REG - Water Intelligence - Interim Results
19/09/2023 07:00
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RNS Number : 8332M Water Intelligence PLC 19 September 2023
Water Intelligence plc (AIM: WATR.L)
Interim Results
Water Intelligence plc (AIM: WATR.L) (the "Group" or "Water Intelligence"), a
leading multinational provider of precision, minimally-invasive leak detection
and remediation solutions for both potable and non-potable water is pleased to
provide its unaudited Interim Results for the period ended 30 June 2023.
Results are in-line with market expectations with strong profit growth as the
Group continues to execute on its long-run growth plan.
Financial Highlights
· Revenue increased by 9% to $38.7 million (1H 2022: $35.6 million)
o Franchise Royalty income grew 2% to $3.63 million (1H 2022: $3.57 million)
o Franchise Related sales grew 14% to $5.9 million (1H 2022: $5.2 million)
o Corporate Store sales grew 9% to $29.2 million (1H 2022: $26.9 million)
§ US Corporate store sales grew 8% to $25.2 million (1H 2022: $23.3 million)
§ International Corporate store sales grew 10% to $4.0 million (1H 2022: $3.6
million)
o Network Sales (implied gross sales of franchisees from which reported
royalty is derived plus direct sales of corporate locations) grew 5% to $89
million (1H 2022: $85 million)
· Statutory Profit Before Tax increased by 21% to $4.2 million (1H
2022: $3.5 million)
· Statutory EBITDA increased by 12% to $7.0 million (1H 2022: $6.2
million)
· PBT Adjusted* increased by 18% to $5.4 million (1H 2022: $4.6
million)
· EBITDA Adjusted** increased by 12% to $7.7 million (1H 2022: $6.9
million)
· EPS Basic increased by 18% to 16.4 cents (1H 2022: 13.9 cents)
· EPS Fully Diluted increased by 22% to 15.9 cents (1H 2022: 13.0
cents)
· PBT Margin increased to 11% (1H 2022: 10%)
· EBITDA margin increased to 18% (1H 2022: 17.5%)
· Cash and equivalents at 30 June of $18.7 million
o Net Cash of $1.75 million (cash minus bank borrowings)
o Bank borrowings amortized through 2028 at a blended fixed rate of 4.9%
o Net Debt (including both Bank Debt and Deferred Acquisition Payments) to
EBITDA ratio: 0.65x
*PBT Adjusted (adjusted for amortisation, share based payments and non-core
costs)
**EBITDA Adjusted (adjusted for share based payments and non-core costs)
Corporate Development
· Accretive re-acquisitions:
o Franchise Acquisition: Nashville, Tennessee
o Subsequent to 1H: Franchise acquisition of Covina, California
· Technology:
o Commercialisation of New Technology Offerings
§ IntelliDitch (Liner for open channel water conveyance and storm water
run-off)
§ Pulse (Sewer diagnostics for municipal and residential customers
respectively)
§ LS1 (Rapid municipal area surveys)
§ CreatorSuite (Video ecommerce of water and wastewater products &
services; distance learning)
o Salesforce.com implementation: on-boarding of all locations continuing
Dr. Patrick DeSouza, Executive Chairman of Water Intelligence, commented:
"We continue to deliver strong results while navigating market volatility
produced by rising interest rates and inflationary pressures. Profits
increased strongly. Margins improved. Our balance sheet remains strong
enabling us to make investments for future growth both in terms of more
trained technicians, new technology solutions for customers and software
infrastructure to enable continuous customer engagement and operating
efficiencies. We remain positive about the future as market demand for water
infrastructure solutions continues to grow."
Enquiries:
Water Intelligence plc
Patrick DeSouza, Executive Chairman Tel: +1 203 654 5426
WH Ireland Limited - NOMAD & Joint Broker Tel: +44 (0)20 7220 1666
Hugh Morgan
James Bavister
RBC Capital Markets - Joint Broker Tel: +44 (0)20 7653 4000
Rupert Walford
Elizabeth Evans
Daniel Saveski
Tel: +44 (0)20 3903 7715
Dowgate Capital Ltd - Joint Broker
Stephen Norcross
Chairman's Statement
Overview
Our fundamentals remain strong despite volatile conditions in the broader
marketplace. Business is growing, profits are strong, earnings per share is
up and we have a balance sheet that provides the Group with flexibility to be
opportunistic. Moreover, market demand for water and wastewater solutions is
only expected to grow over the next decade around the world. The concerns
expressed in the UK media during early July over the significant capital
investment required for water infrastructure in the UK are generally shared
with respect to national water infrastructure around the world.
During 1H, we continued to execute our long-run growth plan to build a "One
Stop Shop" for customers needing water and wastewater solutions; a strategic
concept that we first articulated over a decade ago when we first came to
AIM. Our plan continues to recognize two core attributes of our market
presence. First, we solve problems for customers across the United States with
over 200,000 customer visits annually. This is a significant installed base
from which to grow the business through follow-on offerings. Second, we are
uniquely positioned at the starting point of any customer's journey by having
proprietary solutions that address the customer's first concern: "Do I have a
leak and can you help me find it with minimal destruction?" As a trusted
advisor to the customer from inception, we have the opportunity to upsell
various solutions for related water and wastewater problems. Because of this
unique value proposition or "USP", we have a scalable model that has lower
customer acquisition costs. Our results reinforce these key attributes for
achieving a "One Stop Shop" distribution platform.
Results
During 1H, overall revenue grew by 9% to $38.7 million (1H 2022: $35.6
million). All key performance indicators grew. Franchise royalty grew by
2% to $3.63 million (1H 2022: $3.57 million). Franchise related activities
grew 14% to $5.9 million (1H 2022: $5.2 million) with the sub-component of the
insurance business-to-business channel growing by 15%. US Corporate stores
grew by 8% to $25.2 million (1H 2022: $23.3 million). International
corporate store sales grew by 10% to $4 million (1H 2022: $3.6 million).
The sharp rise in interest rates did adversely affect revenue growth,
particularly US corporate store sales as new construction slowed
dramatically. However, the biggest impact was concentrated in three regions:
Texas, Kentucky and to a lesser degree Florida. In these corporate
locations, sales declined by approximately $1.5 million versus 2022 1H
sales. We are currently redeploying leak detection specialists to other
water and wastewater projects in those same regions and are confident in the
future growth rate of these locations. For example, instead of new
construction, consumers and property managers are focusing on rental
properties which also need pinpoint leak detection solutions. Moreover, our
proprietary new offerings with respect to residential sewer diagnostics should
assist with our adjustment to market changes regarding new construction by
providing solutions for older properties.
As we navigate volatile market conditions, we are also mindful of
profitability and operating efficiencies. During 1H, despite sharply rising
interest rates, persistent inflation adversely affected our cost structure,
particularly in terms of wages and health care benefits. However, we have
navigated this backdrop successfully. Profits grew along all measures,
whilst margins also grew along all measures. Statutory profit before tax
(PBT) increased by 21% to $4.2 million (1H 2022: $3.5 million). PBT adjusted
for non-cash amortization and share-based payment expenses and non-core costs
grew by 18% to $5.4 million (1H 2022: $4.6 million). Earnings before
interest, taxes, depreciation and amortization (EBITDA) grew by 12% to $7.0
million (1H 2022: $6.2 million). EBITDA Adjusted for share-based payments
and non-core costs grew by 12% to $7.7 million (1H 2022: $6.9 million). PBT
margins grew to 11% (1H 2022: 10%); EBITDA margins grew to 18% (1H 2022:
17.5%).
In navigating the dual shocks of rapidly rising interest rates and persistent
inflation, we have been prudent in our corporate finance. Our balance sheet
remains strong, enabling the Group to make both operating adjustments to
navigate the short-run markets and the proper investments for long-run
growth. In addition, we continued to reacquire franchises - Nashville,
Tennessee and Covina, California - in strategic locations. Such acquisitions
are fully accretive to our shareholders.
At 30 June, the Group had $18.7 million in cash and cash equivalents. Net
cash after taking into account bank borrowings was $1.75 million. The
Group's bank facilities, locked-in prior to the interest rate hikes, are
favourable with borrowings amortized through 2028 at a blended rate of 4.9%.
As a result, Water Intelligence has flexibility to increase its credit
facilities if needed as the Group is under-leveraged. The Group's Net Debt
(including both bank debt and deferred consideration) to EBITDA ratio is
0.65x. Such prudent corporate finance, combined with our results, enabled
us to grow EPS - both basic and diluted. EPS (Basic) increased by 18% to
16.4 cents (1H 2022: 13.9 cents). EPS (Fully Diluted) increased by 22% to
15.9 cents (1H 2022: 13 cents).
Strategic Outlook
We will continue to execute our long-run growth plan to create a One-Stop Shop
because we operate in a market where customer demand for solutions to water
and wastewater problems will remain strong given the rising price of water and
the reality of aging water and wastewater infrastructure. Because of
underlying market demand, we are still hiring to put more service vehicles on
the road and training more technicians to deploy our minimally-invasive
technologies. Such new hires are an operating expense but should be
considered an investment given the length of time it takes to train a leak
detection professional and the importance of fully-trained technicians for
future revenue generation based our USP of pinpointing water and wastewater
leaks with minimal destruction. While we have the resources to make this
investment, we will be prudent and monitor the general macroeconomic
picture.
Our prior technology investments will help manage our people investments in
growing the business. On 11 September, we released an update on our new
technology offerings that we are building into our sales plan for 2024:
IntelliDitch (irrigation and stormwater run-off); Pulse (Resident and
Municipal); LS1 (Municipal); CreatorSuite (ecommerce).
First, each of these offerings will add to our matrix of solutions -
residential, commercial, municipal, clean water, wastewater - and enable us to
further position ourselves to customers, whether homeowners or insurance
companies, as a One Stop Shop. For example, with our Pulse product, rapid
sewer diagnostics is a natural upsell during a visit to a home for water leak
detection as most homeowners have insurance or warranty policies for both
water damage and sewer blockages. This offering will also help to drive our
business-to-business channels.
Having a matrix of solutions also helps with navigating changes in market
segments and the management of our workforce. As noted above, the slowdown
in new construction because of the spike in interest rates may be offset by a
focus on aging rental properties, with problems such as sewer blockages. Our
technicians are all cross-trained on the various technologies, making it
easier to redeploy the technicians we have invested in. It should also be
noted that our proprietary LS1 product for rapid, automated municipal surveys
is geared for deploying headcount with less training than is required for
pinpoint leak detection. As this offering is rolled-out, we are planning on
using such surveys as a bridge for technicians to generate sales while
training for full leak detection capabilities.
Second, our software infrastructure enabling customer relationship management
(Salesforce) and video ecommerce (CreatorSuite) applications positions us to
be part of the customer's entire journey across their lifecycle with sales
opportunities to provide solutions to various problems related to water and
wastewater. Given our sales footprint across the US and in the UK, Australia
and Canada, we can also work with partner companies anywhere in the world to
recommend their products to homeowners or property management. Related to
demand for water and wastewater solutions, the development of the smart home
is another sectoral trend that is expected to continue.
Our software infrastructure will also help with workforce management. With our
Salesforce application, we will be more efficient with job scheduling for our
technicians and achieve higher levels of service responsiveness to residential
customers and business-to-business partners. We will also be able to better
integrate work crews with trainees for on-the-job training. With our
CreatorSuite video technology, we can not only use it for ecommerce but also
for distance learning with short form training videos housed in a secure
environment for our technicians. Cutting the time for training will enable
the Group to accept more sales opportunities instead of managing backlogs of
work.
In navigating market conditions, we will continue to execute our growth
plan. However, we are mindful that it all starts with fundamentals,
especially profits. As we build on the fundamentals by simply adding more
trained technicians and service vehicles because of market demand for water
and wastewater solutions, we will be integrating prior investments that make
our operations more efficient and lower customer acquisition costs.
