6th Dec 2005 07:56
Amiad Filtration Systems Ltd06 December 2005 6 December 2005 Amiad Filtration Systems Ltd ("Amiad" or "the Company") Results for the Nine Months to 30 September 2005 Amiad, a producer and global supplier of water filters and filtration systemsfor the industrial & municipal and the irrigation markets announces thirdquarter and nine month results to 30 September 2005. These results cover thetrading period prior to the Company's admission to the Alternative InvestmentMarket on 5 December 2005. Key Highlights• Turnover rose 18% to $33m (9 months, 2004: $28m)• Operating income up 75% to $4.25m (9 months, 2004: $2.43m)• Profit before tax increased 48% to $3.25m (9 months, 2004: $2.20m)• Basic and fully diluted earnings per share increase 77% to 16 cents (9 months, 2004: 9 cents)• Entered into 50% joint venture with Yixing Taixing Environtec Co Ltd (China)• Raised £6.5m before expenses for the Company through admission to AIM in December 2005 Commenting on the results, Yossi Katz, Chief Executive of Amiad said: "Tradingin the nine months to September 2005 was in line with the management'sexpectations. The strong start in the first two quarters has continued into thethird quarter. "Continued demand for the Company's automatic filters means that it ispositioned for a strong finish for the year. The Directors are confident aboutthe Group's prospects for the current financial year." Enquiries: Amiad Filtration SystemsYossi Katz, Chief Executive Officer +972 (0) 4 690 9500Itamar Eder, Chief Financial Officer Corfin CommunicationsHarry Chathli, Neil Thapar + 44 (0) 207 929 8989 OverviewAmiad made significant progress in the nine months to 30 September 2005. Amiadincreased its revenues by 18% to $33 million (9 months, 2004: $28m) and profitbefore tax increased by 48% to $3.25 million (9 months, 2004: $2.20m). If the non-recurring expenses, management fees payable to the shareholders, which wereterminated on Admission, and amortization of non-tangible assets were excluded,the profit before tax was $2.8m. The results reflect continued strong demand for automatic filters specificallyin Mexico and Central America, Spain and China. Over 85% of the Company'srevenues are generated outside Israel. Amiad's automatic filters require low maintenance and can be adapted to provide bespoke solutions to a wide range ofapplications in industries including, steel, power, oil and gas, pulp and paper,in addition to a wide variety of other applications in the irrigation market.Amiad now sells its products worldwide to over 60 countries across the Americas,Africa, Europe, Asia and Australasia. The gross margin for nine months to 30 September 2005 was 49.8%(9 months 2004: 49.3%). Also, as expected the gross margin in the third quarterfell marginally to 45.8% (third quarter 2004: 48.7%) due to maturing projectsand a change of product mix. Margins are expected to recover for the lastquarter of the year. In July 2005, the Company increased to 50 per cent. its stake in Yixing TaixingEnvirontec Co. Ltd, a Chinese affiliate, which will allow it to accelerate sales in the rapidly growing Chinese market and lower the cost of manufacturing of steel manual and automatic filters. In the year to date the Company has identified a number of key market segmentsthat are expected to experience strong market growth due to increasing demand for clean water or higher environmental standards. The Company made significant progress in these markets including ballast water for shipping and oil and gas. The Company intends to increase substantially its presence in the provision of small to medium sized complete drinking water treatment systems by leveraging its market position and aims to achieve this through corporate activity, such as mergers and acquisitions. This market is currently estimated to be worthapproximately US$1 billion per annum. On 5 December 2005, the Company was admitted to AIM. The main rationale for thefloat was to enable the Company to focus on high growth territories in China,India, Mexico, Africa and Eastern Europe. Earnings Per ShareThe Directors of Amiad would like to clarify that the earnings per share figuresdisclosed in the Final Admission Document