Final Results

RNS Number:9025L
Gilat Satcom Limited
16 January 2008



                                GILAT SATCOM LTD

             FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2007

 Q4 ended with record quarterly revenues of $12.7 million; $1.1 million profit
                                  before tax;
  Second consecutive profitable quarter of significant growth in revenues and
     continuous improvement in gross margins, operating margins and EBITDA

Financial Highlights
Figures in           Q4      Q3      Q2       Q1     Year ended     Year ended
US$000s            2007    2007    2007     2007    31 December    31 December
                                                           2007           2006

Revenues         12,653   9,378   9,038    8,710         39,779         37,084
Gross profit      3,669   2,343   1,917    1,789          9,718          9,681
Gross margin
(%)                29.0    25.0    21.2     20.5           24.4           26.1
Operating
profit (loss)     1,320     279    (139)    (798)           662          1,385
Operating
margin (%)           10       3      (2)      (9)           1.7            3.7
EBITDA            2,909   1,837   1,402      731          6,878          7,163
Profit (loss)
before tax        1,125      58    (385)  (1,133)          (335)           252
Net profit          885     265    (438)    (704)             8            377

2007 has been a year of major changes for the company. After a change of
ownership and management, the company went through organizational changes
focusing on increasing sales and enhanced customer services to achieve higher
revenues and profitability. Our efforts resulted moderate improvements in Q3
2007 and more significantly - record revenues of $12.7 million and profit before
tax of $1.1 million in the last quarter of this year.

In the last quarter of the year we succeeded to expand our customer base and
sales to existing customers in the following areas:

* Internet backbone connectivity to large telcos and ISPs - We expanded our
  services to existing customers and to penetrate new territories, while signing
  agreements with new customers in Africa.
* VSAT over KU service - We successfully launched our services in Nigeria
  targeting the smaller businesses with this entry level product.
* Nigeria - We opened our office following the license we received from the
  Nigerian Communication Commission (NCC)
* NetApp - We increased our revenues from sales to large organizations such
  as banks, cellular operators and telcos
* Voice services - we increased revenues from Voice over IP services in
  Africa.

These business efforts generated over $12.7 million of revenues in the fourth
quarter of 2007 with a significant portion of recurring revenues which will
continue into 2008.

The increase in revenues from services using our existing space capacity of over
15 different satellites, resulted in profit before tax of $1.1 million in the
fourth quarter. The positive results of the second half of the year and the
trend of the last two quarters following the appointment of the new CEO are
encouraging. The Board believes that the change of new management with focus on
sales and increased efficiency will generate additional profits for our
shareholders.

Amikam Shorer, Chairman
January 16, 2008

Contacts:

Gilat Satcom Ltd.:                                  [phone]
Liat Helman, CFO

Seymour Pierce                                      [phone]
Stuart Lane or John Depasquale


Chief Executive Officer's statement

Overview

By the end of the third quarter we could see the first indications of change.
The fourth quarter brought actual results, with revenues of $12.7 million, an
increase of 35% compared to the previous quarter and EBITDA of $2.9 million an
increase of 58% compared to the previous quarter. In additions, gross and
operating margins improved as well as profit before tax and net profit.
In the second half of 2007, we reorganized the company in a customer centric
structure. Changes were made in the sales and operation divisions. A new VP of
Customer Services was appointed, while account management was integrated with
the sales team. We went through a review of cross company procedures, focused on
customers and sales, while utilizing our resources in a more efficient way.
Increased sales and profitability were the direct results of the sales effort
and improved customer service.
Full year results were affected by a write-off of a debt and unrecognized
revenues of a large customer of approximately $1.3 million, whereas the related
expenses have been fully accrued.
Although the general results for 2007 were lower than expected, our cash flow
from operations remained strong and allowed us to return approximately US$4.9
million of loans to banks.

Business development and growth

Our targets for 2007 were to focus on our existing markets in Africa and to
expand our customer base. To achieve those targets we increased sales and
marketing efforts in this important continent, opened a local office in Nigeria
and have launched new services such as VSAT over KU band.

Internet backbone connectivity sales to large telcos and ISPs: In this area we
were able to expand our services to our existing customer portfolio in the
different territories, and to sign new agreements with new customers in Africa.
These deals include:

   * Expansion of an agreement with an East African customer for a period of
     one year with an annual revenue value of over $2.0 million.
   * A new agreement with a large ISP, in one of the East African countries,
     to provide internet backbone connectivity with an annual revenue value of
     US$ 1.4 million.

