RNS Number:5690A
Amiad Filtration Systems Ltd
29 March 2006
29 March 2006
Amiad Filtration Systems Ltd
("Amiad" or "the Company")
Results for the Twelve Months to 31 December 2005
Amiad, a producer and global supplier of water filters and filtration systems
for the industrial & municipal and the irrigation markets announces its full
year results to 31 December 2005.
Financial Highlights
* Turnover rose 15% to $42.4m (2004: $36.9m)
* Operating income up 75% to $4.9m (2004: $2.8m)
* Profit before tax increased 57% to $4.1m (2004: $2.6m)
* As expected, gross margins were 50.2%
* Basic and fully diluted earnings per share increase 82% to 20 cents
(2004: 11 cents)
* Raised #6.5m before expenses for the Company through admission to AIM
in December 2005
* A final dividend of 7.71 cents (USD) per share
Operational Highlights
* Strong demand for automatic filters specifically in Mexico and Central
America, Spain and China
* Significant sales growth in Ecuador Columbia and Mexico for irrigation
products
* Solid initial sales of new product containing thread filter in USA and France
* Entered into 50% joint venture with Yixing Taixing Environtec Co Ltd (China)
Commenting on the results, Yossi Katz, Chief Executive of Amiad said: "Amiad is
benefiting from strong growth in water resource infrastructure investment as
demand for clean water increases globally.
"Despite possible seasonal fluctuations in the irrigation sector during the year
the company expects a solid demand for its advanced filtration systems. Our
growing involvement in India, Brazil, China, Eastern Europe, Russia and US
provides the Company with a good platform for further growth in 2006."
Enquiries:
Amiad Filtration Systems +44 (0)20 7929 8989 on the day and
Yossi Katz, Chief Executive Officer +972 (0) 4 690 9500 thereafter
Itamar Eder, Chief Financial Officer
Corfin Communications
Harry Chathli, Neil Thapar +44 (0)20 7929 8989
Overview
Amiad made significant progress in the twelve months to 31 December 2005. The
Company increased its revenues by 15% to $42.4 million (2004: $36.9m) and profit
before tax increased by 57% to $4.1m million (2004: $2.6m). If the non-
recurring expenses, management fees payable to the shareholders, which were
terminated on Admission, and amortisation of non-tangible assets were excluded,
the profit before tax was $5.4m
Amiad is a producer and global supplier of water filters and filtration systems
used in two key markets, namely the industrial and municipal market and the
irrigation market. The Company develops and supplies advanced filtration
systems which improve performance and efficiency. By revenue, automatic filters
are the Company's largest business segment.
These results reflect continued strong demand for automatic filters,
specifically in Mexico and Central America, Spain and China, primarily in the
industrial & municipal markets. Amiad's automatic filters require low
maintenance and can be adapted to provide bespoke solutions to a wide range of
applications 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 in over 60 countries across the Americas, Africa,
Europe, Asia and Australasia. Over 90% of the Company's revenues are generated
outside Israel.
On 5 December 2005, the Company was admitted to trading on AIM. The Company
raised #6.5 million, primarily to develop its sales and marketing strategy in
the high growth territories such as China, India, Mexico, Africa and Eastern
Europe.
Operational Review
During the year, the Company had identified a number of key market segments that
were expected to experience strong growth due to increasing demand for clean
water or higher environmental standards.
Industrial & Municipal
The Company has made significant progress in the Industrial & Municipal sector
during the year, with a double-digit year-on-year growth from the previous year.
A significant contract was signed in France with Veolia for the supply of
filters for pre-filtration of membranes. In September 2005, the Company secured
an order in the US to supply its new product, the thread filter, which was
developed specifically for pre-filtration and sea water application. Another
breakthrough in this segment was filtration of ballast water, with the Company
selling its first commercial system of this product to Meyer Wreft in Germany
and subsequently receiving an order for a system in Pan Asia in Korea.
In July 2005, the Company increased to 50 per cent. its stake in Yixing Taixing
Environtec 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 2006 the Company should continue to benefit from focusing on the emerging
markets of Central America and India as it takes on new employees and enters
into distribution networks.
