30th Mar 2017 07:00
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 thousandsexcept 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 | |||||||||
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 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 END 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 | |||
| |||
Transaction with the non-controlling interests | 2,605 | -,- | |
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