(AFS.L) Amiad Filtration Systems Ltd Buy/Sell

Operational Highlights

Commenting on the results, Arik Dayan, Chief Executive Officer of Amiad, said: "We are pleased to report strong sequential growth in the first half compared with second half last year indicating a sustained return of investment in water infrastructure projects, particularly in the municipal and industrial segments. In the second half of 2008, Amiad focussed on improving its operational efficiency and enhancing its presence strategically in growth markets as market conditions worsened due to the downturn of global economic conditions. As a result, it was able to capitalise as organisations started to re-invest in large scale projects.

Looking ahead, Amiad continues to tightly manage costs. With the current pipeline of orders and the demand for Amiad's products set to continue in new territories as well as its established markets, the Board expects to report full year results which are in line with market expectations."

Enquiries: Amiad Filtration Systems Ltd.
Arik Dayan, Chief Executive Officer +972 (0) 4 690 9500

Rivka Kalmanzon, Chief Financial Officer Corfin Communications
Harry Chathli, Victoria Ward + 44 (0) 20 7977 0020
Operational Review

Revenues for the first half of 2009 increased 9% sequentially to $36.8m from the second half of 2008, however these were down compared with the same period last year (H1 2008: $39.5m). This decrease in revenue was mainly due to the lag in recovery in the irrigation segment and the overall market slowdown in certain key territories.

However, the beginning of 2009 saw a return in investment in infrastructure projects, particularly in the industrial and municipal segment in most of the Company's key markets. Since October 2008 there has been a shift in the mix between the industrial and municipal and the irrigation segment. At present, the industrial and municipal segment accounts for 65% of company revenue and is expected to continue to be the largest contributor.

Specifically, in the industrial and municipal segment, Europe saw heightened activity through the Turkish company that Amiad acquired in 2008, as it delivered large projects in the region as well as other countries such as India. One of the large projects in Turkey, accounting for over Euro 1m of company revenue, was to deliver its products to a new power plant in India. Also, the Company saw increased delivery into Western Europe with projects for the municipal and the oil and gas industries.

In Asia, the Company had targeted India as its main growth area in 2009. The Company performed well here in the period and secured its first large project in the municipal segment for its automatic self cleaning filters and AMF technology for drinking water. This project accounted for over $680,000 of company revenue. With industrial growth set to continue in India, and increased interest for Amiad's products in the irrigation market coming through, the Company remains very optimistic and focussed about its efforts in the region. The Company is actively looking to increase its presence in the area and will consider options available to it to ensure further significant inroads can be made in order for Amiad to continue to capitalise on the increased investment in water infrastructure in the country.

Additionally in Asia, in Singapore the Company secured three large projects in the municipal segment which were delivered and executed in the Philippines. These projects were for use of the AMF technology to produce drinking water. Furthermore, in the Malaysian oil industry, the Company won a large project for their AMF technology and for cooling water which was based on the screen technology. Elsewhere in Asia, as anticipated, the industrial markets in China saw a decline as the steel and petrochemical industries suffered the effects of the global downturn. However, the growth in other parts of Asia largely mitigated this decline.

In South America, Amiad continues to perform well. In Chile, the Company built on its successes to date within the mining industry and secured two projects for cooling water for a large engineering group. The ongoing growth in Chile consolidates the relationship with the Company's industrial and municipal distributor which was started at the end of 2007 and sets the tone for further expansion in the region. For example, in Brazil the Company embarked on a project with a large oil producer in Brazil for over $400,000. With growth in South America set to continue as economic development in the region progresses, Amiad is also exploring opportunities for enhancing its presence in the region.

Although the Company is seeing a general increase in interest levels coming through in the irrigation segment, and a return to growth in Africa, Amiad continues to see a lag in return to investment in this segment. The irrigation segment is impacted by seasonal factors and farming cycles. The Company has been making in roads into new territories and is well placed to capitalise should there be renewed investment in this segment.

Financial review

Revenues for the first half of 2009 increased 9% sequentially to $36.8m from the second half of 2008, however these were slightly down compared with the same period last year (H1 2008: $39.5m). Fully diluted earnings per share decreased by 5% to 19 US $cents (H1 2008: 20.1 cents).