We opened our Nigerian subsidiary and received an International Data Access
license from the NCC. We also recruited a manager for this office. We see our
Nigerian subsidiary as a strategic step, to become a local player in this
important market. Nigeria is the most populous country in Africa with nearly 140
million people, and with a fast growing market for telecommunication services.

We launched our VSAT over KU service aiming the smaller businesses mainly in
Nigeria. During the second half of the year hundreds of new customers have
joined this new service.

During the fourth quarter we received an order to provide VPN connectivity for
three governmental organizations in Africa for an annual value of approximately
$700,000

We increased our revenues from Netapp sales to large organizations such as
banks, cellular operators and telcos in Africa. The fourth quarter was
especially strong in Netapp sales ($1.7 million), with orders from governmental
and banking organizations using their 2007 budgets.

Outside Africa we received an order for a turn-key project to establish an
international satellite based communication network with coverage over 4
continents. The contract is from a customer in Asia for a total consideration of
$3.5 million for a turnkey project including ongoing service and network
operation for two years. We believe that most of the revenues from this project
will be recognized during the first 6 months of 2008.

We continue to focus on acquiring satellite transponder capacity at suitable 
price levels, while investing in new technologies combined with tight resource 
planning in order to increase efficiency in utilization of space segments. Most 
of the new transactions were carried out on our existing satellite capacity 
network over 15 different satellites without additional costs. This utilization 
generated profit before tax of $1.1 million in the fourth quarter.

Review of results

Total revenues for the year ended 31 December 2007 rose 7% to US$39.8 million
(2006: US$37.1 million). Revenues for the fourth quarter of 2007 were $12.7
million representing 35% increase compared to the previous quarter and 20.6%
increase compared to the fourth quarter of 2006. The significant increase in
revenues in the last quarter of 2007 came primarily from backbone services,
NetApp sales and also from sales of VoIP services.

2007 results reflect management's decision to write-off a debt owed by a large
customer of $1.3 million, whereas the related expenses have been fully accrued.
Out of this amount $942,000 are unrecognized revenues related to services
provided in 2007 and an additional $359,000 are a provision for doubtful
accounts related to the fourth quarter of 2006. This loss had a negative effect
of the total outcome of 2007.

Cost of services increased from US$27.4 million or 74% of revenues in 2006 to
US$30.1 million or 76% of revenues in 2007. Cost of sales increased mainly due
to the increase of space segment prices since July 2006 and also from new space
segments leased at the end of 2006. In addition, the cost of sales included
direct expenses for revenues of approximately $942,000 which were not recognized
due to collection issues as described above.

Gross margins Gross margin in the fourth quarter of 2007 was 29.0% compared to
25% in the third quarter of 2007 and compared to 21.2% and 20.5% in the second
and first quarter of the year. This trend of improvement is primarily due to the
increase in backbone connectivity services mostly by using the same satellite
capacity network we had before. The better utilization of space segment and
implementation of new advanced technologies allowed us increased efficiency and
profits. We believe that our continuous efforts will help us to further improve
the gross margins. However, for the full year gross margin decreased from 26% in
2006 to 24% in 2007 as a result of the increase in the cost of goods as
mentioned above.

Sales, marketing and G&A expenses increased from US$8.3 million in 2006 to
US$9.1 million in 2007 and as a percentage of revenue, from 22.4% in 2006 to
22.8% in 2007. The main reasons for the increase were the increase in the cost
of salaries and in agent's commissions which resulted from (i) a 9% depreciation
in the value of the USD against the NIS, (ii) higher sales commissions and (iii)
the change of management during the third quarter.

Operating profit for the fourth quarter of the year was 13 million or 10.4% from
revenues due to the increased revenues and efficiency. The operating profit for
2007 was US$662,000 or 1.7% of total revenue, compared to US$1.4 million or 3.6%
of total revenue in 2006. The decrease in operating profit and margin is due to
the significant operating loss in the first 6 months of the year which included
the doubtful account as detailed above.

