Half-yearly Report

Half-yearly Report

Watermark Global

1 September 2009

Watermark Global Plc

(“Watermark” or the “Company”)

Interim Results for the six months Ended 30 June 2009

Watermark Global ( WET:LSE), the AIM quoted company that focuses on the treatment of Acid Mine Drainage in South Africa announces its Interim Results today.

Highlights:

  • Raised in excess of £2 million in June 2009
  • Completed the pre-feasibility study
  • Progressed the Definitive Feasibility Study (DFS), expected to be completed by end September 2009
  • Environmental Impact Assessment (EIA) in final stages of the scoping phase & submission for formal approval expected by the end September 2009.
  • Loss from ordinary activities for 6 months to end June was £ 432,000, a loss of 0.15p per share

Peter Marks, Chairman of Watermark, commented:

'We are pleased with the substantial progress Watermark has made in the six months to 30 June 2009. There remain a number of key milestones which the Company has to meet in the second half of 2009, and we are confident in our ability to accomplish these as planned and on time.

The Company has advanced from the conceptual stage of the project to a solid business proposition - backed by the results of pilot plant trials, selection of technology, feasibility studies, resource verification and a solid cash position. Your Company has been heavily engaged on several fronts, with all activities being undertaken with a small and energetic staff, headquartered in Pretoria- South Africa

We have reviewed the pre-feasibility study, raised further funds and made substantial progress with the Definitive Feasibility Study (DFS). In addition, and crucially for the project, the application process for the Environmental Impact Assessment (EIA) has begun and whilst there remain bridges to cross, we are confident that we will achieve the milestones associated with this phase of the project. The public consultation process, which began in April 2009, has so far been successful. It is noticeable that to date feedback from the public has been that it has been genuinely impressed with our objectives and overall plan.

The annual report previously released stated our intention to submit our EIA to the Government authorities in September 2009 and we are on track to achieve this timeframe. The completion of the DFS, is now expected to be in September, a few weeks later than the original date set. This is due to the late start of the thermal engineering design process and EIA protocols as announced previously.

At this stage, it may be useful to re-iterate our expected timetable of the next key milestones:

  • Engineering Designs
  -   August 2009
  • Submission of Integrated Regulatory Assessments
- September - October 2009
  • Completion of Bankable Feasibility Study
- end September 2009
  • Memorandum of Understanding with Rand Water
- October 2009
  • Authorisation of Environmental Impact Assessment
- December 2009
  • Binding agreement with Rand Water
- December 2009
  • Commencement of Plant Construction
- January 2010
  • Commissioning of Plant
- January 2011
  • Full Production
- March 2011

Due to the nature of the project and its dependence on Government approval as well as further financing, these timelines could be delayed.

As shareholders will be aware, a significant amount is still to be to achieved for the remainder of the year and beyond. We were very encouraged by the response to our fund raising in June this year when we raised over £2 million. This was augmented by a non-recourse loan of ZAR 10m from the Development Bank of South Africa. This is continuing to fund our DFS and provide working capital. We will also need to raise additional capital to fund the capital construction costs of the plant. As stated previously, we are hopeful that this financing can be finalised by December this year. The type of project financing required has not been finalised at this stage. In addition, we are hoping to announce a Black Economic Empowerment Partner for our project in the second half of this year.'

Results Summary

The loss from ordinary activities for the six month period ended 30 June 2009 was £ 432,000 a loss of 0.15p per share. This loss is inclusive of non-recurring development costs with respect to the water project in South Africa. The net cash position of the Company at 30 June 2009 was approximately £1.762m.

Enquiries:

Watermark Global

   
 
Dirk Kotze, Chief Financial Officer Tel: + 44(0) 20 7233 1462

dkotze@watermarkglobalplc.com

 
Charles Zorab, Investor Relations Tel: + 44(0) 20 7233 1462

czorab@watermarkglobalplc.com

 

Nominated Adviser

 
Cenkos Securities
 
Ian Soanes/Elizabeth Bowman Tel: +44(0) 20 7397 8900
 
Financial PR
 
Bishopsgate Communications
 
Robyn Samuelson/Giang Nguyen Tel: +44(0) 207562 3350

CHAIRMAN’s STATEMENT

The last six months has been an extremely busy and productive time for Watermark and its small professional team. We successfully completed a fundraising in June which raised over £2m which followed on from the Development Bank of South Africa’s non-recourse loan of ZAR10m announced in February. Funds from these sources currently are paying for the work on the Definitive Feasibility Study (DFS).

