RNS Number:7627Q
Amiad Filtration Systems Ltd
26 March 2008
26 March 2008
Amiad Filtration Systems Ltd.
("Amiad" or "the Company")
Results for the year ended 31 December 2007
Amiad, a producer and global supplier of water filters and filtration systems
for the industrial & municipal and the irrigation markets, is pleased to
announce its full year results to 31 December 2007.
Financial Highlights
* Turnover rose 29% to US$57.0m (2006: US$44.1m)
* Operating income of US$6.3m (2006: US$4.6m)
* Profit before tax of US$5.9m (2006: US$3.7m)
* Net Profit of US$4.8m (2006: US$3.0m)
* Cash from operations amounted to US$6.3m (2006: US$3.9m)
* Gross margin reduced to 47.4% (2006: 49.9%) as a result of weak US Dollar and
higher raw material prices
* Basic and fully diluted earnings per share of 24.1 US cents (2006: 15.0 US
cents per share)
* Final dividend for 2007 of 4.8 US cents per share (final dividend 2006:
4.47 US cents per share), making a total dividend for the year of 7.8 US cents
per share (2006: 6.855 US cents per share)
Operational Highlights
* Sales growth in all main territories
* Revenues for Europe increased by approximately 50% year-on-year primarily led
by increased penetration into Eastern Europe and Russia
* Sales in North America and Australia increased by approximately 30% and 40%,
respectively
* New range of automatic microfiber filters continued to gain traction and
increased its contribution to group sales
* Increased demand for products in the irrigation segment due to climate change
initiatives and investment in bio-fuel energy
* Entered first quarter 2008 with a robust order book
* Margins continue to be impacted by the weak US Dollar and higher raw materials
prices
Commenting on the results, Rami Treger, Chief Executive of Amiad, said: "The
Company has entered 2008 with a backlog substantially higher than it did at the
corresponding time in 2007. The Company plans to continue increasing its sales
and marketing efforts globally and believes that global investment in water
filtration and treatment systems will continue to grow, driven by the tightening
in environmental and public health standards, as well as rising demand for clean
water. We believe that Amiad is well positioned to benefit from these trends and
to continue to deliver shareholder value."
Enquiries:
Amiad Filtration Systems Ltd.
Rami Treger, Chief Executive Officer +44 20 7977 0020 on the day and
Itamar Eder, Chief Financial Officer +972 4 690 9500 thereafter
Corfin Communications
Harry Chathli, Neil Thapar, Clare Perks + 44 20 7977 0020
Operational Review
The Board of Amiad is pleased to report a year of good growth, ahead of market
expectations. Revenues for the full year increased by 29% to US$57.0m, compared
to US$44.1m in 2006, reflecting Amiad's increasing penetration of the water
filtration market globally.
Amiad is a producer and global supplier of water filters and filtration systems
for the industrial & municipal and irrigation markets. The market for Amiad's
products continued to expand during 2007 and, accordingly, the Company increased
its sales and marketing efforts globally. With greater global investments in
water infrastructure, the Company benefited from increased investment in the
municipality area (waste water, desalination and potable water) due to stricter
restrictions and regulations being introduced worldwide, as well as solid growth
in the irrigation segment.
The Company saw growth in all of its main territories, particularly in Europe,
Australia and North America, as well as East Asia, including China. Amiad now
sells its products in over 70 countries across the Americas, Africa, Europe,
Asia and Australasia through a network of distributors and its own subsidiaries.
In Europe, there was a 50% growth in sales of Amiad's filters compared to 2006,
primarily due to continued penetration into Eastern Europe and Russia. For the
City of Ramenskoe, the Company was involved in a project to remove iron from
water to produce potable water for the city. This led to three more substantial
projects in Russia. In the industrial sector, it also received orders for the
first time in Kazakhstan and Ukraine to provide filtered water for use in the
steel industry. Earlier in the year, Amiad entered into a contract with Bulmers,
the UK cider producing company, to install water filters at their production
facility.
In North America, Amiad had sales growth of approximately 30%. In the second
half of 2007, it won a substantial specialist project for the provision of clean
water for liquid gas storage. The Company installed filtration system for
surface water for irrigation in the Bonita Bay area and an industrial
application for river water use in the cooling process of a power generating
station in Oklahoma. Its technology was also employed to produce potable water
at a central hospital in Virginia when the city water supply contaminants caused
difficulties with the hospital water systems, contributing to an increased
frequency in replacing cartridge filters and maintenance calls.
Sales into East Asia grew by approximately 5% in 2007 year-on-year. However, in
the second half of 2007, the Company achieved growth of approximately 25%
compared with the second half of 2006 and growth of approximately 35% compared
with the first half of 2007, led by the supply of filters to the oil and gas
industry. In Australia, the Company saw growth in water treatment for membrane
activity.
The Company saw growth in all its product lines, including in its new range of
microfiber filters primarily as a result of projects in Russia, Ireland and
Australia. Additionally, Amiad has seen a significant interest in its filters
for the pre-filtration of membrane systems, including for desalination projects.
One of these systems was used to convert sea water into potable water at the
Davis Research Station in Antarctica.
Also, the Irrigation segment saw good growth in 2007 in all the main territories
as Amiad's products were used to counteract natural events such as droughts as
well as increased planting of crops such as corn, sugarcane and soya beans in
response to the growing demand for alternative fuel sources.
Financial Review
In 2007, the Company increased its revenues by 29% to US$57.0m (2006: US$44.1m),
profit before tax was US$5.9m (2006: US$3.7m) and net profit was US$4.8m
(2006: US$3.0m). In 2007, basic and fully diluted earnings per share were
24.1 US cents per share (2006: 15.0 US cents per share).
In 2007, the gross margin was 47.4% (2006: 49.9%). As previously stated, the
continued rise in raw material costs and the increasing weakness of the US
Dollar are putting pressures on margins and profits.
In 2007, operating income was US$6.3m (2006: $4.6m) reflecting also the
increased investment in sales and marketing.
Net cash and cash equivalents balance as of 31 December 2007 amounted to US$6.2m
(2006: US$ 6.1m). Cash from operations for the full year improved to $6.3m,
compared with US$3.9m in 2006.
Management
In July 2007, it was announced that Rami Treger would succeed Yosef Katz as CEO
and, since his appointment, Rami has successfully integrated into the Company.
Dividend
The Directors are recommending a final dividend for 2007 of 4.8 US cents per
share (final dividend for 2006: 4.47 US cents per share) with an ex-dividend
date of 23 April 2008, a record date of 25 April 2008 and a payment date of
23 May 2008.
This is in addition to the interim dividend of 3.0 US cents (2006: 2.385 US
cents per share), making a total dividend for the year of 7.8 US cents per share
(2006: 6.855 US cents per share).