2007 EBITDA was US$6.9 million or 17.3% of total revenue, compared to US$7.2
million or 19.3% of total revenue in 2006. EBITDA for the fourth quarter of 2007
was 2.9 million or 23.0% of revenues.

Financial expenses for 2007 were $1.0 million compared to $1.1 million in 2006.

Income Tax benefit for 2007 was $343 thousands compared to a tax benefit of $125
thousands in 2006. Since we are incorporated in Israel our tax results are
measured in NIS. The devaluation of the USD against the NIS had a significant
effect on our tax expenses.

Net Profit for 2007 was US$8 thousands compared with a net profit of US$377
thousands in 2006. Net profit for the fourth quarter of 2007 was $885 thousands.

Balance sheet overview

As of 31 December 2007, cash and cash equivalents were US$3.5 million, compared
to US$6.2 million in 31 December 2006. Net Debt (bank debt less cash) as of 31
December 2007 was US$3.2 million compared to US$5.4 million on 31 December 2006.
The decrease in cash was due to the fact that we utilized our cash flow from
operations to pay down US$4.9 million of bank debt during the year as well as
for payment of $2.1 million in advance for space segments for the years
2008-2009.

In May 2007 following the change of ownership in the company, we released a bank
deposit of $3 million which was deposited against our loans, reduced the
interest rate on various loans and cancelled the financial covenants previously
agreed with the bank.

Current assets for 31 December 2007 totaled US$7.6 million including US$3.5
million cash, US$2.6 million receivables and US$1.5 inventory. Current assets
for 31 December 2006 totaled US$10.3 million and included US$6.2 million cash,
US$3.1 million receivables and US$1.0 inventory. The increase in inventory was
due to a specific project which the company won to provide a comprehensive
solution, in which equipment components were delivered during the fourth quarter
but revenues were not recognized since installation is still required. We expect
that we will recognize most of these revenues in the first 6 months of 2008.
Non current Assets for 31 December 2007 were US$27.1 million, compared to
US$29.4 million on 31 December 2006. Major changes included the depreciation of
fixed assets and intangible assets, offset by new investments in fixed assets
and in a fiber optic project "Eassy" as mentioned below.

Current Liabilities for 31 December 2007 were US$14.8 million, compared to
US$8.6 million on 31 December 2006. The main increase in current liabilities is
the current maturity of 7.5 million for a satellite lease which is due in
December 2008. According to our agreement with the provider we have the option
of not renewing the lease and not to pay this amount. However, we expect to
continue the lease according to the original terms.

Non current liabilities for 31 December 2007 were US$4.8 million, compared to
US$16.1 million on 31 December 2006. The decrease was mainly due to the pay down
of bank loans and the change in the lease liability from long term to current
maturities.
Shareholders' equity for 31 December 2007 is US$15.0, compared to US$15.2 on 31
December 2006.

Strategy

We have achieved our main goal of 2007 of regaining profitability. In 2008 we
will continue to focus on increasing profits to our shareholders. We expect we
can generate significant profits by increasing sales on the one hand and
focusing on satellite efficiency on the other.

In 2008-2009 we will be targeting the following:

   * Expanding our African presence by opening local offices and adding local
     resellers
   * increasing sales in other territories such as Central Asia and East
     Europe
   * Promoting our project based sales, using our vast satellite
     communication experience.
   * Further expanding our service offering as we did during the past year
   * Promoting Mobile Satellite Services offerings which we have today mainly
     in Israel, into other markets.
   * Examining new opportunities for fiber connectivity to Africa

Looking forward, our target is to become a service provider for the developing
world for more then satellite services. In May 2007 we announced our decision to
invest and purchase bandwidth capacity for approximately $2.6 million in the
Eastern Africa Submarine Cable System project ("Eassy"). As one of the parties
in this project we will have long-term bandwidth capacity, enabling us to
increase our penetration of the East African market for broadband internet
services. Following our decision, we invested $1.3 million in 2007 the reminder
will be paid in 2008-2012.

Eassy is a US$235 million project to build an undersea fibre optic telecoms
cable servicing the east coast of Africa, which will have connectivity to the
world-wide internet backbone. Its construction is being funded by a consortium
of East African national and international telecoms service providers. Eassy is
scheduled to be ready for commercial use at the beginning of 2010.

