REG - Water Intelligence - Interim Results
25/09/2024 07:00
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RNS Number : 5268F Water Intelligence PLC 25 September 2024
Water Intelligence plc (AIM: WATR.L)
Interim Results: Strong Profit Growth
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 2024.
Results are in-line with market expectations with strong profit growth as the
Group accelerates its long-run growth plan with certain corporate transactions
after the period end.
Financial Highlights
· Revenue increased by 7% to $41.5 million (1H 2023: $38.7 million)
o Franchise Royalty income decreased by 2% to $3.55 million (1H 2023: $3.63
million)
o Franchise Related sales decreased 6% to $5.5 million (1H 2023: $5.9
million)
o Corporate Store sales increased 11% to $32.4 million (1H 2023: $29.2
million)
§ US Corporate sales grew 12% to $28.3 million (1H 2023: $25.2 million)
§ International Corporate sales grew 5% to $4.1 million (1H 2024: $4.0
million)
· Statutory Profit Before Tax increased by 11% to $4.7 million (1H
2023: $4.2 million)
· Statutory EBITDA increased by 13% to $7.8 million (1H 2023: $7.0
million)
· PBT Adjusted* increased by 10% to $6.0 million (1H 2023: $5.4
million)
· EBITDA Adjusted** increased by 12% to $8.7 million (1H 2023: $7.7
million)
· EPS Basic increased by 16% to 19.0 cents (1H 2023: 16.4 cents)
· EPS Fully Diluted increased by 16% to 18.5 cents (1H 2023: 15.9
cents)
· EPS Basic Adjusted* increased by 14% to 24.0 cents (1H 2023: 21.1
cents)
· EPS Fully Diluted Adjusted* increased by 15% to 23.4 cents (1H 2023:
20.4 cents)
· PBT Margin remained consistent at 11% (1H 2023: 11%)
· EBITDA margin increased to 19% (1H 2023: 18%)
· Cash and equivalents at 30 June of $11.1 million
o Net Cash of ($2.82) 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: 0.62x
o Net Debt (including both Bank Debt and Deferred Acquisition Payments) to
EBITDA Adjusted* ratio: 0.54x
*PBT Adjusted (adjusted for amortisation, share based payments and non-core
costs)
**EBITDA Adjusted (adjusted for share-based payments and non-core costs)
Network Sales (implied gross sales of franchisees from which reported royalty
is derived plus direct sales of corporate locations) grew 2% to $91 million
(1H 2023: $89 million).
Corporate Development
During Period
· Acquisition: Franchise in Fresno, 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 completed for B2B insurance channel
Subsequent to Period
· Refinancing of $21 million of Bank Debt and deferred payments for
acquisitions with M&T Bank; amortization - largely interest only - spread
evenly through 2029 at 6.35% fixed rate
· Acquisitions
o Franchise acquisition of Lafayette, Louisiana
o Acquisition of Feakle Gas and Plumbing in Ireland
Dr. Patrick DeSouza, Executive Chairman of Water Intelligence, commented:
"We achieved strong double-digit growth in profits and EBITDA during 1H while
continuing to invest in our long-range growth plan. Our balance sheet remains
strong and under-levered enabling us to have "dry powder" to complement our
organic growth plans with accretive acquisitions.
In June, we announced our capital allocation strategy to fund an accelerated
plan for organic growth, accretive acquisitions and also options for liquidity
for our shareholders through share repurchases given our ability to generate
consistent profit growth. During the summer, we got a jump start on
implementing our strategy by refinancing our bank debt to further increase
free cash flow and executing some acquisitions including one in Ireland that
provides a roadmap for the growth of both the non-US and US businesses.
We are excited about the future as we formally launch our Next 50 growth plan
in October coincident with our American Leak Detection Convention celebrating
the fiftieth anniversary of our core business."
Enquiries:
Water Intelligence plc
Laura Bass, Director, Strategic Finance
Tel: +1 203 584-8240
Grant Thornton UK LLP - Nominated Adviser
Tel: +44 (0) 20 7383 5100
Philip Secrett
Harrison Clarke
Ciara Donnelly
RBC Capital Markets - Joint Broker
Tel: +44 (0)20 7653 4000
Jill Li
Elizabeth Evans
Daniel Saveski
Dowgate Capital Ltd - Joint Broker
Tel: +44 (0)20 3903 7715
Stephen Norcross
Chairman's Statement
As part of the Chairman's Statement in the 2023 Annual Report, we discussed
capital allocation and our go-forward growth plan (Our Next 50), inspired by
this October's Fiftieth Anniversary of American Leak Detection (ALD) - our
core business. We remain confident about the future and our ability to
capture more market share in a growing market for water infrastructure
solutions; hence we have actually launched the Next 50 plan early over the
summer with our non-US businesses.
