AFS.L Regulatory News (AFS)

8 September 2016

Amiad Water Systems Ltd.

("Amiad" or the "Company")

Interim Results

Amiad (AIM: AFS), a leading global producer of water treatment and filtration solutions, announces its interim results for the six months ended 30 June 2016.

Financial Summary

· Revenue was $52.4m (H1 2015: $59.2m)

· Gross margin was 39.2% (H1 2015: 40.1%)

· Operating profit was $1.9m (H1 2015: $3.9m)

· Profit before tax was $1.7m (H1 2015: $3.5m)

· Fully diluted earnings per share of $0.049 (H1 2015: $0.065)

· Net debt at 30 June 2016 was $10.4m (31 December 2015: $8.8m; 30 June 2015: $18.2m)

· Cash and cash equivalents at 30 June 2016 were $16.2m (31 December 2015: $17.0m)

Operational Summary

· Progress made by Amiad Europe where sales increased by over 10% including first six-month contribution in the Industrial and Municipal segments from newly set up UK subsidiary

· Irrigation segment sales, which accounted for 57.9% of total revenue, were broadly level as the segment continued to perform well in Australia and EMEA, supported by sales of Amiad's Omega and Sigma products

· Industrial segment sales decreased to $17.5m (H1 2015: $18.6m), mainly due to weakness in Asia

· Sales in the Oil & Gas segment were significantly lower at $1.7m (H1 2015: $4.7m), compared with a strong 2015, due to the lack of projects as a result of the continuing low oil price environment

· Municipal segment continued to suffer from lack of investment in major infrastructure projects by local authorities as revenue declined to $2.8m compared with $4.8m in H1 2015, but the segment is showing signs of recovery

Post-period development

· Post period, in the Municipal segment the Company was awarded four key projects in Africa via Amiad Europe, Singapore and Israel totalling approximately $5m

o Pre filtration for Ultra Filtration membranes (UF) prior to Reverse Osmosis project in Singapore using new products - Arkal Super Galaxy

o Protection of potable water supply and drip irrigation supply from storm water in Africa via Amiad Europe

o Wastewater treatment in Israel

Arik Dayan, Chief Executive Officer of Amiad, said: "During the period, the Company consolidated the progress made in 2015 and continued to maintain tight control over costs. The Irrigation segment was, again, the main contributor to revenue resulting from increased sales of new products in Australia and EMEA. As expected, however, the Oil & Gas segment saw a reduction in projects, due to the effect on the industry from the continuing low oil price environment, and the Company also received significantly lower revenues from China and Turkey in H1 2016 compared with the same period last year due to a decline in the Industrial segment.

"The first half finished with greater interest in our products as new contracts were signed and the momentum continued into the second half of the year with increased backlog as of July 2016. Irrigation will continue to be the largest contributor to the revenues, Oil & Gas will be lower as expected and the Municipal segment is showing signs of recovery in Asia and Europe. In the Industrial segment orders secured in the first half, in particular in China and USA, should support this segment's revenues in the second half. As a result, the Company expects to report second half revenues which are higher than in the first half."

Enquiries

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 H1 2016 the Company consolidated the significant operational progress made in 2015 and continued to maintain tight control over costs. During the period the Company continued to seek ways of improving its manufacturing processes. Amiad continued to improve its operational efficiency due to its previous investment in the polymeric production process, which has resulted in a reduction in the cost of materials. The Company is investing in its supply chain, developing an in-house metal fabrication capability 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 $30.3m and $17.5m respectively during the period (H1 2015: $30.9m and $18.6m), accounting for 57.9% and 33.4% of the Company's revenue (H1 2015: 52.2% and 31.56%). The Irrigation segment continued to perform well in Australia and EMEA, supported by sales of Amiad's Omega and Sigma products. The decrease in revenue in the Industrial segment was mainly due to weakness in Asia and Turkey.

The Municipal segment sales decreased to $2.8m (accounting for 5.3% of H1 2016 total revenue) from $4.8m in H1 2015 due to a lack of investment by municipal entities in large infrastructure projects. Revenue in the Oil & Gas segment was $1.7m, or 3.3% of total sales, compared with $4.7m (7.9% of total revenue) in H1 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 $11.8m compared with $12.3m in H1 2015 due to a decline in the Irrigation segment, as a result of a lowering in the price of almonds causing weakness in that market, and Municipal segments, partly offset by improvement in the Industrial segment based on increasing demand for power generation projects. The Company also delivered a significant Oil & Gas project during the period.

EMEA

Revenues in EMEA grew by over 10% including the first full six-month contribution in the Industrial and Municipal segments from a newly set up UK subsidiary. Sales in the Irrigation segment in Europe also increased significantly as the sales office established in the region continued to build on success of last year.

Post period, Amiad Europe won a project for the protection of potable water supply and drip irrigation supply from storm water in Africa.

Asia

Sales in Asia, on aggregate, saw a decrease of 37% in revenues compared with H1 2015. There were decreased sales across all segments in India and China. However, despite reduced revenues, there were improved margins in non-irrigation business. In China, the project wins in the Industrial segment are expected to contribute to the anticipated increase in Company revenue in the second half of the year.

Australia

In Australia, revenues were slightly lower at $5.1m compared with $5.6m in H1 2015. The Irrigation segment performed well, achieving a slight increase in revenues, based on sales of the new Omega and Sigma filters. The Industrial segment also saw a slight increase in revenues but there was a sharp drop in Oil & Gas revenues as expected. Revenues in the Municipal segment were marginally below H1 2015 revenue figures.

The above analysis shows the Company's sales by subsidiary.

