TIDMAFS
RNS Number : 9520A
Amiad Water Systems Ltd
30 March 2017
30 March 2017
Amiad Water Systems Ltd.
("Amiad" or the "Company")
Full Year Results
Amiad (AIM: AFS), a leading global producer of water treatment
and filtration solutions, announces its full year results for the
year ended 31 December 2016.
Financial Summary
-- Revenue was $105.6m (2015: $118.8m)
-- Gross margin was 39.3% (2015: 40.5%)
-- Operating profit was $3.7m (2015: $8.8m)
-- Profit before tax was $3.1m (2015: $6.7m)
-- Fully diluted earnings per share of $0.095 (2015: $0.166)
-- Dividend for 2016 of $0.032 per share (2015: $0.067 per share)
-- Net debt at 31 December 2016 of $8.8m (30 June 2016: $10.4m)
-- Cash and cash equivalents at 31 December 2016 of $16.1m (30 June 2016: $16.2m)
Operational Summary
-- Improved operational efficiency of manufacturing process and supply chain
-- Revenues in the second half of the year were significantly
higher than the first half in every segment except Irrigation,
resulting in slight growth in total revenues compared with the
first half
-- Progress made by Amiad Australia where sales increased by
11.0% primarily due to growth in the Irrigation segment based on
sales of the new Omega and Sigma filters
-- Irrigation segment sales, which accounted for 51.9% of total
revenue, were lower overall primarily due to the drought in
California, US
-- Industrial segment sales decreased to $39.7m (2015: $42.8m),
primarily due to weakness in Asia
-- Sales in the Oil & Gas segment were significantly lower
at $3.9m, compared with a strong 2015 (2015: $11.6m), due to the
lack of projects as a result of the low oil price environment over
much of 2016
-- Municipal segment continued to suffer from lack of investment
in major infrastructure projects by local authorities as revenue
declined to $7.2m compared with $8.9m in 2015
Dori Ivzori, Chief Executive Officer of Amiad, said: "This year
was characterised, as expected, by the lack of multiple
multi-million projects, in particular, in the Oil & Gas
segment, which benefited from some exceptionally large projects in
2015. Also, the Irrigation segment saw a drop in revenues as
projects were postponed in the US as a result of the drought in
California. Half way through the year, the Company reacted rapidly
to align its cost base to the expected lower revenues and redoubled
its sales efforts. The Company benefited from these actions
resulting in slight sequential growth in revenues in the second
half and maintaining annual profitability.
"The momentum of the second half has continued into 2017 as
Amiad entered into the new year with a higher backlog compared with
the same time of the prior year supported by increased customer
demand. We expect good growth in the Irrigation segment this year,
particularly in the US following the recovery from the drought in
California, and anticipate an increase in revenue in the Industrial
segment, primarily in the US and EMEA. However, if the weakness of
the US Dollar against the New Israeli Shekel continues, it has the
potential of having a negative impact. Consequently, the management
is committed to maintaining tight cost control whilst continuing to
invest in targeted sales & marketing. Despite this, we expect
to return to sales growth in 2017 and will be presenting our
five-year strategic plan in September."
Enquiries
Amiad Water Systems Ltd.
-------------------------------- -----------------
Dori Ivzori, Chief Executive
Officer
Irit Ben-Dov, Chief Financial
Officer +972 4 690 9500
-------------------------------- -----------------
Stifel Nicolaus Europe
Ltd.
-------------------------------- -----------------
Stewart Wallace, Ben
Maddison +44 20 7710 7600
-------------------------------- -----------------
Luther Pendragon Ltd.
-------------------------------- -----------------
Harry Chathli, Claire
Norbury +44 20 7618 9100
-------------------------------- -----------------
About Amiad
Amiad Water Systems (AIM: AFS) is a leading global producer of
automatic, self-cleaning water treatment and filtration products
and systems. Through its engineering skills and ability to
innovate, Amiad provides cost-effective "green" solutions for the
industrial, municipal, irrigation, oil & gas and ballast water
markets. In these segments its patented products are being
integrated into the core of systems for filtration and water
treatment, micro irrigation and membrane protection, wastewater and
potable water treatment, cooling systems and sea water
filtration.
Headquartered in Israel, Amiad provides these solutions through
nine subsidiaries and a comprehensive network of over 170
distributors to customers in more than 80 countries.
For additional information or product details, please visit
www.amiad.com.
Operational Review
In 2016, the Company continued to make strong progress in
adjusting its cost structure and maintaining control over its
expenses. As a result, it succeeded in remaining profitable and
slightly reducing net debt despite the lower revenues. The
performance of the business in 2016 was as expected with weakness
experienced across Amiad's segments and geographies, except
Australia that achieved 11.0% growth. The revenues were also lower
compared with the previous year due to a lack of substantial
projects delivered during 2016, although some large projects won
during the year were delayed to 2017. In addition, the revenues
achieved in the second half of the year were significantly higher
than the first six months in every segment except Irrigation, which
resulted in total revenues being slightly higher in H2 than in
H1.
During the year the Company also continued to seek ways of
improving its manufacturing processes. Operational efficiency was
increased due to the Company's previous investment in the polymeric
production process, which resulted in a reduction in the cost of
materials. The Company also invested in its supply chain,
developing an in-house metal fabrication capability, which is
expected to be fully operational by mid-2017, to further improve
efficiency and quality, which is expected to further reduce
material costs in future years.
Segment Performance
The Irrigation and Industrial segments generated $54.8m and
$39.7m respectively during the year (2015: $55.3m and $42.8m),
accounting for 51.9% and 37.6% of the Company's revenue (2015:
46.6% and 36.0%). The Irrigation segment declined primarily due to
the impact of the drought in California impeding investment in new
orchards, especially in the almond industry. The Industrial segment
revenues were reduced because of weakness in Asia.
The Municipal segment sales were $7.2m (accounting for 6.8% of
2016 total revenue), compared with $8.9m in 2015, due to a lack of
investment by municipal entities in large infrastructure projects.
Revenue in the Oil & Gas segment was $3.9m, or 3.7% of total
sales, compared with $11.6m (9.7% of total revenue) in 2015 with
the decline due to a reduction in projects as a result of the
continuing low oil price environment, compared with a strong year
in 2015 based on projects awarded in 2014 and delivered in
2015.
Global Activity
US & Latin America
In the US, revenues amounted to $23.6m compared with $26.0m in
2015 due to a decline in the Irrigation segment - primarily as a
result of the drought in California impeding investment - and the
Municipal and Oil & Gas segments. However, this was partly
offset by an increase in revenues in the Industrial segment.
EMEA
Revenues in EMEA were significantly lower in aggregate over
2015, primarily due to weakness in Turkey - especially in the Oil
& Gas segment where it had delivered exceptional projects in
2015 compared with no recorded revenues in this segment in this
geography in 2016.
Specifically in Europe, the reported revenue was slightly below
2015, but would be higher on a constant currency basis, partly due
to the first full twelve-month contribution in the Industrial and
Municipal segments from a newly set up UK subsidiary. Revenues in
Europe in the second half of 2016 were 30% higher than in the first
half of the year.
Sales in the Irrigation segment in Europe increased as the sales
office established in the region continued to build on success of
the prior year, and the Municipal segment also experienced growth,
but this was offset by weakness in the Industrial and Oil & Gas
segments.
Asia
Sales in Asia, on aggregate, decreased compared with 2015. In
India and China there were decreased sales across all segments,
except a slight growth in Oil & Gas in China. However, despite
reduced revenues, there were improved margins in non-irrigation
business. In China, the Industrial segment continued to suffer due
to the decline in the steel mill industry. However, revenues in
China in the second half of 2016 were 80% higher than in the first
half of the year due to the delivery of Industrial segment
projects.