Outlook
Looking ahead, the Company has entered 2008 with a backlog substantially higher
than it did at the corresponding time in 2007. The Company plans to continue
increasing its sales and marketing efforts globally and believes that global
investment in water filtration and treatment systems will continue to grow,
driven by the tightening in environmental and public health standards, as well
as rising demand for clean water. Although, margins continue to be impacted by
the weak US Dollar and higher raw materials prices, the Company's management
believes that Amiad is well positioned to benefit from these trends and to
continue to deliver shareholder value.
CONSOLIDATED BALANCE SHEETS
31 December
2007 2006
$ in thousands
Assets
CURRENT ASSETS:
Cash and cash equivalents 4,060 4,217
Financial assets at fair value through
profit or loss 2,112 1,869
Accounts receivable and accruals:
Trade 17,858 16,871
Other 1,126 1,009
Inventories 15,955 10,470
Current income tax assets 1,695 431
Total current assets 42,806 34,867
NON-CURRENT ASSETS:
Loan to a related party 703 685
Severance pay fund 196
Long-term receivables 158 105
Property and equipment 3,051 * 2,617
Intangible assets 3,815 * 2,759
Deferred income tax assets 1,409 1,225
Total non-current assets 9,332 7,391
Total assets 52,138 42,258
*Reclassified
31 December
2007 2006
$ in thousands
Liabilities and equity
CURRENT LIABILITIES:
Short-term credit and borrowings from bank 8,674 7,532
Accounts payable and accruals:
Trade 12,028 7,862
Other 5,313 3,111
Current income tax liability 398 488
Total current liabilities 26,413 18,993
NON-CURRENT LIABILITIES:
Borrowings from banks and others
(net of current maturities) 2,202 2,786
Severance pay obligations - *37
Deferred income tax liabilities 477 542
Total non-current liabilities 2,679 3,365
Total liabilities 29,092 22,358
EQUITY
Capital and reserves attributable to
equity holders of the Company:
Share capital 2,291 2,291
Capital reserves 12,797 12,797
Currency translation reserve 360 164
Retained earnings 7,559 4,303
23,007 19,555
MINORITY INTEREST 39 345
Total equity 23,046 19,900
Total liabilities and equity 52,138 42,258
*Reclassified
CONSOLIDATED INCOME STATEMENTS
Year ended 31
December
2007 2006
$ in thousands
except per share data
Revenue 56,955 44,076
Cost of sales 29,986 22,097
Gross profit 26,969 21,979
Selling and marketing costs 13,844 11,455
Administrative and general expenses 6,451 *5,581
Amortization of intangible assets 372 * 348
Other losses- net 4
Operating profit 6,302 4,591
Finance income 610 357
Finance costs (1,009) (1,221)
Finance cost- net 399 864
Profit before income taxes 5,903 3,727
Income tax expenses 1,139 736
Profit for the year 4,764 2,991
Attributable to:
Equity holders of the Company 4,582 2,875
Minority interest 182 116
4,764 2,991
*Reclassified
$
Earnings per share attributable to the
equityholders of the Company during the year
(See note 21):
Basic 0.243 0.152
Diluted 0.241 0.150
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to equity holders of the
Company
Currency
Number Share Capital Translation
of shares capital reserve reserve
$ in thousands
BALANCE AT 1 JANUARY 2006 18,872,723 2,291 12,797 123
CHANGES DURING THE YEAR
ENDED 31 DECEMBER 2006:
Currency translation differences - - - 41
Profit for the year - - - -
Total recognised profit for 2006 - - - 41
Dividend ($0.1 per share) - - - -
Dividend to minority - - - -
Share-based payment - Value of
employee services - - -
BALANCE AT 31 DECEMBER 2006 18,872,723 2,291 12,797 164
CHANGES DURING THE YEAR
ENDED 31 DECEMBER 2007:
Currency translation differences - - - 196
Profit for the year - - -
Total recognised profit for 2007 - - - 196
Dividend ($ 0.07 per share) - - -
Purchase of treasury stocks by a - - - -
subsidiary,
see note 16b(4)b
Share-based payment - Value of
employee services - - - -
BALANCE AT 31 DECEMBER 2007 18,872,723 2,291 12,797 360
Retained Total Minority Total
earnings interest equity
$ in thousands
BALANCE AT 1 JANUARY 2006 3,190 18,401 265 18,666
CHANGES DURING THE YEAR
ENDED 31 DECEMBER 2006:
Currency translation differences - 41 - 41
Profit for the year 2,875 2,875 116 2,991
Total recognised profit for 2006 2,875 2,916 116 3,032
Dividend ($0.1 per share) (1,905) (1,905) - (1,905)
Dividend to minority - - (36) (36)
Share-based payment - Value of 143 143 - 143
employee services
BALANCE AT 31 DECEMBER 2006 4,303 19,555 345 19,900
CHANGES DURING THE YEAR
ENDED 31 DECEMBER 2007:
Currency translation differences 196 196
Profit for the year 4,582 4,582 182 4,764
Total recognised profit for 2007 4,582 4,778 182 4,960
Dividend ($ 0.07 per share) (1,410) (1,410) (1,410)
Purchase of treasury stocks by a - - (488) (488)
subsidiary,
see note 16b(4)b
Share-based payment - Value of
employee services 84 84 - 84
BALANCE AT 31 DECEMBER 2007 7,559 23,007 39 23,046
AMIAD FILTRATION SYSTEMS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended 31 December
Note 2007 2006
$ in thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations 22 6,312 *3,884
Interest paid (722) (633)
Income taxes paid (2,029) (1,833)
Net cash generated from operating activities 3,561 1,418
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,254) *(794)
Purchase of intangible assets (599) *(489)
Investment grants received 169 79
Investment in financial assets at fair value
through profit or loss, net (50) (1,853)
Proceeds from sale of property and equipment 154 62
Long-term loan granted to a related party and others (53) (328)
Collection of long-term loan granted to a related 47 85
Net cash used in investing activities (1,586) (3,238)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to minority interests (36)
Dividends paid to equity holders of the Company (1,410) (1,905)
Receipt of long-term borrowings and other liabilities 1,316 1,075
Purchase of treasury stocks by a subsidiary 16b (1,317)
Repayments of long term borrowings (2,126) (1,872)
Short-term borrowings from banks, net 1,354 1,092
Net cash used in financing activities (2,183) (1,646)
EXCHANGE GAIN (LOSSES) ON CASH AND CASH
EQUIVALENTS 51 (9)
NET DECREASE IN CASH AND CASH EQUIVALENTS (157) (3,475)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,217 7,692
CASH AND CASH EQUIVALENTS AT END OF YEAR 4,060 4,217
*Reclassified
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL INFORMATION:
a. Amiad Filtration Systems Ltd. (hereafter -the Company) and its subsidiaries
(together- the Group) is a producer and global supplier of water filters and
filtration systems used in the industrial & municipal market and the irrigation
market.
b. The Company was incorporated in Israel in June 1997. The address of its
registered office is Kibbutz Amiad, Israel.
