Payton Planar Magnetics Ltd.
Annual Report 2023
1
Payton Planar Magnetics Ltd.
Financial Statements as at December 31, 2023
Contents
Page
Board of Directors Report
2
Auditors’
Opinion Report
18
Consolidated Financial Statements:
Statements of Financial Position
22
Statements of Profit or Loss and Other Comprehensive Income
24
Statements of Changes in Equity
25
Statements of Cash Flows
26
Notes to the Consolidated Financial Statements
27
2
The Board of Directors' Report
1
on Corporate Affairs
We are pleased to present the Board of Directors' report on the affairs of Payton Planar Magnetics Ltd. and
its consolidated subsidiaries for the year ended on December 31, 2023
Notice
: This report contains certain forward-looking statements and information relating to the Company that are
based on the beliefs of the Management of the Company as well as assumptions made by and information currently
available to the Management of the Company. Such statements reflect the current views of the Company with
respect to future events. Management emphasizes that the assumptions do not in any way imply commitment
towards realization. The outcome of which is subject to certain risks and other factors, which may be outside of the
Company’s control. Should one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results or outcomes may vary materially from those described herein as
projected, anticipated, believed, estimated, expected or intended.
Reference in this report to forward looking statement shall be by stating that such information is given by way of
estimation, evaluation, assessment, intentions, expectations, beliefs and similar terms, but it is possible that such
information shall be given under other phrases.
1.
A concise description of the corporation and its business environment
A.
The Group
The Group includes Payton Planar Magnetics Ltd. ("the Company"), its consolidated
subsidiaries and it’s Investee.
The Company holds two fully owned subsidiaries: (1) Payton America Inc., in Florida, USA, which mainly engages
in the manufacture and marketing of transformers for the US domestic market; and (2) Himag Planar Magnetics
Ltd., in the UK, which mainly engages in the development, manufacture and marketing of transformers and serves
as the Group base for the UK and the European markets.
The Company also holds an affiliated company, a
strategic investment of 20% in a Hong-Kong holding company, PCT Industries Limited (
"
PCT
"
) that fully owns a
manufacturing subsidiary in China. The Chinese manufacturing subsidiary mentioned above is engaged in
manufacturing and assembly, serves as one of Payton's major Manufacturing Partners.
100%
100%
20%
1
The financial statements as at December 31, 2023 form an integral part thereof.
Payton Planar Magnetics Ltd.
Payton Industries Ltd.
Euronext Brussels
Public
66.2%
33.8%
Payton America Inc
.
Himag Planar
Magnetics Ltd.
PCT Industries
Limited
3
B.
The Group's main fields of activity and changes that occurred in the period from January to December 2023
The Company, an Israeli high-tech enterprise, develops manufactures and markets Planar and Conventional
transformers worldwide.
The Company was founded in order to revolutionize the traditional approach to the design
and manufacture of transformers through the concept of planar transformers. The Company completed its initial
public offering in 1998 on the EuroNext Stock Exchange.
Global Environment changes and External factors effect on the Group’s activity
In 2023 the global slowdown environment continued. It seems that, decrease in demands, excess inventory
levels and the high interest rate are factors influencing customers activity and sometimes resulting in push-out
of scheduled deliveries up on their needs. High prices of raw materials and high manpower costs remain
relevant too. Management believes these trends are not expected to end in the near future.
Additional factors that affect the Group's activity are: the
devaluation of the US$
against the local NIS, the
Euro and the Pound, which mainly decreases local labor costs and other operating costs in Israel and the
United Kingdom. During year 2023 the US$ devaluation became more significant.
Inflation affects
- Since the functional currency of the Group's activity is the US dollar, and since the Group
does not use bank loans, management believes there is no material effect of the inflation in Israel and/or
worldwide on the Group’s business activity, except for some adjustments needed in payroll.
Increase of global interest rate
- since the Company does not hold loans, the Group is not expected to have a
material negative impact due to the increase in the glo
bal interest rate, on the contrary, deposits’ income
increased.
On October 7
th
2023, a war broke out in the state of Israel ("the War"). The War consequences have not
significantly affected the Group's day-to-day operations. The Group's local facility, that is located in the center
area of Israel, rapidly adapted a working routine and continued its ongoing business
.
As of this date
,
the
Group's local facility is fully operative providing products and services on a regular basis to its customers.
Thanks to
the Group’s financial and operational strength, wide business diversification, global dispersion of
production sites and raw material suppliers, the Group's management believes it should be able to continue its
ongoing business fully and continuously
.
Based on the information the Group has at the date of approval of these financial statements, this War is not
expected to have a material impact on the Group's activity
and results. However, due to uncertainty involved
and lack of information regarding the duration of the War, the Group is currently unable to foresee and assess
the future effects of the War.
The Group continues to follow-up and monitors all the above mentioned global developments trying to minimize
any impact including maintaining its close contacts with its subcontractors, suppliers and customers, all in order to
adjust its operations in the best possible way.
It is noted that the above statement is a forward-looking statement as defined above.
On March 28, 2023
-
the Company’s Board of D
irectors decided to pay the shareholders a dividend for the
financial year 2022, at the amount of USD 8,482 thousand (USD 0.48 per share) which was paid in full in June
2023.
On January 24, 2024 -
the Company's Board of Directors announced dividend distribution for the financial year
2023, at the amount of USD 10,072 thousand (USD 0.57 per share) which was paid in full in March 2024.
4
C.
Sales
The Group
’s
main customer base is related to the telecom/datacenter, automotive and power electronic market.
Additional markets the Group aims are Industrial and medical markets.
During 2023, the Group kept operating its
activities in: North America, Europe, Japan, China, S. Korea, India and UK.
Sales for the year ended December 31, 2023 amounted to USD 54,856 compared with USD 60,270 thousand for the
year ended December 31, 2022, reflecting 9% decrease which is reasonable with the global slowdown environment.
Revenues for the year ended 2023 consisted of recurring sales to existing customers and sales to new ones.
The Sales were generated primarily from telecom/datacenter, automotive companies and industrial companies.
D.
Principal customers
The consolidated sales revenues include sales to major customers (which make up in excess of 10% of the sales of
the Group).
For the year ended
December 31
For the year ended
December 31
2023
2022
Quanta Computer Inc.
(
1
)
15%
29%
Customer B
(
2
)
16%
17%
Customer C
(
2
)
14%
*
*
Less than 10% of the Group’s consolidated sales.
(
1
)
Customer related to the Telecom/Datacenter industry; Includes sales to its subsidiaries:
QMB Co., Ltd, and
Tech-Front (Shanghai) Computer Co., Ltd.
(
2
)
Customer related to the Automotive industry.
E.
Marketing
The Group participates in leading electronic exhibitions. Company is focusing on serving Key customers
with routine visits and latest technology development updates.
The Company strategy, which enables fulfilling the mission of gaining worldwide recognition and market share
growth, is:
*
Targeting world leaders in their fields. Having these leaders as our customers is convincing other second tier
companies to adopt the Planar Technology.
*
Focusing on wide-growth-potential customers with a need for advanced technology.
*
To use the Group
’s
own sales team as well as its sales
representatives’
network as sales channels.
*
Expanding our activity in Japan, Europe, North America, India and S. Korea markets.
*
Supporting Research & Development institutes and Engineering Consultants in order to increase exposure to
engineers in the field.
*
Deepening activity with existing customers.
*
Maintaining the wide presence and global recognition.
5
F.
Manufacturing
The Group intends to expand and diversify its manufacturing capacity and capabilities, through manufacturing
partners in the Far East in China and the Philippines. This activity objective is to increase flexible production
capacity, to enable mass production quantities, lower products costs and increase competitiveness.
G.
Competition
In the recent years there has been an increasing interest of magnetics manufacturers to get into the Planar field. We
can note that there are more and more companies that are trying to design and manufacture the planar components.
However, the Company believes in its technology advantage Know-how and capabilities. It estimates it could
generally benefit from an increasing competition in the market due to greater exposure of the technology.
The Company cannot estimate its future market share. The following companies are considered as its potential
competitors: Pulse, Standex and Coilcraft - from the U.S.A. and Premo - from Spain.
H.
Order Backlog
As at December 31, 2023 this backlog amounted to USD 30,765 thousand, and as at March 18, 2024 to USD 32,800
thousand (December 31, 2022 - USD 43,839 thousand). The backlog is composed of the Company and its two fully
owned subsidiaries firm orders.
Order Backlog
US$ in thousands
March 18, 2024
December 31, 2023
1,584
10,497
Delivery due date within first quarter of 2024
13,164
9,936
Delivery due date within second quarter of 2024
10,254
7,364
Delivery due date within third quarter of 2024
6,511
2,478
Delivery due date within fourth quarter of 2024
1,287
490
Delivery due date is after 1.1.2025
32,800
30,765
Total
It should be noted that in light of global slowdown sometimes customers tend to postpone scheduled deliveries up
on their needs. Such changes of delivery dates may lead to a different sales volume than indicated above according
to the quarterly order backlog split.
It is noted that the above statement is a forward-looking statement as defined above.
I
.
Framework agreements that do not constitute binding orders
As of December 31, 2023 and the date of approval of the financial statements, the Group has no material framework
agreements
.
J.
Human Resources
A factor of importance to the Company’s success is its ability to attract, train and retain highly
skilled technical, and
more specifically, qualified electronics engineers with experience in high frequency magnetics and with a
comprehensive understanding of high frequency magnetics, managerial, sales and marketing personnel.
Competition for such personnel is intense. The Company constantly betterments its personnel and has so far
6
succeeded in recruiting the appropriate personnel as required. This personnel is important in maintaining the pace in
research, design and technical customer support. The Company is confident however, that the challenges inherent in
its operations will satisfy its Company’s future re
cruitment needs. By the end of 2023, the Group employed about
172 people. The Company retains employment contracts with most of its key employees and is of the opinion that
relations with its employees are satisfactory.
K.
Quality Control
Payton Group has the ISO9001:2015 certification for its quality system. It has UL recognition for the use of several
Electrical Insulation Systems classes B, F and H in its products, also has recognition of the construction of a family
of magnetic components as complying with the requirements of UL and IEC 60950 standards of safety. Payton is
authorized by an accredited testing agency to apply the CE mark to many of its commercial transformers.
Payton also meets recognized international safety standards and conforms to MIL.T, CSA VDE and other standards.
The Company is certified with ISO14001:2015 (Environmental standard). Payton is a Lead Free company as
required by the 2015/863/EU RoHS directive.
The Company is certified with two important International Quality Management Standards: for Automotive - IATF
16949:2016 and for Space & Avionic - AS9100 (at Payton America only).
L.
Objective and Business Strategy
Since its incorporation, Payton has provided innovative and affordable Planar Magnetic solutions to the Power
Electronic Industry.
By doing so, it has become the undisputable worldwide market leader in the Planar Magnetics Technology, with a
customer base of leading technology-driven OEM's.
