TIDMWTL
RNS Number : 1458M
Waterlogic PLC
13 September 2012
13 September 2012
WATERLOGIC PLC
("Waterlogic", the "Group" or the "Company")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2012
(UNAUDITED)
Waterlogic Plc (AIM: WTL.L), a leading designer, manufacturer
and distributor of point-of-use ("POU") drinking water purification
and dispensing systems, today announces its unaudited interim
results for the six months ended 30 June 2012.
Six months Six months Growth Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
Revenue $46.5m $39.0m 19.2% $84.9m
Gross margin 59.7% 57.1% 4.7% 59.2%
Adjusted EBITDA (1) $4.5m $5.9m (24.1%) $13.4m
Adjusted operating profit (1) $1.4m $3.4m (58.8%) $8.3m
Adjusted net income (1) $0.4m $1.9m (76.5%) $5.5m
Net income ($0.8m) $1.5m (151.3%) $2.8m
Net cash $37.0m $1.1m 3,317.1% $50.6m
Group highlights
-- Healthy organic growth seen in business-to-business ("B2B")
direct, and rental and service channels (10% and 18% respectively)
offset by difficult macroeconomic conditions impacting B2B indirect
channel with organic decline in revenue of 13%
-- B2B rental and service revenue increased to 37% of total revenue (H1 2011: 32%)
-- Adjusted EBITDA decrease of 24% due to significant
business-to-consumer ("B2C") start-up costs, operating expenses
within acquired businesses and increased cost base reflective of a
listed entity on AIM
-- Completed acquisitions of Prisme, DSK and Aqua Service during
H1 and subsequently Taylor Made Water Systems Inc. - pipeline of
future earnings enhancing acquisition opportunities remains
attractive
-- Advanced negotiations with leading European domestic
appliances manufacturer and distributor to sell consumer products
incorporating innovative Firewall(TM) ultra-violet ("UV") into up
to 52 countries
-- First commercial orders have been received under the
previously announced seven year OEM supply agreement with a leading
consumer products company
-- Investment continues to be made in the innovative
Firewall(TM) UV technology which has been incorporated into
exciting new products for both the B2C and B2B sectors due for
launch over the coming year
-- New distributors added in Costa Rica and Guatemala, with
further new partners scheduled for H2 in Italy, South East Asia and
Latin America, helping to diversify the geographical dependency for
the B2B indirect channel
-- Group organised into two new business divisions, Waterlogic
B2B led by Peter Cohen, and Waterlogic B2C led by Group CEO, Jeremy
Ben-David
-- Machines in field increased by 30,000 to 595,000
-- After a challenging first half, management expect improving
trading performance in the second half of the year
Jeremy Ben-David, Waterlogic Group CEO, commented:
"Our strategy of continuing to grow our recurring revenue base
and our efforts to commercialise the innovative Firewall(TM) UV
technology, helped the Company to progress significantly in H1
towards the goals outlined at the time of our IPO. I am
particularly pleased with the advanced status of negotiations for a
major contract with a leading European domestic appliances
manufacturer and distributor in the B2C division.
The acquisitions we have made this year strengthen our position
in core and new markets and we have already begun to see
significant synergies with existing operations. While economic
conditions have impacted order levels from our B2B customers, B2B
direct sales and rental continue to experience healthy organic
growth.
As with previous years, the Board expects the Group to
experience a H2 weighting in terms of revenue. Although the
economic outlook remains challenging, especially in Europe, we
remain well positioned to continue to expand and invest in our
operations, make attractive acquisitions and deliver growth."
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 periods under review, "Adjusted" measures include
adjustments for the share based incentives expense, capital
reorganisation related costs and all acquisition related costs.
Further details and reconciliations to statutory measures are
included in note 5 to the financial information.
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
Notes to editors:
Waterlogic Plc
Waterlogic Plc (AIM: WTL.L) is a leading designer, manufacturer
and distributor of mains attached point-of-use ("POU") drinking
water purification and dispensing systems designed for environments
such as offices, factories, hospitals, hotels, schools, restaurants
and other workplaces. Waterlogic is a Jersey registered company.
