Annual Report and Accounts

ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2019 CONTENTS DIRECTORS, SECRETARY & ADVISERS Directors, Secretary & Advisers 1 Directors Financial & Operational Summary 2 Dr. Gideon Chitayat – Non-Executive Chairman Dr. Zvi Marom – Founder & CEO Strategic Report Moti Nagar – Executive Director & CFO Harel Locker – Non-Executive Director & Senior Independent Director Chairman’s Statement 4 Prof. Ari Shamiss – Non-Executive Director Chief Executive Officer’s Review 6 Prof. Varda Shalev – Non-Executive Director Chief Financial Officer’s Review 9 Registered Office Corporate Strategy 11 P.O.B. 7318, Neve Ne’eman Ind. Area, 4 Ha’harash Street, 4524075 Hod Hasharon, Israel Principal Risks and Uncertainties 13 Company Number Stakeholder Engagements 14 520042813 – Registered in Israel Conducting Business Responsibly 20 Auditors Brightman Almagor Zohar & Co. Corporate Governance Certified Public Accountants A Firm in the Deloitte Global Network, 1 Azriely Center, Tel-Aviv, Israel Directors’ Biographies 23 Directors’ Report 25 Financial Adviser & Stockbroker Shore Capital, Cassini House, 57 St James's Street, London SW1A 1LD, UK Corporate Governance Report 28 Directors’ Remuneration Report 35 Legal Counsel in Israel Lipa Meir & Co., Beit Amot Hashkaot, 2 Weitzman Street, Tel-Aviv 64239, Israel Financial Statements Legal Counsel in UK Independent Auditor’s Report 50 Fladgate LLP, 16 Great Queen Street, London WC2B 5DG, UK Consolidated Statements of Profit or Loss 55 Bankers Consolidated Statements of Comprehensive Income 56 Bank Hapoalim, 4 Hatzoran, Netanya, Israel Bank Leumi, 7 Menahem Begin Street, Ramat-Gan, Israel Consolidated Statements of Financial Position 57 Consolidated Statements of Change in Equity 58 Company Secretary Mr. Arthur Moher, Lipa Meir & Co. Consolidated Statements of Cash Flow 59 Notes to the Consolidated Financial Statements 60 Registrar Link Asset Services, The Registry, 65 Gresham Street, London EC2V 7NQ, UK Financial PR Consultants Luther Pendragon, 48 Gracechurch Street, London EC3V 0EJ, UK BATM | ANNUAL REPORT & ACCOUNTS 2019 1 FINANCIAL & OPERATIONAL SUMMARY Bio-Medical Division (52% of total revenue) continued Cash and ■ Group revenue Adj. operating Awarded $4m contract for agri-waste treatment solution in Taiwan by agri-food conglomerate and, post period, financial assets of Gross profit of increased to profit* of received a contract from a major poultry processor in the Middle East – representing further geographic $44.8m $33.1m expansion of the customer base $123.4m $5.3m ■ Post period, received c. $31m order from a European government for the delivery of 1,000 critical care ventilators (31 Dec 2018: (2018: $34.5m) (2018: $119.6m) (2018: $2.6m) $24.4m) in response to COVID-19 Distribution Unit ■ Doubled the number of NIPT (pre-natal diagnostics) tests provided by the Group’s genetic laboratory in Eastern Europe ■ Strong growth in provision of cancer diagnostics tests in Israel, and received regulatory approval to offer further molecular genetics tests with sales commencing during the year Cash from Earnings per EBITDA* of Gross margin of operating share of Networking and Cyber Division (48% of total revenue) activities of $9.8m 0.93¢ 26.9% • Revenue increased to $59.0m (2018: $57.5m) (2018: $4.9m) $7.2m (2018: 0.09¢) (2018: 28.8%) (2018: $2.6m) • Adj. blended gross margin* of 30.9% (2018: 33.6%) • Networking Unit ■ Completed delivery under partnership with Arm to expand the Group’s NFVTime ecosystem optimised for Arm infrastructure and entered proof-of-concept with Tier 1 network operator – with negotiations underway with * This report includes Other Alternative Measures. For a reconciliation of these measure to the IFRS please refer to page12 several others ■ Commenced revenue generation from sales of the Group’s NFV products ■ Developed new technology to enable significant increase in network traffic when licensing NFVTime on Arm- based NXP Semiconductors (“NXP”) processors ■ Introduced TM-8104 – a new ultra-high capacity networking platform ready for hyper-cloud connectivity, 5G and Multi-access Edge Computing (MEC) Bio-Medical Division (52% of total revenue) ■ Commenced sales of the T-Marc R3305 series – BATM’s first solution for multiservice business routing • Revenue increased to $64.4m (2018: $62.1m) • Cyber Unit ■ Revenue in 2019 doubled over 2018 with delivery on previously-awarded contracts and new orders received • Adj. blended gross margin* of 23.8% (2018: 25.0%) during the year • Diagnostics Unit ■ Received orders totalling $9.1m during the year, including first order for a combined cyber security and ■ Signed conditional investment agreement for up to $30m, with first instalment of $14.5m received during the year, networking solution into Ador Diagnostics (“Ador”) and, post