TIDMWTL
RNS Number : 1526E
Waterlogic PLC
07 April 2014
07 April 2014
Waterlogic Plc
("Waterlogic", the "Group" or the "Company")
RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
Waterlogic Plc (AIM: WTL), a leading designer, manufacturer and
distributor of point-of-use ("POU") drinking water purification and
dispensing systems, today announces its results for the year ended
31 December 2013.
2013 2012* Change
Revenue $124.0m $101.0m 22.9%
Gross margin 63.6% 60.7% 2.9 bps
Adjusted EBITDA(1) $19.5m $13.8m 41.3%
EBITDA $16.1m $9.1m 77.5%
Adjusted operating
profit(1) $12.3m $8.9m 38.4%
Operating profit $5.4m $2.3m 136.1%
Adjusted profit
for the year(1) $7.6m $7.4m 2.8%
Profit for the
year $1.7m $1.2m 34.8%
Net cash from operating
activities $7.5m $6.9m 8.5%
Net assets $90.0m $89.3m 0.8%
Net debt/(funds) $31.0m $(24.4)m
Financial Highlights
-- Group revenue increased by 22.9 per cent from $101.0 million to $124.0 million.
-- Gross margin improved from 60.7 per cent to 63.6 per cent.
-- Organic(2) growth in revenue was 4.1 per cent (3.5 per cent at constant currency).
-- Recurring rental and service revenue increased by 27.9 per
cent to $49.8 million (40.2 per cent of Group revenues).
-- Profit for the year increased 34.8 per cent to $1.7 million.
-- Net cash from operating activities increased by 8.5 per cent to $7.5 million.
-- New $60 million debt facility in 2013, with repayments over a five year period.
-- $55.8 million acquisition of CCW Group in Australia, adding
over 30,000 dispensers in the field and over 11,000 new customers
to the Group.
Operational Highlights
-- Successful worldwide roll out of the new WL3 Firewall(TM) water dispenser.
-- New distributors for the Commercial Division's products added
in Bulgaria, Italy, Lithuania and Chile. Focus on the introduction
of the new Waterlogic Max Firewall(TM) technology product in
France, resulting in a contract with ORPEA under which we delivered
over 1,000 Waterlogic Firewall(TM) purifying water dispensers by
the end of the year.
-- Progress on a number of projects in the Consumer Division,
including product launches with Indesit in Italy and Turkey, a five
year distribution agreement with ALCONIX Japan and an e-Commerce
launch with a major North American retailer.
-- Established additional manufacturing capability, in India,
via Aquaignis (joint venture company with Eureka Forbes).
Jeremy Ben-David, Waterlogic Group CEO, commented:
"2013 results delivered further evidence of the progress we are
making in positioning Waterlogic as a leading player in the
worldwide Point of Use drinking water market. Notable achievements
include positive development in both operating profit and EBITDA,
plus the successful integration of our largest ever acquisition, in
Australia. The Group has delivered another year of revenue growth
combined with increased recurring revenues and margin
improvements.
We enter 2014 with a $16.6 million cash and cash equivalents
position, net debt of $31.0 million and including uncommitted
facilities have a further $21.1 million of funding available.
The investments we have made since our Admission to AIM in 2011
have provided a solid platform for the Group. We plan to continue
to grow our Commercial business organically and, via suitable
acquisitions, focus on the continuous improvement of our quality of
earnings through a higher proportion of recurring rental and
service income and strong operating cash flow.
We remain focused on delivering profitable revenue growth, as
well as delivering sustainable improvements in operating margin and
cash flow. The Directors remain confident about the Group's
Firewall(TM) technology projects, consumer business and growth
opportunities."
(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, acquisition and integration related
costs, corporate reorganisation costs and amortisation of acquired
intangibles. Further details and reconciliations to statutory
measures are included in note 5 to the financial information.
(2) Organic growth is measured as the change in revenue year on
year, at constant currency excluding current year revenues from
acquisitions until after the first anniversary of the
acquisition.
* see note 2 for details of restatement of prior period
figures.
Enquiries:
Waterlogic Plc Via Redleaf Polhill
Jeremy Ben-David, Group
Chief Executive Officer
Robert Bell, Group Chief
Financial Officer
Liberum Capital (Nominated Tel: +44 (0)20 3100
Adviser and Broker) 2000
Steve Pearce
Richard Bootle
Redleaf Polhill (PR Adviser) Tel: +44 (0)20 7382
4730
Rebecca Sanders-Hewett Email: waterlogic@redleafpr.com
Charlie Geller
David Ison
Website: www.waterlogic.com
Chairman's Statement
During 2013 we made progress in delivering on our strategy of
further strengthening our position as a leading international
designer, manufacturer and distributor of quality POU water
dispensers and enhanced the future quality of earnings through
increasing recurring revenues. We also increased our global
presence through signing up new distribution partners in three new
territories, by acquiring a major platform acquisition in Australia
and by adding two businesses in segments where we already had
wholly owned direct sales operations, namely in Germany and the UK.
In addition, we introduced a number of new products, including the
global launch of the WL3, and modified our trading approach to help
our distributors grow through increased technical and marketing
support.
We also invested in our infrastructure and added talented people
to our company in order to achieve our objectives. This included
recruiting several employees focused on business development to our
growing Consumer Division.
During 2013 we saw the acceleration of the implementation of
changes to our IT infrastructure, supply chain and web capabilities
in order to build a strong base for sustainable growth and improve
quality of earnings through recurring revenue streams. These plans
however do not change our ongoing commitment to quality, customer
service, and innovation.
This year the Annual Report and Accounts incorporates the
Strategic Report, in line with the revised reporting guidelines.
These changes are intended to provide more effective communication
with our stakeholders, through focused, relevant narrative
reporting. These changes improve corporate accountability, which is
consistent with our philosophy of providing more information than
required. We will continue to evaluate our communications and
identify ways in which we can further engage with stakeholders.
Results
The Group delivered solid results with revenues increasing by
22.9 per cent to $124.0 million, and organic revenue growth of 4.1
per cent (3.5 per cent at constant currency). This organic growth
is coupled with increased recurring rental and service revenue,
which now represents 40.2 per cent of total Group revenue. Net cash
from operating activities increased by 8.5 per cent to $7.5
million, and adjusted EBITDA increased by 41.3 percent to $19.5
million. Most pleasing was the successful integration of our
largest ever acquisition, which has delivered results in accordance
with expectations.
Board and Governance
The Board recognises the value and importance of corporate
governance and, in recognition of the revised reporting
requirements, has expanded our corporate governance section to
provide improved transparency. Of the range of responsibilities the
Board has, I have previously established a number that are clear
priorities, and we remain firmly focused on these key areas.
Firstly, to debate and agree our strategy and hold the executive
team accountable for its execution; secondly, to ensure we have the
right team in place to execute this strategy and to plan for
succession; and finally to ensure that good corporate governance is
part of our culture.
This year, we have made an internal promotion to strengthen our
executive team on the Board. Robert Bell was appointed as Group
Chief Financial Officer after two years with Waterlogic.
The composition of the Board is kept under regular review to
ensure that we have the appropriate skills to improve the Group's
performance and to provide clear leadership. The Board currently
comprises three Executive Directors and four Non-Executive
Directors. Of these four, the Board considers three to be
independent. The Board comprises business leaders from a diverse
range of sectors including accounting, banking, investing and
management consulting. During the year, the Board has provided
robust challenge and support to the Executive Directors to ensure
that our vision is properly developed and well delivered.
At Waterlogic we endeavour to maintain high levels of trust and
transparency with our stakeholders. Operating our business in this
way enables us to be open about our successes and also open when we
fall short of expectations or targets. With nine acquisitions over
the last two years, we have worked hard on delivering M&A
integration as well as organic growth in the existing business.
2013 has seen a solid performance from our Commercial division
including the successful integration of our largest ever
acquisition in Australia, increased recurring revenues and sales
both Direct and through our dealer network. During 2013, our
Consumer Division realigned its strategy from only supplying OEMs
to include international distribution networks, which resulted in a
slower take off in 2013 but should, in the longer term, build
higher brand loyalty and improve margins. The Board remains
confident in the growth potential of the Consumer division and we
continue to work hard on prioritising our growth opportunities to
ensure future success.
Outlook
We expect 2014 to be another year of progress through a
combination of organic growth, drag through contributions from
acquisitions in our core business of the Commercial Division,
supported by continued growth in the Consumer Division.
In 2014 we will be focused on working toward meeting the needs
and expectations of all our stakeholders. The Board and the
executive team, led by Jeremy Ben-David, have been encouraged by
what was accomplished in 2013 and remain focused on further
developing the business that we do, and how we do it by listening
to our customers and staying true to our corporate values in order
to fully execute our strategy.
We are well positioned to take advantage of opportunities in our
industry and deliver long-term growth to our shareholders.
Finally, on behalf of the Board, I would like to thank our
employees at all levels for their continued commitment and
dedication to making this an exceptional company.
Ariel Recanati
Group Non-Executive Chairman
4 April 2014
STRATEGIC REPORT
Chief Executive's Review
Introduction
Waterlogic has performed well in a competitive market during the
year. Revenue for the year increased by 22.9 per cent from $101.0
million to $124.0 million, with acquisitions in 2013 contributing
$11.8 million of this top line growth and organic revenue growing
by 4.1 per cent (3.5 per cent on a constant currency basis).
Recurring revenues increased from $39.0 million in 2012 (38.6
per cent of total revenue) to $49.8 million in 2013 (40.2 per cent
of total revenue). However, our strategic focus on increasing
recurring revenues, whilst improving the long-term quality of
earnings, has had the effect of lowering earnings and growth rates
in the short term.