Since 30 June, we have taken steps to fuel (i) faster organic growth of
current solutions, as well as, our new technology-driven solutions; (ii) new
revenue and earnings growth through a synergistic non-US acquisition and (iii)
options for increased shareholder liquidity, especially given our consistent
earnings per share growth (EPS). Each of these uses of capital builds on
strong 1H financial results and operating investments.
1H Financial Results. We remained consistent during 1H. Revenue, profits,
EBITDA (earnings before interest taxes depreciation and amortization) were all
up with profits and EBITDA showing double digit growth and EBITDA margins up
1%. EPS, both basic and fully diluted, increased double digits. In terms
of market capture, network sales (direct sales plus gross sales from which
franchise royalty is derived) grew 2% to $91 million. As discussed below, we
expect to accelerate System-wide sales by expanding our B2B channels beyond
insurance.
Group revenues grew 7% to $41.5 million (1H 2023: $38.7 million). US corporate
locations grew 12% to $28.3 million (1H 2023: $25.2 million). International
corporate locations grew 5% to $4.1 million (1H 2023: $3.9 million).
Franchise royalties declined by 2% to $3.5 million (1H 2023: $3.6million) with
such decline largely as a result of prior franchise acquisitions which reduced
the pool of franchise royalties. Franchise-related activities which includes
franchise sales, parts and equipment sales and business to business activities
declined 6% to $5.5 million (1H 2023: $5.9 million). Such decline was
largely due to changes in the insurance channel as certain US insurers
restructured to address prior years' macroeconomic volatility. It is
expected that with the moderation of interest rates and inflation, such effect
will be transitory. As discussed below, now that Salesforce is implemented
across the System for insurance, we are planning on extending our insurance
B2B to other channels such as pools and property management, leading to
further growth.
Profit before Tax grew 11% to $4.7 million (1H 2023: $4.2 million). Profit
before Tax Adjusted for amortization, share-based payments and non-core costs
grew 10% to $6.0 million (1H 2023: $5.4 million). EBITDA grew 13% to $7.8
million (1H 2023: 7.0 million). EBITDA Adjusted for share-based payments and
non-core costs increased 12% to $8.7 million (1H 2023: $7.7 million).
EBITDA margins increased to 19% (1H 2023: 18%). As a result, earnings per
share fully diluted grew 16% to 18.5 cents (1H 2023: 15.9 cents).
Our balance sheet remained strong and under-levered, providing cash for
investments to accelerate 2H growth and beyond. Cash at 30 June was $11.1
million. The ratio of Net Debt (including both bank debt and deferred
payments from prior acquisitions) to EBITDA remained conservative at 0.62 with
Net Debt to EBITDA Adjusted at 0.54. During 1H we continued to invest in the
commercialization of new technologies - Pulse, LeakVue 2, LS1, VersaLiner,
Video commerce and Salesforce - to add to organic growth and efficiencies.
We announced strong results after teaming with Ferguson on an implementation
of VersaLiner. In 2Q, we also completed a significant franchise
reacquisition in Fresno, California reinforcing our regional hub operating
structure and whose revenue and profits impact will show in 2H.
Early Start for the Next 50 Growth Plan
We have started 2H aggressively especially with respect to the Group's non-US
businesses to build momentum for the official October launch in the US of the
Next 50. Given our scalable operating foundation across the US, especially
in terms of regional hubs with both corporate and franchise locations and B2B
channels, we believe that we can readily apply the model for our non-US
businesses.
First, as a prelude, we refinanced $21 million of bank debt and deferred
payments from acquisitions with M&T bank to increase free cash flow to
enhance our ability to fund growth plans in the short and medium run. As noted
above, such refinancing comes on top of an existing under-levered balance
sheet at 30 June that has $11.1 million in cash and achieved 13% growth in
statutory EBITDA to $7.85 million during 1H. With our refinancing, we have a
smooth payment stream combining interest and amortization through 2029 at
6.35%.
