Just Water Spills Losses

Just Water International Ltd has posted disappointing results for the year ended 30 June 2010

After incurring impairment on the Australian subsidiary of $18.3m, the  consolidated EBIT loss was $17.7m, and the loss before tax was $19.4 m. 

Revenue was down 3% at $35.46m ($36.6m) and EBITDA -34% at $6.03m ($9.12m). The EBIT before impairment was down 87% to $610,000 ($4.59m).

Although EBITDA increased in the second half of the year, and we expect this to continue in 2011, the 2010 results are unacceptable, says Tony Falkenstein, managing director. 

As previously advised, the implementation of a new computer system in March  

2009 has impacted the profit results. Although the computer system is still not producing what we expected, it is much improved, and we are at least able to perform standard functions. It is not expected to impact the profit results during the coming year.  

The New Zealand operation had flat sales of $23.97m ($24.10m) and ran a loss of $773m compared with a net profit of $3.21m last year. The second half EBITDA of $2.3m compares to $1.9m in the first half.

“Although better, this second half result is still not acceptable, and significant costs have been taken out of the business in the last few months, positioning the New Zealand operation for an improvement in 2011.  

Income in Australia was $11.49m (12.50m) and EBUITDA was -11% at $1.91m ($2.15m). Goodwill impairment of $#18m knocked EBIT to-$18.05m and the bottom line net loss was -$18.44m (-$1.41m). “In 2009 the Australian subsidiary enjoyed a $900,000 income and profit improvement through an exchange gain on consolidation.

“If this non-cash item is stripped from results the Australian subsidiary has continued to improve since the turn around started in October 2007. Between 2007 and 2010, EBITDA has improved by $4.8m. Considerable attention, and cost to the Group, was diverted by an offer to acquire the Australian business, which the Board rejected in June 2010.  

The directors have decided it would not be prudent to pay a dividend in the current year. The directors are focusing on debt reduction, and would not anticipate resuming dividends in the 2011 year.  

The company has complied with all bank covenants at 30 June 2010. Net bank debt at year end was $25.5m. Debt has remained constant over the past year, and it is expected to reduce significantly in the 2011 year.  

“Overall trading conditions remain challenging in both countries. The underlying base of customers is strong, and there is a focus on managing margins and controlling costs.  

“Based on the actions taken already, it is expected the company will turn around in the 2011 with a markedly improved EBITDA.” 

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