AFS.L Regulatory News (AFS)

21 Sep 2009 07:00



21 September 2009

Amiad Filtration Systems Ltd.

("Amiad" or "the Company")

Results for the six months to 30 June 2009

Amiad, the producer and global supplier of water filters and filtration systems for the industrial, municipal and irrigation markets, announces its interim results for the six months to 30 June 2009. 

Financial Highlights

Revenue was $36.8m (H2 2008: $33.8m) (H1 2008: US$39.5m)

Operating profit was $5.1m (H2 2008: $1.6m) (H1 2008: US$6.1m)

Profits before tax was US$5.7m (H2 2008: $1.3) (H1 2008: US$5.4m)

Gross margins at 47% (H1 2008: 49%)

Fully diluted earnings per share was 19 US $cents (H1 2008: 20.1 cents)

Interim dividend of 3.5 US$ cents (gross) per share (H1 2008: 3.5 US$ cents (gross) per share)

Cash and cash equivalents at 30 June 2009 of US$7.3m (31 December 2008 $6.5m) 

Operational Highlights

Return of demand for large industrial and municipal water filtration projects globally

Increased sales in new and growing geographies of Chile, India and Turkey

Continued penetration into new territories

Improved efficiency and streamlined operations

Strategic infrastructure and activities implemented 

New management in place 

Commenting on the results, Arik Dayan, Chief Executive Officer of Amiad, said: "We are pleased to report strong sequential growth in the first half compared with second half last year indicating a sustained return of investment in water infrastructure projects, particularly in the municipal and industrial segments. In the second half of 2008, Amiad focussed on improving its operational efficiency and enhancing its presence strategically in growth markets as market conditions worsened due to the downturn of global economic conditions. As a result, it was able to capitalise as organisations started to re-invest in large scale projects. 

Looking ahead, Amiad continues to tightly manage costs. With the current pipeline of orders and the demand for Amiad's products set to continue in new territories as well as its established markets, the Board expects to report full year results which are in line with market expectations." 

Enquiries:

  Operational Review

Revenues for the first half of 2009 increased 9% sequentially to $36.8m from the second half of 2008, however these were down compared with the same period last year (H1 2008: $39.5m). This decrease in revenue was mainly due to the lag in recovery in the irrigation segment and the overall market slowdown in certain key territories.

However, the beginning of 2009 saw a return in investment in infrastructure projects, particularly in the industrial and municipal segment in most of the Company's key markets. Since October 2008 there has been a shift in the mix between the industrial and municipal and the irrigation segment. At present, the industrial and municipal segment accounts for 65% of company revenue and is expected to continue to be the largest contributor.

Specifically, in the industrial and municipal segment, Europe saw heightened activity through the Turkish company that Amiad acquired in 2008, as it delivered large projects in the region as well as other countries such as India. One of the large projects in Turkey, accounting for over Euro 1m of company revenue, was to deliver its products to a new power plant in India. Also, the Company saw increased delivery into Western Europe with projects for the municipal and the oil and gas industries. 

In Asia, the Company had targeted India as its main growth area in 2009. The Company performed well here in the period and secured its first large project in the municipal segment for its automatic self cleaning filters and AMF technology for drinking water. This project accounted for over $680,000 of company revenue. With industrial growth set to continue in India, and increased interest for Amiad's products in the irrigation market coming through, the Company remains very optimistic and focussed about its efforts in the region. The Company is actively looking to increase its presence in the area and will consider options available to it to ensure further significant inroads can be made in order for Amiad to continue to capitalise on the increased investment in water infrastructure in the country.

Additionally in Asia, in Singapore the Company secured three large projects in the municipal segment which were delivered and executed in the Philippines. These projects were for use of the AMF technology to produce drinking water. Furthermore, in the Malaysian oil industry, the Company won a large project for their AMF technology and for cooling water which was based on the screen technology. Elsewhere in Asia, as anticipated, the industrial markets in China saw a decline as the steel and petrochemical industries suffered the effects of the global downturn. However, the growth in other parts of Asia largely mitigated this decline.

In South America, Amiad continues to perform well. In Chile, the Company built on its successes to date within the mining industry and secured two projects for cooling water for a large engineering group. The ongoing growth in Chile consolidates the relationship with the Company's industrial and municipal distributor which was started at the end of 2007 and sets the tone for further expansion in the region. For example, in Brazil the Company embarked on a project with a large oil producer in Brazil for over $400,000. With growth in South America set to continue as economic development in the region progresses, Amiad is also exploring opportunities for enhancing its presence in the region.

Although the Company is seeing a general increase in interest levels coming through in the irrigation segment, and a return to growth in Africa, Amiad continues to see a lag in return to investment in this segment. The irrigation segment is impacted by seasonal factors and farming cycles. The Company has been making in roads into new territories and is well placed to capitalise should there be renewed investment in this segment.

Financial review

Revenues for the first half of 2009 increased 9% sequentially to $36.8m from the second half of 2008, however these were slightly down compared with the same period last year (H1 2008: $39.5m). Fully diluted earnings per share decreased by 5% to 19 US $cents (H1 2008: 20.1 cents).

Operating profit increased by 210% sequentially to $5.1m compared to $1.6m in H2 2008 (H1 2008: US$6.1m) and profit before tax increased over threefold sequentially to US$5.7m (from H2 2008: $1.3) (H1 2008: US $6.1m).

Gross margins increased by 10% sequentially to $17.4m compared to $14.6m in H2 2008 (H1 2008: US$19.2m).