Second, we applied capital to acquire a fast-growing Irish plumbing business
for an attractive price. This acquisition works synergistically with our
organic growth plan for expanding our UK and EU business and implementing the
same strategy in Australia. It is also a model for the US part of the Next
50 Plan to be launched with our October Convention. The formula starts with
adding more trained technicians and then follows with the application of the
Group's proprietary solutions for any diameter pipe for water
infrastructure: residential, commercial or municipal.
By acquiring a critical mass of skilled professionals in Ireland, we have now
the capability to leverage the Group's operating assets to push market capture
in three ways: (i) leverage our UK municipal experience from Water
Intelligence International to help execute publicly announced infrastructure
spending in Ireland; (ii) transfer pinpoint leak detection solutions from ALD
to our Irish team to increase residential and commercial market capture
including for the Irish insurance market; and (iii) bid for EU water
infrastructure projects from our Irish base of operations. We are also
reinforcing our technology-driven brand by introducing to Ireland our
proprietary Pulse device (sewer blockages) which has had strong commercial
success in the UK. Given early indications post-acquisition, we are even
more confident in this growth strategy.
We plan to advance this same growth strategy with our Australian locations
where we currently have a critical mass of both municipal projects and ALD
locations. Over the summer, we expanded our existing Sydney Water contract
and during Q2 and Q3 have invested in a significant number of staff that we
are training to expand our Australian locations in 2025 after proper training.
US Business. As we approach ALD's October Convention, we are planning to
execute the same synergistic growth strategy that we have launched with our
non-US businesses in Ireland and Australia. To increase the critical mass of
trained technicians for the US locations, during July we opened our state of
the art training center in Bridgeport, Connecticut. We have brought various
national partners to the location during August to market our technologies.
We will be starting classes this fall to add more trained technicians to ALD
corporate and franchise operations. Further, we have now integrated
Salesforce technology for both corporate and franchise locations as part of
our B2B insurance channels. We are using the data generated to improve
operating efficiencies and to market enhanced Service Level Agreements (SLAs)
for additional insurance partners.
Moreover, with our national operating footprint across the United States and
strong execution experience with national channels, we are also now working
with other national partners in the pool business and property management to
scale our growth model. We anticipate heading into 2025 reinforcing organic
growth with more national accounts and with technology offerings driven by
Pulse (as noted above) and LeakVue for pool leaks.
Beyond organic growth, we will commit capital to selectively acquire
franchises and 3(rd) party companies - as we did in Ireland - that are
synergistic to our overall plan. We executed one tuck-in franchise
acquisition in Lafayette, Louisiana over the summer that will also add to 2H
growth.
It should be noted that in addition to acquiring franchises, we also plan to
sell more franchises to create an on-going cycle of market development and
acquisition. Because of the exit values that the Group has been able to
provide for franchisees, there is renewed interest among the general public
for buying franchise locations. During 1H we sold a new franchise location
in Albany, New York.
In terms of capital allocation, we have cleared the regulatory authorizations
needed to engage in share repurchases to provide liquidity as part of the
Group's overall strategy. Our shareholders will be voting on such a proposal
at our Shareholder meeting on 7 October.
Strategic Direction.
Over the last two years, we have navigated a volatile market characterized by
both inflation and high interest rates. We have focused on profits and
improved our margins but also invested in new technologies and operating
systems for sustaining our future growth. As the macroeconomic picture has
begun to stabilize, we see significant opportunity ahead and we are prepared
with cash resources, operating assets and a strong growth plan. With great
excitement, we have begun our Next 50 growth plan this summer ahead of its
official launch at the ALD Convention in October.