Patrick DeSouza
Executive Chairman
September 19, 2023
Interim Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2023
Six months Six months Year ended
ended ended 31
30 June 30 June December
2023 2022 2022
Notes $ $ $
Unaudited Unaudited Audited
Revenue 4 38,674,922 35,583,457 71,333,461
Cost of sales (5,387,099) (4,656,279) (9,659,600)
Gross profit 33,287,823 30,927,178 61,673,861
Administrative expenses
- Other income 10,716 41,631 130,405
- Share-based payments (206,319) (226,525) (462,097)
- Amortisation of intangibles (416,484) (429,440) (968,086)
- Other administrative costs (27,909,904) (26,074,124) (53,528,825)
Total administrative expenses (28,521,991) (26,688,458) (54,828,603)
Operating profit 4,765,832 4,238,720 6,845,258
Finance income 334,049 21,851 229,550
Finance expense (864,530) (753,508) (1,570,592)
Profit before tax 4 4,235,351 3,507,063 5,504,216
Taxation expense (1,266,129) (1,106,026) (1,837,737)
Profit for the period 2,969,192 2,401,037 3,666,479
Attributable to:
Equity holders of the parent 2,854,408 2,407,239 3,566,540
Non-controlling interests 114,784 (6,202) 99,939
2,969,192 2,401,037 3,666,479
Other comprehensive income
Exchange differences arising on translation of foreign operations 238,363 (370,207)
(409,371)
Cash flow hedge movement not subsequently reclassified to the P&L 24,310 -
448,177
Fair value adjustment on listed equity investment (net of deferred tax) (209,923) (475,794) (690,885)
Total comprehensive income for the period 3,014,400
3,021,943 1,555,036
Earnings per share Cents Cents Cents
Basic 5 16.4 13.9 20.5
Diluted 5 15.9 13.0 19.2
Consolidated Statement of Financial Position as at 30 June 2023
At At At
30 June 30 June 31 December
2023 2022 2022
Notes $ $ $
Unaudited Unaudited Audited
ASSETS
Non-current assets
Goodwill 47,953,610 45,382,040 44,966,672
Listed equity investment 219,049 592,516 474,613
Other intangible assets 7,136,062 4,534,059 6,019,360
Interest rate swap 472,487 - 448,177
Property, plant and equipment 9,266,935 9,655,046 9,224,955
Trade and other receivables 267,612 454,619 287,572
65,315,755 60,618,280 61,421,349
Current assets
Inventories 802,904 735,722 759,070
Trade and other receivables 12,595,302 12,461,108 11,393,584
Cash and cash equivalents 18,731,207 21,907,224 23,014,454
32,129,413 35,104,054 35,167,108
TOTAL ASSETS 4 97,445,168 95,722,334 96,588,457
EQUITY AND LIABILITIES
Equity attributable to holders of the parent
Share capital 6 143,192 142,260 143,192
Share premium 6 35,417,072 35,252,633 35,417,072
Shares held in treasury 6 (1,139,404) (529,077) (1,139,404)
Merger reserve 1,001,150 1,001,150 1,001,150
Share based payment reserve 1,816,423 1,319,519 1,555,090
Foreign exchange reserve (1,266,500) (1,465,700) (1,504,863)
Reverse acquisition reserve 6 (27,758,089) (27,758,089) (27,758,088)
Equity investment reserve (854,136) (429,123) (644,213)
Cash flow hedge reserve 472,487 - 448,177
Retained profit 49,951,542 45,959,816 47,097,133
57,783,737 53,493,389 54,615,246
Equity attributable to Non-Controlling interest
Non-controlling interest 416,539 568,513 598,636
Non-current liabilities
Borrowings and lease liabilities 14,725,059 15,369,104 15,334,813
Deferred consideration 4,731,313 7,929,371 7,164,421
Deferred tax liability 3,092,054 2,502,840 1,915,581
22,548,426 25,801,315 24,414,815
Current liabilities
Trade and other payables 5,415,716 4,730,349 6,331,107
Borrowings and lease liabilities 6,634,568 5,365,027 5,519,560
Deferred consideration 4,646,182 5,763,741 5,109,093
16,696,466 15,859,117 16,959,760
TOTAL EQUITY AND LIABILITIES 97,445,168 95,722,334 96,588,457
Interim Consolidated Statement of Changes in Equity
For the six months ended 30 June 2023
Share Share Shares held Reverse Acquisition Reserve Merger Share based payment reserve Foreign exchange reserve Equity investment reserve Cash Flow Retained Total Non-controlling interest Total