period, received first commercial order for Ador’s NATlab solution ■ Post period, awarded a $4m cyber security contract from the Group’s long-standing government defence ■ Increased sales of new highly-compact metabolism testing analyser, Hemo One department customer ■ Sustained growth in sales of new molecular biology diagnostics Adaltis product line, and introduced new reagents ■ Post period, launched new COVID-19 diagnostics kit for medical facilities, which has received certification and production and sales are ramping up. Also entered a collaboration with Novamed Ltd, an Israeli life sciences company operating in the in-vitro rapid diagnostics market, for the joint development and marketing of a home-use testing kit for COVID-19 Eco Med Unit ■ Commenced delivery on first agri-waste treatment contract outside of Israel with a major food manufacturing group in the Philippines, which is expected to be completed by the end of H1 2020 * See table on page 12 - Key Performance Indicators 2 BATM | ANNUAL REPORT & ACCOUNTS 2019 BATM | ANNUAL REPORT & ACCOUNTS 2019 3 STRATEGIC REPORT STRATEGIC REPORT CHAIRMAN’S STATEMENT I am delighted to present our 2019 Annual Report, which the containment of infectious disease outbreaks – namely, CONDUCTING BUSINESS RESPONSIBLY Nagar, our CFO; and our Executive Team for their efforts. shows how we’ve significantly advanced the execution of our NATlab diagnostic system, which can identify human Many thanks to my Board colleagues for their considerable As noted, providing solutions that benefit society is an our strategy. We are proud of being a successful, growing pathogens with unparalleled speed and accuracy, and our contribution. We all appreciate the dedication, skills and important element of BATM’s strategy. The Board is pleased business and of the important contributions we make to Eco-Med products for pathogenic waste treatment. At the professionalism of our employees all over the globe. Above with the progress achieved during 2019. A highlight was wider society. At a time of global uncertainty, we believe an same time, the importance of secure, virtual networks has all, I would like to thank our loyal shareholders for their the increasing recognition within international markets of important role of business is to seek solutions and create never been more apparent. ongoing support. our agri-waste treatment solution that provides the poultry opportunities. By growing and sustaining a financially- In 2019, we achieved the goals that we set for ourselves industry with significant environmental and safety benefits. I have served on the Board for almost ten years, five of those strong and responsible business over the long-term, guided for the year. We delivered growth in revenue to $123.4m We also strengthened our governance of these matters with as Chairman, and BATM has progressively delivered on its by a clear purpose, we can make a positive and significant (2018: $119.6m) and adjusted operating profit was $5.3m the establishment of a Corporate Social Responsibility and strategy in that time. While it hasn’t been without challenges, impact not just to our clients and our people, but to the (2018: $2.6m). We saw meaningful progression in NFV and Environment Committee of the Board. we are now in the strongest position that I have seen, which economy and society. molecular diagnostics – our key future growth markets. We is also reflected in the share price having increased over I am excited by, and proud of, the work that BATM is are also pleased with the solid commercial traction that we 200% in that time. We all are committed to continuing to undertaking to address urgent human medical issues. SUCCESSFUL EXECUTION OF STRATEGY have established in our Eco - Med and Cyber businesses. We create substantial value for our shareholders, and I look Clearly, an important example is BATM’s current contribution gained new customers and partners, secured new forward to reporting on our progress. We believe the strategy we adopted in both of our divisions is in two key areas to support the worldwide response to contracts, expanded into new territories and continued to proving to be correct. In particular, the COVID-19 pandemic the COVID-19 crisis. Firstly, through the development of establish a leading position in our target markets. has demonstrated the value of our solutions that help with molecular diagnostics kit for medical facility and home testing use. Secondly, through the manufacture of critical Dr. Gideon Chitayat care ventilators. Chairman 30 April 2020 I am confident that BATM is well positioned to meet the challenges of 2020 and generating sustainable long-term growth across the Bio-Medical and the Networking & Cyber Right: NATlab system divisions, which should in

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