Half-yearly Report

Half-yearly Report

Watermark Global

28 September 2012

Watermark Global Plc

(“Watermark” or the “Company”)

Interim Results for the six months Ended 30 June 2012

Watermark Global ( WET:LSE), the AIM-quoted company with Investments in acid mine drainage and coal briquetting in South Africa announces its interim results today.

Highlights

  • Sale of subsidiary Western Utilities Corporation (Pty) Ltd (“WUC”) to Mine Restoration Investments Ltd. (“MRI”) for a total of £4.5m Re-categorised as an investment company on AIM
  • MRI briquetting project making good progress with pilot plant about to commence and commercial scale start-up set for February 2013
  • Profit after tax to 30 June 2012 was £2,716,000 (2011 loss: £620,000), earnings per share of 0.17p (2011 loss: 0.076p per share)
  • Stated net asset value at 30 June 2012 was 0.33p per share

Results Summary

Profit after tax for the six month period ended 30 June 2012 was £2,716,000 (2011: loss of £629,000), a profit of 0.17p per share (2011: loss of 0.076p per share). This profit is inclusive of the gain made in the sale of WUC to MRI of £2,751,000. The cash position of the Company at 30 June 2012 was approximately £796,000.

Additional Information:

Notes from a question and answer session held with Jaco Schoeman will be available on the Company’s website www.watermarkglobalplc.com

Enquiries:

Watermark Global Plc  
Charles Zorab, Investor Relations Tel: + 44(0) 20 7233 1462
czorab@watermarkglobalplc.com
Nominated Adviser: Cenkos Securities
Ian Soanes Tel: +44(0)20 7397 8900

CHAIRMAN’S STATEMENT

During the period, Watermark entered a new phase with the agreement to sell its wholly-owned subsidiary Western Utilities Corporation (Pty) Ltd. (“WUC”) to Mine Restoration Investments Limited (“MRI”). The reasons undertaking this transaction are worth repeating.

Despite the Inter Ministerial Committee of the South African government acknowledging, in a report in February 2011, that WUC’s project for treating polluted water in the Witwatersrand basins was the cheapest and most appropriate technology, it had not been granted the rights to implement the project. Your Board considered that it could not wait for, nor rely upon, the award of a contract to treat Acid Mine Drainage (“AMD”). Although we remain convinced of our position, thanks to the large amount of work which we have already done, the tender for the long-term treatment of AMD has still not been held. Implementation of the project following the long-term tender would take a further 18 months and of course would have placed a further burden on our financial resources.

It was therefore decided to negotiate the acquisition, via WUC, of a coal briquetting project in Kwa Zulu Natal (South Africa) in order to diversify the Company’s interests. At the same time, we were approached by MRI to sell our direct 100% ownership of WUC for a mixture of cash and shares which would de-risk Watermark’s position further and provide the operating businesses with improved access to financing. In consideration for the disposal we received a 40% stake in MRI plus a cash payment of £1.8m valuing WUC at £4.5m.

Shares in MRI were re-listed in June 2012 on the AltX market of the Johannesburg Stock Exchange and a placing of its shares was undertaken at a price of R0.19 per share. This enabled MRI to complete the acquisition of WUC and meet its obligations. Subsequently it has been agreed that approximately £1.55m of the proceeds will be lent until January 2013 to an existing shareholder of MRI, secured against 105m MRI shares with a guaranteed minimum share price on disposal of R0.20 per share.

Watermark is now categorised by AIM as an investment company rather than an operating company. No doubt the current economic climate will create some interesting possibilities and we have commenced the process of reviewing a number of opportunities. Our main areas of interest and our expertise remain in natural resources but we are happy to review opportunities beyond South Africa. As an investment company, Watermark no longer needs a Chief Executive Officer and so Jaco Schoeman has stepped down to become a non-executive director. I would like to thank Jaco very much for the way in which he has led the Company in the past and am pleased that not only will he continue on as a director of your Company, but he is interim Chief Executive Officer of MRI and will remain as our representative on their board as well.