Operating profit increased by 210% sequentially to $5.1m compared to $1.6m in H2 2008 (H1 2008: US$6.1m) and profit before tax increased over threefold sequentially to US$5.7m (from H2 2008: $1.3) (H1 2008: US $6.1m).

Gross margins increased by 10% sequentially to $17.4m compared to $14.6m in H2 2008 (H1 2008: US$19.2m).

Operating profit decreased by 33% sequentially to $5.1m compared to H2 2008: $7.7m (and decreased 16% from H1 2008: $6.1m).

Cash and cash equivalents in the bank was US$7.3m at the end of the period compared with H2 2008 $6.5m and $6.5m in H1 2008, reflecting the increase in organic and strategic growth.

Dividend

The Directors have decided to declare a dividend out of the Company's profits for the six months ended 30 June 2009 of 3.5 US$ cents (gross) per share (H1 2008: US $cents 3.5 (gross) per share), with an ex dividend date of 7 October 2009, a record date of 9 October 2009 and a payment date of 13 November 2009.

Management

Arik Dayan was promoted to the position of CEO of the Company in March 2009. Since his appointment Arik has been focussing on cash flow and expense management. Arik has been working at Amiad since 1997 and has a unique understanding of the business and operations through the insight and experience which he has acquired during his time at the Company.

Ms. Rivka Kalmanzon was appointed as CFO in August 2009. Ms. Kalmanzon has senior management experience in one of the "big 5" CPA firms in Israel, handling a broad spectrum of financial activities. Prior to joining Amiad she served as CFO of several hi-tech, bio-tech and manufacturing companies in Israel and abroad, all of which have several overseas operations.

Outlook

The Company continues to tightly manage costs and is focussed on managing suppliers, inventories and overheads efficiently. As a response to slowdown in global macro economic conditions it is forming local alliances and strategically increasing its presence in territories that are expected to invest heavily in water infrastructure projects.

Looking ahead to second half of 2009, whilst the irrigation market remains unstable, the demand for Amiad's products is set to continue in new territories as well as its established markets in the municipal and industrial segments. As a result, the Board expects to report full year results which are in line with market expectations.
AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED BALANCE SHEET

JUNE 30, 2009

June 30, December 31,

(Unaudited) (Audited)
U.S. dollars in thousands
A s s e t s

CURRENT ASSETS:
Cash and cash equivalents 6,266 6,544 6,509
Short term deposit 1,000

Financial assets at fair value through profit
or loss 295 106 527

Accounts receivable and accruals:
Trade 21,133 24,229 17,864
Other 1,702 1,921 1,996
Inventories 17,100 16,464 19,616
Income tax assets 1,824 1,420 2,233
T o t a l current assets 49,320 50,684 48,745

NON-CURRENT ASSETS:
Loan to a related party 651 778 697
Severance pay fund 135
Long-term receivables 164 151 109
Property and equipment 3,714 3,528 3,855
Intangible assets 6,652 3,854 6,835
Deferred income tax assets 1,357 *930 1,583
T o t a l non-current assets 12,673 9,241 13,079
T o t a l assets 61,993 59,925 61,824

Tal Yeshua Arik Dayan Ricki Kalmanzon
Chairman of the Board CEO CFO

Date of approval of the interim financial information by the Company's Board of Directors: September 13, 2009

AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED BALANCE SHEET

JUNE 30, 2009

June 30, December 31,

(Unaudited) (Audited)
U.S. dollars in thousands
Liabilities and equity

CURRENT LIABILITIES:
Short-term credit and borrowings from banks 11,403 13,255 10,903

Accounts payable and accruals:
Trade 8,176 11,361 12,728
Other 7,024 6,680 7,247
Current income tax liability 1,930 387 106
T o t a l current liabilities 28,533 31,683 30,984

NON-CURRENT LIABILITIES: Borrowings from banks and others
(net of current maturities) 1,926 1,455 2,440
Put option liability 1,801 1,679
Severance pay obligations 24 42
T o t a l non-current liabilities 3,727 1,479 4,161
T o t a l liabilities 32,260 33,162 35,145

Capital and reserves attributable to equity holders of the Company:
Share capital 2,342 2,334 2,342
Capital reserves 13,305 13,401 13,305
Currency translation reserve (37) 624 (269)
Retained earnings 14,049 10,341 11,224
29,659 26,700 26,602

T o t a l equity 29,733 26,763 26,679
T o t a l liabilities and equity 61,993 59,925 61,824

.