Operating profit decreased by 33% sequentially to $5.1m compared to H2 2008: $7.7m (and decreased 16% from H1 2008: $6.1m). 

Cash and cash equivalents in the bank was US$7.3m at the end of the period compared with H2 2008 $6.5m and $6.5m in H1 2008, reflecting the increase in organic and strategic growth. 

Dividend

The Directors have decided to declare a dividend out of the Company's profits for the six months ended 30 June 2009 of 3.5 US$ cents (gross) per share (H1 2008: US $cents 3.5 (gross) per share), with an ex dividend date of 7 October 2009, a record date of 9 October 2009 and a payment date of 13 November 2009. 

Management

Arik Dayan was promoted to the position of CEO of the Company in March 2009. Since his appointment Arik has been focussing on cash flow and expense management. Arik has been working at Amiad since 1997 and has a unique understanding of the business and operations through the insight and experience which he has acquired during his time at the Company.

Ms. Rivka Kalmanzon was appointed as CFO in August 2009. Ms. Kalmanzon has senior management experience in one of the "big 5" CPA firms in Israel, handling a broad spectrum of financial activities. Prior to joining Amiad she served as CFO of several hi-tech, bio-tech and manufacturing companies in Israel and abroad, all of which have several overseas operations. 

Outlook

The Company continues to tightly manage costs and is focussed on managing suppliers, inventories and overheads efficiently. As a response to slowdown in global macro economic conditions it is forming local alliances and strategically increasing its presence in territories that are expected to invest heavily in water infrastructure projects.

Looking ahead to second half of 2009, whilst the irrigation market remains unstable, the demand for Amiad's products is set to continue in new territories as well as its established markets in the municipal and industrial segments. As a result, the Board expects to report full year results which are in line with market expectations.

  AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED BALANCE SHEET 

JUNE 30, 2009

*Reclassified

Date of approval of the interim financial information by the Company's Board of Directors: September 13, 2009

AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED BALANCE SHEET 

JUNE 30, 2009

.

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

AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009

*Reclassified

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

AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009

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

AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009

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

AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009

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

  AMIAD FILTRATION SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

NOTE 1 - GENERAL INFORMATION:

Amiad Filtration 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. 

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

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

NOTE 2 - BASIS OF PREPARATION

This condensed consolidated interim financial information of June 30, 2009 and for the six month periods then ended (hereafter - the interim financial information) have been prepared in condensed form in accordance with IAS 34 - "Interim Financial Reporting". 

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended December 31 2008, which have been prepared in accordance with IFRS. 

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

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended December 31, 2008, as described in those annual financial statements. 

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings. 

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning January 1, 2009:

Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). 

The group has elected to present two performance statements (the income statement and statement of comprehensive income). The interim financial statements have been prepared under the revised disclosure requirements.

The amendment to International Accounting Standard No. 1 (as amended), 'Presentation of Financial Statements' ("the amendment to IAS 1R"), entered into force on January 1, 2009.

AMIAD FILTRATION SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

NOTE 4 - SHAREOLDERS' EQUITY:

b) On 1 April, 2009, the Company's Board of Directors resolved to distribute dividends to its shareholders in the amount of $827 thousand ($0.043 per share).

On 13 September, 2009, the Company's Board of Directors resolved to distribute dividends to its shareholders in the amount of $672 thousand ($0.035 per share).

AMIAD FILTRATION SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

NOTE 4 - SHAREOLDERS' EQUITY (continued):

Earnings per share

Data regarding the earning per share

NOTE 5 - EMPLOYEE INCNTIVE PLAN

During 2009, the board of directors approved a Bonus Scheme which will be available to the Company's employees and Management.

The bonus scheme will be in operation in relation to financial year ending 31 December 2009. The level of bonus payable will be depended on the achievement of targets as set out in the Bonus Scheme.

Any bonus shall be paid following Board's approval of the 2009 financial statement in March 2010. Eligibility to receive the Bonus is contingent upon employment by the Company for the whole of the Bonus Year and/or at the bonus payment date. The payment of any bonus to individual not complying with the above shall be subject to the absolute discretion of the chairman of the Board and/or CEO of the Company.

AMIAD FILTRATION SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

NOTE 5 - EMPLOYEE INCNTIVE PLAN (continued):

The bonus to the Employees shall be paid, subject to the absolute discretion of the Board or of whoever the Board may authorize to do so. As the payment of the bonus is fully discretionary, the Company reserves the right not to pay a bonus to the Employees.

NOTE 6 - REVENUES FROM SALES

Sales by customer location:

NOTE 7 - TAXES ON INCOME: 

The income of the Company is taxed at the regular rate.

The corporate tax rates for 2008 and thereafter are as follows: 2008 - 27%, 2009 - 26% and for 2010 and thereafter - 25%.

On July 23, 2009, the Israel Economic Efficiency Law (Legislation Amendments for Applying the Economic Plan for 2009 and 2010), 2009 (hereinafter - the 2009 Amendment), became effective, stipulating, among other things, an additional gradual decrease in tax rates in 2011 and thereafter, as follows: 2011 - 24%, 2012 - 23%, 2013 - 22%, 2014 - 21%, 2015 - 20% and 2016 and thereafter - 18%.

The calculation of taxes on income in the reported period is based on the best available estimation of the weighted average of expected tax rate for the entire year. The reduction in Israeli corporate tax rates has no material impact on the estimated expected tax rate of the Company in the year ended December 31, 2009.

AMIAD FILTRATION SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

NOTE 8 - CASH FLOWS FROM OPERATIONS: