31 Mar 2015 07:00
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 thousandsexcept 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 | |||||||||
Number | Share | Capital | Currency translation | Transaction with non-controlling | Retained | Non 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 |