TIDMWTL
RNS Number : 2955C
Waterlogic PLC
30 April 2012
30 April 2012
Waterlogic Plc
("Waterlogic", the "Group" or the "Company")
RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 DECEMBER 2011
Waterlogic Plc (AIM: WTL.L), a leading manufacturer and global
distributor of point-of-use ("POU") drinking water purification and
dispensing systems, today announces its results for the year ended
31 December 2011.
2011 2010 Growth
Revenue $84.9m $68.3m 24.3%
Gross margin 59.2% 61.5% (3.7)%
Adjusted EBITDA(1) $13.4m $11.5m 16.7%
EBITDA $10.4m $10.2m 1.9%
Adjusted operating
profit(1) $8.3m $7.3m 13.6%
Operating profit $5.3m $6.0m (12.2)%
Adjusted net income(1) $5.5m $4.8m 15.3%
Net income $2.8m $3.5m (20.6)%
Net assets $86.6m $23.5m 268.5%
Net cash $50.6m $4.5m 1,026.9%
Group Highlights
-- Successful Admission to AIM raising $58.2m net proceeds
-- Revenue growth in the year across all channels to market with
recurring rental and service revenue growing 22.4% and with organic
growth at 6.2%
-- All regions showed revenue growth, particularly Scandinavia
and Germany with increases of 24.4% and 25.4% respectively
-- New distributors in Turkey, Saudi Arabia and Mexico
-- The Company continues to commercialise its innovative
Firewall(TM) UV technology and progress its further expansion into
new markets
-- Acquisition of InnoTech and Aqua Cure businesses and cooler portfolio in France during 2011
-- Net assets include a strong net cash position allowing the
Company to pursue acquisition opportunities
-- Since the year end, the Company continues to pursue its
attractive acquisition pipeline with three transactions already
completed to date
-- Machines in field increased by 65,000 to 565,000
Jeremy Ben-David, Waterlogic Group CEO, commented
"2011 was an extraordinary year for the Group. We changed from
being a privately owned business, following 19 years of successful
profitable growth, to becoming a public company admitted to trading
on the London Stock Exchange AIM market.
Waterlogic revenue for the year was $84.9m, a growth of 24.3%
over 2010. Adjusted operating profit was $8.3m. I am very pleased
with this solid, first set of results following our admission to
AIM, especially considering the general economic environment.
During 2011, we added 65,000 units to our MIF base, which is now
approximately 565,000 units.
We face the future from a strong position aware that this
strength can create good opportunities for us in difficult economic
times.
While the external commercial environment is expected to remain
challenging in 2012, the Directors remain confident about the
Group's Firewall(TM) technology projects, potential acquisitions
being worked on, and the Group's organic business.
We enter 2012 with a $50.6m net cash position and we have a
number of very attractive acquisition opportunities. Our core
business is driven by both rental and service income and
contract-based trade sales (31.8% recurring and 53.9% total
contractual) and is therefore more resilient to economic
cycles."
Enquiries:
Waterlogic Plc Tel: +44 (0)20 7074 1800
Jeremy Ben-David, Group Chief Executive Email: waterlogic@kreabgavinanderson.com
Officer
Steve Harrison, Group Chief Financial
Officer
Liberum Capital (Nominated Adviser Tel: +44 (0)20 3100 2000
and Broker)
Steve Pearce
Richard Bootle
Kreab Gavin Anderson (PR Adviser) Tel: +44 (0)20 7074 1800
James Benjamin Email: waterlogic@kreabgavinanderson.com
Madeleine Palmstierna
Website: www.waterlogic.com
(1)The Directors use adjusted measures to judge the
profitability of the Group to provide them with a consistent basis
for comparison of the Group's results, on a year on year basis.
During the years under review, "Adjusted" measures include
adjustments for the share based incentives expense, capital
reorganisation related costs and acquisition related costs. Further
details and reconciliations to statutory measures are included in
note 5 to the financial information.
CHAIRMAN'S STATEMENT
2011 was a landmark year for Waterlogic. We continued our
growth, increased our adjusted profitability, raised funds to
further expand and develop, restructured and completed an initial
public offering and Admission to trading on the London Stock
Exchange AIM market. The Group also introduced new products for
additional markets and strengthened its Board and governance.
The Group increased revenue by 24.3% to $84.9m (2010: $68.3m).
Adjusted EBITDA increased by 16.7% to $13.4m (2010: $11.5m).
Adjusted operating profit increased by 13.6% to $8.3m (2010:
$7.3m). Operating profit decreased by 12.2% to $5.3m (2010:
$6.0m).
The increases in revenue and adjusted operating profit were a
result of contributions from acquisitions, organic growth and
improvements in existing operations and net favourable currency
effects.
Our balance sheet is strong, ending the year with net cash of
$50.6m (2010: $4.5m) reflecting $58.2m of net proceeds raised, with
net cash inflow from operating activities of $3.5m (2010: $2.3m),
$6.0m spent on acquisitions (2010: $6.0m) and $7.4m of net loan
repayments (2010: $1.8m net increase in loans). Our strong balance
sheet means that we are ideally positioned to take advantage of
accretive acquisitions. We intend to continue undertaking
acquisitions in a disciplined and deliberate manner in order to
deliver long-term value to our shareholders.
During 2011, we have made progress in delivering on our strategy
of further strengthening our position as a leading international
manufacturer and distributor of quality POU water coolers.
In addition to our organic growth in the distribution of POU
water technology to the workplace, factory, school, hospital, hotel
and restaurant environments, we also acquired two bolt-on
businesses in France and the USA, countries where we already had
wholly owned direct sales operations. In addition, we acquired the
majority shareholding in a business, located in the UK, which
distributes complementary products. This acquisition enables us to
increase our product offering to our customers worldwide.
