Refinancing and Expansion of
Credit Facilities for Growth Plan; Shareholder
Meeting
Water Intelligence plc (AIM: WATR.L)
("Water Intelligence" or "Group"), a leading multinational provider
of precision, minimally-invasive leak detection and remediation
solutions for both potable and non-potable water
is pleased to announce the refinancing of its
existing debt ("Refinancing") and expansion of its credit facilities
("Expansion") with M&T Bank, a leading US bank. The
transaction provides the Group with additional non-dilutive
resources and significantly increases the Group's capacity to
execute its strategic growth plan.
Key
terms of the Refinancing and Expansion of 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 requires between 5 and 10% of principal to be
repaid each year freeing additional cash for available accretive
growth opportunities. The Refinancing prudently leverages the
Group's current strong balance sheet and track record of growing
cash from operations to put it in a position to be
opportunistic.
Moreover, 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. Following the
Refinancing and Expansion, the Group will have more than $20
million in resources from which to execute its growth strategy for
any of the four layers of its capital allocation plan discussed
below.
Strategic Rationale for Refinancing
In the Chairman's Statement as part
of the Group's recently released Annual Report, Water Intelligence
reaffirmed its "Build and Buy" growth plan for its water
infrastructure services platform and the decision-making principles
that underpin the Group's approach to capital
allocation.
The Chairman's Statement identifies
four groups of investments that would form a "layer cake" of
growth. The foundational two layers focus on investments to feed
organic growth: both organic growth from the Group's current water
leak detection and repair offerings and organic growth from new
proprietary technology-based solutions for "hard-to-find" leaks in
swimming pools, rapid detection of sewer blockages and efficient,
open channel water conveyance.
The third layer focuses on
acquisitions whether converting franchise locations into
corporate-run operations or acquisitions of third-party companies
that would add products or geographic scale. For example, as
part of this third layer, in July the Group concluded the
acquisition of a profitable and growing Irish plumbing company on
favourable terms for the Group's shareholders. This acquisition
extends Water Intelligence International's operating footprint and
enables further execution in the EU.
Finally, the fourth layer includes
the use of capital to respond to shareholder interest in dividends
or share repurchases, especially given the Group's consistent
growth in EPS. The Chairman's Statement indicates that the
Group would seek regulatory approval as part of its Shareholder
Meeting in order to create an increased set of options for
shareholders.
As noted in the Annual Report, the
Group has resources available to execute its growth plan even in
the absence of today's transaction. We noted in the
Chairman's Statement that for 2023, the Group's Adjusted EBITDA
grew 9% to $13.4 million and the Group had a strong balance sheet
at year-end 2023 with $15.8 million in cash and significant
untapped credit capability.
Now, given (i) current cash of
approximately $12 million, reflecting acquisitions and deferred
payments from prior acquisitions; (ii) anticipated generation of
additional cash from operations during 2H in-line with prior years
and (iii) the expansion of credit facilities outlined above, the
Group will have more than $20 million in resources from which to
execute its growth strategy for any of the four layers of its
capital allocation plan. Moreover, the Group believes that even
with today's transaction that it still remains under-levered, with
net debt to adjusted EBITDA of less than 1.0x, leaving the Group
with the ability to increase available resources further should the
opportunity arise. As part of the transaction, Plainsight Group
will continue to guarantee the bank debt while the Chairman's
guarantee will no longer be needed.
Shareholder Meeting
Water Intelligence will be sending
out shortly its Notice of Annual General Meeting, including seeking
permission from independent shareholders to authorise a repurchase
of shares as part of the Group's wider capital allocation strategy,
and accompanying resolutions.
Executive Chairman, Dr. Patrick DeSouza
commented: "We are excited by the growth
opportunities available to the Group in the marketplace. The demand
for water and wastewater solutions remains strong, especially given
aging infrastructure.
We remain both confident and prudent
as stewards of our shareholders' capital. In the Chairman's
Statement, we set forth our decision-making principles for
allocating capital while factoring-in investment and execution
risk.
Today's transaction supports our
growth plan in a non-dilutive way. We appreciate the support of our
shareholders and look to grow EPS while building a world-class
multinational platform that provides solutions for aging water
infrastructure."
Michael Moulton, Relationship Manager, M&T Bank
added: "We are happy to support a
long standing client of the bank, with this refinancing of their
capital stack."
The
information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
"UK MAR") which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain.
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