Preliminary Results

RNS Number : 2894G
Water Intelligence PLC
27 June 2012
 



27 June 2012

 

Water Intelligence plc (AIM: WATR.L)

("Water Intelligence", the "Group" or the "Company")

 

Preliminary Results for the year ended 31 December 2011

 

Water Intelligence is a leading provider of water monitoring products and leak detection and remediation services.

 

Highlights

 

·              Revenue Growth 12% to $6.36m; Growth in all business segments

·              Operating profit of $98,727 (2010 loss $567,298)

·              Profit before tax and one off costs of $24,305 (2010 loss $187,275 before reverse acquisition costs)

·              Positive operating cash flow of $653,231 (2010 negative $315,010)

·              Positive start to 2012

 

Patrick DeSouza, Executive Chairman of Water Intelligence, comments:

 

"Everything, from market demand trends to financial and operating performance to new product development, headed in the right direction during 2011 to produce sustainable growth in underlying shareholder value.  We have achieved a positive start for 2012 that reinforces performance results in our core business including, because of acute demand for water management solutions, an extended sales life cycle for our Leakfrog product.  Commercialization for our new products will begin during the second half which will add further scale to our existing profitable and growing base.  We have made operating changes where necessary and will continue to do so to maintain performance.  As we execute on all cylinders, we plan for new channel partners and increased communications regarding achievements on both sides of the Atlantic as we build the Group."

 

Water Intelligence plc (www.waterintelligence.co.uk)


Patrick DeSouza, Executive Chairman

Tel: +1 203 654 5426



Merchant Securities Limited


David Worlidge

Tel: +44 20 7628 2200

 

Chairman's Statement

 

Overview

2011 was the first full year of operations for Water Intelligence plc (WI) after the reverse acquisition in July 2010 by American Leak Detection Holding Corp (ALDHC). The object of the acquisition was to create a market leader within a growing and increasingly salient global water infrastructure market. We are executing our corporate strategy to provide integrated water management solutions for utilities and commercial and residential customers.  The Group's smart metering products offered by Qonnectis Networks Limited (QN) alert customers to leaks and complement non-invasive water leak detection and remediation services provided by American Leak Detection Inc (ALD).  Our operating priority has been to ensure strong, sustainable and balanced growth and then scale rapidly with the introduction of new products to the existing customer base.  The full year results for 2011 show we are moving in the right direction on our key performance indicators to meet this operating priority.  Moreover, the first quarter of 2012 has further reinforced 2011 improvements as noted by our recent trading update and new Leakfrog sale to Thames Water announced on 17 May 2012.  We seek to commercialize our next generation products during the second half of 2012.

 

The year to 31 December 2011 saw revenue growth of 12% over 2010.  The operating performance of the Company steadily improved with a return to positive operating profits of $98,727 for the year to 31 December 2011 (2010 loss $567,298).  Finance costs meant that losses before tax were still incurred of $197,043 but this was a dramatic improvement over 2010 (Loss of $870,826).  Moreover, adjusted for one-off costs of $221,348, the severance costs of the former Chief Executive Officer, the Company returned to break-even heading into 2012, which as noted above, produced first quarter results reinforcing the positive direction. 

 

The Company also returned to positive operating cash flows for the year at $653,231 (2010: ($315,010). The interest and loan repayments meant that total cash resources reduced by $276,314 for the year.  Our balance sheet position improved as net debt was also reduced by approximately $400,000.

 

Continued Market Demand for Leakage Solutions. 

 

The worldwide market demand for our water saving products and services continues to develop and grow; the current water shortage in certain parts of the UK has highlighted the need for cost effective solutions such as ours. The £250,000 Leakfrog order from Thames in May 2012 is an indication of an extended sales life cycle to bridge current demand before the deployment of next generation solutions. The development of our Domestic Reporter and Commercial Reporter products, announced in 2011, has progressed with testing accelerating on Domestic Reporter due to customer needs.  We have some exciting market opportunities in sight for both products. The same market trends exist in the US, which is the Company's most developed market, and in Australia, our fastest growing international franchisee market.  During 2011 all regions of the US experienced sales growth at the same time and this has continued into the current year. 

