Watlington: 85 years of supplying water
The Bermuda Stock Exchange has launched its “Own Your Share of Bermuda” campaign to raise awareness of opportunities to invest in the island's public companies. The Royal Gazette is supporting the effort by publishing weekly features on each of the 13 domestic companies listed on the BSX.
Investors looking at Watlington Waterworks Ltd will find a company with a long and steady history.
It was founded in 1932 by Sir Henry Watlington to support the island's growing tourism sector.
When it was set up, it extracted and processed brackish water from wells at Parsons Lane, Devonshire, and then piped the water to Hamilton, as far as the Hamilton Princess. Piped water also went out to Elbow Beach Hotel on South Shore.
During the past 85 years, the company has expanded in terms of its reach and the services it provides.
Today, the company has a market capitalisation of $29.1 million, assets of $28.7 million, and liabilities of $740,000.
During the past four years, Watlington Waterworks's quarterly dividend has steadily risen from 11 cents per share to 15 cents.
Between 2012 and the end of 2016, the company's share price rose from $11 to $20.28.
The shares are currently trading at $27.50 on the Bermuda Stock Exchange.
The stock saw unusual trading activity on April 5 this year when 75,000 of its shares — worth more than $2 million — changed hands. The trading spike was accompanied by a 34.1 per cent rise in Watlington's share price that day.
It appeared that someone had spotted great value in the steady earnings and reliable free cash-flow generation of this venerable company and was prepared to put their money behind their bullishness.
Two years ago, the company made a change to its dividend policy. In a letter to shareholders at the time, it explained the change, saying it would “benefit shareholders more equitably by moving from basing dividends on net earnings to basing dividends on net cash generated”.
Last year the company paid out 12 cents per quarter in regular dividends, plus a 14.5-cent special dividend in May, totalling 62.5 cents per share for the year, or about 2.2 per cent on yesterday's share price.
In the first quarter of 2017, Watlington raised its quarterly dividend by 25 per cent to 15 cents.
Watlington Waterworks's wholly-owned subsidiary Bermuda Waterworks is primarily involved in the production and distribution of water and purification of drinking water at retail and wholesale level.
The company has pipelines supplying water across central and western parishes, and in 2010 entered a memorandum of understanding with the Bermuda Government to extend its pipeline in Southampton towards Somerset and the West End. At the end of June 2016, the expenditure on that project had reached $4.5 million.
It also operates a complex on North Shore, Devonshire, that houses six reverse osmosis plants. The technology at the complex removes impurities from seawater wells to provide drinking water.
Pure Water (Bermuda) was the island's first manufacturer and distributor of bottled water. It was acquired by Watlington in the mid-1990s. The water is bottled in three- and five-gallon containers.
In November, the company opened a drive-through facility at its headquarters on Parsons Road, allowing customers to collect five-gallon water bottles with assistance from staff.
The company also operates The Water Depot, a retail plumbing store selling specialist products.
In its most recent full-year results, to the end of 2015, the company recorded a gross profit of $7.6 million, with profit attributable to owners of $2.2 million, or $2.06 per share.
In its interim financials, released in September, the company reported gross half-year profit of $3.5 million, with profit attributable to owners of $853,797, or 80 cents per share.
Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Past performance is no guarantee of future results