Amiad (AIM: AFS), a leading global producer of water treatment and filtration solutions, provides the following update on trading for the year ending 31 December 2019.
As noted in the Company's interim results announcement on 11 September 2019, Amiad entered the second half of 2019 with a higher order book and larger sales pipeline than at the same point of the previous year. During the second half of the year, the Company was successful in converting this pipeline into sales and expects to achieve revenue growth for full year 2019 over 2018. However, owing to a number of global macroeconomic factors, in particular those impacting the Americas, certain projects did not proceed due to a lack of capital investment. As a result, the Company expects its revenue for full year 2019 to be slightly below market expectations.
The Company has continued to be impacted by currency fluctuations, particularly the New Israeli Shekel against the US Dollar as well as the strengthening of the US Dollar against other local currencies, resulting in a reduction in revenue and gross margin. In addition, the lower-than-anticipated sales in the second half have meant that the Company has not been able to offset the impact on gross margin of the large, lower-margin projects completed in the first half of the year.
As noted in the Company's interim results, the adoption of IFRS 16 has a negative impact on the Company's reported net profit, including a negative currency impact on finance costs resulting from the revaluation of the operating leases that are denominated in the New Israeli Shekel. The Company expects its reported net profit for full year 2019 to be materially impacted by the adoption of IFRS 16.
As a result of the lower-than-expected revenue, the gross margin pressures and the impact of the adoption of IFRS 16, the Company expects net profit for full year 2019 to be $3m-$5m below market expectations.
Looking ahead, the Company expects to enter 2020 with a higher backlog than at the same point in the prior year and is experiencing encouraging sales activity. In addition, as previously noted, the Company continues to focus on implementing measures to increase internal efficiency and reduce its cost base. As a result, the Board continues to look to the future with optimism.
The Company will provide fuller details at the time of its full year results.