The attached notes are an integral part of this condensed consolidated interim financial information.

AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009

Six months ended Year ended
June 30, December 31,

(Unaudited) (Audited)
U.S dollars in thousands
except per share data
REVENUE 36,839 39,473 73,277
COST OF SALES 19,402 20,218 39,420
GROSS PROFIT 17,437 19,255 33,857
SELLING AND MARKETING COSTS 8,365 *9,681 18,068
ADMINISTRATIVE AND GENERAL EXPENSES 3,941 *3,523 8,089

OPERATING PROFIT 5,080 6,054 7,691
FINANCE INCOME 1,478 *209 517
FINANCE COSTS (819) *(883) (1,541)
FINANCE INCOME (COST), NET 659 (674) (1,024)
PROFIT BEFORE INCOME TAX 5,739 5,380 6,667
INCOME TAX EXPENSES 2,091 1,493 1,388
PROFIT FOR THE PERIOD 3,648 3,887 5,279

ATTRIBUTED TO:
Equity holders of the Company 3,652 3,871 5,244
Minority interest (4) 16 35
3,648 3,887 5,279
U.S dollars

Attributable to the equity holders of the Company during the period (see note 4b):
Basic 0.190 0.203 0.274
Diluted 0.190 0.201 0.272

The attached notes are an integral part of this condensed consolidated interim financial information.

AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009

Six months ended Year ended
June 30, December 31,
2009 2008 2008
(Unaudited) (Audited)
U.S dollars in thousands
Profit for the period 3,648 3,887 5,279

Other comprehensive income
Currency translation differences 233 272 (626)

Total comprehensive income for the period 3,881 4,159 4,653

Total comprehensive income attributable to:
Equity holders of the Company 3,884 4,135 4,615
Minority interest (3) 24 38
Total 3,881 4,159 4,653

The attached notes are an integral part of this condensed consolidated interim financial information.

AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009

Attributable to equity holders of the Company
Number of shares Share capital Capital reserve Currency translation Retained earning Total Minority interest Total
reserve shareholders equity
U.S dollars in thousands
BALANCE AT JANUARY 1, 2009 19,237,531 2,342 13,305 (269) 11,224 26,602 77 26,679

(audited)

ENDED JUNE 30, 2009 (unaudited):
Comprehensive income for the 232 3,652 3,884 (3) 3,881

period
Dividend ($ 0.043 per share) (827) (827) (827)
BALANCE AT JUNE 30, 2009 19,237,531 2,342 13,305 (37) 14,049 29,659 74 29,733

(unaudited)

BALANCE AT JANUARY 1, 2008 18,872,723 2,291 12,797 360 7,559 23,007 39 23,046

(audited)

ENDED JUNE 30, 2008 (unaudited):
Comprehensive income for the - - - 264 3,871 4,135 24 4,159

period
Share-based payment - value of - - - 4 4 - 4

employee services
Exercise of options of 310,085 43 604 - (172) 475 - 475

employees
Dividend ($ 0.048 per share) - - - - (921) (921) - (921)
BALANCE AT JUNE 30, 2008 19,182,808 2,334 13,401 624 10,341 26,700 63 26,763

(unaudited)

BALANCE AT JANUARY 1, 2008 18,872,723 2,291 12,797 360 7,559 23,007 39 23,046

(audited)

2008 (audited):
Comprehensive income for the (629) 5,244 4,615 38 4,653

period
Share-based payment - value of 13 13 13

employee services
Exercise of options by 364,808 51 508 559 559

employees
Dividend ($ 0.083 per share) (1,592) (1,592) (1,592)
BALANCE AT DECEMBER 31, 2008 19,237,531 2,342 13,305 (269) 11,224 26,602 77 26,679

(audited)

The attached notes are an integral part of this condensed consolidated interim financial information.

