Halosource Inc : Trading Update

This press release contains certain forward-looking statements.  All statements contained in this press release that do not relate to matters of historical facts should be considered forward-looking statements.  Forward-looking statements include statements with respect to the operations, performance and financial condition of the Company, the market for and benefits of its products and services, Company's introduction and deployment of new products, the potential benefits of business relationships with third parties, and the Company's plans and strategies for future growth. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this press release and the Company undertakes no obligation to update these forward-looking statements. Nothing in this press release should be construed as a profit forecast.

Trading Update

20% revenue growth led by Drinking Water and Recreational Water segments

BOTHELL, WA (US)- HaloSource, the clean water and antimicrobial technology company today is updating its revenue expectations for 2013 to be in the range of US$16.0-16.5 million, which represents a growth in revenue of approximately 20% for the year as a whole and approximately 40% for H2 2013 as compared with H2 2012. This growth was driven by a robust performance in Recreational and Drinking Water, but some temporary challenges in Environmental Water resulted in the Group revenues ending the year in a range around 10% below market consensus.

The revenue growth achieved during 2013 is attributable to:

·     Drinking Water: Revenues for the year grew by more than 50% driven primarily by increased sales to Perfect in China, where volumes shipped in H2 were up more than 300% compared with  H1.  In addition, the Company continues to supply customers elsewhere, including Eureka Forbes, as well as having added Tupperware, Pentair and H2O International as customers during 2013.  The Company expects both the volumes shipped and the number of customers to continue to increase in 2014, driving substantial revenue growth in this business.

As separately announced today, HaloSource has also extended its stand-still agreement for market segments in China with one of the world's largest multinational consumer goods companies in exchange for a one-time payment of US$500,000 (HaloSource received a similar payment in 2012).  The Company is currently shipping product to this partner to support a market launch.

·     Recreational Water: Full year 2013 revenues grew by approximately 29%.  This was driven by a broadening of product distribution in general and strong sales of Mighty PodsTMself-dissolving pouch products, launched in November 2012. The Company's expanded distribution at traditional pool and spa retail outlets and through partnerships with major mass-market players, combined with strengthened sales execution under new leadership, led to a market share gain in a generally flat market. The success of Mighty PodsTMproducts reinforces the importance of the Company's drive towards consumer-focused innovation, and HaloSource is confident of achieving further growth in this segment during this year. 

·     Environmental Water:  Expected revenue growth in this segment has not been achieved, with revenues for 2013 down by approximately 35%, which negatively impacted the overall expected growth in 2013.  In addition to experiencing drought conditions in the Western United States, international partners did not perform to expectations due to both regulatory and competitive issues.  With US construction activity expected to increase in 2014 and key international regulatory approvals now achieved, the Company expects to see an improved performance in this business in 2014 and beyond.

Martin Coles, CEO of HaloSource, commented, "We achieved much good progress during 2013 in particular with the growth we're seeing in our Drinking Water and Recreational Water segments. This clearly underscores the latent demand for our sector leading technology and consumer focused solutions.

While our business continues to grow clearly we are disappointed in the slower than expected pace of revenue growth in Environmental Water.  While it is taking us longer than expected to grow this segment we continue to believe that growth opportunities for our biopolymer based water treatment technologies are as strong as previously anticipated."

The Company continues to be encouraged by the engagement of new and prospective partners with its Drinking Water business. HaloSource remains confident of its prospects of strong growth in 2014 and beyond. With nearly US$13m of cash resources at the close of 2H 2013, the Company has adequate capital to execute against its growth plans.

Enquiries:

HaloSource Technologies that Protect Water and Textiles:

·     HaloPure®media is the most flexible, price-competitive disinfection solution for clean drinking water in the industry. In 2009, it became the first drinking water technology in 30 years to be registered by the United States Environmental Protection Agency (USEPA), widely recognized as having the world's most stringent performance requirements for water purification. In 2010, HaloPure media was approved by China's Ministry of Health (MOH) and recognized for meeting the world's most stringent water purification requirements, a key differentiator for our multi-national partners. In Brazil, the use of HaloPure media has met or exceeded all appropriate standards of the National Institute of Metrology, Standardization and Industrial Quality (INMETRO).

·     SeaKlear®Pool and Spa treatment products bring both natural biopolymers and antimicrobial applications for treating recreational water.

·     HaloShield®products consist of antimicrobial coatings solutions that employ unique technology that binds chlorine-based bleach to textiles such as sheets, lab coats and towels for use as a non-toxic biocide.

HaloSource Technologies that Preserve the Environment:

·     HaloKlear?products use natural biopolymers providing industrial water clarification with dramatic reductions in ecological impact.

HaloSource Initiatives that Celebrate Clean Water:

·     HaloSource supports organizations dedicated to sustainable clean water projects. Earlier this year, we were proud to be a presenting sponsor in the 2012 Carry5 awareness and fundraising event benefiting Water 1st International.

HaloKlear, HaloPure, SeaKlear, HaloShield and Mighty Pods are either trademarks or registered trademarks of HaloSource, Inc. All other trademarks, brand names or product names belong to their respective holders.