The Company is traded on the Alternative Investment Market in London (AIM), a
part of the London Stock Exchange since December 2005.
The principal shareholders of the Company are Kibbutz Amiad ("the Kibbutz"),
directly and through a Company controlled by the Kibbutz, A.M.S.I. Investments
Ltd. ("AMSI") which owns 53.85% of the Company's outstanding shares, and the
Atoka Group which owns 23.06% of the Company's outstanding shares.
c. On 30 June, 1998, the Company entered into an agreement ("the
purchase agreement") with the Kibbutz and with the limited partnership, Amiad
Filtration Systems ("the Partnership") in which the Kibbutz is the general
partner 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 1 January, 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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The principal accounting policies applied in the preparation of these
consolidated financial statement, are set out below. These policies have been
consistently applied through all the years presented, unless otherwise stated.
a. Basis of preparation
The consolidated financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards (IFRS).
The consolidated financial statements have been prepared under the historical
cost convention as modified by the revaluation of financial assets and financial
liabilities at fair value through profit and loss.
The preparation of financial statements in conformity with IFRS requires the use
of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Company's accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated
financial statements, are disclosed in note 3.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
1.Standards and interpretations effective in 2007:
* IFRS 7, 'Financial instruments: Disclosures', and the complementary amendment
to IAS 1, 'Presentation of financial statements - Capital disclosures',
introduces new disclosures relating to financial instruments and does not have
any impact on the classification and valuation of the Group's financial
instruments, or the disclosures relating to taxation and trade and other
payables.
* IFRIC 8, 'Scope of IFRS 2', requires consideration of transactions involving
the issuance of equity instruments, where the identifiable consideration
received is less than the fair value of the equity instruments issued in order
to establish whether or not they fall within the scope of IFRS 2. This
standard does not have any impact on the Group's financial statements.
* IFRIC 10, 'Interim financial reporting and impairment', prohibits the
impairment losses recognised in an interim period on goodwill and investments
in equity instruments and in financial assets carried at cost to be reversed
at a subsequent balance sheet date. This standard does not have any impact on
the Group's financial statements.
2.Standards and interpretations effective in 2007 but not relevant
The following standards and interpretations to published standards are
mandatory for accounting periods beginning on or after 1 January 2007 but
they are not relevant to the Group's operations:
* IFRS 4, 'Insurance contracts';
* IFRIC 7, 'Applying the restatement approach under IAS 29, Financial reporting
in hyper-inflationary economies'; and
* IFRIC 9, 'Re-assessment of embedded derivatives'.
3.Standards, amendments and interpretations to existing standards that
are not yet effective and have not been early adopted by the Group
The following standards, amendments and interpretations to existing standards
have been published and are mandatory for the Group's accounting periods
beginning on or after 1 January 2008 or later periods, but the Group has not
early adopted them:
* IFRIC 11, 'IFRS 2 - Group and treasury share transactions' (effective from 1
January 2008). IFRIC 11 provides guidance on whether share-based transactions
involving treasury shares or involving Group entities (for example, options
over a parent's shares) should be accounted for as equity-settled or cash
settled share-based payment transactions in the stand-alone accounts of the
parent and Group companies. This interpretation is not expected to have an
impact on the Group's financial statement.
* IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009). It
requires an entity to capitalise borrowing costs directly attributable to the
acquisition, construction or production of a qualifying asset (one that takes
a substantial period of time to get ready for use or sale) as part of the cost
of that asset. The option of immediately expensing those borrowing costs will
beremoved. The Group will apply IAS 23 (Amended) from 1 January 2009 but is
currently not applicable to the Group as there are no qualifying assets.
* IFRS 8, 'Operating segments ' (effective from 1 January 2009). IFRS 8 replaces
IAS 14 and aligns segment reporting with the requirements of the US standard
SFAS 131, 'Disclosures about segments of an enterprise and related
information'. The new standard requires a 'management approach', under which
segment information is presented on the same basis as that used for internal
reporting purposes. The Group will apply IFRS 8 from 1 January 2009. The
standard is not expected to impact the segment reporting of the Company.
* IAS 1 (Revised) Presentation of Financial Statements (effective 1 January
2009). IAS 1 ( Revised) replaces IAS 1(Amended 2005), it sets overall
requirements for the presentation of financial statements, guidelines for
their structure and minimum requirements for their content. IAS 1 (Revised)
requires that all owner changes in equity should be presented in the statement
of changes in equity, separately from non-owner changes in equity it also
changed the titles of the financial statements.
* IFRS 3 (Revised) Business Combinations (effective 1 January 2010). IFRS 3
(Revised) replaces IFRS 3. IFRS 3 (Revised) establishes principles and
requirements for how an acquirer: (a) recognises and measures in its financial
statements the identifiable assets acquired, the liabilities assumed and any
non-controlling interest in the acquiree; (b) recognises and measures the
goodwill acquired in the business combination or a gain from a bargain
purchase; and (c) determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination.
* IAS 27 (Amendment) - Consolidated and Separate Financial Statements
(effective 1 January 2010).
The amendments to the Standard relate, primarily, to accounting for
non-controlling interests and the loss of control of a subsidiary.
The most significant changes of IFRS 3 (Revised) and IAS 27 (Amended) are:
- IFRS 3 (Revised) applies also to business combinations involving only
mutual entities and to business combinations achieved by contract alone;
- The definition of a business has been amended;
- Transaction costs incurred by the acquirer in connection with the business
combination do not form part of the business combination transaction;
- Acquisitions of additional non-controlling equity interests after the business
combination are accounted for as equity transactions;
- Disposals of equity interests while retaining control are accounted for as
equity transactions;
* IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum
funding requirements and their interaction' (effective from 1 January 2008).
* IFRIC 14 provides guidance on assessing the limit in IAS 19 on the amount of
the surplus that can be recognised as an asset. It also explains how the
pension asset or liability may be affected by a statutory or contractual
minimum funding requirement. The Group will apply IFRIC 14 from 1 January
2008, but it is not expected to have any impact on the Group's accounts.
* IFRIC 13, 'Customer loyalty programmes' (effective from 1 July 2008).
IFRIC 13 clarifies that where goods or services are sold together with a
customer loyalty incentive (for example, loyalty points or free products),
the arrangement is a multiple-element arrangement and the consideration
receivable from the customer is allocated between the components of the
arrangement using fair values. The Group will apply IFRIC 13 from 1 July
2008, but it is not expected to have any impact on the Group's accounts.