Waterlogic's products and services are built on the simple vision
of a three stage approach to purity:
1. Filtration to remove unwanted contaminants, chlorine and other water-borne tastes and odours
2. Waterlogic's Firewall(TM) ultra-violet ("UV") technology is
one of the most effective water purification technologies for POU
water dispenser applications currently on the market and its
dispensers are certified by the Water Quality Association as being
able to guarantee 99.9999% pure water 100% of the time, a fact
which has been confirmed by over 5,000 physical tests in
independent laboratories. The innovative Firewall(TM) technology
incorporates a highly-specialised, compact UV system in the
faucet/tap, which ensures that water passes through the UV system
immediately before it is dispensed into a cup. This point of
differentiation for Firewall(TM) is unique in the POU market.
3. BioCote silver anti-microbial protection. Plastic surfaces
surrounding dispensing areas of Waterlogic units are infused with a
silver additive called BioCote, a natural anti-microbial that
inhibits the growth of micro-organisms, giving yet another layer of
hygienic defence.
Founded in 1992, Waterlogic was one of the first companies to
introduce POU systems to Europe and has been a leader in the POU
market in terms of product design and quality, the application of
new technologies and in sales and service. Waterlogic has an
extensive and expanding independent global distribution network in
place, reaching 52 countries around the world.
Waterlogic products are currently being sold in North and South
America, Europe, Asia, Australia and South Africa. Waterlogic's
leading markets are the USA and Western Europe, in particular
Germany, France, Scandinavia and the UK. Of the 1.9 million new POU
and bottled water installations in the business-to-business market
in the USA and Europe between 2005 and 2011, approximately 73%
incorporated POU technology, of which approximately 27% were
Waterlogic products.
The Directors believe that the movement away from bottled water
coolers (BWC) to POU water dispensers is set to continue its
current trend as a result of cost, convenience, health benefits and
environmental considerations.
For the financial year ended 31 December 2011, the Group
generated revenues and adjusted EBITDA (adjusted for share based
incentives expense, capital reorganisation related costs and
acquisition related costs) of USD 84.9 million and USD 13.4
million, respectively, and had approximately 565,000 machines
installed as at 31 December 2011.
As part of Waterlogic's on-going commitment to providing safe
water, the Group has pledged to donate USD 225,000 over the next
three years to WaterAid. WaterAid is a renowned international
non-profit organisation that transforms lives by improving access
to safe water, hygiene and sanitation in the world's poorest
countries. Since 1981 WaterAid has reached 15.9 million people
globally with safe water. Website: www.wateraidamerica.org/
CHIEF EXECUTIVE'S STATEMENT
Waterlogic enters its second year as a public company having
made significant progress towards the goals set out at the time of
its flotation. Investment continues to be made in the innovative
Firewall(TM) UV technology which has been incorporated into
exciting new products for both the B2C and B2B sectors due for
launch over the coming year. To help advance this strategy, the
Group has been organised into two new business divisions within
Waterlogic with supporting management structures in both: the B2B
division led by Peter Cohen and the B2C division led by the Group
CEO, Jeremy Ben-David.
In terms of H1 stand-alone performance, the necessary start-up
costs for the B2C channel (USD 0.9 million) and the increased
central costs associated with listed entity requirements (USD 0.7
million) combined with operating expenses from acquired businesses
(USD 3.6 million) outweighed the first half benefits from revenue
and gross profit growth, with the latter also being restrained by
the impact of macro-economic factors on the B2B indirect channel.
However, during this period Waterlogic has improved gross margin
and increased the element of revenue that is recurring in nature,
both of which attest to the strength of Waterlogic's business
model.
B2B division
Machines in field at the end of H1 2012 rose by 13% annually to
595,000, of which approximately 12,000 were via acquisitions. The
rental and service channel now comprises 37% of revenue compared to
32% in H1 2011.
New distributors have been added in Costa Rica & Guatemala,
with further new partners scheduled for H2 in Italy, South East
Asia and Latin America, helping to diversify the geographical
dependency for the indirect channel. Within existing markets new
trade partners have been added such as the recent signing of a
major US office coffee company with initial annual volumes expected
to be approximately 2,000 machines.
The acquisitions made in the first half of the year are yielding
anticipated synergies and are expected to continue to do so. The
conversion from bottled water to POU is at the core of the
rationale for the Aqua Service acquisition. The success of managed
conversion and absorption of coffee-water providers, such as the
recently acquired DSK, now present the Group with a deeper pool of
potential future acquisition opportunities.