reflect the actual number of sharesthat were outstanding as of June 30, 2005 and the three previous financial years ended December 31, 2002, 2003 and 2004 before the share split and bonusshare issue that occurred on November 27, 2005. It has come to their attentionthat footnote 28(f) on page 47 of the Admission Document indicates that the earnings per share calculation reflected these post balance sheet events whichis not the case. In accordance with IFRS, earnings per share for historicalperiods should have reflected the post-balance sheet events, namely the share split and the bonus share issue. Taking into account these adjustments, earningsper share would have been calculated using a figure of 13,826,758 shares inissue. Using this revised figure, the historical earnings per share figures would have been as follows: Adjusted Basic and Fully Diluted Earnings Per Share ---------------- --------------------------- Six months ended Year ended June 30 December 31 ---------------- --------------------------- 2005 2004 2004 2003 2002 ------ ------ ------ ------ ------ EPS - restated 0.11 0.06 0.11 0.08 0.07 Going forward, following the issue of 5,045, 965 new shares in the initialpublic offering, basic earnings per share calculations will take into accountthe share split, bonus issue and new shares issued. As of today, the number of outstanding shares issued, after taking into account these adjustments, is 18,872,723. Under IFRS, for the year ended December 31, 2005, basic earnings pershare will be calculated based on the weighted average number of shares outstanding during the year. OutlookTrading in the nine months to September 2005 was in line with the management'sexpectations. The strong start in the first two quarters has continued into thethird quarter. Continued demand for the Company's automatic filters means thatit is positioned for a strong finish for the year. The Directors are confidentabout the Group's prospects for the current financial year. CONSOLIDATED BALANCE SHEETSU.S. dollars in thousands September 30, December 31, 2005 2004 ---------- ---------- Unaudited Audited ---------- ----------ASSETS CURRENT ASSETS:Cash and cash equivalents 2,600 2,004Marketable securities 77 307Trade receivables 14,792 11,055Other accounts receivable 1,396 1,078Inventories 8,185 8,483 ---------- ---------- Total current assets 27,050 22,927 ---------- ---------- NON-CURRENT ASSETS:Loan to a jointly controlled entity - 256Loans to a related party 376 400Severance pay fund 531 538Long-term receivables 102 228Fixed assets, net 2,683 2,544Other assets, net 2,656 2,872Deferred taxes 834 696 ---------- ---------- Total non-current assets 7,182 7,534 ---------- ---------- TOTAL ASSETS 34,232 30,461 ========== ========== LIABILITIES AND EQUITY CURRENT LIABILITIES:Credit from banks and others 8,531 5,866Trade payables 5,293 6,002Other accounts payable 4,458 4,454 ---------- ---------- Total current liabilities 18,282 16,322 ---------- ---------- NON-CURRENT LIABILITIES:Liabilities to banks and others 4,472 4,319Accrued severance pay 521 571Deferred taxes 663 712 ---------- ---------- Total non-current liabilities 5,656 5,602 ---------- ---------- TOTAL LIABILITIES 23,938 21,924 ---------- ---------- EQUITYEquity attributable to equity holders of theparent 10,035 8,299Minority interest 259 238 ---------- ---------- TOTAL EQUITY 10,294 8,537 ---------- ---------- TOTAL LIABILITIES AND EQUITY 34,232 30,461 ========== ========== The accompanying notes are an integral part of the consolidated financialstatements. CONSOLIDATED STATEMENTS OF INCOMEU.S. dollars in thousands (except per share data) ----------------- ------------------ Nine months ended Three months ended Year ended September 30, September 30, December 31, ----------------- ------------------ 2005 2004 2005 2004 2004 -------- ------- -------- ------- ------------ Unaudited Unaudited Audited ----------------- ------------------ ------------ Revenues from sales 33,029 28,006 11,261 9,087 36,934 Cost of sales 16,585 14,193 6,102 4,662 18,376 ------- ------- ------- ------ -------- Gross profit 16,444 13,813 5,159 4,425 18,558 ------- ------- ------- ------ -------- Selling and marketingexpenses 