International Trading business revenue increased year on year by
13.9 per cent to $16.4 million, and we experienced organic revenue
growth of 21.9 per cent in Germany and 3.0 per cent in France,
demonstrating the strength of our business across the world wide
Group. This was partially offset by a 12.7 per cent reduction in
Aqua Cure resulting from the loss of a filter distribution
agreement.
Machines in field grew by 17.2 per cent in the period (from
640,000 to 750,000), with the estimated addition of 110,000 units
in field during the year, which is an important growth indicator
for the business.
We continue to pursue our strategies of growing our recurring
rental base and achieving growth both organically and through
strategic acquisitions. The acquisition in 2013 of Cool Clear Water
Group (CCWG) in Australia is the Group's largest to date and brings
substantial recurring rental revenues and important growth
opportunities for the Group. We are pleased to have the support of
both Clydesdale and HSBC banks, who financed the Group in this
acquisition.
Operations
The Group is managed on the basis of segment performance,
focused on the geographical location of markets. Operations are
also reviewed on the basis of performance of the Consumer and
Commercial Divisions separately.
The Commercial Division has delivered a strong performance
during the year. We strengthened our position as a premium supplier
of POU water dispensers through the three acquisitions made this
year in Australia, Germany and the UK and with the launch of
several new products. The acquisition of CCWG establishes
Waterlogic as the clear market leader in the Australian POU water
dispenser market, with over 30,000 machines in field at the end of
the year and recurring rental revenue representing over 70 per cent
of total revenue. The new products that were launched in several
markets in the year are based upon the Group's unique Firewall(TM)
technology, with notably a new sparkling range of products
featuring the technology launched in Europe.
In France, the company launched a high volume POU water
dispenser, incorporating the Firewall(TM) technology, which targets
the important hotel, restaurant and catering markets. A new Reverse
Osmosis system filtration system, incorporating the Firewall(TM)
technology, will be launched in Russia, Spain and in the USA in
2014, and several new national accounts were acquired in Germany,
France, Scandinavia and the USA.
The Consumer Division had limited success in 2013, but there
were new product launches in Japan, Turkey and Italy. Revenue
increased from $0.5 million in 2012 to $1.3 million in 2013. Orders
outstanding at the end of 2013 were approximately $0.8 million and
these units are expected to be shipped in H1 2014. A new product
launch is already planned for H1 2014 in the Middle East and there
is a pilot launch planned via a major international retailer's
e-commerce platform in Canada.
The Consumer Division's strategy of pursuing large OEM customers
has been extended to include partnering with smaller high-end and
geographically focused partners, e-commerce and more
direct-to-market strategies. The Group's Indian joint venture
factory began manufacturing Consumer products in February 2014,
targeting the Indian Consumer Market with Firewall(TM) products.
The new Waterlogic Counter Top product for the Consumer and small
Commercial Markets, was launched in several new territories and the
roll out will continue in 2014.
The Consumer Division continues to pursue several opportunities
around the world, although experience shows that planned launches
have taken longer than we had originally anticipated. However, the
Board remains excited by the opportunities in the consumer market
and remains positive about its long-term prospects.
Technology and Innovation
During the year, the Water Quality Association (WQA) presented
an International Award of Merit to our R&D team. The award was
given in recognition of the development of the unique Firewall(TM)
technology as a breakthrough innovation in water purification in
POU water dispensers, which has revolutionised water purification
and quality. The intense dose of UV purification at the point of
dispense means that the customer can be assured of almost absolute
purity every time they dispense water. The Firewall(TM) technology
is the first of its type to achieve two stringent certifications;
NSF/ANSI 55a (for UV purification) and NSF/P231 (for
micro-biological purification) and these certifications are due
very much to the dedicated work of the R&D teams. We are
convinced that Firewall(TM) is a revolutionary piece of technology,
and a genuine advancement in water purification. The technology has
enormous potential as there are a number of different applications
that it could be applied to and it has a relatively small footprint
that can be adapted to fit many existing technologies.
The combination of the Firewall(TM) technology with our
filtration and BioCote antimicrobial protection technologies is
innovative. Each of these technologies plays its part and the whole
system combines to ensure the best drinking water that the consumer
could want. Filters are an effective way of removing chlorine,
sediment and most pathogens from the water, and our new filter
system is designed so that cartridge housings can be reused with
only the filter element (which is biodegradable) replaced. Our
exclusive licence to use BioCote in our water dispensers provides
an additional defence mechanism against the potential degradation
of key external parts. But Firewall(TM) is the centre piece of the
Company's technology suite and is a significant unique selling
point for our sales team and our resellers. Firewall(TM) is
certified 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. Hence, we remain positive that
with the best products on the market we are well equipped to grow
both revenue and market share.
During the year our European Commercial team worked with our
R&D team to develop a high capacity dispenser (called the
Waterlogic MAX). This unit is particularly suited to areas where
there will be a high demand for cold drinking water, for example in
hotel, catering, hospitals and care homes or the Education sector.
By the end of the year we had sold over 1,000 units, and this
dispenser was crucial in securing a significant contract with
ORPEA, a national care home chain in France. Again this product
features Firewall(TM), which provides the reassurance to the end
customer that every touch of a button will provide pure water.
In certain parts of the world, a different filtration method
called Reverse Osmosis (commonly termed 'RO') is required. This
filtration method effectively removes dissolved particles, such as
acid, salts and nitrates. It was therefore a natural step for our
team to integrate the Firewall(TM) UV purification system with an
RO system to create a 'Total Purity' solution. For certain
customers, such as hospitals, this could prove to be a compelling
proposition. Our first machine order was completed in the last
quarter of 2013, and we had, by the end of the year, received
significant orders from two of our key markets.
Essential to our strategy for the Consumer sector is a suite of
products that will suit the varied needs of different households in
different countries. Our compact, counter top dispenser, the Cube,
is an attractive mains-fed unit featuring Firewall(TM), and despite
its size can easily serve a large family (or small office) with
cold, room temperature or hot water. End-user serviceability is an
essential ingredient of the design of our consumer products. As
such, our filters feature a patent pending 'click-in, click-out'
mechanism making their replacement a quick and easy process that
can be done by the consumer. Furthermore, we have developed a
kitchen tap system which conceals the chilling and filtration
system below the worktop leaving only an attractive tap (which
again contains our Firewall(TM) purification technology) fitted to
the surface of the counter or sink unit.
One of the early projects from our joint venture with Eureka
Forbes in India was to engineer our Firewall(TM) technology into
one of their fastest selling and most popular products for the
Indian sub-continent, called the Infiniti. This purifier is ideally
suited to the Indian market, and it was an obvious decision to
incorporate Firewall(TM) into the unit, with an immediate apparent
benefit to the Indian consumer. The resulting upgraded product is
called the Eterniti and is due for launch in H1 2014.
During 2014 we look forward to introducing more products. One
project that is currently well under way is to introduce a
dispenser similar to the Waterlogic MAX (high capacity unit for
hotel and catering environments) but suited to the unique needs of
the market in the USA. Whilst this may seem relatively
straightforward, considering we have equivalent products in Europe,
the differing certification requirements, plus other factors such
as electrical systems and also localised customer preferences mean
that a specific development is required.
A sparkling water Cube is also planned for launch during 2014.
This compact product will have all the significant advantages of
the Firewall(TM) Cube, with the additional benefit of on tap
sparkling and purified water.
Like many other industries, innovation and technology is a
source of competitive advantage. This advantage needs protection
and as such we have invested a great deal in protecting our
intellectual property through patents, design registrations and
trademarks. Notably we have focused on a few critical patents, but
protected these in many territories. The Board at Waterlogic
remains convinced that the Firewall(TM) has many other
applications.
New products and services are the lifeblood of our business, and
in order to maintain our market leadership it is our desire to
continually improve our value proposition to our customers and
prospective customers through our investment in R&D. With a
2013 R&D investment of $2,258,000 including $164,000 on
certifications and testing, together with the deployment and
involvement of our marketing and technical teams in our key
markets, we can be confident in producing new products and
innovations designed to keep Waterlogic at the forefront of our
market.
Product improvement is as important as new product development
and our team of 20 engineers and the staff at our dedicated Water
Quality Centre constantly ensure that our existing products remain
effective and reliable.
Our marketing and R&D teams collaborate on the strategic
road-map for new products, and over the coming year we expect to
see additional new developments being marketed. A few examples are
additional sparkling water versions of our products, and also a new
range update for one of our major strategic partners.
Acquisitions and Asset Purchases
During 2013 the Group completed three acquisitions, with a total
consideration net of cash acquired of $56.3 million.
On 27 February 2013 the Group acquired Water Filters Limited,
trading as Aqua Cure Scotland, a vendor of water filtration and
water purification equipment based in Perth, Scotland. Waterlogic's
acquisition of Aqua Cure Ltd in 2011 was a strategic purchase to
provide the Group with a complementary range of products. The
acquisition of Aqua Cure Scotland expands upon this strategy,
increasing coverage of the UK market by giving the Group direct
access to the Scottish market.
On 7 March 2013 the Group acquired a further 23.85 per cent
holding in Aqua Cure Limited, bringing its total holding in the
company to 93.85 per cent. The Group retains an option over the
remaining 6.15 per cent interest, which may be exercised up to 31
December 2015.
On 21 June 2013 the Group acquired the entire share capital of
Cool Clear Water Group Ltd ('CCWG'), the leading supplier of POU
drinking water purification and dispensing systems in Australia.
The acquisition marked Waterlogic's entry into the Australian water
dispenser market.
CCWG is the clear market leader in the Australian POU market
with over 30,000 POU water dispensers installed and, as such, the
acquisition significantly bolstered the Group's Commercial
division. With over 11,000 customers, ranging from blue-chip
organisations to SMEs, CCWG is the only Australian POU provider
with a presence in all Australian states. CCWG is predominantly a
rental business, which further enhanced the Group's proportion of
recurring revenues and EBITDA margin.
The consideration was satisfied by the payment of AUD$60.0
million (approximately $55.8 million).
On 1 September 2013 the Group acquired the assets of Eauvell
based in Kiel, Northern Germany. The transaction was structured as
an asset purchase for a total purchase price of $0.4 million.
Consumer Product Contracts
The Consumer Division achieved $1.3 million in revenue in 2013
(2012: $0.5 million). The division also had outstanding orders to
the value of $0.8 million at the year end. These products will ship
before the end of H1, 2014.
In May 2013, the Group signed an agreement with ALCONIX, a
well-respected trading company, for the distribution of the Group's
Waterlogic Consumer products in Japan. The five-year agreement
grants Waterlogic exclusivity for the supply of drinking water
purification devices to the Japanese partner, which will in turn
become the sole distributor of Waterlogic Consumer products to the
Japanese Consumer market. The agreement has volume commitments in
place for the first year and includes certain performance clauses.
The volume commitments for the following years of the agreement
will be negotiated in line with the Group's expectations.
The Waterlogic Consumer range of products was launched in Japan
in November 2013. The products carry the "Waterlogic" and
"Firewall(TM)" branding for direct distribution, and "OEM brand"
and "Firewall(TM)" for OEM. ALCONIX are distributing to the market
through department stores, kitchen manufacturers and wholesalers,
mail order catalogues and through healthcare organisations to the
medical industry. The Japanese residential water treatment market
is one of the largest in the world, valued at more than $2 billion
and represents a significant opportunity for the Group.
The Indian joint venture with Eureka Forbes is progressing, with
manufacturing started in the new factory, located in Dehradun in
February 2014. The Group remains very excited by the prospects of
this partnership with Eureka Forbes and by the long term potential
within the Indian market.
Waterlogic Consumer's customer Indesit launched in Turkey and
Italy. Although these launches were later than originally
anticipated, Indesit plans to continue the rollout in further
European territories in 2014. Products were only available through
retail channels since July and August 2013 but sell-through
statistics are improving.
There have been delays in the deployment of certain other
Waterlogic Consumer projects, with the most significant impact from
one customer due to launch in H1 2014. New launches are planned for
H1 2014 in the Middle East and a pilot launch via a major
international retailer's e-commerce platform in Canada.
Whilst the initial period of the Consumer Division's revenue
performance has been far slower than originally envisaged,
management believes that the upside potential of this business
remains very substantial.
Management and Staff
Following the departure in September 2013 of the previous Group
CFO, John Skidmore, the Group promoted Robert Bell to Group CFO on
18 October 2013.
Mr Bell joined Waterlogic in December 2011 as Director of
Accounting, responsible for the Group's financial operations and
reporting, and lately acted as interim CFO for Waterlogic.
Mr Bell's role as Director of Accounting has been replaced by a
new Group Financial Controller, as of 20 January 2014.
The Consumer Division has recruited senior marketing and
business development management more suited for the new strategy of
the division. Experienced executives from the 'high end' consumer
market were recruited to the department and began employment as of
January 2014.
The R&D team has recruited a manager with significant
experience and managerial capability. We continue to develop new
products for new markets and I have little doubt that these efforts
will be reflected in our future results, providing Waterlogic
enormous potential for many years to come.
In order to achieve our international, multi-channel ambitions,
it is essential we have the infrastructure and organisational
capabilities to drive this growth. Since our Admission to AIM, we
have made considerable progress in transforming the business by
strengthening the organisational structure, increasing recurring
revenue streams and attracting a pool of talented staff. The
efforts of our management and employees continue to be exceptional.
I would like to thank them for their relentless efforts in making
Waterlogic a successful market leader in the global POU market.
I believe that Waterlogic's senior management objectives are
aligned with shareholders' interests. The Group's PSP plan
incentivises management to achieve compound shareholder returns as
well as meeting EBIT objectives.
Financial Review
Waterlogic's key financial objective is to deliver sustainable
growth in the profitability of the Group and to continue to build
on the quality of earnings that will lead to increased Shareholder
value in the longer term.
This objective was supported as we continued during 2013 with
the delivery of our business plans, protecting our gross margins
through tight control of material costs. Focused sales activity and
improvements in our bills of material and supply chain helped us
protect profitability.
Key performance Indicators (KPI's)
Waterlogic uses a range of KPIs to monitor progress against our
strategic priorities. These include non-GAAP performance measures
to assist in the measurement of underlying performance.
2009 2010 2011 2012 2013
----------------------- ------- ------- ------- -------- --------
Revenue $61.2m $68.3m $84.9m $101.0m $124.0m
----------------------- ------- ------- ------- -------- --------
Gross Profit $36.1m $41.8m $49.8m $61.3m $78.9m
----------------------- ------- ------- ------- -------- --------
Gross Margin % 59.1% 61.3% 58.8% 60.7% 63.6%
----------------------- ------- ------- ------- -------- --------
Recurring revenue $17.8m $21.9m $27.0m $39.0m $49.8m
----------------------- ------- ------- ------- -------- --------
Recurring revenue
% 29.1% 32.1% 31.8% 38.6% 40.2%
----------------------- ------- ------- ------- -------- --------
Operating profit $5.8m $5.8m $4.9m $2.3m $5.4m
----------------------- ------- ------- ------- -------- --------
Operating margin
% 9.5% 8.6% 5.8% 2.3% 4.4%
----------------------- ------- ------- ------- -------- --------
Adjusted operating
profit $6.3m $7.6m $8.5m $8.9m $12.3m
----------------------- ------- ------- ------- -------- --------
Adjusted EBITDA $11.4m $11.5m $13.3m $13.8m $19.5m
----------------------- ------- ------- ------- -------- --------
Cash flow from
operating activities $6.6m $2.3m $3.5m $6.9m $7.5m
----------------------- ------- ------- ------- -------- --------
Revenues
In 2013, Group revenue was $124.0 million, representing a 22.9
per cent increase on the prior year (2012: $101.0 million).
The movement in foreign currency exchange rates had the effect
of increasing year on year revenues by $0.6 million relative to
revenues at constant currencies. Adjusting for these foreign
currency effects, 2013 acquisitions (increase of $11.8 million),
and the drag through impact of prior year acquisitions (increase of
$7.5 million) underlying organic revenues rose to $105.5 million,
representing organic growth of 4.1 per cent on the prior year (3.5
per cent at constant currencies).
Recurring revenues were $49.8 million in 2013, an increase of
27.9 per cent on 2013 and now representing 40.2 per cent of Group
revenues. Direct revenues increased by 62.1 per cent in 2013 from
$16.0 million to $25.9 million, with indirect revenues increasing
from $46.0 million to $48.3 million, an increase of 4.9 per cent in
the year. Revenues were impacted by delays in the planned launch of
our consumer products and the loss of a filter distribution
agreement in the UK which suppressed earnings in 2013. The Company
has since entered into a strategic relationship with the food
service division of Pentair Filtration and Process for the supply
of filtration units.
Profits
Gross profit benefited from the higher mix of direct sales,
together with rental and service income helping to lift the gross
margin to 63.6 per cent (2012: 60.7 per cent) with gross profit of
$78.9 million.
Group operating profit for the year was $5.4 million, 136.1 per
cent above 2012 ($2.3 million). The Group has presented an adjusted
operating profit which eliminates the effect of the share incentive
plans, capital reorganisation costs, acquisition and integration
related costs, corporate reorganisation costs and the amortisation
of acquired intangibles. This adjusted operating profit of $12.3
million represents an increase of 38.4 per cent on 2012, driven by
improved gross profits mentioned above. Adjusted EBITDA rose to
$19.5 million, including $4.2 million contribution from our
Australian acquisition, 41.3 per cent above 2012 ($13.8 million),
consistent with last year pointing to a continued improvement in
underlying profitability.
Segment operating profit rose by 33.9 per cent in Scandinavia to
$4.5million, and the French segment strengthened performance by
41.0 per cent with an operating profit of $0.7 million compared to
$0.5million in 2012. The German segment made a profit of $2.6
million from $2.0 million in 2012, an increase of 26.7 per cent.
This was to some extent offset by UK segment reducing by 24.4 per
cent as a result of the loss of a filter distribution agreement and
the US segment which made a loss of $1.9 million compared to a
$1.1million loss in 2012 due to one-off costs.
Group operating costs increased by 24.5 per cent (up $14.5
million) to $73.4 million in the year reflecting headcount
increases from both newly acquired businesses and in response to
organic growth needs, $1.7 million in one-off acquisition and
integration related costs, $1.7 million increase in amortisation of
acquired intangibles and increased costs in relation to development
of the Consumer Division. R&D expenditure in the period was
$2.3 million (2012: $3.8 million), of which $0.8 million was
expensed (2012: $1.7 million).
Finance costs in 2013 were $2.2 million compared to $0.7 million
in 2012 as a result of the new Loan facility, including $0.1
million in respect of interest rate swaps to secure the Group's
long term borrowing rate until June 2018.
Group profit before tax for the year was $3.4 million, $1.7
million (91.9 per cent) above 2012 as a result of the above
factors.
Taxation
Taxation was $1.7 million for the year (2012: $0.5 million). The
effective tax rate for the Group increased to 50.3 per cent (2012:
29.2 per cent). The increase in the effective rate in tax is
largely due to the mix of profits and losses in the different tax
jurisdictions in which the group operates. We are working on a
number of measures to achieve lower effective rates over the longer
term.
The amount of tax paid in the year increased to $2.2 million
from $2.0 million in the prior year. However, corporate income
taxes paid can be distorted relative to the annual tax charge as a
result of the payment of a tax liability falling outside the
financial year and because of deferred tax accounting
treatment.
The increase in the net deferred tax liability to $4.4 million
as at 31 December 2013 (2012: $0.2m) relates in large part to a
$5.3 million deferred tax liability recognised on customer
relationship intangibles acquired as part of the CCWG acquisition,
offset by a $0.7 million deferred tax asset acquired as part of the
same acquisition and $0.3 million of foreign exchange gains arising
during the year.
Earnings per share
Basic earnings per share for the year were 2.10 cents, compared
with 1.28 cents in 2012. Diluted earnings per share were 2.07
cents, compared with 1.26 cents in 2012.
Cash and treasury
The Group continues to generate cash, with net cash from
operating activities of $7.5 million (2012: 6.9 million) up 8.5% on
2012. Our key sources of liquidity during the year have been cash
generated from operations and borrowings through our debt facility.
In 2013, this was enhanced through the disposal of freehold
premises in the UK for $0.7 million and in Sweden of $0.4
million.
Balance Sheet
Total assets increased to $178.5 million from the prior year's
$128.0 million, primarily as a result of the acquisition of CCWG
for $55.8 million funded by the new debt facility drawn down of
$47.6 million.
Goodwill increased by $30.3 million to $55.2 million compared
with the prior year, predominantly as a result of goodwill
recognised on the acquisition of CCWG of $30.8 million partially
offset by adverse foreign exchange movements on goodwill
denominated in currencies other than the US dollar. Acquired
intangible assets increased by $13.7 million to $30.6 million,
compared with the prior year amount of $17.0 million, primarily
reflecting the acquired intangibles on CCWG, partially offset by
amortisation and foreign exchange movements. Other intangible
assets increased by $1.1 million, due primarily to the
capitalisation of $1.0 million of development costs and $1.0
million of additions to software, once more offset by amortisation
during the period.
A significant proportion of the non-current assets on our
balance sheet reflect acquisitions since our Admission to AIM in
July 2011.
In accordance with IFRS, acquired intangibles such as customer
relationships and brands are recognised separately from goodwill on
acquisitions, with intangible assets subject to amortisation and
with no amortisation of goodwill. Impairment reviews of these
balances are performed at least annually, and any impairment
recognised through the income statement. Whilst there is no current
impairment there is a sensitivity within our US operations whereby
should the net present value of the future discounted cash flows
decrease by 17 per cent or more relative to our current
expectations, an impairment would result. It is our current
expectation that this event will not occur, and that as such no
impairment has been recognised as at 31 December 2013.
Gross debt increased to $49.6 million as at 31 December 2013.
Gross debt comprises borrowings together with the fair value of
derivative assets or liabilities held to manage interest rate risk
of borrowings. The Group closed the year with net debt of $31.0
million (2012: Net funds $24.4 million), as a result of the
deployment of AUD 60.0 million in support of the acquisition of
CCWG in Australia generated by utilisation of the Group's borrowing
facility. The Group has access to a US$75.0 million facility, of
which $60.0 million is currently committed via a $25.0 million term
loan and a $35.0 million revolving credit facility. The amount
undrawn at the year-end stood at $21.1 million. The term loan
amortises over a five year term, and $1.2 million was repaid during
H2 2013.
Our gearing (presented as a ratio of net debt to equity) has
increased to 35% from (27%) at 31 December 2012.
Current trading and outlook
Waterlogic believes the market will continue to evolve, driven
by a combination of factors including cost pressures, an awareness
of water quality and environment concerns, all of which give our
water dispensers a clear advantage over traditional bottled water
solution. The Directors remain confident that the solid foundations
put in place during 2013, together with continued investment in the
Group's Firewall(TM) technology projects, potential acquisitions
and, most importantly, the Group's organic business will continue
to deliver shareholder value.
Looking forward, Waterlogic is well positioned for the coming
year. The Group has continued to gain revenue share in many of its
markets, as it leads the migration from bottled water to point of
use market and expands its global footprint through continued
organic growth and acquisitions. Waterlogic's emerging markets,
which include South America and Eastern Europe, will continue to be
growth drivers of its International Trading business and, with its
Direct Business set for another strong year the overall outlook is
positive.
The Group has established comprehensive business plans to ensure
it has sufficient information relating to the business and its
ability to generate sufficient profits and cash to cover its
ongoing commitments.
Consolidated income statement
for the year ended 31 December 2013
Year ended
31 December
------------------
2013 2012*
Note $'000 $'000
------------------------------------- ---- -------- --------
Continuing operations
Revenue 3 124,043 100,968
Cost of sales (45,184) (39,691)
------------------------------------- ---- -------- --------
Gross profit 78,859 61,277
Administrative expenses (72,096) (57,513)
Distribution expenses (679) (698)
Marketing expenses (1,525) (1,113)
Other gains and losses 6 868 346
------------------------------------- ---- -------- --------
Operating profit 5 5,427 2,299
------------------------------------- ---- -------- --------
Adjustment for the effect of:
Share based incentives 5 1,709 1,630
Capital reorganisation related costs 5 - 56
Corporate reorganisation costs 5 44 774
Acquisition and integration related
costs 5 1,710 2,308
Amortisation of acquired intangibles 5 3,368 1,788
Adjusted operating profit 12,258 8,855
------------------------------------- ---- -------- --------
Finance income 7 139 177
Finance costs 8 (2,216) (730)
------------------------------------- ---- -------- --------
Profit before tax 3,350 1,746
Income tax expense (1,684) (510)
------------------------------------- ---- -------- --------
Profit for the year 5 1,666 1,236
------------------------------------- ---- -------- --------
Profit attributable to:
Owners of the Company 1,601 972
Non-controlling interests 65 264
------------------------------------- ---- -------- --------
1,666 1,236
------------------------------------- ---- -------- --------
Earnings per share
Basic (cents per share) 9 2.10 1.28
Diluted (cents per share) 9 2.07 1.26
------------------------------------- ---- -------- --------
Adjusted earnings per share
Basic (cents per share) 99.86 9.32
Diluted (cents per share) 99.74 9.16
-------------------------- ---- ----
* see note 2 for details of restatement of prior period
figures.
Consolidated statement of comprehensive income
for the year ended 31 December 2013
Year ended
31 December
---------------
2013 2012*
Note $'000 $'000
-------------------------------------------- ---- ------- ------
Profit for the year 5 1,666 1,236
Items that may be reclassified subsequently
to profit or loss:
Cash flow hedges: Losses arising
during the period (187) -
Exchange differences on translation
of foreign operations (2,021) 882
Income tax relating to items that
may be reclassified 52 -
-------------------------------------------- ---- ------- ------
Total comprehensive income for the
year (490) 2,118
-------------------------------------------- ---- ------- ------
Total comprehensive income attributable
to:
Owners of the Company (503) 1,848
Non-controlling interests 13 270
-------------------------------------------- ---- ------- ------
(490) 2,118
-------------------------------------------- ---- ------- ------
* see note 2 for details of restatement of prior period
figures.
Consolidated balance sheet
as at 31 December 2013
2013 2012* 2011*
Note $'000 $'000 $000
------------------------------------ ---- ------- ------- -------
ASSETS
Non-current assets
Goodwill 55,159 24,858 11,199
Other intangible assets 10 35,065 20,296 8,801
Property, plant and equipment 11 26,349 14,712 9,091
Deferred tax asset 1,171 1,343 545
Investment in joint venture 825 - -
Derivative financial instruments 187 - -
------------------------------------ ---- ------- ------- -------
Total non-current assets 118,756 61,209 29,636
Current assets
Inventories 18,155 13,361 12,495
Trade and other receivables 24,983 23,312 19,441
Cash and cash equivalents 16,619 30,154 51,130
------------------------------------ ---- ------- ------- -------
Total current assets 59,757 66,827 83,066
------------------------------------ ---- ------- ------- -------
Total assets 178,513 128,036 112,702
------------------------------------ ---- ------- ------- -------
EQUITY AND LIABILITIES
Capital and reserves
Stated capital - - -
Additional paid in capital 62,109 60,389 60,261
Translation reserve (1,723) 298 (578)
Hedging reserve (135) - -
Share based payment reserve 4,132 4,420 2,882
Retained earnings 25,501 23,900 22,928
------------------------------------ ---- ------- ------- -------
Equity attributable to Shareholders 89,884 89,007 85,493
Non-controlling interest 114 297 27
------------------------------------ ---- ------- ------- -------
Total equity 89,998 89,304 85,520
------------------------------------ ---- ------- ------- -------
* see note 2 for details of restatement of prior period
figures.
Consolidated balance sheet continued
as at 31 December 2013
2013 2012* 2011*
Note $'000 $'000 $000
-------------------------------------- ---- ------- ------- -------
EQUITY AND LIABILITIES continued
Non-current liabilities
Borrowings:
- bank and other borrowings 12 43,944 2,783 4,173
- obligations under finance
leases 18 21 89
-------------------------------------- ---- ------- ------- -------
Total borrowings 43,962 2,804 4,262
Derivative financial instruments 187 96 132
Deferred tax liability 5,610 1,520 282
Provisions 112 81 69
Deferred and contingent consideration 13 1,414 1,271 1,863
-------------------------------------- ---- ------- ------- -------
Total non-current liabilities 51,285 5,772 6,608
Current liabilities
Trade and other payables 24,861 19,407 13,770
Borrowings:
- bank and other borrowings 3,631 2,855 3,431
- obligations under finance
leases 38 65 89
-------------------------------------- ---- ------- ------- -------
Total borrowings 3,669 2,920 3,520
Current tax liabilities 1,608 1,484 1,112
Provisions 345 81 92
Deferred revenue 6,707 5,496 2,069
Deferred and contingent consideration 13 40 3,572 11
-------------------------------------- ---- ------- ------- -------
Total current liabilities 37,230 32,960 20,574
-------------------------------------- ---- ------- ------- -------
Total liabilities 88,515 38,732 27,182
-------------------------------------- ---- ------- ------- -------
Total equity and liabilities 178,513 128,036 112,702
-------------------------------------- ---- ------- ------- -------
* see note 2 for details of restatement of prior period
figures.
The consolidated Financial Statements were approved by the Board
of Directors and authorised for issue on 4 April 2014 and were
signed on its behalf by:
J Ben-David
Group Chief Executive Officer
Consolidated statement of changes in equity
for the year ended 31 December 2013
Additional Hedging Share
paid reserve based Attributable Non-
Stated in $000 Translation payment Retained to controlling
capital capital reserve reserve earnings* Shareholders interest Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
---------------- ------- ---------- -------- ----------- -------- --------- ------------ ------------ -------
Balance at 1
January 2012
- previously
reported - 60,261 - (578) 2,882 24,033 86,598 27 86,625
Prior period
adjustment
(note 2)* - - - - - (1,105) (1,105) - (1,105)
Balance at 1
January 2012
- restated - 60,261 - (578) 2,882 22,928 85,493 27 85,520
Fair value of
put and
call option
over
non-controlling
interest
acquired in the
year - 128 - - - - 128 - 128
Transfer to
reserves for
share based
payment expense - - - - 1,538 - 1,538 - 1,538
Profit for the
year - - - - - 972 972 264 1,236
Other
comprehensive
income - - - 876 - - 876 6 882
---------------- ------- ---------- -------- ----------- -------- --------- ------------ ------------ -------
Balance at 1
January 2013 - 60,389 - 298 4,420 23,900 89,007 297 89,304
Purchase of
non-controlling
interest - 235 - - - - 235 (235) -
Exercise of PSP
awards - 1,485 - - (1,992) - (507) - (507)
Transfer to
reserves for
share based
payment expense - - - - 1,704 - 1,704 - 1,704
Profit for the
year - - - - - 1,601 1,601 65 1,666
Other
comprehensive
income - - (135) (2,021) - - (2,156) (13) (2,169)
---------------- ------- ---------- -------- ----------- -------- --------- ------------ ------------ -------
Balance at 31
December
2013 - 62,109 (135) (1,723) 4,132 25,501 89,884 114 89,998
---------------- ------- ---------- -------- ----------- -------- --------- ------------ ------------ -------
* see note 2 for details of restatement of prior period
figures.
Consolidated cash flow statement
for the year ended 31 December 2013
Year ended
31 December
------------------
2013 2012*
Note $'000 $'000
-------------------------------------------- ---- -------- --------
Profit after tax for the year 1,666 1,236
Adjustments:
- depreciation and amortisation 10,645 6,757
- acquisitions (contingent consideration
adjustments) 13 (41) 375
- share based incentives expense 16 1,709 1,630
- income tax expense 1,684 510
- net interest expense and changes
in the fair value of derivative financial
instruments 2,077 584
- loss on disposal of non-current
assets 253 57
- share of loss of equity accounted
joint venture 6 65 -
- foreign exchange movements 6 (1,048) (616)
-------------------------------------------- ---- -------- --------
Adjusted operating profit before working
capital movements 17,010 10,533
Net effect of working capital movements 15 191 1,916
-------------------------------------------- ---- -------- --------
Cash flow before purchase of rental
assets, interest and tax 17,201 12,449
Purchases of rental assets (5,946) (3,097)
Proceeds on disposal of rental assets 82 57
Interest paid (1,645) (488)
Tax paid (2,201) (2,016)
-------------------------------------------- ---- -------- --------
Net cash from operating activities 7,491 6,905
Investing activities
Interest received 139 181
Proceeds on disposal of property,
plant and equipment 1,170 4
Purchases of property, plant and equipment (1,400) (2,181)
Purchases of intangible assets (2,117) (1,380)
Acquisitions, net of cash acquired (56,304) (21,045)
Acquisition of non-controlling interest (1,622) -
Deferred and contingent consideration
paid (2,728) (12)
Investment in joint venture (566) -
-------------------------------------------- ---- -------- --------
Net cash used in investing activities (63,428) (24,433)
Financing activities
New bank loans raised 51,845 1,257
Repayment of bank loans and other
financing (8,654) (4,567)
Payment of derivative financial instruments (394) -
-------------------------------------------- ---- -------- --------
Net cash from financing activities 42,797 (3,310)
Translation differences (51) 17
Net (decrease) in cash and cash equivalents (13,191) (20,821)
Net cash and cash equivalents at beginning
of year 29,810 50,631
-------------------------------------------- ---- -------- --------
Net cash and cash equivalents at end
of year 15 16,619 29,810
-------------------------------------------- ---- -------- --------
* see note 2 for details of restatement of prior period
figures.
Notes to the Financial Information
for the year ended 31 December 2013
1. General information
Waterlogic Plc (the "Company") and its subsidiaries (together
the "Group") operate as a vertically integrated business engaged in
the design, manufacture, distribution, servicing and sale of
point-of-use water machines in worldwide markets.
The Company is a Public Limited company which is listed on the
London Stock Exchange's Alternative Investment Market ("AIM"). The
Company is incorporated in Jersey under registration number 108193.
The address of its registered office is 12 Castle Street, St
Helier, Jersey, Channel Islands JE2 3RT and the Company's operating
activities are based in Ireland.
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 December 2013
but is derived from those accounts. The auditors reported on those
accounts on 4 April 2014 and their report was unqualified.
Statutory accounts for 2013 will be delivered following the
Company's Annual General Meeting.
2. Basis of preparation
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRSs), this announcement does not itself contain
sufficient information to comply with IFRSs. The Company expects to
publish full financial statements that comply with IFRSs in May
2014. The Directors believe that the Group is well placed to manage
its business risks successfully despite the current uncertainties
within the global economy. The Group has considerable financial
resources, recurring revenue streams and a broad spread of
customers. As a consequence of these factors and having reviewed
the forecasts for the coming year, 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 the annual Financial Statements.
The financial statements are 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 Statements
in accordance with the policies set out below.
Restatement
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. "Adjusted
measures" in previous periods included adjustments for share based
incentives, capital reorganisation related costs, corporate
reorganisation costs and acquisition and integration related costs.
In 2013 the Group has opted to also include amortisation of
acquired intangibles within Adjusting items on the face of the
consolidated income statement for the year ended 31 December 2013.
As such, in accordance with IAS 8, the consolidated income
statement for the year ended 31 December 2012 has been restated to
provide the appropriate comparative as a result of a change in
definition of adjusted measure. The result of this is the inclusion
of $1,788,000 of amortisation of acquired intangibles within
adjusting items on the face of the consolidated income statement
for the year ended 31 December 2012, with a commensurate increase
in adjusted operating profit for the period. There has been no
effect on profit before tax, the consolidated balance sheet or the
consolidated cash flow statement as a result of this
restatement.
The consolidated income statement comparative for the year ended
31 December 2012 and the consolidated balance sheet comparatives
for the years ended 31 December 2012 and 31 December 2011 have been
restated to eliminate the effects of intra-group profits generated
upon the sale of POU dispensers between Group entities and held as
property, plant and equipment for rental by the Group under
operating leases at the respective period ends. The amounts
restated are an increase in the cost of sales for the year ended 31
December 2012 of $228,000 and a reduction in the deferred tax
expense for 2012 of $15,000. The impact of the restatement upon the
consolidated balance sheet comparatives is a reduction in POU
dispensers cost as at 31 December 2012 of $3,530,000 (2011:
$2,696,000), a reduction in POU dispensers accumulated depreciation
as at 31 December 2012 of $1,940,000 (2011: $1,335,000), an
increase in deferred tax assets as at 31 December 2012 of $272,000
(2011: $257,000) and a decrease in retained earnings as at 31
December 2012 by $1,318,000 (2011: $1,105,000). There has been no
impact upon the net movement in cash and cash equivalents as a
result of these restatements.
3. Revenue
An analysis of the Group's Revenue is as follows:
Year ended
31 December
----------------
2013 2012
$'000 $'000
-------------------------- ------- -------
Continuing operations
Direct revenue 25,945 16,004
Indirect revenue 48,259 45,994
Rental and service income 49,839 38,970
-------------------------- ------- -------
Total Revenue 124,043 100,968
-------------------------- ------- -------
4. Segment reporting
Information reported to the Group's Chief Executive Officer 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 by reportable segment:
Year ended
31 December
------------------
2013 2012*
$'000 $'000
--------------------------------------- -------- --------
International Trading
External revenue 16,372 14,375
Inter-segment revenue 18,119 12,636
--------------------------------------- -------- --------
Total revenue 34,491 27,011
--------------------------------------- -------- --------
Segment operating profit 944 3,415
Scandinavia
External revenue 33,838 31,786
Inter-segment revenue 206 563
--------------------------------------- -------- --------
Total revenue 34,044 32,349
--------------------------------------- -------- --------
Segment operating profit 4,501 3,361
France
External revenue 7,911 7,342
Total revenue 7,911 7,342
--------------------------------------- -------- --------
Segment operating profit 678 481
Germany
External revenue 15,253 11,934
Inter-segment revenue 68 25
--------------------------------------- -------- --------
Total revenue 15,321 11,959
--------------------------------------- -------- --------
Segment operating profit 2,564 2,024
USA
External revenue 29,633 24,768
Total revenue 29,633 24,768
--------------------------------------- -------- --------
Segment operating loss (1,912) (1,137)
UK
External revenue 9,576 10,757
Inter-segment revenue 646 374
--------------------------------------- -------- --------
Total revenue 10,222 11,131
--------------------------------------- -------- --------
Segment operating profit 1,083 1,433
PRC
External revenue 180 6
Inter-segment revenue 21,024 15,258
--------------------------------------- -------- --------
Total revenue 21,204 15,264
--------------------------------------- -------- --------
Segment operating loss (235) (115)
Australia
External revenue 11,320 -
Total revenue 11,320 -
--------------------------------------- -------- --------
Segment operating profit 1,824 -
Segment result
External revenue 124,083 100,968
Inter-segment revenue 40,063 28,856
--------------------------------------- -------- --------
Total revenue 164,146 129,824
--------------------------------------- -------- --------
Segment operating profit 9,447 9,462
Eliminations
External revenue (40) -
Elimination of inter-segment revenue (40,063) (28,856)
--------------------------------------- -------- --------
Eliminations from operating profit (818) (268)
--------------------------------------- -------- --------
Consolidated
External revenue 124,043 100,968
--------------------------------------- -------- --------
Aggregate segment operating profit net
of eliminations 8,629 9,194
Central administration costs (3,202) (6,895)
--------------------------------------- -------- --------
Operating profit 5,427 2,299
--------------------------------------- -------- --------
* see note 2 for details of restatement of prior period
figures.
The accounting policies of the reportable segments are the same
as the Group's accounting policies described in note 3.
Inter-segment revenue is charged at prevailing market rates.
Segment operating profit represents the profit earned by each
segment without allocation of the share of central administration
costs including Directors' salaries, investment revenue, finance
costs and income tax expenses. 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 $1,709,000 for the
year ended 31 December 2013 (2012: $1,630,000) (see note 16).
During the year the Group reviewed the central administration costs
and allocated approximately $2,800,000 of these costs to the
International Trading operating segment. There was no equivalent
allocation of central administration costs in 2012.
Segment net assets
2013 2012*
Year ended 31 December $'000 $'000
------------------------- ------- -------
International Trading 6,979 5,904
Scandinavia 13,142 10,019
France 2,908 2,154
Germany 6,979 4,975
USA 8,171 9,928
UK 6,386 5,597
PRC 1,690 2,551
Australia 13,392 -
------------------------- ------- -------
Total segment net assets 59,647 41,128
Eliminations (2,678) (2,054)
Central services 33,029 50,230
------------------------- ------- -------
Consolidated net assets 89,998 89,304
------------------------- ------- -------
* see note 2 for details of restatement of prior period
figures.
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 joint ventures, other
financial assets (except for trade and other receivables) and tax
assets. Goodwill has been allocated to reportable segments.
Other segment information
Additions
to
Depreciation non-current
and amortisation assets
------------------- ---------------
2013 2012* 2013 2012*
Year ended 31 December $'000 $'000 $'000 $'000
----------------------- --------- -------- ------- ------
International Trading 433 127 1,191 1,004
Scandinavia 1,792 1,477 1,135 16,222
France 573 611 1,195 2,463
Germany 1,688 1,458 2,492 1,491
USA 3,344 2,557 3,856 13,646
UK 395 395 393 52
PRC 446 521 546 1,560
Australia 2,370 - 61,830 -
Eliminations (826) (606) (1,101) (834)
Add: Central services 430 217 343 364
----------------------- --------- -------- ------- ------
Total 10,645 6,757 71,880 35,968
----------------------- --------- -------- ------- ------
* see note 2 for details of restatement of prior period
figures.
The Group is managed on the basis of segment performance,
focused on the geographical location of markets. Management review
the revenue and gross margin of the Consumer and Commercial
Divisions. Accordingly, the following additional disclosure has
been made with respect to the Consumer and Commercial
Divisions.
Year ended
31 December
----------------
2013 2012*
$000 $'000
------------------- ------- -------
Commercial revenue
External revenue 122,754 100,461
Gross profit 78,543 61,188
------------------- ------- -------
Gross margin 64% 61%
------------------- ------- -------
Consumer revenue
External revenue 1,289 507
Gross profit 316 89
------------------- ------- -------
Gross margin 25% 18%
------------------- ------- -------
Consolidated
External revenue 124,043 100,968
Gross profit 78,859 61,277
------------------- ------- -------
Gross margin 64% 61%
------------------- ------- -------
* see note 2 for details of restatement of prior period
figures.
Information about major customers
No single customer accounted for more than 10 per cent of
reported revenue in 2013 and no single major customer accounted for
more than 10 per cent of the total balance of trade receivables
(net of allowances for doubtful debts) on 31 December 2013. At 31
December 2012 no single major customer accounted for more 10 per
cent of reported revenue and no single customer accounted for more
than 10 per cent of the total balance.
5. Adjusted profitability measures
The Directors use adjusted measures to judge the profitability
of the Group to provide them with a consistent basis of comparison
of the Groups results on a year-on-year basis. During the years
under review, these "Adjusted" measures include: Adjusted operating
profit; Adjusted EBITDA; and Adjusted profit for the year.
The following items, including their tax effect where
applicable, have been taken into account when calculating adjusted
items:
-- Share based incentives expense
-- Share based payment expense recognised in connection with the PSP (note 16).
-- Capital reorganisation related costs
-- Costs associated with the capital reorganisation of WIL.
-- Corporate reorganisation costs
-- Costs associated with termination of employment resulting from:
-- relocation and/or redundancy of role; and
-- termination payments to Executive Directors of the Group.
-- Acquisition and integration related costs
-- Costs associated with acquisitions, including transaction
costs and fair value adjustments on contingent consideration.;
and
-- Costs associated with the integration of companies, including
restructuring undertaken as a result of the acquisition of
subsidiaries by the Group.
-- Amortisation of acquired intangibles
-- Amortisation charge for the year relating to intangibles
acquired with purchased subsidiaries
-- This item has been identified as an adjusting item for the
first time in these financial statements. To ensure a consistent
basis of comparison, prior year figures have been updated where
appropriate.
Year ended
31 December
--------------
2013 2012*
$'000 $'000
------------------------------------------ ------ ------
Operating profit 5,427 2,299
Add depreciation and amortisation 10,645 6,757
------------------------------------------ ------ ------
EBITDA 16,072 9,056
Adjusting items:
- share based incentives expense 1,709 1,630
- capital reorganisation related costs - 56
- corporate reorganisation costs 44 774
- acquisition and integration related
costs 1,710 2,308
- amortisation of acquired intangibles 3,368 1,788
Total adjusting items 6,831 6,556
------------------------------------------ ------ ------
Adjusted operating profit 12,258 8,855
Adjusted EBITDA 19,535 13,824
------------------------------------------ ------ ------
Profit for the year 1,666 1,236
Total adjusting items and related finance
costs 6,871 6,671
Tax effect of adjusting items (933) (507)
------------------------------------------ ------ ------
Adjusted net profit for the year 7,604 7,400
Less: Non-controlling interest share of
adjusted profit (81) (319)
------------------------------------------ ------ ------
Adjusted profit for the year attributable
to the owners of the Company 7,523 7,081
------------------------------------------ ------ ------
* see note 2 for details of restatement of prior period
figures.
6. Other gains and losses
Year ended
31 December
--------------
2013 2012
$'000 $'000
------------------------------------------------- ------ ------
Loss on disposal of non-current assets (253) (57)
Reduction/(increase) in contingent consideration
for acquired businesses (note 13) 41 (375)
Gains on foreign exchange movements 1,048 616
Share of results of joint ventures (65) -
Other gains 97 162
------------------------------------------------- ------ ------
868 346
------------------------------------------------- ------ ------
No other gains or losses have been recognised in respect of
loans or on financial liabilities measured at amortised cost.
7. Finance income
Year ended
31 December
--------------
2013 2012
$'000 $'000
---------------------- ------ ------
Bank deposit interest 95 134
Other finance income 44 43
---------------------- ------ ------
139 177
---------------------- ------ ------
8. Finance costs
Year ended
31 December
--------------
2013 2012
$'000 $'000
-------------------------------------------- ------ ------
Interest on bank overdrafts and loans 1,926 370
Other financial expenses 75 155
-------------------------------------------- ------ ------
Total interest expense 2,001 525
Unwinding of discount effect on liabilities 40 115
Change in fair value of derivative option
contract - 126
Loss arising on derivatives in a designated
fair value hedge accounting relationship 64 -
Financial assets and liabilities at fair
value through profit and loss - net change
in fair value:
Designated on initial recognition 111 (36)
2,216 730
-------------------------------------------- ------ ------
Other financial expenses include bank charges arising on
transactions executed and completed in the corresponding period.
The unwinding of discount effect on liabilities in both years is in
respect of contingent consideration owing on acquisitions. The loss
on derivatives in a designated fair value hedge accounting
relationship relates to the interest charge in the period in
relation to interest rate swaps designated as cash flow hedges on
the Group's loan facilities.
9. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Earnings
Year ended
31 December
--------------
2013 2012*
$'000 $'000
------------------------------------------- ------ ------
Profit attributable to the owners of
the Company 1,601 972
------------------------------------------- ------ ------
Adjusted profit attributable to the owners
of the Company 7,523 7,081
------------------------------------------- ------ ------
* see note 2 for details of restatement of prior period
figures.
Year ended 31
December
------------------------
2013 2012*
Number Number
------------------------------------------ ----------- -----------
Weighted average number of shares in
issue 77,649,417 77,604,207
Weighted average number of shares held
by employee share trust (1,364,253) (1,660,000)
------------------------------------------ ----------- -----------
Shares used to calculate basic earnings
per share 76,285,164 75,944,207
Dilution due to share based incentive
plans 929,683 1,356,781
------------------------------------------ ----------- -----------
Shares used to calculate diluted earnings
per share 77,214,847 77,300,988
------------------------------------------ ----------- -----------
Basic earnings per share (cents) 2.10 1.28
Diluted earnings per share (cents) 2.07 1.26
Basic adjusted earnings per share (cents) 9.86 9.32
Diluted adjusted earnings per share
(cents) 9.74 9.16
------------------------------------------ ----------- -----------
* see note 2 for details of restatement of prior period
figures.
Earnings per share have been calculated by dividing the Profit
attributable to the owners of the Company by the weighted average
number of shares in issue during the year.
10. Other intangible assets
Development Software Acquired
costs Brand names, $'000 Acquired brand names,
$000 trademarks customer trademarks
and patents relationships and patents Total
$'000 $'000 $'000 $'000
------------------------- ------------ ------------ --------- -------------- ------------- --------
Cost
At 1 January 2012 1,383 491 2,233 8,172 896 13,175
Additions 925 265 245 - - 1,435
Acquisitions - - - 11,412 716 12,128
Exchange differences - 31 14 341 3 389
------------------------- ------------ ------------ --------- -------------- ------------- --------
At 1 January 2013 2,308 787 2,492 19,925 1,615 27,127
Additions 976 187 954 - - 2,117
Acquisitions (note
14) - - 126 17,617 302 18,045
Exchange differences 1 - 53 (885) (24) (855)
------------------------- ------------ ------------ --------- -------------- ------------- --------
At 31 December 2013 3,285 974 3,625 36,657 1,893 46,434
------------------------- ------------ ------------ --------- -------------- ------------- --------
Accumulated amortisation
At 1 January 2012 (617) (293) (731) (2,620) (113) (4,374)
Charge for the year (155) (91) (338) (1,614) (174) (2,372)
Exchange differences (26) (3) (10) (43) (3) (85)
------------------------- ------------ ------------ --------- -------------- ------------- --------
At 1 January 2013 (798) (387) (1,079) (4,277) (290) (6,831)
Charge for the year (586) (124) (465) (3,034) (334) (4,543)
Exchange differences (1) - (24) 36 (6) 5
------------------------- ------------ ------------ --------- -------------- ------------- --------
At 31 December 2013 (1,385) (511) (1,568) (7,275) (630) (11,369)
------------------------- ------------ ------------ --------- -------------- ------------- --------
Carrying amount
At 31 December 2013 1,900 463 2,057 29,382 1,263 35,065
------------------------- ------------ ------------ --------- -------------- ------------- --------
At 31 December 2012 1,510 400 1,413 15,648 1,325 20,296
------------------------- ------------ ------------ --------- -------------- ------------- --------
The Group have elected to disclose amounts in relation to
acquired intangibles separately from those internally generated by
the Group for the year ended 31 December 2013. Corresponding
figures for 2012 have been restated to present the comparative
amounts accordingly.
11. Property, plant and equipment
Fixtures,
Plant fittings
Point-of-use and and Motor
Property dispenser* machinery equipment vehicles Total*
$'000 $'000 $'000 $'000 $'000 $'000
------------------------- -------- ------------ ---------- ---------- --------- --------
Cost
At 1 January 2012 594 16,053 3,882 2,558 952 24,039
Additions 4 3,097 1,687 345 140 5,273
Acquisitions - 3,699 633 129 43 4,504
Disposals - (471) (14) (71) (77) (633)
Exchange differences 27 582 118 147 12 886
------------------------- -------- ------------ ---------- ---------- --------- --------
At 1 January 2013 625 22,960 6,306 3,108 1,070 34,069
Additions - 5,946 589 659 152 7,346
Acquisitions (note
14) - 11,060 120 220 895 12,295
Disposals (632) (1,006) (2,244) (501) (201) (4,584)
Exchange differences 7 (501) 72 (47) (30) (499)
------------------------- -------- ------------ ---------- ---------- --------- --------
At 31 December 2013 - 38,459 4,843 3,439 1,886 48,627
------------------------- -------- ------------ ---------- ---------- --------- --------
Accumulated depreciation
At 1 January 2012 (30) (10,367) (2,075) (1,924) (553) (14,949)
Charge for the year (42) (3,203) (633) (309) (198) (4,385)
Eliminated on disposal - 374 14 67 77 532
Exchange differences (2) (358) (23) (148) (24) (555)
------------------------- -------- ------------ ---------- ---------- --------- --------
At 1 January 2013 (74) (13,554) (2,717) (2,314) (698) (19,357)
Charge for the year (17) (4,703) (558) (445) (379) (6,102)
Eliminated on disposal 86 839 1,581 486 87 3,079
Exchange differences 5 88 (19) 23 5 102
------------------------- -------- ------------ ---------- ---------- --------- --------
At 31 December 2013 - (17,330) (1,713) (2,250) (985) (22,278)
------------------------- -------- ------------ ---------- ---------- --------- --------
Carrying amount
At 31 December 2013 - 21,129 3,130 1,189 901 26,349
------------------------- -------- ------------ ---------- ---------- --------- --------
At 31 December 2012 551 9,406 3,589 794 372 14,712
------------------------- -------- ------------ ---------- ---------- --------- --------
* see note 2 for details of restatement of prior period
figures.
No Freehold property was held by the Group as at 31 December
2013 (2012: $0.6 million). The property disposed of during the year
had been secured by mortgage. Additionally the Group's obligations
under finance leases are secured by the lessors' title to the
leased assets, which at 31 December 2013 had a carrying amount of
$0.1 million (2012: $0.1 million).
12. Borrowings
The Group has the following principal bank loans:
Carrying
Value 31
Maturity December
Date Repayable Rate 2013
---------- ----- ---------- --------------------- -------------- ----------
$'000
Facility 13 June NIBOR +
A (a) 2018 By instalments 2.75% 8,019
13 June
(b) 2018 By instalments BBSW + 2.75% 14,019
Facility 13 June
B (c) 2018 In full on maturity BBSW + 2.75% 25,957
13 June LIBOR +
(d) 2018 In full on maturity 2.75% 1,649
----- ---------- --------------------- ------------------------- ----------
49,644
Other loans 51
Unamortised finance
fees (2,235)
----------------------------- ------------------------------------ ----------
47,460
----------------------------- ------------------------------------ ----------
(a) A Norwegian Kroner denominated term loan was taken out by
Waterlogic Norge AS on 19 June 2013 and is repayable by instalments
every six months, with the first of these having been made on 31
December 2013.The Group hedges this loan for interest rate risk
using an interest rate swap exchanging fixed rate interest for
variable rate interest. The outstanding balance is adjusted for
fair value movements in the hedged risk, being movements in the 3
months Norwegian Interbank Offer Rate (NIBOR).
(b) An Australian Dollar denominated term loan was taken out by
Waterlogic Australia Pty Limited on 19 June 2013 and is repayable
in instalments every six months, with the first of these having
been made on 31 December 2013. The Group hedges the loan for
interest rate risk using an interest rate swap exchanging fixed
rate interest for variable rate interest. The outstanding balance
is adjusted for fair value movements in the hedged risk, being
movements in the 3 months Bank Bill Swap Bid Rate (BBSW).
(c) An Australian Dollar revolving credit facility loan was
taken out by Waterlogic Australia Pty Limited on 19 June 2013. This
loan is repayable at the behest of the Group at any point up until
13 June 2018. There is no current intention to repay this loan
within the next 12 months and as such it has been classified as a
non-current liability. The Group has purchased interest rate caps
in order to mitigate interest rate risk in relation to a portion of
this loan. The caps have not been designated as effective hedges in
the period, and as such are recognised separately as financial
assets carried at fair value through profit and loss.
(d) A Pounds Sterling denominated loan was taken out by WLI (UK)
Limited on 19 June 2013. This loan is repayable at the behest of
the Group at any point up until 13 June 2018. There is no current
intention to repay this loan within the next 12 months and as such
it has been classified as a non-current liability.
Unamortised finance fees relate to amounts capitalised that were
payable to professional advisors and lenders in relation to the
loan facilities taken out during the year. The costs have been
capitalised within those entities to whom the loans accrue, with
fees attributed to undrawn facilities being held by the Group
parent company. These fees are being amortised on a straight-line
basis throughout the loan period.
The bank loans are guaranteed by various entities within the
Group, including the ultimate parent company, Waterlogic Plc. The
bank loans are subject to covenants relating to Group performance
measures, namely cash flow cover, interest cover and
leveraging.
13. Deferred and contingent consideration
2013 2012
$'000 $'000
--------------------------------------------- ------ ------
InnoTech (USA - acquired in 2011) - 266
Aqua Cure (UK - acquired in 2011) 398 2,169
Prisme S.A.R.L. (France - acquired in
2012) - 152
TaylorMade Water Systems Inc (USA - acquired
in 2012) 967 1,906
AquaPerfect LLC (USA - acquired in 2012) - 350
Water Filters Limited (UK - acquired in
2013) 49 -
Eauvell (Germany - acquired in 2013) 40 -
--------------------------------------------- ------ ------
Total 1,454 4,843
--------------------------------------------- ------ ------
Current 40 3,572
Non-current 1,414 1,271
--------------------------------------------- ------ ------
Total 1,454 4,843
--------------------------------------------- ------ ------
During 2013 the Group paid $4,350,000 (2012: $12,000) in
deferred consideration.
At 31 December 2013 the group had additional liabilities for
contingent consideration to the vendors of Water Filters Limited
and Eauvell. As at the year end the Group has re-evaluated the
amounts recorded for the contingent consideration for both InnoTech
and Aqua Cure, resulting in a $54,000 charge in relation to the
former and a $95,000 release to profit and loss in relation to the
latter. Exchange gains of $94,000 (2012: losses of $77,000) were
recognised in relation to deferred and contingent consideration
during the period.
In 2012 the Group re-evaluated the amounts recorded for the
contingent consideration due for both InnoTech and Aqua Cure,
resulting in charges of $50,000 and $325,000 respectively.
The Group also re-evaluated the amount recorded for contingent
consideration recognised in relation to TaylorMade Water Systems
Inc, with a resultant increase to goodwill of $963,000 as a
measurement period adjustment in relation to the acquisition of
that entity.
14. Acquisitions
Water Filters Limited (Aqua Cure Scotland)
On 27 February 2013, the Group acquired 100% of the shares of
Water Filters Limited ("WFL") for total consideration of $0.5
million. WFL is a key distributor of Aqua Cure Limited's products
to the Scottish market and the acquisition represents an
opportunity for Waterlogic to increase both its market share and
geographic reach in the UK market.
Fair
value
$'000
------------------------------- ------
Net assets acquired:
- trade receivables 44
- other monetary assets 224
- monetary liabilities assumed (51)
- intangible assets recognised 132
- deferred tax liability (28)
------------------------------- ------
Total net assets acquired 321
Goodwill recognised 184
------------------------------- ------
505
------------------------------- ------
Satisfied by:
- cash consideration 463
- retention amount 46
- working capital adjustment (4)
------------------------------- ------
505
------------------------------- ------
Net cash flow on acquisition:
Cash consideration 459
Less cash acquired (165)
------------------------------- ------
294
------------------------------- ------
Intangible assets of $132,000 have been recognised comprising
non-compete agreements with vendors and on-going customer
relationships that existed at the date of acquisition. A deferred
tax liability of $28,000 has been recognised in respect of the
customer relationships with a corresponding offset to goodwill. The
goodwill and amortisation charges of the intangible assets are not
expected to be deductible for tax purposes.
Acquisition-related costs of $34,000 have been expensed as
incurred and are included in administrative expenses. WFL
contributed $320,000 of revenue and $28,000 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 WFL occurred on
1 January 2013, Group revenue would have been approximately $60,000
higher and Group operating profit would have been approximately
$5,000 higher.
14. Acquisitions continued
Eauvell Wasserspender Service GmbH
On 1 September 2013, the Group acquired certain assets of
Eauvell Wasserspender Service GmbH ("Eauvell") for total
consideration of $0.4 million. Eauvell is a bottled water company
based in Kiel, Germany. The acquisition of the customers, brand and
operating assets of the business provides Waterlogic with a
strategic foothold in Northern Germany.
Fair
value
$'000
-------------------------------- -------
Net assets acquired:
- property, plant and equipment 132
- other monetary assets 59
- monetary liabilities assumed (38)
- intangible assets recognised 174
-------------------------------- -------
Total net assets acquired 327
Goodwill recognised 76
-------------------------------- -------
403
-------------------------------- -------
Satisfied by:
- cash consideration 365
- retention amount 38
-------------------------------- -------
403
-------------------------------- -------
Net cash flow on acquisition:
Cash consideration 365
365
-------------------------------- -------
Intangible assets of $174,000 have been recognised comprising
on-going customer relationships that existed at the date of
acquisition and the 'Eauvell' brand name. The goodwill and
amortisation charges of the intangible assets are not expected to
be deductible for tax purposes.
Acquisition-related costs of $13,000 have been expensed as
incurred and are included in administrative expenses. Eauvell
contributed $168,000 of revenue and $43,000 of operating losses to
the Group's results for the period between the date of acquisition
and the balance sheet date. Had the acquisition of Eauvell occurred
on 1 January 2013, Group revenue would have been approximately
$338,000 higher and Group operating profit would have been
approximately $17,000 lower.
14. Acquisitions continued
Cool Clear Water Group Ltd
On 21 June 2013, the Group acquired 100% of the shares of Cool
Clear Water Group Ltd ("CCWG") for total consideration of $55.8
million. CCWG is the market leading POU operator in Australia. This
acquisition is a strategic expansion into a new geographical region
which secures a platform for growth and also strengthens the
group's recurring contracted revenue. The purchase price allocation
exercise is still in process and accordingly the fair values set
out below are provisional.
Provisional
fair value
$'000
-------------------------------- -----------
Net assets acquired:
- property, plant and equipment 12,288
- trade receivables 3,244
- other monetary assets 2,021
- monetary liabilities assumed (5,577)
- net deferred tax liability (4,646)
- intangible assets recognised 17,613
Total net assets acquired 24,943
Goodwill recognised 30,835
-------------------------------- -----------
55,778
-------------------------------- -----------
Satisfied by:
- cash consideration 54,412
- additional consideration 812
- working capital adjustment 554
55,778
-------------------------------- -----------
Net cash flow on acquisition:
Cash consideration 55,778
Less: cash acquired (152)
55,626
-------------------------------- -----------
Intangible assets of $17,613,000 have been recognised comprising
on-going customer relationships and brand value that existed at the
date of acquisition. The majority of the intangible asset value
relates to customer contracts and relationships, which represent
the future discounted cash flows arising on the customer base
allowing for customer attrition rates in revenue and profits from
these customers, and the balance of the asset value relates to the
trade name 'Culligan'. The intangible asset relating to customer
contracts and relationships is being amortised over ten years and
the trade name 'Culligan' is being amortised over 3.5 years.
Neither the goodwill nor the intangible assets recognised give rise
to a tax deduction. A deferred tax liability of $5,284,000 is
recognised in respect of these intangible assets with a
corresponding offset to goodwill. This deferred tax liability is
recycled through the income statement in line with the amortisation
charges of the related intangible asset.
Goodwill of $30,835,000 arising from the acquisition relates to
the value of the assembled workforce, the synergistic nature of the
acquisition due to long-term cross-selling opportunities, potential
cost savings, and the expected future growth of the business.
Acquisition-related costs of $1,116,000 have been expensed as
incurred and are included in administrative expenses. CCWG
contributed $11,320,000 of revenue and $2,078,000 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 CCWG
occurred on 1 January 2013, Group revenue would have been
approximately $10,089,000 higher and Group operating profit would
have been approximately $1,852,000 higher. There was an asset
purchase and restructure in the period prior to acquisition which
means actual performance pre-acquisition is not reflective of the
business structure that was acquired by Waterlogic. Therefore this
uplift approximation is calculated by pro-rating the year-to-date
results in place of using actual performance pre-acquisition.
TaylorMade Water Systems Inc
The Group made a further payment of $19,000 in relation to the
acquisition of Taylormade during the current year with a
commensurate increase in Goodwill. The Group re-evaluated the
amount recorded for contingent consideration recognised in relation
to TaylorMade Water Systems Inc, increasing both contingent
consideration payable and goodwill by $963,000 as a measurement
period adjustment in relation to the acquisition of that
entity.
15. Notes to the cash flow statement
Year ended
31 December
---------------
2013 2012
$'000 $'000
---------------------------------------- ------- ------
Movements in working capital
Decrease/(increase) in trade and other
receivables 1,268 (451)
(Increase)/decrease in inventories (2,814) 362
Increase in trade and other payables 2,783 2,129
Decrease in deferred revenue (1,046) (124)
---------------------------------------- ------- ------
Net effect of working capital movements 191 1,916
---------------------------------------- ------- ------
Net cash and cash equivalents
Cash and cash equivalents 16,619 30,154
Bank overdrafts - (344)
---------------------------------------- ------- ------
Net cash and cash equivalents 16,619 29,810
---------------------------------------- ------- ------
Net 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.
16. Share based compensation
Performance Share Plan and Non-Executive awards
At the date of the Company's Admission to AIM 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; and/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 2018.
Options under Non-Executive awards are held by Benoît 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 2013 is as follows:
Number
------------------------------------------------------- ---------
Continued employment only (including the Non-Executive
Awards) 824,445
Continued employment and EBIT for a specific
fiscal year 1,128,116
Continued employment and TSR for a specific
period 1,425,831
Continued employment and other non-market conditions 81,097
------------------------------------------------------- ---------
3,459,489
------------------------------------------------------- ---------
There are 43 beneficiaries of the PSP as at 31 December 2013
(2012: 37). The weighted average fair value of each award made in
2013 is $1.94 (2012: $2.78).
Details of awards outstanding under the PSP are as follows:
2013 2012
Performance Share Plan ("PSP") Number Number
------------------------------------- ----------- ---------
Outstanding at beginning of period 4,649,482 4,192,788
Granted during the period 805,000 2,054,240
Forfeited during the period (19,729) (839,692)
Exercised during the period (835,640) -
Expired during the period (1,139,624) (757,854)
------------------------------------- ----------- ---------
Outstanding at the end of the period 3,459,489 4,649,482
------------------------------------- ----------- ---------
Exercisable at the end of the period 518,134 835,640
------------------------------------- ----------- ---------
The weighted average share price at the date of exercise for
share options exercised during the period was $2.57 (2012: none
exercised).
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 $1,709,000 (2012:
$1,630,000).
The weighted average remaining contractual life of the awards
outstanding at 31 December 2013 is 2.5 years (2012: 2.7 years). In
2013, awards were granted on 12 July. The aggregate of the
estimated fair values of awards issued on those dates is
$1,563,000. In 2012, awards were granted on 11 June, 27 and 28
September and 1 October. The aggregate of the estimated fair values
of awards issued on those dates was $5,705,000.
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 an appropriate statistical model. This initial valuation
remains fixed throughout the life of the award, irrespective of the
actual performance. Where a lapse occurs on non-market based
options due to the cessation of employment the cumulative charge
taken to date is reversed.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSIFALFLSEEL
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