Last checked at 29 Jun 2010 07:00
Watermark Global PlcFinal Results for the year ended 31 December 2009
Watermark Global Plc (AIM: WET) ("Watermark" or " the Company"), a water treatment and management company listed on the London AIM with a focus on Acid Mine Drainage in South Africa, announces its final results for the year ended 31 December 2009.
Highlights
Non- recourse loan for R10m from Development Bank of South Africa in February 2009 (please refer to note 17 of the Financial Statements) Placing of shares in UK and Australia to raise £2m in May 2009 to fund Definitive Feasibility Study ("DFS") Successful completion of the DFS in October 2009 Signing of a R5m loan from Industrial Development Corporation of South Africa. Approval of the Final Scoping Report December 2009 Watermark has established itself as a key player in addressing Acid Mine Drainage in the Witwatersrand area of South Africa, for both interim and long term solutions. Placing of shares in the UK and Australia announced in May 2010 ( of which the second tranche is subject to shareholder approval at the Company's Annual General Meeting to be held on 30 June 2010) to raise approximately £0.7m.Results Summary
The loss from ordinary activities for the year ended 31 December 2009 was £1.73m, resulting in a loss of 0.4p per share. The net cash position of the group at 31 December 2009 was approximately £278,381.
Annual General Meeting
The Annual General Meeting of the Company will be held on 30 June 2010 at 3.00 pm at 42, Queen Anne's Gate, London SW1H 9AP. Notice of the meeting was sent to shareholders on 7 June 2010. A copy of the report and accounts will be made available on the Company's website www.watermarkglobalplc.com.
A copy of the report and accounts will be posted to shareholders on 30 June 2010.
| Enquiries | ||
| Watermark Global plc | ||
| Peter Marks, Chairman | Tel: + 44(0) 20 7233 1462 | |
| Dirk Kotze, Chief Financial Officer | Tel: + 44(0) 20 7233 1462 | |
| dkotze@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
2009 was a year of considerable achievement for our Acid Mine Drainage (AMD) project, but ultimately also a frustrating one. In the interim report I mentioned to shareholders that "due to the nature of the project and its dependence on Government approval as well as further financing, these timelines could be delayed." This unfortunately proved to be an accurate state of affairs.
Turning to more positive news, in February 2009 we received a non-recourse loan from the state funded Development Bank of South Africa. This was important not just for the loan, but also as an indication of that institution's support for the project itself. Its purpose was to help fund the Definitive Feasibility Study. To complete that funding, we asked shareholders in May 2009 to support the Company and we were very pleased with the £2 million pounds which we raised.
At the same time in May, Jacob Zuma was inaugurated as President of South Africa. The new administration meant a change of personnel at many of the Government departments with which we had been dealing. This in turn led to us having to explain and in some cases re-engage with the incoming administration regarding the impending environmental disaster of AMD, an explanation of the proposed solution for the Acid Mine Drainage problem presented by the WUC project and how it would assist with the alleviation and prevention of AMD in the region.
We had earlier appointed Golder Associates, a well known firm of technical consultants, to conduct the Definitive Feasibility Study, covering the project's technical, legal, environmental and financial aspects. This was a very large and thorough study, unique for South Africa, and was completed on time and on budget. It was delivered to us by the end of October 2009 and demonstrated that we had a viable project from both a technical and a financial standpoint, assuming that we could obtain the necessary permits and an off-take agreement for the clean water which we intended to produce.
The normal course of events would have been to obtain approval for our final scoping report from the Gauteng Department of Agriculture and Rural Development and to then submit the Environmental Impact Assessment (EIA) to the authorities for final approval by February 2010. In the end, we only got approval for the final scoping report by the end of 2009. We had intended to submit the EIA immediately thereafter, but we decided not to as it would have meant putting sensitive and proprietary intellectual property created by WUC into the public domain. The Government indicated that a Public Private Partnership would be their preferred institutional model and that the water could also be used to augment stressed river systems. Before submitting the EIA, we will require clarity on both these issues.
Despite this, in December 2009 we were able to negotiate a non-recourse loan from the Industrial Development Corporation of South Africa. Together with the DBSA loan, these two para-statal organisations also have the right to fund a total of 60% of the project's capital cost.
Since the end of 2009, we have been in constant negotiations with the mining houses and the Government, trying to find a way to break the current impasse. Meanwhile, the environmental time bomb is ticking away and the country and mines are in dire need of more water. Because of this delay, your Company has had to deal with its own funding problems. Initially, we were fortunate enough to obtain some funding from the mining companies themselves for the first part of 2010, but ultimately we had to decide on a longer term solution. Thus we have just completed a small fund raising of £705,000 in two tranches, with the second tranche subject to shareholder approval at the Annual General Meeting (AGM) to be held on June 30, 2010.
This cash will enable us to continue with the project until such time as the Government decides to remedy the AMD problem. It cannot prevaricate forever, because if it does, there is a view that eventually toxic water will spill over into the streets of Johannesburg.
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 cleanup of AMD. A year later and we are repeating the same words. Only this time the heat is being turned up on the Government as the press and the public understand how critical the position is. We remain of the view that Watermark's solution is still very much in the frame to achieve this. We believe it is favoured by many of the mining companies themselves, and we are well ahead of any competing technologies in terms of getting our process, technology, and approvals to market. It is now clearly incumbent upon the Government to get the ball rolling and prove it can be an agent for change for good.
I would like to once again thank our dedicated staff in South Africa who has come through an incredibly difficult year. Not only have they pushed the project forward as well as they have been enabled 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, the Board has now implemented a range 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 of the Company and the project.
Peter MarksChairman
| Directors' Report |
| For the year ended 31 December 2009 |
The Directors submit their report and the financial statements of Watermark Global Plc for the year ended 31 December 2009.
Principal activities
The principal activity of the Group during the period was that of commercialising process technologies and acting as Project manager for the treatment of acid mine drainage (AMD) on the Witwatersrand Goldfields of South Africa. The principal activity of the Company was that of a holding Company.
Results and dividends
The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The loss of the Group for the year ended 31 December 2009 was £1,727,861 (2008: £2,907,718). The Directors do not recommend the payment of a dividend (2008: £nil).
Business review
A review of the Group's operations and management plans for the future of the business are included in the Chairman's Statement on pages 2-3. The Group is currently in the development phase of its water treatment project in South Africa and the focus of the Group is on overhead cost and cash management. The Group also employs tight control over its projects, with specific management measurements, such as effective project planning, timeline management, resource management and cost and risk management.
The Group's Acid Mine Drainage project reached the final stages of development during the fourth quarter of 2009, with the Definitive Feasibility Study being completed by Golder Associates and the submission of the detailed Scoping Report for the Environmental Impact Assessment. Negotiations commenced with the authorities and with Rand Water for an off-take agreement and regarding the operating and project model. Progress in this regard has been limited as the mining companies and the authorities have yet to agree on certain important issues pertaining to the project. The cost of the definitive feasibility study is regarded as development cost and as such has been capitalised. These costs includes preliminary engineering and design cost, cost for the completion of the Environmental Impact Assessment and ongoing technical research and improvement costs, associated with the final AMD solution. (See note 13).