B2C division
The Group is in advanced negotiations for a supply agreement
with one of Europe's leading manufacturers and distributors of
major domestic appliances for the supply and distribution of
advanced water purification devices designed for the kitchen
incorporating Waterlogic's innovative Firewall(TM) UV
technology.
This partner is a key European player that manufactures and
distributes its own internationally well-recognised brands through
major retail outlets.
With the increased availability of products, such a significant
reference account and the new divisional structure, we will be
better placed to expedite the B2C business growth going
forward.
Additionally, first commercial orders have been received under
the previously announced seven year OEM supply agreement with a
leading consumer products company.
We continue to make good progress with other projects in the B2C
division across several geographies and through various
distribution channels.
Results and Operations
Group revenue increased 19% to USD 46.5 million (H1 2011: USD
39.0 million). Direct sales revenue and revenue from rental and
service both experienced healthy organic growth (10% and 18%
respectively) but this was entirely offset by a decline in B2B
indirect sales of 13% compared to H1 2011. In the B2B indirect
channel, the difficult economic climate has caused some significant
destocking by distributors as seen when a significant European
client did not order products in H1 but started to place
significant orders again in H2. In addition, indirect sales in the
US continued to be impacted by the restructuring of a major US
customer in the latter half of 2011, which lingered into the first
half of 2012.
Regionally, organic revenue growth was strongest in Scandinavia
(6%) and Germany (5%) but the decline in the indirect channel
highlighted above saw falls in Ireland's sales to third parties of
19% and revenue in the US unchanged year on year, with the US
performance continuing to be impacted by the restructuring of a
major customer as noted above. For the period ended 30 June 2012,
gross profit was 25% higher than in the prior year at USD 27.8
million (H1 2011: USD 22.2 million) with acquisitions in 2012
contributing approximately USD 3.5 million.
The Group's combined gross margin for the period has increased
to 59.7% compared to 57.1% H1 2011 and 59.2% FY 2011 as a result of
the increased weighting of direct, rental and service revenues
within the Group's overall revenue.
Whilst the change in mix has benefited the gross margin, the
operating margin has been impacted by increased costs both related
to the start-up of the Group's B2C offering of USD 0.9 million
(versus H1 2011: USD 0.2 million) and centrally due to additions to
the support functions which were largely taken on board in H2 2011
(USD 0.7 million). Foreign exchange movements, in particular the
strength of the dollar against the euro and Norwegian Kroner, also
led to an exchange impact of USD 0.4 million compared to H1 2011.
Separately, overheads in the businesses the Group acquired in 2012
represented an increase of USD 2.9 million and incremental
overheads from a full six month period for 2011 acquisitions a
further USD 0.7 million. Adjusting items, such as the share based
incentives, were USD 1.1 million higher in H1 2012 compared to H1
2011.
Net finance costs fell from USD 0.7 million in H1 2011 to USD
0.2 million in H1 2012 following repayment of shareholder loans and
certain US bank borrowings during the latter part of 2011.
Inventory rose by USD 0.6 million from 31 December 2011 to 30
June 2012, but USD 0.7 million related to inventory in businesses
acquired in the period. The period end inventory days (119 days)
were slightly higher than June 2011 (110 days).
Whilst revenue increased by 19%, trade and other receivables
increased by only 9% (USD 1.8 million) between 31 December 2011 and
30 June 2012 due, in part, to both the non-linearity of monthly
revenue and receivables within the businesses acquired in the
period (USD 1.3 million).
The Group's net cash fell from USD 50.6 million at 31 December
2011 to USD 37.0 million at 30 June 2012 with the majority of the
cash outflow related to the three acquisitions made (USD 11.7
million) and the addition of further rental assets (USD 1.7
million).
The Market
According to the latest Zenith West Europe Coolers Report 2012,
the number of plumbed-in mains water coolers (i.e. POU) units
increased by 8% in 2011, approaching the 1.1 million units in field
mark and taking POU's share of the cooler market to 40%. Estimates
for the market size of North America and Europe remain at 10
million units with bottled water coolers representing circa 80% of
that market. The opportunity to convert customers away from bottled
water to the far more environmentally-friendly and cost effective
solution of POU represents a significant opportunity for the Group
for several years to come.
