ASSETS 26,750 29,652
Assets held for disposal - -
TOTAL ASSETS 46,756 47,391
SHAREHOLDERS’ EQUITY and LIABILITIES (in k€)
12/31/2010 12/31/2009
Share capital 711 691
Issue premiums, merger premiums
Reserves 27,722 27,866
Consolidated result 2,793 -186
Minority interests 2,969 2,135
SHAREHOLDERS’ EQUITY 34,195 30,505
Non-current provisions 407 268
Non-current fi nancial liabilities 4,386 6,166
Deferred tax liabilities 2
Other non-current liabilities
NON-CURRENT LIABILITIES 4,795 6,434
Current fi nancial liabilities 419 174
Current provisions
Suppliers and related accounts 2,355 5,514
Other liabilities 4,992 4,762
Current fi nancial liabilities
CURRENT LIABILITIES 7,766 10,451
Liabilities linked to assets held for disposal - -
TOTAL SHARESHOLDERS’ EQUITY AND LIABILITIES
46,756 47,391
25
App
endi
ces
Consolidated Income Statement >
Consolidated Income Statement (in k€) 12/31/2010 12/31/2009
Sales 43,994 34,835
Other income from operations 0 2
INCOME FROM ORDINARY ACTIVITIES 43,994 34,837
Purchases consumed -17,169 -14,212
Duties, taxes and similar payments -850 -390
Employee-related expenses -13,780 -12,300
Amortization and provisions -729 -661
Other current operating income and expenses -7,933 -7,153
OPERATING INCOME BEFORE INTEREST AND TAXES
3,533 120
Other operating income and expenses -134 -404
Charge related to stock options
OPERATING RESULT 3,399 -284
Net interest expense -414 -374
Other fi nancial income and expenses 191 -91
FINANCIAL RESULT -223 -465
CURRENT PRE-TAX PROFIT 3,176 -749
Taxes 282 968
NET INCOME FROM CONSOLIDATED COMPANIES
3,458 218
Share of profi ts from associated companies
NET INCOME FROM CONTINUING OPERATIONS
Net income from discontinued operations or operations to be discontinued
- -
NET INCOME 3,458 218
Attributable to:
Holders of ordinary share capital in the parent company
2,793 -186
Minority interests 665 405
Group share of net income per share- before dilution (in euros)
0.7857 -0.05405
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)
0.7624 -0.05405
26
Consolidated cash fl ow statement>
(in k€) Consolidated 2010 Consolidated 2009
Consolidated net income (1) 3 458 219
+/- Net charges for amortization and provisions (2) 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 fl ow from operating activities after net interest expense and taxes 4,191 971
+ Net interest expense 343 374
+/- Tax expenses (including deferred taxes) -282 -968
Cash fl ow from operating activities before net interest expense and taxes (A)
4,253 377
- Taxes paid -346 -164
+/- Variation in WCR linked to operations (3) -810 4,612
+/- Other fl ows generated by operations - -
NET CASH FLOW GENERATED BY OPERATIONS (D) 3,097 4,825
- Cash fl ows paid linked to acquisitions of tangible and intangible assets -1,703 -1,329
- Cash fl ows received linked to disposal of tangible and intangible assets 101 0
- Cash fl ows paid linked to acquisitions of fi nancial assets 0
+/- Impact of variations in scope -75
+/- Variation in loans and advances granted 12
+ Investment subsidies received - -
+/- Other cash fl ows linked to investment operations - -
= NET CASH FLOW LINKED TO INVESTMENT OPERATIONS (E) -1,602 -1,392
+ Sums received from shareholders as part of capital increases:
- Paid by shareholders of the parent company -404
+ Cash fl ows received linked to new borrowing 7
- Loan repayments (including fi nance leases) -1,779 -1,859
- Net fi nancial interest paid (including fi nance leases) -337 -374
+/- Other cash fl ows linked to fi nancing operations -6 -
+ Increase in cash funds
= NET CASH FLOW LINKED TO FINANCING OPERATIONS (F) -2,526 -2,226
+/- Impact of variations in exchange rates (G) 48 -502
= VARIATION IN NET CASH FLOW H = (D+ E+ F + G) -983 705
OPENING CASH FLOW (I) 4,491 3,787
CLOSING CASH FLOW (J) 3,508 4,491
27
App
endi
ces
Statement of variations in shareholders’ equity>
(in k€) Share capital Reserves Consolidated
result Total group
share Total min. int.