7,880 6,826 2,589 2,280 9,774 General andadministrative expenses 4,062 4,248 1,301 1,619 5,562 Amortization of otherassets 254 309 85 103 411 ------- ------- ------- ------ -------- 12,196 11,383 3,975 4,002 15,747 ------- ------- ------- ------ -------- Operating income 4,248 2,430 1,184 423 2,811 Financial expenses(income), net 848 238 225 (210) 249 Other income(expenses), (146) 10 229 26 23net ------- ------ ------- ------ -------- Income before taxes onincome 3,254 2,202 1,188 659 2,585 Taxes on income 968 949 385 266 864 ------- ------ ------- ------ -------- Net income 2,286 1,253 803 393 1,721 ======= ====== ======= ====== ======== Attributable to: Equity holders of theparent 2,325 1,289 795 413 1,671 Minority interest (39) (36) 8 (20) 50 ------- ------ ------- ------ -------- 2,286 1,253 803 393 1,721 ======= ====== ======= ====== ======== ======= ====== ======= ====== ========Basic and dilutedearnings per share(in U.S.dollars) 0.16 0.09 0.06 0.03 0.11- see also Note 4 ======= ====== ======= ====== ======== The accompanying notes are an integral part of the consolidated financialstatements. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYU.S. dollars in thousands Attributable to equity holders of the parent --------------------------------------------------------- Share Capital Perpetual Foreign currency capital reserves debenture translation reserve -------- --------- ---------- ----------Audited---------Balance atJanuary 1,2004 1,497 1,020 2,824 41 Interest on perpetualdebenture - - - -Exchangedifferencesonperpetual debenture - - 47 -Currencytranslationdifferences - - - (2)Dividend - - - -Net income - - - - ------- -------- --------- ---------Balance atDecember31, 2004 1,497 1,020 2,871 39 Unaudited-----------Interest on perpetualdebenture - - - -Exchangedifferencesonperpetual debenture - - (181) -Currencytranslationdifferences - - - (38)Dividend - - - -Changes in minorityinterestupon the saleof investmentin a company - - - -Net income - - - - ------- ------- -------- -------- Balance atSeptember30, 2005 1,497 1,020 2,690 1 ======= ======= ======== ======== Unaudited-----------Balance atJanuary 1,2004 1,497 1,020 2,824 41Interest on perpetualdebenture - - - -Exchangedifferencesonperpetual debenture - - (64) -Currencytranslationdifferences - - - 45Dividend - - - -Changes in minorityinterestfrom theinvestmentin a company - - - -Net income - - - - ------- ------- ------- -------- Balance atSeptember30, 2004 1,497 1,020 2,760 86 ======= ======= ======= ======== The accompanying notes are an integral part of the consolidated financialstatements. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYU.S. dollars in thousands - Continued Attributable to equity holders of the parent ----------- -------- --------- -------- --------- Retained earnings Total Minority Total Total interest equity recognized income (expense) *) ----------- -------- --------- -------- --------- Audited---------Balance atJanuary 1,2004 1,734 7,116 188 7,304 Interest onperpetualdebenture (113) (113) - (113) -Exchangedifferencesonperpetual debenture (47) - - - -Currencytranslationdifferences - (2) - (2) (2)Dividend (373) (373) - (373) -Net income 1,671 1,671 50 1,721 1,671 ---------- -------- -------- -------- --------- Balance atDecember31, 2004 2,872 8,299 238 8,537 1,669 ========= Unaudited-----------Interest onperpetualdebenture (81) (81) (81) -Exchangedifferencesonperpetual debenture 181 - - - -Currencytranslationdifferences - (38) - (38) (38)Dividend (470) (470) (36) (506) -Changes inminorityinterestuponthe sale ofinvestment in a company - - 96 96 -Net income 2,325 2,325 (39) 2,286 2,325 --------- -------- ------- ------- ---------Balance atSeptember30, 2005 4,827 10,035 259 10,294 2,287 ========= ======== ======= ======= ========= Unaudited-----------Balance atJanuary 1,2004 1,734 7,116 188 7,304 1,288Interest onperpetualdebenture (113) (113) - (113) -Exchangedifferencesonperpetual debenture 64 - - - -Currencytranslationdifferences - 45 - 45 45Dividend (373) (373) - (373) -Changes inminorityinterestfrom the investmentin a company - - 35 35 -Net income 1,289 1,289 (36) 1,253 1,289 --------- -------- ------- -------- --------- Balance atSeptember30, 