Final Results

Final Results

Watermark Global

4 June 2013

Watermark Global Plc

Preliminary Unaudited Results for the year ended 31 December 2012

Watermark Global Plc (AIM: WET) (“Watermark” or “the Company”), an investment company listed on AIM, announces its preliminary results for the year ended 31 December 2012 .

Highlights

  • Net assets per share of 0.252p per share being Net assets of £3.819 million as at 31 December 2012 (2011: £2.458 million)
  • The profit from ordinary activities for the year ended 31 December 2012 was £1,389,842 (2011: loss £996,842) resulting in a profit of 0.09p (2011: loss 0.08p) per share.
  • Completion of sale of Western Utilities Corporation (Pty) Ltd. for consideration of £4.5million comprising £1.81 million in cash and £2.69million in shares of Mine Restoration Investments Ltd (“MRI”), listed on the AltX market of the Johannesburg Stock Exchange
  • MRI finalising construction of anthracite coal briquetting project in KwaZulu Natal, South Africa
  • Appointment of Justin Lewis as non-executive director
  • Proposed change of name to Armadale Capital Plc

Peter Marks Chairman commented: “2012 was a transformative year during which we completed the sale of our subsidiary, Western Utilities Corporation Pty Ltd to MRI.

With this new structure, the Board intends to support the development of MRI, which is due to commence production and become revenue generating this year and seek further investment opportunities in African based projects in the natural resources and infrastructure sectors.”

Annual General Meeting

The Annual General Meeting of the Company will be held on 28 June 2013 at 4.00 pm at 42, Queen Anne’s Gate, London SW1H 9AP. Notice of the meeting is included in the report and accounts which have been posted to shareholders. A copy of the report and accounts will be made available on the Company’s website www.watermarkglobalplc.com

Enquiries
Watermark Global plc
Peter Marks, Chairman Tel: + 44(0) 20 7233 1462
pmarks@watermarkglobalplc.com
or
Nominated Adviser: Cenkos Securities
Ian Soanes/Ivonne Cantu Tel: +44(0)20 7397 8928
or
Investor Relations
Charles Zorab Tel: + 44(0) 20 7233 1462
czorab@watermarkglobalplc.com

CHAIRMAN’S STATEMENT

2012 was a transformative year for the Group during which we completed the demerger of our operating businesses by way of the sale of our subsidiary, Western Utilities Corporation (Pty) Ltd. (“WUC”), to Mine Restoration Investments Ltd. (“MRI”). Following this disposal, Watermark became a de facto investment company with a 40 per cent equity interest in MRI, together with a loan of ZAR 20million, subsequently paid down to ZAR15million, secured by, and convertible at our option into, MRI shares. With this new structure, the Board intends to support the development of MRI, which is due to commence production and become revenue generating this year and seek further investment opportunities in African-based projects in the natural resources and infrastructure sectors.

Results

The WUC sale, for an aggregate consideration of £4.50 million, was satisfied by a combination of cash (£1.81 million) and shares in MRI (£2.69 million), recording a profit on disposal of £2.25 million, after expenses, in the year ended 31 December 2012 and a profit after tax for the year of £1.389 million.

As part of the process of preparing the accounts of the Company, the Directors are required to review the carrying value of all it assets. Accordingly, the Directors have reduced the carrying value of the Company’s shareholding in MRI by £0.5 million to more accurately reflect the current share price of MRI. As at 31 December 2012 the Company had net assets £3.819 million (2011: £4.572 million).

Mine Restoration Investments Ltd (“MRI”)

MRI’s main activities are the commercialisation of its coal briquetting technology and of its long term solution to the treatment for AMD. The Company currently holds 40 per cent of the issued share capital of MRI, which is listed on the AltX exchange in South Africa. In addition, a ZAR15 million loan to another major shareholder of MRI has been secured on a further 17 per cent of the issued share capital of MRI. The loan pays a coupon of 2% over South African prime rate. Whilst this loan note is currently redeemable on 12 July 2013, the Directors are, at this stage, likely to extend the repayment date to allow the Company to maintain the optionality over the MRI shares, given the relatively near-term commencement of commercial operations at MRI

Coal Briquetting

MRI is in the final stages of constructing and commissioning a coal briquetting plant at an anthracite coal mine in the KwaZulu-Natal Province, South Africa. Whilst there have been delays to its commissioning resulting in an additional funding requirement to commence commercial operations of approximately £0.65 million, of which £325,000 is being provided by the two principal shareholders, the Board of MRI expects to achieve the remaining funding and production to commence in September 2013 at the rate of 5,000 tons per month. Your Board believes that this will be a significant milestone for the Company and will demonstrate its efficacy on a commercial scale. The next step is for MRI to seek further sites to build additional plants and roll out the concept. The completion of this initial plant will result in maiden revenues for MRI which the Directors believe will underpin the intrinsic value of MRI.