The Company’s assets now comprise largely listed investments and cash or cash equivalents. At 30 June 2012 they were more than £5.0 million or 0.33 pence per share. The Company’s net asset value is significantly greater than the Company’s share price even without adjusting for the current market price of MRI (which would make the net asset value nearer to 0.4 pence per share) and we are working to achieve a share price that more accurately reflects the value of the Company.

We thank all shareholders for their continued interest in Watermark and look forward to bringing you further updates on the progress of MRI as well as other opportunities in the coming months.

Peter Marks

Chairman

Condensed Consolidated Statement of Comprehensive Income

For the period ending 30 June 2012

    Six months ended
Note 30/06/2012   30/06/2011
£’000 £’000
Continuing operations
Revenue - -
Cost of sales - -
Gross profit - -
Interest income 1 1
Depreciation (1) (1)
Finance cost - (9)
 
Consulting expenses (16) -
Other expenses (97) (321)
Loss before tax (113) (312)
Taxation - -
Loss for the period from continuing operations 113 (312)
 
Discontinued Operations
Profit/(Loss) for the year from discontinued operations 9 2,751 (433)
Profit/(Loss) for the period 2,638 (745)
 
Other comprehensive income
Exchange differences on translating foreign operations
Exchange differences arising during the period 78 116
Total comprehensive income/ (loss) for the period 2,716 (629)
 
Total comprehensive income (loss) attributable to
Owners of Watermark Global Plc 2,716 (629)
 
Profit/(Loss) per share
From continued operations
Basic 6 0.17p (0.076p)
Fully diluted 6 0.17p (0.076p)

Condensed Consolidated Statement of Financial Position

As at 30 June 2012

  Notes   30/06/2012   31/12/2011
£’000 £’000
Assets
Non Current assets
Other Financial Instruments 10 2,701 -
Property, plant and equipment 1 -
2,702 -
Current assets
Trade and other receivables 1,579 32
Cash and cash equivalents 796 764
2,375 796
Assets of disposal groups classified as held for sale - 3,664
   
Total assets 5,077 4,460
 
Equity and liabilities
Ordinary shares 2,247 2,247
Share premium account 8 10,856 10,856
Share option reserve 8 1,428 1,428
Foreign exchange reserves 8 - 78
Retained earnings 8 (9,513) (12,150)
Equity attributable to owners of the Company 5,018 2,459
Non-controlling interest - 74
Total equity 5,018 2,533
 
Current liabilities
Trade and other payables 59 189
Liabilities of disposal groups classified as held for sale - 1,738
Total liabilities 59 1,927
 
Total equity and liabilities 5,077 4,460

Condensed Consolidated Statement of Changes in Equity

For the period ended 30 June 2012

  Share Capital

£’000

  Share Premium

£’000

  Share Option Reserve

£’000

  Retained Earnings

£’000

  FX Reserves

£’000

  Attributable to Owners

£’000

  Total

 

£’000

 
Balance 01/01/2011 1,454 9,808 1,420 (11,154) 148 1,676 1,676
 
Loss for the period - - - (745) - (745) (745)
Other comprehensive income - - - - 116 116 116
Total comprehensive income for the period - - - (745) 264 (629) (629)
Share placement 645 860 - - - 1,505 1,505
Issue of ordinary shares for raising fees 41 55 - - - 96 96
Balance 30/06/2011 2,140 10,723 1,420 (11,899) 264 2,648 2,648
 
Balance 01/01/2012 2,247 10,856 1,428 (12,150) 78 2,458 2,458
 
Loss for the period - - - 2,637 - 2,638 2,638
Other comprehensive income - - - - (78) (78) (78)
Total comprehensive income for the period - - - 2,637 (78) 2,560 2,560
             
Balance 30/06/2012 2,247 10,856 1,428 (9,513) - 5,018 5,018

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

Reserve Description and purpose

Share capital Amount subscribed for share capital at nominal value

Share premium Amount subscribed for share capital in excess of nominal value, net of allowable expenses

Share option reserve Reserve for share options granted but not exercised

Retained earnings Cumulative net gains and losses recognised in the statement of comprehensive income

Foreign exchange reserves Cumulative net gains and losses recognised on consolidation

