WATERCO LIMITED — Annual Report 2012

Aug 26, 2012

WATERCO LIMITED A. B.N. 62 002 070 733

==> picture [129 x 53] intentionally omitted <==

36 SOUTH ST RYDALMERE NSW 2116 AUSTRALIA PO BOX 230, RYDALMERE BC , NSW 1701 Tel: ( 612) 9898 8600 Fax: (612) 9898 1877 www.waterco.com

WATERCO LIMITED

Preliminary Final Report for the Financial Year Ended 30 June 2012

FOR ANNOUNCEMENT TO THE MARKET

==> picture [129 x 53] intentionally omitted <==

WATERCO LTD

Summary of results FY ended 30 June 2012

Sales Revenue	$66.1 million, down 2%
NetProfitAfter Tax	$2.09million, down34%
EBIT (& Goodwill impairment)	$4.49 million, down 26%
Totaldividend payout	7c pershare (fullyear)

CEO REVIEW OF OPERATIONS

REVENUE AND PROFITABILITY

The Group reported a Net Profit After Tax (NPAT) of $2.09 million, registering a decrease of 34% on the previous corresponding period (PCP). The main contributory factor to this is the decrease in turnover, as a result of adverse weather events across Australia. The trend of wet weather during the year was reported to be the wettest since records began in 1990. However the weather conditions had improved during the last quarter of the year, enabling sales in Australia operations to better those of the PCP. A significant decline in performance in North America and Europe, as a result of continuing poor market sentiments and the European Debt crisis, also contributed to the decline in the Group’s performance.

Although the NPAT was below the PCP, it is slightly ahead of the last profit guidance and significantly better than the expectations in early May, not long after the start of the last quarter of the financial year.

In line with the drop in NPAT, Earnings Before Interest and Tax (EBIT) for the year (before foreign exchange adjustments on intercompany loans) fell 25% to $4.54 million from $6.07 million and Sales Revenue fell 2% to $66.1 from to $67.7 million.

In the Australian division, which accounts for a major portion of the profitability of the Group, lower Chemical sales to the retail sector accounted for most of the decline in sales.

DIVISIONAL EBIT PERFORMANCE

The breakdown of EBIT contributions (after consolidation adjustments for unrealised forex gains/losses on intercompany loans and intercompany dividends) by division is as follows:

	FY12	FY11
	($000)	($000)	% Change
Australia and New Zealand	4,195	5,639	-26%
North America and Europe	(1,466)	211	-794%
Asia	1,810	220	+721%
Consolidated Reported EBIT	4,539	6,070	-25%

AUSTRALIA AND NEW ZEALAND

Australian and New Zealand operations, predominantly in the domestic swimming pool industry, form the majority of the Group’s activities. As well as selling a wide range of products, including chemicals for swimming pool water treatment, Waterco, as franchisor of the Swimart chain of pool stores, has acquired an extremely good understanding of the factors driving consumer demand in the after-market. The franchise programme has been developed in-house since 1984, with the opening of our first company-owned pool shop in Sydney. Very soon thereafter, the Company converted this to the franchised Swimart Pool and Spa retail system. As a result of this solid foundation, this division has maintained an acceptable, albeit lower, level of profitability through the difficult times of the last few years. The Company is confident that this wealth of knowledge and experience will enable us to emerge stronger in the marketplace, when the business environment and consumer confidence return to better levels.

It has also, in recent years, enabled Waterco to increase sales of the larger filters, for public pools, aquaculture and industrial water treatment, strengthening Waterco’s presence beyond and cushioning the significant drop in sales to the domestic swimming pool sector.

Waterco is proud that the Company’s Air Scour Filtration system was chosen for the Glen Eira Sports and Aquatic Centre, which features five separate pools, two water slides, and a fully equipped aquatic wellness area. Glen Eira City Council required the very best in commercial swimming pool filtration technology to maximise water and energy savings and chose Waterco, after an extensive selection process. The project was the largest-ever capital works project embarked upon by Glen Eira City Council. The $41.2 million facility has been designed to provide aquatic, recreation and well-being opportunities for all segments of the community.

Waterco’s Air Scour Filtration system provides extremely uniform air scour distribution resulting in a saving of between 25 and 35 per cent of the backwash water for all filters. Installed by WJ Pratt Pty Ltd, the filtration system consisted of air scour filters which included nine units of Micron Air Scour Deep Bed Vertical Nozzle Plate filters and 12 units of Micron Air Scour Deep Bed Horizontal filters, which are the first Horizontal Air Scour filters manufactured by Waterco.

In the domestic pool sector, some successful new products, including a wider range of LED underwater lights, the MultiCyclone Plus (which is an integrated cartridge filter combined with Waterco’s awardwinning MultiCyclone system) and a robotic cleaner for domestic pools, enabled us to contain the impact of adverse conditions on our results.

Unfortunately, our efforts were insufficient to counter the full effects of the weather conditions, which were adverse during the peak of the trading season. This division, therefore, saw a drop in EBIT of 26%, from a reduction in sales revenue of 3%.

NORTH AMERCIA AND EUROPE

Waterco North America and Europe comprises the Group’s operations in the USA, Canada, UK and France.

The US market is the largest in the world and Waterco USA has made a substantial investment through its acquisition of Baker Hydro in March 2005. Our operations in Augusta, Georgia manufacture larger filters and assemble commercial pumps.

In the United States, sales were flat in local currency terms, with expected improvements from the commercial water treatment market not occurring in the financial year. Waterco USA recorded a higher loss this financial year compared with PCP as a result of this shortfall in the water-treatment industry.

However, sales of water-treatment products are considered promising, with Waterco USA currently having a large quote register, which are expected to result in some sales being realized in the new financial year. Of significance is a small desalination plant project requiring a high pressure seven-bar rated nozzle-plate filter of three metre diameter, which is expected to be delivered in the new financial year. This supply contract was awarded following a successful commissioning of another small desalination plant using a horizontal high pressure seven bar rated filter in Vladivostok.

Waterco Canada (WCI) manufactures and distributes heat pumps mainly into the swimming pool industry. Drawing from a successful history spanning 20 years, including several years prior to WCI’s acquisition in 2005, this restructured entity, with a new research and development laboratory and assistance from our research and development division in Sydney, has improved performance of its products in both quality and cost. This was instrumental in the improvement of the results of WCI over the past two years. Under the Waterco umbrella, WCI celebrated the milestone of producing the 50,000th heat pump produced by the business before and after our acquisition. The conversion to a new environmentally friendly refrigerant has been completed. WCI completed the development of the first commercial-rated heat pump and successfully launched this new range in Canada.

For this financial year, sales in WCI declined, as a result of customers clearing inventory held over from the previous season. WCI has had a change in management during the year and it is expected that this will contribute to improved sales in the new financial year.

Waterco Europe (WEL) , combining an entity set up in 2003 and the acquisition of Lacron in 2004, enjoys a continuous and successful history of almost 40 years in manufacturing fibreglass filters. The renown of the Lacron name for quality filters, coupled with progressive manufacturing techniques – which were introduced after the acquisition - has enabled WEL to bring to the market filters of quality at acceptable prices. As a result, both the Lacron and the Waterco brands are now well-recognised as quality products in Europe. This recognition continues, even after the manufacturing operations have been transferred to Malaysia and China, because the same high standards have been maintained.

Waterco France (WFR) was set up, as the thrust into Europe from the UK base could be best achieved with complementary facilities in France. WFR is located in Lyon, which is in the heart of the French swimming pool market, with access to convenient transport links. France is one of the largest markets in Europe, reputed to have a market value double that of Australia’s. This new office will allow the European base to grow our market share through recognised distribution centres throughout France, as well as service surrounding countries, predominantly those located in Southern Europe. The expenses for establishing an outlet in France were substantial and were written off as they were incurred, in accordance with accounting principles. However, the benefits are expected to be realised commencing from the next financial year.

Sales in WEL and WFR for the year were around the same level as PCP, despite extremely tough trading conditions. This was achieved through various strategic efforts, including improved sales in the Commercial Pool sector, particularly in Eastern Europe.