 

Public recognition of the importance of saving water is only growing providing pressure on governments to make the necessary spend on products and services such as ours. The UK's OFWAT (water regulatory agency) indicated that as late as 2009-2010, the water companies in England and Wales lost approximately 3.3 billion litres per day from leakage (Source: BBC News Magazine, 4 April 2012 "Eight Radical Solutions for the Water Shortage").  In the U.S. and Canada, it has been reported that approximately 15% of daily drinking water is lost to leakage; and in China and India, loss of drinking water from leaky pipes may reach up to 40% (Source: National Bank Financial, What the Looming Global Water Crisis Means for Investors August 2011).  We are well-positioned to provide solutions, especially with our product and services mix for the residential market.

 

UK Product Market. In developing our Domestic Reporter and Commercial Reporter products, we have chosen to work with potential customers in designing and refining the functionality of our products.  Hence testing has taken longer than expected but we are hoping to be more responsive to the requirements of big customers.  Domestic Reporter is a wireless product to allow households to monitor water usage, usage over the previous day, week or month and the projected cost of their annual water bill based on the usage at the time, as well as, alerting the homeowner to leaks. Our development partners have 10.4 million customers combined which, together with other water utility companies, offers a huge market opportunity for an easy to use product designed to help reduce water consumption and to address the continuing problem of water leakage. We anticipate commercialization of Domestic Reporter to commence in the second half of the 2012.  Meanwhile, our Commercial Reporter is a low cost data logger and automatic meter reading unit that allows corporate water users to closely monitor water usage and can be used by water utilities to intensively monitor usage in a specific geographic area and offer their customers managed services. We are working with channel partners on a go-to-market plan and making adjustments to functionality to respond to market demand.

 

U.S. Services Market. All regions of the US experienced sales growth.  Royalty income grew by 6.6% to $4,131,459 and we are pleased to see this trend is continuing into 2012.  During March 2012, the US Environmental Protection Agency (EPA) celebrated its fourth annual "Fix a Leak Week" and called attention to the importance of fixing residential leaks. The EPA estimated that approximately 1 trillion gallons of water is lost annually from residential leaks or an amount equal to the annual water use in Los Angeles, Chicago and Miami combined.  Moreover, the EPA has pointed out that 10% of the homes in the US waste approximately 90 gallons of water per day due to leakage and that homeowners could save 10% on their water bills by fixing leaks.  As macroeconomic conditions continue to improve in the United States, more homeowners are calling ALD to help save water.  Our nationwide footprint of franchise operations in 42 states of the US makes us a market leader in a fragmented market for solution providers and we are working towards achieving national accounts for the enhanced deployment of our leak detection services. We are currently working with a channel partner to extend our leak detection services in a greater way to the municipal market.

 

Financial Results and Operating Priorities

 

As noted above, we are headed in the right direction with improved operating performance. Strong, sustainable and balanced growth is our priority. Revenues increased 12% to $6,358,272 in 2011 as compared to $5,698,024 in 2010.  Moreover, the Group returned to operating profits and, as noted, excluding the one-time costs, it reached breakeven with respect to profit before tax. This result was a big change from 2010.  Our key performance indicators - franchise royalties, corporate stores, and net debt - all improved over 2010.  Franchise royalties increased 6.6% to $4,131,459 which represented 65% of total revenues. It is pleasing that the other areas of the business also increased resulting in overall franchise income representing a decrease in the proportion of total revenues when compared to 2010.  Hence, while, our core franchise business is growing, we are also becoming more diversified with growth in product and equipment sales.  We see these segmental trends towards robust diversified sources of revenue continuing especially in light of Thames's recent purchase of £250,000 of Leakfrogs, and the anticipated introduction of our next generation Reporter products.

 

Outlook

 

We have a big opportunity ahead of us and a return to profitability was a prerequisite.  Hence, while we might have proceeded faster with our product development, we feel that we took measured steps with our potential customers to manage working capital properly. In this light, 2011 was a good start with a return to operating profits and the positioning of the Company for scalable growth through the development of new smart metering products that will augment our services business. We are pushing ahead with our operating priorities to build sustainable shareholder value. We are experiencing in our core US based business continued growth in 2012 adding momentum to the progress made in 2011.  Now that the development phase of our UK products is complete and we plan to begin commercialization, we will reinforce our ALD base for the future with the right investments during the second half of 2012.  