2004 2,601 7,964 187 8,151 2,622 ========= ======== ======= ======== ========= *) Attributable to equity holders of the parent. The accompanying notes are an integral part of the consolidated financialstatements. CONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousands Nine months ended Nine months ended Year ended September 30, September 30, December 31, 2005 2004 2004 --------- --------- --------- Unaudited Unaudited Audited --------- --------- --------- Cash flows from operating activities:------------------------------------- Net income 2,286 1,253 1,721Adjustments to reconcilenet income to net cashprovided by (used in)operating activities (a) (3,840) (629) 92 --------- --------- --------- Net cash provided by(used in) operatingactivities (1,554) 624 1,813 --------- --------- --------- Cash flows from investing activities:--------------------------------------- Purchase of fixed assets (891) (892) (1,151)Investment grantsreceived 150 - 128Acquisition of companyincluded according to theproportionateconsolidation method (b) (517) - -Increase in cashresulting from transitionto full consolidation ofa company previouslyincluded according to theproportionateconsolidation method (d) 8 - -Disposal of (investmentin) marketable securities 218 (243) (261)Proceeds from sale offixed assets 16 40 46Proceeds from the sale ofa subsidiary(c) 50 - -Long-term loan granted toa related party andothers (122) (55) (154)Collection of long-termloan granted to a relatedparty 65 43 57 --------- --------- ---------Net cash used ininvesting activities (1,023) (1,107) (1,335) --------- --------- --------- Cash flows from financing activities:--------------------------------------- Dividends paid to theminority interest (36) - -Dividends paid to equityholders of the parent (470) (373) (373)Interest on perpetualdebenture (108) (109) (109)Receipt of long-termloans and otherliabilities 2,326 2,743 2,911Repayment of long-termloans (1,513) (1,328) (1,662)Receipt of loans fromothers - 214 233Short-term credit frombanks, net 3,008 (938) (1,280) --------- --------- ---------Net cash provided by(used in) financingactivities 3,207 209 (280) --------- --------- ---------Effect of exchange ratechanges on cash and cashequivalents (34) 16 19 --------- --------- --------- Increase (decrease) incash and cash equivalents 596 (258) 217Cash and cash equivalentsat the beginning of theperiod 2,004 1,787 1,787 --------- --------- --------- Cash and cash equivalentsat the end of the period 2,600 1,529 2,004 ========= ========= ========= Interest paid 595 287 490 ========= ========= ========= Income taxes paid 1,241 416 530 ========= ========= ========= The accompanying notes are an integral part of the consolidated financialstatements. CONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousands Nine months ended Nine months ended Year ended September 30, September 30, December 31, 2005 2004 2004 --------- --------- --------- Unaudited Unaudited Audited --------- --------- --------- (a) Adjustments to reconcile net income to net cash provided by (used in) operating activities: ---------------------------------------------------------- Income and expenses not involving operating cash flows: Depreciation and amortization 683 563 902 Deferred taxes, net (187) (320) (206) Accrued severance pay, net (43) 16 (83) Exchange rate differences on liabilities to banks and (29) (93) 235 other long-term liabilities Loss on sale of fixed assets and other 38 15 15 Exchange rate differences on loans to related party and 77 (19) (19) others --------- --------- --------- 539 162 844 --------- --------- --------- Changes in operating assets and liabilities: Increase in trade receivables (3,362) (3,745) (1,099) Decrease (increase) in other accounts receivable (161) 163 (77) Decrease (increase) in inventories 237 (1,587) (2,860) Increase (decrease) in trade payables (1,000) 2,864 1,707 Increase (decrease) in other accounts payable (93) 1,514 1,577 --------- --------- --------- (4,379) (791) (752) --------- --------- --------- (3,840) (629) 92 ========= ========= =========(b) Acquisition of company included according to the proportionate consolidation method ---------------------------------------------------------- Working capital (excluding cash and cash equivalents) (321) Long term loans 75 Fixed assets, net (271) --------- (517) =========(c) Proceeds from the sale of a subsidiary ---------------------------------------- Working capital (excluding cash and cash equivalents) (434) Fixed assets, net 484 --------- 50 =========(d) Increase in cash resulting from transition to full consolidation of a company previously included according to the proportionate consolidation method ---------------------------------------------------------- Working capital deficiency (excluding cash and cash 126 equivalents) Fixed assets, net (118) --------- 8 ========= The accompanying notes are an integral part of the consolidated financialstatements. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS NOTE 1:- GENERAL a. These financial statements have been prepared in a condensed format as ofSeptember 30, 2005 and for the nine months and three months then ended. Thesefinancial statements should be read in conjunction with the Company auditedannual financial information and accompanying notes as of December 31, 2004,included in the admission document dated November 29, 2005. b. On December 5, 2005, the Company's shares were admitted to trading on AIM, amarket operated by the London Stock Exchange. Concurrently, the Companycompleted an initial public offering (IPO) of 5,045,965 Ordinary shares at 129pence ($2.24) per share. The total cash proceeds derived from the IPO (beforeplacement and other related costs) were $11.3 million. The placement expensesare estimated to amount of approximately $ 1.7 million In the framework of placement, a shareholder of the Company (Gaon Agro) sold1,164,454 Ordinary shares. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES a. The interim consolidated financial statements have been prepared inaccordance with International Financing Reporting Standards ("IFRS") in thecontext of interim condensed financial standards. The significant accountingpolicies and methods of computation applied in the preparation of the interimfinancial statements are the same as those applied in the annual financialinformation as of December 31, 2004. b. Following are data regarding the exchange rates of certain foreign currenciesin relation to the U.S Dollar: As of 1 Euro 1 AUD 1 NIS----------------------- -------- -------- -------- US$ --- --------------------- September 30, 2005 0.832 1.315 0.217December 31, 2004 0.733 1.283 0.232 NOTE 3:- SIGNIFICANT EVENTS IN THE REPORTING PERIOD a. On March 25, 2005, the Company resolved to pay a dividend in amount of $ 470thousand. The dividend was paid in August 2005. b. In April 2005, the Company reached an agreement with respect to final taxassessments for the tax years until and including 2003. Due to this agreement,an income tax benefit in respect of prior years was recorded in the financialstatements for the nine months period ended September 30, 2005, amounting to $271 thousand, which was not included in prior years since their utilization wasuncertain. c. In June 2005, the Company entered into a settlement agreement with aplaintiff. Due to the settlement agreement, expenses of $ 300 thousand wererecorded in respect of payments to the plaintiff and other expenses relating tothe lawsuit. These expenses were included in other expenses in the statement ofincome. d. In July 2005, the Company, through its subsidiary in Singapore, purchased 50%of a company in China for a total consideration of $ 1.4 million (a loanpreviously granted to the company in China, was included as part of the cost ofshares). e. On September 1, 2005, the Company signed an agreement with PlastroIrrigation Ltd. ("Plastro"), which held until the said date 50% of the shares ofAmiad Australia Pty Ltd. ("Amiad Australia"). Pursuant to the agreement, AmiadAustralia transferred to Plastro all of its shares in a 50%-owned subsidiary,PAP, and, in consideration, Plastro transferred to the Company all of its sharesin Amiad Australia. After implementation of the agreement, the Company holds100% of the shares of Amiad Australia. The fair value of the shares received inAmiad Australia approximated the carrying values of the PAP