Since completing the Pre-Feasibility Study in October 2008, we have been engaged in negotiations on several fronts pushing forward Watermark’s Acid Mine Drainage (AMD) sustainable solution to mining groups, regulatory bodies, government authorities potential customers, engineering and environmental consultants, and financial institutions. The Company has entered a very important and exciting phase in the projects development.

To reiterate the key milestones in our programme moving forward are:

  • Engineering Designs
  -   August 2009
  • Submission of Integrated Regulatory Assessments
- September - October 2009
  • Completion of Bankable Feasibility Study
- end September 2009
  • Memorandum of Understanding with Rand Water
- October 2009
  • Authorisation of Environmental Impact Assessment
- December 2009
  • Binding agreement with Rand Water
- December 2009
  • Commencement of Plant Construction
- January 2010
  • Commissioning of Plant
- January 2011
  • Full Production
- March 2011

Due to the nature of the project and its dependence on Government approval as well as further financing, these timelines could be delayed.

Costing of the collection and distribution network of piping (72.7 km) has been completed and WUC is currently finalising the construction packages for this part of the project which will include the engineering to a level that will provide a capital estimate to within a 10% accuracy level.

Engineering designs for the water treatment section of the plant are on track and due for completion by the end of August 2009 or shortly thereafter. WUC currently envisages some delay in the thermal design portion of the plant, due to the outstanding integration methodologies between the water and thermal portions of the plant. This is because of unexpected delays experienced in the capital raising during the second quarter of 2009, which, as a consequence, hampered the execution of detailed engineering on the thermal phases.

The Environmental Impact Assessment (EIA) is proceeding according to plan and the EIA submission for formal approval is expected by the end of September 2009. The EIA has reached the final stages of the Scoping Phase. This should provide the Company with sufficient time for authorisation in order to proceed with construction by the first quarter of 2010, subject to the required project finance being available and in place.

The Integrated Water Use License Application, Air, Noise and Visual Impact Assessment, Heritage Impact Assessment and Public and Worker Safety Assessments will all be submitted as part of the Environmental Impact Assessment. All of the above submissions will be subject to authorisation by the regulatory authorities within a statutory time frame of 45 days which is expected to occur by December 2009.

Golder Associates, a well known firm of consultants, has been contracted as an independent third party to sign off on the DFS. It is envisaged that as a result of certain delays the DFS will now be completed by the end of September 2009 due largely to the late start of the thermal engineering design process and EIA protocols.

WUC remains confident at this stage that construction will still be able to commence in January 2010, as previously announced. This is however dependent upon reaching financial closure on the main Project Financing package which will be based on the outcomes of the DFS at the end of September 2009. Work on securing the required project financing has commenced and the expected timing for this financing to be in place is by December 2009.

The off-take agreement with Rand Water (RW) is currently being negotiated. In order to conclude the off-take agreements, WUC and RW need to agree on the quality control protocols and price of the final water product to be delivered to RW.

At the same time, WUC is not in a position to conclude the pricing with RW until the engineering and costing studies have been completed. WUC is working towards signing a Memorandum of Understanding (MOU) with RW, whereby RW will, in principle, purchase the water from WUC on condition that the water quality and price can be agreed upon. Concluding a satisfactory agreement with RW is seen as a critical component to the economic and operational integrity of the project.

A new and significant development which has arisen this year is that WUC is currently investigating a partnership with a Black Economic Empowerment (BEE) group. The Department of Water Affairs and Environment (DWAE) has issued a Guideline document for BEE relating to all future Water Use License Applications (WULA). Although the Guidelines do not specify the percentage BEE required, it has become clear to WUC and Watermark Global that they will be encouraged by the key regulators to include a BEE structure. For this reason WUC has appointed Advocate Jerome Brauns to formulate a broad based Black Economic Empowerment structure which will comply both with the Mining Charter and the Guidelines for WULA as envisaged by DWAE.

The Board views the coming months as critical to Watermark’s development. A key part of this next step is the securing of the significant amount of project finance required to construct the necessary infrastructure. Various capital structures are being modelled and reviewed and we are continuing to work very closely with our financial advisers in relation to this aspect of the project. No decisions have as yet been taken on the optimal project finance structure, however we are encouraged by the number of financial institutions in South Africa and elsewhere who have expressed a keen interest to be involved in the project as it is seen to be commercially attractive and essential to the well being of the region and its people.

I would like to thank all our management, staff, shareholders and other stakeholders for their continuing support and interest in the Company’s activities.