 

Given market demand for water solutions, we are well-positioned relative to other companies in sectors that are more susceptible to choppy macroeconomic conditions and companies in our own sector that do not have our suite of product offerings and existing services footprint.  With board, management and franchisees aligned, we look forward to sustainable, long-term growth.

 

Dr. Patrick DeSouza

Executive Chairman

 

 

27 June 2012

 



 

Consolidated Statement of Comprehensive Income for the year ended 31 December 2011


 

 

Notes

Year ended

31 December 2011

Year ended

31 December

2010



$

$





Revenue

3

6,358,272

5,698,024





Cost of sales


(498,704)

(355,342)





Gross profit


5,859,568

5,342,682

Administrative expenses




-             Share-based payments


(36,643)

(20,399)

-             Impairment of goodwill


(75,000)

-

-             Reverse acquisition costs


-

(681,893)

-             Amortisation of intangibles


(264,062)

(322,395)

-             Other administrative costs


(5,385,136)

(4,885,293)

 

Total administrative expenses


 

(5,760,841)

 

(5,909,980)





Operating profit/(loss)


98,727

(567,298)





Finance income


22,808

19,103

Finance expense


(318,578)

(322,631)





Loss before tax


(197,043)

(870,826)

Taxation (expense)/credit

4

(264,145)

1,658





Loss for the year


(461,188)

(869,168)





Other Comprehensive Income




Exchange differences arising on translation of foreign operations


 

34,031

 

(18,833)

Total comprehensive loss for the year


 

(427,157)

 

(888,001)





Loss per share


Cents

Cents

Basic

5

(4.5)

(21.9)

Diluted

5

(4.5)

(21.9)

 

The results reflected above relate to continuing activities. The loss for the current and prior year and the total comprehensive loss for the current and prior year are wholly attributable to equity holders of the Parent Company, Water Intelligence plc.



 

Consolidated Statement of Financial Position as at 31 December 2011


Notes

2011

2010



$

$

ASSETS




Non-current assets




Goodwill

6

2,294,940

2,369,940

Other intangible assets


3,709,060

3,973,122

Property, plant and equipment


35,692

76,729

Deferred tax asset


55,218

279,388

Trade and other receivables


44,839

52,439



 

6,139,749

 

6,751,618





Current assets




Inventories


91,270

242,049

Trade and other receivables

7

779,840

825,487

Corporation tax


62,724

35,335

Cash and cash equivalents


364,099

606,382



 

1,297,933

 

1,709,253

 

TOTAL ASSETS


 

7,437,682

 

8,460,871





EQUITY AND LIABILITIES




Equity attributable to holders of the parent




Share capital


12,716,863

12,716,863

Share premium


4,203,812

4,203,812

Capital redemption reserve


6,517,644

6,517,644

Merger reserve


8,501,150

8,501,150

Other reserves


69,925

601

Reverse acquisition reserve


(27,758,088)

(27,758,088)

Retained loss


(1,167,365)

(706,177)



 

3,083,941

 

3,475,805





Non-current liabilities




Borrowings

8

2,582,964

3,086,408

Promissory notes

8

-

85,222

Provision for onerous contracts


72,359

193,218



 

2,655,323

 

3,364,848





Current liabilities




Trade and other payables

9

970,984

884,264

Borrowings

8

600,521

632,439

Promissory notes

8

7,272

16,880

Provision for onerous contracts


119,641

86,635



 

1,698,418

 

1,620,218

 

TOTAL EQUITY AND LIABILITIES


 

7,437,682

 

8,460,871

 



 

Consolidated statement of changes in equity for the year ended 31 December 2011


 

Share

Capital

 

Share

Premium

Capital

Redemption

Reserve

Reverse

Acquisition

Reserve

 

Merger

Reserve

 

Other

Reserves

Retained

Profit/

(Loss)

 

Total

Equity


$

$

$

$

$

$

$

$

As at 1 January 2010

84

1,924,895

-

-

-

-

162,991

2,087,970

Parent Company equity reflected on reverse acquisition

 

 

18,853,090

 

 

