Amiad Annual Report 2018.Pdf
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Contents 3 Directors & Senior Management, 21 Corporate Governance Report Secretary & Advisers 26 audit committee report 4 Financial and Operational Summary 28 Independent Auditor’s Report 5 Chairman’s Statement 29 Consolidated Statements of Financial Position 6 Chief Executive’s Review 31 Consolidated Statements of 8 Chief Financial Officer's Statement Comprehensive Income 9 Growth Strategy 32 Consolidated Statements of Changes In Equity 10 Segment focus on Irrigation 33 Consolidated Statements of 12 Geographical focus on US Cash Flows 13 Leveraging TEQUATIC™ PLUS 34 Notes to Consolidated Financial Statements 14 Directors’ Report 80 Appendix - List of subsidiaries 18 Directors’ & Senior Management Biographies Directors & Senior Management, Secretary & Advisors Directors & Senior Management Auditors and Reporting Accountants Yariv Avisar (Non-executive Chairman)* Kesselman & Kesselman Dori Ivzori (Chief Executive Officer) (a member of PricewaterhouseCoopers International Ltd.) Avishay Afriat (Chief Financial Officer)** Certified Public Accountant (lsr.) Arie Schor (Statutory External Director)*** Trade Tower, 25 Hamered Street, Tel Aviv 68125 Derek Zissman (Statutory External Director) P.O. Box 452, Tel Aviv 61003 Amos Shalev (Non-executive Director) Israel Jenny Cohen Derfler (Non-executive Director) Zehava Simon (Non-executive Director) Bankers Dr. Gilead Fortuna (Non-executive Director) Bank Hapoalim Ltd. Oded Rosen (Non-executive Director) Branch No. 472 Afula Company Secretary Israel Ben Gilad United Mizrahi Bank Ltd. Registered and Head Office Branch No. 487 Amiad Water Systems Ltd. Kiryat Schmona D.N. Galil Elyon 1, 1233500 Israel Israel Bank Leumi le-Israel B.M. Nominated Adviser and Broker Branch No. 745 Stifel Nicolaus Europe Ltd. Afula 150 Cheapside Israel London EC2V 6ET UK First International Bank of Israel Ltd. Branch No. 002 Solicitors to the Company as to English Law Tiberias Bryan Cave Leighton Paisner LLP Israel Adelaide House London Bridge Registrar London EC4R 9HA Link Asset Services UK The Registry 34 Beckenham Road Solicitors to the Company as to Israeli Law Beckenham BR3 4ZF Gross, Kleinhendler, Hodak, Halevy, Greenberg, Shenhav & Co. UK One Azrieli Center Round Building Financial Public Relations Advisor Tel Aviv 6701101 Luther Pendragon Israel 48 Gracechurch Street London EC3V 0EJ UK * Mr. Yariv Avisar replaced Mr. Eli Opper as Chairman in September 2018 ** Mr. Avishay Afriat replaced Ms. Irit Ben Dov as CFO in March 2019 *** Appointment effective April 1, 2018 Annual Report 2018 Amiad Water Systems Ltd. 3 Financial & Operational Summary Financial Summary Operational Summary • Revenue of $113.9m (2017: $112.3m) • Positive sales momentum: • Gross margin of 40.8% (2017: 39.5%) – Growth in revenue reflecting increased sales in Americas and APAC regions • Operating profit of $6.1m (2017: $4.6m) – Key geography of the US achieved strong return to growth, • Profit before tax of $4.8m (2017: $5.1m, which included with sales increasing 27.3% exceptional gains from foreign currency hedging) – Industry business unit sales grew by 4.9%, with growth in • Fully diluted earnings per share of $0.10 (2017: $0.14) Petrol, Petrochemical, Oil & Gas and Municipal segments • Net debt at 31 December 2018 was $13.8m (30 June 2018: in most geographies $10.8m) primarily reflecting an investment into inventories – Increase in underlying Irrigation sales offset by reduction in to support recent product launches revenue generated under the distribution agreement with • Cash and cash equivalents at 31 December 2018 were $13.5m Netafim, resulting in slight decrease in Irrigation business (30 June 2018: $14.6m) unit sales overall • Enhanced product offering and strengthened operations: – Successfully launched new range of irrigation products, which have been well received and contributed to Irrigation revenue in the second half of 2018 – Completed integration of TEQUATIC™ PLUS Filter production line and employees, and implemented a focused the sales effort resulting strong pipeline and potential demand – Enhanced efficiency across the business with multiple actions, including in-house metal fabrication facility and increased automation in manufacturing – Gained 100% ownership of Amiad India subsidiary with acquisition of outstanding 40% shareholding from local partner 4 Annual Report 2018 Amiad Water Systems Ltd. Chairman’s Statement I am pleased to be presenting my first Annual Report and agriculture for food production, particularly in emerging markets Accounts as Chairman of Amiad. I have joined a company that that are addressing rapid development and population growth. has considerably strengthened its foundations and refocused its There is also a rising trend worldwide of