Payton plans to maintain its lead and continue to facilitate the transition of the Magnetics market to the Planar
Technology by:
1.
Maintaining business efficiency, operational efficiency and constant search for cost saving solutions.
2.
Maintaining and strengthening its current customer base. This will enable Payton to build a track record as a
reliable high-volume Planar component supplier to leading OEM's.
3.
Selectively developing additional key strategic customers, especially in Japan, North America, India, S. Korea in
order to further propagate Payton Planar unique technology.
4.
Aiming and focusing on new high growth segments such as Automotive (EV/HEV) in addition to the present
Telecom and industrial markets.
5.
Continuing to educate the Power Electronics industry about Planar technology.
6.
Continuing to develop its mass production expertise and capacities to a level that will enable Payton to address
the large price-sensitive segments and mass production quantities segments of the global Magnetics market.
7.
Payton is constantly looking for business opportunities to expand its core business with synergetic product lines.
It is noted that the above statement is a forward-looking statement as defined above.
7
M.
Coming year outlook
In 2024 the Group is preparing to cope with the slowdown global markets. There are some push-out of scheduled
deliveries up based on customer needs, and great caution needs to be taken with regards to purchases forecast and
inventory planning.
The raw materials prices are high and no significant price reduction is expected in coming
future. At this stage, it is not possible to assess the extent of the impact of the trends described above on the Group's
activities.
With regards to the War, currently, there is no material impact on the Group's activity
and results. However, it is
still impossible to foresee and assess long future effects.
The Group plans to continue investing efforts to improve and efficient its production capacity as well as integration
of automation. In addition to its normal course of business the Group will continue its ongoing searching of new
markets as well as other business opportunities providing innovative solutions and new technologies as in order to
keep expanding its customer base, core business, enlarging its market share and maximize business challenges to
the greatest possible extent.
The Group will also continue its ongoing search for business and M&A opportunities, synergetic to its core
business, in order to expand its activity. (When and if the FIMI
2
transaction is completed, the Company will
examine the need to update its goals and targets as necessary).
It is noted that the above statement is a forward-looking statement as defined above.
2
Fimi Opportunity 7, LP.
See paragraph 5-Subsequent Events, hereinafter.
8
N.
Risk Factors
Major Impact
Medium Impact
Small Impact
Macro Risks
The
global
business
environment
changes
have
many implications including the
following:
Raw material high costs.
Difficulties
in
recruiting
manpower and increase of
labor costs.
Changes and push-out of
scheduled
deliveries
by
customers.
Currency
exposure
during credit term period
with regards to invoices
issued in local currency.
Evaluation/Devaluation
of the local currencies,
NIS and GBP, reflects an
increase/decrease in labor
costs and other operating
costs.
Changes
in
regulation,
changes in international
tariffs.
Market Risks
Metals prices fluctuations
especially:
Copper,
Aluminum, Tin and Silver,
which
are
part
of
the
transformers
bill
of
materials.
Automotive
industry
-
alongside the
opportunity
for
a large growth there is
an inherent
risk in this
industry, especially during
a
period
of
economic
uncertainty
where
a
decrease in demand could
be material. In addition, the
growing competition in this
industry creates a constant
pressure to reduce prices
and margins.
Specific Risks
Manufacturing partners
dependency.
O.
Current Shareholders position
Shareholder name
Number of shares
Percentage of the
outstanding shares
Comments
Payton Industries Ltd.
11,694,381
66.2%
Israeli company traded in the Tel
Aviv stock exchange.
Public
5,976,394
33.8%
Listed on the EuroNext since June
1998.
Total
17,670,775
100.0%
Total outstanding shares.
9
2.
Financial position
A.
Statement of Financial Position as at December 31, 2023
Cash and cash equivalents,
Short-term Deposits and marketable securities
-
these items amounted to a total of
USD 56,186 thousand as at December 31, 2023 compared to USD 45,237 as at December 31, 2022. Despite the
dividend payment during year 2023, Company presents increase in Cash and cash equivalents attributed mainly to
Company’s profitability.
The Group's management believes, a solid financial position is an important factor in order to successfully
overcome times of crisis.
Investment in equity accounted investee
-
represents the investment in PCT
3
(20%) engaged in manufacturing and
assembly that serves as one of the Company's major manufacturing Partners in China.
The investment amounted to USD 1,409 thousand as at December 31, 2023 compared with USD 1
,
427 thousand as
at December 31, 2022. The decrease resulted from a write-off of the option to increase Company
’s
share in PCT,
estimated at a value of USD 100 thousand, which expired in 2023 without exercise. In addition, during year 2023
PCT paid dividend to its shareholders. Company received USD 128 thousand which was also deducted from this
investment.
I
nvestee’s
profits during year 2023 shortened these two investment decreases.
Trade payables -
amounted to USD 3,663 thousand as at December 31, 2023 compared with USD 1,419 thousand
as at December 31, 2022. The increase in this item is mainly explained by decrease of advance payment made in
favor of a principal subcontractor including returning to its normal payment terms.
B.
Interest rate, Currency and Market exposure - Data and Policy
Interest rate exposure
The Group’s interest rate exposure relates mainly to its balance of cash equivalents and bank deposits.
These
balances are mostly held in USD bearing interest rates given by banks (during 2023, about 6%). It is noted that
during 2023 in light of high exchange rate, some NIS balances were kept in short term deposits bearing interest rate
of about 5%.
Data on linkage terms
The financial statements of the Company reflect the functional currency of the Company, which is the USD.
Most of the Group's sales (94%) during 2023 were in USD or were linked to the USD.
Approximately 2% of the
Group’s sales
in 2023 were in Euro, 1% were in NIS, and about 3% were in GBP.
During 2023, approximately 96% of the costs of raw material and finished goods purchased by the Group were in
USD or were linked to the USD.
During 2023, approximately 82% of
the Group’s salaries
were in New Israeli Shekel ("NIS") and about 7% were
in GBP.
3
See paragraph 1A above -
“The Group”
.
10
Currency exposure risks
Since most of the Group's sales and purchases were in USD or linked to the USD, the Group's gross profit was
exposed to the changes in exchange rates of the USD in relation to the Euro, the GBP and to the local New Israeli
Shekel ("NIS") mostly with regards to labor costs and other operating costs (see also Data on linkage terms, above).
The Group is exposed to erosion of the USD in relation to the NIS and the GBP
. Most of the Group’s salaries and
other operating costs are fixed in the local currencies. Devaluation of the USD in relation to the NIS and the GBP
increases
the Group’s labor costs and thus
influences its operating results.
Devaluation of the USD in relation to Euro and the GBP leads to a
decrease in Group’s assets held in those
currencies.
The Company is subcontracting in China. Devaluation of the USD with relation to the Chinese currency has an
indirect effect on
the Group’s cost of goods sold.
Market risks
During 2023 the Company seldom used some derivatives as a tool for hedging, mainly in order to hedge its labor
costs paid in NIS. With regards to all other operating costs, there is no need to use derivatives since hedging is being
kept inherently as part of the operational activity.
11
C.
Operating results
Summary of Consolidated Statements of Income
US Dollars in thousands
Payton Planar Magnetics Ltd.
Consolidated Comprehensive Income Statements
Total
Total
Quarter
Quarter
Quarter
Quarter
2023
2022
10-12/23
7-9/23
4-6/23
1-3/23
Revenues
54,856
60,270
15,097
15,018
12,684
12,057
Cost of sales
(30,753)
(35,778)
(8,872)
(7,918)
(7
,
322)
(6,641)
Gross profit
24,103
24,492
6,225
7,100
5,362
5,416
Development costs
(1,442)
(1,545)
(352)
(335)
(423)
(332)
Selling & marketing expenses
(2,152)
(1,932)
(597)
(481)
(575)
(499)
General & administrative expenses
(3,863)
(3,864)
(866)
(875)
(1,126)
(996)
Other income (expenses), net
(245)
57
(253)
(2)
-
10
Operating profit
16,401
17,208
4,157
5,407
3,238
3,599
Finance income (expenses), net
1,881
200
844
289
453
295
Share of profits (losses) of
equity accounted investee
218
481
174
45
(22)
21
Profit before taxes on income
18,500
17,889
5,175
5,741
3,669
3,915
Taxes on income
(3,234)
(3,972)
(973)
(978)
(636)
(647)
Net profit for the year/period
15,266
13,917
4,202
4,763
3,033
3,268
Other comprehensive income
(loss) items that will not be
transferred to profit &loss
Remeasurement of defined
benefit plan
27
226
27
-
-
-
Share of other comprehensive
income (loss) of equity
accounted investee
(6)
(28)
5
(10)
(6)
5
Total other comprehensive
income (loss), net of tax
21
198
32
(10)
(6)
5
Total comprehensive income
for the year/period
15,287
14,115
4,234
4,753
3,027
3,273
General Note
:
The Group is exposed to abrasion of the USD in relation to the NIS, Euro (€) and the Pound (
£).
Most of the Group’s salaries and other operating costs are fixed in local currencies. Revaluation/devaluation of the
local currencies drives to an increase/decrease in labor costs and other operating costs, thus, affects the operating
results of the Company
)
it is noted that during year 2023 average exchange rate of the NIS verses the USD increased
by about 10% reflected a decrease
in labor costs and in other local operating costs).
Sales revenues -
The Group’s sales revenues for the year ended December 31,
2023 were USD 54,856 thousand
compared with USD 60,270 thousand for the year ended December 31, 2022, representing 9% decrease that reflects
the global
demand decrease and the postponements of deliveries per customer’s request in several projects.
12
Gross profit
-
The Group’s gross results for the year ended December 31,
2023 were USD 24,103 thousand (44%),
compared with USD 24,492 thousand (41%), in the year ended December 31, 2022. The gross margin is influenced
mainly by the sales products mix and production locations, in addition the devaluation of the USD versus the local
currencies (NIS and GBP) resulted in a decrease in labor costs and other local operating costs.
Development costs -
Payton’s strategy is aimed on maintaining the leadership of the Planar Technology. The
Engineering Department works in conjunction with engineering departments of the forerunners of today’s global
technology. Development costs are mainly incurred to design and customize products for specific orders. These
development costs, mainly engineering labor costs, are based upon time expended by the department’s employees.
The Group’s development costs for
the year ended December 31, 2023 were USD 1,442 thousand compared with
USD 1,545 thousand in the year ended December 31, 2022, most of this decrease was an outcome of the
devaluation of the USD versus the NIS resulted in engineering labor costs decrease.
Selling & marketing expenses -
The Group’s selling & marketing expenses are mainly comprised of: (1)
commissions to the Group's reps’ and Marketing Personnel, which are calculated as a portion of sales, however it is
further explained that not all the sales a
re subject to reps’ commissions and of (2) other selling expenses (fixed)
based on management policy. The Group’s marketing efforts are concentrated through participation in major power
electronic shows around the world and by collaborating with its worldwide rep's Network
.