2,510,565

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

21,363,655

Issue of shares

237,908

-

-

-

-

-

-

237,908

Issue of consideration shares

 

114,880

 

-

 

-

 

(27,758,088)

 

8,501,150

 

-

 

-

 

(19,142,058)

Reverse acquisition adjustment

 

(84)

 

(1,924,895)

 

-

 

-

 

-

 

-

 

-

 

(1,924,979)

Issue of open offer shares

 

3,525

 

260,857

 

-

 

-

 

-

 

-

 

-

 

264,382

Issue of shares to advisers and creditors

 

1,289

 

95,337

 

-

 

-

 

-

 

-

 

-

 

96,626

Issue of re sub-underwriting shares

 

13,748

 

1,017,341

 

-

 

-

 

-

 

-

 

-

 

1,031,089

Conversion of loan notes

 

10,067

 

583,972

 

-

 

-

 

-

 

-

 

-

 

594,039

Cost of raising equity

-

(264,260)

-

-

-

-

-

(264,260)

Cancellation deferred shares

 

(6,517,644)

 

-

 

6,517,644

 

-

 

-

 

-

 

-

 

-

Share based payment expense

 

-

 

-

 

-

 

-

 

-

 

19,434

 

-

 

19,434

Total comprehensive loss

 

-

 

-

 

-

 

-

 

-

 

(18,833)

 

(869,168)

 

(888,001)

As at 1 January 2011

12,716,863

4,203,812

6,517,644

(27,758,088)

8,501,150

601

(706,177)

3,475,805

Share based payment expense

 

-

 

-

 

-

 

-

 

-

 

36,643

 

-

 

36,643

Foreign exchange






(1,350)


(1,350)

Total comprehensive loss

 

-

 

-

 

-

 

-

 

-

 

34,031

 

(461,188)

 

(427,157)

As at 31 December 2011

 

12,716,863

 

4,203,812

 

6,517,644

 

(27,758,088)

 

8,501,150

 

69,925

 

(1,167,365)

 

3,083,941

 

The following describes the nature and purpose of each reserve within owners' equity:

 

Share capital

Amount subscribed for share capital at nominal value.

Share premium

Amount subscribed for share capital in excess of nominal value.

Capital redemption

Non-distributable reserve in relation to cancellation of deferred shares

Retained profit/(losses)

Cumulative net losses recognised in the Financial Statements

Reverse acquisition

Non-distributable amount arising on the reverse acquisition. 

Other reserves

Amounts recognised for the fair value of share options granted in accordance with IFRS 2 and exchange differences on translating foreign operations.

Merger reserve

Non-distributable reserve arising on reverse acquisition

 



 

Consolidated statement of cash flows for the year ended 31 December 2011

 

 

 

 

 

Year ended

31 December

2011

Year ended

31 December

2010


Notes

$

$





Net cash generated from/(used in) operating activities


 

653,231

 

(315,010)





Cash flows from investing activities




Interest received


22,808

19,103

Interest paid


(318,578)

(322,631)

Purchase of plant and equipment


(3,883)

(7,124)

Sale of fixed assets


300

801

Trade notes issued


-

105,993

 

Net cash used in investing activities


 

(299,353)

 

(203,858)





Cash flows from financing activities




Proceeds from borrowings


-

4,000,000

Principal payments on long term debt and promissory notes


(630,192)

(4,776,392)

Repayment of obligations under finance leases


-

(16,617)

Proceeds  from issue of shares


-

1,295,471

Fees associated with share issue capitalised


-

(264,260)

Proceeds from issue of convertible loan notes


-

452,883

 

Net cash (used in)/from financing activities


 

(630,192)

 

691,085





Net (decrease)/increase in cash and cash equivalents


(276,314)

172,217

 

Cash and cash equivalents at the beginning of year


 

606,382

 

369,650

Cash acquired on Reverse acquisition


-

83,348

Effect of foreign exchange rate changes


34,031

(18,833)

 

Cash and cash equivalents at end of year


 

364,099

 

606,382

 



 

1.         General information

 

The Group is a leading provider of water monitoring products, leak detection equipment and remediation services. The Group's strategy is to focus on providing a critical mass of water management products and services and to be a "one-stop" shop for leak alerts, precision, non-invasive leak detection and remediation.

