Water and wastewater treatment company De.mem (ASX: DEM) is forecasting a strong outlook for 2021 driven by visible revenues and positive operating momentum, according to its consolidated 2020 full-year financial report.
The Australian-Singaporean company has confirmed its first positive quarter of operating cash flow was achieved in December 2020 of $544,000 – a milestone it initially revealed in its December quarterly report.
Over the full 2020 calendar year, this has significantly reduced annual operating cash outflow by $600,000 to -$1.1 million.
De.mem said this result was driven by the company’s strong overall operational performance, record customer cash receipts of $16.5 million (up 41% on 2019) with growing sales and expansion into high value-add and recurring revenue segments, as well as gross margins increasing year-on-year from 26% to 31%.
Total income (revenues plus other income) for the calendar year grew by 47% to $15.1 million with sales growth driven by record water treatment equipment sales and strong recurring revenue growth.
The company also reported an improvement in revenue “quality”, with growing recurring revenues and revenue diversification across a range of customer industry segments.
These segments include sustainable agriculture, energy/power generation, food and beverages, mining and resources, and real estate and infrastructure.
This sales momentum has continued into the 2021 calendar year, with De.mem recently securing a new $550,000 contract with AGL Energy (ASX: AGL) for the supply of water treatment equipment to an Australian power station.
De.mem made strategic business acquisitions in late 2019 in line with its objective to become a “one-stop shop” for decentralised water treatment options, which proved their worth over the 2020 calendar year with strong operational performance.
Pumptech, acquired in August 2019, recorded a 67% growth in total cash receipts to $4 million with December quarter receipts of $1.17 million exceeding the March 2020 quarter by 67%.
Meanwhile, German subsidiary De.mem-Geutec GmbH, acquired in October 2019, achieved an 18% increase in cash receipts to $2.6 million and improved by 33% from March to December 2020.
2021 outlook and strategic priorities
De.mem said the factors supporting its strong outlook for the 2021 calendar year include a new Australian sales team managing a growing pipeline of projects across the country, an increased customer focus on buying from Australian suppliers to avoid global supply chain risks, the recommissioning of projects paused by the COVID-19 pandemic, as well as opportunity for growth in New Zealand as international markets reopen.
The company achieved the three strategic priorities it had outlined for 2020 of sales growth, enhancing revenue quality and becoming cash flow positive, and has set these goals again for 2021.
It is already off to a good start, beginning the year with about $14 million of visible cash receipts, comprised of $10 million in recurring revenue and about $4 million in contracted revenues for water treatment equipment.