share Total
Shareholders’ equity at December 31, 2009
691 27,865 -187 28,369 2,136, 30,505
Allocation of income -187 +187
Corporate action 20 626 646 646
Financial instruments
Payments on shares
Corporate actions on control shares
Dividends1 -1,035 -1,035 -1,035
Net income for the period 2,793 2,793 665 3,458
Exchange gains/losses2 439 439 168 ,,607
Variation in scope
Other movements 14 14 14
Shareholders’ equity at 31 December 2010
711 27,722 2,793 31,226 2,969 34,195
(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.
28
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 offi ce 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 fi elds across a whole line of analysis, or a surface, so that the measurement of the electromagnetic fi elds 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-fi eld and far-fi eld 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 fi nancial 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 fi nance, 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 CA-BRIERES D’AIGUES.
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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 mainte-nance 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 signifi cant 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 fi ve 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 specifi c 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.
SAS 100%
Etb 100% Etb 100% Etb 100% Etb 100% Etb 100% Ste 61.65%
SATIMO
SATIMOINDUSTRIES
FranceParis/Brest
Etb 100%
SATIMO
Sweden
Ste 100%Ste 100%
ORBIT/FRGermany
Ste 100%Ste 100%
ORBIT/FRIsraël
Ste 100%Ste 100%
ORBIT/FRHorsham US
Ste 100%Ste 100%
AEMISan Diego US
Etb 100%
SATIMO
Hong Kong
Etb 100%
SATIMO
Japan
Etb 100%
SATIMO
Italy
Etb 100% S
SATIMO
Atlanta US
St 61 65%
ORBIT/FR
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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 signifi cant, 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 fi nancial 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 diffi cult. Particular attention is paid to the assessment of this risk.
2/ Signifi cant events taking place during the fi nancial year
Business activity for Microwave Vision Group in 2010 demonstrates signifi cant 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 fi eld 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 refl ects an vigorous recovery in orders coming from Asia and a slower recovery from Europe, while the United States was already achieving signifi cant activity levels in 2009.
The structure of costs linked to the business activity benefi ted from all the efforts undertaken but never-theless we observe the impact of one deal, non-recurring, by ORBIT/FR for which the costs of termina-tion turned out to be higher than those forecast.
Business activity in 2010 benefi ted 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.
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3/ Accounting principles and methods of valuation
The fi nancial statements were approved on 21 April 2011 by the Board of Directors and are expressed in thousands of euros (unless otherwise indicated).The consolidated fi nancial statements for the group at December 31, 2010 are established in ac-cordance 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.
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 fi nancial 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 modifi ed the following standards in particular: - revised IAS 1 – Presentation of fi nancial statements; - IAS 7 – Cash fl ow 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 fi nancial statements.
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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 – Classifi cation of rights issues; • amendment to IFRIC 14 – Assets in defi ned benefi ts schemes and minimum funding requirement; • IFRIC 19 – Extinguishing fi nancial 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 associa-ted with them have been reclassifi ed 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 stan-dard 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 benefi ts 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 fi nancial 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 fi nancial statements could differ from current assessments.
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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 fl ows resulting from the use of the assets. It could therefore be the case that the fl ows effectively released by these assets differ signifi cantly 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.
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 specifi c transaction, the group’s management uses its judgment to defi ne and apply the accounting principles and methods that enable the appropriate and reliable information to be obtained such that the fi nancial statements: • present a true and fair view of the group’s fi nancial position and performance and of its cash fl ows; • refl ect the economic reality of transactions; • are objective, prudent and complete in all their signifi cant 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 fi nancial and operational policies in such a way as to benefi t 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 com-panies, 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.