Irrigation
Revenue derived from products being sold to the irrigation market also saw
double digit growth compared to the previous year, mainly due to two large
projects in the early part of 2005. This was an unusual high as this segment is
the one most affected by seasonality. The Company achieved significant
penetration into Central America, mainly in Mexico and also expanded sales in
Ecuador and Colombia. In Europe, the Company installed 86 filtration systems in
Spain through their distributor, Mondragon.
In the latter part of 2005, the Company started to produce and sell automatic
disc filters for the irrigation sector and expects to supply this to customers
in the coming year. This is an important addition it the Company's current main
product line of automatic filters.
On September 1, 2005, the Company acquired the remaining 50% of the shares in
Amiad Australia from Plastro Irrigation Ltd. ("Plastro"). Accordingly, Amiad
ceased to sell directly to the irrigation market and now focuses on filtration
and water treatment systems for the municipal and industrial markets. The
Company will continue to sell filters for the irrigation sector via Plastro.
Financial review
The Company increased its revenues by 15% to $42.4 million (2004: $36.9m) and
profit before tax increased by 57% to $4.1 million (2004: $2.6m). Basic and
fully diluted earnings per share increased by 82% to 20 cents (2004: 11 cents).
As expected, the gross margin was 50.2%, same as in 2004.
Operating income increased by 75% to $4.9m (2004: $2.8m) reflecting the growth
in revenues and a tight control over operational expenditure. Net income
amounted to $2.9m compared to $1.7m for the previous year.
Net cash balances as of December 31, 2005, amounted to $7.7m reflecting the
$9.3m net proceeds from the placing on admission to AIM in December 2005, and
after repayment of loans and reducing the use of credit facilities. Cash from
operations for the full year was negative $0.3m compared with a positive $1.8m
in 2004. In the first half of 2005 the cash from operations was negative $2.1m
which, as expected, turned to a positive $1.8m in the second half of the year.
R&D
Amiad employs 25 people worldwide in research & development and engineering. It
has a good track record of innovation with success in increasing automation,
efficiency and space saving. The Company's breakthrough product, the thread
filter is the only effective alternative to other membrane filtering systems.
The Company intends to invest 3-5% of sales on R&D on an ongoing basis.
Dividend
The Directors are recommending a dividend payment of approximately 7.71 cents
(USD) per share for the twelve months payable on 5 May 2006 to shareholders on
the register on 5 April 2006 which is set as the Ex-Dividend date.
Outlook
Global demand for clean water continues to rise steadily. This is expected to
lead to significant investment in water resource infrastructure over the long
term. The Company has seen a further increase in demand for its advanced
filtration systems, specifically in the Industrial & Municipal markets. Sales in
the irrigation segment will reflect the seasonality associated with the farming
patterns during the early part of the year. However, increased distribution and
sales in India, Brazil, China, Eastern Europe, Russia and US provides the
Company with a solid platform for further growth in 2006.
CONSOLIDATED BALANCE SHEETS
December 31,
--------------------------
2005 2004
-------- --------
U.S. dollars in thousands
--------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 7,692 2,004
Marketable securities 4 307
Trade receivables 14,467 11,055
Other accounts receivable 1,250 1,078
Inventories 8,210 8,483
-------- --------
Total current assets 31,623 22,927
-------- --------
NON-CURRENT ASSETS:
Loan to a jointly controlled entity - 256
Loans to a related party 411 400
Severance pay fund 558 538
Long-term receivables 94 228
Fixed assets, net 2,613 2,544
Other assets, net 2,618 2,872
Deferred taxes 1,128 696
-------- --------
Total non-current assets 7,422 7,534
-------- --------
TOTAL ASSETS 39,045 30,461
======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Credit from banks and others 6,348 5,866
Trade payables 5,833 6,002
Income taxes payable 870 1,509
Other accounts payable 2,579 2,945
-------- --------
Total current liabilities 15,630 16,322
-------- --------