The Group’s selling &
marketing expenses for the year ended December 31, 2023 amounted to USD 2,152 thousand (4%) compared with
USD 1,932 thousand (3%) in the year ended December 31, 2022. The increase in year 2023 resulted mainly due to
increase in other marketing expenses mainly digital marketing and travel expenses and as well as increase in sales
commission and incentives of marketing team worldwide.
General & Administrative expenses -
The Group’s
General & Administrative expenses for the year ended
December 31, 2023 amounted to USD 3,863 thousand compared with USD 3,864 thousand in the year ended
December 31, 2022.
Finance income, net
-
The Group’s finance income for the year ended December 31,
2023 amounted to USD 1,881
thousand compared with USD 200 thousand for the year ended December 31, 2022. This increase is mainly
explained by the increase of the market interest rate on bank deposits.
Taxes on income
-
for the year ended December 31, 2023 amounted to USD 3,234 thousand compared with USD
3,972 thousand in the year ended at December 31, 2022. On previous year (2022) Company applied the Temporary
Order to the Law for the Encouragement of Capital Investments enabling it a beneficiary corporate tax rate on its
exempt profits and paid an exceptional tax expenses at the amount of USD 0.9
million. See also Notes 13A & 13F
to the 2023 yearly Report.
13
D.
Information regarding - Transactions with related parties
(pursuant to note 17 to the Consolidated Financial
Statements as at December 31, 2023)
D.1
Balances with key management personnel and interested and related parties
December 31, 2023
Equity
accounted
investee
The Parent
Company
Key
management
personnel
employed by
the Group
Key
management
personnel not
employed by
the Group
Directors not
employed by
the Group
$ thousands
$ thousands
$ thousands
$ thousands
$ thousands
Payables:
Short-term employment
benefits
-
-
99
-
-
Post-employment benefits
-
-
27
-
-
Trade payables
152
-
-
-
-
Other payables
-
-
-
723
9
December 31, 2022
Equity
accounted
investee
The Parent
Company
Key
management
personnel
employed by
the Group
Key
management
personnel not
employed by
the Group
Directors not
employed by
the Group
$ thousands
$ thousands
$ thousands
$ thousands
$ thousands
Receivables:
Other accounts receivable
287
82
-
-
-
Payables:
Short-term employment
benefits
-
-
109
-
-
Post-employment benefits
-
-
33
-
-
Trade payables
125
-
-
-
-
Other payables
-
-
-
706
12
D.2
Transactions with related parties
Equity accounted investee
Year ended December 31,
2023
2022
$ thousands
$ thousands
Purchases
9,504
14,857
D.3
Compensation to key management personnel and interested parties
For the year ended December 31, 2023
Key
management
personnel
employed by
the Group
Key management
personnel not
employed by the
Group (*)
Directors not
employed by the
Group
$ thousands
$ thousands
$ thousands
Short-term employee benefits
510
-
-
Post-employment benefits
51
-
-
Other
-
1,604
38
Total
561
1,604
38
Number of people
3
2
3
14
Compensation to key management personnel and interested parties (Cont.)
For the year ended December 31, 2022
Key
management
personnel
employed by
the Group
Key
management
personnel not
employed by
the Group (*)
Directors not
employed by the
Group
$ thousands
$ thousands
$ thousands
Short-term employee benefits
500
-
-
Post-employment benefits
(48)
-
-
Other
-
1,571
39
Total
452
1,571
39
Number of people
5
2
3
(*)
Management fees and related benefits to Wichita Ltd. (see Note 14A) and to Yaarh-Looking To The Future Ltd. (see Note
14B) include an amount of USD 184 thousand and an amount of USD 251 thousand, respectively, for each of the years
ended December 2023, and 2022, recorded as selling and marketing expenses.
Inter-company transactions between the Company and its two fully owned subsidiaries (Payton America Inc. and Himag Planar
Magnetics Ltd.) include, inter alia, the following: engineering support, purchasing and subcontracting, marketing, administrative and
management services. All the inter-company transactions are being eliminated within these consolidated financial statements.
3.
Liquidity
A.
Operating activities
Cash flows generated from operating activities for the year ended December 31, 2023, amounted USD 19,204
thousand, compared with the cash flows generated from operating activities of USD 11,634 thousand for the year
ended December 31, 2022. The increase in cash flows from operating activities generated from increase in the net
profit and mostly
from increase in trade payables as well as from other non-cash adjustments and changes in assets
and liabilities.
B.
Investing activities
Cash flows used for investing activities in the year ended December 31, 2023 amounted USD 2,636 thousand
compared with cash flows used for investing activities of USD 6,409 thousand in the year ended December 31,
2022. The decrease in cash flows used for investing activities in the year ended December 31, 2023 compared with
previous year (2022) is explained mainly by the decrease of the investment in bank deposits, net.
C.
Financing activities
Cash flows used for financing activities for the year ended December 31, 2023, amounted USD 8,482 thousand,
representing a dividend payment (announced March 28, 2023) that was paid on June 2023.
Cash flows used for financing activities for the year ended December 31, 2022, amounted USD 8,023 thousand,
representing a dividend payment (announced March 28, 2022) that was paid on June 2022.
[After the reporting date, on January 24, 2024, the Company declared a dividend in the amount of USD 10,072
thousand, USD 0.57 per share].
15
4.
Financing sources
The Group financed its activities during the reported periods from its own resources.
5.
Subsequent Events
On January 24, 2024
, the Company's Board of Directors decided to pay to its shareholders a dividend for the
financial year 2023 in the amount of USD 10,072 thousand, USD 0.57 per share (paid on March 5, 2024). The
dividend is submitted to a tax withholding of 15%.
On February 14, 2024
, the Parent Company, Payton Industries Ltd, entered into an agreement with FIMI ISRAEL
OPPORTUNITY 7, a Limited Partnership, and FIMI Opportunity 7, LP a Limited Partnership (together hereinafter:
"FIMI"), to allocate 1,468,057 ordinary shares of the Parent Company (hereinafter: "Allocated Shares") which,
subject to their allocation, shall constitute approximately 17.76% of the Parent Company's issued and outstanding
share capital and voting rights (hereinafter: the "Share Purchase Agreement"), all conditional upon the occurrence of
certain conditions.
Simultaneously Mr. David Yativ, the controlling shareholder of the Parent Company (hereinafter: "
Yativ
") has
entered into an agreement to sell to FIMI 1,000,000 shares of the Parent Company, constituting around 12.09% of
the Parent Company's share capital. Furthermore, FIMI and Yativ agreed on the terms of a shareholders' rights
agreement that will be executed on the closing of the transaction.
It is hereby clarified that the completion of the Share Purchase Agreement and the other transactions
described above (hereinafter: "the FIMI Transaction") are subject, inter alia, to the approval of the Parent
Company
’s
Shareholders' meeting, to be held on April 8, 2024.
On February 28, 2024
the Parent Company's board of directors has decided to grant certain employees of the
Company with options to purchase shares of the Parent Company, according to the Parent Company's incentive
option plan and subject to the completion of the FIMI Transaction and to the approval of the updated remuneration
policy by the Company Shareholders' meeting.
Among the above-mentioned employees: Mr. Doron Yativ
4
and Mr. Amir Yativ
5
who will be granted with 30,000
and 20,000, respectively, non-marketable options of the Parent Company.
On March 7, 2024
, the Company's remuneration committee and the Board of Directors have examined the updated
remuneration policy, found it fair, logic and appropriate and decided to approve it. In addition the above mentioned
quorums approved the Company's participation in the service fee of FIMI for the consulting services to be provided
to Payton Group as part of the FIMI Transaction, for a period of 3 years, for a monthly payment of NIS 40 thousand
to be shared equally between the Company and the Parent Company (the participation amount shall be examined
and adjusted on a yearly basis according to the actual services). The above resolutions are subject to the approval of
the Company's shareholders' meeting, to be held on April 15, 2024.
4
David Yativ’s son
serves as a director and the CEO of the Company.
5
David Yativ’s son
serves as an engineering and development manager.
16
6.
External factors effects
-
Global slowdown environment, decrease in demands, excess inventory levels and the high interest rate are
factors influencing customers activity and sometimes resulting in push-out of scheduled deliveries up on their
needs
- see paragraph B above.
-
For
the effect of ‘
Risk Factors
’
- see paragraph 1N above.
To the best of the Board of Directors’ and management’s knowledge, except the above mentioned, there have been
no significant changes in external factors that may materially aff
ect the Company’s financial position or results of
operations.
7.
Statement by senior management in accordance with article 12, § 2 (
3
°
(
of the Royal Decree per
14.11.2007
Pursuant to article 13 § 2,3 of the Royal Decree of 14 November 2007, David Yativ Chairman of the Board of
Directors declares, on behalf of and for the account of Payton Planar Magnetics that, as far as is known to him,
a) The financial statements at December 31, 2023 are drawn up in accordance with IFRS-reporting as adopted by
the European Union and present a true and fair view of the equity, financial situation and results of the company
b) The report gives a true and fair view of the main events of the financial year, their impact on the financial
statements, the main risk factors and uncertainties, as well as the main transactions with related parties and their
possible impact on the financial statements.
The Company's Board of Directors wishes to thank our shareholders for their continuance trust and belief.
The Company's Board of Directors wishes to express its sincere thanks to the entire personnel for their efforts and
contribution to the Group's affairs.
Ness-Ziona, March 27, 2024.
David Yativ
Chairman of the Board
of Directors
Doron Yativ
Director and C.E.O.
17
PAYTON PLANAR MAGNETICS LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31,
2023
I N D E X
Page
Auditors’ Opinion Report
18-21
Consolidated Statements of Financial Position
22-23
Consolidated Statements of Profit or Loss and Other Comprehensive Income
24
Consolidated Statements of Changes in Equity
25
Consolidated Statements of Cash Flows
26
Notes to the Consolidated Financial Statements
27-57
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18
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
Independent Auditors’ Report
To the Shareholders of Payton Planar Magnetics Ltd.
Opinion
We have audited the consolidated financial statements of Payton Planar Magnetics Ltd. (“the
Company”), which comprise the consolidated statement of financial position
as at December 31,
2023
, and the consolidated statements of profit or loss and other comprehensive income, consolidated
statements of changes in equity and consolidated statements of cash flows for the year then ended, and
notes to the consolidated financial statements, including material accounting policy information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Company as at December 31, 2023, and its
consolidated financial performance and its consolidated cash flows for the year then ended in
accordance with International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the
Auditors’ Responsibilities for the
Audit of the Consolidated Financial Statements
section of our report. We are independent of the
Company in accordance with the International Ethics Standards
Board for Accountants’
International
Code of Ethics for Professional Accountants (including International Independence Standards)
(IESBA Code) and we have fulfilled our ethical responsibilities in accordance with the IESBA Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current period. These matters were addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. For the matter below, our
description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the
Auditors' Responsibilities for the Audit of
the Consolidated Financial Statements
section of our report, including in relation to this matter.