Australia
In Australia, revenues were 11% higher at $11.1m compared with
$10.0m in 2015. The Irrigation segment performed well based on
sales of the new Omega and Sigma filters. The Industrial and
Municipal segments also saw a slight increase in revenues, but
there was a sharp drop in Oil & Gas revenues as expected.
The above analysis shows the Company's sales by business
unit.
Financial Review
Revenue for the year ended 31 December 2016 was $105.6m compared
with $118.8m for 2015. As stated above, the reduction was due to
weakness across the Company's segments and geographies (except
Australia) - in particular, due a reduction in the number of
substantial projects delivered in 2016, with some being delayed to
2017. However, as anticipated, revenue in the second half of the
year was slightly higher than the first six months of 2016.
Gross margin was 39.3% (2015: 40.5%). The Company maintained
tight cost control with lower selling & marketing and
administrative & general expenses, however this was not
sufficient to fully offset the decline in revenues and as a result
operating margins declined. Spending on R&D increased as Amiad
invested in sustaining its product innovation to support future
sales.
Operating profit was $3.7m (2015: $8.8m) and profit before tax
was $3.1m compared with $6.7m for the prior year. Fully diluted
earnings per share were $0.095 compared with $0.166 in 2015. Across
the currencies with which the Company operates, there was no
material impact from foreign exchange movements in 2016. The
Company has hedging arrangements in place for the first six months
of 2017 that are secured at 2016 average FX rates.
As at 31 December 2016, cash and cash equivalents were $16.1m
(30 June 2016: $16.2m). Net debt at year-end 2016 was $8.8m (30
June 2016: $10.4m), which was reduced more than expected as a
result of tight management of the working capital and expense
level.
Dividend
In line with the Company's dividend policy, the Directors have
decided to declare a dividend, representing a total pay-out of
approximately 30% of the Company's profits for the twelve months
ended 31 December 2016, of $0.032 gross per share (dividend 2015:
$0.067 gross per share), with an ex-dividend date of 6 April 2017,
a record date of 7 April 2017 and a payment date of 4 May 2017.
Outlook
The momentum of the second half continued into 2017 as Amiad
entered into the new year with a higher backlog compared with the
same time of the prior year supported by increased customer demand.
The Company expects good growth in the Irrigation segment this
year, particularly in the US following the recovery from the
drought in California, and anticipates an increase in revenue in
the Industrial segment, primarily in the US and EMEA. However, if
the weakness of the US Dollar against the New Israeli Shekel
continues, it has the potential of having a negative impact.
Consequently, the management team is committed to maintaining tight
cost control whilst continuing to invest in targeted sales &
marketing. Despite this, the Company expects to return to sales
growth in 2017 and it will be presenting its five-year strategic
plan in September.
AMIAD WATER SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
31 December
-----------------
2016 2015
-------- -------
$ in thousands
-----------------
Assets
CURRENT ASSETS:
Cash and cash equivalents 16,091 17,018
Financial assets at fair
value through profit
or loss- derivatives 85 148
Trade and other receivables:
Trade 33,939 36,014
Other 4,331 4,488
Inventories 24,938 24,719
Current income tax assets 417 430
------------------ -----------------
Total Current Assets 79,801 82,817
------------------ -----------------
NON-CURRENT ASSETS:
Investment in joint venture 10 10
Severance pay fund, net 361 95
Long-term receivables 59 43
Property, plant and equipment 10,783 10,731
Intangible assets 14,532 15,690
Deferred income tax assets 2,222 1,778
------------------ -----------------
Total Non-Current Assets 27,967 28,347
------------------ -----------------
Total Assets 107,768 111,164
================== =================
Date of approval of the financial statements by the board of
directors: March 29, 2017.