Outlook
Despite difficult macro-economic conditions, the Group has
strengthened its recurring revenue base and advanced products based
on its innovative Firewall(TM) UV technology to the stage of
commercial release. The agreement being negotiated with one of
Europe's leading manufacturers and distributors of major domestic
appliances represents for Waterlogic another important supply and
distribution agreement for products incorporating Firewall(TM) UV
technology for the residential market. In addition, first
commercial orders have been received under the previously announced
seven year OEM supply agreement with a leading consumer products
company. Direct sales and rental continue to experience healthy
organic growth, but the economic climate continues to present
significant challenges to our B2B indirect customers. The
reorganisation of the business into distinct B2B and B2C divisions,
cemented by the appointment of Peter Cohen, and the continued
focused acquisition strategy and our recent acquisition of Taylor
Made Water Systems in California ensures Waterlogic remains
well-positioned to continue to expand and invest in our operations,
make attractive acquisitions and deliver growth.
After a challenging first half, management expect improving
trading performance in the second half of the year and we look
forward to updating shareholders in due course.
Jeremy Ben-David
Group Chief Executive
13 September 2012
WATERLOGIC PLC
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2012
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
Note USD'000 USD'000 USD'000
------------------------------------------ ----------- ----------- -------------
Continuing operations
Revenue 3 46,453 38,970 84,856
Cost of sales (18,698) (16,734) (34,652)
----------- ----------- -------------
Gross profit 27,755 22,236 50,204
Distribution expenses (504) (422) (792)
Marketing expenses (533) (334) (696)
Administrative expenses (26,430) (19,101) (43,677)
Other gains and losses (334) 640 213
----------- ----------- -------------
Operating (loss)/ profit (46) 3,019 5,252
------------------------------------------ ----------- ----------- -------------
Adjustment for the effect of:
Share based incentives 965 140 1,872
Capital reorganisation related costs - - 628
Acquisition related costs 484 248 534
------------------------------------------ ----------- ----------- -------------
Adjusted operating profit 5 1,403 3,407 8,286
------------------------------------------ ----------- ----------- -------------
Finance income 91 224 83
Finance costs (262) (971) (1,571)
----------- ----------- -------------
(Loss)/ profit before tax (217) 2,272 3,764
Income tax expense (550) (776) (1,006)
----------- ----------- -------------
(Loss)/ profit for the period (net
income) (767) 1,496 2,758
=========== =========== =============
(Loss)/ profit attributable to:
Owners of the Company (see note 1) (909) 1,304 2,488
Non-controlling interests 142 192 270
----------- ----------- -------------
(767) 1,496 2,758
=========== =========== =============
Earnings per share: 6
Basic (cents per share) (1.20) 2.86 4.12
=========== =========== =============
Diluted (cents per share) (1.18) 2.86 4.10
=========== =========== =============
WATERLOGIC PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2012
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
USD'000 USD'000 USD'000
------------------------------------------------------ ----------- -------------
(Loss)/ profit for the period (767) 1,496 2,758
Exchange differences on translation of
foreign operations (808) 491 (574)
--------- ----------- -------------
Total comprehensive income for the period (1,575) 1,987 2,184
========= =========== =============
Total comprehensive income attributable
to:
Owners of the Company (1,715) 1,617 1,815
Non-controlling interests 140 370 369
--------- ----------- -------------
(1,575) 1,987 2,184
========= =========== =============
WATERLOGIC PLC
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2012
As at As at As at
30 June 30 June 31 December
2012 2011 2011
USD'000 USD'000 USD'000
----------------------------------------------- --------- -------------
ASSETS
Non-current assets
Goodwill 20,916 13,415 11,199
Other intangible assets 11,810 7,867 8,801
Property, plant and equipment 13,653 10,763 10,452
Deferred tax asset 1,011 9 288
------------------------------------- -------- --------- -------------
Total non-current assets 47,390 32,054 30,740
------------------------------------- -------- --------- -------------
Current assets
Inventories 13,118 12,854 12,495
Trade and other receivables 21,231 22,413 19,441
Derivative financial instruments - - -
Cash and cash equivalents 37,287 3,333 51,130
------------------------------------- -------- --------- -------------
Total current assets 71,636 38,600 83,066
------------------------------------- -------- --------- -------------
Total assets 119,026 70,654 113,806
------------------------------------- -------- --------- -------------
EQUITY AND LIABILITIES
Capital and reserves
Stated capital - - -
Additional paid in capital 60,261 1,952 60,261
Translation reserve (1,385) 408 (578)