Interim Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2024
Six months Six months Year ended
ended ended 31
30 June 30 June December
2024 2023 2023
Notes $ $ $
Unaudited Unaudited Audited
Revenue 4 41,525,858 38,674,922 75,974,552
Cost of sales (4,992,886) (5,387,099) (10,362,197)
Gross profit 36,532,972 33,287,823 65,612,355
Administrative expenses
- Other income 737,289 10,716 59,422
- Share-based payments (151,138) (206,319) (571,970)
- Amortisation of intangibles (427,026) (416,484) (841,516)
- Other administrative costs (31,442,024) (27,909,904) (57,074,745)
Total administrative expenses (31,282,899) (28,521,991) (58,428,809)
Operating profit 5,250,073 4,765,832 7,183,546
Finance income 186,835 334,049 699,819
Finance expense (731,327) (864,530) (1,643,978)
Profit before tax 4 4,705,581 4,235,351 6,239,387
Taxation expense (1,412,117) (1,266,129) (1,605,585)
Profit for the period 3,293,464 2,969,192 4,633,802
Attributable to:
Equity holders of the parent 3,300,966 2,854,408 4,398,681
Non-controlling interests (7,502) 114,784 235,121
3,293,464 2,969,192 4,633,802
Other comprehensive income
Exchange differences arising on translation of foreign operations (103,159) 238,363
199,826
Cash flow hedge movement not subsequently reclassified to the P&L 11,765 24,310
(171,912)
Fair value adjustment on listed equity investment (net of deferred tax) (173,597) (209,923) (21,927)
Total comprehensive income for the period 4,639,789
3,028,473 3,021,943
Earnings per share Cents Cents Cents
Basic 5 19.0 16.4 25.3
Diluted 5 18.5 15.9 24.7
Consolidated Statement of Financial Position as at 30 June 2024
At At At
30 June 30 June 31 December
2024 2023 2023
Notes $ $ $
Unaudited Unaudited Audited
ASSETS
Non-current assets
Goodwill 52,473,874 47,953,610 49,791,203
Listed equity investment 237,304 219,049 447,231
Other intangible assets 8,959,620 7,136,062 7,840,157
Interest rate swap 288,030 472,487 276,265
Property, plant and equipment 12,883,938 9,266,935 10,538,135
Trade and other receivables 297,707 267,612 207,990
75,140,473 65,315,755 69,100,981
Current assets
Inventories 870,648 802,904 723,315
Trade and other receivables 11,737,242 12,595,302 11,063,253
Investments 4,446,570 - 6,875,250
Cash and cash equivalents 6,665,581 18,731,207 8,882,627
23,720,041 32,129,413 27,544,445
TOTAL ASSETS 4 98,860,514 97,445,168 96,645,426
EQUITY AND LIABILITIES
Equity attributable to holders of the parent
Share capital 6 143,192 143,192 143,192
Share premium 6 35,226,469 35,417,072 35,417,072
Shares held in treasury 6 (752,140) (1,139,404) (1,139,404)
Merger reserve 1,001,150 1,001,150 1,001,150
Share based payment reserve 2,405,485 1,816,423 2,254,347
Foreign exchange reserve (1,408,196) (1,266,500) (1,305,037)
Reverse acquisition reserve 6 (27,758,088) (27,758,089) (27,758,088)
Equity investment reserve (839,737) (854,136) (666,140)
Cash flow hedge reserve 288,030 472,487 276,265
Retained profit 54,796,780 49,951,542 51,495,814
63,102,945 57,783,737 59,719,171
Equity attributable to Non-Controlling interest
Non-controlling interest 343,642 416,539 610,375
Non-current liabilities
Borrowings and lease liabilities 13,681,567 14,725,059 12,510,867
Deferred consideration 501,720 4,731,313 3,632,074
Deferred tax liability 3,988,963 3,092,054 2,618,605
18,172,250 22,548,426 18,761,546
Current liabilities
Trade and other payables 5,685,245 5,415,716 5,997,028
Borrowings and lease liabilities 7,078,714 6,634,568 6,805,131
Deferred consideration 4,477,718 4,646,182 4,752,175
17,241,677 16,696,466 17,554,334
TOTAL EQUITY AND LIABILITIES 98,860,514 97,445,168 96,645,426
Interim Consolidated Statement of Changes in Equity
For the six months ended 30 June 2024
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 2023 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
Distribution to non-controlling interest - - - - - - - - - - - (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
Share-based payment expense - - - - - 365,652 - - - - 365,652 - 365,652
Transaction options - - - - - 12,273 - - - 12,273 - 12,273
Options granted in lieu of board fees - - - - - 60,000 - - - - 60,000 - 60,000