AMIAD FILTRATION SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009

Six months ended Year ended
June 30, December 31,

(Unaudited) (Audited)

U.S dollars in thousands CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations (see note 8) 3,189 86 7,134
Interest paid (283) (450) (747)
Income tax paid (983) (1,580) (3,616)
Net cash generated from (used in) operating 1,923 (1,944) 2,771

activities CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiary (1,520)
Purchases of property and equipment (356) (904) (1,846)
Purchases of intangible assets (213) (243) (545)
Investments grants received 29 29

Investment in financial assets at fair value through
profit or loss, net 2,012 2,012
Investment in short-term deposit (1,000)
Proceeds from sale of property and equipment 125 58 112
Long-term loan granted to others, net 7 (43)
Collection of long-term loan granted to a related (31) 28 104

party
Net cash generated from (used in) investing (1,475) 987 (1,697)

activities CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of options by employees 475 559
Dividends paid to equity holders of the Company (827) (921) (1,592)
Receipt of long-term borrowings and other 17 1,786

liabilities
Repayments of long term borrowings (817) (939) (1,816)
Short-term borrowings from banks, net 794 4,713 2,554
Net cash generated from (used in) financing (833) 3,328 1,491

activities

EQUIVALENTS (243) 2,484 2,449
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,509 4,060 4,060
CASH AND CASH EQUIVALENTS AT END OF YEAR 6,266 6,544 6,509

The attached notes are an integral part of this condensed consolidated interim financial information.
AMIAD FILTRATION SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 1 - GENERAL INFORMATION:

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.

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.

NOTE 2 - BASIS OF PREPARATION

This condensed consolidated interim financial information of June 30, 2009 and for the six month periods then ended (hereafter - the interim financial information) have been prepared in condensed form in accordance with IAS 34 - "Interim Financial Reporting".

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended December 31 2008, which have been prepared in accordance with IFRS.

This condensed consolidated interim financial information is reviewed and not audited.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended December 31, 2008, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning January 1, 2009:

a) IAS 1 (revised), *Presentation of financial statements*. The revised standard prohibits the presentation of items of income and expenses (that is *non-owner changes in equity*) in the statement of changes in equity, requiring *non-owner changes in equity* to be presented separately from owner changes in equity. All *non-owner changes in equity* are required to be shown in a performance statement.

Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).

The group has elected to present two performance statements (the income statement and statement of comprehensive income). The interim financial statements have been prepared under the revised disclosure requirements.

The amendment to International Accounting Standard No. 1 (as amended), 'Presentation of Financial Statements' ("the amendment to IAS 1R"), entered into force on January 1, 2009.

AMIAD FILTRATION SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

The amendment to IAS 1R explains that only some, and not all, financial assets and liabilities classified as *held for trading* under the provisions of International Accounting Standard No. 39, *Financial Instruments * Recognition and Measurement* (*IAS 39*) can be regarded as examples of assets and liabilities classified as current. The application of the provisions of the above amendment is not expected to affect the Group*s financial statements to any significant degree. b) IFRS 8, 'Operating segments' (effective from January 1, 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 is apply IFRS 8 from 1 January 2009. The standard has no material impact on the segment reporting of the Company.
c) The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but are not currently relevant for the Group:
· IFRIC 13, *Customer loyalty programmes*;
· IFRS 2 (amendment), *Share-based payment*;
· IAS 36 (Amendment), *Impairment of assets*;
· IAS 38 (Amendment), *Intangible assets*;
· IAS 19 (Amendment), *Employee benefits*;

· IAS 39 (amendment), *Financial instruments: Recognition and measurement*.

NOTE 4 - SHAREOLDERS' EQUITY:

b) On 1 April, 2009, the Company's Board of Directors resolved to distribute dividends to its shareholders

in the amount of $827 thousand ($0.043 per share).

On 13 September, 2009, the Company's Board of Directors resolved to distribute dividends to its shareholders in the amount of $672 thousand ($0.035 per share).

AMIAD FILTRATION SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 4 - SHAREOLDERS' EQUITY (continued):

Data regarding the earning per share

Six months ended Year ended December 31,
June 30,

(Unaudited) (Audited)
U.S. dollars in thousands

Weighted average number of Ordinary shares outstanding (in thousands): Basic:
Number of shares in the beginning of 19,238 18,873 18,873

the period
Adjustments for exercise of options 196 260

Number of shares used for calculation of earnings

per share -basic 19,238 19,069 19,133

Diluted: Number of shares used for calculation of earnings
per share -basic 19,238 19,069 19,133
Adjustments for share options 17 155 129

Number of shares used for calculation of earnings
per share -diluted 19,255 19,224 19,262

Net income attributable to equity holders
of the Company 3,652 3,871 5,244
Basic earnings per share (in U.S. 0.190 0.203 0.274

dollars)
Diluted earnings per share (in U.S. 0.190 0.201 0.272

dollars)

NOTE 5 - EMPLOYEE INCNTIVE PLAN

During 2009, the board of directors approved a Bonus Scheme which will be available to the Company's employees and Management.