Acid Mine Drainage

Various discussions have taken place between MRI, the Department of Water Affairs (“DWA”) and Aurecon, who have been appointed contractor to the DWA for investigating long term sustainable solutions for acid mine drainage. The DWA asked for expressions of interest in relation to the long term solution in December 2012 which MRI has done. At the beginning of this year, MRI submitted their project summary to the DWA, to which they now await a response. MRI expects the outcome of Aurecon’s investigations and the shortlist of companies selected to tender for the long term solution to be announced shortly. Importantly, our relationship with the mines involved in the various basins remains strong. This gives continued confidence that MRI’s solution remains one of the most attractive to all parties.

Strategy and Investing policy

Following the disposal of WUC, the Group has ceased to have any operating businesses. The Company used a portion of the cash proceeds to make a loan of ZAR20 million to a shareholder of MRI, the proceeds of which were used to subscribe for shares in MRI. ZAR5 million of the loan has since been repaid, with the balance secured on MRI shares.

The Group is fully invested with the principal assets of the Group being a 40 per cent interest in MRI, together with the loan, secured on MRI shares. Your Board intends to continue to support its substantial investment in MRI which it believes has considerable upside potential. The next significant milestone for MRI is the completion of the commissioning of the coal briquetting project which should deliver maiden revenues for MRI. Once proven on a commercial level, there are many opportunities to roll out the technology to other sites and build additional and larger plants.

As we have indicated, part of your Board’s brief has also been to investigate and source other opportunities for investment. In line with its investment policy, the Company is seeking investments with the following key characteristics:

  • African based projects in the natural resources or infrastructure sectors;
  • Near term potential of cash flow – in production 12 - 18 months from investment;
  • An existing experienced core management team which can be expanded over time.

Your Board believes this is an opportune time to be seeking new opportunities as there are many firms in the current phase of the resources cycle wishing to dispose of natural resource assets at prices which are now more realistic than a year ago. We are looking to acquire interests in assets which are near producing cash flow, probably located in Africa and accretive. Furthermore we are only interested in businesses where we can see the financing would be realistically achieved. We believe there will be a number of potential opportunities that fit into this category.

To date, we have looked closely at two in the natural resources area, one in coal and the other gold. Neither, for different reasons, matched up to our criteria in terms of risk/reward. We will of course remain actively looking, with the help of our advisers and our broader networks, to build a portfolio of investments over the medium term to enhance the growth prospects of the company.

Board

Following the disposal of WUC, Jaco Schoeman ceased to be Managing Director and left the Board, becoming Chief Executive of MRI. On behalf of the Board, I would like to thank Jaco for his significant contribution to the Group over the last six years. Jaco has guided the development of the business and I am pleased shareholders continue to benefit from his expertise through our investment in MRI.

I am delighted that Justin Lewis has accepted our invitation to the Board. Justin brings with him an extensive network of contact and experience in the both the Southern African resources industry as well as the international financial markets which will be of considerable benefit in identifying new investment opportunities for the Company in future. Most recently, Justin has led the development of Beacon Hill Resources Plc, from a small London listed investment company to one of the three coal producers in Mozambique.

Change of name / Annual General Meeting

Enclosed with the accounts is a notice of Annual General Meeting. In addition to the usual resolutions, you will note the Company is proposing to undertake a capital reorganisation by way of a share split and consolidation. Because the par value of the ordinary shares is currently greater that the market value of the shares, the Company is currently unable to issue shares. The resolutions, if passed by shareholders, will rectify this.

Your Board is also proposing the Company change its name to Armadale Capital Plc, in keeping with the change from an operating company to an investment company.

Outlook

The Company has now completed its transformation from the operator, developer and funder of the technological processes owned by WUC to an investor through its interests in MRI. Importantly, the Company has maintained an option over the upside potential of these technologies but no longer has the direct responsibility for funding them. Whilst currently fully invested, your Directors believe the Company now has a good platform from which to look at other investments which can be added alongside its interests in MRI.