Accordingly, our audit included the performance of procedures designed to respond to our assessment
of the risks of material misstatement of the consolidated financial statements. The results of our audit
procedures, including the procedures performed to address the matter below, provide the basis for our
audit opinion on the accompanying consolidated financial statements.
19
Revenue recognition
As discussed in Notes 2E and 16A to the consolidated financial statements, revenues for the year
ended December 31, 2023, are USD 54.9 million. According to IFRS 15, the Company recognizes
revenue from goods with no alternative use over time. The Company’s revenues are generated from
the sale of goods manufactured according to customer specifications and based mainly on non-
cancelable and non-refundable terms. The Company is entitled to reimbursement of the costs incurred
to date, including a reasonable margin. Customer-specific goods cannot be sold to any other customer
and therefore have no alternative use.
Furthermore, and due to the materiality of revenue to the
financial statements of the Company, and the significant management judgment involved in the
revenue recognition process, we identified revenue recognition as a key audit matter.
How our audit addressed the key audit matter
With respect to this audit matter, our main audit procedures included obtaining an understanding of
the design and implementation of key internal controls surrounding the recording of revenues. We
sampled revenues while focusing on transactions recorded close to the year-end and in the beginning
of the subsequent period, and checked that such transactions were included in the appropriate period.
Our testing included sampling of source documents such as purchase orders and reviewing terms of
contracts with customers to obtain evidence that revenues recorded meet the criteria of IFRS 15. We
also checked if any credit notes were issued in the subsequent period in order to obtain evidence of
proper revenue recognition in 2023.
Other Matter
The financial statements of Payton Planar Magnetics Ltd. for the year ended December 31, 2022,
were audited by another auditor who expressed an unmodified opinion on those statements on March
28, 2023.
Other Information in the Company's 2023 Annual Report
Other information consists of the information included in the Annual Report, other than the
consolidated financial statements and our auditor's report thereon. Management is responsible for the
other information.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRSs, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
20
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to co
ntinue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal c
ontrol.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditors’ report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of
our auditors’ report. However, future events or conditions may
cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
21
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
European Uniform Electronic Format (ESEF)
In accordance with the draft standard on the audit of compliance of the Financial Statements with the
European Single Electronic Format (hereafter “ESEF”), we have audited as well whether the ESEF
-
format is in accordance with the regulatory technical standards as laid down in the EU Delegated
Regulation nr. 2019/8
15 of 17 December 2018 (hereafter “Delegated Regulation”).
The Board of Directors is responsible for the preparation, in accordance with the ESEF requirements,
of the consolidated financial statements in the form of an electronic file in ESEF format (hereafter
“digital consolidated financial statements”) included in the annual financial report.
It is our responsibility to obtain sufficient and appropriate information to conclude whether the format
and the tagging of the digital consolidated financial statements comply, in all material respects, with
the ESEF requirements under the Delegated Regulation.
In our opinion, based on our work performed, the format of and the tagging of information in the
official English version of the digital consolidated financial statements as per March 27,
2024
,
included in the annual financial report of Payton Planar Magnetics Ltd., are, in all material respects,
prepared in compliance with the ESEF requirements under the Delegated Regulation.
The partner in charge of t
he audit resulting in this independent auditors’ report is Mr. Shahar Zvulun.
Tel-Aviv, Israel
KOST FORER GABBAY & KASIERER
March 27, 2024
A Member of Ernst & Young Global
22
PAYTON PLANAR MAGNETICS LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31,
2023
2022
Note
$ thousands
$ thousands
Current assets
Cash and cash equivalents
3
Short-term deposits and marketable securities
4
Trade accounts receivable
5
Other accounts receivable
6
Inventory
7
Total current assets
Non-current assets
Investment in equity accounted investee
8
Other investment
8
Property, plant and equipment
9
Intangible assets
Total non-current assets
Total assets
The accompanying notes are an integral part of these consolidated financial statements.
23
PAYTON PLANAR MAGNETICS LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31,
2023
2022
Note
$ thousands
$ thousands
Liabilities and equity
Current liabilities
Trade payables
Other payables
10
Current income tax liability
Employee benefits
12
Total current liabilities
Non-current liabilities
Employee benefits
12
Deferred tax liabilities
13D
Total non-current liabilities
Total liabilities
Equity
Share capital
15
Share premium
Retained earnings
Total equity
Total liabilities and equity
David Yativ
Doron Yativ
Michal Lichtenstein
Chairman of the Board of Directors
Chief Executive Officer
V.P. Finance & CFO
Date of approval of the financial statements: March 27, 2024
The accompanying notes are an integral part of these consolidated financial statements.
24
PAYTON PLANAR MAGNETICS LTD.
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Year ended December 31,
2023
2022
Note
$ thousands
$ thousands
Revenues
16A
Cost of sales
16B
(30,753 )
(35,778 )
Gross profit
Development costs
(1,442 )
(1,545 )
Selling and marketing expenses
16C
(2,152 )
(1,932 )
General and administrative expenses
16D
(3,863 )
(3,864 )
Other income (expenses), net
16E
(245 )
Operating profit
Finance income
16F
Finance expenses
16F
(142 )
(250 )
Finance income, net
Share of profits of equity accounted investee
Profit before taxes on income
Taxes on income
13F
(3,234 )
(3,972 )
Net Profit
Other comprehensive income (loss) items that
will not be transferred to profit and loss
Remeasurement of defined benefit plan
12B
Share of other comprehensive loss of equity accounted
investee
(6 )
(28 )
Total other comprehensive
income, net of tax
Total comprehensive income
Earnings per share
Basic and diluted earnings per share (in $)
18
The accompanying notes are an integral part of these consolidated financial statements.
25
PAYTON PLANAR MAGNETICS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share capital
Share
Retained
Number of
premium
earnings
Total
shares
$ thousands
$ thousands
$ thousands
$ thousands
Balance at January 1, 2022
Net Profit
-
Other comprehensive income
-
Total comprehensive income
-
Transaction with owners,
recognized directly in equity
Dividend to owners
-
(8,023 )
(8,023 )
Balance at December 31, 2022
Net Profit
-
Other comprehensive income
-
Total comprehensive income
-
Transaction with owners,
recognized directly in equity
Dividend to owners
-
(8,482 )
(8,482 )
Balance at December 31, 2023
The accompanying notes are an integral part of these consolidated financial statements.
26
PAYTON PLANAR MAGNETICS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
2023
2022
Note
$ thousands
$ thousands
Operating activities
Net Profit
Adjustments:
Depreciation
9
Taxes on income
13F
Share of profits of equity accounted investee
8
(218 )
(481 )
Loss (gain) on sale of property, plant and equipment, net
16E
(57 )
Impairment loss of an option in an equity accounted investee
8,16E
Finance income, net
16F
(1,779 )
(18 )
Decrease (increase) in trade accounts receivable
5
(457 )
Decrease (increase) in other accounts receivable
6
(541 )
Decrease (increase) in inventory
7
(747 )
Increase (decrease) in trade payables
(2,703 )
Increase (decrease) in other payables
10
(64 )
Change in employee benefits
12
(63 )
(130 )
Interest received
16F
Interest paid
16F
(23 )
(17 )
Income taxes paid, net
13
(2,552 )
(3,839 )
Cash flows generated from operating activities
Investing activities
Investments in deposits, net
4
(2,321 )
(4,785 )
Acquisition of other investment
8
(900 )
Dividend received from an equity accounted investee
8
Acquisition of property, plant and equipment
9
(536 )
(993 )
Investments in marketable securities
4
(57 )
Proceeds from sale of property, plant and equipment
9, 16E
Proceeds from sale of marketable securities
4
Cash flows used for investing activities
(2,636 )
(6,409 )
Financing activities
Dividend paid
15B
(8,482 )
(8,023 )
Cash flows used for financing activities
(8,482 )
(8,023 )
Net increase (decrease) in cash and cash equivalents
(2,798 )
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash and cash equivalents
(168 )
(345 )
Cash and cash equivalents at end of the year
The accompanying notes are an integral part of these consolidated financial statements.
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
27
GENERAL
A.
Reporting entity
in Israel
The address of the Company’s registered office is 3 Ha’avoda Street, Ness
The Company is a subsidiary of Payton Industries Ltd.
ultimate controlling shareholder is Mr. David Yativ. The securities of the Company are
registered for trade on the Euronext stock exchange in Brussels.
The consolidated financial statements of the Group as at and for the year ended December 31,
2023,
comprise the Company and its subsidiaries (together referred to as the “Group”).
B.
Definitions:
In these financial statements:
1.
The Company
- Payton Planar Magnetics Ltd.
2.
The Group
- The Company and its subsidiaries.
3.
Payton Industries Ltd.
- Parent company, traded on the Tel Aviv Stock Exchange.
4.
Subsidiaries
- Companies, the financial statements of which are fully consolidated,
directly or indirectly, with the financial statements of the Company.
5.
Investee companies
- Subsidiaries and companies, the Company's investment in which is
stated, directly or indirectly, on the equity basis.
6.
Related party
-
Within its meaning in IAS 24 (2009), “Related Party Disclosures”.
7.
Israeli CPI
- The Consumer Price Index as published by the Central Bureau of Statistics
in Israel.
8.
NIS
- New Israeli Shekel.
9.
$ or USD
- U.S. Dollar.
10.
GBP
ACCOUNTING POLICIES
The following accounting policies have been applied consistently in the financial statements for
all periods presented, unless otherwise stated.
Basis of presentation of the financial statements
Reporting Standards ("IFRS") and its interpretations adopted by the International Accounting
The Group's financial statements have been prepared on a cost basis, except for: financial
assets and liabilities which are presented at fair value through profit or loss, provisions,
employee benefit assets and liabilities and investment in equity accounted investee.
The Group has elected to present the profit or loss items using the function of expense method.
Functional currency and presentation currency
The functional currency of the Group is the USD and it represents the primary economic
environment in which the Group operates. The presentation currency of the financial
Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories
comprises costs of purchase and costs incurred in bringing the inventories to their present
location and condition. The Group periodically evaluates the condition and age of inventories
and makes provisions for slow moving inventories accordingly.
Cost of inventories is determined as follows:
Starting January 1, 2023
Raw materials - at cost of purchase on the basis of weighted average
Work in progress and finished goods - on the basis of average costs including materials, labor
and other direct and indirect manufacturing costs
Purchased merchandise and products - at cost of purchase on the basis of weighted average
Before January 1, 2023
Raw materials - at
cost of purchase on the basis of “first
-in, first-
out”
Work in progress and finished goods - on the basis of costs including materials, labor and
other direct and indirect manufacturing costs
Purchased merchandise and products - at cost of purchase on the
basis of “first
-in, first-
out”
method
The change in measurement method described above did not have a material impact on the
Property, plant and equipment
lives of each part of the assets, as follows:
% | ||
Buildings (except land component) | 2-15 | (mainly 2%) |
Land under finance lease | 1.5 | |
Machinery and equipment | 15-33 | (mainly 15%) |
Motor vehicles | 15 | |
Office equipment | 7-33 | (mainly 7%) |
Computers | 33 |
E.