Share based payment reserve 3,678 - 2,882
Retained earnings 23,125 22,850 24,033
------------------------------------- -------- --------- -------------
Equity attributable to Shareholders 85,679 25,210 86,598
Non-controlling interest 167 354 27
------------------------------------- -------- --------- -------------
Total equity 85,846 25,564 86,625
------------------------------------- -------- --------- -------------
WATERLOGIC PLC
CONSOLIDATED BALANCE SHEET (continued)
AS AT 30 JUNE 2012
Note As at As at As at
30 June 30 June 31 December
2012 2011 2011
USD'000 USD'000 USD'000
EQUITY AND LIABILITIES (continued)
Non-current liabilities
Borrowings:
- bank and other borrowings 3,776 5,795 4,173
- convertible loan notes - - -
- obligations under finance leases 42 138 89
------------------------------------------ --------- --------- -------------
Total borrowings 3,818 5,933 4,262
Derivative financial instruments - - 132
Provisions 74 77 69
Deferred tax liabilities 1,548 638 282
Deferred and contingent consideration 781 3,583 1,863
------------------------------------------ --------- --------- -------------
Total non-current liabilities 6,221 10,231 6,608
Current liabilities
Trade and other payables 16,789 13,462 13,769
Borrowings:
- bank and other borrowings 3,475 8,064 3,431
- convertible loan notes - 6,003 -
- obligations under finance leases 95 127 89
------------------------------------------ --------- --------- -------------
Total borrowings 3,570 14,194 3,520
Current tax liabilities 573 1,399 1,112
Provisions - 1,545 92
Derivative financial instruments 114 519 -
Deferred revenue 4,465 3,676 2,069
Deferred and contingent consideration 1,448 64 11
------------------------------------------ --------- --------- -------------
Total current liabilities 26,959 34,859 20,573
------------------------------------------ --------- --------- -------------
Total liabilities 33,180 45,090 27,181
------------------------------------------ --------- --------- -------------
Total equity and liabilities 119,026 70,654 113,806
------------------------------------------ --------- --------- -------------
This financial information was approved by the Board of
Directors and authorised for issue on 13 September 2012 and was
signed on its behalf by:
Jeremy Ben-David Steven Harrison
Group Chief Executive Officer Group Chief Financial Officer
WATERLOGIC PLC
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2012
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
USD'000 USD'000 USD'000
(Loss)/profit after tax for the period (767) 1,496 2,758
Adjustments:
depreciation and amortisation 3,088 2513 5,142
acquisitions (negative goodwill and contingent
consideration) 132 (69) (379)
share based incentives expense 965 140 1,872
income tax expense 550 776 1,006
net interest expense and changes in the
fair value of derivative financial instruments 153 968 1,593
loss on disposal of non-current assets 24 37 55
--------------------------------------------------- ----------- ----------- -------------
Adjusted operating profit before working
capital movements 4,145 5,861 12,047
Net effect of working capital movements (1,772) (1,847) (1,086)
--------------------------------------------------- ----------- ----------- -------------
Cash flow before purchase of rental assets,
interest and tax 2,373 4,014 10,961
Purchases of rental assets (1,715) (1,266) (3,671)
Proceeds on disposal of rental assets 40 51 98
Interest paid (227) (802) (1,890)
Tax paid (1,093) (1,055) (2,009)
--------------------------------------------------- ----------- ----------- -------------
Net cash from operating activities (622) 942 3,489
Investing activities
Interest received 90 3 85
Proceeds on disposal of property, plant
and equipment - 1 4
Purchases of property, plant and equipment (608) (366) (1,031)
Purchases of intangible assets (434) (424) (1,271)
Acquisition, net of cash acquired (11,700) (5,172) (5,112)
Deferred and contingent consideration
paid (12) (725) (726)
--------------------------------------------------- ----------- ----------- -------------
Net cash used in investing activities (12,664) (6,683) (8,051)
Financing activities
Proceeds from the issue of new shares
(net of costs) - (420) 58,240
New bank loans raised 671 3,832 5,027
Repayment of bank loans and other financing (1,426) (1,212) (12,442)
--------------------------------------------------- ----------- ----------- -------------
Net cash from financing activities (755) 2,200 50,825
Translation differences 451 132 (125)
Net (decrease)/increase in cash and cash
equivalents (13,590) (3,409) 46,138
Net cash and cash equivalents at beginning
of the period 50,631 4,493 4,493
--------------------------------------------------- ----------- ----------- -------------
Net cash and cash equivalents at end of
the period 37,041 1,084 50,631
--------------------------------------------------- ----------- ----------- -------------
WATERLOGIC PLC
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED 30 JUNE 2012
1. General information
Waterlogic Plc (WLP) is a public limited company incorporated in
Jersey whose shares are publicly traded. 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.