On behalf of the Board I wish to thank all our shareholders for their on-going support for the Company during what has been another year of significant change. With the anticipated commencement of the briquetting plant over the course of the remainder of 2013 and further progress on the AMD front, we look forward to the rest of this year and beyond with considerable optimism and will be in contact with our shareholders through the release of additional updates.

Peter Marks
Chairman
4 June 2013

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2012

 
      Note       2012       2011
£ £
Continuing operations
Revenue - -
Cost of sales -       -
Gross profit -
Interest income 82,608 1,329
Depreciation (140) (140)
Impairment of investment (537,238) -
Employee benefit expenses - (80,000)
Reclassification of exchange differences on disposal of a foreign operation

77,891

-

Consulting expenses (126,783) (208,193)
Other expenses (362,424)       (532,665)
Loss before tax (866,086) (819,669)
Taxation -       -
Loss for the year from continuing operations (866,086) (819,669)
 
Discontinued operations
Profit/(Loss) for the year from discontinued operations 2,255,332       (177,173)
Profit/(Loss) for the year 1,389,246 (996,842)
 
Other comprehensive income
Exchange differences on translating foreign operations
Exchange differences arising during the year (77,891)       (69,786)
Total comprehensive income for the year 1,311,355       (1,066,628)
 
Profit/(Loss) per share Pence Pence
Basic and fully diluted
From continuing operations (0.06) (0.07)
From continuing and discontinued activities 0.09       (0.08)
 

Consolidated Statement of Financial Position

As at 31 December 2012

 
      Note       2012       2011
£ £
Assets
Non-Current assets
Property, plant and equipment 71 211
Investments 2,148,050       -
2,148,121 211
Current assets
Trade and other receivables 1,167,631 32,563
Cash and cash equivalents 550,181       764,280
1,717,812 796,843
Assets of disposal group classified as held for sale -       3,662,716
1,717,812       4,459,559
 
Total assets 3,865,933       4,459,770
 
Equity and liabilities
Ordinary shares 2,297,060 2,247,060
Share premium account 10,856,029 10,856,029
Share option reserve 1,428,361 1,428,361
Foreign exchange reserve - 77,891
Retained earnings (10,761,564)       (12,150,810)
Equity attributable to owners of the Company 3,819,886 2,458,531
Non-controlling interest -       74,461
Total equity 3,819,886       2,532,992
 
Current liabilities
Trade and other payables 46,047 188,865
 
Liabilities of disposal group classified as held for sale -       1,737,913
Total liabilities 46,047       1,926,778
 
Total equity and liabilities 3,865,933       4,459,770
 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2012

 
        Ordinary Shares       Share Premium       Share

Option Reserve

      FX reserves       Retained Earnings       Attributable To Owners       Total
      £       £       £       £       £       £       £
Balance at

1 January 2011

1,454,310

     

9,808,072

     

1,420,361

     

147,677

     

(11,153,968)

     

1,676,452

1,676,452

Loss for the year - - - - (996,842) (996,842) (996,842)
Other comprehensive

Income

-

     

-

     

-

     

(69,786)

     

-

     

(69,786)

     

(69,786)

Total comprehensive

income for the year

-

     

-

     

-

     

(69,786)

     

(996,842)

     

(1,066,628)

     

(1,066,628)

Share placement 645,000 860,000 - - - 1,505,000 1,505,000
Shares issued to staff

and directors

31,500

40,500

-

-

-

72,000

72,000

Issue of ordinary shares

for services rendered

75,429

93,028

-

-

-

168,457

168,457

Options granted to Directors - - 8,000 - - 8,000 8,000
Issue of ordinary shares

in lieu of fees

40,821

     

54,429

     

-

     

-

     

-

     

95,250

     

95,250

Balance at

31 December 2011

2,247,060

     

10,856,029

     

1,428,361

     

77,891

     

(12,150,810)

     

2,458,531

     

2,458,531

Profit for the year - - - - 1,389,246 1,389,246 1,389,246
Reclassification of exchange differences on disposal of a foreign operation

 

-

     

 

-

     

 

-

     

 

(77,891)

     

 

-

     

 

(77,891)

     

 

(77,891)

Other comprehensive

Income

-

     

-

     

-

     

(77,891)

     

-

     

(77,891)

     

(77,891)

Total comprehensive

income for the year

-       -       -       -       1,389,246       1,311,355       1,311,355
Issue of ordinary shares

for services rendered

50,000       -       -       -       -       50,000       50,000
Balance at

31 December 2012

2,297,060       10,856,029       1,428,361       -       (10,761,564)       3,819,886       3,819,886