Together, the EBIT in the North America and Europe Division showed a significant loss of $1.47m compared with PCP’s profit of $211,000.

ASIA

Waterco Far East in Malaysia (WFE) was borne out of Waterco’s familiarity with the Southeast Asian market. WFE was initially, a sales operation designed to service Waterco Australia’s Southeast Asian customer base. In 1991 WFE added manufacturing operations to its undertakings in Kuala Lumpur, Malaysia. As well as bringing the Group closer to its markets in Southeast Asia, this also gave it cost-

efficiency in its manufacturing operations. Since then, WFE has become the principal manufacturing facility for pumps and filters for the Waterco Group. This year, WFE delivered several new products, notably, the LED Underwater Lights and MultiCyclone Plus, which helped cushion the Australian business from the decline of the market in general.

WFE manufactured the commercial filtration equipment recently installed in the Glen Eira Sports and Aquatic Centre.

WFE recently achieved ISO9001:2008 certification, the internationally recognised standard for the quality management of businesses and demonstrates the existence of an effective and well-designed quality management system, which satisfies the rigours of an independent and external audit. A key criterion of this standard is that the management system can provide confidence in creating products that meet expectations and requirements.

Waterco in China commenced operations in 2000, delivering advantages of low operational costs and a foothold into the huge local market. Today, these operations manufacture filters primarily for the European and the Australian markets. High manufacturing standards have been maintained, further enhancing the acceptance of filters made by Waterco in China, with the Waterco brand, in these markets.

Waterco China has also achieved an internationally recognised quality assurance certificate.

Waterco International in Singapore (WI) focuses on sales in Asia other than Malaysia and China, where we have our own trading entities. WI also provides technical assistance to our Indonesian entity and has been able to contribute to the growth of the latter.

The Asia Division achieved a significantly improved EBIT, through the improvement of sales into local markets, as well as increased manufacturing activity, through intercompany demands.

PRODUCT DEVELOPMENT AND WATER TREATMENT

The company continued to put resources into research and development, expanding further into high pressure filters suitable for water treatment. During the year, following the successful commissioning of the multiple large composite filters installed for pre-filtration of seawater for a desalination plant in Iraq, another set of composite horizontal filters of high-pressure seven-bar rating filter were successfully commissioned in Vladivostok, Russia, extending the acceptance of Watero filters for use in desalination plants. This is encouraging and signifies progress in Waterco’s thrust into this relatively new market .

Waterco has recently made a new breakthrough with the range of nozzle plate filters, employing unique manufacturing techniques to further strengthen its nozzle plate design, allowing the manufacture of Nozzle plate filters up to 3 meters in diameter, which can flex on both the horizontal and vertical axes. Waterco is currently patenting the process internationally, ensuring that Waterco will be in the unique position of being able to manufacture the world’s largest fibreglass wound nozzle plate filters, giving Waterco’s filters a distinct advantage over steel filters, which are less enduring to the degree of flexing experienced .

The patent for MultiCyclone was approved in the previous year, by European authorities; following that, formal acceptances of the patent in Australia and China are now in place. This will further reinforce our marketing of this product globally.

Waterco embraces the growing trend towards energy conservation. To this end, during the year Waterco introduced a power-conserving pump to the market. In addition, Waterco has made available glass beads as filtration media, which, together with progressive design of the internal components (laterals), which guide water through the filter, enables users to conserve water during the filter cleaning or backwashing process. The new MultiCyclone Plus also conserves water through reducing the

need for backwashing or cleaning of filter elements. Waterco has won several awards for environmental consciousness in this product design.

The company has also invested in a new patent for measuring Hydrogen Peroxide in pool water, thus automating the process for using a non-chlorine method for sanitizing water for the swimming pool industry as well as the water treatment industry. Before this, the absence of a reliable method of controlling the level of Hydrogen Peroxide has limited the use of Hydrogen Peroxide as a pool sanitation agent. Hydrogen Peroxide is preferred to chlorine for sanitizing pool water as it is more environmentally friendly, decomposing into water and oxygen on being applied. It also offers an alternative to swimmers who are sensitive to chlorine.

