Amiad Water Systems Ltd – Interim Results

Amiad Water Systems Ltd – 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 2019.

Financial Summary*

·    Revenue of $58.4m (H1 2018: $56.2m)

·    Gross margin of 39.2% (H1 2018: 42.2%)**, primarily due to sales mix and exchange rate impact

·    Operating profit of $2.5m (H1 2018: $3.1m)

·    Profit before tax of $0.9m (H1 2018: $2.2m), primarily reflecting the impact of IFRS 16

·    Fully diluted earnings per share of $0.026 (H1 2018: $0.056)

·    Net debt at 30 June 2019 was $14.4m (31 December 2018: $13.8m)

·    Cash and cash equivalents at 30 June 2019 were $14.1m (31 December 2018: $13.5m)

* H1 2018 financials have not been restated for IFRS 16, in accordance with the available exemption.

** During the period, Amiad reclassified certain expenses from 'cost of sales' to 'selling and marketing' expenses. The Company has retrospectively applied this reclassification to the prior period and restated the gross margin.

Operational Summary

·    Positive sales momentum:

·    Growth in sales in all of the Company's geographic regions

·    Increase in revenue in both the Irrigation and Industry business units

·    Revenue generated under distribution agreement with Netafim increased by 8.5%

·    Received growing interest in new irrigation product range and TEQUATIC™ PLUS Filter, which is expected to translate to ramp up in sales in H2 2019

·    Improved operations:

·    Increase in total revenue achieved on consistent cost base

·   Implemented further internal efficiency measures, such as introducing automation to additional manufacturing processes

Dori Ivzori, Chief Executive Officer of Amiad, said: "With this set of results, we are beginning to see the operational benefits of our strategic plan as we achieved an increase in revenue without expanding the cost base. This was based on sales growth in all three of our geographic regions and in both the Irrigation and Industry business units. We were also pleased to see a return to growth in revenue generated under our agreement with Netafim. During the period, however, we experienced currency headwinds and the adoption of IFRS 16 had a negative impact on the financial reporting. Nonetheless, we are pleased with the operational progress that we achieved during the period.

"Looking ahead, we entered the second half of 2019 with a higher backlog than at the same point of the prior year as well as a larger sales pipeline, which we expect to convert to orders during the rest of this year. In particular, we expect a ramp up in sales of the new irrigation products to contribute to growth in the Irrigation business unit while the TEQUATIC™ PLUS Filter is expected to contribute to growth in the Industry business unit. We also anticipate an improvement in gross margin for the full year over the first half of 2019. We expect to experience currency fluctuations in H2, but the full extent is not known presently. Despite this, we anticipate good revenue growth for full year 2019, broadly in line with market expectations, and the Board looks to the future with confidence."

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