 

Consolidated Statement of Cash Flows

For the year ended 31 December 2012

 
      2012       2011
£ £
 
Cash flows from operating activities
Profit/(Loss) before taxation (continued and discontinued) 1,389,246 (1,340,233)
Depreciation 140 7,187
Foreign exchange differences - 286,287
Finance cost - 294,703
Profit on disposal of subsidiary (2,255,332) -
Impairment of investment 537,238 -
Interest income - (2,061)
Expenses for equity settled share based payments - 248,457
Expenses for equity settled commissions -       95,250
2,074,280 (410,410)
Changes in working capital

Increase in receivables

(1,602,754) (31,544)
Decrease in payables (142,818)       (155,922)
Net cash used in operating activities (2,074,280)       (597,876)
 
Cash flows from investing activities
Payments for property, plant and equipment and development costs - (55,477)
Proceeds from disposal of fixed assets - 9,564
Proceeds from disposal of subsidiary 1,814,710 2,061
Purchase of investments -       (155,000)
Net cash from/(used in) investing activities 1,814,710       (198,852)
 
Cash flows from financing activities
Proceeds from share placement - 1,505,000
Finance cost -       (294,703)
Net cash from financing activities -       1,210,297
 
Net (decrease)/increase in cash and cash equivalents (259,570) 413,569
Cash and cash equivalents brought forward 809,751       396,182
Cash and cash equivalents carried forward 550,181       809,751

Notes to the financial statements
For the year ended 31 December 2012

1. Accounting policies

1.1 Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The principal accounting policies are set out below.

1.2 Going Concern

At 31 December 2012 the group held £550,000 in cash together with a substantial debtor in respect of a loan to TAM. The group also held an investment in MRI, a listed company in South Africa. The directors believe that these resources are sufficient to enable the group to continue to meet its liabilities as they fall due for a period of at least 12 months from the date of approval of the financial statements.

The financial statements have therefore been prepared on the going concern basis as, in the opinion of the Directors, at the time of approving the financial statements, there is a reasonable expectation that the Company will continue in operational existence for the foreseeable future.

1.3 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

Notes to the financial statements (continued)
For the year ended 31 December 2012

2. Segmental Information

2.1 Segmental information for the year ended 31 December 2012

For management purposes the Group was organised into two operating divisions; Corporate and Operations. These divisions are the basis on which the Group reported its primary segment information. This information also represents the geographical segments of the United Kingdom and South Africa. Due to the disposal of WUC during the year the Operations segment has been classified as discontinued.

     
Corporate
United

Kingdom

£
Result
Segment result from continuing operations (948,694)
Interest income 82,608
Loss before tax (866,086)
Discontinued activities – South Africa operations (Note 18) 2,255,332
 
1,389,246
 

Other segment items included in the statement of comprehensive income:

                 
Corporate Operations
United Kingdom South Africa Total
(discontinued)
£ £ £
Depreciation (Note 12) (140) (223) (363)
Share based payments (Note 16) -       (50,000)       (50,000)
 
Statement of Financial Position                                          
 
£ £ £
Segment assets 3,865,933 - 3,865,933
Segment liabilities (46,047)               -               (46,047)
Net assets 3,819,886               -               3,819,886
 

Notes to the financial statements (continued)
For the year ended 31 December 2012

3. Profit/(Loss) per share

Profit for the year attributable to shareholders, including discontinued activities is £1,389,246 (2011: Loss £996,842). This is divided by the weighted average number of shares outstanding calculated to be 1,513,474,807 (2011: 1,220,358,976) to give a basic profit per share of 0.09p (2011: 0.08p loss per share)

The calculation of dilutive profit per share, both including and excluding discontinued activities, is based on the weighted average number of shares outstanding adjusted by dilutive share options. The Group’s share options are non-dilutive as the market price of the shares is below the exercise price. Consequently the diluted profit per share has been stated at the same figure as the basic profit per share.

Loss for the year attributable to shareholders, excluding discontinued activities, is £866,086 (2011: loss £819,669). This is divided by the weighted average number of shares outstanding calculated to be 1,513,474,807 (2011: 1,220,358,976) to give an adjusted basic loss per share, excluding discontinued activities, of 0.07p (2011: 0.06p loss per share)

4. Audit Status and availability of accounts

The audited financial statements of the Company are expected to be available on the Company’s website www.watermarkglobalplc.com in the first week of June 2013.

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