Condensed Consolidated Statement of Cash Flows

For the period ended 30 June 2012

  Six Months ended
30/06/2012   30/06/2011
£’000 £’000
 
Cash flows from operating activities
Profit/(Loss) before taxation 2,638 (745)
Depreciation 1 4
Foreign exchange differences (171) 370
 
Re-measurement of Subsidiary on disposal (2,931) -
Expenses for equity settled commissions - 96
Interest paid - 139
Interest received (1) (1)
(464) (137)
Changes in working capital

Decrease/(increase) in trade and other receivables

2,100 (143)
Decrease / (Increase) in trade creditors and other payables (1,869) 18
Net cash used in operating activities (233) (262)
 
Cash flows from investing activities
Payments for Equity Investment (2,685) -
Proceeds from disposal of Subsidiary 2,949 -
Interest received 1 -
Net cash used in investing activities 265 -
 
Cash flows from financing activities
Proceeds from share placement - 1,505
Interest paid - (139)
Net cash from financing activities - 1,366
 
Net increase in cash and cash equivalents 32 1,104
 
Cash and cash equivalents brought forward 764 396
   
Cash and cash equivalents carried forward 796 1,500

Notes to the condensed consolidated financial statements

For the period ended 30 June 2012

1. Incorporation and principal activities

Country of incorporation

Watermark Global Plc was incorporated in the United Kingdom as a public limited company on 19 August 2005. Its registered office is 42, Queen Anne’s Gate, London SW1H 9AP. The Company is domiciled in South Africa.

Principal activities

The principal activity of the Group during the period was that of commercialising process technologies, namely the process technology for the treatment of acid mine drainage and briquetting of coal fines. The principal activity of the Company was that of a holding Company.

2. Accounting policies

2.1 Statement of compliance

These financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The financial information contained in this condensed set of financial statements in respect of the year ended 31 December 2011 has been extracted from the Annual Report and Accounts, which were approved by the Board of Directors on 13 June 2012 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.

The half-yearly results for the current and comparative periods are unaudited. The auditors have carried out a review of this condensed set of financial statements for the six months ended 30 June 2012 and their report is set out at the end of these financial statements.

This condensed set of financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union. This condensed set of financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2011 which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2011 as described in those annual financial statements.

2.2 Going Concern

The directors of the company are of the opinion that the Company and Group will continue to trade as a going concern for the next twelve months. The disposal of Western Utilities Corporation (Pty) Ltd to MRI, including the listing of the shares on the Johannesburg Stock Exchange, was completed on the 25 June 2012. The company received payment of £1.8 million of which approximately £1.55m have been lent to a MRI Shareholder, repayment is expected by 12 January 2013. This funding together the current cash reserves will be sufficient to enable the continuing group to continue trade for the next twelve months.

2.3. Investment

Investments are stated at cost less impairment in value, which is recognised as an expense in the period the impairment is identified.

3. Segmental Information

3.1 Segmental information for the period ended 30 June 2012

For management purposes, the Group is organised 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 of the United Kingdom and South Africa. Due to the sale of the water technology division (Note 9) the water technology segment has been classified as discontinued

      Corporate
 
United Kingdom
£’000
 
Result
Segment result from continuing operations 441
Interest income 1
Loss before tax 442
Discontinued activities – water technology (South Africa) 2,196
 
2,638

Other segment items included in the income statement:

  Corporate   Water Technology  
United Kingdom South Africa

(Discontinued)

Total
£’000 £’000 £’000
 
Depreciation 1 1 2
  Corporate   Water Technology    
Statement of Financial Position United Kingdom South Africa

(Discontinued)

Consolidation Adjustments Total
£’000 £’000 £’000 £’000
Segment assets 4,785 4,453 (4,162) 5,076
Segment liabilities (318) (6,069) 6,329 (58)
Net assets/(liabilities) 4,467 (1,616) 2,167 5,018

3.2 Segmental information for the period ended 30 June 2011

    Corporate
 
United Kingdom
£’000
 
Result
Segment result from continuing operations (313)
Interest income 1
Loss before tax (312)
 
Discontinued activities – water technology (South Africa) (433)
 
    (745)