The bonus scheme will be in operation in relation to financial year ending 31 December 2009. The level of bonus payable will be depended on the achievement of targets as set out in the Bonus Scheme.

Any bonus shall be paid following Board's approval of the 2009 financial statement in March 2010. Eligibility to receive the Bonus is contingent upon employment by the Company for the whole of the Bonus Year and/or at the bonus payment date. The payment of any bonus to individual not complying with the above shall be subject to the absolute discretion of the chairman of the Board and/or CEO of the Company.

AMIAD FILTRATION SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 5 - EMPLOYEE INCNTIVE PLAN (continued):

The bonus to the Employees shall be paid, subject to the absolute discretion of the Board or of whoever the Board may authorize to do so. As the payment of the bonus is fully discretionary, the Company reserves the right not to pay a bonus to the Employees.

NOTE 6 - REVENUES FROM SALES

Sales by customer location:
Six months ended Year ended
June 30, December 31,
2009 2008 2008
(Unaudited) (Audited)

U.S. dollars in thousands

North America 9,324 11,257 19,853
Europe 6,830 7,111 14,738
Australia 4,476 6,333 11,024
East Asia 8,306 6,207 13,716
Israel 3,590 3,118 5,485
South America 2,854 3,285 4,795
Africa 327 657 1,198
Middle East 1,132 1,505 2,468
Total 36,839 39,473 73,277

NOTE 7 - TAXES ON INCOME:

The income of the Company is taxed at the regular rate.

The corporate tax rates for 2008 and thereafter are as follows: 2008 - 27%, 2009 - 26% and for 2010 and thereafter - 25%.

On July 23, 2009, the Israel Economic Efficiency Law (Legislation Amendments for Applying the Economic Plan for 2009 and 2010), 2009 (hereinafter - the 2009 Amendment), became effective, stipulating, among other things, an additional gradual decrease in tax rates in 2011 and thereafter, as follows: 2011 - 24%, 2012 - 23%, 2013 - 22%, 2014 - 21%, 2015 - 20% and 2016 and thereafter - 18%.

The calculation of taxes on income in the reported period is based on the best available estimation of the weighted average of expected tax rate for the entire year. The reduction in Israeli corporate tax rates has no material impact on the estimated expected tax rate of the Company in the year ended December 31, 2009.

AMIAD FILTRATION SYSTEMS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 8 - CASH FLOWS FROM OPERATIONS:
Six months ended Year ended
June 30, December 31,
2009 2008 2008
(Unaudited) (Audited)

U.S. dollars in thousands

Profit for the period 3,648 3,887 5,279

Adjustments to reconcile net income to net cash generated from operating activities: Income and expenses not involving cash flows:
Depreciation and amortization 791 578 1,388
Interest paid 283 450 747
Income taxes paid 983 1,580 3,616
Share based payment 4 13
Deferred income taxes, net 235 2 (733)
Accrued severance pay, net (177) 220 238
Exchange rate differences on borrowings (94) 59 (47)
Loss (Gain) on sale of property and equipment 51 (3) 9
Gain from financial assets at fair value through 232 (6) (427)

profit Exchange rate differences on borrowings to
related party and others 23 (110) (7)
2,327 2,774 4,797

Changes in working capital: Decrease (increase) in accounts receivable:
Trade (2,838) (5,998) (421)
Other 694 (477) (1,418)

Increase (Decrease) in accounts payable:
Trade (5,188) (1,136) 1,919
Other 1,357 1,267 1,647
Decrease (increase) in inventories 3,076 (231) (4,669)
Increase in put option 113
(2,786) (6,575) (2,942)
Cash generated from operations 3,189 86 7,134

Non-cash transaction - grant receivables
regarding the purchase of Fixed assets - (31) (31)

This information is provided by RNS The company news service from the London Stock Exchange

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