Capital Premium in treasury Reserve Hedge Reserve Profit Equity
$ $ $ $ $ $ $ $ $ $ $ $ $
As at 1 January 2022 142,260 35,252,633 (468,427) (27,758,088) 1,001,150 1,092,993 (1,095,492) 46,672 - 43,552,575 51,766,276 612,528 52,378,804
Share based payment expense - - - - - 226,525 - - - - 226,525 - 226,525
Share buyback - - (60,650) - - - - - - (60,650) - (60,650)
Dividend paid - - - - - - - - - - - (37,813) (37,813)
Profit for the period - - - - - - - - - 2,407,239 2,407,239 (6,202) 2,401,037
Other comprehensive loss - - - - - - (370,207) (475,794) - - (846,001) - (846,001)
As at 30 June 2022 (unaudited) 142,260 35,252,633 (529,076) (27,758,088) 1,001,150 1,319,518 (1,465,699) (429,122) - 45,959,814 53,493,389 568,513 54,061,902
Options purchase 932 164,439 (584,150) - - - - - - (418,779) - (418,779)
Share-based payment expense - - - - - 235,572 - - - 235,572 - 235,572
Share buyback - - (26,177) - - - - - (26,177) - (26,177)
Purchase non-controlling interest - - - - - - - - (21,983) (21,983) (76,017) (98,000)
Profit for the period - - - - - - - 1,159,302 1,159,302 106,141 1,265,443
Other comprehensive income - - - - - - (39,164) (215,091) 448,177 - 193,922 - 193,922
As at 31 December 2022 (audited) 143,192 35,417,072 (1,139,404) (27,758,088) 1,001,150 1,555,090 (1,504,863) (644,213) 448,177 47,097,133 54,615,246 598,636 55,213,882
Share based payment expense - - - - - 206,319 - - - 206,319 - 206,319
Transaction options - - - - - 55,013 - - 55,013 - 55,013
Partnership distribution - - - - - - - - - - (296,882) (296,882)
Profit for the period - - - - - - - - 2,854,409 2,854,409 114,784 2,969,193
Other comprehensive income - - - - - - 238,363 (209,923) 24,310 - 52,750 - 52,750
As at 30 June 2023 (unaudited) 143,192 35,417,072 (1,139,404) (27,758,088) 1,001,150 1,816,422 (1,266,500) (854,136) 472,487 49,951,542 57,783,738 416,539 58,200,277
Interim Consolidated Statement of Cash Flows
For the six months ended 30 June 2023
Six months Six months Year ended
ended ended 31 December 2022
30 June 2023 30 June 2022
$ $ $
Unaudited Unaudited Audited
Cash flows from operating activities
Profit before tax 4,235,351 3,507,063 5,504,216
Adjustments for non-cash/non-operating items:
Depreciation of plant and equipment 1,776,887 1,559,464 3,236,683
Amortisation of intangible assets 416,484 429,440 968,086
Share based payments 206,319 226,525 462,097
Interest paid 864,530 466,225 1,570,591
Interest received (334,049) (21,851) (229,550)
Operating cash flows before movements in working capital 7,165,521 6,166,866 11,512,123
Increase in inventories (43,834) (58,504) (81,852)
Increase in trade and other receivables (1,181,758) (4,055,364) (2,820,793)
Increase/(Decrease) in trade and other payables (1,010,504) 509,562 1,932,825
Cash generated by operations 4,929,426 2,562,560 10,542,303
Income taxes (44,045) (60,046) (1,670,816)
Net cash generated from operating activities 4,885,381 2,502,514 8,871,487
Cash flows from investing activities
Purchase of plant and equipment (1,050,204) (649,120) (1,202,705)
Purchase of intangibles (1,335,772) (1,165,452) (2,424,395)
Acquisition of subsidiaries - (3,850,000) (3,850,000)
Reacquisition of Franchises (2,125,000) (1,400,000) (1,600,000)
Purchase of listed equity investment - - (153,700)
Purchase of non-controlling interest - - (98,000)
Interest received 334,049 21,851 229,550
Net cash used in investing activities (4,176,927) (7,042,720) (9,099,250)
Cash flows from financing activities
Share buy-back - (60,652) (86,826)
Options exercised - - (418,780)
Dividend paid - (37,812) (37,812)
Partnership distribution (296,882) - -
Interest paid (643,506) (466,225) (1,202,378)
Proceeds from borrowings 3,358,458 10,057,373 12,356,696
Repayment of borrowings (2,330,903) (1,778,343) (3,815,204)
Repayment of notes (4,242,043) (4,309,447) (5,759,978)
Repayment of lease liabilities (836,825) (759,815) (1,595,853)
