TIDMWATR
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 Tel: +44 (0)20 7220 1666
Broker
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 3,021,943 1,555,036 3,014,400
------------------------------------ ------ ------------- ------------- -------------
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 Reverse Merger Share Foreign Equity Cash Retained Total Non-controlling Total
Capital Premium held Acquisition Reserve based exchange investment Flow Profit interest Equity
in treasury Reserve payment reserve reserve Hedge
reserve Reserve
$ $ $ $ $ $ $ $ $ $ $ $ $
----------------- -------- ----------- ------------ ------------- ---------- ---------- ------------ ----------- -------- ----------- ----------- ---------------- -----------
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
30 June 30 June 2022
2023 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 (4,283,247) (1,895,128) (787,898)
Cash and cash equivalents at the
beginning of period 23,014,454 23,802,352 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 ($), rounded to the nearest dollar.
Foreign currencies
(i) Functional and presentational currency
Items included in this interim consolidated financial
information are measured using the currency of the primary economic
environment in which each entity operates ("the functional
currency") which is considered by the Directors to be the Pounds
Sterling (GBP) for the Parent Company and US Dollars ($) 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 GBP1 = US$
1.2627 (30 June 2022: GBP1 = 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 Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 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 Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 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 Year ended 31 December
2023 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 Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 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
Shares of 1p each in treasury
Number
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 . This announcement is not being sent
to shareholders.
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END
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
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For further information about how RNS and the London Stock Exchange
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END
IR FLFETAIITLIV
(END) Dow Jones Newswires
September 19, 2023 02:00 ET (06:00 GMT)
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