NON-CURRENT LIABILITIES:
Liabilities to banks and others 3,601 4,319
Accrued severance pay 519 571
Deferred taxes 629 712
-------- --------
Total non-current liabilities 4,749 5,602
-------- --------
TOTAL LIABILITIES 20,379 21,924
-------- --------
CHARGES, CONTINGENT LIABILITIES AND COMMITMENTS
EQUITY
Share capital 2,291 1,497
Capital reserves 12,797 1,020
Perpetual debenture - 2,871
Foreign currency translation reserve 123 39
Retained earnings 3,190 2,872
-------- --------
18,401 8,299
Minority interest 265 238
-------- --------
TOTAL EQUITY 18,666 8,537
-------- --------
TOTAL LIABILITIES AND EQUITY 39,045 30,461
======== ========
CONSOLIDATED STATEMENTS OF INCOME
--------------------------
Year ended
December 31,
--------------------------
2005 2004
------ -------- -------
Note U.S. dollars in thousands
(except per share data)
------ --------------------------
Revenues from sales 42,406 36,934
Cost of sales 21,139 18,376
-------- --------
Gross profit 21,267 18,558
-------- --------
Selling and marketing expenses 10,571 9,774
General and administrative expenses 5,471 5,562
Amortization of other assets 340 411
-------- --------
16,382 15,747
-------- --------
Operating income 4,885 2,811
Financial expenses, net 822 249
Other income (expenses), net (1) 23
-------- --------
Income before taxes on income 4,062 2,585
Taxes on income 1,151 864
-------- --------
Net income 2,911 1,721
======== ========
Attributable to:
Equity holders of the parent 2,943 1,671
Minority interest (32) 50
-------- --------
2,911 1,721
======== ========
Basic and diluted earnings per share
(in U.S. dollars) 3 0.20 0.11
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to equity holders of the parent
-----------------------------------------------------------
Share Capital Perpetual Foreign Retained Total
capital reserves debenture *) currency earnings
trans-
lation
reserve
-------- -------- --------- --------- --------- -------
U.S. dollars in thousands
-----------------------------------------------------------
Balance at
January 1, 2004 1,497 1,020 2,824 41 1,734 7,116
Interest on
perpetual
debenture*) - - - - (113) (113)
Exchange differences
on perpetual - - 47 - (47) -
debenture
Currency translation
differences - - - (2) - (2)
Dividend - - - - (373) (373)
Net income - - - - 1,671 1,671
------- -------- --------- --------- --------- -------
Balance at
December 31, 2004 1,497 1,020 2,871 39 2,872 8,299
Net proceeds
from issuance 545 8,730 - - - 9,275
of shares in IPO
Deferred taxes in
respect of IPO costs - 621 - - - 621
Interest on
perpetual debenture *) - - - - (81) (81)
Exchange differences
on perpetual debenture - - (196) - 196 -
Conversion of
perpetual debenture *) - 2,675 (2,675) - - -
Currency translation
differences - - - 84 - 84
Dividend - - - - (2,804) (2,804)
Dividend to minority - - - - - -
Changes in - - - - - -
minority interest
upon the sale of
investment in a
company
Issuance of
bonus share 249 (249) - - - -
Share-based payment - - - - 64 64
Net income - - - - 2,943 2,943
-------- -------- --------- --------- --------- -------
Balance at
December 31, 2005 2,291 12,797 - 123 3,190 18,401
======== ======== ========= ========= ========= =======
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)
-------- -------- -------------
Minority Total Total
interest equity recognized
income
(expense) **)
-------- -------- -------------
U.S. dollars in thousands
--------------------------------------
Balance at January 1, 2004 188 7,304 -
Interest on perpetual debenture *) - (113) -
Exchange differences on perpetual - - -
debenture
Currency translation differences - (2) (2)
Dividend - (373) -
Net income 50 1,721 1,671
-------- -------- ------------
Balance at December 31, 2004 238 8,537 1,669
======== ======== ============
Net proceeds from issuance of
shares in IPO - 9,275 -
Deferred taxes in respect of IPO
costs - 621 -
Interest on perpetual debenture *) - (81) -
Exchange differences on perpetual - - -
debenture
Conversion of perpetual debenture *) - - -
Currency translation differences - 84 84
Dividend - (2,804) -
Dividend to minority (36) (36) -
Changes in minority interest upon
the sale of investment in a company 95 95 -
Issuance of bonus shares - - -
Share-based payment - 64 -
Net income (32) 2,911 2,943
-------- -------- ------------
Balance at December 31, 2005 265 18,666 3,027
======== ======== ============
*) See Note 18c.