Property, plant and equipment
lives of each part of the assets, as follows:
% | ||
Buildings (except land component) | 2-15 | (mainly 2%) |
Land under finance lease | 1.5 | |
Machinery and equipment | 15-33 | (mainly 15%) |
Motor vehicles | 15 | |
Office equipment | 7-33 | (mainly 7%) |
Computers | 33 |
Revenue
The Group applies International Financial Reporting Standard 15 (“IFRS 15” or “the
standard”) which provides guidance on revenue recognition.
According to IFRS 15, the Group
recognizes revenue from goods with no alternative use over time.
The standard describes a five step model for recognizing revenue from contracts with
customers:
(1)
Identifying the contract with the customer.
(2)
Identifying distinct performance obligations in the contract.
(3)
Determining the transaction price.
(4)
Allocating the transaction price to distinct performance obligations.
(5)
Recognizing revenue when the performance obligations are satisfied.
Identifying the contract
The Group accounts for a contract with a customer only when the following conditions are
met:
(a)
The parties to the contract have approved the contract (in writing, orally or according to
other customary business practices) and they are committed to satisfying the obligations
attributable to them;
(b) The Group can identify the rights of each party in relation to the goods that will be
transferred;
(c)
The Group can identify the payment terms for the goods that will be transferred;
(d) T
he contract has a commercial substance (i.e. the risk, timing and amount of the entity’s
future cash flows are expected to change as a result of the contract); and
(e)
It is probable that the consideration, to which the Group is entitled to in exchange for the
goods transferred to the customer, will be collected.
Identifying performance obligations
In accordance with the standard, the Group should identify distinct performance obligations in
contract with customers
.
The Group is characterized by transactions with a one performance
obligation in each contract.
Determining the transaction price
The transaction price is the amount of the consideration to which the Group expects to be
entitled in exchange for the goods promised to the customer.
Satisfaction of performance obligations
Revenue is recognized when the Group satisfies a performance obligation by transferring
control over promised goods to the customer.
The Group’s revenue is generated from the sale of goods
manufactured according to customer
specifications and based mainly on NCNR terms (non-cancelable and non-refundable). The
Group is entitled to reimbursement of the costs incurred to date, including a reasonable
margin. Customer-specific goods cannot be sold to any other customer and therefore have no
alternative use.
Contract asset
A contract asset is recognized when the Group may recognize revenue but still has a
contractual obligation to perform, such as delivery, before it can receive consideration for
goods sold to the customer.
Contract assets are classified as receivables when the rights in their respect become
unconditional. In the following year, as the contractual obligation is completed, contract assets
G.
Initial application of new financial reporting and accounting standards and amendments
to existing financial reporting and accounting standards
Amendment to IAS 1, "Presentation of Financial Statements":
In February 2021, the IASB issued an amendment to IAS 1,
"Presentation of Financial
Statements"
("the Amendment"), which replaces the requirement to disclose 'significant'
accounting policies with a requirement to disclose 'material' accounting policies.
According to the amendment, information about accounting policy is material if, when taken
into account together with other information provided in the financial statements, it can
reasonably be expected to influence the decisions that users of financial statements make
based on those reports.
The amendment to IAS 1 also clarifies that information about accounting policy may be
material if, without it, users of financial statements may be prevented from understanding
other material information in the financial statements. In addition, the amendment clarifies that
there is no need to disclose information about accounting policy that is not material.
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2: -
ACCOUNTING POLICIES (Cont.)
31
The Amendment is applicable for annual periods beginning on January 1, 2023.
The application of the above Amendment had an effect on the disclosures of the Group's
accounting policies, but did not affect the measurement, recognition or presentation of any
CASH AND CASH EQUIVALENTS
December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Cash for immediate withdrawal |
23,900 |
14,296 |
Cash equivalents - short-term deposits |
3,021 |
4,707 |
26,921 |
19,003 |
|
The Group’s exposure to currency risk
and sensitivity analysis concerning cash and cash equivalents is
SHORT-TERM DEPOSITS AND MARTKETABLE SECURITIES
December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Bank deposits (*) |
28,517 |
25,475 |
Marketable securities: |
||
Shares |
329 |
274 |
Mutual funds |
419 |
485 |
748 |
759 |
|
29,265 |
26,234 |
|
(*) Include short-term deposits, mainly in dollars, bearing interest at an average annual rate of
approximately 6% (December 31, 2022: 4.19%).
The Group’s exposure to
currency risk concerning deposits and marketable securities is disclosed in
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
32
TRADE ACCOUNTS RECEIVABLE
A.
Trade accounts receivable, net:
December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Trade receivables |
9,546 |
10,374 |
Less provision for doubtful debts |
- |
- |
Trade accounts receivable, net |
9,546 |
10,374 |
As at December 31, 2023, and 2022, there is no provision for expected credit losses as there are
no amounts that are significantly past due.
B.
Following is information about the credit risk exposure of the Group's trade accounts
receivable:
December 31, 2023:
| Past due |
|||||
Not past due |
< 30 days |
31- 120 days |
> 120 days |
Total |
|
$ thousands |
|||||
Gross carrying amount |
7,642 |
1,442 |
462 |
- |
9,546 |
Allowance for ECLs |
- |
- |
- |
- |
- |
December 31, 2022:
| Past due |
|||||
Not past due |
< 30 days |
31- 120 days |
> 120 days |
Total |
|
$ thousands |
|||||
Gross carrying amount |
6,915 |
3,050 |
382 |
27 |
10,374 |
Allowance for ECLs |
- |
- |
- |
- |
- |
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
33
NOTE 6: -
OTHER ACCOUNTS RECEIVABLE
December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Contract assets |
2,204 |
1,293 |
Government institutions |
130 |
47 |
Current tax assets |
8 |
- |
Related parties |
- |
82 |
Prepaid expenses |
290 |
213 |
Other receivables |
172 |
620 |
2,804 |
2,255 |
|
The Group’s exposure to currency risk concerning other accounts receivable is disclosed in Note
11 on
INVENTORY
December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Raw and packing material |
2,575 |
3,076 |
Work-in-process |
754 |
785 |
Finished products |
603 |
658 |
3,932 |
4,519 |
|
INVESTMENTS IN INVESTEES AND OTHER
Details of the subsidiaries, their activities and the Company's interest therein as at
December 31, 2023:
1.
Payton America Inc. (hereinafter “Payton America”):
Payton America, a fully owned U.S. subsidiary, located in Florida, manufactures and sells
Planar transformers and inductors.
2. Himag Planar Magnetics Ltd. (hereina
fter “Himag Planar”):
Himag Planar, a fully owned UK subsidiary, incorporated for the purpose of the business
activity acquisition of Himag Solutions Ltd. The investment in Himag Planar constitutes
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: -
INVESTMENTS IN INVESTEES AND OTHER (Cont.)
34
B.
Investment in Equity Accounted Investee
In October 2018 the Company acquired 20% of the rights in a Hong-Kong holding company -
PCT Industries Limited (hereinafter -
“PCT”), holding a fully owned
manufacturing
subsidiary in Dongguan, China, engaging in manufacturing and assembly, which currently
serves as one of the Company’s major manufacturing partners.
In accordance with the investment agreement, the Company was granted an option to increase
its share of the rights in PCT by 15% (up to 35%) (hereinafter - "the option").
The option expired in 2023 without exercise. As a result, as at December 31, 2023, the
Company recognized an impairment loss in the amount of USD 100 thousand that is recorded
in profit or loss under other expenses, net (see Note 16E, hereinafter).
The fair value of the option estimated at USD 100 thousand as at December 31, 2022, was
presented under “Investment in Equity Accounted Investee”.
During 2023 PCT decided to pay the shareholders a dividend at the amount of USD 640
Other Investment
In September 2022, the Group acquired shares and options of CaPow Technologies Ltd. (less
than 20% of the startup's share capital), an Israeli startup in the field of wireless charging
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
35
PROPERTY, PLANT AND EQUIPMENT
A.
Composition and movement
Machinery | Computers | ||||
and | Motor | and Office | Land and | ||
equipment | vehicles | equipment | Buildings | Total | |
$ thousands | |||||
Cost | |||||
Balance as of January 1, 2023 | 4,679 | 703 | 1,845 | 12,131 | 19,358 |
Acquisitions | 170 | 68 | 258 | 9 | 505 |
Disposals | (342) | (58) | (1) | - | (401) |
Balance as of December 31, 2023 | 4,507 | 713 | 2,102 | 12,140 | 19,462 |
Accumulated depreciation | |||||
Balance as of January 1, 2023 | 3,480 | 184 | 1,351 | 4,031 | 9,046 |
Depreciation for the year | 308 | 102 | 132 | 286 | 828 |
Disposals | (189) | (52) | (1) | - | (242) |
Balance as of December 31, 2023 | 3,599 | 234 | 1,482 | 4,317 | 9,632 |
Carrying amounts as of | |||||
December 31, 2023 | 908 | 479 | 620 | 7,823 | 9,830 |
Year 2022:
Machinery | Computers | ||||
and | Motor | and Office | Land and | ||
equipment | vehicles | equipment | Buildings | Total | |
$ thousands | |||||
Cost | |||||
Balance as of January 1, 2022 | 4,244 | 638 | 2,051 | 12,109 | 19,042 |
Acquisitions | 435 | 316 | 254 | 22 | 1,027 |
Disposals | - | (251) | (460) | - | (711) |
Balance as of December 31, 2022 | 4,679 | 703 | 1,845 | 12,131 | 19,358 |
Accumulated depreciation | |||||
Balance as of January 1, 2022 | 3,201 | 291 | 1,621 | 3,707 | 8,820 |
Depreciation for the year | 279 | 86 | 190 | 324 | 879 |
Disposals | - | (193) | (460) | - | (653) |
Balance as of December 31, 2022 | 3,480 | 184 | 1,351 | 4,031 | 9,046 |
Carrying amounts as of | |||||
December 31, 2022 | 1,199 | 519 | 494 | 8,100 | 10,312 |
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9: -
PROPERTY, PLANT AND EQUIPMENT (Cont.)
36
B.
Details on land rights used as property, plant and equipment by the Group
The land on which the Company’s premises in Israel are built, has a carrying amount of USD
1,183 thousand as at December 31, 2023 (December 31, 2022: USD 1,204 thousand) and is
leased from the Israel Lands Administration under a capital lease ending on June 30, 2032.