Further focus on sales and profitability growth together with business
development efforts and continuous strategic examination will fulfil our vision
to enhance our telecommunications services for the developing world using a
variety of technologies and infrastructures and creating value for our
shareholders.

Roy Hess, CEO
16 January 2008

                               GILAT SATCOM LTD.
                          CONSOLIDATED BALANCE SHEETS
                            IN THOUSAND U.S. DOLLARS

                                                              December 31
                                                         2 0 0 7       2 0 0 6
ASSETS

CURRENT ASSETS
Cash and cash equivalents                                  3,439         5,916
Short-term deposits                                           12           248
Trade receivables                                            605         2,315
Other receivables                                          2,025       (*) 803
Inventories                                                1,491         1,011
Total current assets                                       7,572        10,293

NON-CURRENT ASSETS
Property and equipment                                    17,443        20,339
Intangible assets                                          6,245         7,430
Deferred income taxes                                      1,751         1,130
Financial assets available for sale                          660             -
Other                                                      1,010           536
Total non-current assets                                  27,142        29,435

                                                          34,682        39,728

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Current maturities of long term loans from banks and
others                                                     1,900         2,600
Current maturities of obligations under finance leases     7,469           626
Trade accounts payable                                     4,102         3,863
Other payables and current liabilities                     1,352         1,539
Total current liabilities                                 14,823         8,628

NON-CURRENT LIABILITIES
Long-term credit from banks and others                     4,750         8,925
Obligations under finance leases                               -         7,080
Liabilities for severance pay, net                            76            70
Total non-current liabilities                              4,826        16,075

COMMITMENTS AND CONTINGENT LIABILITIES

SHAREHOLDERS EQUITY
Share capital                                                 39            39
Capital reserves                                          15,321        15,321
Accumulated deficit                                         (327)     (*) (335)
                                                          15,033        15,025

                                                          34,682        39,728
(*) Restated - see Note 3

The financial statements were approved by the board of directors and authorized
for issue on January 16, 2008.

They were signed on its behalf by:

AMIKAM SHORER-Chairman        ROY HESS-C.E.O         LIAT HELLMAN-C.F.O


                               GILAT SATCOM LTD.
                         CONSOLIDATED INCOME STATEMENTS
                            IN THOUSAND U.S. DOLLARS

                                                       Year ended December 31,
                                                        2 0 0 7       2 0 0 6

Revenues                                                 39,779        37,084

Cost of revenues                                         30,061        27,403

Gross profit                                              9,718         9,681

Operating expenses:

Selling and marketing                                     3,508         3,206

General and administrative                                5,548         5,090

Total operating expenses                                  9,056         8,296

Profit from operations                                      662         1,385

Financial income                                            226           235

Financial expenses                                       (1,223)       (1,368)

Profit (loss) before income taxes                          (335)          252

Income tax benefit                                          343           125

Net profit (loss) for the year                                8           377

Earnings (loss) per share:
Basic earnings (loss) per share (in dollars)               0.00         0.021

Diluted earning (loss) per share (in dollars)              0.00         0.021

Number of shares used in computing basic earnings
(loss) per share (in thousand)                           17,692        17,692

Number of shares used in computing diluted earnings
(loss) per share (in thousand)                           17,692        17,724



                               GILAT SATCOM LTD.
                         STATEMENT OF CHANGES IN EQUITY
                            IN THOUSAND U.S. DOLLARS

                                     Share     Capital    Accumulated
                                     Capital   reserves   Deficit        Total

Balance as of January 1, 2006             39     15,267   (*) (712)     14,594

Share based payments to employees          -         88             -       88

Capital surplus on account of
deferred                                   -        (34)            -      (34)
tax

Net profit for the year                    -          -           377      377

Balance as of December 31, 2006           39     15,321          (335)  15,025

Loss for the year                          -          -             8        8

Balance as of December 31, 2007           39     15,321          (327)  15,033

(*) Restated - see Note 3.