 

The Company is a public limited company domiciled in the United Kingdom and incorporated under registered number 03923150 in England and Wales. The Company's registered office is Hexagon Business Centre, Hexagon House, Station Lane, Witney, Oxfordshire OX28 4BN.

 

The Company is listed on AIM of the London Stock Exchange. These Financial Statements were authorised for issue by the Board of Directors on 27 June 2012.

 

2.         Significant accounting policies

 

Basis of preparation

These Financial Statements of the Group and Company are prepared on a going concern basis, under the historical cost convention (with the exception of share based payments and goodwill) and in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the International Accounting Standards Board (IASB) and adopted by the European Union, in accordance with the Companies Act 2006. The Parent Company's Financial Statements have also been prepared in accordance with IFRS and the Companies Act 2006.

 

The preparation of Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.

 

The estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

The Financial Statements are presented in US Dollars ($), rounded to the nearest dollar.

 

Going concern

The Group's business activities, together with factors likely to affect its future development, performance and position are set out in the Directors' Report and the Chairman's Statement.

 

The Directors have prepared a business plan and cash flow forecast for the period to 30 June 2013. The forecast contains certain assumptions about the level of future sales and the level of gross margins achievable. These assumptions are the Directors' best estimate of the future development of the business. The Directors acknowledge that the Group in the near-term trading is reliant on cash generation from its US-based royalty income. The achievement of a successful product development and subsequent sales initiative will require additional working capital finance to be put in place. The Directors believe that the funding will be able to be made available on a case by case basis such that the group will have adequate cash resources.

 

The Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future and accordingly, continue to adopt the going concern basis in preparing the financial statements.

 

Basis of consolidation

The Group financial statements consolidate the accounts of Water Intelligence plc and all of its subsidiary undertakings made up to 31 December 2011.  The Consolidated Statement of Comprehensive Income includes the results of all subsidiary undertakings for the period from the date on which control passes. Control is achieved where the Company (or one of its subsidiary undertakings) obtains the power to govern the financial and operating policies of an investee entity so as to derive benefits from its activities.

 

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement

 

The prior year acquisition of ALDHC was, under IFRS3, accounted for as a reverse acquisition. The assets and liabilities revalued at their fair value on acquisition therefore related to the Company. A reverse acquisition reserve was created to enable the presentation of a consolidated statement of financial position which combines the equity structure of the legal parent with the reserves of the legal subsidiary

 

Inter-company transactions and balances and unrealised gains or losses on transactions between group companies are eliminated in full.

 

3.         Revenues

 

In the opinion of the Directors, the operations of the Group currently comprise four operating segments, being the franchises, corporate owned stores, other activities including product and equipment sales and head office costs.

 

The Group mainly operates in the US, with operations in the UK and certain other countries. In 2011 96% (2010 94%) of its revenue came from the US based operations, the remaining 4% (2010 6%) of its revenue came from either UK or overseas based operations.

 

No single customer accounts for more than 10% of the Group's total external revenue.

 

Segment information

Information reported to the Group's Chief Operating Decision Maker (being the Executive Chairman), for the purpose of resource allocation and assessment of division performance is separated into four segments:

-               Franchisor royalties revenue less US head office costs

-               Corporate-operated stores revenues less direct stores costs

-               Other activities including product and equipment sales

-               Unallocated head office costs.

 

The following is an analysis of the Group's revenues and results from operations and assets by business segment:

Revenue


Year ended

31 December

2011

Year ended

31 December

2010



$

$

Royalties from franchisees


4,131,459

3,876,047

Corporate-operated Stores


1,367,645

1,361,324

Other activities


859,168

460,653

 

Total


 

6,358,272

 

5,698,024

 

 

 

Loss before tax


Year ended

31 December

2011

Year ended

31 December

2010



$

$

Royalties from franchisees


883,051

585,242

Corporate-operated Stores


(105,164)

(139,679)

Other activities


(243,785)

(342,999)

Unallocated head office costs


(731,145)

(973,390)

Total


 

(197,043)

 

(870,826)

 

 

 

Assets

 

 

 

Year ended

31 December

2011

Year ended

31 December

2010



$

$

Royalties from franchisees


5,157,602

5,315,158

Corporate-operated Stores


300,424

431,631

Other activities


1,979,656

2,714,082

 

Total


 

7,437,682

 

8,460,871

 

For the purpose of monitoring segmental performance, no liabilities are reported to the Group's Chief Operating Decision Maker.