The Company has the right to extend the lease period by another 49 years under certain
circumstances.
C.
Acquisition of property, plant and equipment on credit
As at December 31, 2023, the Group acquired property, plant and equipment on credit in the
amount of USD 18 thousand (December 31, 2022: USD 49 thousand). As of the date of
signing these financial statements, this amount has been paid.
D.
Additional information
The Group has assets that have been fully depreciated and are still in use. As at December 31,
2023 the original cost of such assets is USD 4,561 thousand (December 31,
2022
: USD 3,816
December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Employees and related benefits |
789 |
860 |
Government institutions |
46 |
- |
Other payables and accrued expenses |
1,204 |
1,243 |
2,039 |
2,103 |
|
The Group’s exposure to currency and liquidity risks concerning other payables is disclosed in Note
11
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
37
Fair value
Management believes that the carrying amount of cash and cash equivalents, short-term
deposits, trade accounts receivable, other accounts receivable, trade payables and other
payables approximate their fair value
.
Financial assets presented in the Statement of Financial Position at fair value are measured
Financial risk management objectives and policies:
The Group's principal financial assets include cash and cash equivalents, short-term deposits
and receivables that derive directly from its operations. The Group's principal financial
liabilities are comprised payables. The Group also holds investments available-for-sale.
The Group is exposed to market risk, credit risk and liquidity risk. The Board of Directors has
overall responsibility for the establishment and oversight of the Group’s risk management
framework. The Board of Directors defines principles for overall risk management, as well as
the specific policy for certain risk exposures and also the use of financial instruments and
excess liquidity investments. The Group's risk management framework focuses on actions to
minimize possible negative effects on the Group's financial performance.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices. Market risk comprises currency risk.
The Group's normal course of business is being managed in U.S. dollar, thus, most of the
market risks are hedged.
The Group uses, from time to time, derivatives as a tool for hedging, in order to neutralize
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate as a result of changes in foreign currency exchange rates.
Since most of the Group's sales are in U.S. dollar, the Group's gross profit is exposed to
the changes in exchange rates of the U.S. dollar in relation to the NIS and GBP, with
regards to local labor costs and other operating costs, and in relation to the Chinese
currency, with regards to costs of raw materials. The Group uses derivatives, from time to
time, as a tool for economic hedging, especially in order to hedge labor costs and other
costs paid in NIS.
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11: -
FINANCIAL INSTRUMENTS (Cont.)
38
The Group’s exposure to foreign currency risk was as follows based on notional amounts:
| December 31, 2023 | ||||||
Dollar | NIS | Euro | GBP | Other | Total | |
$ thousands | ||||||
Current financial assets: | ||||||
Cash and cash equivalents | 26,347 | 107 | 58 | 403 | 6 | 26,921 |
Deposits and Marketable | ||||||
securities | 25,188 | 4,077 | - | - | - | 29,265 |
Trade and other receivables | 11,068 | 313 | 15 | 356 | - | 11,752 |
Current financial liabilities: | ||||||
Trade payables | (3,139) | (400) | (20) | (104) | - | (3,663) |
Other payables | (1,006) | (174) | (17) | - | (7) | (1,204) |
58,458 | 3,923 | 36 | 655 | (1) | 63,071 | |
| December 31, 2022 | ||||||
Dollar | NIS | Euro | GBP | Other | Total | |
| $ thousands | ||||||
Current financial assets: | ||||||
Cash and cash equivalents | 14,673 | 3,814 | 346 | 163 | 7 | 19,003 |
Deposits and Marketable | ||||||
securities | 25,233 | 1,001 | - | - | - | 26,234 |
Trade and other receivables | 10,944 | 392 | 201 | 215 | - | 11,752 |
Current financial liabilities: | ||||||
Trade payables | (940) | (424) | (14) | (41) | - | (1,419) |
Other payables | (983) | (206) | (47) | - | (7) | (1,243) |
48,927 | 4,577 | 486 | 337 | - | 54,327 | |
Information regarding significant exchange rates:
| 1 US Dollar | ||||||
December 31 | Rate of change | December 31 | Rate of change | December 31 | Rate of change | |
NIS | % | Euro | % | GBP | % | |
2023 | 3.627 | 3.07 | 0.904 | (3.62) | 0.785 | (5.42) |
2022 | 3.519 | 13.15 | 0.938 | 6.23 | 0.830 | 12.16 |
2021 | 3.110 | (3.27) | 0.883 | 8.34 | 0.740 | 1.09 |
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11: -
FINANCIAL INSTRUMENTS (Cont.)
39
Foreign currency sensitivity analysis:
The following table demonstrates the sensitivity test to a reasonably possible change in
NIS, Euro and GBP exchange rates, with all other variables held constant. The impact on
the Group's income before tax is due to changes in the fair value of monetary assets and
liabilities. The Group's exposure to foreign currency changes for all other currencies is
immaterial.
Profit or loss |
||
December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Increase in the exchange rate of: |
||
5% in the NIS |
196 |
229 |
5% in the Euro |
2 |
24 |
5% in the GBP |
33 |
17 |
A strengthening of the USD against the above currencies as at December 31 would have
had the equal but opposite effect on the above currencies to the amounts shown above, on
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations as a customer or
under a financial instrument leading to a loss to the Group. The Group is exposed to credit
risk from its operating activity (primarily trade accounts receivable) and from its
financing activity, including deposits with banks.
The Group’s revenues are derived from sales to customers in Israel, Asia, Europe,
America and other countries around the world. The Company’s Management regularly
monitors the customers’ balances and includes specific provis
ions for doubtful debts in
the financial statements that adequately reflect, in the opinion of management, the loss
inherent in debts the collection of which is doubtful. The Group has credit risk insurance
for most of its Israeli and other customers, whose yearly activity exceeds USD 5 thousand
and USD 10 thousand, respectively.
The Group’s cash surpluses are invested in banks. The Group has a surplus cash
investment policy for the purpose of reducing risk or maintaining liquidity. This policy is
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11: -
FINANCIAL INSTRUMENTS (Cont.)
40
Liquidity risk
The Group’s approach to managing liquidity is to ensure, as far as possible, that it will
always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the
Group’s reputation.
The following are the contractual maturities of financial liabilities based on the actual
rates at the reporting date:
December 31, 2023 |
||
6 months or less |
Total |
|
$ thousands |
$ thousands |
|
Trade payables |
3,663 |
3,663 |
Other payables |
1,204 |
1,204 |
4,867 |
4,867 |
|
December 31, 2022 |
||
6 months or less |
Total |
|
$ thousands |
$ thousands |
|
Trade payables |
1,419 |
1,419 |
Other payables |
1,243 |
1,243 |
2,662 |
2,662 |
|
EMPLOYEE BENEFIT ASSETS AND LIABILITIES
Employee benefits include post-employment benefits and short-term benefits.
A.
Short-term employee benefits
December 31 , |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Presented under current liabilities: |
||
Provision for vacation and recreation |
493 |
557 |
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: - EMPLOYEE BENEFIT ASSETS AND LIABILITIES (Cont.)
41
B.
Post-employment benefits
According to the labor laws and Severance Pay Law in Israel, the Company is required to pay
compensation to an employee upon dismissal or retirement or to make current contributions in
defined contribution plans pursuant to section 14 to the Severance Pay Law, as specified
below. The Group's liability is accounted for as a post-employment benefit. The computation
of the Group's employee benefit liability is made according to the current employment
contract based on the employee's salary and employment term which establish the entitlement
to receive the compensation.
1. Defined contribution plans
Section 14 to the Severance Pay Law, 1963 applies to part of the compensation payments,
pursuant to which the fixed contributions paid by the Group into pension funds and/or
policies of insurance companies release the Group from any additional liability to
employees for whom said contributions were made. These contributions and contributions
for benefits represent defined contribution plans.
Year ended December 31 , | ||
2023 | 2022 | |
$ thousands | $ thousands | |
Expenses in respect of defined contribution plans | 481 | 495 |
2. Defined benefit plans
The Group accounts for that part of the payment of compensation that is not covered by
contributions in defined contribution plans, as above, as a defined benefit plan for which
an employee benefit liability is recognized and for which the Group deposits amounts in
severance pay funds and in qualifying insurance policies. Net liability for defined benefit
plan is presented under non-current liabilities.
Risks affiliated with the Group’s liability for defined benefit obligations refer to deviations
in salary increases, deviations in assets performances from the expectation, as well as
change in interest rate environment.
For sensitivity analyses, reflecting the effect of changes in salary increase assumptions and
interest rate, see D hereinafter.
December 31, | ||
2023 | 2022 | |
$ thousands | $ thousands | |
Present value of defined benefit obligation | 2,008 | 1,944 |
Fair value of plan assets | 1,627 | 1,530 |
Net recognized liability for defined benefit obligations | 381 | 414 |
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: -
EMPLOYEE BENEFIT ASSETS AND LIABILITIES (Cont.)
42
A.
Changes in the defined benefit obligation
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Defined benefit obligations as at January 1 |
1,944 |
2,478 |
Expenses recognized in profit or loss: |
||
Current service costs |
75 |
96 |
Past service cost |
16 |
28 |
Interest costs |
72 |
42 |
Loss (gain) from remeasurement in other comprehensive income: |
||
Actuarial gain arising from changes in financial assumptions |
(36) |
(363) |
Return on plan assets (excluding amounts included in net interest |
||
expenses) |
1 |
(5) |
Other actuarial loss |
21 |
11 |
Changes in respect of foreign exchange differences |
12 |
31 |
Other adjustments: |
||
Benefits paid |
(29) |
(67) |
Changes in respect of foreign exchange differences |
(68) |
(307) |
Defined benefit obligation as at December 31 |
2,008 |
1,944 |
B.
Changes in the fair value of plan assets
Plan assets comprise assets held by a long-term employee benefit fund or qualifying
insurance policies.
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Fair value of plan assets as at January 1 |
1,530 |
1,747 |
Income recognized in profit or loss: |
||
Interest income |
35 |
30 |
Gain (loss) from remeasurement in other comprehensive income: |
||
Return on plan assets (excluding amounts included in net interest |
||
expenses) |
37 |
(18) |
Other actuarial loss |
(5) |
(31) |
Changes in respect of foreign exchange differences |
- |
2 |
Other adjustments: |
||
Contributions by employer |
- |
(65) |
Benefits paid |
74 |
70 |
Changes in respect of foreign exchange differences |
(44) |
(205) |
Defined benefit obligation as at December 31 |
1,627 |
1,530 |
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: -
EMPLOYEE BENEFIT ASSETS AND LIABILITIES (Cont.)
43
C.
The principal assumptions underlying the defined benefit plan
2023 |
2022 |
|
% |
% |
|
Discount rate (*) |
3.11 |
2.69 |
Expected rate of salary increase |
3 |
3 |
(*) The discount rate is the yield at the reporting date on high quality NIS-denominated
corporate debentures that have maturity dates approximating the terms of the Group’s
obligations.