**) Attributable to equity holders of the parent.
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------
Year ended
December 31,
-------------------------
2005 2004
--------- ---------
U.S. dollars in thousands
-------------------------
Cash flows from operating activities:
-------------------------------------
Net income 2,911 1,721
Adjustments to reconcile net income to net cash
provided by (used in) operating activities (a) (3,220) 92
--------- ---------
Net cash provided by (used in) operating
activities (309) 1,813
--------- ---------
Cash flows from investing activities:
-------------------------------------
Purchase of fixed assets (1,041) (1,151)
Purchase of other assets (44) -
Investment grants received 113 128
Disposal of (investment in) marketable securities 300 (261)
Acquisition of company included according to the
proportionate consolidation method (b) (517) -
Increase in cash resulting from transition to full
consolidation of a company previously included
according to the proportionate consolidation method (d) 8 -
Proceeds from sale of fixed assets 41 46
Proceeds from the sale of a subsidiary (c) 50 -
Long-term loan granted to a related party and others (284) (154)
Collection of long-term loan granted to a related
party 268 57
--------- ---------
Net cash used in investing activities (1,106) (1,335)
--------- ---------
Cash flows from financing activities:
---------------------------------------
Net proceeds from issuance of shares in IPO 9,275 -
Dividends paid to the minority interest (36) -
Dividends paid to equity holders of the parent (2,804) (373)
Interest on perpetual debenture (135) (109)
Receipt of long-term loans and other liabilities 1,964 2,911
Repayment of long-term loans (1,928) (1,662)
Receipt of loans from others - 233
Short-term credit from banks, net 840 (1,280)
--------- ---------
Net cash provided by (used in) financing
activities 7,176 (280)
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents (73) 19
Increase in cash and cash equivalents 5,688 217
Cash and cash equivalents at the beginning of the
year 2,004 1,787
--------- ---------
Cash and cash equivalents at the end of the year 7,692 2,004
========= =========
Interest paid 823 490
========= =========
Income taxes paid 1,643 530
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------
Year ended
December 31,
--------------------------
2005 2004
--------- ---------
U.S. dollars in thousands
--------------------------
(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 980 902
Share-based payment 64 -
Deferred taxes, net 107 (206)
Accrued severance pay, net (72) (83)
Exchange rate differences on liabilities to banks
and other long-term liabilities 61 235
Loss on sale of fixed assets and others 66 15
Exchange rate differences on loans to related
party and others 22 (19)
-------- ---------
1,228 844
-------- ---------
Changes in operating assets and liabilities:
Increase in trade receivables (3,068) (1,099)
Increase in other accounts receivable (59) (77)
Decrease (increase) in inventories 167 (2,860)
Increase (decrease) in trade payables (392) 1,707
Increase (decrease) in other accounts payable (1,096) 1,577
-------- ---------
(4,448) (752)
-------- ---------
(3,220) 92
======== =========
(b) Acquisition of company included according to
the proportionate consolidation method
--------------------------------------------
Working capital (excluding cash and
cash equivalents) (321)
Other assets (42)
Fixed assets, net (229)
Long-term receivables 75
--------
Cash outflow (517)
========
(c) Proceeds from the sale of a subsidiary
----------------------------------------
Working capital (excluding cash and
cash equivalents) (476)
Fixed assets, net 526
--------
Cash inflow 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 equivalents) 121
Fixed assets, net (113)
--------
Cash flow 8
========
The accompanying notes are an integral part of the consolidated financial
statements.
NOTE 1:- GENERAL
a. The Company was incorporated in Israel in June 1997. On December 5, 2005,
the Company's shares were admitted to trading on the AIM, a market operated
by the London Stock Exchange. Concurrently, the Company completed an initial
public offering (IPO) of its shares - see Note 18b. The principal
shareholders of the Company are Kibbutz Amiad ("the Kibbutz"), through a
company controlled by the Kibbutz, A.M.S.I. Investments Ltd. ("AMSI") which
owns 54.1% of the Company's outstanding shares, and Gaon Agro Industries Ltd.