In 2011, we started selling our first products incorporating our
innovative patent-pending Firewall(TM) UV technology to our
customers. We signed a seven year OEM supply agreement with a
leading consumer products company. This is Waterlogic's first major
supply and distribution agreement for products incorporating our
Firewall(TM) UV technology into the consumer market. Management
continues to identify further opportunities in this market.
We expect 2012 to be another year of progress with a combination
of organic growth, contributions from new acquisitions and the
on-going commercialisation of our Firewall(TM) UV technology. We
are continuing with our development of new products, which we
believe will open additional opportunities for the Group.
Finally, on behalf of the Board, I would like to thank our
employees for their commitment and dedication. It is through their
hard work that we have delivered the significant progress we have
seen in 2011.
Ariel Recanati
Group Non-Executive Chairman
30 April 2012
CHIEF EXECUTIVE'S STATEMENT
2011 was an extraordinary year for the Group. We changed from
being a privately owned business, following 19 years of successful
profitable growth, to becoming a public company admitted to trading
on the London Stock Exchange AIM market.
Waterlogic revenue for the year was $84.9m, a growth of 24.3%
over 2010. Adjusted operating profit was $8.3m. I am very pleased
with this solid, first set of results following our Admission to
AIM, especially considering the general economic environment.
During 2011, we added 65,000 units to our MIF base, which is now
approximately 565,000 units.
Trading review
Organic growth at 6.2% was mainly impacted by one of the Group's
larger customers undergoing substantial organisational change in
2011 which led to orders being placed for 7,561 fewer units than in
2010. Excluding this effect the core business would have delivered
underlying organic growth at 13.6%. Despite the smaller underlying
growth we do not see a significant change in the market dynamics or
the Company's performance relative to its competition.
We will strengthen our direct sales operation both organically
and through acquisitions. The Group also continues to invest in
expanding its direct sales forces and marketing efforts in all
geographies where the Company is directly present. We work very
closely with significant trade partners and will continue to
improve our product offering and relationship with them.
Waterlogic's core activity of business to business (B2B) POU
dispensers experienced healthy organic growth in 2011, despite the
time and efforts management focused on our Admission to AIM during
the first half of the year.
During the year, the Company added three new distributors in new
and existing markets (Saudi Arabia, Mexico and Turkey).
Acquisitions and asset purchases
We successfully completed three transactions in 2011. These were
all completed prior to our Admission to AIM and we expect will add
approximately $11.0m of annual revenue. We acquired the trade and
assets of a B2B POU dealer in Nashville, Tennessee as a bolt-on to
CoolerSmart, our direct sales and rental operation in the US. In
Europe, we acquired an installed base of POU dispensers in
France.
In the UK a significant acquisition was the controlling interest
in Aqua Cure Limited (Aqua Cure). This is an established company
with a strong management team, which specialises in the sale of
ancillary equipment to the water, coffee and vending
industries.
Aqua Cure's product range includes items such as filters,
specialist water solutions for calcium build up, sanitising
equipment and fittings. Aqua Cure turns over approximately $10.0m
in revenue annually and the Board expects its acquisition will
enable Waterlogic to expand its product offering and is also a
potential route to market for the new Waterlogic filter range.
Currently 95% of Aqua Cure's business is generated in the UK and we
believe there is a substantial opportunity to take the successful
Aqua Cure model and export it to other markets where Waterlogic has
a strong base. An objective continues to be for Waterlogic to
provide our customers with a wider product range internationally,
thereby offering an enhanced customer service.
The pipeline for potential acquisitions is healthy, with several
on-going discussions and negotiations taking place. I am confident
that we will see excellent opportunities materialising in 2012 and
beyond. Already in early February, we completed the first
acquisitions of the year, buying the shares of Det Stavangerske
Kaffeselskap SA in Norway, a $3.9m revenue business, and Prisme
SARL a distributor of Waterlogic products in France. The latter is
a bolt-on acquisition adding 2,400 machines to our MIF base in
France and $1.0m in revenue. In March, the Company completed the
acquisition of Aqua Service AS in Scandinavia, which added 10,885
machines to our MIF base and $10.5m of revenue.
Growth through the acquisition of dealers and competitors and
into related businesses continues to be a major part of the
Company's strategy.
Technological innovation
2011 saw the full launch of our innovative Firewall(TM) UV
technology. This patent-pending system is a significant achievement
with credit due to our dedicated and talented factory management
and Research and Development ("R&D") team, who identified the
need and over a two year period of development and rigorous testing
achieved a major technical breakthrough. The Firewall(TM) system
eradicates virtually all bacteria at the point of dispense from the
faucet/tap and its potential applications go well beyond the
business-to-business POU dispenser market. We see significant
opportunities in applying this technology in new segments and
markets, including the consumer market, refrigerators, air
purifiers and humidifiers, healthcare and the portable water
market. It also enables Waterlogic to provide pure drinking water
in regions of the world where the incoming mains water is not
potable. This opens up significant opportunities for us in the
world's developing markets.
A short time after the Company's Admission to AIM, we signed our
first agreement for the supply to the consumer market of a product
incorporating the Firewall(TM) technology. This agreement, was
signed in September 2011 with a leading consumer product company.
It is envisaged that this agreement, as well as the pending launch
of three new consumer product ranges, will help Waterlogic exploit
the significant opportunities that Firewall(TM) is opening up.
The Company is actively pursuing the commercialisation of the
Firewall(TM) technology with new product launches in the consumer
market. The Company is in discussions with several large potential
distribution partners including utilities, water treatment
companies, white goods manufacturers and consumer product companies
with the view of launching these products through different
channels in 2012 and beyond.
Operations
The Company has recently invested in a new long term testing
facility. This allows the R&D and Quality Control teams in the
factory to test new development products in market conditions and
to simulate long term testing of the products prior to launch. This
investment was particularly important due to the anticipated launch
of the many new and diverse product lines in 2012 and beyond. In
addition, there was further investment in the factory with the
decision to build a semi-automated third production line. This line
has recently been completed and will enable the factory to increase
capacity by up to 50%.