The information for the year ended 31 December 2011 does not
constitute statutory accounts. A copy of the statutory accounts for
that year has been delivered to the registrar of companies in
Jersey. The auditors reported on those accounts: their report was
unqualified and did not draw attention to any matters by way of
emphasis.
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.
2. Basis of preparation
The annual financial statements of Waterlogic Plc are prepared
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with IFRSs have been condensed or omitted
from the half year condensed financial information. However, this
information includes all adjustments, which are, in the opinion of
management, necessary to fairly state the results of the interim
period and the Group believes that the disclosures are adequate to
make the information presented not misleading. The same accounting
policies, presentation and methods of computation are followed in
the condensed financial information as applied in the Group's
latest annual audited financial statements.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing this condensed financial
information.
The half year condensed financial information for the six months
ended 30 June 2012 have not been audited or reviewed by auditors
pursuant to the Auditing Practices Board guidance on Review of
Interim Financial Information, and was approved by the Board for
issue on 13 September 2012.
3. Revenue
An analysis of the Group's revenue is as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
USD'000 USD'000 USD'000
---------------------- ----------- ----------- -------------
Continuing operations
Direct sales 7,387 5,495 12,130
Indirect sales 21,848 20,973 45,719
Rental and service
income 17,218 12,502 27,007
---------------------- ----------- ----------- -------------
Consolidated revenue 46,453 38,970 84,856
---------------------- ----------- ----------- -------------
4. Business and geographical segments
The following is an analysis of the Group's revenue and
operating profit by business segment:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
USD'000 USD'000 USD'000
--------------------------------------------------------- ------------ ---------------
Business - to - business
External sales 46,433 38,970 84,856
Gross profit 27,746 22,236 50,204
----------------------- -------------------------------- ------------ ---------------
Gross margin 60% 57% 59%
----------------------- -------------------------------- ------------ ---------------
Segment operating
profit 4,404 3,819 10,464
Business - to - consumer
External sales 20 - -
Gross profit 9 - -
----------------------- -------------------------------- ------------ ---------------
Gross margin 45% - -
----------------------- -------------------------------- ------------ ---------------
Segment operating
loss (938) (247) (861)
Eliminations
External sales - - -
Gross profit - - -
------------------- --- ----- ----
Gross margin - - -
------------------- --- ----- ----
Segment operating
profit/ (loss) 89 (92) 284
Consolidated
External sales 46,453 38,970 84,856
Gross profit 27,755 22,236 50,204
Gross margin 60% 57% 59%
Aggregate segment operating
profit 3,555 3,480 9,887
Share based incentive
costs (965) (140) (1,872)
Central administration
costs (2,636) (321) (2,763)
Operating ( loss)/
profit (46) 3,019 5,252
Following the recent organisation of the business along the
lines of B2B and B2C, this will be a measure reported to the
Group's Chief Executive for the purpose of resource allocation and
assessment of segment performance.