shares that weretransferred. In addition, the parties agreed that the securities and guarantees that theCompany extended to PAP, and the securities and guarantees that Plastro extendedto Amiad Australia will be cancelled by no later than February 2006 .Each of theparties agreed to indemnify the other party in respect to claims that are basedon the holdings of the other party in the shares that were sold in the frameworkof the transaction. f. On August 12, 2005, the Company granted to three senior employees, thechairman of the board of directors and to Kibbutz Amiad options to purchase386,682, 154,674 and 77,336 Ordinary Shares, respectively (adjusted for theshare split and bonus share-see Note 5(b)). The options were granted accordingto the share option plan adopted by the Company on June 22, 2005. The optionsgranted were conditional on admission of the Company's shares on AIM. Theoptions to the senior employees were granted in the framework of the Company'soption plan that was submitted to the Israeli Tax Authorities, in accordancewith the provisions of Section 102 to the Israeli Income Tax Ordinance and theremaining options were granted under the provision of section 3(i) of theIsraeli Income Tax Ordinance. The options vest over a period of four years(except in the case of the CEO where the period is two years) and have anexercise price of $ 1.53 per share. The options will be held during the vestingperiod by a trustee and will be released in accordance with the terms of optionplan. Unexercised options expire 10 years after date of grant. NOTE 3:- SIGNIFICANT EVENTS IN THE REPORTING PERIOD (Cont.) f. (Cont.) The accounting treatment in respect of the options is in accordance with theprovisions of IFRS 2, "Share-based payment", according to which the fair valueof the options on the date of the grant is recorded as compensation expense overthe vesting period with a corresponding increase in capital reserves inshareholders' equity. NOTE 4:- EARNINGS PER SHARE As described in Note 5(b) below, the Company effected a split of the sharecapital and approved bonus shares to the shareholders. Immediately beforeadmission, the number of outstanding Ordinary shares was 13,826,758 shares. The earnings per share presented in these financial statements have beenadjusted retrospectively to reflect the share split and the bonus shares. ------------ ------------ Nine months ended Three months ended Year ended September 30 September 30 December 31 ------------ ------------ 2005 2004 2005 2004 2004 ------- ------- ------- ------- Unaudited Audited ----------- ---------Actual weightedaverage number ofoutstandingOrdinary shares asof the respectiveperiod (inthousands) 5,743 5,743 5,743 5,743 5,743 Effect of splitand Bonus shares(in thousands) 8,084 8,084 8,084 8,084 8,084 ------- ------- ------- ------- -------- Number of sharesused forcalculation ofearnings per share(in thousands) 13,827 13,827 13,827 13,827 13,827 ======= ======= ======= ======= ======== Net income,attributable toshareholders ofthe parentaccording to thestatement ofincome (US dollarsin thousands) 2,325 1,288 795 413 1,671 Less - interest onperpetualdebenture (USdollars inthousands) (81) (81) (27) (27) (113) ------- ------- ------- ------- -------- 2,244 1,207 768 386 1,558 ======= ======= ======= ======= ======== Basic and dilutedearnings per share(in US dollars) 0.16 0.09 0.06 0.03 0.11 ======= ======= ======= ======= ======== NOTE 4:- EARNINGS PER SHARE (Cont.) The earnings per share ("EPS") data reported on page 27 to the admissiondocument dated November 29, 2005 were not retrospectively adjusted of theeffects share split and the bonus shares as required by IFRS. The adjusted EPSdata for the periods reported in the admission document are as follows (in USdollars): -------------- ----------------------- Six month ended Year ended June 30 December 31 -------------- ----------------------- 2005 2004 2004 2003 2002 ------- --------- -------- --------- --------- Audited Unaudited Audited ------- --------- ----------------------- --------- --------- EPS as reported 0.26 0.14 0.27 0.20 0.18 EPS as adjusted 0.11 0.06 0.11 0.08 0.07 Following the completion of the Company's IPO, the number