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➎ Conversion of fi nancial 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 fi nancial 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 fi nancial 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:
4/ Notes to the balance sheet
➊ Goodwill
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 fl ow method on the basis of existing operating forecasts over a period of four years at a minimum. Existing forecasts are based on past expe-rience as well as on the outlooks for developments in the market, and take into account the company’s business plan.
(in €) $ $HK YEN SEK
12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009
Closing rate 1.32520 1.43328 10.3209 11,1136 108.0497 130,7190 8.9928 10.3114
Average rate 1.32471 1.39051 10,2774 10.7701 116.1440 130,0390 9.5328 10.6033
(in k€) 12/31/2009 Increase Decrease Other variation 12/31/2010
ORBIT/FR Goodwill 8 050 0 0 0 8 050
ANTENNESSA Goodwill 3 459 0 0 1 3 460
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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 fl ows. On the basis of existing forecasts and projections of cash fl ow before tax, the recoverable amount has been determined by applying a discount rate after tax of 12%. The fi nal amount has been valued on the basis of the most recent free cash fl ow as defi ned in the company’s business plan (year 2014).
➋ Intangible assets
The net value of intangible assets amounts to €238k at December 31, 2010.
Software, patents and licenses are accounted for at their acquisition cost. They are amortized over a period of three to fi ve years using the straight-line method.
Research costs are accounted for as a charge in the fi nancial 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 fi rst marketed. Without calling into question SATIMO’s technological advances, the development of transversal re-search projects with the research teams of the new subsidiary ORBIT/FR means that the company no longer has suffi cient 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.
The assets are recognized at their acquisition cost, increased by incidental costs relating to transport and installation.
(in k€) 12/31/2009 Increase Decrease 12/31/2010
Gross 960 166 73 1 053
Amortization 735 148 68 815
Net 225 18 5 238
(in k€) 12/31/2009 Increase Decrease 12/31/2010
Gross 5 773 1 536 1 515 5 794
Amortization 3 449 474 1 503 2 420
Net 2 324 1 062 12 3 374
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Amortization is calculated by the straight-line method over the estimated lifecycle of the assets:
Fixtures and fi ttings 5 to 10 yearsEquipment and tools 3 to 7 yearsOffi ce equipment, IT and furniture 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 signifi cant.
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 leasesThe total amount of fees remaining to pay on lease contracts and long-term rent contracts amounts to €189,014.
Details of leases:
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 fi nancial year during which they were incurred.
➍ Non-current fi nancial 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 benefi t against which it will be able to charge a deductible temporary difference.
Name of items (in €)
Gross value of items
Fees for the fi nancial year
Corresponding provision for amortization
Cumulative amortization
Loans remaining due
Spectrum analyzer 107,484 9,555 8,957 107,484 0
BNP lease Minolta 43,919 8,778 8,784 8,784 35,135
ECS STARLAB 207,000 75,559 75,559 75,559 131,441
TOTAL 358,403 93,892 93,300 191,827 166,576
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Tax assets and liabilities are valued using the tax rate and fi scal rules applicable at December 31, 2010, i.e.:
France 33,33 %USA 30 %Hong Kong 17 %Italy 27 %
The tax rate in each of these countries is identical to that used during the previous fi nancial 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:
Microwave Vision S.A. defi cit (foreign establishments) €341kSATIMO Industries defi cit €2,626kORBIT/FR defi cit €1,130kORBIT/FR temporary difference €473kRestatement of amortization of research and development costs €52kTemporary difference €14kRestatement €14k Other elements €29k
5/ Current assets
➊ Inventory
Stocks of materials and components and inventory of intermediate and fi nished products are valued at their historical cost (acquisition cost or production cost).
Intermediate and fi nished 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 fi nancial year is lower than this histo-rical cost.
