TIDMAFS
RNS Number : 9216I
Amiad Water Systems Ltd
31 March 2015
31 March 2015
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
twelve months ended 31 December 2014.
Financial Summary - in line with market expectations
-- Revenue was $118.5m (2013: $118.8m)
-- Operating profit was $2.9m (2013: $5.7m)
-- Adjusted* profit before tax was $2.3m
-- Loss before tax, including currency-related finance expense
and one-off restructuring charge, was $0.4m (2013: $5.1m
profit)
-- Gross margin was 38.9% (2013: 40.8%)
-- Fully diluted loss per share of $0.065 (2013: $0.153 earnings)
-- Net debt of $21.3m (30 June 2014: $19.7m; 31 December 2013: $13.7m)
-- Cash and cash equivalents at 31 December 2014 were $14.1m (30
June 2014: $14.7m; 31 December 2013: $14.9m)
* Adjusted to exclude currency-related finance expense of $2.2m
and one-off restructuring charge of $0.5m
Operational Summary
-- Developed markets performed well, but developing markets
experienced delays in, or cancellations of, certain orders in H2
2014
-- Increased traction in Irrigation, Municipal and Oil & Gas
segments (excluding extraordinary project in H1 2013), but slowdown
in Industrial and Ballast Water segments, particularly in H2
2014
o Irrigation segment continued to be largest contributor to
revenues at $52.5m (2013: $50.9m), representing 44.3% of total
sales
o Municipal segment was broadly flat, but revenues in this
segment in USA and Turkey increased significantly
o Overall, Industrial segment sales were broadly flat compared
with 2013, but grew 34% and 31% in the USA and Europe
respectively
o Sales in Oil & Gas segment declined slightly to $7.1m
(2013: $8.0m), but excluding the exceptionally large project in
Colombia in H1 2013 (valued at approximately $5m), Oil & Gas
segment revenues grew 137%
o Postponement in implementation of coastguard regulations by
International Maritime Organization ("IMO") continued to impact
sales in Ballast Water segment
-- Implemented restructuring and cost cutting exercise, which is
expected to reduce operating expenses by approximately $4m in 2015.
The Company incurred one-off finance expense of $0.5m in 2014
Arik Dayan, Chief Executive Officer of Amiad, said: "Whilst we
achieved growth in our key segments in developed countries, as we
have stated previously, 2014 was a transitional year. Revenues were
flat compared with 2013, in line with market expectations, due to
reduced sales in developing countries towards the end of the year
and a greater-than-expected impact of currency fluctuation. In
response, we embarked upon a restructuring program to realign the
sales teams and reduce administrative overheads. With a combination
of the restructuring as well as the solid platform of growing sales
in developed countries, the Company exited 2014 in better shape
than it began the year.
"Amiad entered 2015 with an 18% higher backlog than at the
equivalent period in 2014. We are committed to maintaining tight
cost control whilst continuing to invest in targeted sales &
marketing and product development. As a result, the Board expects
revenues for full year 2015 to be in line with market
expectations."
Enquiries
Amiad Water Systems Ltd.
-------------------------------- -----------------
Arik Dayan, Chief Executive
Officer
Irit Ben-Dov, Chief Financial
Officer +972 4 690 9500
-------------------------------- -----------------
Stifel Nicolaus Europe
Ltd
-------------------------------- -----------------
Giles Balleny +44 20 7710 7600
-------------------------------- -----------------
Luther Pendragon Ltd.
-------------------------------- -----------------
Harry Chathli, Claire
Norbury, Oliver Hibberd +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
ten 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
During the year, the Company gained traction in the Irrigation,
Municipal and Oil & Gas segments (excluding an extraordinary
project delivered in H1 2013), but suffered from a slowdown in the
Industrial and Ballast Water segments, particularly in the second
half of the year. In addition, whilst developed markets performed
well, the developing markets experienced delays in, or
cancellations of, certain orders in the second half of 2014. As a
result, despite achieving sequential growth in H1 2014 (over H2
2013) and entering H2 2014 with a higher backlog than at the same
time in the previous year, the Company reported revenues broadly
flat for full year 2014 over 2013.
