REG - Water Intelligence - Trading Update and Acquisition

Water IntelligenceAnnouncement

07/02/2023 07:00

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RNS Number : 0951P  Water Intelligence PLC  07 February 2023

2022 Full Year Trading Update

and

Acquisition of Nashville Franchise

 

Water Intelligence plc (AIM: WATR.L) ("Water Intelligence" or the "Group"), a
leading multinational provider of precision, minimally-invasive leak detection
and remediation solutions for both potable and non-potable water, is pleased
to provide a trading update and operational highlights for the year ended 31
December 2022 and also to announce the strategic acquisition by its American
Leak Detection subsidiary of its Nashville franchise.

The Group continues to perform strongly despite ongoing macroeconomic
uncertainty.  Market demand for the Group's water leak detection and repair
solutions remains strong despite signs of recessionary pressure going into
2023.

In terms of market capture, network sales (direct corporate sales and indirect
gross sales to third parties from which franchise royalty is derived) grew
approximately 10.5%, reaching approximately $168 million (FY 2021: $152
million).

Franchise Acquisition / Subsequent Event

We are pleased to announce that the Group has reacquired its Nashville,
Tennessee franchise.  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.

2022 Highlights

Financial Performance

v  Group Revenue increased by 31% to $71.3 million (2021: $54.5 million)

 

American Leak Detection subsidiary

§ Franchise royalty declined 1% to $6.7 million (2021: $6.8 million) due to
the franchise acquisitions in 2021 reducing the pool of franchise royalty for
2022 (without these acquisitions franchise royalty would have grown 8%)

·    Franchise Related Activities (Insurance Channel) grew 9% to $10.6
million (2021: $9.8 million)

§ US Corporate locations sales grew 48% to $47.3 million (2021: $31.9
million)

·    Same store sales grew 25% to $36.2 million (2021: $28.9 million)

·    Same store profits grew 14% to $6.2 million (2021: $5.4 million)

Water Intelligence International subsidiary

§ International corporate locations grew 9% to $6.7 million (2021: $6.1
million)

 

v  EBITDA Adjusted* grew 20% to $12.3 million (2021: $10.3 million)

o  EBITDA grew 16% to $11.1 million (2021: $9.5 million)

 

v  PBT Adjusted* grew 12% to $7.8 million (2021: $6.9 million)

o  PBT declined 3% to $5.5 million (2021: $5.7 million) (due to non-cash
expenses especially related to Salesforce implementation)

 

*EBITDA Adjusted and PBT Adjusted both adjusted for non-core costs and
non-cash expense of share-based payments; PBT Adjusted also adjusted for
non-cash expense of amortization. EBITDA and PBT are adjusted to exclude the
2021 one-time gain of $1.9 million to allow for like-for-like comparisons with
2021

Balance Sheet at 31 December 2022

§ Cash at $23 million

§ Cash net of bank debt at $6.2 million

§ Cash net of bank debt and deferred franchise acquisition payments at $(6.4)
million

·    Debt and acquisition payments all spread through 2027 at a blended
fixed rate of approximately 4.9% reflecting different facilities

o    Credit availability of $3 million for additional franchisee
reacquisitions under current bank credit facilities at a blended fixed rate of
approximately 5.5% and 5 year amortization

Corporate Development:

·   Expansion of Acquisition Credit Facilities ($17 million at a blended
fixed rate of approximately 5.5% through 2027)

·    Franchise Acquisitions:  Fort Worth, Texas; Midland, Texas

·    Plumbing Acquisition:  Fairfield, Connecticut

·    Sale of Franchise Territory:  Central North Carolina

·  Salesforce and related web applications being developed and implemented
across all US locations (automates all aspects of workflow: scheduling and
delivery; marketing follow-up; e-commerce; highest level of data security in
Salesforce Cloud)

·    New Service Offerings developed and commercial in 2023: Residential
Pulse (sewer diagnostic tool) and Municipal LS1 (snapshot survey tool)

 

The Group will announce its audited full year results by early June.

 

Commenting on the Group's performance, Executive Chairman, Dr. Patrick DeSouza
remarked:

"We are pleased that during 2022 our team successfully navigated various
challenges posed by short-run inflationary shocks and subsequent rises in
interest rates which are now raising concerns over potential recessionary
pressure.  Despite this, our core business remains strong and market demand
for water infrastructure solutions continues to grow.

We remain confident in our strategic growth plan.  For 2022, sales growth
remained strong - both corporate and franchise; we increased EBITDA by double
digits while continuing to scale operations through (i) investment in
additional hiring and training of technicians, (ii) implementation of
Salesforce and related applications and (iii) commercial launch of new service
offerings.  The strength of our balance sheet enables us to continue to
reinvest in our growth plan.  Further, we have credit availability with the
attractive fixed rates that we negotiated in the first half of 2022 for future
profitable franchise acquisitions.

We are very mindful that macroeconomic volatility remains a challenge for
2023.  We will be disciplined in managing expenses as we remain acutely
focused not just on revenue growth but also on enhancing profit margins.
Moreover, during the coming months, we will also be coming to the end of our
large upfront investment spend for our Salesforce operating backbone and new
service offerings for customers, which will drive both cost efficiencies and
revenue growth going forward.

As we head into 2023, we are positioned to better meet growing market demand
with scalable operations and an ability to provide our customers with added
solutions for their water and wastewater problems.  With increasingly adverse
climate conditions - whether droughts, freezes or flooding - our customers
need us more than ever."

This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.

 

Enquiries:

 

Water Intelligence plc

Patrick DeSouza, Executive Chairman
                            Tel: +1 203 654 5426

Maria McDonald, Director, Communications                Tel: +1
415 272 2459

 

RBC Capital Markets - Joint Broker                    Tel:
+44 (0) 207 653 4000

Rupert Walford

Daniel Saveski

 

WH Ireland Limited - NOMAD & Joint Broker        Tel: +44 (0)207 220
1666 (        )

Hugh Morgan

James Bavister

 

Dowgate Capital Ltd - Joint Broker                    Tel:
+44 (0)20 3903 7721

Stephen Norcross

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