("Gaon Agro") which owns 13% of the Company's outstanding shares.
b. The Group is a producer and global supplier of water filters and filtration
systems used in the industrial & municipal market and the irrigation market.
c. On June 30, 1998, the Company entered into an agreement with the Kibbutz and
with the limited partnership, Amiad Filtration Systems ("the partnership") in
which the Kibbutz is the general partner ("the purchase agreement") whereby
all of the partnership's business activities, assets, including goodwill and
intellectual property, but excluding property rights (lease rights and/or
ownership to land and buildings) were transferred to the Company in effect as
from January 1, 1998 ("the transfer date"). All of the partnership's
liabilities were also transferred to the Company as of the transfer date,
except for certain guarantees and charges that remained in the partnership.
The transfer of the above assets and liabilities was carried out at no
consideration in accordance with the regulations of the Israeli Economy
Settlements Regulations (Legislation Amendments) Tax Reliefs Relating to
Assistance Arrangements with Farmers, 1990. According to these regulations,
for income tax purposes, the cost of transferred assets, the respective
accumulated depreciation and their purchase date shall be as in the
transferring partnership.
d. Definitions:
In these financial statements:
The Company - Amiad Filtration Systems Ltd.
The Group - The Company and its subsidiaries.
Subsidiaries - Companies over which the Company exercises control and whose
accounts are consolidated with those of the Company.
Jointly controlled entities - Companies owned by various entities that has a
contractual arrangement for joint control, and whose accounts are
consolidated with those of the Company using the proportionate consolidation
method.
NIS - New Israeli shekels
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation:
The consolidated financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards ("IFRS").
b. Accounting policies:
The accounting policies adopted by the Group for all periods presented are in
compliance with the IFRSs that are effective at December 31, 2005.
c. Financial statements in U.S. dollars - the functional and presentation
currency:
The functional and presentation currency of the Company and its subsidiaries
(except in Australia and China - see below), is the U.S. dollar. Transactions
in foreign currencies are initially recorded in the functional currency rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the functional currency
rate of exchange ruling at the balance sheet date. All differences are taken
to the consolidated statement of income.
The functional currency of the subsidiary in Australia is the Australian
dollar ("AUD"). The functional currency of the jointly controlled entity in
China is the Chinese RMB. As at the reporting date, the assets and
liabilities of these companies are translated into U.S. dollars at the rate
of exchange prevailing at the balance sheet date, and income and expenses are
translated at weighted average exchange rates. The exchange rate differences
arising on the translation are taken directly to a separate component of
equity ("foreign currency translation reserve").
d. Principles of consolidation:
Subsidiaries are consolidated from the date on which control is transferred
to the Company and cease to be consolidated from the date on which control is
transferred out of the Company.
Intercompany balances and transactions, including profits from inter-company
transactions not yet realized outside the Group, have been eliminated upon
consolidation.
The financial statements of the subsidiaries are prepared for the same
reporting periods as the parent company, using consistent accounting
policies.
The financial statements were consolidated with those of the following
subsidiaries:
- Filtration Ltd., wholly-owned and controlled by the Company, is
registered in Israel and engaged in the manufacture and marketing of
automatic water filters ("Filtration").
- Amiad U.S.A. Inc., an 82%-owned subsidiary, is registered in the State
of California, U.S.A. and is engaged in the sale of the Company's
products and other irrigation products in the U.S., Canada and Mexico.
- Filtration and Control Systems Pte Ltd., wholly-owned and controlled by
the Company, is registered in Singapore and is engaged in the marketing
and distribution of the Company's products in East Asia, except China.
- Amiad France S.A.R.L., a 66%-owned subsidiary, is registered in France
and engaged in the marketing and distribution of the Company's products
in France.
- Amiad Filtration Solutions Ltd., wholly-owned and controlled by the
Company, is registered in Israel from January 2005 and operates a sales
office in Germany.
- Amiad Australia Pty Ltd. ("Amiad Australia") - wholly-owned and
controlled by the Company commencing from September 1, 2005 (see Note
7a). From October 1, 2003 until August 31, 2005, Amiad Australia's
financial statements were consolidated by the proportionate
consolidation method. The Company is engaged in the marketing and
distribution of filtration and irrigation products to the
agricultural, industrial and municipal markets in the Australian region.