Assumptions regarding future mortality are based on published statistics and mortality
tables.
D.
Sensitivity analysis
Below are reasonably possible changes at the end of the reporting period in each
actuarial assumption assuming that all other actuarial assumptions are constant:
Change in |
|
defined benefit |
|
obligation |
|
$ thousands |
|
December 31, 2023: |
|
Sensitivity test for changes in the expected rate of salary increase |
|
The change as a result of: |
|
Salary increase of 1% |
94 |
Salary decrease of 1% |
(65) |
Sensitivity test for changes in the discount rate of the plan assets and liability |
|
The change as a result of: |
|
Increase of 1% in discount rate |
(64) |
Decrease of 1% in discount rate |
89 |
E.
Effects of the Group's defined benefit plan on its future expected cash flows
The expected contributions to the plan in 2024 are USD 76 thousand.
The average weighted life of the plan as of December 31, 2023 is 8.06 years (as of
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
44
TAXES ON INCOME
A.
Tax laws applicable to the Group
’s
companies
1.
The Dollar regulations
The Company, being a "foreign investment company", elected to be taxed as from the year
2009, based upon its results in dollars and according to applicable income tax regulations
(hereinafter - "the Dollar regulations").
2.
Tax benefits under the Law for the Encouragement of Capital Investments - 1959 ("the
Investment Law")
The Company is subject to the Law for the Encouragement of Capital Investments - 1959
which was amended last in 2010 (hereinafter -
“the Amendment to the Law”). The
Amendment to the Law provisions applies to preferred income derived or accrued in 2011
and thereafter by a preferred company, per the definition of these terms in the Amendment
to the Law.
The Amendment provides that only companies in Development Area A will be entitled to
the grants track and that they will be entitled to receive benefits under this track and under
the tax benefits track at the same time. In addition, a preferred enterprise track was
introduced, which mainly provide a uniform and reduced tax rate for all the company’s
income entitled to benefits. On August 5, 2013 the Knesset passed the Law for Changes in
National Priorities (Legislative Amendments for Achieving Budget Objectives in the
Years 2013 and 2014) - 2013, which raised the tax rates on preferred income as from the
2014 tax year as follows: 9% for Development Area A and 16% for the rest of the country.
As stated in Note 1, the Company's factory is not located in Development Area A, and
therefore the Company's tax rate on preferred income is 16%.
The Amendment to the Law also provides that no tax will apply to a dividend distributed
out of preferred income to a shareholder that is a company, for both the distributing
company and the shareholder. A tax rate of 20% shall apply to a dividend distributed out
of preferred income to an individual shareholder or foreign resident, subject to double
taxation prevention treaties.
The Company complies with the conditions provided in the amendment to the Law for the
Encouragement of Capital Investments for inclusion in the scope of the tax benefits track.
On November 15, 2021 the Economic Efficiency Law (Legislative Amendments for the
2021 and 2022 Budget Years) - 2021 (hereinafter: "the Economic Efficiency Law") was
published as well as a Temporary Order to the Law for the Encouragement of Capital
Investments - 1959 (hereinafter: "the temporary order"), which offers a reduced tax rate
arrangement to companies that received an exemption from corporate tax under the
aforesaid law. The temporary order provided that companies that choose to apply the
temporary order, which is effective until November 14, 2022, will be entitled to a reduced
tax rate on the "release" of exempt profits (hereinafter: "the beneficiary corporate tax
rate"). The release of exempt profits makes it possible to distribute them at a reduced rate
of corporate tax at the company level based on the rate of the profits being distributed
pursuant to the conditions set forth in the Amendment.
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: -
TAXES ON INCOME (Cont.)
45
The reduced corporate tax rate will be determined according to the rate of exempt profits
the company chooses to release from its entire exempt profits, and will be between 40%
and 70% of the corporate tax rate that would have applied to the revenue in the year it was
produced if it had not been exempt, but in any event no less than 6%.
Furthermore, a company that chooses to release its exempt profits and pay a beneficiary
corporate tax rate will be required to invest in its enterprise, within a period of 5 years
beginning from the tax year it elected, an amount calculated according to a formula
provided in the temporary order (30% of the exempt income multiplied by the corporate
tax rate and multiplied by the release rate). The investment will be made in productive
assets (with the exclusion of buildings), research and development in Israel and salaries to
new employees of the enterprise. Failure to comply with this condition will require the
company to pay additional corporate tax.
In addition, according to the Economic Efficiency Law an amendment was made to
Section 74 of the Law for the Encouragement of Capital Investments - 1959 with respect
to identifying the sources of dividend distributions as from August 15, 2021.
The Company applied the temporary order in 2022
. In accordance with the Company’s
decision and pursuant to the temporary order, the dividend payment made in June 2022
was subject to a beneficiary corporate tax rate, at the amount of USD 919 thousand, which
was paid in April 2022.
3.
Tax benefits under the Law for the Encouragement of Industry (Taxes), 1969
The Company currently qualifies as an “Industrial Company” as defined in the Law for the
Encouragement of Industry (Taxes) - 1969 and accordingly it is entitled to benefits, of
which the most significant one is higher rates of depreciation than those prescribed in the
Israeli tax ordinance.
B.
Tax rates applicable to the Group
1.
The Israeli corporate income tax rate was 23% in 2023 and 2022.
Current taxes for the reported periods and deferred tax balances as at December 31, 2023
and 2022 are calculated according to the tax rate presented above. See also Note 13A(2)
above.
2.
The principal tax rates applicable to the subsidiaries whose place of incorporation is
abroad are:
A.
A company incorporated in the U.S - Payton America is subject to the tax rate of its
country of domicile. The primary tax rates applicable to the subsidiary are 21% Federal
Tax and 5.5% State Tax.
B.
A company incorporated in the UK - Himag Planar is subject to the tax rate of its
country of domicile. The primary tax rate applicable to the subsidiary is 19%.
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: -
TAXES ON INCOME (Cont.)
46
C.
Final tax assessments
The Company has final tax assessments up to and including the 2017 tax year.
With few exceptions the U.S. subsidiary is no longer subject to U.S. Federal income tax
examinations by tax authorities for years before 2020.
Deferred tax assets and liabilities
Composition:
Statements of |
Statements of |
|||
financial position |
profit or loss |
|||
December 31, |
Year ended December 31, |
|||
2023 |
2022 |
2023 |
2022 |
|
| $ thousands |
||||
Deferred tax liabilities: |
||||
Property, plant and equipment |
(1,121) |
(1,183) |
62 |
(28) |
Investment in investees |
(104) |
(56) |
(50) |
(50) |
Others |
(246) |
(153) |
(93) |
83 |
(1,471) |
(1,392) |
|||
Deferred tax assets: |
||||
Employee benefits |
160 |
178 |
(11) |
(25) |
160 |
178 |
|||
Deferred tax expenses |
(92) |
(20) |
||
Deferred tax assets liabilities, net |
(1,311) |
(1,214) |
||
Deferred taxes in respect of companies in Israel are calculated according to the tax rate
anticipated to be in effect on the date of reversal as stated above. Deferred taxes in respect of
foreign subsidiary are calculated according to the relevant tax rates.
As at December 31, 2023 a deferred tax liability in the amount of USD 786 thousand (2022:
USD 696 thousand) for temporary differences in the amount of USD 3,419 thousand (2022:
USD 3,027 thousand) related to investment in a subsidiaries was not recognized because the
Company is able to control the timing of the reversal of the temporary differences and it is
probable that the temporary differences will not reverse in the foreseeable future.
As at December 31, 2023 deferred tax assets have not been recognized mainly in respect of
capital tax losses in the amount of USD 722
thousand (year ended December 31, 2022: USD
USD 585 thousand, respectively) since currently it is not probable that future taxable profit
will be available, against which the Group can utilize the benefits.
As at December 31, 2022 deferred tax assets have not been recognized mainly in respect of
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: -
TAXES ON INCOME (Cont.)
47
E.
Taxes on income relating to items recorded in other comprehensive income
Year ended December 31 , | ||
2023 | 2022 | |
$ thousands | $ thousands | |
Actuarial gain from defined benefit plans | (7) | (53) |
Company's share of the other comprehensive loss | ||
of equity accounted investee | 2 | - |
(5) | (53) | |
F.
Taxes on income included in profit or loss
Year ended December 31 , | ||
2023 | 2022 | |
$ thousands | $ thousands | |
Current taxes | 3,142 | 3,033 |
Deferred taxes (see also D above) | 92 | 20 |
Taxes in respect of previous years | - | 919 |
3,234 | 3,972 | |
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: -
TAXES ON INCOME (Cont.)
48
Theoretical tax
The reconciliation between the tax expense, assuming that all the income, expenses, gains and
losses in profit or loss were taxed at the statutory tax rate and the taxes on income recorded in
profit or loss is as follows:
Year ended December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Profit before taxes on income |
18,500 |
17,889 |
Statutory tax rate |
23% |
23% |
Tax computed at the statutory tax rate |
4,255 |
4,114 |
Increase (decrease) in taxes on income resulting from the following: |
||
Tax benefit arising from preferred income tax rates by virtue of the |
||
Encouragement Law |
(1,004) |
(931) |
Non-deductible expenses and tax-exempt income, net |
64 |
19 |
Group's share of losses of equity accounted investee |
- |
(61) |
Tax saving in respect of foreign subsidiaries |
(79) |
(36) |
Taxes in respect of previous years |
- |
919 |
Others |
(2) |
(52) |
3,234 |
3,972 |
|
A.
According to a Management Services Agreement signed between the Company and Wichita
Ltd., a management company under the full control of Mr. David Yativ (approved by the
Company's General meeting dated September 20, 2023), David Yativ will continue to provide
management services as the Active Chairman of the Company for a period of 3 years, as of
November 1, 2023. For providing these management services, Wichita Ltd. will be entitled to
a monthly management fee of USD 53 thousand (linked to the Israeli consumer price index
according to the base index known on April 15, 2023) and an annual bonus calculated as 3.4%
of the Company’s annual profit before taxes on income and before any other profit based
bonus.
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14: - COMMITMENTS (Cont.)
49
B.