Peter Marks

Chairman

1 September 2009


Condensed Consolidated Income Statement for the period ending 30 June 2009

  Six Months ended
30/06/09       30/06/08
£ ‘000 £ ‘000
  Note
 
Continuing Operations
 
Revenue 37 69
 
Cost of Sales (10) (44)
   
Gross Profit 27 25
 
Investment Revenue 6 53
Other gains and losses 81 -
Administrative expenses (424) (418)
Share based Payments (122) (875)
Loss on disposal of subsidiary - (277)
   
Loss before tax (432) (1 492)
 
Taxation 4 - -
   
Loss for the period from continuing operations (432) (1 492)
 
Discontinued Operations
 
Loss for the period from discontinued operations - (130)
   
Loss for the period (432) (1 622)
 
Attributable to:
 
Equity holders of the parent (432) (1 622)
 
Loss per Share
 
From continuing and discontinued operations
 
Basic Loss per share 5 0.15p 0.66p
 
Diluted Loss per share 0.15p 0.66p
 
From continuing and discontinued operations
 
Basic Loss per share 5 0.15p 0.72p
 
Diluted Loss per share 0.15p 0.72p



Condensed consolidated balance sheet for the period at 30 June 2009

       
  30/06/09 31/12/08
Note £ ‘000 £ ‘000
 
Non-current assets
Fixed assets 6 2,105 667
Deferred Tax 100 100
2,205 777
Current assets
Receivables - amounts falling due within one year 35 555
Cash and cash equivalents 1,763 651
1,798 1,206
   
Total Assets 4,003 1,983
 
Equity and Liabilities
Capital and Reserves
Called up share capital 7 1,019 379
Share premium account 7 9,547 8,054
Reserves 8 1,445 1,469
Profit and loss account (8,923) (8,491)
Equity attributable to Equity Holders of the Parent Company 3,088 1,411
 
Current Liabilities
Trade and other Payables 913 572
Provisions 2 -
915 572
   
Total Equity and Liabilities 4,003 1,983



Condensed consolidated statement of recognized income and expense for the period ended 30 June 2009

       
Six Months ended
30/06/09 30/06/08
£ ‘000 £ ‘000
 
Loss for the period (432) (1,622)
Loss for the period (432) (1,622)
Exchange difference on translation of overseas operations (13) (138)
Total recognized income and expenses in the period (445) (1,760)



Condensed consolidated statement of changes in equity for the period ended 30 June 2009

  Issued Capital   Share Premium   Reserves   Retain Earnings   Total
Balance 1/01/08 337 6,671 1 139 (5,583) 2,563
Changes in Equity 2008 -
Exchange gains - - (138) - (138)
Loss from Operations - - - (1,621) (1,621)
Share Based Payments 17 657 202 - 875
Balance 30/6/2008 353 7,328 1 203 (7,204 ) 1,679
 
Balance 1/01/09 353 8,054 1 468 (8,491) 1,384
Changes in Equity 2009 -
Exchange gains - - (13) - (13)
Loss from Operations - - - (432) (432)
Share Based Payments 66 93 (10) - 149
Issue of Shares 600 1,400 - - 2,000
Balance 30/6/2009 1,019 9,547 1,445 (8,923) 3,088



Condensed Consolidated Cash Flow Statement for the period ended 30 June 2009

       
  Six Months ended
Note 30/06/09 30/06/08
£ ‘000 £ ‘000
 
Net cash outflow from operating activities 9 537 (780)
 
Interest received 6 53
Proceeds from disposal of fixed assets 6
Acquisitions of fixed assets (1,438) (115)
   
Net cash used in investing activities (1,426) (62)
 
Proceeds from the issue of ordinary shares 2,000 -
   
Net cash from financing activities 2,000 -
 
Net increase/(decrease) in cash and cash equivalents 1,111 (842)
 
Cash and cash equivalents at 1 January 651 2,106
   
Cash and cash equivalents at 30 June 1,762 1,264



Historical cost profits and losses

There was no difference between the reported loss before taxation and the historical cost loss before taxation for the period.


Notes to the condensed consolidated financial statement for the period ended 30 June 2009

1. Basis of accounting

The condensed interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standards (IAS) 34 Interim Financial Reporting.

2. Significant accounting policies

The condensed interim financial statements have been prepared under the historical cost convention. The same accounting policies, presentation and method of computation are followed in these condensed financial statements as were applied in the preparation of the Group’s Annual financial statements for the year ended 31 December 2008.