Segment Performance
The Irrigation and Industrial segments generated $52.5m and
$46.9m respectively during the period (2013: $50.9m and $47.3m),
accounting for 44.3% and 39.6% of the Company's revenues (2013:
42.9% and 39.9%). The Municipal segment generated $10.7m (9.1%)
compared with $10.4m in 2013. Revenue in the Oil & Gas segment
was $7.1m, or 6.0% of total sales, compared with $8.0m (6.7%) in
2013 - with the latter including an extraordinary single large
project in the Oil & Gas segment in Colombia, value at
approximately $5m. The Ballast Water segment remained weak with
revenues of $1.3m, representing 1.1% of overall revenue, compared
with $2.1m in 2013. This was largely due to the previously stated
postponement in the implementation of coastguard regulations by the
IMO.
Operational Efficiencies
In response to the sustained weakness in some of its key
markets, the Company commenced, in November 2014, a restructuring
and cost cutting exercise to reduce operational expenses and
headcount in sales & marketing and G&A expenses at its
headquarters. As a result of these measures, which are now
complete, the Company reduced its headcount, primarily at its
headquarters, and expects operating expenses to be approximately
$4m lower in 2015.
The operational changes at the headquarters were, in part,
facilitated by the strengthening of the Company's subsidiaries - in
particular, the diversification of Amiad's manufacturing base with
the increase in production capacity in China and Europe. The
Company's subsidiary in China is now able to produce for the local
and global markets. In addition, Amiad is benefiting from
organisational efficiencies implemented during the year that are
designed to enhance the operations of the Company with regards to
the coordination between the headquarters in Israel and the
subsidiaries globally, including streamlining the sales
process.
Global Activity
US and South America
Amiad performed well in the US, with revenues increasing 20% to
$28.5m. During the first half the year, Amiad achieved growth in
all segments, with a slight decline in Oil & Gas and Ballast
Water in the second half. This growth was due to projects such as
that awarded by Newport News Shipbuilding (NNS), a division of
Huntington Ingalls Industries (HII), to supply Amiad automatic
self-cleaning screen filters for the aircraft carrier John F.
Kennedy (CVN 79), the second ship of the new class of US Navy
aircraft carriers as well as several projects in the Irrigation and
Oil & Gas - for fracking, and injection and cooling water -
segments across the US.
In Latin America, sales continued to be depressed. However, the
Company delivered an injection water project in the Oil & Gas
segment in Brazil for $0.5m, and was awarded projects in Peru and
Mexico. The Company continues to build an effective team and to
increase its presence locally in the region.
EMEA
Amiad performed well in most segments in Europe - undertaking
significant work in Italy, Spain and France - thereby reporting an
increase in sales of 28% compared with the equivalent period last
year. The Company achieved a significant increase in sales in the
Oil & Gas segment. In addition, the Irrigation sales office
that was established during the year in Europe is performing well
and resulted in modest growth in regionally sales in this
segment.
Asia
Revenues in China declined slightly in 2014 over 2013, primarily
due to weakness in the Industrial segment. However, the subsidiary
is in a stronger operational position with the increase in
production capabilities - which enables them to now offer local
manufacturing for the region and globally. In India and South East
Asia, the Company achieved slight growth in revenue, primarily due
to the Industrial segment.
Australia
The Industrial segment suffered in Australia from the weakness
in the Australian economy due to the reduced demand for raw
materials from China, Australia's largest export customer, which
has resulted in resource companies cancelling or postponing
projects. However, the Irrigation segment more than doubled its
sales due to several projects in protecting drip irrigation based
on the new Amiad self-cleaning filters, Omega and Sigma. In
addition, a number of mining projects and a further project with
Origin Energy, one of Australia's leading integrated energy
companies, providing filtration for a coal seam gas to liquefied
natural gas plant contributed towards a marked improvement in sales
in the Oil & Gas segment.