AMIAD WATER SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
31 December
-----------------
2016 2015
-------- -------
$ in thousands
-----------------
Liabilities and Equity
CURRENT LIABILITIES:
Bank credit and current
maturities of
borrowings from bank 11,253 14,188
Financial liabilities at
fair value through
profit or loss- derivatives 66 214
Trade and other payable:
Trade 13,854 15,461
Other 10,278 9,946
Liability to the CEO of
a subsidiary -,- 1,367
Current income tax liability 816 321
--------- ---------
Total Current Liabilities 36,267 41,497
--------- ---------
NON CURRENT LIABILITIES:
Borrowings from banks
(net of current maturities) 13,596 11,673
Liability to the CEO of
a subsidiary 1,508
Accrued severance pay ,net 369 321
Deferred income tax liabilities 6 329
--------- ---------
Total Non-Current Liabilities 13,971 13,831
--------- ---------
Total Liabilities 50,238 55,328
========= =========
EQUITY:
Capital and reserves attributable
to
equity holders of the Company:
Share capital 2,798 2,798
Capital reserves 28,520 28,437
Transaction with non-controlling
interests (259) (180)
Currency translation reserve (6,288) (4,145)
Retained earnings 29,857 28,773
--------- ---------
54,628 55,683
Non-controlling interests 2,902 153
--------- ---------
Total Equity 57,530 55,836
--------- ---------
Total Liabilities and Equity 107,768 111,164
========= =========
AMIAD WATER SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended 31 December
-------------------------
2016 2015
------------ -----------
$ in thousands
except per share
data
-------------------------
Revenue 105,590 118,779
Cost of revenue 64,077 70,630
--------- ---------
Gross Profit 41,513 48,149
Research and development, net 3,402 2,932
Selling and marketing costs 24,423 25,460
Administrative and general expenses 9,953 11,049
Other gains (losses) 34 114
--------- ---------
Operating Profit 3,701 8,822
--------- ---------
Finance income 1,009 790
Finance costs (1,622) (2,960)
--------- ---------
Finance costs, net (613) (2,170)
--------- ---------
Profit before income taxes 3,088 6,652
Income tax expenses 677 1,581
--------- ---------
Profit for the year 2,411 5,071
========= =========
Other comprehensive loss (income):Items
that will not be reclassified
to profit or loss:
Remeasurements of post-employment
benefit obligations, net (260) 92
--------- ---------
Items that may be subsequently
reclassified to profit or loss:
Currency translation differences 2,147 1,963
--------- ---------
Other comprehensive loss for the
year 1,887 2,055
========= =========
Total comprehensive income for
the year 524 3,016
========= =========
Profit attributable to:
Equity holders of the Company 2,342 4,921
Non-controlling interests 69 150
--------- ---------
2,411 5,071
========= =========
Total comprehensive income attributable
to:
Equity holders of the Company 228 2,872
Non-controlling interests 65 144
--------- ---------
459 3,016
========= =========
$
--------------
Earnings per share attributable to
the equity
holders of the Company during the
year:
Basic 0.103 0.217
===== =======
Diluted 0.095 0.166
===== =======
AMIAD WATER SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to equity holders of the
Company
------------------------------------------------------------------------
Transaction
Currency with
Number Share Capital translation non-controlling Retained Non-controlling Total
of shares capital reserve reserve interest earnings Total interest equity
----------- -------- -------- ------------- ---------------- --------- -------- ---------------- --------
$ in thousands
----------------------------------------------------------------------------------------------------
BALANCE AT 1 JANUARY
2015 22,663,651 2,798 28,371 (2,138) (180) 23,944 52,745 9 52,754
=========== ======== ======== ============= ================ ========= ======== ================ ========
Comprehensive income
(loss):
Profit
(loss)for the
year 4,921 4,921 150 5,071
Currency
translation
differences (1,957) (1,957) (6) (1,963)
Remeasurement of
net
defined benefit
liability (92) (92) (92)
------------- --------- -------- ---------------- --------
Total comprehensive
income (loss) (1,957) 4,829 2,872 144 3,016
Transaction with
owners:
Recognition of
compensation
related to
employee
stock
and
options
grants 66 66 66
-------- -------- --------
Total transaction with
owners 66 66 66
----------- -------- -------- ------------- ---------------- --------- -------- ---------------- --------
BALANCE AT 31 DECEMBER
2015 22,663,651 2,798 28,437 (4,145) (180) 28,773 55,683 153 55,836
=========== ======== ======== ============= ================ ========= ======== ================ ========
Comprehensive income
(loss):
Profit for the
year 2,342 2,342 69 2,411
Currency
translation
differences (2,143) (2,143) (4) (2,147)
Remeasurement
of net
defined
benefit
liability 260 260 260
------------- --------- -------- ---------------- --------
Total comprehensive
income (loss) (2,143) 2,602 459 65 524
Transaction with
owners:
Transaction
with the
minority (79) (79) 2,684 2,605
Recognition of
compensation
related to
employee
stock
and
options
grants 83 83 83
Dividend
($0.067 per
share) (1,518) (1,518) (1,518)
-------- --------- -------- --------
Total transaction with
owners 83 (79) (1,518) (1,514) 2,684 1,170
----------- -------- -------- ------------- ---------------- --------- -------- ---------------- --------
BALANCE AT 31 DECEMBER
2016 22,663,651 2,798 28,520 (6,288) (259) 29,857 54,628 2,902 57,530
=========== ======== ======== ============= ================ ========= ======== ================ ========
AMIAD WATER SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended 31
December
-----------------
2016 2015
-------- -------
$ in thousands
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations 6,166 16,425
Interest paid (764) (781)
Interest received 124 130
Income taxes paid, net (635) (312)
--------- ---------
Net cash generated from operating
activities 4,891 15,462
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant
and equipment (2,564) (2,084)
Purchase of intangible assets (225) (334)
Investment grants received 127 131
Proceeds from sale of property,
plant and equipment 38 131
Restricted deposit 465 25
--------- ---------
Net cash used in investing activities (2,159) (2,131)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to equity holders
of the Company (1,518) -,-
Receipt of long-term borrowings 9,014 10,000
Payments of long term borrowings (11,394) (8,522)
Increase (decrease) in bank
credit and short term
borrowing, net 1,370 (10,958)
--------- ---------
Net cash used in financing activities (2,528) (9,480)
--------- ---------
EXCHANGE RATE LOSS ON CASH AND
CASH EQUIVALENTS (1,131) (923)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (927) 2,928
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 17,018 14,090
--------- ---------
CASH AND CASH EQUIVALENTS AT OF YEAR 16,091 17,018
========= =========
AMIAD WATER SYSTEMS LTD.
CASH FLOWS FROM OPERATING ACTIVITIES
Year ended 31
December
-----------------
2016 2015
-------- -------
$ in thousands
-----------------
Profit (loss) for the year 2,411 5,071
-------- -------
(a) Adjustments to reconcile net income to net cash
generated from used in operating activities:
Depreciation and amortization 3,431 3,446
Interest paid 764 781
Interest received (124) (130)
Income taxes paid, net 635 312
Share based payment, net 83 66
Distribution of profits to a CEO of a subsidiary (371) (102)
Changes in liability to the CEO of a subsidiary 151 50
Decrease (increase) in deferred income taxes, net (814) 442
Accrued severance pay, net 65 (155)
Exchange rate differences on borrowings 91 347
Increase in assets at fair value through profit or loss (85) (548)
Loss (profit) from sale of property, plant and equipment 19 (111)
-------- -------
3,845 4,398
======== =======
Changes in working capital:
Decrease (increase) in accounts
receivable:
Trade 878 6,383
Other (491) (1,101)
Increase in long term receivable (18) (5)
Increase (decrease) in accounts
payable:
Trade (980) 1,617
Other 1,127 1,670
Increase in inventories (606) (1,608)
------ --------
(90) 6,956
------ --------
Cash generated from operations 6,166 16,425
====== ========
(b) Supplementary information on
investing
activity not involving cash flows-
Transaction with the non-controlling
interests 2,605 -,-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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