adopting irrigation strategy and is poised to deliver sustainable growth. solutions that are more sustainable and more efficient, which benefits both the environment and the site owner. In Industry, Strategy delivery growing urbanisation necessitates increased demand for water The results of 2018 reflect the successful implementation of and wastewater treatment systems in municipal markets. At the Amiad’s plan to focus on delivering profitable growth – with same time, environmental regulation and consciousness as well operating profit increasing 34.6%. This was achieved through as a desire for maximum efficiency drives petrochemical, oil & a number of measures, in particular, the full year contribution gas, food & beverage and other industries to adopt advanced from our in-house metal fabrication facility and the introduction filtration systems. In addition, all of these requirements are of automation to certain manufacturing processes. In addition, exacerbated by increasing water scarcity. we focused on identifying purchase economies and efficiencies At Amiad, we can address these demands thanks to our broad through global coordination across our group. These efforts have portfolio of water treatment and filtration solutions that are been sustained into this current year and we look forward to designed to: delivering further improvement in our margins. • use minimal energy – some even operate solely through We also advanced our strategic goals to strengthen our market water pressure; position in the Irrigation industry and North American market. • conserve water: our self-cleaning filters utilise minimal In Irrigation, we launched a series of innovative new products amount of back flush water; that have been very well received and enabled us to increase • have a small footprint without sacrificing performance; the market size that Amiad can service. We continue to focus and to significant sales and marketing efforts on Irrigation to build on • perform and are built to last – requiring low maintenance. our established base in this area and we expect overall growth in 2019. Corporate leadership Finally, on behalf of the Board, I would like to thank my In North America, following the reorganisation of our Industry predecessor, Eli Opper, for his contribution as Chairman and sales team and channel partner network in 2017, as well as everything that he has done to leave Amiad in a stronger position a focused sales effort in Irrigation, we are delighted that we than when he began his tenure. We would also like to thank Irit achieved an almost 30% growth in sales. We also continued Ben-Dov for her tremendous contribution as CFO, and who is to strengthen our platform in the US with the completion of now applying her vast skills and knowledge of our business as the integration of the TEQUATIC™ PLUS Filter equipment and EMEA Region Manager, and to welcome Avishay Afriat to the employees at our headquarters in Mooresville, North Carolina as role of CFO, who has been instrumental to our finance team for well as implementing significant sales efforts and cost reduction almost 10 years. Equally, I would like to thank all of our staff and measures. We are receiving good demand for this offering, which shareholders for their ongoing support. is supporting our backlog for 2019. As a result, with continued positive momentum, we expect significant growth in the US in With the strengthening of Amiad’s foundations and the long-term this current year. growth drivers showing no sign of abating, we look forward to delivering further growth and shareholder value. Going forward, we remain focused on driving growth primarily in Irrigation and in North America – and, above all, are committed to achieving profitable growth and increasing our efficiency. Yariv Avisar Chairman Significant growth drivers [xx] April 2019 We continue to be supported by sustained growth drivers across our business. In Irrigation, there is increasing demand for Annual Report 2018 Amiad Water Systems Ltd. 5 Chief Executive’s Review Amiad performed well in most of its markets during 2018, the impact of reclassification) all segments increased sales. In including a return to growth in our key geography of the US. We particular, sales growth in the PPOG segment was driven by our launched a new Sigma series of irrigation products and completed acquisition at the end of 2017 of the licence to the TEQUATIC™ integration of our TEQUATIC™ PLUS Filter acquisition, which were PLUS Filter following the implementation of significant sales both well received. We also continued to enhance our operational efforts (as well as cost reduction measures) during 2018. efficiency and benefitted from, among other measures, the contribution from our new in-house metal fabrication facility. As In Latin America, sales were broadly