At December 31, stocks and inventory broke down as follows:
Raw materials and supplies €4,531,706Intermediate and fi nished products €563,176Provisions for raw materials and supplies have been constituted to the value of €52,105
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➋ Customer receivables and associated accounts
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 pro-visions 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
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
(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
(in €) 12/31/2009 12/31/2010
Deferred tax assets 1,047 588
Other receivables 4,588 2,548
Prepaid expenses 121 136
Number of shares 12/31/2009 12/31/2010
Ordinary shares 3,455,205 3,554,885
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➋ Own shares
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 sharehol-ders’ equity and does not contribute to the income for the fi nancial year.
➌ Potential share capital
The inventory of securities giving access to existing share capital at December 31, 2010 can be presented as follows:
Breakdown of share capitalTo the best knowledge of the company, the breakdown of share capital is as follows:
On the assumption that the warrants and options were exercised, the impact on the breakdown of share capital would be as follows:
Number of shares % capital Number of voting rights
Employees 710,406 20% 1,311,346
Steady private investors 558,299 16% 747,362
Public 2,286,180 64% 2,459,026
Number of shares % capital Number of voting rights
Employees 818,781 22.4% 1,419,721
Steady private investors 558,299 15.2 % 747,362
Public 2,286,180 62.4% 2,459,026
12/31/2009 12/31/2010
Number of own shares 3,471 3,554
Own shares (in €) 29,434 33,380
Equity warrants 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 benefi ciaries 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
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➍ DividendsThe company carried out a distribution of dividends during the fi nancial year, amounting to €1,035,068.
➎ ReservesSee 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 fi nance 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 fi nancial debts (excluding factoring), cash and cash equivalents, excluding discontinued operations.
(en k€) 12/31/09 12/31/10
A Cash 4,615 3,878
B Equivalent instruments
C Investment securities 50 50
D Liquidities (A+B+C) 4,665 3,928
E Short-term fi nancial 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 fi nancial debts
I Short-term fi nancial debts (F+G+H) -1,989 -2,230
J Net fi nancial/excess short-term debt (I-E-D) 2,676 1,698
K Banking loans of more than one year -4,348 -2,509
L Bonds issued
M Other loans of more than one year
N Net medium and long-term fi nancial debt (K+L+M)A -4,348 -2,509
O Net fi nancial debt (J+N) A+B+C) -1,642 -811
Consolidated shareholders’ equity 30,505 34,195
Net debt ratio on shareholders’ equity 5.4 % 2.4 %
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The group has available the following short-term credit lines;
Cash credits (bank, Dailly1, MCNE2) €3,900kAdvances on public contracts €1,500kSecurities €6,800kMiscellaneous €1100k
At December 31, 2010, cash credit lines were used up to the order of €402k.
➊ Financial liabilities
Accrued interest amounts to €5k at 12/31/2010.
The principal characteristics of the loans and fi nancial liabilities are detailed in the table below:
➋ Provisions for liabilities and charges
Charges for guarantees are separated out by analysis during each fi nancial 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 fi gure for the fi nancial year as that observed by applying the guarantee expenses for the fi nancial year to the sales fi gure from the previous fi nancial year.
1 French fi nance law2 Mobilisation de Créance Née sur l’Etranger – Short-term realisation of receivables from overseas. A short-term fi nancing 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.
Changes in fi nancial liabilities (excl. factoring) (in k€)
December 31, 20101 6,166
Subscription 0
Repayment -1,367
December 31, 2010 4,799
Type of fi nancial liabilities (in k€)
Bank loans and investments 4,386
Overdrafts 0
December 31, 2010 4,386
Type Nominal (in k€) 12/31/2010 A - 1 year A + 1 year Rate
Antennessa CIC loan 3,000 974 613 361 4.65%
ORBIT/FR SG CIC OSEO loan 6,000 3,041 1,193 1,848 Euribor 3 month + 2.17%
Anvar 300 300 300 0 %
SODIE Antennessa loan 50 5 5 3.50%
(in k€) 12/31/2009 Provision allowance Write-down 12/31/2010
Provisions for guarantees 151 39 0 190
Total 151 393 0 19017 %
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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 benefi ts
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 benefi ts are as follows:
8/ Other current liabilities
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 fi nancial 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.