Net cash generated by/(used in) financing activities (4,991,702) 2,645,079 (560,135)
Net (decrease)/increase in cash and cash equivalents (787,898)
(4,283,247) (1,895,128)
Cash and cash equivalents at the beginning of period 23,802,352
23,014,454 23,802,352
Cash and cash equivalents at end of period 18,731,206 21,907,224 23,014,454
Notes to the Interim Consolidated Financial Information
for the six months ended 30 June 2023
1 General information
The Group is a leading provider of minimally-invasive leak detection and
remediation services and products for water and wastewater infrastructure. The
Group's strategy is to be a provider of "end-to-end" solutions - a "one-stop
shop" for residential, commercial and municipal customers..
The Company is a public limited company domiciled in the United Kingdom and
incorporated under registered number 03923150 in England and Wales. The
Company's registered office is 27-28 Eastcastle Street, London, W1W 8DH.
2 Significant accounting policies
Basis of preparation and changes to the Group's accounting policies
The accounting policies adopted in the preparation of the interim consolidated
financial information are consistent with those of the preparation of the
Group's annual consolidated financial statements for the year ended 31
December 2022.
This interim consolidated financial information for the six months ended 30
June 2023 has been prepared in accordance with IAS 34, "Interim financial
reporting". This interim consolidated financial information is not the Group's
statutory financial statements and should be read in conjunction with the
annual financial statements for the year ended 31 December 2022, which have
been prepared in accordance with International Financial Reporting Standards
(IFRS) and have been delivered to the Registrar of Companies. The auditors
have reported on those accounts; their report was unqualified, did not include
references to any matters to which the auditors drew attention by way of
emphasis of matter without qualifying their report and did not contain
statements under section 498(2) or (3) of the Companies Act 2006.
The interim consolidated financial information for the six months ended 30
June 2023 is unaudited. In the opinion of the Directors, the interim
consolidated financial information presents fairly the financial position, and
results from operations and cash flows for the period. Comparative numbers for
the six months ended 30 June 2022 are unaudited.
This interim consolidated financial information is presented in US Dollars
($), rounded to the nearest dollar.
Foreign currencies
(i) Functional and presentational currency
Items included in this interim consolidated financial information are measured
using the currency of the primary economic environment in which each entity
operates ("the functional currency") which is considered by the Directors to
be the Pounds Sterling (£) for the Parent Company and US Dollars ($) for
American Leak Detection Holding Corp. This interim consolidated financial
information has been presented in US Dollars which represents the dominant
economic environment in which the Group operates and is considered to be the
functional currency of the Group. The effective exchange rate at 30 June 2023
was £1 = US$ 1.2627 (30 June 2022: £1 = US$ 1.2161).
Critical accounting estimates and judgments
The preparation of interim consolidated financial information requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and
liabilities and the reported amounts of income and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of current events and actions, the resulting accounting estimates
will, by definition, seldom equal the related actual results.
In preparing this interim consolidated financial information, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied
to the consolidated financial statements for the year ended 31 December 2022.