Product Development
Amiad's portfolio of products launched in November 2011 continue
to be well-received and are increasingly penetrating the market. In
2014, sales of Omega, Sigma and Super Galaxy products were higher
at approximately $6m (2013: $2m), with a strong backlog for 2015.
In particular, the growth in the Oil & Gas segment during the
year was based on sales of the Omega. The recently-launched 6-inch
and 8-inch Sigma is achieving strong sales in the Irrigation
market, particularly in the US and Australia.
Financial Review
Revenue for the twelve months ended 31 December 2014 was $118.5m
compared with $118.8m for the full year 2013.
The Company was significantly impacted by currency factors: a
combination of hedging deals and adverse changes in exchange rates,
mainly the US Dollar against the New Israeli Shekel, but also
between the Australian and US Dollars as well as the Euro and US
Dollar. The total adverse impact of currency exchange resulted in
$2.2m in finance expenses during the year. In addition, as noted
above, the Company incurred a one-off restructuring expense of
$0.5m.
Fully diluted loss per share was $0.065 (2013: $0.153 earnings).
Operating profit was $2.9m compared with $5.7m in 2013 and loss
before tax was $0.4m (2013: $5.1m profit), with the decline being a
result of the currency fluctuation and one-off restructuring
expense.
Gross margin was 38.9% compared with 40.8% in 2013. The decline
was due to the weakness of the US dollar against the Israeli shekel
as well as $0.5m in labour costs being moved from G&A expenses
to cost of sales due to the restructuring.
As of 31 December 2014, cash and cash equivalents in the bank
were $14.1m compared with $14.7m at 30 June 2014 and $14.9m at 31
December 2013. Net debt at year end was $21.3m (30 June 2014:
$19.7m).
Dividend
Whilst the Company adheres to a progressive dividend policy,
given the financial performance during the year, particularly in H2
2014, the Board of Directors believe that it would not be in the
best interests of the Company or its shareholders to declare a
final dividend for 2014. However, assuming the Company continues to
perform in line with management expectations, the Board anticipates
resuming dividend payments from H1 2015.
The Directors declared an interim dividend out of the Company's
profits for the six months ended 30 June 2014 of $0.022 gross per
share (interim dividend 2013: $0.051 gross per share; total
dividend for 2013: $0.073).
Outlook
The positive steps taken by the Company to cut costs in response
to the uncertainty around certain contracts towards the end of 2014
has left Amiad in a better shape as it entered 2015 compared with
2014. The focus of the management team is to run the streamlined
operations effectively with a focus on improving profits whilst
realigning the Company for growth. The management believes that it
has the market-leading technology, products and the personnel that
will enable it to capture opportunities across the majority of the
market segments and territories in which it operates.
Amiad entered 2015 with an 18% higher backlog than at the
equivalent point in 2014. The Industrial and Oil & Gas segments
have seen an increase in backlog of 30% respectively, whilst the
Ballast Water segment continues to suffer from the postponement of
the implementation of IMO regulation and a lack of clear direction
resulting in reduced impetus for change amongst ship builders.
The Company's management team is committed to maintaining tight
cost control whilst continuing to invest in targeted sales &
marketing and product development. As a result, the Board expects
revenues for full year 2015 to be in line with market
expectations.
