Preliminary results

Preliminary results

Watermark Global

Watermark Global Plc

Preliminary Results for the year ended 31 December 2010

Watermark Global Plc (AIM: WET) (“Watermark” or “ the Company”), a water treatment and management company listed on AIM with a focus on Acid Mine Drainage (“AMD”) treatment in South Africa, announces its unaudited preliminary results for the year ended 31 December 2010

Results Summary

The loss from ordinary activities for the year ended 31 December 2009 was £1,086,292 (2009: loss £1,727,861), resulting in a loss of 0.1p (2009: loss 0.4p) per share. The Company has continued to generate an operating loss whilst awaiting the outcome of the South African Government’s decision on the clean up project for AMD.

The Company has announced a conditional placing to raise up to £1.5 million to provide sufficient working capital to allow the Company to continue to operate for the next twelve months and participate in any tender process for the long term AMD clean up project as well undertake a role in the short term in conjunction with the Government.

The financial information set out below does not constitute the Company’s statutory accounts for the year ended 31 December 2010, but is derived from those accounts. Statutory accounts for 2010 will be delivered to the Registrar of Companies following the Company’s Annual General Meeting. The auditors will be reporting on those accounts on 3rd June 2011 and their report is anticipated to include an emphasis of matter, as for 2009, in respect of going concern and intangible assets.

Annual General Meeting

The Annual General Meeting of the Company will be held on 30 June 2011 at 09.00 am. at 42, Queen Anne’s Gate, London SW1H 9AP. Notice of the meeting will be sent to shareholders as part of the report and accounts on 6 June 2011. 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
Jaco Schoeman, Chief Executive Officer Tel: + 44(0) 20 7233 1462

jschoeman@watermarkglobalplc.com

Nominated Adviser: Cenkos Securities

Ian Soanes/Elizabeth Bowman Tel: +44(0)20 7397 8928

Investor Relations

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

czorab@watermarkglobalplc.com

 

CHAIRMAN’S STATEMENT

2010 was another year of further progress but continuing frustration in relation to our Acid Mine Drainage clean up project. The environmental and political profile of the AMD problem has continued to increase as the water becomes closer to polluting the table water around Johannesburg. However, there is still no definitive decision on the structure and process to be used to clean up the AMD nor a timeframe for the long term infrastructure project that will be required to be developed to facilitate the clean up. Due to the nature of the project and its dependence on South African Government approval as well as further financing all timelines remain uncertain although the release of a report by the Government in February 2011 regarding the problem noted that the Company’s technology was one of the only viable clean up options. This is discussed further below.

At the date of this announcement and as previously announced our wholly owned subsidiary, Western Utilities Corporation (Pty) Ltd (“WUC”) has completed 14 specialist studies as part of the EIA process which form the basis of the Environmental Impact Report (EIR). WUC also completed a Definitive Feasibility Study (DFS) which has been signed off by International Consultants, Golder & Associates and has remained ready to commence the construction of the required infrastructure. WUC has provided the Government and the mining houses with a clear, well documented, detailed and practical solution to the treatment of AMD and the Board believes that WUC remains several years ahead of the competition in terms of the work already completed and now awaits the Government’s decision on how it intends to finance any project and how WUC would be involved.

During 2010 the Department of Water Affairs and Environment (DWAE) announced that it acknowledged its responsibility and liability associated with ownerless and abandoned mines within the project area and that a Public Private Partnership (“PPP”) structure would be the preferred structure to be entered into between the State and the mines in respect of a long term solution to clean up the AMD.

The Government also announced that interim measures were being investigated with the mines and Government to prevent the occurrence of an environmental disaster. Quoted below is part of a budget address given by the Minister of Water Affairs and Environment on 15 April 2010, over 12 months ago.

“There is a big problem of Acid Mine Drainage in the Witwatersrand area which threatens our ground water resources and human survival. Even the famous Cradle of Humankind is under threat. We are currently involved with short term solutions to alleviate the worst effects…. We also need a sustainable long term strategy to manage this. I hope you will be encouraged when I tell you that we are presently hard at work with mining operators in search of a lasting solution.”

In simple terms, and for the sake of re-inforcing a very significant point, WUC has:

  • conducted pilot plant tests for the optimum method of treating AMD;
  • completed 14 specialist studies as part of the EIA process and which will form the basis of the Environmental Impact Report (EIR);
  • completed a Definitive Feasibility Study (DFS) which has been signed off by an Independent Third Party, Golder & Associates (a well established, international company);

A Government task force was established in 2010 whose role was to collect information, investigate the scope and scale of the problem, determine possible solutions and report back to a ministerial committee drawn from the Ministers of the various interested sectors (e.g. water affairs, mining, finance, etc.). On 24 February 2011, the DWA published this report entitled “Mine Water Management in the Witwatersrand Gold Fields with Special Emphasis on Acid Mine Drainage”. (This can be viewed on line at:

http://www.dwaf.gov.za/Documents/ACIDReport.pdf )

The report reviewed the technologies available for the treatment of the AMD within each of the Witwatersrand basins (Western, Central and Eastern). The report indicates that the Alkali Barium Calcium “ABC”) and Magnesium Barium Alkaline (“MBA”) processes, both of which were developed by the Council for Scientific and Industrial Research ("CSIR") and TUT ('Tshwane University of Technology") were economically viable. As WUC was involved in the technology developed it has retained rights to the ABC process and any additional improvements on the ABC process (which includes the MBA process) WUC would receive a fee if this chemical process is used anywhere in the world to treat AMD.

The Board believes that the appointment of the Tans-Caledon Tunnel Association (TCTA) in February 2011, a quasi state organisation tasked with the implementation of critical infrastructure projects with specific reference to bulk water supply, as the Government’s implementation agent was an encouraging move.. TCTA’s role is to implement a short term solution to prevent AMD from causing further damage to the environment. WUC has been discussing with the TCTA, which understands the commercial environment, on how it can assist in the short term solution whilst at the same realising value for its shareholders. Whilst the Company expects these negotiations will lead to a positive outcome, which would augur well for the Company’s long-term prospects, it will not result in a substantial contract in the short-term. Any agreement reached would not prevent WUC from participating in the operation and maintenance of the short, medium or long term aspects of AMD treatment in respect of which WUC fully intends to tender.

Your Board understands that it has been a very frustrating time for all the stakeholders in Watermark. At the same time, shareholders need to understand that management has done everything within its power to effect a solution. We are pleased with the recent agreement and of course we will remain very active in engaging all interested parties – especially Government and industry as well as Black Economic Empowerment Groups – to continue working towards a long term solution. Whilst the press in South Africa and various pressure groups continue to raise the issue and apply pressure for urgent actionit should be noted that at this stage the Company remains unable to provide a definitive timeframe as to when further progress will be made or what WUC’s role in any solution will be. Accordingly, the Company will continue to manage its cash resources judiciously and reduce its costs in a manner that will enable it to continue to operate on a reduced basis until such time as its role becomes clear.

Conditional Placing

I am pleased to report that the Company has, today, announced a conditional placing of up to 430,000,000 new ordinary shares in the Company at a price of 0.35p raising gross proceeds of £1,505,000 The Placing will ensure continuity of existing operations, without any interruption or loss of competitive advantage as we hope to move into a period where we can actively assist in the Government’s plan to clean up AMD as part of the short term and long term projects. The Placing will be conducted in two tranches of £462,000 and £1,043,000 respectively with the second tranche subject to shareholder approval at the Company’s AGM which is to be held on 30 June 2011. Your Board is unanimously recommending that shareholders vote for the approval of the second tranche of the Placing. The Placing will allow the Company to continue to progress discussions with the TCTA on how it can be involved further with both the short term and long term solutions. It will also provide sufficient working capital to allow us to expand our technical team should we need to as the projects advance. Whilst there remains no clarity or certainty on how the Company will be able to participate in a long term solution for the treatment of AMD, your Board remains critically aware of the need to continue to assess how the Company can ensure that shareholder value is created and maintained. For this reason, the Company is seeking to utilise its extensive intellectual property into other business areas. Accordingly, some of the Placing proceeds will be set aside for the purpose of reviewing and carrying out due diligence in relation to other investment opportunities which, if completed, would be expected to add to the Company’s asset base and enhance shareholder value. There are at present two opportunities which we have identified as prospective. One is an AMD remediation project associated with anthracite coal mining and briquetting of the resulting waste fines. The other involves the separation of water and oil from an oil producing field to create industrial grade usable water. At this stage, any review or investigation of other opportunities should be considered preliminary. In the event that anything progresses to a more advanced stage, shareholders will be fully informed via an update to the market. It should be stressed that neither of these opportunities should in any way be seen as a diminution of our resolve or attitude towards the treatment of AMD in the gold fields of South Africa which remains the focus of Watermark’s business.

Outlook

A year ago we stated that there were good reasons to believe that the Government and its agencies understood the pressing need to give the go ahead to the clean-up of AMD. . It seems that they now believe that WUC’s solution and its extensive feasibility work can help them to achieve this. We believe it is favoured by many of the mining companies themselves and we believe that we remain well ahead of any competing technologies in terms of getting our selected process, technology, and approvals to market. It is now clearly incumbent upon the Government and its various key agencies to urgently demonstrate that it can be an agent of change for good.

In closing, I would like to once again thank our dedicated staff in South Africa who have come through an incredibly difficult year. Not only have they pushed the project forward as well as they have been allowed to but they have doggedly kept Watermark very much in the frame whilst maintaining good relations with all participants in the project. In the face of the need to conserve cash, they have continued to maintain a number of important cost cutting measures to keep the project afloat while the Government considers the issue. I would also like to thank our strong shareholder base for their continued support and interest in the Company and for this very important project.

Peter Marks

1st June 2011

Unaudited Consolidated Statement of Comprehensive Income

For the year ended 31 December 2010

  2010   2009
£ £
Continuing operations
Revenue 130,458 11,975
Cost of sales -   (11,191)
Gross profit 130,458 784
Interest income 1,672 8,030
Other gains and losses (509) 40,826
Depreciation and amortisation expenses (9,704) (9,802)
Employee benefit expenses - (83,861)
Finance cost (270,733) (69,675)
Consulting expenses (69,300) (136,196)
Other expenses (682,340)   (1,522,910)
Loss before tax (900,456) (1,772,804)
Taxation (185,836)   44,943
Loss for the year (1,086,292) (1,727,861)
Other comprehensive income
Exchange differences on translating foreign operations
Exchange differences arising during the year 147,677   (50,370)
Total comprehensive income for the year (938,615)   (1,778,231)
 
Loss per share from continued operations Pence Pence
 
Basic (0.1) (0.4)
Fully diluted (0.1)   (0.4)
 

Unaudited Consolidated Statement of Financial Position

As at 31 December 2010

  2010   2009
£ £
Assets
Non Current assets
Intangible assets 3,473,549 2,778,863
Property, plant and equipment 9,198 17,177
Deferred tax -   157,027
3,482,747 2,953,067
Current assets
Trade and other receivables 6,241 85,692
Cash and cash equivalents 396,182   278,381
402,423   364,073
Total assets 3,885,170   3,317,140
 
Equity and liabilities
Share capital 1,454,310 1,030,595
Share premium account 9,808,072 9,453,737
Share option reserve 1,420,361 1,420,361
Foreign exchange reserve 147,677 -
Retained earnings (11,153,968)   (10,067,676)
Equity attributable to owners of the Company 1,676,452   1,837,017
 
Non current liabilities
Borrowings 1,324,190 892,760
 
Current liabilities
Trade and other payables 349,962 587,363
Borrowings 534,566   -
884,528   587,363
Total liabilities 2,208,718   1,480,123
 
Total equity and liabilities 3,885,170   3,317,140
 

Unaudited Company Statement of Financial Position

As at 31 December 2010

  Note   2010   2009
 
£ £
Assets

Non Current assets

Investments 14 7 7
Property, plant and equipment 14 351   491
358 498
 
Current assets
Trade and other receivables 15 2,447 25,258
Cash and cash equivalents 347,833   216,303
350,280 241,561
     
Total assets 350,638   242,059
 
Equity and liabilities
 
Equity
Share capital 18 1,454,310 1,030,595
Share premium account 18 9,808,072 9,453,737
Share option reserve 20 1,420,361 1,420,361
Retained earnings 20 (12,451,366)   (11,742,978)
Total equity 231,377 161,715
 
Current liabilities
Trade and other payables 16 119,261 80,344
     
Total equity and liabilities 350,638   242,059
 

Unaudited Consolidated Statement of Changes in Equity

For the year ended 31 December 2010

  Share Capital   Share Premium   Share

Option Reserve

  FX reserves   Retained Earnings  

Attributable To

Owners

  Total
£ £ £ £ £ £ £
Balance at 1 January 2009 379,304 8,053,737 1,418,450 50,370 (8,491,140) 1,410,721 1,410,721
Loss for the year - - - - (1,727,861) (1,727,861) (1,727,861)
Other comprehensive income -   -   -   (50,370)   -   (50,370)   (50,370)
Total comprehensive income for the year -   -   -   (50,370)   1,727,861   (1,778,231)   (1,778,231)
Share placement 600,000 1,400,000 - - - 2,000,000 2,000,000
Shares issued to staff and directors 15,291 - (10,381) - 67,325 72,235 72,235
Options issued to staff - - 12,292 - - 12,292 12,292
Issue of ordinary shares in lieu of fees 36,000 - - - 84,000 120,000 120,000
Balance at 31 December 2009 1,030,595 9,453,737 1,420,361 - (10,067,676) 1,837,017 1,837,017
Loss for the year - - - - (1,086,292) (1,086,292) (1,086,292)
Other comprehensive income -   -   -   147,677   -   147,677   147,677
Total comprehensive income for the year -   -   -   147,677   (11,153,968)   (938,615)   (938,615)
Share placement 368,181 306,819 - - - 675,000 675,000
Issue of Ordinary shares to staff 1,125 975 - - - 2,100 2,100
Issue of ordinary shares for services rendered 36,000 31,200 - - - 67,200 67,200
Issue of ordinary shares in lieu of fees 18,409   15,341   -   -   -   33,750   33,750
Balance at 31 December 2010 1,454,310   9,808,072   1,420,361   147,677   (11,153,968)   1,676,452   1,676,452
 