                                GILAT SATCOM LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            IN THOUSAND U.S. DOLLARS

                                                          Year ended December 31
                                                           2 0 0 7     2 0 0 6
Cash flows - operating activities:
Net Profit for the year                                          8         377
Adjustments to reconcile net profit (loss) to net
cash provided by operating activities:
Depreciation of property and equipment and
amortization of
intangible assets                                            6,216       5,778
Share based payment                                              -          88
Appreciation of finance lease                                  386         381
Appreciation of bank deposits                                  (16)        (88)
Decrease (increase) in trade receivables                     1,710        (345)
Decrease (increase) in other receivables                      (757)        937
Increase in inventories                                       (480)        (11)
Increase in other non current assets                          (940)       (183)
Increase (decrease) in trade accounts payable                  239         615
Increase (decrease) in other payables and current
liabilities                                                   (186)      1,195
Decrease in deferred income taxes                             (353)       (175)
Increase in liabilities for severance pay, net                   6          19
Net cash provided by operating activities                    5,833       8,588

Cash flows - investing activities:
Investment in financial assets available for sale             (660)          -
Repayment of a short- term bank deposit                        252           -
Purchases of property and equipment                         (2,207)     (2,505)
Purchase of intangible assets                                 (196)        (18)
Net cash used in investing activities                       (2,811)     (2,523)

Cash flows - financing activities:
Repayments of loans from banks and others                   (4,875)    (21,805)
Receipt of long term loans from bank                             -      14,825
Receipt of long term loans from shareholders                 2,450           -
Repayment of long term loans from shareholders              (2,450)          -
Repayment of finance lease                                    (624)       (156)
Net cash used in financing activities                       (5,499)     (7,136)

Decrease in cash and cash equivalents                       (2,477)     (1,071)

Cash and cash equivalents at the beginning of the year       5,916       6,987
Cash and cash equivalents at the end of the year             3,439       5,916


Appendix B - Non-cash transaction:

Purchase of property and equipment under finance lease           -      (1,181)


Note 1 - General

a. Gilat Satcom Ltd. was incorporated in Israel and commenced operations in
February 1993.

b. The Company is engaged in providing local and international communications
services. The communications services provided by the Company are mainly via
satellites and consist of broadband connectivity to the internet backbone as
well as voice services, private networks data services and supplementary
services as part of the communications services that it provides.

c. Definitions:

The Company      -   Gilat Satcom Ltd.

Satcom or the    -   Satcom Systems Ltd. - a public company registered in Israel
parent Company       and listed in the Tel Aviv stock exchange.

Subsidiary       -   Controlled company, whose financial statements are
                     consolidated, directly or indirectly, with those of the
                     Company.

Related          -   As defined in IAS 24.
parties

CPI              -   Consumer price index

USD or $         -   The United State of America dollars

GBP              -   Great Britain Pound

NIS              -   The new Israeli Shekel

d. Use of estimates:

The preparation of financial statements in accordance with IFRS requires
estimates and assumptions by the management that affect the amounts reported in
the financial statements and the accompanying notes. Actual results could differ
from the estimates.

e.  Critical accounting judgments and key sources of estimation uncertainty:

In the application of the company accounting policies, which are described in
note 2, the directors are required to make judgments, estimates and assumptions
about the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based
on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimate is revised if the revision affects only that period or in the period of
the revision and future periods if the revision affects both current and future
periods.

Critical judgments in applying accounting policies
The company used critical judgments, apart from those involving estimations (see
below), at the goodwill's valuation, that the directors have made in the process
of applying the entity's accounting policies and that have the most significant
effect on the amounts recognized in financial statements.

Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key
sources of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year. The main estimation made
by the board of directors in the process of applying the entity's accounting
policies and that have the most significant effect are:

1. Collection's probability for revenue recognition.
2. Collection's probability for the purpose of allowance for doubtful debt
3. The company's expected utilization of deferred tax asset.

Note 2 - Significant Accounting Policies

The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") and their interpretations, as published
by the International Accounting Standards Board (IASB). The accounting policies
were applied consistently by all the Group companies. The significant accounting
policies applied in the financial statements, on a consistent basis, are set out
below:

a. Basis of preparation:

The financial statements have been prepared on the historical cost basis.

b. Functional and presentation currency:

The majority of the Company's sales are mainly denominated the U.S. dollar. A
substantial portion of the Company's expenses, mainly cost of revenues and
selling and marketing expenses, are incurred in U.S. dollars or linked thereto.
The majority of the company's assets are purchased in US dollars as well.
Therefore, the Company has determined that the U.S. Dollar is the currency of
the primary economic environment in which that company operates, and thus its
functional and presentation currency.