In parallel, the Company continues to investigate new potential
locations for an additional factory. The PRC factory will continue
to be the Company's main production centre but a second facility is
required in order to meet the anticipated volumes from our entering
into consumer markets. In order to mitigate geographical
concentration and associated risks, the new factory will be based
in another country. The project is expected to result in the
identification of the preferred location during 2012 with initial
investment taking place within the following twelve months.
2011 also saw the development and enhancement of an in-house
range of filters. These filters have the major advantage of being
environmentally friendly (no longer requiring plastic disposal post
servicing) and offering substantial savings to customers. A new
system for quick and easy replacement of filters has also been
developed by Waterlogic engineers and is now going through the
process of patent application. This innovation was developed with
the consumer market in mind, with an ability for the homeowner to
replace filters within minutes and without specialist training or
tools. The Company's acquisition of Aqua Cure in 2011, which
specialises in the sale of ancillary equipment to the water, coffee
and vending industries, is a potential route to market for the new
Waterlogic filter range.
Current trading and outlook
While the external commercial environment is expected to remain
challenging in 2012, the Directors remain confident about the
Group's Firewall(TM) technology projects, potential acquisitions
and most importantly, the Group's organic business.
We enter 2012 as a strong company with many opportunities. We
have a strong balance sheet with $50.6m of net cash and we have a
number of very attractive acquisition opportunities. Our core
business is driven by rental and service income (over 31.8%
recurring and 53.9% total contractual) and is therefore more
resilient to economic cycles. Furthermore, our efficiency
programmes, implemented across the business in 2011, are now
providing additional funds to enable us to invest in our commercial
programmes and capabilities so that we can better exploit the full
potential of the portfolio we now have.
Jeremy Ben-David
Group Chief Executive Officer
30 April 2012
FINANCIAL REVIEW
Group results
Group revenue for 2011 increased 24.3% to $84.9m (2010: $68.3m).
Excluding the net impact of foreign currency effects (down $2.2m)
and acquisitions ($9.9m), underlying revenue was higher at $74.8m
representing like-for-like growth of 6.2%.
The benefit to gross profit from comparable year on year unit
sales growth was offset by price pressures in the first half of the
year and the acquisition of Aqua Cure (a wholesale business making
consequentially lower margins) so that overall, the gross margin
declined to 59.2% (2010: 61.5%) with gross profit of $50.2m.
Group operating profit for the year was $5.3m, 12.2% below 2010
($6.0m). Operating profit adjusted to eliminate the effect of the
share incentive plans, acquisition costs and the capital
reorganisation costs associated with our Admission to AIM was $8.3m
which reflects annual growth of 13.6%, which has been driven by the
aforementioned revenue growth of 24.3%, albeit at the slightly
reduced gross margin, and by a lesser growth in operating costs
(excluding the above eliminations) of 20.8%.
Segment operating profit rose strongly in Scandinavia (58.2%)
and the French business strengthened performance reducing its
operating loss to $0.1m compared to an operating loss in 2010 of
$0.4m. The US division made a small profit of $0.1m (2010: profit
of $0.2m) with increases in gross profit offset by the addition of
US-based group business development personnel. The operating
subsidiaries in the US, CoolerSmart and Innowave, made a combined
operating profit of $1.1m.
Growth of 9.7% in the external sales of the International
Wholesale division was predominantly from established customers,
although new distributors did add a further 1,140 units in the
year. The acquisition of Aqua Cure Limited during the year added a
new business segment for the UK.
Group operating costs increased by $9.0m to $45.0m in the year
reflecting headcount increases from both newly acquired businesses
and in response to organic growth needs, as well as a $0.7m higher
charge on the share based incentive plan compared to prior year and
$0.6m of capital reorganisation costs mentioned above.
Finance costs for 2011 were $1.6m compared to $0.4m in 2010. The
increase was partly due to additional borrowings taken prior to the
Admission in order to fund 2011 acquisitions and more significantly
due to the revaluation of the derivative option on the German
controlling interest acquired in 2010. The 2011 charge includes
$0.1m in respect of interest rate swaps taken out during the year
to secure the Group's long term borrowing at an attractive average
rate of 4.5% until 2016.
Group profit before tax for the year was $3.8m, $2.1m below 2010
profit before tax, but inclusive of the share incentive plan costs,
acquisition costs and capital reorganisation costs ($3.0m combined
value).
Taxation was $1.0m for the year, $1.4m below 2010 reflecting the
lower profit before tax achieved and benefits of the post Admission
Group structure. The effective tax rate for the Group reduced to
26.7% (2010: 40.8%).
Basic earnings per share for the year were 4.12 cents, compared
with 6.5 cents in 2010. Diluted earnings per share were 4.1 cents,
compared with 6.5 cents for 2010.
The Group expensed $0.3m in the year on research and
development, and invested a further $0.9m within capital
expenditure. There were two major elements to this expenditure. The
first was further development of new products, in particular those
incorporating Firewall(TM) and the second, development of the
Group's own filter line.
Balance sheet
Net assets increased to $86.6m (2010: $23.5m). The main
movements in the balance sheet items were property plant and
equipment (relating mainly to the addition of water dispensers for
rental of $3.8m), goodwill and other intangible fixed assets
increasing by $10.0m (of which $5.2m was goodwill arising from
acquisitions during the year) and the change in net funds following
the successful fund raising.