 

Geographic information

 

Total revenue

 

Total revenue from activities by geographical area is detailed below:

 

 

 

Revenue by geography

 

 

 

Year ended

31 December

2011

Year ended

31 December

2010



$

$

US


5,856,369

5,367,232

International


501,903

330,792

Total


 

6,358,272

 

5,698,024

 

Revenue from franchisor activities by geographical area is detailed below.

 

Royalties from franchisees

 

 

 

 

 

 

Year ended

31 December 2011

 

Year ended

31 December 2010



$

$

US


3,882,459

3,638,047

International


249,000

238,000

 

Total

 

 

 

4,131,459

 

3,876,047

 

4.         Taxation

    


 

 

 

Year ended

31 December

2011

 

Year ended

31 December 2010



$

$

Current tax:




Current tax on profits/(losses) in the year


39,975

(35,335)





Total current tax


39,975

(35,335)





Deferred tax


224,170

33,677





Income tax expense/(credit)


264,145

(1,658)

 

The tax on the group's loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

 





Loss before tax on ordinary activities


(197,043)

(870,826)





Tax calculated at domestic rate applicable profits in respective countries


4,228

(463,601)





Tax effects of:




Non deductible expenses


111,837

160,496

State taxes net of federal benefit


44,931

1,000

Depreciation (less than)/in excess of capital allowances


(152,465)

1,199

Addition/(deduction) for research and development


2,339

(30,515)

Tax losses unrelieved


195,624

329,763

Prior year adjustments


57,651

-

Taxation expense/(credit) recognised in income statement


 

264,145

 

(1,658)

 

The Group is subject to income taxes in two jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

 

5.         Loss per share

 

The earnings per share has been calculated using the loss for the year and the weighted average number of ordinary shares outstanding during the year, as follows:

 

 

 

Basic

 

 

 

 

 

Year ended

31 December

2011

 

Year ended

31 December

2010

Loss attributable to shareholders of the Company ($)


(427,158)

(869,168)

Weighted average number of ordinary shares


9,604,417

3,962,211

 

Loss per share (cents)


 

(4.5)

 

(21.9)

 

Diluted loss per share (cents)


 

(4.5)

 

(21.9)

 

The diluted loss per share is the same as the basic loss per share as the conversion of share options decreases the basis loss per share, thus being anti-dilutive.

 

6.         Goodwill                                                                                                                   

 

 

 

 


Goodwill

Owned and

Operated stores

 

Franchisor

activities

 

 

Totals



$

$

$

$

Cost






At 1 January 2010


-

239,500

636,711

876,211

Additions


1,493,729

-

-

1,493,729

At 31 December 2010


1,493,729

239,500

636,711

2,369,940







Additions


-

-

-

-

At 31 December 2011


1,493,729

239,500

636,711

2,369,940

 

Impairment






At 1 January 2010


-

-

-

-

Impairment in year


-

-

-

-

At 31 December 2010


-

-

-

-







Impairment in year


-

75,000

-

75,000

At 31 December 2011


-

75,000

-

75,000







Carrying amount






At 31 December 2010


1,493,729

239,500

636,711

2,369,940

At 31 December 2011


1,493,729

164,500

636,711

2,294,940

 

An impairment review is undertaken annually or whenever changes in circumstances or events indicate that the carrying amount may not be recovered.  For the purpose of impairment testing, goodwill is allocated to each of the cash generating units expected to benefit from the synergies of the combination.  Cash generating units to which goodwill has been allocated are tested for impairment annually.  If the recoverable amount of the cash generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.  An impairment loss recognised for goodwill is not recovered in a subsequent period.

 

Calculation of each cash generating unit's recoverable amount requires the use of estimates, with regards to forecast cash flows and discount rates. An impairment charge was recognised in the year to 31 December 2011 of $75,000 (2010: $nil) as the recoverable amount of one of the cash generating units did not exceed its carrying amount. No impairment is recognised for the remaining cash generating units and had the estimated cost of capital used in determining the discount rate used in these calculations been 10% higher than management's estimates, the Group would still not have incurred any impairment. 