4. Business and geographical segments (continued)
The following is an analysis of the Group's revenue and
operating profit by geographical segment:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
USD'000 USD'000 USD'000
-------------------------------------------------------- ----------- -------------
International Trading
External sales 6,053 7,460 15,909
Inter-segment sales 6,966 6,017 13,563
------------------------ ------------------------------ ----------- -------------
Total revenue 13,019 13,477 29,472
------------------------ ------------------------------ ----------- -------------
Segment operating
profit 2,717 2,215 5,386
Scandinavia
External sales 14,423 10,085 21,014
Inter-segment sales 58 17 58
------------------------ ------------------------------ ----------- -------------
Total revenue 14,481 10,102 21,072
------------------------ ------------------------------ ----------- -------------
Segment operating
profit 817 1,153 2,434
France
External sales 3,378 2,814 6,539
Inter-segment sales - - -
------------------------ ------------------------------ ----------- -------------
Total revenue 3,378 2,814 6,539
------------------------ ------------------------------ ----------- -------------
Segment operating
profit (36) 59 (122)
Germany
External sales 5,810 5,520 11,618
Inter-segment sales 6 85 92
------------------------ ------------------------------ ----------- -------------
Total revenue 5,816 5,605 11,710
------------------------ ------------------------------ ----------- -------------
Segment operating
profit 937 660 1,359
US
External sales 11,055 11,035 22,655
Inter-segment sales - 200 -
------------------------ ------------------------------ ----------- -------------
Total revenue 11,055 11,235 22,655
------------------------ ------------------------------ ----------- -------------
Segment operating
profit (677) (332) 67
UK
External sales 5,730 2,056 7,118
Inter-segment sales 163 45 168
---------------------------- -------------------------- ----------- -------------
Total revenue 5,893 2,101 7,286
---------------------------- -------------------------- ----------- -------------
Segment operating
profit 694 175 717
PRC
External sales 4 - 3
Inter-segment sales 6,882 7,333 15,834
---------------------------- -------------------------- ----------- -------------
Total revenue 6,886 7,333 15,837
---------------------------- -------------------------- ----------- -------------
Segment operating
profit (986) (358) (238)
Eliminations
External sales - - -
Inter-segment sales (14,075) (13,697) (29,715)
---------------------------- -------------------------- ----------- -------------
Total revenue (14,075) (13,697) (29,715)
---------------------------- -------------------------- ----------- -------------
Segment operating
profit 89 (92) 284
CONSOLIDATED
External sales 46,453 38,970 84,856
Inter-segment sales - - -
---------------------------- -------------------------- ----------- -------------
Total revenue 46,453 38,970 84,856
---------------------------- -------------------------- ----------- -------------
Aggregate segment
operating profit 3,555 3,480 9,887
Share based incentive
costs (965) (140) (1,872)
Central administration
costs (2,636) (321) (2,763)
Operating profit (46) 3,019 5,252
4. Business and geographical segments (continued)
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.
5. Adjusted profitability measures
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
USD'000 USD'000 USD'000
Operating (loss)/profit (46) 3,019 5,252
Add depreciation and amortisation 3,088 2,513 5,142
------ ----------- -------------
EBITDA 3,042 5,532 10,394
Adjusting items:
share based incentives expense 965 140 1,872
capital reorganisation related costs - - 628
costs related to completed and non-completed
acquisitions 484 248 534
------ ----------- -------------
Total adjusting items 1,449 388 3,034
====== =========== =============
Adjusted operating profit 1,403 3,407 8,286
Adjusted EBITDA 4,491 5,920 13,428
(Loss)/profit for the period (Net
Income) (767) 1,496 2,758
Total adjusting items 1,449 388 3,034
Tax effect of adjusting items (239) - (276)
------ ----------- -------------
Adjusted net income 443 1,884 5,516
====== =========== =============
6. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
USD'000 USD'000 USD'000
(Loss)/ profit attributable to the
owners of the Company (909) 1,304 2,488
============ ============ =============
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
Number Number Number
Weighted average number of shares
in issue 77,604,207 47,280,002 61,986,447
Weighted average number of shares
held by the employee benefit trust (1,660,000) (1,660,000) (1,660,000)
------------ ------------ -------------
Shares used to calculate basic earnings
per share 75,944,207 45,620,002 60,326,447
Dilution due to share based incentive
plans 1,005,047 - 341,523
Shares used to calculate diluted earnings
per share 76,949,254 45,620,002 60,667,970
============ ============ =============
Basic earnings per share (cents) (1.20) 2.86 4.12
Diluted earnings per share (cents) (1.18) 2.86 4.10
7. Acquisition of subsidiaries and asset purchases
Prisme
On 31 January 2012 the Group acquired the entire issued share capital
of Prisme S.A.R.L for total consideration of USD 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)
USD'000
Net assets acquired:
property, plant and equipment 89
trade receivables 189
other monetary assets -
monetary liabilities assumed (526)
intangible assets recognised 906
deferred tax (302)
Total net assets acquired 356
Goodwill recognised 1,139
--------
1,495
========
Satisfied by:
Cash 1,360
Contingent consideration 135
1,495
========
Net cash flow on acquisition
Cash consideration 1,360
Plus overdrafts acquired 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 USD 906,000 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 USD 302,000 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 USD 115,737 have been expensed and
are included in administrative expenses as incurred.