Foreign Currencies:

Transactions in currencies other than U.S. dollars are recorded at the rates of
exchange prevailing on the dates of the transactions. At each balance sheet
date, monetary assets and liabilities that are denominated in foreign currencies
are translated at the rates prevailing on the balance sheet date. Gains and
losses arising from translation are included in net profit or loss for the
period.

Exchange rates and linkage basis:

Assets and liabilities in or linked to the NIS are included in the financial
statements according to the representative exchange rate as published by the
Bank of Israel on balance sheet date.

Data regarding exchange rates of U.S. dollar in relation to NIS are as follows:

                                                                 Exchange rate
                                                                        1NIS/$
31 December 2007                                                         0.260
31 December 2006                                                         0.237

c. Basis of Consolidation:

The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) as of the
end of each reporting period. Control is achieved where the Company has the
power to govern the financial and operating policies of an investee entity so as
to obtain benefits from its activities.

On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognized as goodwill.

The results of subsidiaries acquired or disposed of during the reporting period
are included in the consolidated income statements from the effective date of
acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group.

All intra-group transactions, balances, income and expenses are eliminated on
consolidation.

d. Cash equivalents:

The Company considers all highly liquid investments originally purchased with
maturities of three months or less to be cash equivalents.

e. Short-term deposits:

The Company classifies deposits with original maturities of more than three
months and less than one year as short-term deposits. The short-term deposits
are presented at cost, including accrued interest.

f. Trade accounts receivable:

Trade receivables are recognized and carried at original invoice amount or
unbilled amount less an allowance for any uncollectible amounts. A specific
estimate for doubtful debts is made when collection of the full amount is no
longer probable. Bad debts are written-off when detected by management.

g. Inventories:

Inventories are stated at the lower of cost and net realizable value. Cost is
determined on the "first in first out" basis. Net realizable value presents the
estimated selling price loss costs necessary to make the sale.

h. Property and equipment:

Property and equipment are stated at cost, less accumulated depreciation and any
accumulate impairment losses. Depreciation is calculated by the straight-line
method over the estimated useful lives of the assets at the following annual
rates:

                                                       %
Satellites communication equipment                   10-20 (mainly 10)
Computers and peripheral equipment                   10-33 (mainly 33)
Office furniture and equipment                         6

Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets, or where shorter, the term of the
relevant lease.

i. Leasing:

Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.

Assets held under finance leases are recognized as assets of the Company at the
present value of the minimum lease payments. The corresponding liability to the
lessor is included in the balance sheet as a finance lease obligation. Lease
payments are apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly against income.

j. Intangible assets
Customer portfolio and International satellite communication license are stated
at cost, net of accumulated amortization and accumulated impairment losses.
Amortization is calculated by the straight-line method over their estimated
useful lives:
                                                                         %
Customer portfolio                                                      20
International satellite communication license                        10-14

k. Goodwill:

Goodwill arising from business combinations represents the excess of the cost of
acquisition over the Company's interest in the fair value of the identifiable
assets and liabilities of a subsidiary at the date of acquisition.

Goodwill is stated at cost and is reviewed for impairment at least annually. Any
impairment is recognized immediately in profit or loss and is not subsequently
reversed.

l. Impairment of tangible and intangible assets excluding goodwill:

At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss.

If any such indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if any). Where the
asset does not generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash-generating unit to which the
asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less that its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount.

An impairment loss is recognized as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognized
for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognized as income immediately.

m. Severance pay:

Pursuant to Israeli severance pay law, employees are entitled to one month's
salary for each year of employment or a portion thereof. As a policy, all of the
company's employees are entitled to receive all severance pay payments that were
deposited on their name as a part of their insurance policy regardless whether
they have resigned or have been laid off. Over the years, the average rate of
the increase in the salaries suits common discount rate. Based on these facts,
the Company's liability for severance pay is calculated based on the most recent
salary of the employees multiplied by the number of years of employment, as of
the balance sheet date. The Company's liability for all of its employees is
provided by monthly deposits with insurance policies and by an accrual.
The deposited funds include profits accumulated up to the balance sheet date.
The value of the deposited funds is based on the cash surrender value of the
insurance policies.

n. Equity instruments

A equity instrument is any contract indicating a residual right in the Group's
assets after the deduction of all of its liabilities. Equity instruments that
were issued by the Company are recorded according to the receipts, net of the
expenses related directly to the issuance of these instruments.

o. Revenue recognition:

Revenue is measured at the fair value of the consideration received or
receivable.