Cash and treasury
The Group continues to be cash generative from its operating
activities, with net cash inflow from operating activities for 2011
of $3.5m, $1.2m above 2010. The Group closed the year with a net
cash balance of $50.6m (2010: $4.5m) including $58.2m net proceeds
received from the Group's Admission on the London Stock Exchange
AIM market. These higher inflows were then offset by higher cash
outflows in support of acquisitions ($6.0m) and net repayment of
financing arrangements ($7.4m). Interest received and paid resulted
in a net outflow of $1.8m which was $0.8m higher than 2010, due
predominantly to interest payments on debt prior to Admission.
Investing activities for 2011 resulted in an outflow of $8.1m in
total which was $0.1m lower than the corresponding outflow in
2010.
In broad terms, the Group's net funds are notionally allocated
for future acquisition opportunities and working capital
requirements, the development and commercialisation of Firewall(TM)
technology and creating new manufacturing capacity.
Steven Harrison
Group Chief Financial Officer
30 April 2012
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2011 Year ended 31 December
2011 2010
Continuing operations Note $'000 $'000
Revenue 3 84,856 68,268
Cost of sales (34,652) (26,261)
Gross profit 50,204 42,007
Distribution expenses (792) (714)
Marketing expenses (696) (648)
Administrative expenses (43,677) (34,973)
Other gains and losses 213 311
Operating profit 5,252 5,983
-------------------------------------- ----- ------------ -----------
Adjustment for the effect of:
Share based incentives 1,872 1,196
Capital reorganisation related costs 628 -
Acquisition related costs 534 118
Adjusted operating profit 8,286 7,297
-------------------------------------- ----- ------------ -----------
Finance income 83 247
Finance costs (1,571) (361)
Profit before tax 3,764 5,869
Income tax expense (1,006) (2,397)
Profit for the year 2,758 3,472
Profit attributable to:
Owners of the Company 2,488 2,967
Non-controlling interests 270 505
2,758 3,472
Earnings per share 6
Basic (cents per share) 4.12 6.50
Diluted (cents per share) 4.10 6.50
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2011
Year ended 31 December
2011 2010
$'000 $'000
Profit for the year 2,758 3,472
Exchange differences on translation of
foreign operations (574) 344
Total comprehensive income for the period 2,184 3,816
Total comprehensive income attributable
to:
Owners of the Company 1,815 3,365
Non-controlling interests 369 451
2,184 3,816
CONSOLIDATED BALANCE SHEET
As at 31 December 2011
2011 2010
ASSETS $'000 $'000
Non-current assets
Goodwill 11,199 6,325
Other intangible assets 8,801 4,724
Property, plant and equipment 10,452 9,784
Deferred tax asset 288 68
Total non-current assets 30,740 20,901
Current assets
Inventories 12,495 11,621
Trade and other receivables 19,441 14,548
Cash and cash equivalents 51,130 6,495
Total current assets 83,066 32,664
Total assets 113,806 53,565
EQUITY AND LIABILITIES
Capital and reserves
Stated capital - -
Additional paid in capital 60,261 605
Translation reserve (578) 95
Share based payment reserve 2,882 -
Retained earnings 24,033 21,545
Equity attributable to Shareholders 86,598 22,245
Non-controlling interest 27 1,301
Total equity 86,625 23,546
CONSOLIDATED BALANCE SHEET (continued)
As at 31 December 2011 2011 2010
EQUITY AND LIABILITIES (continued) $'000 $'000
Non-current liabilities
Borrowings:
- bank and other borrowings 4,173 4,799
- convertible loan notes - 5,679
- obligations under finance leases 89 172
Total borrowings 4,262 10,650
Derivative financial instruments 132 -
Deferred tax liability 282 -
Fair value of embedded derivatives (FVTPL) - 267
Provisions 69 65
Deferred and contingent consideration 1,863 -
Total non-current liabilities 6,608 10,982
Current liabilities
Trade and other payables 13,769 9,557
Borrowings:
- bank and other borrowings 3,431 3,918
- convertible loan notes - 351
- obligations under finance leases 89 167
Total borrowings 3,520 4,436
Current tax liabilities 1,112 1,296
Provisions 92 1,788
Deferred revenue 2,069 1,692
Deferred and contingent consideration 11 268
Total current liabilities 20,573 19,037
Total liabilities 27,181 30,019
Total equity and liabilities 113,806 53,565
This financial information was approved by the Board of
Directors and authorised for issue on 30 April 2012 and was signed
on its behalf by
Jeremy Ben-David Steven Harrison
Group Chief Executive Officer Group Chief Financial Officer
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
Additional based Attributable
Stated paid in Translation payment Retained to Non-controlling
capital capital reserve reserve earnings Shareholders interest Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
- 605 (303) - 18,624 18,926 1,284 20,210
Balance at 1
January 2010
Initial
recognition of
non-controlling
interest - - - - (46) (46) 46 -
De-recognition
of minority
interest
following
acquisition
of
non-controlling
interest - - - - - - (480) (480)
Profit for the
year - - - - 2,967 2,967 505 3,472
Other comprehensive income 398 398 (54) 344
Balance at 31
December 2010 - 605 95 - 21,545 22,245 1,301 23,546
Share for share
exchange to
acquire
non-controlling
interest - 1,571 - - - 1,571 (1,571) -
Issue of new shares on
Admission 65,387 - - - 65,387 - 65,387
Costs relating
to the issue
of new shares - (7,147) - - - (7,147) - (7,147)
Initial
recognition of
non-controlling
interest - - - - - - (72) (72)
Fair value of
put and call
option over
non-controlling
interest
acquired in the
year - (155) - - - (155) - (155)
Fair value of
LTIP accrual
transferred to
reserves - - - 1,507 - 1,507 - 1,507
Transfer to
reserves for
share
based payment
expense - - - 1,375 - 1,375 - 1,375
Profit for the
year - - - - 2,488 2,488 270 2,758
Other
comprehensive
income - - (673) - - (673) 99 (574)
Balance at 31
December 2011 - 60,261 (578) 2,882 24,033 86,598 27 86,625
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2011 Year ended 31 December
2011 2010
$'000 $'000
Note
Profit after tax for the year 2,758 3,472
Adjustments:
depreciation and amortisation 5,142 4,214
acquisitions (negative goodwill and contingent
consideration adjustments) (379) (551)
share based incentives expense 1,872 1,196
income tax expense 1,006 2,397
net interest expense and changes in the
fair value of derivative financial instruments 1,593 346
loss on disposal of non-current assets 55 13
------------ ----------
Adjusted operating profit before working
capital movements 12,047 11,087
Net effect of working capital movements 8 (1,086) (3,686)
Cash flow before purchase of rental assets,
interest and tax 10,961 7,401
Purchases of rental assets (3,671) (2,731)
Proceeds on disposal of rental assets 98 150
Interest paid (1,890) (1,044)
Tax paid (2,009) (1,474)
Net cash from operating activities 3,489 2,302
Investing activities
Interest received 85 15
Proceeds on disposal of property, plant
and equipment 4 44
Purchases of property, plant and equipment (1,031) (1,474)
Purchases of intangible assets (1,271) (365)
Acquisitions, net of cash acquired (5,112) (5,317)
Acquisition of non-controlling interests - (480)
Deferred and contingent consideration paid (726) (664)
Net cash used in investing activities (8,051) (8,241)
Financing activities
Proceeds from the issue of new shares (net
of costs) 8 58,240 -
New bank loans raised 5,027 3,466
Repayment of bank loans and other financing (12,442) (1,641)
Net cash from financing activities 50,825 1,825
Translation differences (125) 17
Net increase/(decrease) in cash and cash
equivalents 46,138 (4,097)
Net cash and cash equivalents at beginning
of year 4,493 8,590
Net cash and cash equivalents at end of
year 8 50,631 4,493
NOTES TO THE FINANCIAL INFORMATION
1. General information
Waterlogic Plc is a holding company incorporated in Jersey on 19
May 2011 and based in Ireland. In anticipation of the admission by
the Company of its Ordinary Shares to the AIM market of the London
Stock Exchange Plc (the "Admission"), the Company acquired all of
the share capital of Waterlogic International Limited ("WIL"), a
company registered in the Bahamas through a share for share
exchange conditional upon Admission, which occurred on 11 July
2011. The acquisition of the shares of WIL has been accounted for
as a capital reorganisation in accordance with the provisions of
IFRS 3 Business Combinations. As such WIL is considered to be the
acquirer and the Company the acquiree, except that the legal share
capital presented is that of the Company. Accordingly these
financial statements present the share capital and Additional Paid
in Capital as if the capital reorganisation took place on 1 January
2010 and the other assets, liabilities, reserves, results and cash
flows are presented as if they were in WIL's own financial
statements.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2011,
but is derived from those accounts. The auditors reported on those
accounts on 30 April 2012 and their report was unqualified.
Statutory accounts for 2011 will be delivered following the
company's Annual General Meeting.
The Group is a vertically integrated business engaged in the
design, manufacture, distribution, servicing and sale of point of
use water machines in worldwide markets.
2. Basis of preparation
The Company has prepared the financial information under
International Financial Reporting Standards ("IFRS") as adopted by
the EU. The financial information has been prepared on a going
concern basis and under the historical cost convention, modified by
the revaluation of certain financial instruments.
The financial information is presented in US dollars. This is
the predominant functional currency of the Group and is the
currency of the primary economic environment in which it operates.
Foreign operations are consolidated within the financial
information in accordance with the policies set out below.
3. Revenue
An analysis of the Group's revenue is as follows:
Year ended 31 December
2011 2010
Continuing operations $'000 $'000
Direct sales 12,130 9,491
Indirect sales 45,719 36,714
Rental and service income 27,007 22,063
Consolidated total revenues 84,856 68,268
4. Business and geographical segments
Information reported to the Group's Chief Executive for the
purposes of resource allocation and assessment of segment
performance is focused on the location of markets in which the
Group operates. The Group's reportable segments are set out
below
The following is an analysis of the Group's revenues and
operating profit/(loss) by reportable segment:
Year ended 31 December
2011 2010
$'000 $'000
International Trading
External sales 15,909 14,496
Inter-segment sales 13,563 16,407
Total revenue 29,472 30,903
Segment operating profit 5,386 5,657
Scandinavia
External sales 21,014 16,899
Inter-segment sales 58 88
Total revenue 21,072 16,987
Segment operating profit 2,434 1,539
France
External sales 6,539 6,254
Inter-segment sales - -
Total revenue 6,539 6,254
Segment operating loss (122) (414)
Germany
External sales 11,618 9,266
Inter-segment sales 92 57
Total revenue 11,710 9,323
Segment operating profit 1,359 1,804
USA
External sales 22,655 21,324
Inter-segment sales - 184
Total revenue 22,655 21,508
Segment operating profit 67 191
UK
External sales 7,118 -
Inter-segment sales 168 -
Total revenue 7,286 -
Segment operating profit 717 -
PRC
External sales 3 29
Inter-segment sales 15,834 16,931
Total revenue 15,837 16,960
Segment operating (loss)/profit (238) 286
Eliminations
External sales - -
Inter-segment sales (29,715) (33,667)
Total revenue (29,715) (33,667)
Segment operating loss (1,588) (1,357)
CONSOLIDATED
External sales 84,856 68,268
Inter-segment sales - -
Total revenue 84,856 68,268
Aggregate segment operating profit 8,015 7,706
Central administration costs (2,763) (1,723)
Operating profit 5,252 5,983
Segment operating profit represents the profit earned by each
segment without allocation of the share of central administration
costs including Directors' salaries, investment revenue and finance
costs and income tax expense. This is the measure reported to the
Group's Chief Executive for the purpose of resource allocation and
assessment of segment performance.