* IAS 32 (Amendment) 'Financial instruments presentation' and IAS 1
(Amendment) 'Presentation of financial statements' (effective from 1 January
2009). These refer particularly to the distinction between equity and debt
in accounting for Company capital to which cancellation rights are attached
(puttable financial instruments). Puttable financial instruments previously
had to be classified as a liability, whereas in the future such cancellable
instruments are to be classified as a equity in certain circumstances. The
amendments are to be applied for the first time for annual periods beginning
on or after 1 January 2009. The Group is currently evaluating the impact
these amendments may have on the Group's accounts.
4.Interpretations to existing standard that are not yet effective and
not relevant for the Group's operations
The following interpretation to an existing standard that has been published and
are mandatory for the Group's accounting periods beginning on or after 1 January
2008 but are not relevant for the Group's operations-
IFRIC 12, 'Service concession arrangements' (effective from 1 January 2008).
IFRIC 12 applies to contractual arrangements whereby a private sector operator
participates in the development, financing, operation and maintenance of
infrastructure for public sector services. IFRIC 12 is not relevant to the
Group's operations.
b.Foreign currency translation:
1.Functional and presentation currency
Items included in the financial statements of each of the Group entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated financial
statements are presented in U.S. dollar, which is the Company's functional and
presentation currency.
Foreign currency transactions are translated into the functional currency using
exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement.
2. Group companies.
The functional currency of the subsidiary in Australia is the Australian dollar
("AUD").
The functional currency of the subsidiary in France is the EURO.
The functional currency of the jointly controlled entity in China is the Chinese
RMB.
The results and financial position of those Group entities (none of which has
the currency of hyperinflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
a) Assets and liabilities for each balance sheet presented are translated at the
closing rate at that balance sheet date;
b) Income and expenses for each income statement are translated at average
exchange rates; and
c) All resulting exchange differences are recognised as a separate component of
equity.
On consolidation, exchange differences arising from the translation of the net
investment in foreign operations, are taken to equity.
When foreign operations is partially disposed or sold, exchange differences that
were recorded in equity are recognised in the income statement as part of gain
on loss or sale.
Goodwill and fair value adjustments arising on acquisition of foreign entity are
treated as assets and liabilities of foreign entity and translated at the
closing rate.
c. Principles of consolidation
(1) Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the
financial and operating policies generally accompanying a shareholding of more
than one half of thevoting rights. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are de-consolidated from
the date that control ceases.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any minority
interest. The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded as goodwill.
If the cost of acquisition is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised directly in the income
statement.
Inter-Company transactions, balances and unrealized gains on transactions
between Group companies are eliminated. Unrealized losses are also eliminated
but considered an impairment indicator of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the Group.
(2) Transactions and minority interests
The Group applies a policy of treating transactions with minority interests as
transactions with parties external to the Group. Disposals to minority interests
result in gains and losses for the Group that are recorded in the income
statement. Purchases from minority interests result in goodwill, being the
difference between any consideration paid and the relevant share acquired of the
carrying value of net assets of the subsidiary.
d. Proportionately consolidated companies
There is a contractual agreements for joint control of the Company Yixing
Taixing Environtec Co.Ltd (hereafter- Yixing Taixing), held 50%, with the other
venturers. Accordingly, it is accounted for by 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.
e. Property and equipment:
1) All property and equipment (including leasehold improvements) are stated at
historical cost, less accumulated depreciation, impairment and investment
grants. Historical cost includes expenditure that is directly attributable to
the acquisition of the items.
Repairs and maintenance are charged to the income statement during the period
in which they are incurred.
2) The assets are depreciated using the straight-line method over their
estimated useful lives.
Annual rates of depreciation are as follows:
%
Machinery and equipment 7 - 20
Office furniture and equipment 7 - 20
Computers and peripheral equipment 20 - 33
Motor vehicles 15 - 20
Leasehold improvements Over the term of the lease
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable amount
if the asset's carrying amount is greater than its estimated recoverable amount
(note 2(g)).
Leasehold improvements (fixtures) in buildings under operating leases are
depreciated using the straight-line method over the term of the lease, which is
shorter than the estimated useful lives of the improvements.
3) Gains and losses on disposals are determined by comparing proceeds with the
carrying amount. These gains and losses are included in the income statement,
within other (losses) gain.
f. Intangible assets
1) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net identifiable assets of the acquired subsidiary
at the date of acquisition. Goodwill on acquisition of subsidiaries is included
in 'intangible assets'. Separately recognised goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses. Impairment
losses on goodwill are not reversed.
Goodwill is allocated to cash-generating units that is not larger then an
operating segment for the purpose of impairment testing. The allocation is made
to those cash-generating units or Groups of cash-generating units that are
expected to benefit from the business combination in which the goodwill arose.
2) Customer relations and know-how
Acquired customer relations and know-how are shown at historical cost. Customer
relations and know-how have finite useful life and are carried at cost less
accumulated amortisation. Amortisation is calculated using the straight line
method. (10 years).
3) Computer software and licences
Acquired computer software and licences are capitalised on the basis of the
costs incurred to acquire and bring to use the specific software. These costs
are amortised over their estimated useful lives (three to five years).
g. Impairment of non-financial assets
Assets that have an indefinite useful life for example goodwill are not subject
to amortisation and are tested annually for impairment.
Assets that are subject to depreciation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset's fair value less costs to sell and its value in use.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating
units).
Non financial assets other than goodwill that suffered impairment are reviewed
for possible reversal of the impairment at each reporting date.
h. 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 - on the "first-in
first-out" basis.
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 - on the "first-in, first-out" basis.
Net realizable value is the estimated selling price in the ordinary course of
business less applicable variable selling expenses.
i. Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held
for trading. A financial asset is classified in this category if acquired
principally for the purpose of selling in the short-term. Assets in this
category are classified as current assets.
Gains or losses arising from changes in the fair value of the 'financial assets
at fair value through profit or loss' category are presented in the income
statement in the period in which they arise.
j. Derivative financial instruments
Foreign currencies derivatives are initially recognized at fair value on the
date a derivative contract is entered into and are subsequently accounted at
fair value through profit or Loss. Changes in the fair value in any of these
derivative instruments are recognized immediately in the income statement within
'finance income/loss'.
k. Trade receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost less provision for impairment. A provision for
impairment of trade receivables is made when there is objective evidence that
the Group will not be able to collect all amounts due according to the original
terms of the receivables.
Significant financial difficulties of the debtor, probability that the debtor
will enter bankruptcy or financial reorganisation, and default or delinquency in
payments are considered indicators that the trade receivable is impaired.