AMIAD WATER SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
31 December
-----------------
2014 2013
-------- -------
$ in thousands
-----------------
Assets
CURRENT ASSETS:
Cash and cash equivalents 14,090 14,871
Financial assets at fair
value through profit
or loss 452 480
Trade and other receivables:
Trade 44,091 41,560
Other 3,230 3,501
======== ========
Inventories 23,729 25,277
Current income tax assets 869 367
-------- --------
Total Current Assets 86,461 86,056
-------- --------
NON-CURRENT ASSETS:
Investment in joint venture 10 -,-
Loans to a related party -,- 100
Severance pay fund, net 105 261
Long-term receivables 48 36
Property, plant and equipment 11,184 11,449
Intangible assets 16,849 16,846
Deferred income tax assets 2,738 1,722
======== ========
Total Non-Current Assets 30,934 30,414
-------- --------
Total Assets 117,395 116,470
======== ========
AMIAD WATER SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
31 December
-----------------
2014 2013
-------- -------
$ in thousands
-----------------
Liabilities and Equity
CURRENT LIABILITIES:
Bank credit and current
maturities of
borrowings from bank 23,212 10,544
Financial liabilities at
fair value through
profit or loss- derivatives 1,066 63
Trade and other payable:
Trade 15,064 19,670
Other 8,431 9,433
Put option liability 2,927 2,204
Current income tax liability 463 529
--------- ---------
Total Current Liabilities 51,163 42,443
--------- ---------
NON CURRENT LIABILITIES:
Borrowings from banks
(net of current maturities) 12,205 17,988
Investment in associate 110
--------- ---------
Accrued severance pay ,net 450 381
Deferred income tax liabilities 823 1
--------- ---------
Total Non-Current Liabilities 13,478 18,480
--------- ---------
Total Liabilities 64,641 60,923
--------- ---------
EQUITY:
Capital and reserves attributable
to
equity holders of the Company:
Share capital 2,798 2,798
Capital reserves 28,371 28,271
Transaction with non-controlling
interests (180) (180)
Currency translation reserve (2,188) (1,416)
Retained earnings 23,944 26,082
========= =========
52,745 55,555
Non-controlling interests 9 (8)
--------- ---------
Total Equity 52,754 55,547
--------- ---------
Total Liabilities and Equity 117,395 116,470
========= =========
AMIAD WATER SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended 31
December
--------------------
2014 2013
--------- ---------
$ in thousands
except per share
data
--------------------
Revenue 118,471 118,787
Cost of sales 72,418 70,360
--------- ---------
Gross Profit 46,053 48,427
Research and development, net 3,158 3,357
Selling and marketing costs 28,204 27,456
Administrative and general expenses 11,359 11,929
Other gains (losses) (468) 27
--------- ---------
Operating Profit 2,864 5,712
--------- ---------
Finance income 137 1,901
Finance costs (3,430) (2,278)
--------- ---------
Finance costs, net (3,293) (377)
Share in loss of joint venture -,- (188)
--------- ---------
Profit before income taxes (429) 5,147
Income tax expenses 559 1,499
--------- ---------
Profit for the year (988) 3,648
========= =========
Other comprehensive income (loss)-
Items that will not be reclassified
to profit or loss:
Remeasurements of post-employment
benefit obligations (135) 72
--------- ---------
Items that may be subsequently
reclassified to profit or loss:
Currency translation differences (773) (1,271)
--------- ---------
Other comprehensive income for
the year (908) 1,199
========= =========
Total comprehensive income for
the year (1,896) 2,449
========= =========
Profit attributable to:
Equity holders of the Company (1,006) 3,700
Non-controlling interests 18 (52)
--------- ---------
(988) 3,648
========= =========
Total comprehensive income attributable
to:
Equity holders of the Company (1,913) 2,503
Non-controlling interests 17 (54)
--------- ---------
(1,896) 2,449
========= =========
$
------------------
Earnings per share attributable to the
equity
holders of the Company during the year:
Basic (0.044) 0.163
========= =======
Diluted (0.065) 0.153
========= =======
AMIAD WATER SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to equity holders of the
Company
------------------------------------------------------------------------
Transaction
Currency with Non
Number Share Capital translation non-controlling Retained controlling Total
of shares capital reserve Reserve Interest earnings Total interest Equity
----------- -------- -------- ------------- ---------------- --------- -------- ------------ --------
$ in thousands
------------------------------------------------------------------------------------------------
BALANCE AT 1 JANUARY
2013 22,663,651 2,798 28,029 (147) (180) 24,826 55,326 46 55,372