Financial Review

Revenue for the six months ended 30 June 2016 was $52.4m compared with $59.2m for H1 2015. As previously stated, the weakness in revenue was a result of the reduction in projects in the Oil & Gas segment, due to the effect on the industry from the continuing low oil price environment, compared with a strong year experienced in 2015. Revenues were also lower from China, due to a decline in the Industrial segment, and Turkey.

Gross margin was 39.2% (H1 2015: 40.1%). 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 $1.9m (H1 2015: $3.9m) and profit before tax was $1.7m compared with $3.5m for the first six months of the prior year. Fully diluted earnings per share were $0.049 compared with $0.065 in H1 2015.

As at 30 June 2016, cash and cash equivalents were $16.2m (31 December 2015: $17.0m). Net debt was $10.4m (31 December 2015: $8.8m; 30 June 2015: $18.2m), and is expected to be at a similar level at year-end 2016 bearing in mind the expected increase in capital expenditure in H2 2016.

Update on appointment of Chief Executive Officer

As announced on 7 June 2016, Mr Arik Dayan, the Company's Chief Executive Officer and Director, has informed the Board of Directors of his intention to step down from his post to pursue other interests and new challenges. Arik Dayan will remain as the CEO and on the Board of Directors until a replacement is found and a period of orderly handover occurs. The search for his successor as CEO is at an advanced stage and the Board intends to make an announcement shortly.

Outlook

The first half finished with greater interest in the Company's products as new contracts were signed and the momentum continued into the second half of the year with increased backlog than this time last year. Irrigation will continue to be the largest contributor to the revenues, Oil & Gas will be lower as expected and, offsetting uncertainties which are currently affecting Turkey, the Municipal segment is showing signs of recovery in Asia and Europe. In the Industrial segment, orders secured in the first half, in particular in China and USA, should support this segment's revenues in the second half.

Consequently, the Company expects to report second half revenues which are higher than in the first half. However, the quantum of the increase will be determined by how trading develops in the second half and the timing of the delivery of the newly won large contracts.

AMIAD WATER SYSTEMS LTD.

CONDENSED CONSOLIDATED BALANCE SHEET

JUNE 30, 2016

Date of approval of the interim financial information by the Company's Board of Directors: September 6, 2016

AMIAD WATER SYSTEMS LTD.

CONDENSED CONSOLIDATED BALANCE SHEET

JUNE 30, 2016

The attached notes are an integral part of this condensed consolidated interim financial information.

AMIAD WATER SYSTEMS LTD.

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2016

The attached notes are an integral part of this condensed consolidated interim financial information.

(Continued) - 1

AMIAD WATER SYSTEMS LTD.

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2016

(Concluded) - 2

AMIAD WATER SYSTEMS LTD.

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2016

The attached notes are an integral part of this condensed consolidated interim financial information.

AMIAD WATER SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2016

The attached notes are an integral part of this condensed consolidated interim financial information.

AMIAD WATER SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 1 - GENERAL INFORMATION

a. Amiad Water Systems Ltd. (hereafter -"the Company") and its subsidiaries (together- the Group) is a producer and global supplier of water filters and filtration systems used in the industrial, municipal market and the irrigation market.

b. The Company was incorporated in Israel in June 1997. The address of its registered office is Kibbutz Amiad, Israel.

The Company is traded in the Alternative Investment Market in London (AIM), a part of the London Stock Exchange, since December 2005.

The principal shareholders of the Company, as for the report release date, are Kibbutz Amiad (hereafter -The "Kibbutz"), directly and through a Company controlled by the Kibbutz, A.M.S.I. Investments Ltd. ("AMSI") which owns 45.84% of the Company's outstanding shares.

The Kibbutz and AMSI are engaged in a shareholders agreement with Kibbutz Beit Zera Cooperative Agricultural Society Ltd. and two cooperatives held by Beit Zera (hereinafter - "Beit Zera") which owns 4.5% of the Company's outstanding shares and with Bermad Industries Cooperative Agricultural Society Ltd. (hereinafter - "Bermad") which owns 8.99% of the Company's outstanding shares. The agreement was signed upon Beit Zera and Bermad becoming shareholders in the Company pursuant to the acquisition of Arkal Filtration systems Cooperative Agricultural Society Ltd. Pursuant to the shareholders agreement the parties thereto shall vote their shares together at all meeting of the shareholder of the Company, as shall be agreed among them or in the absence of an agreement as shall be decided by the Kibbutz. In addition, the shareholder agreement imposes on Beit Zera and Bermad certain limitations on the transferability of shares of the Company they received pursuant to the acquisition of Arkal Filtration systems Cooperative Agricultural Society Ltd.

These group consolidated financial statement were authorized for issue by board of directors on September 5, 2016.

AMIAD WATER SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 2 - BASIS OF PREPARATION

a. These condensed consolidated interim financial statements for the six months ended 30 June 2016 have been prepared in accordance with IAS 34, 'Interim financial reporting'. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2015, which have been prepared in accordance with IFRSs.

This condensed consolidated interim financial information is reviewed and not audited.

b. Estimates -

The preparation of interim financial statements requires management to exercise its judgment; it also requires the use of accounting estimates and assumptions that affect the application of the group's accounting policy and the amounts of reported assets, liabilities, income and expenses. Actual results may differ from those estimates.

In preparation of these condensed consolidated interim financial statements, the significant judgments that were exercised by the management in applying the group's accounting policy and the key sources of estimation uncertainty were similar to those applied in the consolidated annual financial statements for the year ended December 31, 2015.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies and computation methods used in preparing the interim financial information are consistent with those used in preparing the 2015 annual financial statements.

NOTE 4 - REVENUES FROM SALES:

Sales by customer location:

AMIAD WATER SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 5 - CASH FLOWS FROM OPERATIONS: