Waterlogic Publish Interim Results For The Six Months Ended 30 June 2012
September 17, 2012
Group revenue increased 19% to USD 46.5 million (H1 2011: USD 39.0 million)
Waterlogic Plc, designer, manufacturer and distributor of point-of-use (POU) drinking water purification and dispensing systems, announces its unaudited interim results for the six months ended 30 June 2012.
Group highlights
• Healthy organic growth seen in business-to-business (B2B) direct, and rental and service channels (10% and 18% respectively) offset by difficult macroeconomic conditions impacting B2B indirect channel with organic decline in revenue of 13%
• B2B rental and service revenue increased to 37% of total revenue (H1 2011: 32%)
• Adjusted EBITDA decrease of 24% due to significant business-to-consumer (B2C) start-up costs, operating expenses within acquired businesses and increased cost base reflective of a listed entity on AIM
• Completed acquisitions of Prisme, DSK and Aqua Service during H1 and subsequently Taylor Made Water Systems Inc. – pipeline of future earnings enhancing acquisition opportunities remains attractive
• Advanced negotiations with leading European domestic appliances manufacturer and distributor to sell consumer products incorporating innovative Firewall™ ultra-violet ("UV") into up to 52 countries
• First commercial orders have been received under the previously announced seven year OEM supply agreement with a leading consumer products company
• Investment continues to be made in the innovative Firewall™ UV technology which has been incorporated into exciting new products for both the B2C and B2B sectors due for launch over the coming year
• New distributors added in Costa Rica and Guatemala, with further new partners scheduled for H2 in Italy, South East Asia and Latin America, helping to diversify the geographical dependency for the B2B indirect channel
• Group organised into two new business divisions, Waterlogic B2B led by Peter Cohen, and Waterlogic B2C led by Group CEO, Jeremy Ben-David
• Machines in field increased by 30,000 to 595,000
• After a challenging first half, management expect improving trading performance in the second half of the year
Results and Operations
Group revenue increased 19% to USD 46.5 million (H1 2011: USD 39.0 million). Direct sales revenue and revenue from rental and service both experienced healthy organic growth (10% and 18% respectively) but this was entirely offset by a decline in B2B indirect sales of 13% compared to H1 2011. In the B2B indirect channel, the difficult economic climate has caused some significant destocking by distributors as seen when a significant European client did not order products in H1 but started to place significant orders again in H2. In addition, indirect sales in the US continued to be impacted by the restructuring of a major US customer in the latter half of 2011, which lingered into the first half of 2012.
Regionally, organic revenue growth was strongest in Scandinavia (6%) and Germany (5%) but the decline in the indirect channel highlighted above saw falls in Ireland’s sales to third parties of 19% and revenue in the US unchanged year on year, with the US performance continuing to be impacted by the restructuring of a major customer as noted above. For the period ended 30 June 2012, gross profit was 25% higher than in the prior year at USD 27.8 million (H1 2011: USD 22.2 million) with acquisitions in 2012 contributing approximately USD 3.5 million.
The Group’s combined gross margin for the period has increased to 59.7% compared to 57.1% H1 2011 and 59.2% FY 2011 as a result of the increased weighting of direct, rental and service revenues within the Group’s overall revenue.
Whilst the change in mix has benefited the gross margin, the operating margin has been impacted by increased costs both related to the start-up of the Group’s B2C offering of USD 0.9 million (versus H1 2011: USD 0.2 million) and centrally due to additions to the support functions which were largely taken on board in H2 2011 (USD 0.7 million). Foreign exchange movements, in particular the strength of the dollar against the euro and Norwegian Kroner, also led to an exchange impact of USD 0.4 million compared to H1 2011. Separately, overheads in the businesses the Group acquired in 2012 represented an increase of USD 2.9 million and incremental overheads from a full six month period for 2011 acquisitions a further USD 0.7 million. Adjusting items, such as the share based incentives, were USD 1.1 million higher in H1 2012 compared to H1 2011.
Net finance costs fell from USD 0.7 million in H1 2011 to USD 0.2 million in H1 2012 following repayment of shareholder loans and certain US bank borrowings during the latter part of 2011.
Inventory rose by USD 0.6 million from 31 December 2011 to 30 June 2012, but USD 0.7 million related to inventory in businesses acquired in the period. The period end inventory days (119 days) were slightly higher than June 2011 (110 days).
Whilst revenue increased by 19%, trade and other receivables increased by only 9% (USD 1.8 million) between 31 December 2011 and 30 June 2012 due, in part, to both the non-linearity of monthly revenue and receivables within the businesses acquired in the period (USD 1.3 million).
The Group’s net cash fell from USD 50.6 million at 31 December 2011 to USD 37.0 million at 30 June 2012 with the majority of the cash outflow related to the three acquisitions made (USD 11.7 million) and the addition of further rental assets (USD 1.7 million).
Jeremy Ben-David, Waterlogic Group CEO, commented: “Our strategy of continuing to grow our recurring revenue base and our efforts to commercialise the innovative Firewall™ UV technology, helped the Company to progress significantly in H1 towards the goals outlined at the time of our IPO. I am particularly pleased with the advanced status of negotiations for a major contract with a leading European domestic appliances manufacturer and distributor in the B2C division.
The acquisitions we have made this year strengthen our position in core and new markets and we have already begun to see significant synergies with existing operations. While economic conditions have impacted order levels from our B2B customers, B2B direct sales and rental continue to experience healthy organic growth.
As with previous years, the Board expects the Group to experience a H2 weighting in terms of revenue. Although the economic outlook remains challenging, especially in Europe, we remain well positioned to continue to expand and invest in our operations, make attractive acquisitions and deliver growth.”
Directly released from Waterlogic Plc
Photo: waterlogic.com