(in k€) 12/31/2009 12/31/2010
Social security and tax liabilities 1,452 1,736
Deferred income 2,103 1,900
Advance payments on orders 418 1,074
Miscellaneous 938 188
TOTAL 4,911 4,898
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9/ Notes to the income statement
➊ Sales
Sales of products and sales of research studies: The sales fi gure is accounted for as and when necessary, in accordance with IAS 37 relating to construc-tion 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 fi nancial year compared to the forecast total cost price at the end of the contract) to fi nd the difference between the invoice amount and the sales fi gure 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.
MaintenanceMaintenance 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 fi nancial 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 profi tability. A huge effort has also been made in terms of production costs, but the results of this will not be seen until after the fi nancial year 2012.
R&D expenses amounted to €4,101k during 2010. They are essentially made up of employee-related expenses.
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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 fi nancial year.
➌ Other operating income and expenses
Other operating income and expenses break down as follows:
➍ Charge related to stock option plans
IFRS 2 sets out, inter alia, that all transactions settled in shareholders’ equity instruments must be refl ected in the fi nancial 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 fi nancial year 2010.
➎ Financial income
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.
(in k€)12/31/200912 months
12/31/201012 months
Microwave Vision
Option plan 76 0
Tax audit 106 0
Other operating income and expenses 19 27
Earn-out on ORBIT/FR purchase 82
ORBIT/FR
Redundancy payments 75 0
Relocation of ORBIT/FR manager 105 0
Other operating income and expenses 23 25
Total other operating income and expenses 404 134
(in k€) 12/31/2009 12/31/2010
Net interest expense 374 414
Other fi nancial income and expenses 2,103 1,900
Financial income 465 223
45
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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.
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.
➐ Earnings per share
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.
(in k€) 12/31/2009 12/31/2010
Taxes payable -164 -346
Deferred taxes -1,132 -628
Before dilution After dilution
Group share of net income €2,793k €2,793k
Number of shares 3,554,885 3,663,260
Net earnings per share €0.7857 €0.7624
(in k€)
Profi t before tax and minority interests 910
Theoretical corporate income tax rate 33%
Theoretical income tax saving (liability) 242
Effect of differences in tax rates, modifi cations to fi scal legislation and miscellaneous 34
Ongoing difference -1
Non-activated tax loss carryforwards generated during the fi nancial year 0
Consumption of non-activated defi cits in 2010 183
Activation of 2008 ORBIT/FR defi cits 0
R&D expenses-34190
Research tax credit for 2010 238
Demonstrated variance 610
46
10/ Information by sector
The fi rst 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 refl ecting 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 geo-graphical region.
➊ Income Statement by sector
December 31, 2010 (in k€) Multi-probe Mono-probe Consolidated
Sales 18,272 25,722 43,994
Operating income before interest and taxes
2,186 1,340 3,526
Financial income -140 -83 -223
Net income 1,848 1,606 3,454
31 December 2009 (in k€) Multi-probe Mono-probe Consolidated
Sales 12,724 22,110 34,834
Operating income before interest and taxes
-1,842 1,962 120
Financial income -463 2 -465
Net income -1,828 2,046 218
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➋ Balance sheet by sector
➌ Sales by destination
Sales are broken down according to the location of the entity realizing the sale.
11/ Related party disclosures
➊ Identifi cation of related parties
There are no associated companies or joint ventures.