 

7.  Trade and other receivables

 

Non-current



31 December 2011

31 December 2010


$

$

 

Trade notes receivable

 

44,839

 

52,439

 

All non-current receivables are due within five years from the end of the reporting period.

 



Current

31 December 2011

31 December 2010


$

$

Trade receivables

165,127

163,684

Prepayments

104,192

89,067

Due from Group undertakings

-

-

Accrued royalties receivable

305,282

303,826

Loans receivable

-

80,119

Trade notes receivable

44,896

27,680

Other receivables



      Due from related party

138,806

145,805

VAT debtor

21,537

15,306

 

Current portion

 

779,840

 

825,487

 

Trade receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

 

The average credit period taken on sales is 39 days (2010: 26 days).

 

As at the 31 December 2011, trade receivables of $19,327 (2010: $12,800) were past due but not impaired.  These relate to a number of customers for whom there is no history of default.  The ageing analysis of these trade receivables is as follows:

 

Ageing of past due but not impaired receivables



Year ended

31 December 2011

Year ended

31 December 2010



$

$

60-90 days


8,343

7,563

90+ days


10,984

5,237

 

 


 

19,327

 

12,800

 

Average age (days)


141

112

 

The carrying amounts of the Group's trade and other receivables are denominated in the following currencies:

 


 

 

 

Year ended

31 December 2011

Year ended

31 December 2010



$

$

US Dollar


695,097

637,166

UK Pound


84,743

188,321



 

779,840

 

825,487

 

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.  The Group does not hold any collateral as security.

 

8.         Borrowings

Bank Loan

On 16 July 2010 ALDHC drew down a six-year term loan at an initial rate of 8% per annum of US$4.0 million from the Bank of Southern Connecticut.

 

The Bank Loan is repayable in full on or before 16 July 2016 with monthly repayments of principal and interest at 8% per annum until the principal balance is reduced to US$2.0 million when the interest rate becomes 2% above "Wall Street Journal Prime" adjusted annually. At that point, the Group has the option of pre-payment without penalty.

 

The Bank Loan is secured by substantially all of the assets of ALDHC and its principal operating subsidiary ALD and guaranteed by PSS plus one significant shareholder, being the Executive Chairman.

 

Promissory Notes

In addition to the Bank Loan, there is a Promissory Note in place at 31 December 2011 to finance the acquisition of trade assets. The Promissory was repaid in full on 29 March 2012.

 

 

 

 

Year ended

31 December

2011

Year ended

31 December

2010

Year ended

31 December

2011

Year ended

31 December 2010


Current

Non-current

Financial Instruments

$

$

$

$

Borrowings

600,521

632,439

2,582,964

3,086,408






Promissory notes

7,272

16,880

-

85,222






 

Total current liabilities

 

607,793

 

649,319

 

2,582,964

 

3,171,630

 

9.         Trade and other payables




31 December 2011

31 December 2010


$

$

Trade payables

461,342

194,157

Other payables

4,074

4,638

Accruals

468,787

447,790

Due to Group undertakings

-

-

Deferred Income

36,781

237,679


 

970,984

 

884,264

 

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs and are payable within 3 months. The average credit period taken for trade purchases is 41 days (2010: 30 days).

 

The Directors consider that the carrying amount of trade payables approximates to their fair value.

 

10.        Status of financial information

 

The financial information set out above does not comprise the Company's statutory accounts for the periods ended 31 December 2011 or 31 December 2010. Statutory accounts for 31 December 2010 have been delivered to the Registrar of Companies and those for 31 December 2011 will be delivered in due course. The auditors have reported on those accounts; their report was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis of matter without qualifying their report and did not contain statements under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2011 or for 2010.

 

11.        Publication of announcement and the report and accounts

 

A copy of this announcement will be available at the Company's registered office (Hexagon Business Centre, Hexagon House, Station Lane, Witney, Oxfordshire OX28 4BN) 14 days from the date of this announcement and on its website - www.waterintelligence.co.uk.

 

This announcement is not being sent to shareholders. The Annual Report will be posted to shareholders in the near future and will be made available on the website.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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