In June 2004, Amiad Australia and unrelated parties active in the
Australian irrigation market established a jointly controlled company
(50%), Plastro Asia Pacific Pty Ltd. ("PAP"), which is engaged in the
manufacture and marketing of agricultural irrigation products.
The agreement between Amiad Australia and the other shareholders
provided Amiad Australia with potential voting rights that are currently
exercisable. Based on an assessment of these potential voting rights,
together with its existing voting power, Amiad had determined in
accordance with IAS 27, "Consolidated and Separate Financial
Statements," that it controlled PAP and accordingly the accounts of PAP
were consolidated in these financial statements.
e. Jointly controlled entity:
The jointly controlled entity is included in the consolidated financial
statements using the proportionate consolidation method. Under this method,
the Company combines its share of the assets, liabilities, revenues and
expenses of the jointly controlled entity with similar line items in the
consolidated financial statements.
f. Cash equivalents:
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
g. Short-term marketable securities:
Marketable securities held for trading are stated at quoted market prices at
balance sheet date. Changes in their value are included in financial
expenses, net in the statement of income.
h. Trade receivables:
Trade receivables are recognized and carried at original invoice amount, less
an allowance for doubtful accounts. The allowance for doubtful accounts is
principally determined in respect of specific debts whose collection, in the
opinion of the Company's management, is doubtful.
i. Inventories:
Inventories are stated at the lower of cost and net realizable value. Cost is
determined as follows:
Raw materials, auxiliary materials and packing materials - using the
"first-in, first-out" method.
Work in progress - on the basis of average cost including materials, labour
and other direct and indirect manufacturing costs.
Finished products - on the basis of average cost including materials, labour
and other direct and indirect manufacturing costs.
Purchased products - using the "first-in, first-out" method.
j. Fixed assets:
Fixed assets are stated at cost net of accumulated depreciation and
investment grants. Expenditures for improvements and upgrading are added to
cost. The Company evaluates in each reporting period the necessity to record
an impairment loss (see l. below).
Depreciation is calculated by the straight-line method over the estimated
useful lives, as follows:
%
--------------------
Machinery and equipment 6 - 20 (mainly 10%)
Office furniture and equipment, computers and
peripheral equipment 7 - 33 (mainly 33%)
Motor vehicles 15 - 20 (mainly 15%)
Leasehold improvements Over the term of
the lease
k. Other assets:
Other assets comprise know-how, customer relationships, non-competition
agreements and goodwill. Most of these assets were acquired in connection
with the acquisition of Filtration Ltd. in a business combination in 2000.
The fair value of these assets (other than goodwill) was based on an
independent valuation. Following initial recognition, the cost model is
applied to these assets.
The periods of amortization of these assets are as follows:
Know-how - amortized over a period of 10 years, using the straight-line
method.
Customer relationships - amortized over the estimated lives of the customer
relationship (10 years), taking into account the scope of sales to acquired
customers.
Non-competition agreements - were amortized over a period of 2-4 years, using
the straight-line method.
Goodwill on acquisition is measured at cost being the excess of the cost of
the business combination over the fair value of net assets acquired. Goodwill
is not amortized commencing from January 1, 2002, and is measured at cost
less any accumulated impairment losses. Goodwill is reviewed for impairment
annually or more frequently if events or changes in circumstances indicate
that the carrying value may be impaired.
l. Recoverable amount of non-current assets:
The carrying values of non-current assets are reviewed for impairment when
events or changes in circumstances indicate the carrying value may not be
recoverable. If any such indication exists and where the carrying values
exceed the estimated recoverable amount, the assets or cash-generating units
are written down to their recoverable amount. The recoverable amount is the
higher of net selling price and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. For an asset that does
not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
m. Share-based payment transactions:
Employees (including senior executives) of the Group receive remuneration in
the form of share-based payment transactions, whereby employees render
services as consideration for equity instruments (equity-settled
transactions).
The cost of equity-settled transactions is measured by reference to the fair
value at the grant date using an option-pricing model (see Note 18d).