Impaired account is principally determined in respect of specific debts whose
collection, in the opinion of the Company's management, is uncollectible (note 3
(c)). The amount of the provision is recognised in the income statement within
'administrative and general expenses'. When a trade receivable is uncollectible
it is written of against the allowance account for trade receivables. Subsequent
recoveries of amounts previously written off are credited against administrative
and general costs in the income statement.
l. Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks and other short-term highly liquid investments with original maturities of
three months or less.
m. Current and deferred income tax
The current income tax charge is calculated on the basis of the tax laws enacted
or substantively enacted at the balance sheet date in the countries where the
Group's subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation and establishes
provisions where appropriate on the basis of amounts expected to be paid to the
tax authorities.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
the deferred income tax is not accounted for, if it arises from initial
recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither the accounting
nor taxable profit.
As stated in note 19(c), upon distribution of dividends from tax-exempt income
of "approved enterprises", the amount distributed will be subject to tax at the
rate that would have been applicable had the Company not been exempted from
payment thereof. The amount of the related tax is charged as an expense in the
income statements.
Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantially enacted by the balance sheet date and are expected to
apply when the related deferred income tax asset is realized or the deferred
income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences
can be utilised.
Deferred income tax on temporary differences arising on investments in
subsidiaries and in the event the distribution of earnings by investees as
dividends are not provided, since the Group controls the timing of the reversal
of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred income tax assets and deferred income tax liabilities are offset only
if they relate to the same taxable entity and that entity has a legally
enforceable right to offset those assets against the liabilities.
n. Employee benefits:
1. Severance pay obligations
Labour laws and agreements in Israel and abroad require companies in the Group
to pay a certain multiple of monthly pay as severance benefits to employees who
are dismissed, resign or retire from their employment. The severance pay
obligation is accounted for as a defined benefit plan.
The liability recognised in the balance sheet in respect of severance pay is the
present value of the defined benefit obligation at the balance sheet date less
the fair value of plan assets, together with adjustments for unrecognized
actuarial gains or losses. The obligation is measured annually by independent
actuaries using the projected unit credit method. The present value of the
obligation is determined by discounting the estimated future cash outflows using
interest rates of government bonds that are denominated in the currency in which
the benefits will be paid, and that have terms to maturity approximating to the
terms of the related severance pay obligations.
The Group purchases insurance policies and contributes to severance pay funds to
manage its exposure to the severance pay obligation. The rights to reimbursement
under insurance policies are recognised as severance pay assets when it is
virtually certain that the insurance Company will reimburse some or all of the
expenditure required to settle the severance pay obligation. The severance pay
assets from severance pay funds are stated at fair value through the income
statements.
2) Vacation and recreation pay
Under Israeli law, each employee is entitled to vacation days and recreation
pay, both computed on an annual basis. The entitlement is based on the length of
the employment period. The Group recognizes a liability and an expense for
vacation and recreation pay, based on the entitlement of each employee.
3) Profit-sharing and bonus plans
The Group recognizes a liability and an expense for bonuses and profit sharing
based on a formula that takes into consideration the profit attributable to the
Company's shareholders after certain adjustments. The Group recognizes a
provision where contractually obliged or where there is a past practice that has
created a constructive obligation.
4) Share-based compensation
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 fair value of the employee services received in exchange for these grant of
the share options is recognised as an expense. The total amount to be expensed
over the vesting period is determined by reference to the fair value of the
options granted excluding the impact of any non-market vesting conditions.
Non-market vesting conditions are included in assumptions about the number of
options that are expected to vest. At each balance sheet date, the entity
revises its estimates of the number of options that are expected to vest. It
recognises the impact of the revision of original estimates, if any, in the
income statements, and a corresponding adjustment to shareholders' equity over
the remaining vesting period.
Cancellations or settlements are accounted for as an accelerations of vesting.
As a result the Company recognises immediately the amount that otherwise would
have been recognised for services received over the remainder of the vesting
period.
The proceeds received, net of any direct costs, are credited to share capital
(nominal value) and share premium when the options are exercised.
Fair value of cash-settled awards is measured on the grant-date, and any portion
of a periodic expense computed as above is recorded periodically and recognized
as a liability in the Group's balance sheet. The accumulated liability is
remeasured at each balance sheet date, until the said liability is settled.
Changes in the amount of the liability are carried to statements of income.
o. Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for
the sale of goods in the ordinary course of the Group's activities. Revenue is
shown, net of value-added tax, returns, rebates and discounts and after
eliminating sales within the Group. Revenue is recognised as follows:
1. Sales of goods
Sales of goods are recognised when a Group entity has delivered products to the
customer and there is no unfulfilled obligation that could affect the customer's
acceptance of the products. Delivery does not occur until the risks of
obsolescence and loss have been transferred to the customer, and either the
customer has accepted the products in accordance with the sales contract, the
acceptance provisions have lapsed, or the Group has objective evidence that all
criteria for acceptance have been satisfied.
2. Contract work performed
Contract costs are recognized when incurred.
When the outcome of a construction contract cannot be estimated reliably,
contract revenue is recognized only to the extent of contract costs incurred
that are likely to be recoverable.
When the outcome of a construction contract can be estimated reliably and it is
probable that the contract will be profitable, contract revenue is recognised
over the period of the contract. When it is probable that total contract costs
will exceed total contract revenue, the expected loss is recognised as an
expense immediately.
The Group uses the 'percentage-of-completion method' to determine the
appropriate amount to recognise in a given period. The stage of completion is
measured by reference to the contract costs incurred up to the balance sheet
date as a percentage of total estimated costs for each contract.
The Group presents as an asset the gross amount due from customers for contract
work for all contracts in progress for which costs incurred plus recognised
profits (less recognised losses) exceed progress billings. Progress billings not
yet paid by customers and retention are included within 'trade and other
receivables'.
3. Interest income
Interest income is recognized on time proportion basis, using the effective
interest method.
p. Operating lease
Leases in which a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments made under
operating leases are charged to the income statement on a straight-line basis
over the period of the lease.
q. Borrowings
Borrowings from banks and others are recognised initially at fair value, net of
transaction costs incurred, and subsequently stated at amortised cost. Any
difference between proceeds (net of transaction costs) and the redemption value
is recognised in the income statement over the period of the instrument, using
the effective interest method. Borrowings are classified as current liabilities
unless the Group has an unconditional right to defer settlement of the liability
for at least 12 month after the balance sheet date.
r. Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
s. Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability
in the Group's financial statements in the period in which the dividends are
approved by the Company's shareholders.
t. Trade payables
Trade payables are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method.
u. Basic and diluted earnings per share:
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary shares
in issue during the year.