DIVIDEND AND OUTLOOK

The results for the year are disappointing. It is recognised that profitability has yet to return to normal levels, with the North America and Europe Division incurring an EBIT loss. However, Waterco has been working hard to mitigate the effects of adverse conditions and remains profitable. Waterco believes that trading conditions globally and the weather conditions in Australia will improve, facilitating better performance ahead.

Accordingly, Waterco declares a final dividend payment of 4 cents per share, payable to shareholders on 14 December 2012. This brings the total dividend payout to 7 cents per share for the year, a satisfactory outcome in the environment of poor global economic conditions.

The Board will provide a profit guidance at a later stage for the financial year ended 30 June 2013, as more information becomes available during the year.

WATERCO LIMITED Preliminary Final Report for the Financial Year Ended 30 June 2012

SUMMARY OF RESULTS

	SUMMARY OF RESULTS
			$A'000
	Revenues Profit (loss) after tax attributable to members		Down 2.4.% to 66,140 Down 36.6% to 2,031
	Dividends		Amount per security	Franked amount persecurity
	Final dividend		4¢	4¢
	Previous corresponding period		5¢	5¢
	Date for determining entitlements to the dividend			2012
			16~~th~~ November	2012
	Statement of Comprehensive Income
	Revenues Expenses Goodwill (on acquisition) Impairment Losses Finance costs Other Expenses		Current period - $A'000	Previous corresponding period-$A'000
			66,555 (6) (1,636) (62,011)	68,204 (6) (1,588) (62,127)
	Profit (loss) before tax Income tax_(see Annexure A)_		2,902 814	4,483 1,303
	Profit (loss) after tax Net profit (loss) attributable to non controlling interests		2,088 57	3,180 (24)
	Net profit (loss) for the period attributable to members		2,031	3,204
	Non-owner transaction changes in equity Net exchange differences recognised in equity Other revenue, expense and initial adjustments recognised directly in equity		1,557	(7,549)
	Total transactions and adjustments recognised directlyinequity		1,557	(7,549)

Total changes in equity not resulting from transactions with owners as owners 3,588 4,345

Total changes in equity not resulting from transactions with owners as owners	3,588	4,345
Earnings per security (EPS)	Current period	Previous corresponding Period
Basic EPS Diluted EPS	6.1c 6.1c	9.8c 9.8c

Calculation of Earnings per security (EPS)

Dividends	Amount per security	Franked amount persecurity
Net Profit ($000) Net Profit/(Loss) attributable to non controlling interests ($000) Earnings used in calculation of basic EPS ($000) Weighted average number of ordinary shares outstanding during the year used in calculation of basic EPS	2,088 57 2,031 33,464,447	3,180 (24) 3,204 32,683,116

Notes to the statement of comprehensive income

Profit (loss) attributable to members

	Profit (loss) after tax Less (plus)noncontrollinginterests	Current period - $A'000	Previous corresponding period-$A'000
		2,088 57	3,180 (24)
	Profit (loss) after tax, attributable to members	2,031	3,204

Revenue and Expenses - SEE ANNEXURE A

	Capitalised outlays Interest costs capitalised in asset values Outlays capitalised in intangibles (excluding those arising from acquisition of a business)	- -	- -

Operating Segments – SEE ANNEXURE A

Movement in Retained Profits

	Retained profits (accumulated losses) at the beginning of the financial period Net profit (loss) attributable to members Transfer from Asset Revaluation Reserve Adjustment relating to AASB 121 Dividendspaid	Current period - $A'000	Previous corresponding period -$A'000
		11,167 2,031 1,257 - 2,671	10,899 3,204 - - 2,936
	Retained profits (accumulated losses) at end of financialperiod	11,784	11,167

Intangibles – Impairment/Amortisation

	Impairment of goodwill Amortisation of other intangibles Total Impairment/ amortisation of intangibles		Consolidated -	current period
		Before tax $A'000 (a)	Related tax $A'000 (b)	Related non controlling interests $A'000 (c)	Amount (after tax) attributable to members $A'000 (d)
		6 -	- -	- -
		6	-	-

parison of half year profits Consolidated profit (loss) after tax attributable to members reported for the_1st_ half year Consolidated profit (loss) after tax attributable to members for the_2nd_half year	Current year - $A'000	Previous year - $A'000
	1,595	2,634
	436	570

Comparison of half year profits

	Consolidated Statement of Financial Position Current assets Cash and cash equivalents Trade and other receivables Inventories Other Total current assets	At end of current period $A’000	As shown in last annual report $A'000	As in last half yearly report $A'000
		1,998 8,452 25,292 583	2,795 8,260 25,837 570	2,457 12,717 27,994 685
		36,325	**37,462 **	43,853
	Non-current assets Other property, plant and equipment (net) Intangibles (net) Deferred tax assets Other Total non-current assets	36,846 25 578 378	34,691 31 (37) 355	36,353 29 134 345
		37,827	35,040	36,861
	Total assets	**74,152 **	**72,502 **	80,714
	Current liabilities Trade and other payables Interest bearing liabilities Current tax liabilities Provisions exc. tax liabilities Total current liabilities	6,517 3,056 (257) 1,333	6,955 3,410 378 1,506	12,308 3,033 490 1,694
		10,649	12,249	17,525
	Non-current liabilities Trade and other payables Interest bearing liabilities Deferred tax liabilities Provisions exc. tax liabilities Total non-current liabilities	- 20,989 524 171	- 19,802 235 110	- 21,112 347 103
		**21,684 **	20,147	21,562
	Total liabilities	32,333	32,396	39,087
	Net assets	41,819	40,106	41,627
	Equity Issued Capital Employee share loans Reserves Retained Earnings	35,562 (85) (5,718) 11,784	34,841 (103) (6,019) 11,167	35,291 (94) (4,931) 11,100
	Parent entity Interest Non controlling interests in controlled entities Total equity	41,543 276	39,886 220	41,366 261
		41,819	40,106	41,627

Consolidated Statement of Cashflows Cash flows related to operating activities Receipts from customers Payments to suppliers and employees Interest and other items of similar nature received Interest and other costs of finance paid Income taxes paid Other Net operating cash flows	Current period $A'000	Previous corresponding period -$A'000
	70,382 (64,003) 56 (1,637) (1,507) 234	73,236 (63,699) 32 (1,588) (1,304) 521
	3,525	7,198
Cash flows related to investing activities Payment for purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from sale of business Investments Payment for intangibles Net investing cash flows	(3,309) 26 - - -	2,462 73 - - -
	(3,283)	2,535
Cash flows related to financing activities Proceeds from issues of shares Proceeds from borrowings Repayment of borrowings Dividends paid Net financing cash flows	722 1,039 (2,671)	973 183 (2,948)
	(910)	(1,792)
Net increase (decrease) in cash held Cash at beginning of period (see Reconciliation of cash) Exchange rate adjustments. Cash at end of period (see Reconciliation of cash)	(668) 2,381 119	7,941 3,505 (9,065)
	1,832	2,381

Non-cash financing and investing activities

During the year, the economic entity acquired plant and equipment with an aggregate fair value of $58,800 (2011-$236,446) by means of finance leases. These financing activities are not reflected in the statement of cash flows.

Reconciliation of cash

Reconciliation of cash at the end of the period (as shown in the consolidated statement of cash flows) to therelateditemsinthe accountsis asfollows.	Current period $A'000	Previous corresponding period-$A'000
Cash on hand and at bank Bank overdraft Other (provide details) Total cash at end ofperiod	1,998 (166)	2,795 (414)
	**1,832 **	**2,381 **

Other notes to the condensed financial statements

Ratios Profit before tax / revenue Consolidated profit (loss) before tax as a percentage of revenue Profit after tax /equity interests Consolidated net profit (loss) after tax attributable to members as a percentage of equity (similarly attributable) at the end of the period	Current period	Previous corresponding Period
	4.4%	6.6%
	4.9%	8.0%
NTA PER SHARE Net tangible asset backing per ordinary security
	Current period	Previous corresponding Period
	$1.23	$1.21

Final Dividend Declared

Date the dividend is payable Record date to determine entitlements to the dividend	14~~th~~ December 2012
	16~~th~~ November 2012

Dividend per share

Dividend per share
	Amount per security	Franked amount per security at % tax	Amount per security of foreign source dividend
Final dividend:Current year Previous year	4¢ 5¢	4¢ 5¢	¢ ¢

Total dividend per share (interim plus final)

	+Ordinary securities	Current year	Previous year
		7¢	9¢

Dividend Plans in operation

Waterco Dividend Reinvestment Plan

• Shares to be issued at 7.5% discount to average market price of the dividend record date and the four prior trading days.