Other segment items included in the income statement:

Corporate Water
Technology Total
United Kingdom South Africa

(Discontinued)

£’000 £’000 £’000
Depreciation - 4 4
Share based payments for capital raising 96 - 96
  Corporate   Water    
Technology
Statement of Financial Position United Kingdom South Africa

(Discontinued)

Consolidation Adjustments Total
£’000 £’000 £’000 £’000
Segment assets 5,027 4,465 (2,390) 7,102
Segment liabilities (186) (5,600) 3,559 (2,227)
Net assets/(liabilities) 4,841 (1,135) 1,169 4,875

4. Other gains and losses

  30 June 2012   30 June 2011
£ £
 
Gains on disposal of disposal groups held for sale 555 -

Western Utilities Corporation (Pty) ltd was classified and accounted for at 31 December 2011 as a disposal group held for sale. The value of the investment was re-measured to fair value based on the outstanding loan owned to the group. The gain arises from the disposal of the group being the difference of the re-measured net asset value and the purchase price.

5. Taxation

No provision has been made for income tax for the period under review.

6. Profit per share

Profit per share for the period under review attributable to shareholders is £ 2,638,000 (2011: Loss £745,000). This is divided by the weighted average number of shares outstanding for the period calculated to be 1,531,374,350 (2011: 969,540,827) to give basic profit per share of 0.17p (2011: (0.076p loss)

The calculation of dilutive loss per share 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 loss per share has been stated at the same figure as the loss per share.

7. Share capital

No changes in share capital for the period under review.

8. Reserves

  Group foreign exchange reserve   Company and Group share option reserve   Company and Group share premium account   Group profit and loss account
£’000 £’000 £’000 £’000
At 1 January 2011 148 1,420 9,808 (11,153)
Loss for the year - - - (997)
Exchange difference (70) - - -
Options granted to Directors - 8 - -
New shares issued - - 860 -
Share based payments - - 188 -
At 31 December 2011 78 1,428 10,856 (12,150)
Loss for the period - - - 2,637
Exchange difference (78) - - -
 
       
At 30 June 2012 - 1,428 10,856 (9,513)

9. Discontinued Operations

Discontinued operation

A discontinued operation is a component of the Group’s activities that is distinguishable by reference to geographical area or line of business that is held for sale, has been disposed of or discontinued, or is a subsidiary acquired exclusively for resale. When an operation is classified as discontinued, the comparative income statement is represented as if the operation had been discontinued from the start of the comparative period.

Disposal of an operation

On 25 June 2012, Watermark sold its wholly-owned operating subsidiary, Western Utilities Corporation (Pty) Limited to Mine Restoration Investments Limited for a consideration of £4.50 million comprising £1.81 million in cash and £2.69 million in MRI shares.

Loss for the year from discontinued operations

    30 June 2012   30 June 2011
  £ £
Revenue 2 120
Operating costs (299) (406)
Interest income 1 1
Finance costs 116 (148)
Loss before tax (180) (432)
Taxation - -
Loss from discontinued activities after taxation (180) (433)
 
Profit on re-measurement to fair value less cost to sell
Gain on disposal of operations 2,931 -
Profit/(loss) for the year from discontinued operations 2,751 (433)

The Western Utilities Corporations (Pty) ltd has been classified and accounted for at 31 December 2011 as a disposal group held for sale.

10. Other Financial Assets

    30 June 2012   31 December 2011
  £ £
Available-for-sale investments carried at fair value
Shares(i) 2,685 -
 
Loans to related parties(ii) 16 -
     
  2,701 -

(i) The Group holds 40 % of the ordinary share capital of in Mine Restoration Investments Limited, company involved in providing solutions to the waste that occurs from coal mining (coal fines), as well as Acid Mine Drainage (AMD). The Group does not have any direct control over the company.

Independent Auditors’ Report on Review of Consolidated Half-Yearly Financial Information

We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 30 June 2012 which comprises the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cash flows and the comparative figures and associated notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors’ responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union.

As disclosed in Note 2 the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.

MOORE STEPHENS LLP

150 Aldersgate Street

LONDON

EC1A 4AB

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