The principal directors at Microwave Vision are: • Philippe Garreau (Chief Executive Offi cer)• Arnaud Gandois (Deputy Managing Director)• Luc Duchesne (Deputy Managing Director)• Gianni Barone (Sales Director)• Pascal Gigon (Chief Financial Offi cer) carries out his function via the GFC structure• Eric Beaumont (Strategy Director)
December 31, 2010 (in k€) Multi-probe Mono-probe Consolidated
Non-current assets 8,688 10,234 18,922
Current assets 20,175 7,889 28,064
Non-current liabilities 5,208 5,208
Current liabilities 5,751 1,832 7,583
31 December 2009 (in k€) Multi-probe Mono-probe Consolidated
Non-current assets 7,679 10,060 17,739
Current assets 17,907 11,744 29,651
Non-current liabilities 6,434 6,434
Current liabilities 5,419 5,032 10,451
(in k€) 12/31/2009 12/31/2010
Europe 9,750 8,956
North America 15,349 18,937
Asia 9,736 16,101
TOTAL 34,835 43,994
48
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 fi nancial 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 offi cers’ fees: Chairman of the Board of Directors and Deputy Managing DirectorsThese 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 offi cers’ fees, we can specify that Mr. Philippe Garreau receives a short-term com-pany car benefi t for an annual amount of €3,240. All other categories of post-employment benefi t, other long-term benefi ts, retirement benefi ts 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.
49
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12/ Other information
➊ Management of fi nancial risks
Exposure to interest rate riskThe group is exposed to foreign exchange risk and interest rate risk. The group’s principal fi nancial instruments are made up of bank loans, overdrafts with banks, and cash. The group also holds fi nancial 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 fi nancial markets only for temporary investment purposes, without risk to its surplus cash resources.
Exposure to foreign exchange riskThe group does not hedge against its foreign exchange risk.
➋ Off-balance sheet commitments
Collateral of business assets located in Villebon-sur-Yvette (91140), 17 avenue de Norvège, amounting to €3,000k in the fi rst instance, granted to the CIC, and collateral of business assets located in Villebon-sur-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 fi nancial year 2010, the group paid €193,609 to its statutory auditors.
➎ Average workforce by category at December 31, 2010
Executives 165Non-executives 68Total 233
1 Droit Individuel à la Formation
50
➏ Profi t-sharing scheme
The amount of the profi t-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 fi nancial 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 fi xed at €6.48, i.e. an issue premium per share of €6.28 and a total issue premium of €625,990.40.
51
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❚ 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 30
• Risk factors 30
2/ SIGNIFICANT EVENTS TAKING PLACE DURING
THE FINANCIAL YEAR 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 33
• Methods of consolidation 33
• Conversion of financial statements from
foreign companies 34
4/ NOTES TO THE BALANCE SHEET 34
• Goodwill 34
• Intangible assets 35
• Tangible assets 35
• Non-current financial assets 36
• Non-current tax assets 36
5/ CURRENT ASSETS 37
• Inventory 37
• Customer receivables and associated accounts 38
• Other receivables and current assets 38
6/ SHAREHOLDERS’ EQUITY 38
• Share capital and issue premiums 38
• Own shares 39
• Potential share capital 39
- Breakdown of share capital 39
• Dividends 40
• Reserves 40
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
10/ INFORMATION BY SECTOR 46
• Income Statement by sector 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 48
- Corporate officers’ fees:
Chairman of the Board of Directors
and Managing Directors 48
- Equity options and equity warrants schemes 48
12/ OTHER INFORMATION 49
• Management of financial risks 49
- Exposure to interest rate risk 49
- Exposure to foreign exchange risk 49
• Off-balance sheet commitments 49
• Individual Right to Training (DIF) 49
• Auditors’ fees 49
• Average workforce by category 49
• Profit-sharing scheme 50
• Capital increase carried out during
the financial year 2010 51
List of Appendices
Investors 65%
Individual 15%
Employees 20%
microwave vision - highlights microwave vision on the stock market
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❚ Breakdown of shares
microwave vision - highlights
Investors 65%
Individual 15%
Employees 20%
microwave vision on the stock market
❚ Breakdown of shares
> Market leader in antenna measurement
> 249 employees, of which 60% are engineers qualifi ed 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
1 Innovating company
> 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)
> 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
Contact: CEO: Philippe GarreauMD SATIMO Industries: Arnaud GandoisMD ORBIT/FR: Per IversenChief Financial Offi cer: Pascal Gigon
> Tel.: +33 1 69 29 02 47> email: contactfi [email protected]> Address: Microwave Vision, 17 avenue de Norvège, 91140 Villebon-sur-Yvette
Microwave Vision’s global presence