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares issued and outstanding to assume conversion of all
dilutive potential ordinary shares, being employee share options under the 2005
plan. For employee share options, a calculation is made of the number of shares
that could have been acquired at fair value based on the monetary value of the
subscription rights attached to outstanding share options. The number of shares
calculated as above is compared with the number of shares that would have been
issued assuming the exercise of the share options.
v. 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.
w. 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.
Below are Data regarding the exchange rates of certain currencies in relation to
the U.S. dollar and data regarding the CPI:
Exchange Exchange rate Exchange
rate of one of one rate of one CPI*
Euro Australian NIS
Dollar
At end of year:
2007 1.471 0.878 0.260 113.63
2006 1.317 0.790 0.237 109.90
2005 1.183 0.734 0.217 110.00
Increase
(decrease)
during the year:
2007 11.69% 11.14% 9.70% 3.39%
2006 11.33% 7.63% 9.22% (0.01%)
* Based on the index for the month ending on each balance
sheet date, on the basis of 2000 average = 100.
NOTE 3 - CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below:
a. Severance pay benefits
The present value of the severance pay obligations depends on a number of
factors that are determined on an actuarial basis using a number of assumptions.
The assumptions used in determining the net cost (income) for severance pay
include the expected long-term rate of return on the relevant severance pay
assets and the discount rate. Any changes in these assumptions will impact the
carrying amount of severance pay assets and obligations.
The expected return on the severance pay assets assumption is determined on a
uniform basis, taking into consideration long-term historical returns.
The Group determines the appropriate discount rate at the end of each year. This
interest rate is to be used in determining the present value of estimated future
cash outflows expected to be required to settle the pension obligations. The
markets in high-quality corporate bonds are not sufficiently liquid in order to
use them in determining the discount rate. In determining the appropriate
discount rate, the Group considers the interest rates of government bonds that
are denominated in the currency in which the benefits will be paid, and that
have terms to maturity approximating the terms of the related pension liability.
Other key assumptions for pension obligations such as future salary increases
are based on current rates of wage inflation.
b. Income and deferred tax assets
The Group is subject to income taxes in several jurisdictions. Significant
judgement is required in determining the worldwide provision for income taxes.
There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The Group
recognizes liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such
differences will impact the income tax and deferred tax provisions in the period
in which such determination is made.
The Group recognizes deferred tax assets and liabilities based on the
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities. The Group regularly reviews its deferred tax assets
for recoverability, based on historical taxable income, projected future taxable
income, the expected timing of the reversals of existing temporary differences
and the implementation of tax planning strategies. If the Group is unable to
generate sufficient future taxable income in certain tax jurisdictions, or if
there is a material change in the actual effective tax rates or time period
within which the underlying temporary differences become taxable or deductible,
the Group could be required to eliminate a portion of the deferred tax assets,
resulting in an increase in its effective tax rate and an adverse impact on
operating results.
c. Provision for impairment of receivables
The Group follows the guidance of IAS 39 (revised 2004) on determining whether a
trade receivable is impaired. This determination requires significant judgement.
In making this judgement, the Group evaluates, among other factors, the ageing
analysis of the balances, historical bad debts, repayment patterns, the
financial health and the near-term business outlook of the customer and industry
trends.
d. Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in
accordance with the accounting policy stated in Note 2(f)(1).
e. Inventory Valuation
Inventory, which is a material part of the Group's total assets, is valued at
the lower of cost and net realizable value. Raw materials and purchased products
are determined on the "first-in first-out" basis. Work in progress and finished
products determined on basis of average cost. If actual market prices for
finished products prove less favorable than those projected by management,
inventory write-downs may be required. Inventory is written down for estimated
obsolescence based upon assumptions about future demand and market conditions.
Likewise, favorable future demand and market conditions could positively impact
future operating results in inventory that has been written down is sold.
NOTE 16 - CONTINGENT LIABILITIES AND COMMITMENTS:
a. Commitments:
1) Employee incentive plan-
On 27 July 2007, the board of directors approved a bonus scheme (hereafter "the
Bonus Scheme"), which will be available to staff members and senior management,
including three members of the board of directors.
a. Senior Management - The Bonus Scheme will be in operation in relation to
financial year ending 31 December 2007 which will pay a bonus to senior
management by reference to their monthly salary. The level of bonus payable will
be depended on the achievement of targets as set out in the Bonus Scheme. The
maximum total bonus liability for the Company is NIS 600,000
(approx $ 156,000).
Any bonus shall be paid following Board of directors approval of the 2007
financial statement in March 2008. If any member of senior management is not
employed by the Company for the whole of the bonus Year or is not employed at
the bonus payment date, the payment of any bonus to that individual shall be
subject to the absolute discretion of the Chairman and/or CEO of the Company.
b. Staff members - a discretionary Bonus Scheme will be in operation in relation
to the financial year ending 31 December 2007 which will provide a bonus pool
for staff members to recognize their contribution to the success of the
business. The level of bonus payable will be depended on the achievement of
targets as set out in the Bonus Scheme. The total amount of the bonus for the
staff will be calculated as a bonus pool, the amount in the pool depends on the
achievement of the targets. The maximum bonus pool is NIS 900,000 (approx
234,000$).
A portion of the bonus pool may be paid to the Kibbutz subject to the formula
that is presented in the bonus scheme.
The Company recorded a provision in the amount of 292 thousand $ in respect of
this bonus plan.
2) The Group has lease agreements in respect of motor vehicles, which terminate
between 2008 and 2010. The estimated annual lease payments are $ 340 thousand.
3) According to a lease agreement between the Company and the Kibbutz, the
Company pays the Kibbutz $ 32.5 thousand per month for the rental of its
offices and plant. The rent is reviewed every three years
(see also Note 23c). On 1 January, 2007, the Company, entered an additional
agreement with the Kibbutz, for the rent of an additional building. The lease
payments for the additional building amount to $ 1.9 thousand per month.
Certain subsidiaries have lease contracts for various periods with estimated
monthly lease payments of $ 52 thousand.
4) The future aggregate minimum lease payments under non-cancellable operating
lease agreements subsequent to the balance sheet date are as follows:
31 December
2007 2006
$ in thousands
Not later than 1 year 1,301 1,059
Later than 1 year and not later than
5 years 1,935 2,211
Later than 5 years 1,136 1,460
4,372 4,730
Operating lease expenses for 2007 were $1,299 (2006: $1,101).