The last date for receipt of election notices for the dividend 16 ~~[th]~~ November 2012

Issued and quoted securities at end of current period

Category of securities	Total number	Number quoted	Issue price per security (cents)	Amount paid up per security (cents)
Ordinary securities Changes during current period (a) Increases through issues (b) Decreases through returns of capital, buybacks	33,895,279	33,895,279
	373,089 278,907	373,089 278,907	$1.21 $0.97	$1.21 $0.97
Options Directors and Senior Executives option plan Issued during current period Exercised during current period Expired duringcurrentperiod	90,000	-	Exercise price	Expiry Date
			$1.35	1/7/2013
	-	-
	-	-
	-	-

Annual meeting

The annual meeting will be held as follows:

Place

Date

Time

36 SOUTH ST RYDALMERE NSW 2116 30[th] OCTOBER 2012 3PM

Approximate date the annual report will be available

27[th] SEPTEMBER 2012

Compliance statement

1. This report has been prepared in accordance with the Corporations Act 2001 including complying with Australian Accounting Standards, including the Interpretations, and the Corporations Regulations 2001

2. This report and the accounts upon which the report is based use the same accounting policies.

3. This report does give a true and fair view of the matters disclosed.

4. This report is based on accounts which are in the process of being audited.

5. The entity has a formally constituted audit committee.

==> picture [79 x 39] intentionally omitted <==

Soon Sinn Goh Chief Executive Officer

27[th] August 2012

.

Notes:

1. Reconciliation of income tax prima facie payable on the profit before tax to income tax expense where prima facie tax payable differs by more than 15% from income tax expense .

2. Rounding of figures: Some of the information in this report have been rounded to the nearest $1,000 (where stated).

3. Comparative figures: When required by Accounting Standards, comparative figures have been adjusted to conform with changes in presentation for the current financial year.

WATERCO LIMITED ABN 62 002 070 733 AND CONTROLLED ENTITIES

PRELIMINARY FINAL REPORT 30 JUNE 2011

ANNEXURE A

REVENUE AND EXPENSES

Revenues Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation, impairment and amortisation expense Finance costs Advertising expense Discounts allowed Outward freight expense Rent expense Contracted staff expense Warranty expense Commission expense Other expenses Profit before income tax expense Income tax expense Profit for the year		Consolidated Group 2012 2011 $ $
		66,555,228 68,203,500 676,921 (1,040,701) (35,884,592) (33,843,892) (13,047,318) (12,578,413) (1,325,900) (1,379,709) (1,636,511) (1,587,878) (1,388,194) (1,435,333) (95,583) (106,694) (1,483,096) (1,598,852) (2,156,172) (2,209,001) (236,888) (399,522) (406,803) (469,778) (361,657) (362,924) (6,306,907) (6,708,212)
		2,902,528 4,482,591 814,539 1,302,486
		2,087,989 3,180,105

WATERCO LIMITED ABN 62 002 070 733 AND CONTROLLED ENTITIES

PRELIMINARY FINAL REPORT 30 JUNE 2012 ANNEXURE A

Operating Segments

Segment Information

Identification of reportable segments

The group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors (chief operating decision makers) in assessing performance and determining the allocation of resources.

The group is managed primarily on the basis of location since the group’s operations have similar risk profiles and performance criteria. Operating segments are therefore determined on the same basis.

The group operates predominantly in one industry being the manufacture and wholesale of swimming pool chemicals, accessories and equipment, manufacture and sale of solar pool heating systems and as a franchisor of swimming pool outlets retailing swimming pool accessories and equipment.

Basis of accounting for the purposes of reporting by operating segments

Accounting Policies Adopted

Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision maker with respect to operating segments are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group.