Central administration costs comprise principally the employment
related costs and other overheads incurred by the Company, and its
subsidiaries WIL and WLI (UK) Ltd, net of management charges to and
from other subsidiaries, and inter-company commission income. Also
included within central administration costs is the charge relating
to the share-based payment plans of $1,872,000 for the year ended
31 December 2011 (2010: $1,196,000).
Segment net assets
2011 2010
$'000 $'000
International trading 14,349 14,993
Scandinavia 4,272 7,304
France 202 323
Germany 3,763 5,140
USA 12,118 8,557
UK 7,733 -
PRC 1,760 1,965
Central services 60,739 28,198
Total segment assets 104,936 66,480
Eliminations (18,311) (42,934)
Consolidated net assets 86,625 23,546
For the purposes of monitoring segment performance and
allocating resources between segments the Group's Chief Executive
monitors the tangible, intangible and financial assets attributable
to each segment. All assets are allocated to reportable segments
with the exception of investments in associates, other financial
assets (except for trade and other receivables) and tax assets.
Assets used jointly by reportable segments are allocated on the
basis of the revenues earned by individual reportable segments. The
eliminations principally represent goodwill recognised on internal
transfers and investments in subsidiaries.
Other segment information
Depreciation and Additions to non-current
amortisation assets
Year ended 31 December 2011 2010 2011 2010
$'000 $'000 $'000 $'000
International trading 96 63 372 352
Scandinavia 339 310 231 1,030
France 436 362 751 540
Germany 1,277 896 1,369 1,230
USA 2,198 2,146 3,917 6,415
UK 271 - 7,896 -
PRC 325 223 624 266
Other - - - -
Central services 200 214 515 259
Total 5,142 4,214 15,675 10,092
Information about major customers
No single customer accounted for more than 10 per cent of
reported sales in 2011. Included in revenues shown for 2010 in
International Trading and USA are $2,304,000 and $4,632,000
respectively which are attributed to the Group's largest customer
which is the only one to exceed 10 per cent of Group revenue in
that year.
A single major customer accounted for 12.1 per cent of the total
balance of trade receivables net of allowances for doubtful debts
on 31 December 2011. In 2010 the two largest customers represented
12.8 per cent and 10.1 per cent of the total trade receivables net
of allowances from doubtful debts. No other customer accounted for
more than 10 per cent of the total balance of trade receivables net
of allowances for doubtful debts during the period under
review.
5. Adjusted profitability measures
Year ended 31 December
2011 2010
$'000 $'000
Operating profit 5,252 5,983
Add depreciation and amortisation 5,142 4,214
EBITDA 10,394 10,197
Adjusting items:
share based incentives expense 1,872 1,196
capital reorganisation related costs 628 -
acquisition related costs 534 118
Total adjusting items 3,034 1,314
Adjusted operating profit 8,286 7,297
Adjusted EBITDA 13,428 11,511
Profit for the year (Net Income) 2,758 3,472
Total adjusting items 3,034 1,314
Tax effect of adjusting items (276) -
Adjusted net income 5,516 4,786
6. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Earnings
Year ended 31 December
2011 2010
$'000 $'000
Profit attributable to the owners of the Company 2,488 2,967
Year ended 31 December
2011 2010
Number Number
Weighted average number of shares in issue 61,986,447 47,280,002
Weighted average number of shares held by employee
share trust (1,660,000) (1,660,000)
Shares used to calculate basic earnings per
share 60,326,447 45,620,002
Dilution due to share based incentive plans 341,523 -
Shares used to calculate diluted earnings per
share 60,667,970 45,620,002
Basic earnings per share (cents) 4.12 6.50
Diluted earnings per share (cents) 4.10 6.50
Earnings per share have been calculated by dividing the profit
attributable to shareholders by the weighted average number of
shares in issue during the year.
7. Acquisition of subsidiaries and businesses
Acquisitions of businesses
Acquisitions of businesses represent transactions in which the
Group buys existing rental agreements, customer relationships, POU
coolers, other assets or business operations from a third
party.
On 30 March 2011 the Group acquired the B2B POU coolers and
rental contracts of InnoTech LLC, a US water business based in
Tennessee, for initial consideration of $1.0 million in order to
expand into a geography adjacent to its existing rental business in
the US.
InnoTech Fair value
$'000
Net assets acquired:
property, plant and equipment 82
net current liabilities assumed (35)
intangible assets recognised on acquisition 806
Total net assets acquired 853
Goodwill recognised on acquisition 588
1,441
Satisfied by:
Cash 1,036
future contingent consideration 405
1,441
Net cash flow on acquisition
Cash consideration 1,036
Less cash acquired (61)
975
The intangible assets recognised primarily relates to the value
of the customer relationships that existed at the date of
acquisition. This value represents the future discounted cash flows
arising on the customer base projected over ten years allowing for
customer attrition rates and expected growth in revenue and profits
from these customers. The goodwill will be deductible for tax
purposes.
The Group has an obligation to the vendors to make payments in
the future based upon the revenues and earnings of the InnoTech
business over the two years after acquisition. Payments are to be
made in stages and the obligation has been recorded as either a
current or non-current liability dependent upon the expected timing
of the payment. The present value of the expected payments is
$405,000.
Acquisition-related costs of $53,000 have been expensed and are
included in administrative expenses. InnoTech contributed $458,000
of revenue and $5,000 of operating loss to the Group for the period
between the date of acquisition and the balance sheet date.
If the acquisition of InnoTech had been completed on 1 January
2011 Group revenue would have been approximately $150,000 higher
and Group operating profit would have been unchanged.
Acquisition of subsidiaries:
On 13 April 2011 the Group acquired 70 per cent of the shares of
Aqua Cure Limited, a UK based reseller of consumables for the water
industry for initial consideration of $4.2 million. Aqua Cure is a
trade supplier of water filtration, purification and treatment
consumables and the acquisition represents a strategic opportunity
for Waterlogic to develop into this adjacent segment of the POU
market.