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 shares 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
 

Unaudited Company Statement of Changes in Equity

For the year ended 31 December 2010

  Share Capital   Share Premium   Share

Option Reserve

  Retained Earnings  
£ £ £ £
Balance at 1 January 2009 379,304 8,053,737 1,418,450 (8,187,822)
Loss for the year -   -   -   (3,706,481)    
Total comprehensive income for the year -   -   -   (3,706,481)    
Share placement 600,000 1,400,000 - -
Shares issued to staff and directors 15,291 - (10,381) 67,325 72,235
Options issued to staff - - 12,292 - 12,292
Issue of ordinary shares in lieu of fees 36,000   -   -   84,000    
Balance at 31 December 2009 1,030,595 9,453,737 1,420,361 (11,742,978)
Loss for the year -   -   -   (708,388)    
Total comprehensive income for the year -   -   -   (708,388)    
Share placement 368,181 306,819 - - 75,000
Issue of Ordinary shares to staff 1,125 975 - - 2,100
Issue of ordinary shares for services rendered 36,000 31,200 - - 67,200
Issue of ordinary shares in lieu of fees 18,409   15,341   -   -   33,750
Balance at 31 December 2010 1,454,310   9,808,072   1,420,361   (12,451,366)   61,377
 

Unaudited Consolidated Statement of Cash Flows

For the year ended 31 December 2010

  2010   2009
£ £
 
Cash flows from operating activities
Loss before taxation
(900,456)		 (1,772,804)
Depreciation 9,704 9,802
Foreign exchange differences 135,611 (68,017)
Finance cost 270,733 69,675
Loss/(gain) on disposal of assets 509 (3,030)
Impairment of assets under construction - 651,229
Interest income (1,672) (8,030)
Expenses for equity settled share based payments 69,300 204,527
Expenses for equity settled commissions 33,750   -
(382,521) (916,648)
Changes in working capital

Decrease in trade and other receivables

79,451 469,982
(Decrease)/increase in trade creditors and other payables (237,401)   14,761
Net cash used in operating activities (540,471)   (431,905)
 
Cash flows from investing activities
Payments for property, plant and equipment and development costs (281,218) (2,784,014)
Proceeds from disposal of fixed assets 776 11,466
Interest income 1,672   8,030
Net cash used in investing activities (278,770)   (2,764,518)
 
Cash flows from financing activities
Proceeds from share placement 675,000 2,000,000
Proceeds from loans 532,775 893,161
Finance cost (270,733)   (69,675)
Net cash from financing activities 937,042   2,823,486
 
Net increase/(decrease) in cash and cash equivalents 117,801 (372,937)
Cash and cash equivalents brought forward 278,381 651,318
     
Cash and cash equivalents carried forward 396,182   278,381
 

Unaudited Company Statement of Cash Flows

For the year ended 31 December 2010

  2010   2009
£ £
 
Cash flows from operating activities
Loss before taxation (708,388) (3,706,481)
Adjustment for:
Depreciation 140 140
Interest income (16,011) (13,252)
Expenses for equity settled share based payments 69,300 204,527
Expenses for equity settled commissions 33,750 -
Provision for balance due from subsidiary 345,678 2,966,379
     
(275,531) (548,687)
Changes in working capital
Increase in receivables (322,867) (1,312,040)
Decrease in payables 38,917 (15,727)
     
Net cash used in operating activities (559,481)   (1,876,453)
 
Cash flows from investing activities
Interest income 16,011   13,252
Net cash from investing activities 16,011   13,252
 
Cash flows from financing activities
Proceeds from share placement 675,000 2,000,000
     
Net cash from financing activities 675,000   2,000,000
 
 
Net increase in cash and cash equivalents 131,530 136,798
 
Cash and cash equivalents brought forward 216,303 79,505
     
Cash and cash equivalents carried forward 347,833   216,303
 

Enquiries:

Watermark Global Plc

 
Jaco Schoeman, Chief Executive Officer Tel: + 44(0) 20 7233 1462

jschoeman@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 8928

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