Contribution from non-controlling interest - - - - - - - - - - - 73,500 73,500
Profit for the period - - - - - - - - 1,544,272 1,544,272 120,338 1,664,610
Other comprehensive income - - - - - - (38,537) 187,995 (196,221) - (46,763) - (46,763)
As at 31 December 2023 (audited) 143,192 35,417,072 (1,139,404) (27,758,088) 1,001,150 2,254,347 (1,305,037) (666,140) 276,265 51,495,814 59,719,171 610,375 60,329,546
Share based payment expense - - - - - 151,138 - - - - 151,138 - 151,138
Share buyback - - (39,114) - - - - - - - (39,114) - (39,114)
Issue of Treasury Shares - (190,603) 426,377 - - - - - - - 235,774 - 235,744
Distribution to non-controlling interest - - - - - - - - - - - (259,231) (259,231)
Profit for the period - - - - - - - - - 3,300,966 3,300,966 (7,502) 3,293,464
Other comprehensive income - - - - - - (103,159) (173,597) 11,765 - (264,991) - (264,991)
As at 30 June 2024 (unaudited) 143,192 35,226,469 (752,140) (27,758,088) 1,001,150 2,405,485 (1,408,196) (839,737) 288,030 54,796,780 63,102,945 343,642 63,446,587
Interim Consolidated Statement of Cash Flows
For the six months ended 30 June 2024
Six months Six months Year ended
ended ended 31 December 2023
30 June 2024 30 June 2023
$ $ $
Unaudited Unaudited Audited
Cash flows from operating activities
Profit before tax 4,705,581 4,235,351 6,239,387
Adjustments for non-cash/non-operating items:
Depreciation of plant and equipment 2,164,749 1,776,887 3,745,773
Amortisation of intangible assets 427,026 416,484 841,516
Share based payments 151,138 206,319 571,970
Interest paid 731,327 864,530 1,643,978
Interest received (186,835) (334,049) (699,819)
Operating cash flows before movements in working capital 7,992,987 7,165,521 12,342,805
(Increase)/Decrease in inventories (147,333) (43,834) 35,755
(Increase)/Decrease in trade and other receivables (763,706) (1,181,758) 409,913
Decrease in trade and other payables (811,844) (1,010,504) (490,886)
Cash generated by operations 6,270,103 4,929,426 12,297,587
Income taxes (5,430) (44,045) (897,106)
Net cash generated from operating activities 6,264,674 4,885,381 11,400,481
Cash flows from investing activities
Purchase of plant and equipment (904,971) (1,050,204) (1,269,867)
Disposal of plant and equipment - - 191,178
Purchase of intangibles (1,491,522) (1,335,772) (3,370,700)
Reacquisition of Franchises (2,000,000) (2,125,000) (4,203,500)
Sale / (Purchase) of investments 2,428,680 - (6,875,250)
Interest received 186,835 334,049 699,818
Net cash used in investing activities (1,780,978) (4,176,927) (14,828,321)
Cash flows from financing activities
Share buy-back (39,114) - -
Contribution from non-controlling interest - - 73,500
Distribution to non-controlling interest (259,232) (296,882) (296,882)
Interest paid (610,059) (643,506) (1,360,057)
Proceeds from borrowings 2,000,000 3,358,458 2,811,353
Repayment of borrowings (2,759,300) (2,330,903) (4,986,658)
Repayment of notes (3,726,079) (4,242,043) (5,229,265)
Repayment of lease liabilities (1,306,955) (836,825) (1,715,978)
Net cash used in financing activities (6,700,739) (4,991,702) (10,703,987)
Net decrease in cash and cash equivalents (14,131,827)
(2,217,043) (4,283,247)
Cash and cash equivalents at the beginning of period 23,014,454
8,882,627 23,014,454
Cash and cash equivalents at end of period 6,665,581 18,731,206 8,882,627
Notes to the Interim Consolidated Financial Information
for the six months ended 30 June 2024
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 2023.
This interim consolidated financial information for the six months ended 30
June 2024 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 2023, 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 2024 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 2023 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 2024
was £1 = US$ 1.2647 (30 June 2023: £1 = US$ 1.2627).
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 2023.
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 - Fresno, California (1 May 2024) and as a Subsequent
Event Feakle Gas and Plumbing, Ireland (1 July 2024). The Group also
refinanced and expanded its credit facilities in August 2024.