Subsequent Events
In May 2010, the Company announced a placing of shares to UK and Australian institutions to raise £705,000 (256,363,636 ordinary shares at 0.275 pence). The placing is in two tranches with the first tranche (101,850,000 ordinary shares at 0.275 pence) completed on the 28 May 2010. The second tranche of the placing is subject to approval by shareholders at the AGM on the 30 June 2010. All Directors have indicated their intention to vote the shares which they own in favour of the placing.
Directors
The following Directors have held office during the year:
| P A Marks |
| WJ Schoeman |
| D A Kotzé |
| A Gunn (non-executive) |
Directors' interests
Directors' interests, including family interests, in the Ordinary Share capital, were as follows:
| 31December2009 | 31December2008 | |||
| P A Marks | 8,362,000 | 2,000,000 | ||
| WJ Schoeman | 15,000,000 | 10,000,000 | ||
| D A Kotzé | 6,000,000 | 2,000,000 |
Directors also hold options over Ordinary Shares as follows:
| Number of Options | December2009 | December2008 | ||
| P A Marks | 1,500,000 | 1,500,000 | ||
| D A Kotzé | - | 2,000,000 |
The options issued to Dirk Kotzé in 2008, were cancelled on 19 March 2009 and replaced with 2,000,000 fully paid-up shares in lieu of services rendered.
No options have been awarded to Directors during the financial year under review.
Company Secretary
Mr Charles Zorab held the position of Company Secretary for the Company at the end of the financial year. The registered office is at 42, Queen Anne's Gate, London SW1H 9AP.
Substantial shareholdings
At 23 June 2010 the Company was aware of the following interests in 3% or more of the nominal value of the Company's shares:
| Name | Ordinary Sharesof 0.15p | % | ||
| Bell Potter Securities | 149,987,198 | 19.0% | ||
| Hargreave Hale | 49,500,000 | 6.3% | ||
| Peregrine Corporate Limited | 112,160,000 | 14.2% | ||
| Savoy Inv Management | 30,500,000 | 3.9% | ||
| Hoodless Brennan | 42,437,000 | 5.4% |
* P. A. Marks is a Director and owns 20% of the share capital of Peregrine Corporate Limited.
Shares under option or issued on exercise of options
Shares held under option are detailed in the notes to the financial statements, note 18.
Indemnification of officers of the company
During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company against liability when acting for the Company.
Remuneration Report
The Remuneration Report that forms part of the Directors' Report, sets out information about the remuneration of the Company's directors for the financial year ended 31 December 2009.
The following persons acted as directors of the Company during the financial year:
Mr Peter Marks -ChairmanMr Jaco Schoeman - Managing DirectorMr Dirk Kotzé - Financial DirectorMr Adam Gunn - Non Executive DirectorMr Jaco Schoeman is also Chief Executive Officer of Western Utilities Corporation (Pty) LtdMr Dirk Kotzé - is also Chief Financial Officer of Western Utilities Corporation (Pty) Ltd
| Name | 2009 | 2008 | ||||||||||||||
| Employee Benefits | Share Based Payments | Total | Employee Benefits | Share Based payments | Total | |||||||||||
| Salary & Fees | Bonus | Options, rights and fully paid up shares | Salary & fees | Bonus | Options, rights and fully paid up shares | |||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||||
| Executive Directors | ||||||||||||||||
| Peter Marks | 99 | - | - | 99 | 101 | - | - | 101 | ||||||||
| Jaco Schoeman | 145 | 25 | 45 | 215 | 121 | - | 306 | 427 | ||||||||
| Dirk Kotzé | 145 | 25 | 19 | 189 | 121 | - | 122 | 243 | ||||||||
| Non-Executive Directors | ||||||||||||||||
| Adam Gunn | 24 | - | - | 24 | 6 | - | - | 6 | ||||||||
The total salary and fees paid to Jaco Schoeman and Dirk Kotzé consist of Directors fees paid by the Company and salaries earned as full time employees of the Groups South African subsidiary. (See note 10). Bonuses were granted to Jaco Schoeman and Dirk Kotzé for the successful completion of the pre-feasibility study and securing funding for the project of £25,000 each in March 2009.
Shares were granted to Jaco Schoeman and Dirk Kotzé as part of their employment contract and agreed by the remuneration committee. The remuneration committee consists of the Peter Marks, Dirk Kotzé, and Adam Gunn.
In view of the Company's need to conserve cash, the Board has decided to suspend payments of Directors' fees, which will accrue (in partial or in full) until such time as the Company can properly afford to pay them, a situation which is being kept under review. Senior management of the Company have also agreed to accept a reduction in salary of 40% until such time as the financial position of the company is more secure.
Executive Directors currently have employment contracts which may be terminated by the Company with up to six months notice. No other payments are made in compensation for loss of office.
The Remuneration of the non-executive directors is determined by the Board within the limits set out in the Articles of Association of the Company.
Policy on payment of trade payables
The Group seeks to maintain good terms with all of its trading partners. In particular, it is the Group's policy to agree appropriate terms and conditions for its transactions with suppliers and, provided the supplier has complied with its obligations, to abide by the terms of payment agreed. Trade creditor days of the Company for the year ended 31 December 2009 were 76 days (2008: 30 days), calculated in accordance with the requirements set down by the Companies Act 2006. This represents the ratio, expressed in days, between the amounts invoiced to the Company by its suppliers in the year and the amounts due, at the year end, to trade creditors. An arrangement was reached with a major creditor in May 2010 (outstanding balance £315,000), involving a monthly payment of £17,500 for the next six months, where after the situation will be re-evaluated. This will see the balance owed reduced by £105,000, leaving an outstanding balance of approximately £210,000 after six months. The total amount outstanding at 31 December 2009 was £410,000.
Statement of Directors' responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with IFRS as adopted by the European Union and applicable law. The financial statements must, in accordance with IFRS as adopted by the European Union, present fairly the financial position and performance of the Company; such references in the UK Companies Act 2006 to such financial statements giving a true and fair view are references to their achieving a fair presentation. Under Company law Directors must not approve the financial statements unless they are satisfied that they give a true and fair view. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading on the Alternative Investment Market.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether the financial statements have been prepared in accordance with IFRS as adopted by the European Union; Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.
Going Concern
The Directors of the Company are of the opinion that the Company will continue to trade as a going concern for the next twelve months despite the delay in government approvals. Following the completion of the share placement in May and June 2010 and the significant cost savings implemented, the Company will be able to continue to service its debts and its running costs.
Financial risks
The Group's risks and use of financial instruments are described in Note 4 to the financial statements.
Directors' Confirmation
The Directors who held office at the date of approval of this Directors' Report confirm that so far as each Director is aware:
(a) there is no relevant audit information of which the Company's auditors are unaware; and
(b) each Director has taken all the steps that ought to have been taken as a Director, including making appropriate enquiries of fellow Directors and of the Company's auditors for that purpose, in order to be aware of any information needed by the Company's auditors in connection with preparing their report and to establish that the Company's auditors are aware of that information.