Det Stavangerske Kaffeselskap (DSK)
On 1 February 2012 the Group acquired 100 per cent of the shares of
Det Stavangerske Kaffeselskap AS ("DSK") for total consideration of
USD 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)
USD'000
Net assets acquired:
property, plant and equipment 22
trade receivables 364
other monetary assets 604
monetary liabilities assumed (675)
intangible assets recognised 560
deferred tax (164)
Total net assets acquired 711
Goodwill recognised 790
---------
1,501
=========
Satisfied by:
Cash 1,587
Assignment of declared dividend (86)
1,501
=========
Net cash flow on acquisition
Cash consideration 1,587
Less assignment of declared dividend (86)
Add overdrafts acquired 88
Less cash balances acquired (19)
---------
1,570
=========
Intangible assets of USD 560,000 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 USD 164,000 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 USD 144,390 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 for total consideration of USD 6.7
million. Aqua Service is a leading vendor of water dispensers and coffee
machines based in Sweden and Norway, and the acquisition represents
a strategic opportunity for Waterlogic to enhance market share in both
Sweden and Norway. The purchase price allocation exercise is not yet
finalised and accordingly the fair values set out below are provisional.
(Provisional
fair value)
USD'000
Net assets acquired:
property, plant and equipment 3,220
trade receivables 727
other monetary assets 1,722
monetary liabilities assumed (8,782)
intangible assets recognised 2,172
deferred tax (608)
Total net liabilities acquired (1,549)
Goodwill recognised 8,269
--------
6,720
========
Satisfied by:
Cash 6,644
Deferred consideration 76
6,720
========
Net cash flow on acquisition
Cash consideration 6,644
Add loan balances acquired 2,558
Less cash balances acquired (495)
--------
8,707
========
Intangible assets of USD 2,172,000 have been recognised
comprising the value of the customer contracts and on-going
customer relationships that existed at the date of acquisition and
the trade name "Aqua Service". 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. The value of the trade name has been established
using the 'Relief from Royalty' method using an applicable royalty
rate based on an assessment of the strength of the trade name and
is being amortised over a five year period. A deferred tax
provision of USD 608,000 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 USD 316,342 have been expensed and
are included in administrative expenses as incurred.
8. Notes to the cash flow statement
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
USD'000 USD'000 USD'000
Movements in working capital
Decrease / (increase) in trade and
other receivables 134 (6,414) (3,393)
(Increase) / decrease in inventories (103) (622) 27
(Decrease) / increase in trade and
other payables (3,759) 3,098 1,953
Increase in deferred revenue 1,956 2,091 327
-------- ----------- -------------
Net effect of working capital movements (1,772) (1,847) (1,086)
======== =========== =============
Proceeds from issue of new shares
Cash from issue of new shares - - 65,387
Costs associated with issue of new
shares - (420) (7,147)
-------- ----------- -------------
Net proceeds from issue of new shares - (420) 58,240
======== =========== =============
Net Cash
Cash and cash equivalents 37,287 3,333 51,130
Bank overdrafts (246) (2,249) (499)
-------- ----------- -------------
37,041 1,084 50,631
======== =========== =============
Cash and cash equivalents comprise cash and short-term bank
deposits with an original maturity of three months or less. The
carrying amount of these assets is approximately equal to their
fair value.
9. Events after the balance sheet date
Taylor Made
On 23 August 2012 the Group completed the acquisition of the
entire issued share capital of Taylor Made Water Systems Inc, a
vendor of water dispensers and coffee machines based in California.
The agreed cash consideration is subject to working capital
adjustments which will be determined 90 days after the acquisition
date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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