The cost of equity-settled transactions is recognized, together with a
corresponding increase in equity, over the period in which the performance
conditions are fulfilled, ending on the date the options vest. The cumulative
expense, recognized at each reporting date until the vesting date, reflects
the extent to which the vesting period has expired and the Company's best
estimate of the number of equity instruments that will ultimately vest. No
expense is recognized for amounts that do not ultimately vest.
n. Deferred income taxes:
The Company provides for deferred income taxes using the liability method of
accounting. Under the liability method, deferred taxes are recognized for
temporary differences between the tax basis of assets and liabilities and
their carrying amounts for financial reporting purposes. Deferred taxes are
measured based on enacted tax rates that will be in effect in the year in
which the differences are expected to reverse. Deferred tax assets in respect
of carryforward losses and other temporary deductible differences are
recognized to the extent that it is probable that they will be utilized.
Taxes that would apply in the event of the distribution of earnings by
investees as dividends have not been taken into account in computing deferred
taxes, when the distribution of dividend does not involve an additional tax
liability or when the Company is able to control the distribution of
dividends that will cause an additional tax liability.
o. Revenue recognition:
Revenues from product sales are recognized upon delivery to the customer and,
in certain circumstances, after customer acceptance.
p. Exchange rates and linkage basis:
Monetary assets and liabilities, denominated in currencies other then U.S.
dollar, are translated using exchange rates in effect at balance sheet date.
Monetary assets and liabilities linked to the Israeli Consumer Price Index
("CPI") are presented according to the relevant index for each linked asset
or liability.
Exchange differences are recorded in the statements of income.
Below are data about the exchange rates of certain currencies in relation to the
U.S. dollar and data regarding the CPI:
As of 1 Euro 1 AUD 1 NIS CPI
--------------- -------- -------- -------- --------
U.S. dollars
----------------------------------------
December 31, 2005 0.845 1.363 0.217 110.00
December 31, 2004 0.733 1.283 0.232 107.44
December 31, 2003 0.791 1.330 0.228 106.16
q. Basic and diluted earnings per share:
Basic earnings per share are computed by dividing net income attributable to
ordinary equity holders of the parent (after deducting interest on perpetual
debenture) by the weighted average number of Ordinary shares outstanding
during the period, adjusted retrospectively for a share split and issuance of
bonus shares. Diluted earnings per share are computed based on the above plus
the effect of dilutive securities (options).
r. Fair value of financial instruments:
The carrying amounts of cash and cash equivalents, trade receivables and
other accounts receivable, credit from banks, trade and other accounts
payables approximate their fair value due to the short-term maturity of such
instruments. The fair value of long-term liabilities for banks and others
also approximates carrying value, as these liabilities bear interest at
variable rates.
s. Government grants:
Royalty-bearing grants from the Government of Israel for funding approved
research projects and for participation in export marketing expenses are
recognised at the time the Company is entitled to such grants. Such grants
are recorded as a liability when repayment is probable.
Non-royalty-bearing grants from the Government of Israel for purchases of
fixed assets, in accordance with the Law for the Encouragement of Capital
Investments, 1959 were deducted from the respective purchased assets.
NOTE 3:- EARNINGS PER SHARE
As described in Note 18b, in November 2005, the Company effected a split of the
Company's share capital, and distributed bonus shares to the shareholders.
The earnings per share presented in these financial statements have been
adjusted retrospectively to reflect the share split and the bonus shares.
--------------------------
Year ended
December 31,
--------------------------
2005 2004
--------- --------
U.S. dollars in thousands
--------------------------
Weighted average number of Ordinary shares
outstanding (in thousands)
Number of shares in the beginning of the year 5,743 5,743
Effect of split and bonus shares 8,084 8,084
Effect of issuance of shares in IPO 420 -
-------- --------
Number of shares used for calculation of earnings
per share 14,247 13,827
======== ========
U.S. dollars in thousands
-------------------------
Net income attributable to equity holders of the
parent 2,943 1,671
Less - interest on perpetual debenture (81) (113)
-------- --------
2,862 1,558
======== ========
Basic and diluted earnings per share (in U.S.
dollars) *) 0.20 0.11
======== ========
*) Basic and diluted earnings per share are presented in the same amount, since
the effect of share options is immaterial.
- ENDS -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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