3 Significant events and transactions
As detailed in Footnote 7 - "Reacquisition of franchisee territories and other
acquisitions" the Group reacquired the following franchises and 3(rd) party
companies: Franchises - Nashville Tennessee (7 February 2023) and as a
Subsequent Event to 1H, Covina, California (23 July 2023).
4 Segmental information
In the opinion of the Directors, the operations of the Group currently
comprise four operating segments: (i) franchise royalty income, (ii)
franchise-related activities including sale of franchise territory,
business-to-business sales and product and equipment sales, (iii) US
corporate-operated locations led by the Group's U.S.-based American Leak
Detection subsidiary and (iv) international corporate locations led by the
Group's UK-based Water Intelligence International subsidiary.
The Group mainly operates in the US, with operations in the UK, Canada and
Australia. In the six months to 30 June 2023, 89.7% (1H 2022: 89.8%) of its
revenue came from the US-based operations; the remaining 10.3% (1H 2022:
10.2%) of its revenue came from its international corporate operated
locations.
No single customer accounts for more than 10% of the Group's total external
revenue.
The Group adopted IFRS 8 Operating Segments with effect from 1 July 2008. IFRS
8 requires operating segments to be identified on the basis of internal
reports about components of the Group.
Information reported to the Group's Chief Operating Decision Maker (being the
Executive Chairman), for the purpose of resource allocation and assessment of
division performance is separated into four income generating segments that
serve as key performance indicators (KPI's):
- Franchise royalty income;
- Franchise-related activities (including sale of franchise
territory, product and equipment sales and Business-to-Business sales);
- US corporate operated locations; and
- International corporate operated locations.
Items that do not fall into the four segments have been categorised as
unallocated head office costs and non-core costs.
The following is an analysis of the Group's revenues, results from operations
and assets:
Revenue Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December
2022
$ $ $
Unaudited Unaudited Audited
Franchise royalty income 3,629,081 3,574,855 6,746,928
Franchise related activities 5,870,970 5,154,080 10,624,268
US corporate operated locations 25,224,557 23,267,410 47,296,711
International corporate operated locations 3,950,314 3,587,113 6,665,554
Total 38,674,922 35,583,457 71,333,461
Profit before tax Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December
2022
$ $ $
Unaudited Unaudited Audited
Franchise royalty income 1,040,511 963,463 1,956,609
Franchise related activities 483,872 497,801 964,667
US corporate operated locations 4,393,824 4,462,386 8,252,651
International corporate operated locations 338,847 39,007 85,599
Unallocated head office costs (1,490,273) (2,035,594) (4,915,011)
Non-core costs (531,430) (420,000) (840,299)
Total 4,235,351 3,507,063 5,504,216
Assets Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
$ $ $
Unaudited Unaudited Audited
Franchise royalty income 27,255,768 28,132,461 29,945,794
Franchise related activities 3,095,479 2,725,813 3,166,036
US corporate operated locations 50,991,843 48,408,920 47,356,148
International corporate operated locations 16,102,079 16,455,139 16,120,479
Total 97,445,168 95,722,334 96,588,457
Geographic Information
The Group has two wholly-owned subsidiaries - American Leak Detection (ALD)
and Water Intelligence International (WII). Operating activities are
captured as both franchise-executed operations and corporate-executed
operations. ALD has both US franchises and corporate-operated locations.
It also has international franchises, principally located in Australia and
Canada. Operations focus on residential and commercial water leak detection
and remediation with some municipal activities. By comparison, WII has only
corporate operations located outside the United States. These WII
international operations are principally municipal activities with some
residential leak detection and remediation. As noted herein, the Group's
vision is to become a multinational growth company and a "One Stop Shop" for
residential, commercial and municipal solutions to water and wastewater
infrastructure problems.