5) As for other agreements with the Kibbutz, see Note 23.
b. Contingent liabilities:
1) According to the purchase agreement (see Note 1(c)), the Company agreed to
indemnify the Partnership and the Kibbutz for any claim filed against them in
connection with the transferred activity up to the date of transfer. This
liability does not pertain to tax liabilities that may apply to the Kibbutz
in respect of the Partnership's operation, including the transfer of its
assets to the Company and in respect of payments claimed from the Kibbutz due
to claims as to the existence of employee-employer relationships between the
Company and the Kibbutz members employed by the Company.
Further, the Company has undertaken to assume all of the liabilities in
connection with investment grants that the Partnership received from the State
of Israel up to the date of transfer under the Law for the Encouragement of
Capital Investments, 1959.
The receipt of grants by the Partnership, as above, and the receipt of other
grants by the Company, is conditional upon the fulfillment of the conditions of
the letters of approval. In the event of failure to comply with the conditions
of the approval, the amount of the grants may be required to be refunded,
including interest and linkage differences from the date of receipt. As
Collateral for the fulfillment of the conditions relating to the receipt of
investment grants, the Company recorded floating charges on all of its assets in
favor of the State of Israel. The Company's management believes that as of the
date of the approval of the financial statements, the Company is meeting the
conditions of the letters of approval.
2) The Group is contingently liable in respect of performance guarantees
provided by banks to customers in the amount of 262$ thousand at 31 December,
2007 (556 $ thousand at 31 December 2006).
3) The Company and a subsidiary participate in programs sponsored by the Israeli
Government for the support of research and development activities. The
Company and its subsidiary obtained grants from the Office of the Chief
Scientist in the Israeli Ministry of Industry, Trade and Labor ("the OCS")
The Company and the subsidiary are obligated to pay royalties to the OCS
amounting to 2% of the sales of the products and other related revenues
generated from such projects, up to an amount equal to 100% of grants received,
linked to the exchange rate of the U.S. dollar.
The Israeli Government awarded a subsidiary grants for participation in foreign
marketing expenses, for which the subsidiary is obligated to pay royalties at
the rate of 3% of the increase in export sales in relation to the base year, up
to the amount of the grants received, linked to the U.S. dollar.
As of 31 December, 2007, the Company and the subsidiary had recorded a liability
for grants received in the amount of $244 thousand. The Company and the
subsidiary have an outstanding contingent obligation to pay royalties in the
amount of $451 thousand, in respect of projects for which there is a reasonable
assurance that part or all of the grants received will not be repaid. The
Company and the subsidiary will record this obligation as a liability if facts
and circumstances would require the Company and the subsidiary to revise upwards
their estimates of future sales.
4) a. In March 2006, a claim was filed in the supreme court of Victoria against
the subsidiary in Australia, Amiad Australia PTY Ltd. (hereafter - the
subsidiary) as well as 8 other defendants (together, the Parties) for damages
allegedly caused by inducing certain people who were then employed by the
claimant to breach their employment and other duties to the claimant, and
otherwise interfered with their employment contracts.
In May 2007, the claimant filed an Amended Statement of Claim which altered the
nature of the claim and increased the quantum of the claim against the
subsidiary and the other defendant.
On March 6 2008 a settlement agreement was signed between the claimant and the
parties.
According to the settlement agreement Plastro Irrigation Systems Ltd.
(hereafter- Plastro, one of the defendants) will pay, or cause its subsidiary in
Australia, Plastro Asia Pacific Pty Ltd, to pay a final amount of AUD
$2,000,000 plus GSP to the claimant.
Based on its agreement with Plastro, as of February 26 2008, the Company will
pay Plastro AUD$ 100,000, as participation in the settlement agreement.
The Company included in its accounts a provision in this respect.
b. In August 2007, Amiad USA, Inc (hereafter "Amiad USA") received a draft
complaint from counsel for Yitzhak Orlans, the former President and director of
Amiad USA, Inc (here after "Orlans"). The draft complaint alleges age
discrimination, disability discrimination, employment discrimination, wrongful
termination and further alleges various other violations of the California Labor
Code and the California Business & Professions Code in connection with the
termination of Mr. Orlans employment with Amiad USA, Inc. The draft complaint
indicates that Mr. Orlans is seeking damages in excess of USD$2,625,000 as well
as unspecified amounts of non-economic damages, punitive damages and attorneys\'
fees and costs.
In November 2007 Amiad USA and Orlans signed a settlement agreement. According
to the settlement agreement, the parties agree that:
Amiad USA shall pay Orlans an amount of $80,000 less all applicable
employment-related withholding taxes and deductions as a payment of a lump-sum
retirement package.
In addition, Amiad USA shall redeem Orlans shares in Amiad USA for an aggregate
price of $1,317,000.
As a result of the purchase of the shares from Orlans by Amiad USA the Company
holds the entire outstanting share capital of Amiad USA and it recorded a
decrease in minority interest in the amount of $488 thousand and additional
goodwill in the amount of $ 829 thousand.
NOTE 17 - SHAREHOLDERS' EQUITY:
a. Composed of ordinary shares of NIS 0.5 par value, as follows:
Number of shares
31 December
2007 2006
Authorized 20,000,000 20,000,000
Issued and fully paid * 18,872,723 18,872,723
* The shares are quoted on the London Stock Exchange Alternative Market (AIM),
as of 31 December, 2007 at GBP 2 per ordinary share of NIS 0.5 par value.
b. Share options:
1) On 12 August 2005, the Company granted to three senior employees, the
chairman of the board of directors and to the Kibbutz options to purchase
386,682, 154,674 and 77,336 Ordinary Shares, respectively. The options to the
senior employees were granted in the framework of the Company's option plan that
was submitted to the Israeli Tax Authorities, in accordance with the provisions
of Section 102 to the Israeli Income Tax Ordinance and the remaining options
were granted under the provisions of section 3(i) of the Income Tax Ordinance.
Under section 102, the grantee's income will be taxed at a reduced tax rate of
25% and the Company will not be allowed to deduct the corresponding expense for
tax purposes with the exception of the work-income benefit component, if any,
determined on the grant date.
The options vest over a period of four years (except in the case of the CEO
where the period is three years) and have an exercise price of $ 1.53 per share.
The options will be held during the vesting period by a trustee and will be
released in accordance with the terms of the option plan. Unexercised options
expire 10 years after date of grant.
The weighted average fair value of the options as at the grant date is $0.49 per
share, and was estimated using a binomial option pricing model based on the
following significant data and assumptions: Share price - $1.53;
exercise price- $ 1.53, expected volatility - 38.4%;
risk-free interest rate - 4.4%, expected dividends - 0% and expected average
life of options 4 years.The volatility measured at the standard deviation of
expected share price returns is based on the historical volatility of similar
listed entities.
2) On 19 April 2007, following a request made by the Company, the senior
employees and the chairman of the board of directors gave written notice to the
Company of their waiver, with immediate effect, of 21,874 and 8,751 options
respectively granted to them by the Company.
