De.mem expands into Australia with acquisition of Akwa-Worx

De.mem Limited DEM Akwa-Worx acquisition

Singapore-based water treatment company De.mem (ASX: DEM) has expanded into Australia with the acquisition of Queensland-headquartered Akwa-Worx.

De.mem designs, builds, owns and operates de-centralised, customisable and high-quality waste water treatment systems for its clients. De.mem announced on 14 September 2017 the signing of a binding purchase agreement to acquire 100% of the shares in Akwa-Worx.

Established in 2002, Akwa-Worx is a water and waste water treatment original equipment manufacturing (OEM) business focused on the design and construction of packaged systems for the Australasian market. Akwa-Worx’s customers include a number of leading corporations from the Australian mining sector.

The acquisition further establishes De.mem as a strong player in the market for de-centralised water treatment in the Asia-Pacific region and provides a number of strategic growth opportunities. The transaction will result in an integrated product offering with the ability to cross-sell technology, an additional route to market for De.mem’s innovative hollow fibre nanofiltration (NF) membrane, the potential for combined manufacturing initiatives and a platform for further expansion into key growth markets, including China, where De.mem will be able to leverage the extensive mining and industrial expertise of Akwa-Worx.

Currently, De.mem has group companies in Singapore, Vietnam and Australia. In the short term, De.mem is planning to set up a representative office in Western Australia, followed by further expansion in China and the Asia Pacific region.

Akwa-Worx reported revenue of approximately AUD$7 million for the 2017 financial year with a normalised Earnings Before Interest Taxes, Depreciation and Amortisation (EBITDA) of approximatelyAUD$800,000 Akwa-Worx has around AUD$2 million of annualised recurring revenue from its long-term operations and maintenance contracts.

According to the agreement, De.mem will pay an initial consideration of AUD$ 1.5 million in cash plus AUD$460,000 in shares, with additional payments subject to certain revenue milestones being achieved. The transaction will be funded through De.mem’s existing cash reserves. Shane Ayre, the Managing Director and founder of Akwa-Worx, will retain his role at Akwa-Worx and become a member of the management team at De.mem.

“The acquisition of Akwa-Worx is a game changer for De.mem,” said De.mem CEO Andreas Kroell. “With an established client base and recurring revenues, the Akwa-Worx business provides a strong platform for growth in the Australian marketplace and beyond.”

Within the last six months, De.mem has won new business in Vietnam, achieved production of the first industrial-sized low-pressure NF membrane module and opened a new facility in Singapore for membrane module production.

Since June 2016, De.mem has held an exclusive worldwide license from Nanyang Technological University (NTU) for the use of its breakthrough NF technology. The NF membrane combines both Reverse Osmosis (RO) and ultrafiltration (UF) in a process that is more energy efficient, low-cost and easy to maintain than standard RO filtration.

“We are delighted to conclude the transaction with De.mem and are committed to working with the Board and Management to deliver their strategic initiatives in the decentralised waste water treatment systems sector,” said Ayre. “De.mem’s innovative membrane technologies, such as the flagship low-pressure hollow fibre nanofiltration membrane, are a key differentiator in the market”.

Filip has written in both Australia and abroad covering everything from the global economy, politics and geopolitical issues to commodities and small cap stocks on the ASX.