On behalf of the Board
_________________
D KotzéDirector
Date: 28 June 2010
| Consolidated Statement of Comprehensive Income | ||||||
| For the year ended 31 December 2009 | ||||||
| Note | 2009 | 2008 | ||||
| £ | £ | |||||
| Continuing operations | ||||||
| Revenue | 2 | 11,975 | 158,158 | |||
| Cost of sales | (11,191) | (136,491) | ||||
| Gross profit | 784 | 21,667 | ||||
| Investment revenue | 6 | 8,030 | 87,635 | |||
| Other gains and losses | 7 | 40,826 | (277,238) | |||
| Depreciation and amortisation expenses | 14 | (9,802) | (11,405) | |||
| Employee benefit expenses | 19 | (83,861) | (1,551,509) | |||
| Finance cost | 8 | (69,675) | - | |||
| Consulting expenses | (136,196) | (163,759) | ||||
| Other expenses | 25 | (1,522,910) | (1,102,868) | |||
| Loss before tax | (1,772,804) | (2,997,477) | ||||
| Income tax credit | 11 | 44,943 | 99,626 | |||
| Loss for the year from continuing operations | (1,727,861) | (2,897,851) | ||||
| Discontinued operations | ||||||
| Loss from discontinued operations | - | (9,867) | ||||
| Loss for the year | (1,727,861) | (2,907,718) | ||||
| Other comprehensive income | ||||||
| Exchange differences on translating foreign operations | ||||||
| Exchange differences arising during the year | (50,370) | (6,951) | ||||
| Total comprehensive income for the year | (1,778,231) | (2,914,669) | ||||
| Total comprehensive loss attributable to | ||||||
| Owners of Watermark Global Plc | (1,778,231) | (2,914,669) | ||||
| Loss per share | Pence | Pence | ||||
| From continued operations | ||||||
| Basic | 12 | (0.4) | (1.2) | |||
| Fully diluted | 12 | (0.4) | (1.2) | |||
| Consolidated Statement of Financial Position | ||||||
| As at 31 December 2009 | ||||||
| Notes | 2009 | 2008 | ||||
| £ | £ | |||||
| Assets | ||||||
| Non Current assets | ||||||
| Intangible assets | 13 | 2,778,863 | - | |||
| Property, plant and equipment | 14 | 17,177 | 677,107 | |||
| Deferred tax | 11 | 157,027 | 99,626 | |||
| 2,953,067 | 776,733 | |||||
| Current assets | ||||||
| Trade and other receivables | 15 | 85,692 | 555,272 | |||
| Cash and cash equivalents | 278,381 | 651,318 | ||||
| 364,073 | 1,206,590 | |||||
| Total assets | 3,317,140 | 1,983,323 | ||||
| Equity and liabilities | ||||||
| Share capital | 18 | 1,030,595 | 379,304 | |||
| Share premium account | 18 | 9,453,737 | 8,053,737 | |||
| Share option reserve | 20 | 1,420,361 | 1,418,450 | |||
| Foreign exchange reserves | 20 | - | 50,370 | |||
| Retained earnings | 20 | (10,067,676) | (8,491,140) | |||
| Equity attributable to owners of the Company | 1,837,017 | 1,410,721 | ||||
| Non-current liabilities | ||||||
| Borrowings | 17 | 892,760 | - | |||
| Current liabilities | ||||||
| Trade and other payables | 16 | 587,363 | 572,602 | |||
| Total liabilities | 1,480,123 | 572,602 | ||||
| Total equity and liabilities | 3,317,140 | 1,983,323 | ||||
Approved by the Board and authorised for issue on 28 June 2010
Signed on behalf of the Board of Directors
__________________
D KotzéFinance Director Company
Registration No. 5541602
| Company Statement of Financial Position | ||||||
| As at 31 December 2009 | ||||||
| Notes | 2009 | 2008 | ||||
| £ | £ | |||||
| AssetsNon - Current assets | ||||||
| Investments | 14 | 7 | 7 | |||
| Property, plant and equipment | 14 | 491 | 631 | |||
| 498 | 638 | |||||
| Current assets | ||||||
| Trade and other receivables | 15 | 25,258 | 1,679,597 | |||
| Cash and cash equivalents | 216,303 | 79,505 | ||||
| 241,561 | 1,759,102 | |||||
| Total assets | 242,059 | 1,759,740 | ||||
| Equity and liabilities | ||||||
| Equity | ||||||
| Share capital | 18 | 1,030,595 | 379,304 | |||
| Share premium account | 18 | 9,453,737 | 8,053,737 | |||
| Share option reserve | 20 | 1,420,361 | 1,418,450 | |||
| Retained earnings | 20 | (11,742,978) | (8,187,822) | |||
| Total equity | 161,715 | 1,663,669 | ||||
| Current liabilities | ||||||
| Trade and other payables | 16 | 80,344 | 96,071 | |||
| Total equity and liabilities | 242,059 | 1,759,740 | ||||
Approved by the Board and authorised for issue on 28 June 2010
Signed on behalf of the Board of Directors
__________________
D KotzéFinance Director
Company Registration No. 5541602
| Consolidated Statement of Changes in Equity | ||||||||||||||
| For the year ended 31 December 2009 | ||||||||||||||
| ShareCapital£ | SharePremium£ | OptionReserves£ | RetainedEarnings£ | FXReserves£ | Attributableto Owners£ | Total£ | ||||||||
| Balance 1/1/2008 | 336,554 | 6,670,787 | 1,082,045 | (5,583,422) | 57,321 | 2,563,285 | 2,563,285 | |||||||
| Loss for the year | - | - | - | (2,907,718) | - | (2,907,718) | (2,907,718) | |||||||
| Other comprehensive income | - | - | - | - | (6,951) | (6,951) | (6,951) | |||||||
| Total comprehensive income for the year | - | - | - | (2,907,718) | (6,951) | (2,914,669) | (2,914,669) | |||||||
| Recognition of share based payments | 42,750 | 1,382,950 | 336,405 | - | - | 1,762,105 | 1,762,105 | |||||||
| Balance 31/12/2008 | 379,304 | 8,053,737 | 1,418,450 | (8,491,140) | 50,370 | 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 | - | - | - | (1,727,861) | (50,370) | (1,778,231) | (1,778,231) | |||||||
| Share placement | 600,000 | 1,400,000 | - | - | - | 2,000,000 | 2,000,000 | |||||||
| Issue of shares 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 for raising fees | 36,000 | - | - | 84,000 | - | 120,000 | 120,000 | |||||||
| Balance 31/12/2009 | 1,030,595 | 9,453,737 | 1,420,361 | (10,067,676) | - | 1,837,017 | 1,837,017 | |||||||
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 foreign currency transactions |
| Company Statement of Changes in Equity | ||||||||||||
| For the year ended 31 December 2009 | ||||||||||||
| Share Capital£ | SharePremium£ | OptionReserves£ | RetainedEarnings£ | Attributableto Owners£ | Total£ | |||||||
| Balance 1/1/2008 | 336,554 | 6,670,787 | 1,082,045 | (5,795,817) | 2,293,569 | 2,293,569 | ||||||
| Loss for the year | - | - | - | (2,392,005) | (2,392,005) | (2,392,005) | ||||||
| Other comprehensive income | - | - | - | - | - | - | ||||||
| Total comprehensive income for the year | - | - | - | (2,392,005) | (2,392,005) | (2,392,005) | ||||||
| Recognition of share based payments | 42,750 | 1,382,950 | 336,405 | - | 1,762,105 | 1,762,105 | ||||||
| Balance 31/12/2008 | 379,304 | 8,053,737 | 1,418,450 | (8,187,822) | 1,663,669 | 1,663,669 | ||||||
| Loss for the year | - | - | - | (3,706,481) | (3,706,481) | (3,706,481) | ||||||
| Other comprehensive income | - | - | - | - | - | - | ||||||
| Total comprehensive income for the year | - | - | - | (3,706,481) | (3,706,481) | (3,706,481) | ||||||
| Share placement | 600,000 | 1,400,000 | - | - | 2,000,000 | 2,000,000 | ||||||
| Issue of shares 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 for commission paid | 36,000 | - | - | 84,000 | 120,000 | 120,000 | ||||||
| Balance 31/12/2009 | 1,030,595 | 9,453,737 | 1,420,361 | (11,742,978) | 161,715 | 161,715 | ||||||
| Consolidated Statement of Cash Flows | ||||
| For the year ended 31 December 2009 | ||||
| 2009 | 2008 | |||
| £ | £ | |||
| Cash flows from operating activities | ||||
| Loss before taxation | (1,772,804) | (2,997,477) | ||
| Depreciation | 9,802 | 11,405 | ||
| Foreign exchange differences | (68,017) | 32,908 | ||
| Loss from discontinued operations | - | (9,867) | ||
| Loss on disposal of subsidiary | - | 277,238 | ||
| Finance cost | 69,675 | - | ||
| Gain on disposal of assets | (3,030) | - | ||
| Impairment of assets under construction | 651,229 | - | ||
| Interest received | (8,030) | (87,636) | ||
| Expenses for equity settled share based payments | 204,527 | 210,596 | ||
| Expenses for equity settled commissions | - | 1,551,509 | ||
| (916,648) | (1,011,324) | |||
| Changes in working capital Decrease/(Increase) in trade and other receivables | 469,982 | (469,683) | ||
| Increase in trade creditors and other payables | 14,761 | 370,888 | ||
| Net cash used in operating activities | (431,905) | (1,110,119) | ||
| Cash flows from investing activities | ||||
| Payments for property, plant and equipment and development costs | (2,784,014) | (432,187) | ||
| Proceeds from disposal of fixed assets | 11,466 | - | ||
| Interest received | 8,030 | 87,636 | ||
| Net cash used in investing activities | (2,764,518) | (344,551) | ||
| Cash flows from financing activities | ||||
| Proceeds from share placement | 2,000,000 | - | ||
| Proceeds from DBSA loan agreement | 893,161 | - | ||
| Interest paid | (69,675) | - | ||
| Net cash from financing activities | 2,823,486 | - | ||
| Net decrease in cash and cash equivalents | (372,937) | (1,454,670) | ||
| Cash and cash equivalents brought forward | 651,318 | 2,105,988 | ||
| Cash and cash equivalents carried forward | 278,381 | 651,318 | ||
| Company Statement of Cash Flows | ||||
| For the year ended 31 December 2009 | ||||
| 2009 | 2008 | |||
| £ | £ | |||
| Cash flows from operating activities | ||||
| Loss before taxation | (3,706,481) | (2,392,005) | ||
| Adjustment for: | ||||
| Depreciation | 140 | 280 | ||
| Interest received | (13,252) | (87,375) | ||
| Share based payments | 204,527 | 1,762,105 | ||
| Provision for balance due from subsidiary | 2,966,379 | - | ||
| (548,687) | (716,995) | |||
| Changes in working capital | ||||
| Increase in receivables | (1,312,040) | (659,715) | ||
| Decrease in payables | (15,727) | (19,008) | ||
| Net cash used in operating activities | (1,876,453) | (1,395,718) | ||
| Cash flows from investing activities | ||||
| Interest received | 13,252 | 87,375 | ||
| Net cash from investing activities | 13,252 | 87,375 | ||
| Cash flows from financing activities | ||||
| Proceeds from issue of ordinary shares net of issue costs | 2,000,000 | - | ||
| Net cash from financing activities | 2,000,000 | - | ||
| Net increase/ (decrease) in cash and cash equivalents | 136,798 | (1,308,343) | ||
| Cash and cash equivalents brought forward | 79,505 | 1,387,848 | ||
| Cash and cash equivalents carried forward | 216,303 | 79,505 | ||
| Notes to the financial statements |
| For the year ended 31 December 2009 |
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. The principal activity of the Company was that of a holding Company.
2. Accounting policies
2.1 Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
The Group has adopted IAS 1 (revised) 'Presentation of Financial Statements' as of 1 January 2009. The revised standard prohibits the presentation of items of income and expenditure within the statement of changes in equity.
The principal accounting policies are set out below.
2.2 Going Concern
The directors of the company are of the opinion that the Company will continue to trade as a going concern for the next twelve months despite the delay in government approvals. With the share placement in May and June 2010 and the significant cost savings implemented, the company will be able to continue to service its debts and its running costs.
The financial statements do not include the adjustments that would result if the company and group were unable to continue as a going concern.
2.3 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.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.
All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation.
2.4 Revenue recognition
Revenue represents amounts receivable for water, plant, management, service and Company administrative service done on behalf of Western Basin Environmental Corporation (WBEC), net of VAT, trade discounts and other sales tax.
2.5 Interest Income
Interest income is recognised in the bank as it arises.
2.6 Foreign currencies
The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group entity are expressed in pounds, which is the functional currency of the Company and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for:
exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are expressed in Pounds using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.
2.7 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
2.8 Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise cash at bank and in hand, with a maturity date of less than three months.
2.9 Share-based payments
IFRS 2 'Share-based Payment' requires the recognition of equity-settled share-based payments at fair value at the date of grant and the recognition of liabilities for cash-settled share based payments at the current fair value at each reporting date.
The Group provides benefits to employees and service providers (including senior executives) of the Group in the form of share based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions).
The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a Black-Scholes model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than market conditions linked to the price of the share of Watermark Global PLC, if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or other service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group's best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The profit and loss account charge or credit for a period represents the movements in cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.
2.10 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current Tax
The tax currently payable is based on taxable profit for the year. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is included in the accounting for the business combination.
2.11 Investments
Investments in subsidiary companies are stated at cost less impairment in value, which is recognised as an expense in the period the impairment is identified.
2.12 Property, plant and equipment
Assets in the course of construction for production, supply or administrative purposes, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets (other than assets under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
| Fixtures, Fittings and Equipment - | Over 3 and 4 years | |
| Assets under construction - | Not depreciated |
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
2.13 Intangible assets
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:
the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and the ability to measure reliably the expenditure attributable to the intangible asset during its development.The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
2.14 Impairment of tangible and intangible assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
2.15 Financial assets
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
2.16 Financial liabilities and equity instruments issued by the Group
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are classified as either financial liabilities or 'other financial liabilities'.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.
3. Significant Judgements and Sources of Estimation Uncertainty
In preparing the annual financial statements of the Group, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement are inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include:
Trade receivables and loans and receivables
The Group assesses its trade receivables and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the Group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.
Development costs
The group assess development costs as intangible assets and are recorded based on actual cost spent on development. Due to the nature of the development and the dependency on government approval, development cost could be impaired in future. (See note 13)
Impairment testing
The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumptions may change which may then impact our estimations and may then require a material adjustment to the carrying value of goodwill and tangible assets.
The Group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including economic factors.
Taxation
Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.
The Company 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 income tax and deferred tax provisions in the period in which such determination is made.
The Company recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Company to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realise the net deferred tax assets recorded at the end of the reporting period could be impacted.
4. Financial Risk Management
Financial risk factors
The Group is exposed to liquidity risk, market risk (interest rate risk and currency risk), credit risk and capital risk management arising from the financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below:
Liquidity Risk
The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by monitoring cash flows and managing the maturity profiles of financial assets and liabilities within the bounds of contractual obligations.
Credit Risk
The Company manages credit risk through strict payment terms. Maximum payment terms granted is 30 days from service delivery. Outstanding accounts are monitored on a monthly basis.
Market Risk
Interest rate risk is the risk that the value of the financial instruments will fluctuate due to changes in the market interest rates. The Group's income and operating cash flows are substantially independent of changes in market interest rates. The Group is exposed to interest rate risk in relation to its bank deposits.
The Group received an interest bearing loan from the Development Bank of South Africa at a fixed interest rate of 25%. The loan is furthermore a non-recourse loan payable on the achievement of the commercialisation of the AMD project in South Africa.
The Group has monies on deposit which earn interest at rates from 4% to 10% depending on location. Interest rates in South Africa are more volatile than in the United Kingdom and hence a larger sensitivity range has been used. The sensitivity of interest rate increases and decreases is set out below:
| 2009 | 2008 | ||||
| Interestreceivedreduction | Interestreceivedreduction | ||||
| £ | £ | ||||
| Interest rate decrease | |||||
| 1% | (3,642) | (4,765) | |||
| 2% | (7,284) | (9,531) | |||
| 3% | (10,926) | (14,296) | |||
| Interestreceivedincrease | Interestreceivedincrease | ||||
| Interest rate increase | |||||
| 1% | 3,642 | 4,765 | |||
| 2% | 7,284 | 9,531 | |||
| 3% | 10,926 | 14,296 | |||
Currency Risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a foreign currency that is not the Group's measurement currency. The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar and South African Rand. The Group's management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.
Loans between companies which are members of the Watermark Global Plc Group are made in the functional currency of the lending company. In all other respects, the policy for all Group companies is that they only trade in their principal functional currency, except in exceptional circumstances from time to time.
As at 31 December 2009 the Group held no monetary assets or liabilities in currencies other than the functional currency of the operating units involved. These operating units refer to South Africa and the UK and assets are held in both Sterling and Rand. Interest rate exposure has been included as part of the sensitivity calculations.
Credit Risk
The Group manages credit risk through strict payment terms. Maximum payment terms granted is 30 days from service delivery. Outstanding accounts are monitored on a monthly basis.
Capital Risk Management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and accumulated losses as disclosed in notes 18 and 20. The Group does not use derivative financial instruments and has no long term debt facilities.
Fair value estimation
The fair values of the Group's financial assets and liabilities approximate to their carrying amounts at the reporting date.
5. Segmental Information
5.1 Segmental information for the year ended 31 December 2009
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.
| Corporate | Water | |||||
| Technology | ||||||
| United Kingdom | South Africa | Total | ||||
| £ | £ | £ | ||||
| Revenue | ||||||
| External | - | 11,975 | 11,975 | |||
| Total revenue from continuing operations | - | 11,975 | 11,975 | |||
| Result | ||||||
| Segment result from continuing operations | (768,353) | (1,012,481) | (1,780,834) | |||
| Finance income | 8,030 | |||||
| Loss before tax | (1,772,804) | |||||
| Income tax credit | 44,943 | |||||
| (1,727,861) | ||||||
Other segment items included in the income statement:
| Corporate | WaterTechnology | |||||
| UnitedKingdom | South Africa | Total | ||||
| £ | £ | £ | ||||
| Depreciation | 140 | 9,662 | 9,802 | |||
| Share based Employee Payments | 83,861 | - | 83,861 | |||
| Impairment of Assets under construction | - | 651,229 | 651,229 |
| Corporate | WaterTechnology | |||||||
| Statement of Financial Position | UnitedKingdom | South Africa | ConsolidationAdjustments | Total | ||||
| £ | £ | £ | £ | |||||
| Segment assets | 3,518,598 | 2,764,921 | (2,966,379) | 3,317,140 | ||||
| Segment liabilities | (4,281,962) | (80,344) | 2,882,183 | (1,480,123) | ||||
| Net assets/(liabilities) | (763,364) | 2,684,577 | (84,196) | 1,837,017 |
5.2 Segmental information for the year ended 31 December 2008
In 2008 for management purposes the Group was 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.
| Corporate | Water | Total | |||||
| Technology | |||||||
| UnitedKingdom | South Africa | ||||||
| £ | £ | £ | |||||
| Revenue | |||||||
| External | 51 | 158,107 | 158,158 | ||||
| Total revenue from continuing operations | 51 | 158,157 | 158,158 | ||||
| Result | |||||||
| Segment result from continuing operations | (2,658,205) | (426,907) | (3,085,112) | ||||
| Finance income | 87,635 | ||||||
| Loss before tax | (2,997,477) | ||||||
| Income tax credit | 99,626 | ||||||
| (2,897,851) | |||||||
Other segment items included in the income statement:
| Corporate | Water | |||||
| Technology | Total | |||||
| UnitedKingdom | South Africa | |||||
| £ | £ | £ | ||||
| Depreciation | 1,491 | 9,914 | 11,405 | |||
| Share based Employee Payments | 1,551,509 | - | 1,551,509 | |||
| Loss on sale of Subsidiary | 277,238 | - | 277,238 |
| Corporate | Water | |||||||
| Technology | ||||||||
| Statement of Financial Position | UnitedKingdom | South Africa | ConsolidationAdjustments | Total | ||||
| £ | £ | £ | £ | |||||
| Segment assets | 1,799,244 | 1,843,583 | (1,659,504) | 1,983,323 | ||||
| Segment liabilities | (134,697) | (2,099,947) | 1,662,042 | (572,602) | ||||
| Net assets/(liabilities) | 1,664,547 | (256,364) | 2,538 | 1,410,721 |
6. Interest received
Interest on bank and cash balances received can be summarised as follows:
| 2009 | 2008 | |||
| £ | £ | |||
| Continuing Operations | ||||
| Bank deposits | ||||
| UK | 1,028 | 28,970 | ||
| South Africa | 7,002 | 58,173 | ||
| Australia | - | 492 | ||
| 8,030 | 87,635 |
7. Other gains and losses
| 2009 | 2008 | |||
| £ | £ | |||
| From continuing operations | ||||
| Services to related parties | 37,796 | - | ||
| Profit on disposal of assets | 3,030 | - | ||
| Loss on disposal of subsidiary | - | (277,238) | ||
| 40,826 | (277,238) |
8. Finance cost
| 2009 | 2008 | |||
| £ | £ | |||
| Interest on non-recourse loan (DBSA) | 69,675 | - | ||
| 69,675 | - |
Interest payable on the Development Bank of South Africa ("DBSA") loan is based on a fixed contract rate of 25%. The loan of ZAR 10 million is a non-recourse loan based on the final implementation of the AMD project in South Africa. Should financial closure for the AMD project not be reached, the loan is written-off, alternatively if the project reaches financial closure, the DBSA has the right to fund up to 50% of the debt portion for the project, estimated at ZAR 1 billion. The contract was signed 25 February 2009.
9. Loss before taxation
| 2009 | 2008 | |||
| £ | £ | |||
| Loss before taxation is stated after charging/(crediting): | ||||
| Depreciation | 9,802 | 11,405 | ||
| Auditors' remuneration - audit | 30,000 | 24,500 | ||
| Subsidiary auditor's fees | 15,000 | 10,000 | ||
| Exchange gain | (238,106) | (97,114) | ||
| Share based payments for services (note 19) | 120,666 | 210,596 | ||
| Share based employee benefits (note 19) | 83,861 | 1,551,509 |
10. Employees
| 2009 | 2008 | |||
| The average monthly number of persons (including Directors) employed by the Group during the period was: | ||||
| Group | 8 | 5 | ||
| Company | 5 | 3 | ||
| Employment costs | £ | £ | ||
| Wages and salaries (including directors) | 594,165 | 412,869 | ||
| Directors' remuneration | ||||
| Aggregate emoluments (including benefits in kind) | 526,874 | 777,000 | ||
| Emoluments of the Highest Paid Director | 215,000 | 427,000 |
The total salaries and wages cost includes payment to Jaco Schoeman and Dirk Kotzé as full time employees of the Group's South African subsidiary, Western Utilities Corporation (Pty) Ltd.
11. Taxation
| 2009 | 2008 | |||
| £ | £ | |||
| Group | ||||
| Current Tax | ||||
| Current tax on profits for the year | - | - | ||
| Total current tax | - | - | ||
| Deferred tax movement | (44,943) | (99,626) | ||
| Income tax credit | (44,943) | (99,626) |
| 2009 | 2008 | |||
| £ | £ | |||
| Factors affecting the tax charge for the period | ||||
| Loss on ordinary activities before taxation | (1,772,754) | (3,007,344) | ||
| Loss on ordinary activities before taxation multiplied by standard rate of UK corporation tax of 28%/30% | (496,371) | (902,203) | ||
| Effects of : | ||||
| Depreciation | 2,745 | 3,421 | ||
| Impairment of assets under construction | 182,344 | - | ||
| Loss on disposal of subsidiary | - | 83,171 | ||
| Profit on sale of assets | (849) | |||
| Share based employee compensation costs | 57,267 | 451,444 | ||
| Deferred tax (Western Utilities Corporation) | 44,943 | 99,626 | ||
| Losses carried forward | 209,921 | 264,541 | ||
| UK Corporation tax | - | - |
A deferred tax asset of £496,371 (2008: £902,203) has not been recognised due to the uncertainty over the timing of future recoverability.
A deferred tax asset of £ 157,027 (2008: £99,626) has been recognised relating to losses incurred in Western Utilities Corporation (Pty) Limited which are expected to be utilised in the foreseeable future, subject to the approval being obtained for the water reclamation project.
12. Loss per share
Loss for the year attributable to shareholders is £1,727,861 (2008: £2,907,718). This is divided by the weighted average number of shares outstanding calculated to be 480,443,691 (2008: 235,163,631) to give basic loss per share of 0.4p (2008: 1.2p 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.
13. Intangible assets
| £ | ||
| Cost | ||
| At 31 December 2008 and 1 January 2009 | - | |
| Additions | 2,778,863 | |
| At 31 December 2009 | 2,778,863 | |
| £ | ||
| Net book value | ||
| 31 December 2009 | 2,778,863 | |
| 31 December 2008 | - |
Intangible Assets relate to the development cost associated with the Definitive Feasibility Study for the Group's AMD project in South Africa. WUC started with the development of the commercial scale plant through the development of a definitive feasibility study that among others included the design and costing of the full scale plant together with the Environmental Impact Assessment (EIA) and resource verification studies.
The Group's Acid Mine Drainage project reached the final stages of development during the fourth quarter of 2009, with the Definitive Feasibility Study being completed by Golder Associates and the submission of the detailed Scoping Report for the Environmental Impact Assessment. Negotiations commenced with the authorities and with Rand Water for an off-take agreement and regarding the operating and project model. Progress in this regard has been limited as the mining companies and the authorities have yet to agree on certain important issues pertaining to the project. The cost of the definitive feasibility study is regarded as development cost and as such has been capitalised.
Despite the uncertainty above, the directors consider it appropriate to carry these costs as an asset.
14. Fixed assets
14.1 Property, plant and equipment - Group
| Plant &Machinery | Fixtures,Fittings &Equipment | Assets underconstruction | Total | |||||
| £ | £ | £ | £ | |||||
| Cost | ||||||||
| At 31 December 2007 | 167,521 | 30,736 | 231,747 | 430,004 | ||||
| Additions | - | 12,705 | 549,112 | 561,817 | ||||
| Disposals | (167,521) | (5,298) | (129,630) | (302,449) | ||||
| Foreign exchange movement | - | 818 | - | 818 | ||||
| At 31 December 2008 | - | 38,961 | 651,229 | 690,190 | ||||
| Additions | - | 5,151 | - | 5,151 | ||||
| Disposals | - | (11,465) | - | (11,465) | ||||
| Foreign exchange movement | - | 2,505 | - | 2,505 | ||||
| At 31 December 2009 | - | 35,152 | 651,229 | 686,381 | ||||
| Accumulated depreciation | ||||||||
| At 31 December 2007 | 25,994 | 2,019 | - | 28,013 | ||||
| Charge for the year | - | 11,381 | - | 11,381 | ||||
| Disposals | (25,994) | (476) | - | (26,470) | ||||
| Foreign exchange movement | - | 159 | - | 159 | ||||
| At 31 December 2008 | - | 13,083 | - | 13,083 | ||||
| Charge for the year | - | 9,802 | - | 9,802 | ||||
| Disposals | - | (5,124) | - | (5,124) | ||||
| Impairment | - | 651,229 | (651,229) | |||||
| Foreign exchange movement | - | 214 | - | 214 | ||||
| At 31 December 20009 | - | 17,975 | 651,229 | 669,204 | ||||
| Net Book Value | ||||||||
| At 31 December 2009 | - | 17,177 | - | 17,177 | ||||
| At 31 December 2008 | - | 25,878 | 651,229 | 677,107 | ||||
| At 31 December 2007 | 141,527 | 28,717 | 231,747 | 401,991 |
Impairment losses recognised for the year
Assets under construction relate to costs incurred by Western Utilities Corporation (Pty) Limited (WUC) which was established to develop and commercialise a process technology which will facilitate the treatment of acid water, which is an industrial by-product of the mining process, and to sell the treated water to industrial customers. The group has assessed the carrying value for assets under construction and has decided to impair the assets due to the uncertainty of government approvals.
| Property, plant and equipment - Company | ||||
| Company : | Fixtures,Fittings &Equipment | Total | ||
| £ | £ | |||
| Cost | ||||
| At 31 December 2007, 31 December 2008 and at 31 December 2009 | 1,401 | 1,401 | ||
| Accumulated Depreciation | ||||
| At 1 January 2008 | 490 | 490 | ||
| Charge for the year | 280 | 280 | ||
| At 31 December 2008 | 770 | 770 | ||
| Charge for the year | 140 | 140 | ||
| At 31 December 2009 | 910 | 910 | ||
| Net book value | ||||
| At 31 December 2009 | 491 | 491 | ||
| At 31 December 2008 | 631 | 631 | ||
| At 31 December 2007 | 911 | 911 | ||
14.2 Investments
| £ | ||
| Cost | ||
| At 1 January 2008 and 31 December 2008 | 1,600,007 | |
| Disposal | (1,600,000) | |
| At 31 December 2009 | 7 | |
| Provision for impairment | ||
| At 1 January 2008 and 31 December 2008 | 1,600,000 | |
| Disposal | (1,600,000) | |
| At 31 December 2009 | - |
| Net book value | ||
| At 31 December 2009 | 7 | |
| At 31 December 2008 | 7 | |
| At 31 December 2007 | 7 |
Microfuze International Pty Limited was disposed of on the 20 March 2009 for $1. The balance due from the subsidiary was fully written down as at 31 December 2008.
Investments in subsidiaries comprise the following, all of which are fully consolidated:
| Name and nature of business | Country ofRegistration | Class of shares | % held | |||
| Water Utilities Limited(dormant holding Company) | BVI | Ordinary | 100 | |||
| Western Utilities Corporation (Pty) Limited(acid mine drainage process development)-held indirectly | South Africa | Ordinary | 100 |
15. Trade and other receivables
| Group: | 2009 | 2008 | ||
| £ | £ | |||
| Other debtors and prepayments | 85,692 | 555,272 | ||
| 85,692 | 555,272 | |||
| Company : | ||||
| Amounts owed by Group undertakings | - | 1,659,504 | ||
| Other debtors and prepayments | 25,258 | 20,093 | ||
| 25,258 | 1,679,597 |
As at 31 December 2009 the amounts owed by Group undertakings represents a balance due from Western Utilities Corporation (Pty) Limited of £2,966,379. Interest is payable at LIBOR. The full amount was provided for due to the uncertainties with current government approvals in South Africa.
16. Trade and other payables
| Group | 2009 | 2008 | ||
| £ | £ | |||
| Trade payables | 554,945 | 528,629 | ||
| Other payables | - | 9,741 | ||
| Accruals and deferred income | 32,418 | 28,999 | ||
| Taxation and social security | - | 5,233 | ||
| 587,363 | 572,602 | |||
| Company | ||||
| Trade payables | 50,344 | 69,071 | ||
| Accruals and deferred income | 30,000 | 27,000 | ||
| 80,344 | 96,071 |
17. Other financial liabilities
| Held at amortised cost | 2009 | 2008 | ||
| £ | £ | |||
| Development Bank of South Africa Limited | 892,760 | - |
Security held: First ranking pledge and cession in security of the Borrower's shareholders claims in the Borrower; first ranking cession security of all the bank and investment accounts of the Borrower; first ranking pledge and cession of all debtors' balances and claims which the Borrower may have against third parties.
The interest rate is 25% per annum.
The repayment terms: Loan is repayable on the 5th anniversary of the commencement date or on the date of the subsequent financial close. Subsequent financial close means the date after which all conditions precedent stipulated in the legal agreements for the undertaken project have been fulfilled, deferred or waived. Undertaken project means the acid mine drainage treatment project to be implemented by the Borrower and/or the Sponsor as a result of the completion of the project. The creditor will forfeit the claim regarding the original loan and any interest accrued if at any stage undertaken project will be assessed as not feasible and all the development regarding the project will be abandoned.
18. Share capital
| 2009 | 2008 | |||
| £ | £ | |||
| Capital comprises | ||||
| Authorised | ||||
| 1,000,000,000 ordinary shares of 0.15p each | 1,500,000 | 1,500,000 | ||
| Allotted, issued and fully paid | ||||
| 687,063,554 (2008: 252,869,110) ordinary shares of 0.15p each. | 1,030,595 | 379,304 |
18.1 Fully paid ordinary shares
| Number ofShares | Share Capital | SharePremium | ||||
| Balance at 1 January 2008 | 224,369,110 | 336,554 | 6,670,787 | |||
| Issue of shares for services | 28,500,000 | 42,750 | 1,382,950 | |||
| Balance at 31 December 2008 | 252,869,110 | 379,304 | 8,053,737 | |||
| Issue of shares for cash | 400,000,000 | 600,000 | 1,400,000 | |||
| Issue of shares for raising fees | 24,444,444 | 36,666 | - | |||
| Issue of shares in lieu of options to Director | 2,000,000 | 3,000 | - | |||
| Issue of shares under employee share scheme | 7,750,000 | 11,625 | - | |||
| Balance at 31 December 2009 | 687,063,554 | 1,030,595 | 9,453,737 |
Fully paid ordinary shares, which have a par value of £0.0015, carry one vote per share and carry the right to dividends.
The fair value of shares issued in lieu of the raising fee was determined using a market rate for similar services.
During the year shares were issued to the Directors and staff of the Company under a share participation scheme as follows:
| Number of Shares | Value | |||
| £ | ||||
| J Schoeman | 5,000,000 | 45,000 | ||
| D Kotzé | 2,000,000 | 18,000 | ||
| Senior Staff | 750,000 | 6,750 |
19. Share based payment arrangements
| Details of the share options outstanding as at 31 December 2009 | ||||||||
| Name | Date granted | Number | Exercise price | Expiry date | ||||
| Pence | ||||||||
| Duncan Clegg | 2006/02/13 | 1,500,000 | 10 | 2011/02/13 | ||||
| Peter Marks | 2006/02/13 | 1,500,000 | 10 | 2011/02/13 | ||||
| Doug Parrish | 2006/02/13 | 4,000,000 | 10 | 2011/02/13 | ||||
| Timothy Wall | 2006/02/13 | 2,000,000 | 10 | 2011/02/13 | ||||
| Nabarro Wells | 2006/02/13 | 3,700,000 | 10 | 2011/02/13 | ||||
| Sandy Barblett | 2007/06/06 | 3,000,000 | 10 | 2012/06/06 | ||||
| Art Greenberg | 2007/06/06 | 1,000,000 | 10 | 2012/06/06 | ||||
| Harley Grant | 2007/06/06 | 2,000,000 | 10 | 2012/06/06 | ||||
| Jeff Henry | 2007/06/06 | 2,000,000 | 10 | 2012/06/06 | ||||
| Mike Dureau | 2007/06/06 | 110,000 | 10 | 2012/06/06 | ||||
| Steven Ribich | 2007/12/10 | 1,947,000 | 10 | 2012/12/10 | ||||
| Rockbury | 2008/04/30 | 3,330,000 | 7.5 | 2013/04/30 | ||||
| Bertie Steytler | 2009/07/01 | 1,000,000 | 3 | 2014/06/30 | ||||
| Charles Zorab | 2009/07/01 | 1,000,000 | 3 | 2014/06/30 | ||||
| 28,087,000 | ||||||||
During the year options granted to D Kotzé were cancelled and replaced by 2,000,000 fully paid ordinary shares. The fair value of the allotted shares is included in the share capital calculations. No options expired and none were forfeited or exercised during the year.
The fair value of the options vested in the period was £12,292 (2008: £336,405). The assessed fair value at grant date is determined using the Black-Scholes Model that takes into account the exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.
The following table lists the inputs to the model used for the year ended 31 December 2009:
| July 2009 | ||
| Dividend yield (%) | - | |
| Expected volatility (%) | 177 | |
| Risk-free interest rate (%) | 5.23 | |
| Share Price at grant date (pence) | 0.67 | |
| No. of options | 2,000,000 |
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome. The exercise period is 5 years from the date of grant.
The following table summarise the total share based payments effected for the year 31 December 2009:
| 2009 | 2008 | |||
| Issued to | Value£ | Value£ | ||
| Directors | 64,819 | 1,551,509 | ||
| Service providers | 120,666 | 210,596 | ||
| Senior staff members | 19,042 | - | ||
| Total | 204,527 | 1,762,105 |
20. Reserves
| Groupforeignexchangereserve | Companyand Groupshareoptionreserve | Companyand Groupsharepremiumaccount | Group profitand lossaccount | Companyprofit andloss account | ||||||
| £ | £ | £ | £ | £ | ||||||
| At 31 December 2007 | 57,321 | 1,082,045 | 6,670,787 | (5,583,422) | (5,795,817) | |||||
| Loss for the year | - | - | - | (2,907,718) | (2,392,005) | |||||
| Exchange difference | (6,951) | - | - | - | - | |||||
| New shares issued | - | - | 1,382,950 | - | - | |||||
| Share based payments | - | 336,405 | - | - | - | |||||
| At 31 December 2008 | 50,370 | 1,418,450 | 8,053,737 | (8,491,140) | (8,187,822) | |||||
| Loss for the year | - | - | - | (1,727,861) | (3,706,481) | |||||
| Exchange difference | (50,370) | - | - | - | - | |||||
| New shares issued | - | - | 1,400,000 | 151,325 | 151,325 | |||||
| Share based payments | - | 1,911 | - | - | - | |||||
| At 31 December 2009 | - | 1,420,361 | 9,453,737 | (10,067,676) | (11,742,978) |
The company has taken advantage of the exemption conferred by section 408 of Companies Act 2006 from presenting its own income statement. A loss after taxation of £3,706,481 (2008: £2,392,005) has been included in the financial statements of the parent company.
21. Related party transactions
Other than transactions with Group companies and Directors as disclosed in the Notes, there were no transactions with other related parties.
22. Ultimate controlling party
There was no ultimate controlling party during the year.
23. Subsequent events
In May 2010, the Company announced a placing of shares to UK and Australian institutions to raise £705,000 (256,363,636 ordinary shares at 0.275 pence). The placing is in two tranches with the first tranche (101,850,000 ordinary shares at 0.275 pence) completed on the 28 May 2010. The second tranche of the placing is subject to approval by shareholders at the AGM on the 30 June 2010. All Directors have indicated their intention to vote the shares which they own in favour of the placing.
24. Commitments
| Operating lease | 2009 | 2008 | ||
| £ | £ | |||
| Minimum lease payment due | ||||
| Within one year | 18,197 | 20,334 | ||
| In second to fifth year inclusive | - | 18,197 | ||
| 18,197 | 38,531 |
Operating lease payments represents rentals payable by the Groups subsidiary in South Africa for its office properties. Leases are negotiated for an average term of seven years and rentals are fixed for an average of three years. No contingent rent is payable.
25. Other expenses
The following significant expenses have been included in other expenses
| 2009 | 2008 | |||
| Audit Fees | 30,000 | 24,500 | ||
| Directors fees | 214,394 | 161,238 | ||
| Foreign exchange gains | (238, 106) | (97,114) | ||
| Impairment of assets under construction | 651,229 | - | ||
| Legal Fees | 85,132 | 51,067 | ||
| Professional Fees | 64,711 | 297,690 | ||
| Broker & Nomad fees | 50,000 | 53,369 | ||
| Salary & Wages | 325,291 | 257,869 |
26. Standards issued but not in force
At the date of approval of these financial statements the following accounting standards were issued by the International Accounting Standards Board but were not yet effective:
| Standard / Interpretation | Effective for annual periodsbeginning on or after | |
| (i) Adopted by the European Union | ||
| IFRS 1 "First time adoption of International Financial Reporting Standards" (Revised) | 1 July 2009 | |
| IFRS 3 "Business combinations" (Revised)
| 1 July 2009 | |
| International Accounting Standard (IAS) 27 "Consolidated and separate financial statements" (Amended) | 1 July 2009 | |
| International Financial Reporting Interpretation Committee (IFRIC) 17 "Distribution of non-cash assets to owners" | 1 July 2009 | |
| Amendments to IAS 39 "Eligible Hedged items" | 1 July 2009 | |
| Improvements to IFRSs 2008 - Amendments to IFRS 5 "Non-current assets held for sale and discontinued operations" | 1 July 2009 | |
| Amendments to IAS 32 "Classification of rights issues" | 1 February 2010 | |
| (ii) Not adopted by the European Union | ||
| Improvements to IFRSs - 2009 | 1 July 2009/1 January 2010 | |
| Amendments to IFRS 2 "Group cash-settled share-based payment transactions" | 1 January 2010 | |
| Amendments to IFRS 1 "Additional exemptions for first-time adopters" | 1 January 2010 | |
| IFRIC 19 "Extinguishing financial liabilities with equity instruments" | 1 July 2010 | |
| Amendments to IFRIC 14 "Prepayments of a minimum funding requirement" | 1 January 2011 | |
| IAS 24 "Related party disclosures" (Revised) | 1 January 2011 | |
| IFRS 9 "Financial instruments" | 1 January 2013 |
The Board of Directors expects that the adoption of these accounting standards in future periods will not have a material effect on the financial statements of the Group.
The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2009, but is derived from those accounts. Statutory accounts for 2009 will be delivered to the Registrar of Companies on 30 June 2010. The auditors have reported on those accounts and their report was not qualified, but drew attention by way of emphases of matter to uncertainties over going concern and intangible assets.
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