At the same time, the Company received written notice from Kibbutz Amiad of its
waiver, with immediate effect, of its right to options granted to it by the
Company over 77,336 ordinary shares.
As a result of the cancellation of such options, the Company recognized an
amount of $50 thousand, in respect of options not yet vested.
3) On 19 April 2007, the board of directors resolved to grant options over
72,961 ordinary shares under the 2005 options plan to a director of the Company,
at an exercise price of $ 1.53 per ordinary share (being the same price as the
exercise price for the options previously granted to the Kibbutz and all other
option holders), such options vest over a period of two years and one month.
Unexercised options expire eight years and one month after date of grant. The
actual grant date of the above option was 26 Jun 2007 following the approval of
the grant at the Company's annual general meeting on such date.
The weighted average fair value of the options at the grant date is $1.19 per
share, and was estimated using a binomial option pricing model based on the
following significant data and assumptions: Share price - $2.5; exercise price -
$ 1.53, expected volatility - 39 %; risk-free interest rate - 4.6%, expected
dividends - 1.3% and an expected life of options eight years and one month.
The volatility measured at the standard deviation of expected share price
returns is based on the historical volatility of the Company.
4) In 2007 the CEO of the Company resigned and terminated his employment with
the Company. As a result 54,722 options, with vesting period of 11 August 2008,
were forfeited.
5) On 5 July, 2007 the Company entered into an employment agreement with a new
CEO in respect of his employment as of 1 august 2007.
On 5 July, 2007 the Company granted to the new CEO, under 2005 option plan,
options to purchase 54,722 ordinary shares of the Company at an exercise price
of GBP 1.355 (2.74$) per ordinary share, such option vest over a period of three
years and 11 months. Unexercised options expire tan years after date of grant.
The weighted average fair value of the options as at the grant date is $1.06 per
share, and was estimated using a binomial option pricing model based on the
following significant data and assumptions: Share price - $2.73; exercise price
- $ 2.74, expected volatility - 39.79%; risk-free interest rate - 4.44%,
expected dividends - 1.38% and expected average life of options 6 years.
The volatility measured at the standard deviation of expected share price
returns is based on the historical volatility of the .
As to phantom bonus granted to the new CEO see note 18.
6) The expense recognized in respect of equity grants in the 12-month period
ended 31 December 2007 is $ 84 thousand (in the year ended in 31 December 2006 $
143 thousand).
Movements in the number of potential shares to be issued under outstanding
average exercise prices in respect to equity grants are as follows:
2007 2006
Exercise Number Exercise Number of
price per of potential price per potential
share shares share Shares
At 1 January $ 1.532 618,692 $ 1.532 618,692
Granted $ 2.05 127,683 -
Forfeited* $ 1.532 (162,683) -
At 31 December 583,692 618,692
As of 31 December 2007, out of the 583,693 outstanding potential shares to be
issued, 188,783 options (2006- 116,006) are exercisable.
Below are the number of outstanding potential shares to be issued in respect to
equity grants, having the following expiry dates and exercise prices as of 31
December 2007 and 2006.
*Including sum of 107,961 potential shares that had been wavered.
Expiry date Exercise Number of potential shares
price
2007 2006
11 August 2015: $ 1.532 528,970 618,692
5 September 2017: $ 2.74 54,722
583,692 618,692
e. The Company's board of Directors has adopted a dividend policy, pursuant to
which the Company, subject to future performance and funding requirements, will
distribute annual dividends of up to 50% of the net income in the calendar year.
On 4 May, and 1 November 2006, the Company distributed dividends to its
shareholders in the amount of NIS 6,553 thousand, NIS 1,967 thousand,
respectively (total $ 1,905 thousand).
On 17 May, 2007 and 22 October, 2007 the company distributed dividends to its
shareholders in the amount of NIS 3,337 thousand, NIS 2,275 (total $1,410
thousand)
NOTE 18 - PHANTOM BONUS:
On 5 July 2007, the Company entered into an employment agreement with a new CEO
in respect of his employment as of 1 August 2007. Pursuant to the terms of the
agreement the CEO is entitled to receive a cash phantom bonus which will be
calculated based of the changes in the average price of the Company's ordinary
share for the 2 years period ended in August 2009. The bonus will be paid on
August 2009, provided that the CEO is employed by the Company at the such date.
The fair value of the phantom bonus as of 31 December 2007 is $110 thousand, and
was estimated using a Monte Carlo option pricing model based on the following
significant data and assumptions: Share price - $1.987; exercise price - $ 0,
expected volatility - 39.79%; risk-free interest rate - 4.44%, and expected
average life of options 1.59 years.
The volatility measured at the standard deviation of expected share price
returns is based on the historical volatility of the Company.
The expense recognized in respect of the phantom bonus in the 12-month period
ended 31 December 2007 is $23 thousand. The Company recorded a respective
liability in the amount of $23 thousand.
NOTE 21 - EARNINGS PER SHARE:
Data regarding the earning per share:
Year ended 31 December
2007 2006
$ in thousands
Weighted average number of Ordinary
shares
outstanding (in thousands)
Basic:
Number of shares in the beginning of the period 18,873 18,873
Number of shares used for calculation of earnings
per share -basic 18,873 18,873
Diluted:
Number of shares used for calculation of earnings
per share -basic 18,873 18,873
Adjustments for share options 151 309
Number of shares used for calculation of earnings
per share -diluted 19,024 19,182
Net income attributable to equity holders
of the parent 4,582 2,875
Basic earnings per share (in U.S.dollars) 0.243 0.152
Diluted earnings per share (in U.S.dollars) 0.241 0.150
NOTE 22 - CASH FLOWS FROM OPERATING ACTIVITIES:
Year ended 31 December
2007 2006
$ in thousands
Profit for the year 4,764 2,991
(a) Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation, and impairment amortization 1,017 941
Interest paid 722 633
Income taxes paid 2,029 1,833
Share based payment 84 143
Deferred income taxes, net (249) (184)
Accrued severance pay, net (233) 76
Exchange rate differences on borrowings 12 69
Gain from marketable securities (193) (12)
Loss (gain) on sale of fixed assets (3) 14
Exchange rate differences on loans to related
party and others (70) (48)
7,880 6,456
Changes in working capital:
Increase in accounts receivable:
Trade (607) (2,261)
Other (1,476) *(108)
Increase in accounts payable:
Trade 3,684 1,802
Other 2,059 131
Increase in inventories (5,228) (2,136)
(1,568) (2,572)
Cash generated from operations 6,312 3,884
Non-cash transaction - grant receivables
regarding the purchase of Fixed assets (55) 139
*Reclassified
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR MGGZFZKGGRZZ
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