Inter-segment transactions

An internally determined transfer price is set for all inter-entity sales. The price is reviewed annually (unless special circumstances arise) and is based on what would be realised in the event the sale was made to an external party at arm’s length under the same terms and conditions. All such transactions are eliminated on consolidation for the Group’s financial statements.

Corporate charges are allocated to reporting segments based on the services provided to those reporting segments

Inter-segment loans payable and receivable are initially recognised at the consideration received net of transaction costs. If inter-segment loans receivable and payable are not on commercial terms, these are not adjusted to fair valued based on market interest rates.

Segment assets

Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of the economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location.

Segment liabilities

Liabilities are allocated to segments where is a direct nexus between the incurrence of the liability and the operations of the segment.

Unallocated items

The following items of revenue, expenses, assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment:

• other revenues

Comparative information

This is the first reporting period in which AASB8: Operating Segments has been adopted. Comparative information has been stated to confirm to the requirements of the Standard.

WATERCO LIMITED ABN 62 002 070 733 AND CONTROLLED ENTITIES

PRELIMINARY FINAL REPORT 30 JUNE 2012 ANNEXURE A Operating Segments

Geographical Segments

REVENUE Sales to customers outside the consolidated group Intersegment sales Total segment revenue Reconciliation of segment revenue to group revenue Other revenue Intersegment elimination Total group revenue Segment net profit/(loss) from continuing operations before tax Reconciliation of segment result to group net profit/loss before tax Unallocated items - other Net profit/(loss) before tax from continuing operations Segment assets Segment asset increases for the period Capital expenditure Reconciliation of segment assets to group assets Intersegment eliminations Total group assets Segment liabilities Reconciliation of segment liabilities to group liabilities Intersegment eliminations Total group liabilities	2012 AUSTRALIA & NEW ZEALAND ASIA NORTH AMERICA &EUROPE $ $ $	CONSOLIDATED GROUP $
	46,160,589 6,886,857 13,092,317 1,346,310 16,628,258 1,687,707	66,139,763 19,662,275
	47,506,899 23,515,115 14,780,024 3,226,535 1,541,455 (1,449,997)	85,802,038 415,465 (19,662,275)
		66,555,228
		3,317,993
	70,763,714 36,573,098 (3,099,160)	(415,465)
		2,902,528
		104,237,652
	1,660,892 1,878,516 211,098 29,037,270 23,628,594 5,184,106	3,750,506 (30,085,708)
		74,151,944
		57,849,970
		(25,517,415)
		32,332,555

WATERCO LIMITED ABN 62 002 070 733 AND CONTROLLED ENTITIES

PRELIMINARY FINAL REPORT 30 JUNE 2012 ANNEXURE A Operating Segments

Geographical Segments

REVENUE Sales to customers outside the consolidated group Intersegment sales Total segment revenue Reconciliation of segment revenue to group revenue Other revenue Intersegment elimination Total group revenue Segment net profit/(loss) from continuing operations before tax Reconciliation of segment result to group net profit/loss before tax Unallocated items - other Net profit/(loss) before tax from continuing operations Segment assets Segment asset increases for the period Capital expenditure Reconciliation of segment assets to group assets Intersegment eliminations Total group assets Segment liabilities Reconciliation of segment liabilities to group liabilities Intersegment eliminations Total group liabilities	2011 AUSTRALIA & NEW ZEALAND ASIA NORTH AMERICA &EUROPE $ $ $	CONSOLIDATED GROUP $
	47,067,148 6,265,669 14,406,520 1,899,483 16,014,630 1,164,735	67,739,337 19,078,848
	48,966,631 22,280,299 15,571,255 4,798,965 (65,268) 213,057	86,818,185 464,163 (19,078,848)
		68,203,500
		4,946,754
	69,945,505 32,557,702 (3,078,852)	(464,163)
		4,482,591
		99,424,355
	1,404,768 (2,411,700) 649,595 28,880,595 21,520,058 3,658,300	(357,337) (26,922,611)
		72,501,744
		54,058,953
		(21,662,847)
		32,396,106