Aqua Cure Fair value
$'000
Net assets acquired:
property, plant and equipment 795
trade receivables 1,552
other monetary assets 1,104
monetary liabilities assumed (4,754)
intangible assets recognised on acquisition 2,445
Total net assets acquired 1,142
Less assets attributable to non-controlling interests (343)
Add non-controlling interest share of the shareholder
loan note liability 415
Total net assets attributable to Waterlogic 1,214
Goodwill recognised on acquisition 4,605
5,819
Satisfied by:
cash (including $1,384,000 for the purchase of the shareholder
loan notes) 4,232
fair value of the option agreement to acquire non-controlling
interests (155)
future contingent consideration 1,742
5,819
Net cash flow on acquisition
Cash consideration 4,232
Less cash acquired (96)
4,136
Intangible assets of $2,445,000 have been recognised comprising
the value of the customer relationships that existed at the date of
acquisition and the trade name "Aqua Cure". The customer
relationship value represents the future discounted cash flows
arising on the customer base projected over ten years allowing for
customer attrition rates and expected growth in revenue and profits
from these customers. The trade name is being amortised over a five
year period. A deferred tax liability of $636,000 has been
recognised in respect of each of these intangible assets with a
corresponding off-set to goodwill. This deferred tax liability is
recycled through the income statement in line with the amortisation
charges of the related intangible asset. The goodwill recognised is
not deductible for tax purposes.
The Group entered into a put and call option arrangement with
the holders of the minority interest whereby each party can buy or
sell the shares held by the minority shareholders at specific
points in the future by applying the valuation formula used in
determining the price for the current investment. The fair value of
these option agreements is $155,000 in favour of the Company and
this has been recorded as a debit to the additional paid-in capital
reserve. The estimated present value of the future cash flows at
the time of the acquisition under the option agreements is
$1,742,000 and this is recorded as a non-current liability as the
first payment is due more than twelve months after the balance
sheet date.
Acquisition-related costs of $205,000 have been expensed and are
included in administrative expenses. Aqua Cure contributed
$7,118,000 of revenue and $717,000 of operating profit to the
Group's results for the period between the date of acquisition and
the balance sheet date. Had the acquisition of Aqua Cure occurred
on 1 January 2011 Group revenue would have been approximately $2.9
million higher and Group operating profit would have been
approximately $0.3 million higher.
8. Notes to the cash flow statement
Year ended 31 December
2011 2010
$'000 $'000
Movements in working capital
Increase in trade and other receivables (3,393) (1,920)
Decrease/(increase) in inventories 27 (2,427)
Increase in trade and other payables 1,953 1,855
Increase/(decrease) in deferred revenue 327 (1,194)
Net effect of working capital movements (1,086) (3,686)
Proceeds from issue of new shares
Cash from issue of new shares 65,387 -
Costs associated with issue of new shares (7,147) -
Net proceeds from issue of new shares 58,240 -
Net Cash
Cash and cash equivalents 51,130 6,495
Bank overdrafts (499) (2,002)
50,631 4,493
Cash and cash equivalents comprise cash and short-term bank
deposits with an original maturity of three months or less, net of
outstanding bank overdrafts. The carrying amount of these assets is
approximately equal to their fair value.
9. Share-based compensation
Cash-settled long-term incentive plan
The Group had established a Long-Term Incentive Plan ("LTIP")
that has been granted to certain executives under what is known as
the phantom share scheme.
The Group recognised a liability for the services provided by
the qualifying executives in accordance with the fair value of the
expected cash settlement due in the future. The vesting period
ranged between four and six years across the holders from date of
grant. The award was forfeited if the executive left the Group
before vesting.
As at the date of Admission to AIM the beneficiaries of the LTIP
exchanged their interest in the LTIP for awards under the
Performance Share Plan ("PSP"). The fair value of the LTIP awards
at the date of Admission as estimated by the Directors based upon
the enterprise value of the Group immediately before Admission was
transferred from provisions to the share-based payment reserve in
accordance with modification accounting of IFRS 2 share based
payments.
Prior to the transfer to the share based payment reserve the
fair value of this liability was re-measured at each balance sheet
date, with any changes in fair value recognised in administrative
expenses in the income statement for the period.
The fair value of the LTIP liability for the period under review
is as follows:
$'000
Fair value at 31 December 2009 209
Unwinding discount effect during 2010 25
Change in fair value during 2010 1,171
Fair value at 31 December 2010 1,405
Change in fair value during 2011 102
Transferred to share based payment reserve (1,507)
Fair value at 31 December 2011 -
The entire LTIP balance at 31 December 2010 was classified as
current.
The fair value of the LTIP awards at the date of Admission and
at 31 December 2010 was estimated by the Directors in accordance
with the LTIP Rules based upon the number of phantom shares that
had vested at that date, a strike price and the imputed net asset
value (after deduction of external debt) for the WIL Group.
Performance Share Plan and Non-Executive Awards
At Admission the Company established the PSP for certain
officers and employees of the Group. Awards take the form of a
right to acquire Ordinary Shares in the Company for nil
consideration. All the Awards include performance conditions, which
are primarily one or more of (i) continued employment within the
Group; (ii) earnings for a specified fiscal year of the
consolidated Group or an individual subsidiary; or (iii) an
absolute level of Total Shareholder Return (TSR) over a specified
period of typically three years. Awards based on EBIT have been
issued for fiscal years up to the year ending 31 December 2016.
The Company has also made Non-Executive Awards to Benoit
Raillard and Jeremy Marshall. The Non-Executive Awards are not
granted pursuant to the PSP but, except for not having any
performance conditions other than continuing to be a Director of
the Company have terms that mirror the PSP Awards.