=========== ======== ======== ============= ================ ========= ======== ============ ========
Comprehensive
income:
Profit for the
year 3,700 3,700 (52) 3,648
Currency
translation
differences (1,269) (1,269) (2) (1,271)
Remeasurement of
net
defined benefit
liability 72 72 72
------------- --------- -------- ------------ --------
Total comprehensive
income (1,269) 3,772 2,503 (54) 2,449
Transaction with
owners:
Recognition of
compensation
related to
employee
stock
and
options
grants 242 242 242
Dividend
($0.106 per
share) (2,516) (2,516) (2,516)
----------- -------- -------- --------- -------- --------
Total transaction with
owners 242 (2,516) (2,274) (2,274)
----------- -------- -------- ------------- ---------------- --------- -------- ------------ --------
BALANCE AT 31 DECEMBER
2013 22,663,651 2,798 28,271 (1,416) (180) 26,082 55,555 (8) 55,547
=========== ======== ======== ============= ================ ========= ======== ============ ========
Comprehensive
income:
Profit for the
year (1,006) (1,006) 18 (988)
Currency
translation
differences (772) (772) (1) (773)
Remeasurement
of net
defined
benefit
liability (135) (135) (135)
------------- --------- -------- ------------ --------
Total comprehensive
income (772) (1,141) (1,913) 17 (1,896)
Transaction with
owners:
Recognition of
compensation
related to
employee
stock
and
options
grants 100 100 100
Dividend
($0.106 per
share) (997) (997) (997)
-------- --------- -------- --------
Total transaction with
owners 100 (997) (887) (897)
----------- -------- -------- ------------- ---------------- --------- -------- ------------ --------
BALANCE AT 31 DECEMBER
2014 22,663,651 2,798 28,371 (2,188) (180) (23,944) 52,745 9 52,754
=========== ======== ======== ============= ================ ========= ======== ============ ========
Year ended 31
December
-----------------
2014 2013
-------- -------
$ in thousands
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from (used in)
operations (302) 9,547
Interest paid (816) (815)
Interest received 162 273
Income taxes paid (2,576) (926)
-------- --------
Net cash generated from (used
in) operating activities (3,532) 8,079
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant
and equipment (2,581) (2,406)
Purchase of intangible assets (653) (756)
Investment grants received 332 130
Proceeds from sale of property,
plant and equipment 57 40
Restricted deposit (266) 718
Collection of long-term loan
granted to a related party
and other 40 637
-------- --------
Net cash used in investing
activities (3,071) (1,637)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to equity holders
of the Company (997) (2,516)
Receipt of long-term borrowings 3,072 8,570
Payments of long term borrowings (9,016) (7,452)
Increase (decrease) in bank
credit and short term
borrowing, net 12,988 (3,932)
-------- --------
Net cash generated from (used
in) financing activities 6,047 (5,330)
-------- --------
EXCHANGE RATE (LOSS) ON CASH
AND CASH EQUIVALENTS (225) (496)
-------- --------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (781) 616
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 14,871 14,255
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF YEAR 14,090 14,871
======== ========
CASH FLOWS FROM OPERATING ACTIVITIES:
Year ended 31
December
-----------------
2014 2013
-------- -------
$ in thousands
-----------------
Profit for the year (988) 3,648
-------- -------
(a) Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 3,690 3,839
Interest paid 816 815
Interest received (162) (273)
Income taxes paid 2,576 926
Share based payment 100 242
Increase in Put option -,- 130
Share in loss of joint venture (60) 188
Decrease (Increase) in deferred income taxes, net (287) 277
Accrued severance pay, net 127 120
Exchange rate differences on borrowings (133) (201)
Decrease in assets at fair value through profit or loss 1,031 611
Profit from sale of fixed assets (2) (3)
Exchange rate differences on loans to
related party and others -,- (33)
7,696 6,638
======== =======
Year ended 31
December
-----------------
2014 2013
-------- -------
$ in thousands
-----------------
Changes in working capital:
Decrease (increase) in accounts
receivable:
Trade (3,604) (1,265)
Other (118) 1,177
Decrease in prepaid expenses -,- 54
Increase in long term receivable (13) -,-
Increase (decrease) in accounts
payable:
Trade (3,579) 482
Other (823) (1,361)
Decrease in inventories 1,127 174
-------- --------
(7,010) (739)
-------- --------
Cash generated from (used in) operations (302) 9,547
======== ========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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