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 3rd 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
ended
30 June
2024
|
Six months
ended
30 June
2023
|
Year ended
31
December
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
|
|
3,028,473
|
3,021,943
|
4,639,789
|
|
|
|
|
|
|
|
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
30 June
2024
|
At
30 June
2023
|
At
31 December
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 Cash Flows
For
the six months ended 30 June 2024
|
|
Six months
ended
30 June
2024
|
Six months
ended
30 June
2023
|
Year ended
31 December
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
|
(2,217,043)
|
(4,283,247)
|
(14,131,827)
|
|
Cash
and cash equivalents at the beginning of period
|
8,882,627
|
23,014,454
|
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 3rd
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
30 June
2024
|
Six months
ended
30 June
2023
|
Year ended
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
30 June
2024
|
Six months
ended
30 June
2023
|
Year ended
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
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
Year ended
31 December
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
Unaudited
|
Year ended 31 December
2023
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
30 June
2024
|
Six months
ended
30 June
2023
|
Year ended
31 December 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 of 1p
each
|
Shares held in treasury
Number
|
|
|
|
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.
This announcement is not being sent to shareholders.