The number of Awards with the different performance conditions
at 31 December 2011 are as follows:
Number
Continued employment only (including the Non-Executive
Awards) 1,275,887
Continued employment and EBIT for a specific fiscal year 2,336,974
Continued employment and TSR for a specific period 486,796
Continued employment and other non-market conditions 93,131
Total 4,192,788
There are 35 beneficiaries of the PSP as at 31 December
2011.
The weighted average fair value each award made in 2011 is
$2.21.
Valuation methodology
The fair value of the PSP Awards other than the TSR related
Awards is measured as the market price of the underlying share at
the date of grant. The market price is obtained from external,
publicly available sources. At each year end the relevant accrual
for each grant is revised, if appropriate, to take account of any
changes in estimate of the likely number of shares expected to
vest.
The fair value of the TSR related Awards is measured by applying
the probability of satisfying the conditions at the grant date
through a binomial statistical model. This initial valuation
remains fixed throughout the life of the Award, irrespective of the
actual performance. Where a lapse occurs due to the cessation of
employment the cumulative charge taken to date is reversed.
The total expense recognised in the year for the PSP Awards
(including the social security charges estimated to arise on the
eventual exercise of the Awards) is $1,732,000 (2010: $nil).
At 31 December 2011 4,192,788 awards had been granted and none
had been forfeited, lapsed, expired or exercised. None were
exercisable at the end of the period. The weighted average
remaining contractual life of the awards outstanding at 31 December
2011 is 3.2 years.
10. Events after the balance sheet date
Acquisitions of subsidiaries:
Det Stavangerske Kaffeselskap
On 1 February 2012 the Group acquired 100 per cent of the shares
of Det Stavangerske Kaffeselskap AS ("DSK") for total consideration
of $1.5 million. DSK of Norway is a leading vendor of water
dispensers and coffee machines in the Stavanger region and the
acquisition represents a strategic opportunity for Waterlogic to
enhance market share in Norway. The purchase price allocation
exercise is not yet finalised and accordingly the fair values set
out below are provisional.
Provisional
Fair value
$'000
Net assets acquired:
property, plant and equipment 22
trade receivables 488
other monetary assets 634
monetary liabilities assumed (762)
intangible assets recognised 555
deferred tax liability (162)
Total net assets acquired 775
Goodwill recognised 727
1,502
Satisfied by:
Cash 1,587
assignment of declared dividend (85)
1,502
Net cash flow on acquisition
Cash consideration 1,587
Less assignment of declared dividend (85)
Less cash balances acquired (19)
1,483
Intangible assets of $555,000 have been recognised comprising
the value of the customer contracts and on-going customer
relationships that existed at the date of acquisition. Customer
contracts in place at the acquisition date have been valued based
upon the discounted cash flows arising from these contracts
following the deduction of relevant contributory asset charges. The
customer relationship value represents the future discounted cash
flows arising on the customer base projected over ten years
allowing for customer attrition rates and expected growth in
revenue and profits from these customers. A deferred tax provision
of $162,000 is recognised in respect of these intangible assets
with a corresponding off-set to goodwill. This deferred tax
provision is recycled through profit and loss in line with the
amortisation charges of the related intangible asset. We do not
expect the goodwill to be deductible for tax purposes.
Acquisition-related costs of $88,000 have been expensed and are
included in administrative expenses as incurred.
Prisme
On 31 January 2012 the Group acquired the entire issued share
capital of Prisme S.A.R.L for total consideration of $1.5 million.
Prisme, based in the south of France, is a leading vendor of POU
dispensers in the region and the acquisition represents a strategic
opportunity for Waterlogic to enhance market share in France. The
purchase price allocation exercise is not yet finalised and
accordingly the fair values set out below are provisional.
Provisional
Fair value
$'000
Net assets acquired:
property, plant and equipment 100
trade receivables acquired 197
monetary liabilities assumed (205)
intangible assets recognised 889
deferred tax liability (296)
Total net assets acquired 685
Goodwill recognised 810
1,495
Satisfied by:
Cash 1,360
contingent cash consideration 135
1,495
Net cash flow on acquisition
Cash consideration 1,360
Add overdrafts assumed 62
1,422
The contingent cash consideration represents the retained
element of the purchase price, equal to 10 per cent, to be paid on
the first anniversary of the completion date subject to the
acquired business meeting a number of specified conditions agreed
at the acquisition date. It has been discounted using the Group's
weighted average cost of capital.
Intangible assets of $889,000 have been recognised comprising
the value of the customer contracts and on-going customer
relationships that existed at the date of acquisition. Customer
contracts in place at the acquisition date have been valued based
upon the discounted cash flows arising from these contracts
following the deduction of relevant contributory asset charges. The
customer relationship value represents the future discounted cash
flows arising on the customer base projected over ten years
allowing for customer attrition rates and expected growth in
revenue and profits from these customers. A deferred tax provision
of $296,000 is recognised in respect of these intangible assets
with a corresponding off-set to goodwill. This deferred tax
provision is recycled through the income statement in line with the
amortisation charges of the related intangible asset. We do not
expect the goodwill to be deductible for tax purposes.
Acquisition-related costs of $66,000 have been expensed and are
included in administrative expenses as incurred.
Aqua Service
On 13 March 2012 the Group completed the acquisition of the
entire issued share capital of Aqua Service AS, a vendor of water
dispensers and coffee machines based in Sweden and Norway. The
agreed cash consideration is subject to working capital adjustments
which will be determined upon completion of the Aqua Service
statutory audit for the year ended 31 December 2011.
Initial consideration of $6.5 million was paid in cash on the
acquisition date.
Due to the proximity of the acquisition date to the date these
financial statements were authorised for issue, the fair values of
the identifiable assets acquired and liabilities assumed are yet to
be finalised.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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