1. Sale of goods

Revenue from the sale of goods is recognised when all the following conditions
are satisfied:

   * The Company has transferred to the buyer the significant risks and
     rewards of ownership of the goods;
   * The Company retains neither continuing managerial involvement to the
     degree usually associated with ownership nor effective control over the
     goods sold;
   * The amount of revenue can be measured reliably;
   * It is probable that the economic benefits associated with the
     transaction will flow to the Company; and
   * The costs incurred or to be incurred in respect of the transaction can
     be measured reliably.

2. Revenue from rendering services

The Company records its revenues from rendering of services on a relative basis
over the period of the agreement or performance of the service when it is
probable that the economic benefits associated with the transaction will flow to
the company.

p. Credit costs:

All credit costs are recognized in the statement of operations in the period
they occur.

q. Taxation:

The Company accounts for income taxes under the liability method of accounting.
Under the liability method, deferred taxes are determined based on the
differences between the financial statement and tax basis of assets and
liabilities at enacted tax rates in effect in the year in which the differences
are expected to reverse. Deferred tax assets in respect of carry forward losses
and other temporary deductible differences are recognized to the extent that it
is probable that they will be utilized.

The tax benefit (expense) represents the sum of the tax currently payable and
deferred taxes. Deferred tax is charged or credited in the income statements,
except when it relates to items charged or credited directly to equity, in which
case the deferred tax is also dealt with in equity. Deferred tax liabilities are
not recognized for taxable temporary differences associated with investment in
subsidiaries and associates because the group is able to control the reversal of
the temporary difference and it is probable that the temporary differences will
not reverse in the foreseeable future.

r. Fair value of financial instruments:

The carrying amounts of cash and cash equivalents, short-term bank deposits,
trade receivables, trade payables, obligations under finance leases and
liabilities for severance pay are usually identical, or approximate their fair
value.

s. Share-based Payments

Equity-settled share based payments to employees and others providing similar
services are measured at the fair value of the equity instrument at the grant
date. Fair value is measured using the B&S model. The expected life used in the
model has been adjusted based on management's best estimate, for the effects of
non-transferability, and behavioral considerations.

The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period of each
instatement, based on the Company estimate of awards that will eventually vest.

t. Earning per share

Earning per share is computed based on the number of ordinary shares. Basic
earning per share includes only shares actually existing during the period, and
convertible securities (such as options) are included only in the computation of
fully-diluted earnings per share. Moreover, convertible securities that were
converted during the period are included in the fully-diluted earnings per share
only until the conversion date; as from that date, the securities are included
in basic earnings per share. Options are included in fully-diluted earnings when
their exercise will cause the issuance of shares for consideration that is lower
than the share's market price

u. Adoption of new and revised Standards

At the date of authorisation of these financial statements, the following
Standards and Interpretations were in issue but not yet effective:

   * IAS 1 - Presentation of Financial Statements- Comprehensive revision
     including requiring a statement of comprehensive income - Effective for
     annual periods beginning on or after 1 January 2009.
   * IAS 23 - Borrowing Costs - Comprehensive revision to prohibit immediate
     expensing - Borrowing costs relating to qualifying assets for which the
     commencement date for capitalisation is on or after 1 January 2009.
   * IFRS 8 - Operating Segments - Effective for annual periods beginning on
     or after 1 January 2009.
   * IFRIC 11 - IFRS 2 - Group and Treasury Share Transactions - Effective
     for annual periods beginning on or after 1 March 2007.
   * IFRIC 12 - Service Concession Arrangement - Effective for annual periods
     beginning on or after 1 January 2008.
   * IFRIC 13 - Customer Loyalty Programmes - Effective for annual periods
     beginning on or after 1 July 2008.
   * IFRIC 14 - IAS 19 - The Limit on a Defined Benefit Asset, Minimum
     Funding Requirements and their Interaction - Effective for annual periods
     beginning on or after 1 January 2008.

The directors anticipate that the adoption of these Standards and
Interpretations in future periods will not have material impact on the financial
statements of the Group.






                      This information is provided by RNS
            The company news service from the London Stock Exchange

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