JWI
04/09/2013 13:38
FLLYR
REL: 1338 HRS Just Water International Limited
FLLYR: JWI: Preliminary Full Year Report and Release for 30 June 2013
Chairman's and Chief Executive's review
Just Water International Limited
Results for year ended 30 June 2013
Just Water International Limited (JWI) presents its full year results for the
year ended 30 June 2013.
Consolidated result
Consolidated: 2013; 2012; %
$'000; $'000; Change
Operating Revenue: 27,892; 29,931; (7%)
EBITDA: 7,349; 8,187; (10%)
Depreciation & Amortisation: (4,005); (4,543); 12%
EBIT: 3,344; 3,644; (8%)
Interest: (1,235); (1,571); 21%
Net profit before tax: 2,109; 2,073; 2%
Tax: (391); (317); (23%)
NPAT: 1,718; 1,756; (2%)
(Net of elimination entries)
This was another year of consolidation, with a continued focus on debt
reduction. Revenue decreased as competitors reduced prices in an effort to
try and entice current customers away from Just Water.
Despite the fall in revenue, net profit before tax has increased by almost 2%
over the previous year. This is as a result of on-going cost control, lower
depreciation and interest savings through the reduction of debt. EBITDA and
EBIT include a small net positive exchange gain.
Operating and investing cash flow totalled $3.3 million for the year,
compared to $3.2 million in the previous year. As a result we have been able
to reduce total bank borrowings during the year by NZ$3.3 million. This is
after paying NZ$0.648 million for the acquisition of 'Pure Rain' on 28 June
2013. In the previous year we repaid bank borrowings of $3.2 million after
paying NZ$0.900 million for the acquisition of the business of Just Plants.
The assets of 'Pure Rain', a water filter business based in Brisbane, were
acquired on 30 June 2013, and this business is being absorbed into the
Clearwater operation. It is a good fit for Clearwater and strengthens its
residential business with about 3,000 new accounts.
After balance date, Just Water announced the unconditional acquisition of the
assets of 'Aquaman', a Brisbane-based water cooler business. This business
will add over 500 customers to Clearwater's cooler base.
The Company has reduced debt by $10 million over the last 3 years, and the
directors believe that it is now in a position to realise opportunities to
further expand the operations of the Group in both New Zealand and Australia.
With the appointment of a new CEO, and our Founder taking on a more strategic
role, the directors believe that it has the people, financial resources and
systems to grow the business without undue pressure.
Diversity
The Company does not have a formal diversity policy however does not
discriminate in terms of gender, race, colour or religion in the appointment
of directors, management or staff. At balance date the composition of
directors and officers was:
2013: Male; Female
Non-executive directors: 2; 1
Key Management - New Zealand: 2; 4
Key Management - Australia; 3; 1
Total: 7; 6
2012: Male; Female
Non-executive directors: 2; 1
Key Management - New Zealand: 4; 5
Key Management - Australia: 3; 2
Total: 9; 8
New Zealand
New Zealand: 2013; 2012; %
$'000; $'000; Change
Operating Revenue: 18,491; 19,705; (6%)
EBITDA: 5,341; 5,797; (8%)
Depreciation & Amortisation: (2,960); (3,323); 11%
EBIT: 2,381; 2,474; (4%)
(Net of elimination entries)
The New Zealand operations EBIT reduced by 4% in difficult trading
conditions. The primary driver for the reduced profitability was the ongoing
reduction in revenue. The exchange gain was only $0.03 million this year so
had a minimal effect on the EBIT.
The overall base of contracts, from which recurring income occurs, was 36,095
at year end. This is a 4.0% reduction for the year and continues the trend
of reducing the customer churn rate which was 6.3% last year. We are pleased
that this indicator shows that we are on the right track. The Board will not
be satisfied until we show growth in the customer base.
A price war manifests itself particularly in New Zealand, as our competitors
continue to discount deeply. Our objective is to achieve profitable growth;
which can be challenging when competitors continually drive market
profitability down with price discounts.
The Company is still the only 'large' bottled water company in New Zealand
that has all its bottling plants certified to the stringent ABWI
International standards, and the only company that complies. The Company
believes that organisations changing to a 'non-certified' supplier are taking
a corporate risk with the health of their staff and customers. Recent events
in other market sectors re-emphasises the need to have people, systems and
processes in place to minimise any risk to consumers. We actively encourage
customers of the industry to ask detailed questions about water quality and
processing standards before choosing their supplier.
The Company has undertaken various initiatives during the year. The 'Just
Water Filter' has been sold online, and through various other channels such
as kitchen designers and plumbers. Filters continue to be a core part of our
business in Australia and we firmly believe that the New Zealand market will
further develop in this sector.
The Company continues to publicise the issue of obesity, and has successfully
created debate in the community. Just Water's "free" water cooler campaign in
lower socio economic areas has had a positive influence on soft drink
consumption. We continue to champion the reduction in consumption of sugar
saturated soft drinks to responsible levels to address the urgent issue of
type 2 diabetes and premature death through the over consumption of sugar
saturated drinks.
Australia
Australia: 2013; 2012; %
$'000; $'000; Change
Operating Revenue: 9,401; 10,226; (8%)
EBITDA: 2,008; 2,390; (16%)
Depreciation & Amortisation: (1,045); (1,220); 14%
EBIT: 963; 1,170; (18%)
(Net of elimination entries)
The Australian operations also reduced profitability as a result of
aggressive discounting by competitors in the key corporate market. As noted
below the quantity of rental and service contracts increased for the first
time in many years, but at a lower yield.
Before the acquisition mentioned above, the number of contracts from which
recurring income is received increased to 10,509. This is an increase of 3%
for the year compared to the previous year reduction of 0.6% and reinforces
the Board's belief that there continues to be growth opportunities available
in Australia. Pricing remains very competitive with on-going pressure on
average monthly rental value.
The Company continues to expand its on-line sales channel using the Just
Water Filter - www.justwaterfilters.com.au, and online water cooler product
under the name "The Watercooler Company" - www.thewatercoolercompany.com.au.
Dividend
There will be no dividend in the current year, as the Company focuses on debt
reduction, profitability and growing the business.
Audit
Just Water International Limited's accounts have been audited and an
unqualified audit opinion was given.
Board and Chief Executive
As advised, a new Chief Executive, Ian Ormiston, has been appointed to
replace Tony Falkenstein, the founder of the Company, and will start in his
new position in September 2013. Ian brings a wealth of experience in both
the Australian and New Zealand markets, in particular with Les Mills
International Ltd, where he remains a director.
Tony Falkenstein will continue on the Board as 'Founder Director', and will
remain involved in the strategic growth of the Company.
Bank Facilities
The Company has complied with all bank covenants at 30 June 2013. Net bank
debt at year end was $15.5 million (June 2012 $18.9 million). Debt has
decreased by $3.3 million over the past year. The Company has an unutilised
funding facility of $3.9 million as at 30 June 2013 (June 2012: $5.4m), and
thus has funding capability in place for growth and exploring further
acquisitions. During the year the Company voluntarily requested the bank to
reduce the facility by a further $2.5 million in order to reduce on-going
facility fees. Since balance date a further $1.5 million has been reduced
for the same reason.
Receivables
At 30 June there continued to be in excess of $80 million of expected future
rental income stream which is not recognised in the financial statements.
Expected future rental income streams have been calculated on the basis of
average customer life. This calculation of future receivables is used as part
of the monitoring of compliance for our bank covenants.
Summary
Overall trading conditions continue to remain challenging in both countries.
The Company continued to reduce debt as a prime objective, but has
successfully taken a far more aggressive approach to protecting its customer
base.
The recent acquisitions of Pure Rain and Aquaman are significant in terms of
fuelling the growth in Australia, and the Company will be investigating
further opportunities.
The directors are pleased with progress over the last year. The Company is in
a sound position both financially and people-wise, giving it the foundation
on which to expand.
Staff and Shareholders
The directors wish to acknowledge the efforts of the management team and all
staff for their efforts throughout the year.
Yours sincerely
Paul Connell Tony Falkenstein
Chairman Chief Executive
End CA:00240691 For:JWI Type:FLLYR Time:2013-09-04 13:38:42