of outstanding sharesincreased by 5,045,965 shares. NOTE 5:- EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE a. On November 9 and November 23, 2005, the Company distributed a dividend toits shareholders in the amounts of NIS 10 million ($ 2.13 million) and NIS 760thousand ($ 161 thousand), respectively. These amounts were immediately extended as shareholders loans to the Company,and will be repaid immediately upon the Company's IPO. b. On November 27, 2005, the Company effected a split of the Company's sharecapital such that each NIS 1 Ordinary Share was split into 2 Ordinary Shares ofNIS 0.5 par value each. In addition, the Company approved distribution of2,339,704 Ordinary shares as bonus shares to any party that was a shareholder inthe Company on November 24, 2005. Subsequent to the split and bonus shares, the number of outstanding sharesimmediately before admission is 13,826,758. For the affect on the earnings pershare, see Note 4. c. The following agreement, dated November 24, 2005 between the Company and itsshareholders, amends or terminates the respective agreements as described innote 26 of the financial information of the Company as of June 30, 2005: (1) Addendum to a sublease agreement between the Company, Kibbutz Amiad andAmiad Filtration System LLP. According to the addendum, the monthly rate is US$32 Thousand. The rent is reviewed every 3 years. The term of the sublease is 10years with an option to extend until December 31, 2022. NOTE 5:- EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE (Cont.) (2) Termination agreements dated November 24, 2005. It was agreed that themanagement agreements with the Kibbutz, the indemnification agreements with theKibbutz in the event of dissolution, the consulting agreements with Gaon Agroand the investment agreement with Gaon Agro will be cancelled upon thecompletion of the Company's IPO.In addition, the perpetual debenture that the Company issued to Gaon Agro willbe converted into additional paid-in capital and, therefore, the interestpayment in respect thereof will be ceased. As of the date of approval of these financial statements, the Company completedthe admission and all these agreements came into force and effect. (3) Addendum to a manpower agreement dated November 24, 2005 between the Companyand Kibbutz Amiad pursuant to which the Kibbutz agrees to provide the Companywith manpower services. The term of the agreement is 10 years commencing onOctober 1, 2005. The agreement is automatically renewable for additional 10years each, unless either party notifies the other of its intention not to renewthe term of the agreements six month prior to the end of the agreement. TheKibbutz may terminate the agreement by a six month written notice at any time.Upon termination all personnel supplied by the kibbutz, may become the Companyemployees. The cost of the manpower services under the agreement will be paidmonthly based on a formula which varies depending on the number of workers andthe function each worker undertake in the Company. (4) Addendum to a service agreement dated November 24, 2005 between the Companyand Kibbutz Amiad pursuant to which the Kibbutz agrees to provide the Companywith various services including utilities, maintenance etc. The term of theagreement is 10 years commencing on October 1, 2005. The agreement isautomatically renewable for additional 10 years each, unless either partynotifies the other of its intention not to renew the term of the agreements sixmonth prior to the end of the agreement. In accordance with the addendum, thecost of services was updated to $ 12 thousand per month from $ 16 thousand permonth. NOTE 6:- TAXES ON INCOME On July 25, 2005 the Knesset enacted the Law for Amendment of the Income TaxOrdinance (Amendment No. 147), 2005 ("the Law"). The Law determines, inter alia,that the corporate tax rate will be reduced gradually as follows: 2006 - 31%;2007 - 29%; 2008 - 27%; 2009 - 26%; 2010 and onward - 25%. The effect of the Law on the financial statements for the periods endedSeptember 30, 2005 was not material. - - - - - - - - - - - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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