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 2024, 89.9% (1H 2023: 89.7%) of its
revenue came from the US-based operations; the remaining 10.1% (1H 2023:
10.3%) 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 2024 30 June 2023 31 December
2023
$ $ $
Unaudited Unaudited Audited
Franchise royalty income 3,554,456 3,629,081 6,738,816
Franchise related activities 5,534,301 5,870,970 11,163,422
US corporate operated locations 28,298,872 25,224,557 50,459,736
International corporate operated locations 4,138,228 3,950,314 7,612,578
Total 41,525,858 38,674,922 75,974,552
Profit before tax Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December
2023
$ $ $
Unaudited Unaudited Audited
Franchise royalty income 1,138,459 1,040,511 2,156,421
Franchise related activities 541,415 483,872 925,126
US corporate operated locations 5,134,673 4,393,824 8,411,622
International corporate operated locations (161,386) 338,847 443,180
Unallocated head office costs (1,272,580) (1,490,273) (4,627,640)
Non-core costs (675,000) (531,430) (1,069,322)
Total 4,705,581 4,235,351 6,239,387
Assets Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
$ $ $
Unaudited Unaudited Audited
Franchise royalty income 21,827,215 27,255,768 24,761,073
Franchise related activities 3,495,142 3,095,479 3,028,788
US corporate operated locations 57,389,619 50,991,843 52,394,708
International corporate operated locations 16,148,538 16,102,079 16,460,857
Total 97,860,514 97,445,168 96,645,426
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 2024 Year ended 31 December 2023
Unaudited Audited
US International Total US International Total
$ $ $ $ $ $
Franchise royalty income 3,504,010 50,447 3,554,456 6,638,442 100,374 6,738,816
Franchise related activities 5,534,301 - 5,534,301 11,163,422 - 11,163,422
US corporate operated locations 28,298,872 - 28,298,872 50,459,736 - 50,459,736
International corporate operated locations - 4,138,228 4,138,228 - 7,612,578 7,612,578
Total 37,337,183 4,188,675 41,525,858 68,261,600 7,712,952 75,974,552
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 2023
30 June 2024 30 June 2023
Unaudited Unaudited Audited
Earnings attributable to shareholders of the Company ($)
3,300,966 2,854,408 4,398,681
Weighted average number of ordinary shares 17,402,288 17,358,688 17,358,688
Diluted weighted average number of ordinary shares 17,823,584 17,911,023 17,833,235
Earnings per share (cents) 19.0 16.4 25.3
Diluted earnings per share (cents) 18.5 15.9 24.7
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 2024 17,398,688 89,000 17,487,688
At 30 June 2023 17,358,688 129,000 17,487,688
At 31 December 2023 17,358,688 129,000 17,487,688
The net number of options including the new grants and leavers from the
Company at 30 June 2024 is 2,773,000.
Group & Company Share Capital Share Premium Shares In Treasury
$ $ $
At 30 June 2024 143,192 35,226,469 (752,140)
At 30 June 2023 143,192 35,417,072 (1,139,404)
At 31 December 2023 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 9 May 2024, the Group announced the reacquisition of its Fresno, California
franchise territory within the Group's ALD franchise business. As Fresno is
located between the Bay Area and Los Angeles in the Central Valley of
California, the reacquisition reinforces the Group's strategy of establishing
regional corporate hubs in the US that fuel growth in adjacent franchise
locations. The cash consideration for the acquisition is $2.9 million based
on 2023 revenue of $1.8 million, adjusted profit before tax of $0.6 million
and the transfer of all operating assets to the Group.
Subsequent Events
On 9 July 2024, the Group announced the acquisition Feakle Gas and Plumbing,
Ireland. The transaction is structured as a purchase of 100% of the issued
share capital of FG&P by Water Intelligence Leak Detection and Repair,
WII's Irish subsidiary. The purchase price of €2.32 million in cash is based
on the FG&P's 2023 Accounts of €3.7 million in sales and adjusted
operating profits of €550,000. The purchase price is risk-adjusted by being
structured as a four-year earnout with incentives for strong growth of both
revenue and profits above the baseline 2023 Accounts.
On 13 August 2024, the Group announced a refinancing and expansion of its
credit facilities. The Refinancing spreads the amortization of approximately
$21 million of total liabilities (bank debt and deferred payments from
franchise acquisitions) through 2029 at a fixed rate of 6.35%. The debt
service for the next five years only requires between 5 and 10% of principal
to be repaid each year freeing up additional cash for accretive growth
opportunities. Additionally, as part of the Refinancing, M&T Bank and the
Group have agreed on an Expansion of its credit capacity with a $3 million
acquisition line of credit with a floating market rate capped at 8% and a $2
million working capital line of credit at a floating market rate.
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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