Total Revenue
Six months ended 30 June 2023 Year ended 31 December 2022
Unaudited Audited
US International Total US International Total
$ $ $ $ $ $
Franchise royalty income 3,577,830 51,252 3,629,081 6,636,512 110,416 6,746,928
Franchise related activities 5,870,970 - 5,870,970 10,624,268 - 10,624,268
US corporate operated locations 25,224,557 - 25,224,557 47,296,711 - 47,296,711
International corporate operated locations - 3,950,314 3,950,314 - 6,665,554 6,665,554
Total 34,673,356 3,635,985 38,674,922 64,557,491 6,775,970 71,333,461
5 Earnings per share
The earnings per share has been calculated using the profit for the period and
the weighted average number of Ordinary shares outstanding during the period,
as follows:
Six months ended Six months ended Year ended
31 December 2022
30 June 2023 30 June 2022
Unaudited Unaudited Audited
Earnings attributable to shareholders of the Company ($)
2,854,409 2,407,239 3,566,540
Weighted average number of ordinary shares 17,358,688 17,361,439 17,360,189
Diluted weighted average number of ordinary shares 17,911,023 18,463,573 18,554,459
Earnings per share (cents) 16.4 13.9 20.5
Diluted earnings per share (cents) 15.9 13.0 19.2
Earnings per share are computed based on Ordinary shares. There is a class
of B Ordinary Shares discussed in Footnote 6 that are not admitted to trading.
6 Share capital
The issued share capital at the end of the period was as follows:
Group & Company
Ordinary Shares held in treasury Number
Shares of 1p each
Number Total Number
At 30 June 2023 17,358,688 129,000 17,487,688
At 30 June 2022 17,366,688 56,500 17,423,188
At 31 December 2022 17,358,688 129,000 17,487,688
On 6 February 2023, in lieu of compensation board members received options to
purchase 105,000 New Ordinary Shares at a price of $8.18. These options have
a four-year vesting requirement.
On 6 February 2023, certain vendors, retained as employees, were granted
options to purchase 25,000 New Ordinary Shares at a price of $8.18 pursuant to
the acquisition of a franchise acquired in 2023. These options have a
four-year vesting requirement.
The net number of options including the new grants and leavers from the
Company at 30 June 2023 is 2,358,000.
Group & Company Share Capital Share Premium Shares In Treasury
$ $ $
At 30 June 2023 143,192 35,417,072 (1,139,404)
At 30 June 2022 142,260 35,252,633 (529,077)
At 31 December 2022 143,192 35,417,072 (1,139,404)
Reverse acquisition reserve
The reverse acquisition reserve was created in accordance with IFRS3 Business
Combinations and relates to the reverse acquisition of Qonnectis Plc by ALDHC
in July 2010. Although these Consolidated Financial Statements have been
issued in the name of the legal parent, the Company it represents in substance
is a continuation of the financial information of the legal subsidiary ALDHC.
A reverse acquisition reserve was created in 2010 to enable the presentation
of a consolidated statement of financial position which combines the equity
structure of the legal parent with the reserves of the legal subsidiary.
Qonnectis Plc was renamed Water Intelligence Plc on completion of the reverse
acquisition on 29 July 2010.
7 Reacquisition of franchisee territories and other acquisitions in the
period
On 7 February 2023, the Group announced the reacquisition of its Nashville,
Tennessee franchise territory within the Group's ALD franchise business. The
acquisition is pursuant to the Group's growth strategy of creating regional
hubs and adds further corporate scale to operations in the Midwest, United
States. The cash consideration for the acquisition is $3.25 million based on a
2022 Adjusted Income Statement of $2.4 million in revenue and $550,000 in
profit before tax and includes the transfer of all operating assets to the
Group.
Subsequent Event
On 23 July 2023, the Group announced the reacquisition of its Covina,
California franchise territory within the Group's ALD franchise business.
The cash consideration for the acquisition is $1.5 million based on the
trailing twelve months pro forma of $1.3 million in revenue and $0.3 million
in profit before tax and includes the transfer of all operating assets to the
Group.
8 Publication of announcement and the Interim Results
A copy of this announcement will be available at the Company's registered
office (27-28 Eastcastle Street, London, W1W 8DH) from the date of this
announcement and on its website - www.waterintelligence.co.uk
(http://www.waterintelligence.co.uk) . This announcement is not being sent to
shareholders.
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