3. Segment information

The following is an analysis of the Group’s revenue and results by operating segment for the periods under review. For management purposes the group is organized into two operating divisions; Corporate and water technology. These divisions are the basis on which the Group reports its primary segment information. This information also represents the geographical segments being the United Kingdom and South Africa. For practical purposes the group’s office in Australia was included in the result of the corporate segment. The Australian office was closed down in 2008.

  Revenue       Results
Six Months ended Six Months ended
30/6/2009       30/6/2008 30/6/2009       30/6/2008
£ ‘000 £ ‘000 £ ‘000 £ ‘000
Continuing operations
 
Corporate -United Kingdom - - (349) (1,389)
Water technology - South Africa 39 69 (89) (148)
39 69 (438) (1,537)
 
Discontinued Operations
 
Corporate Australia - 0.043 - (138)
       
39 69 (438) (1,675)
 
Finance Income 6 53
Loss before tax (432) (1,622)
Income tax credit - -
Loss for the period (432) (1,622)

All the segment revenue reported above is from external customers. The segment results for each one of the segment is the net result for each segment, including finance cost, but excluding finance income and taxation.

The following is an analysis of the Group’s assets by segment.

    30/6/2009       31/12/2008
£ ‘000 £ ‘000
Continuing operations
 
Corporate -United Kingdom 1,676 100
Water technology - South Africa 2,327 1,843
4,003 1,943
Discontinued Operations
 
Corporate Australia 0 40
   
Total Segment Assets 4,003 1,983

4. Income tax

No provision has been made for income tax for the interim period.

5. Loss per share

From continuing and discontinued operations

The calculation of the basic loss per share is based on the following data:

    Six Months ended    
30/06/09       30/06/08
£ ‘000 £ ‘000
Earnings
 

Loss for the purpose of basic and diluted loss per share
for the period attributable to equity holders of the parent for the period attributable to equity holders of the parent

(432) (1,622)
 
Number of Shares
 

Weighted average number of ordinary shares for the purpose
of basic loss per share of basic loss per share

284,838,416 225,414,110

From continuing operations

Earnings figures are calculated as follows:

  Six Months ended
30/06/09       30/06/08
£ ‘000 £ ‘000
 

Loss for the purpose of basic and diluted loss per share
for the period attributable to equity holders of the parent for the period attributable to equity holders of the parent

(432) (1,622)
 
Less loss for the period from discontinued operations - 130
   

Loss for the purpose of basic and diluted loss per share
for the period from continuing operations for the period from continuing operations

(432) (1,492)
 
*The denominators used are the same as those detailed above.

The calculation of diluted loss per share is based on the weighted average number of shares outstanding adjusted by the dilutive share options. The weighted number of shares outstanding is (2009: 309,925,416). On the assumptions that the share options, which would give rise to the dilution, may not be exercised due to current losses, the diluted loss per share has been stated at the same figure as the basic loss per share.

6. Property Plant and Equipment

During the period under review the Group commenced with the Definitive Feasibility Study, which includes the costing and engineering for the proposed new water treatment facility, as well as the collection and distribution network for AMD and drinking water. The total cost to date is approximately £ 1.4m and the study will be completed in the third quarter of 2009.

The group also disposed of equipment relating to the original pilot plants with a carrying amount of £ 67 000 for proceeds of £ 79 000.

7. Share based transactions

During the period under review the company completed a capital raising of £2m through the placement of 400,000,000 ordinary shares at 0.5p. In addition a total number of 24,000,000 shares were issued in settlement of commission relating to the completion of the capital raising.

Directors’ transactions

The company issued 2,000,000 ordinary shares at 0.61p per share in settlement in respect of its Directors past services. The shares were issued as follows;

  No of shares       £
Dirk Kotze 2,000,000 12,200
   
2,000,000 12,200

8. Reserves

  Six Months ended
30/06/09       30/06/08
£ ‘000 £ ‘000
 
Share option reserve 1,408 1,284
Foreign currency translation 37 (81)
1,445 1,203

9. Notes to the condensed consolidated cash flow statement for the period ended 30 June 2009

  Six Months ended
30/06/09       30/06/08
£ ‘000 £ ‘000
 
Net cash outflow from operating activities
Operating loss (439) (1,675)
Loss on disposal of Investment - 277
Depreciation charges 5 15
Decrease/ (Increase) in debtors 520 (70)
(Decrease)/Increase in creditors 342 (64)
Foreign exchange (13) (138)
Share based payments 122 875
   
537 (780)

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