According to a Management Services Agreement signed between the Company and Yaarh -
Looking To The Future Ltd., a management company under the full control of Mr. Doron
Yativ (approved by the Company's General meeting dated September 20, 2023), Doron Yativ
will continue to provide management services as the Company's C.E.O, for a period of 3
years, as of November 1, 2023. For providing these management services, Yaarh - Looking
To The Future Ltd. will be entitled to a monthly management fee of USD 27 thousand (linked
to the Israeli consumer price index according to the base index known on April 15, 2023)
which shall be raised by 3% in April each year, and an annual bonus calculated as 2% of the
Company’s annual profit before taxes on income and before any ot
Share capital - Composition
Number of shares |
||
Authorized |
Issued and paid |
|
December 31, 2023 and 2022 |
||
Ordinary shares of NIS 1 each |
20,000,000 |
17,670,775 |
The holders of ordinary shares are entitled to receive dividends as declared from time to time
Dividends
The following dividends were paid by the Company:
Year ended December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
USD 0.480 per ordinary share |
8,482 |
- |
USD 0.454 per ordinary share |
- |
8,023 |
After the reporting date, on January 24, 2024, the Company declared a dividend for the
financial year 2023 in the amount of USD 10,072 thousand (paid on March 5, 2024). This
amount was not recognized as distribution to the owners in the period and no liability was
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
50
ADDITIONAL INFORMATION TO PROFIT OR LOSS ITEMS
Additional information on revenues
Year ended December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Export |
53,567 |
59,029 |
Israel |
1,289 |
1,241 |
54,856 |
60,270 |
|
Revenues from principal customers which each accounts for 10% or more of total revenues
reported in the financial statements:
Year ended December 31, |
||
2023 |
2022 |
|
% |
% |
|
Customer A |
15 |
29 |
Customer B |
16 |
17 |
Customer C |
14 |
* |
* Less than 10% of the sales of the Group
Geographical information
Segment revenue based on the geographical location of customers:
Year ended December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Israel |
2,200 |
3, 392 |
Europe |
11,652 |
10,146 |
America |
10,772 |
9,914 |
Asia |
30,232 |
36,818 |
54,856 |
60,270 |
|
:
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16: -
ADDITIONAL INFORMATION TO PROFIT OR LOSS ITEMS (Cont.)
51
Cost of sales
Year ended December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Materials consumed* |
23,616 |
28,646 |
Salaries and related benefits |
5,272 |
5,560 |
Depreciation |
543 |
541 |
Other manufacturing expenses |
1,236 |
1,462 |
Change in inventory of finished products and work in process |
86 |
(431) |
30,753 |
35,778 |
|
* Includes inventory write-off of USD 142 thousand and USD 218 thousand for the years
C.
Selling and marketing expenses
Year ended December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Salaries and related benefits** |
975 |
973 |
Sales commissions |
777 |
689 |
Advertising and marketing |
70 |
52 |
Exhibits and travel abroad |
173 |
141 |
Other |
157 |
77 |
2,152 |
1,932 |
|
** Includes expenses related to related parties in the amount of USD 435 thousand for each of
the years ended December 31, 2023 and 2022 (see Note 17C).
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16: -
ADDITIONAL INFORMATION TO PROFIT OR LOSS ITEMS (Cont.)
52
General and administrative expenses
Year ended December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Salaries and related benefits |
1,230 |
1,255 |
Maintenance and communications |
316 |
271 |
Depreciation |
285 |
338 |
Professional services |
295 |
294 |
Management fees and related benefits to |
||
related parties (see note 17) |
1,134 |
1,104 |
Other |
603 |
602 |
3,863 |
3,864 |
|
Other income (expenses), net
Year ended December 31, |
||
2023 |
2022 |
|
$ thousands |
$ thousands |
|
Capital gain (loss) on sale of property, plant and |
||
equipment, net |
(145) |
57 |
Impairment loss of an option in an equity accounted |
||
investee (see note 8B) |
(100) |
- |
(245) |
57 |
|
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16: -
ADDITIONAL INFORMATION TO PROFIT OR LOSS ITEMS (Cont.)
53
Finance income (expenses)
Year ended December 31, | ||
2023 | 2022 | |
$ thousands | $ thousands | |
Finance income | ||
Interest income from bank deposits and cash | 1,947 | 447 |
Income from marketable securities, net | 76 | - |
Other | - | 3 |
2,023 | 450 | |
Finance expenses | ||
Bank charges and others | 33 | 35 |
Interest for delayed tax payments | 23 | 17 |
Net loss from marketable securities | - | 76 |
Net loss from change in exchange rates | 77 | 122 |
Other | 9 | - |
142 | 250 | |
BALANCES AND TRANSACTIONS WITH INTERESTED AND RELATED PARTIES
Balances with key management personnel and interested and related parties
December 31, 2023
Key | Key | ||||
management | management | ||||
Equity | personnel | personnel not | Directors not | ||
accounted | The Parent | employed by | employed by | employed by | |
investee | Company | the Group | the Group | the Group | |
$ thousands | $ thousands | $ thousands | $ thousands | $ thousands | |
Payables: | |||||
Short-term employment | |||||
benefits | - | - | 99 | - | - |
Post-employment benefits | - | - | 27 | - | - |
Trade payables | 152 | - | - | - | - |
Other payables | - | - | - | 723 | 9 |
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
54
December 31, 2022
Key | Key | ||||
management | management | ||||
Equity | personnel | personnel not | Directors not | ||
accounted | The Parent | employed by | employed by | employed by | |
investee | Company | the Group | the Group | the Group | |
$ thousands | $ thousands | $ thousands | $ thousands | $ thousands | |
Receivables: | |||||
Other accounts receivable | 287 | 82 | - | - | - |
Payables: | |||||
Short-term employment | |||||
benefits | - | - | 109 | - | - |
Post-employment benefits | - | - | 33 | - | - |
Trade payables | 125 | - | - | - | - |
Other payables | - | - | - | 706 | 12 |
B.
Transactions with related parties
Equity accounted investee | ||
Year ended December 31, | ||
2023 | 2022 | |
$ thousands | $ thousands | |
Purchases | 9,504 | 14,857 |
Compensation to key management personnel and interested parties
For the year ended December 31, 2023
Key | Key | ||
management | management | ||
personnel | personnel not | Directors not | |
employed by | employed by | employed by | |
the Group | the Group (*) | the Group | |
$ thousands | $ thousands | $ thousands | |
Short-term employee benefits | 510 | - | - |
Post-employment benefits | 51 | - | - |
Other | - | 1,604 | 38 |
Total | 561 | 1,604 | 38 |
Number of people | 3 | 2 | 3 |
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17: -
BALANCES AND TRANSACTIONS WITH INTERESTED AND RELATED PARTIES
(Cont.)
55
For the year ended December 31, 2022
Key |
Key |
||
management |
management |
||
personnel |
personnel not |
Directors not |
|
employed by |
employed by |
employed by |
|
the Group |
the Group (*) |
the Group |
|
$ thousands |
$ thousands |
$ thousands |
|
Short-term employee benefits |
500 |
- |
- |
Post-employment benefits |
(48) |
- |
- |
Other |
- |
1,571 |
39 |
Total |
452 |
1,571 |
39 |
Number of people |
5 |
2 |
3 |
(*) Management fees and related benefits to Wichita Ltd. (see Note 14A) and to Yaarh-
Looking To The Future Ltd. (see Note 14B) include an amount of USD 184 thousand and
an amount of USD 251 thousand, respectively, for each of the years ended December
2023, and 2022, recorded as selling and marketing expenses.
Inter-company transactions between the Company and its two fully owned subsidiaries
(Payton America Inc. and Himag Planar Magnetics Ltd.) include, inter alia, the following:
engineering
support,
purchasing
and
subcontracting,
marketing,
administrative
and
management services. All the inter-company transactions are being eliminated within these
D.
Commitments
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
56
NET EARNINGS PER SHARE
Details of the number of shares and income used in the computation of net earnings per share:
Year ended December 31, | ||
2023 | 2022 | |
Net profit attributable to equity holders of the Company | ||
($ thousands) | 1 5 , 266 | 13,917 |
Weighted number of shares (*) | 17,671 | 17,671 |
Basic and diluted earnings per ordinary share (in US$) | 0. 86 | 0.79 |
(*) The Company has no dilutive instruments. Data relates to the computation of basic and
The Group has one operating segment, the transformer segment. The Group’s chief operating
decision maker (hereinafter: "CODM") makes decisions and allocates resources with respect to all
the transformers as a whole.
Geographical information
Non-current assets (property, plant and equipment and intangible assets) are based on the
geographical location of the assets:
December 31, | ||
2023 | 2022 | |
$ thousands | $ thousands | |
Israel | 8,6 46 | 9,052 |
Europe | 561 | 690 |
America | 645 | 592 |
9,852 | 10,334 | |
PAYTON PLANAR MAGNETICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
57
EVENTS AFTER THE REPORTING DATE
A.
On January 24, 2024, the Company
’s Board of Directors
decided to pay the shareholders a
dividend for the financial year 2023 in the amount of USD 10,072 thousand.
The dividend per share is USD 0.57, paid on March 5, 2024.
B.
On February 14, 2024, the Parent Company, Payton Industries Ltd, entered into an agreement
with FIMI ISRAEL OPPORTUNITY 7, a Limited Partnership, and FIMI Opportunity 7, LP a
Limited Partnership (together hereinafter: "FIMI"), to allocate 1,468,057 ordinary shares of
the Parent Company (hereinafter: "Allocated Shares") which, subject to their allocation, shall
constitute approximately 17.76% of the Parent Company's issued and outstanding share
capital and voting rights (hereinafter: the "Share Purchase Agreement"), all conditional upon
the occurrence of certain conditions.
Simultaneously Mr. David Yativ, the controlling shareholder of the Parent Company
(hereinafter: "Yativ") has entered into an agreement to sell to FIMI 1,000,000 shares of the
Parent Company, constituting around 12.09% of the Parent Company's share capital.
Furthermore, FIMI and Yativ agreed on the terms of a shareholders' rights agreement that will
be executed on the closing of the transaction.
It is hereby clarified that the completion of the Share Purchase Agreement and the other
transactions described above (hereinafter: "the FIMI Transaction") are subject, inter alia, to
the approval of the Parent Company
’s
Shareholders' meeting, to be held on April 8, 2024.
C.
On February 28, 2024 the Parent Company's board of directors has decided to grant certain
employees of the Company with options to purchase shares of the Parent Company, according
to the Parent Company's incentive option plan and subject to the completion of the FIMI
Transaction and to the approval of the updated remuneration policy by the Company
Shareholders' meeting.
Among the above-mentioned employees: Mr. Doron Yativ (David Yativ
’
s son, serves as
director and the CEO of the Company) and Mr. Amir Yativ ( David Yativ
’
s son, serves as an
engineering and development manager) who will be granted with 30,000 and 20,000,
respectively, non-marketable options of the Parent Company.
D.
On March 7, 2024, the Company's remuneration committee and the Board of Directors have
examined the updated remuneration policy, found it fair, logic and appropriate and decided to
approve it. In addition the above mentioned quorums approved the Company's participation in
the service fee of FIMI for the consulting services to be provided to Payton Group as part of
the FIMI Transaction, for a period of 3 years, for a monthly payment of NIS 40 thousands to
be shared equally between the Company and the Parent Company (the participation amount
shall be examined and adjusted on a yearly basis according to the actual services). The above
resolutions are subject to the approval of the Company's shareholders' meeting, to be held on