TIDMWATR
RNS Number : 8036E
Water Intelligence PLC
14 February 2018
Water Intelligence plc
("Water Intelligence" or the "Company")
Q4 Trading Update and Corporate Development
Water Intelligence plc (AIM: WATR.L), 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 statement for the year ended 31
December 2017. We are also including an update on our corporate
development as we expand our offerings to become a "one-stop"
platform with a variety of cross-selling opportunities. The Company
expects to announce its audited results for the year ended 31
December 2017, on or around 9 May 2018, approximately the same date
as last year.
Highlights
-- Revenue up 45% to $17.7 million (2016: $12.2m)
o Corporate revenues of approximately $8 million, up 64%
o Franchise royalty income of approximately $6 million, up
7%
o Business-to-Business sales, led by insurance channel, of
approximately $2.5 million (2016: $0.66m)
o Equipment purchases of approximately $1.2 million, up
11.6%
o Total Sales to Customers: Franchise system sales (from which
royalty is drawn) and Corporate sales of approximately $90 million
(2016: approximately $82 million)
-- Adjusted PBT up 21% to $1.7 million (2016: $1.4 million), including increased investment in infrastructure to allow for additional growth in 2018 and beyond
-- Insurance channel momentum: first national account
implemented; second account signed and in process of
implementation; pipeline developing
-- Agreement signed with Flo Technologies for American Leak
Detection business growth; launch of renewables line for UK-based
municipal business growth
-- Tax cuts expected to benefit the Company in 2018 and beyond
-- Sales and Adjusted PBT rate of growth accelerated 2017 vs 2016 compared with 2016 vs. 2015
-- Confident of further growth in year ahead given anticipated
US economic growth for our core American Leak Detection business
and water loss as a salient issue worldwide driving consumer,
business and municipal spending
Trading Update
Water Intelligence had another strong year. The Company's upward
growth trajectory, referred to in the Q3 Trading Update, remained
consistent for the remainder of 2017. Revenue and profit before
taxes adjusted each grew significantly during 2017 when compared
with 2016. Importantly, the rate of growth along both dimensions
actually accelerated year-over-year when reviewing 2016 results
relative to 2015.
Revenue grew to $17.7 million which was 45% higher than 2016
revenue of $12.2 million. This path showed acceleration from 38%
year-over-year growth when comparing 2016 to 2015 (2015: $8.8
million). Put another way, in just two years, sales have doubled.
Further, despite investing for such top-line growth, Water
Intelligence also scaled well in terms of profits before taxes
adjusted. The adjustment made is to focus on on-going operations.
Profits before taxes are adjusted for amortization, a non-cash
expense, and one-time costs given that acquisitions (whether
franchise reacquisition or third party) are part of our on-going
business plan. During 2017, profits before taxes adjusted reached
$1.7 million which was 21% higher than profits before taxes
adjusted in the same way during 2016 (2016: $1.4 million). This
strong result also showed acceleration from 8% growth in profits
before taxes adjusted when comparing 2016 to 2015. (2015: $1.3
million). Note that profits before taxes unadjusted actually grew
faster at approximately 50% year-over-year. (2017: $1.15 million;
2016: $0.77 million).
Market demand for our offerings only continues to increase.
Problems of water scarcity and the implications of water loss from
failing infrastructure are increasingly salient worldwide from Cape
Town, a city which may become the first in the world to run out of
water, to California where drought and wildfires are causing
government to increase regulatory demands to lower water loss from
leakage.
Our Water Intelligence platform offers an increasing range of
solutions to address customer demand whether residential,
commercial or municipal. In breaking down our sales by business
lines, we see growth in each segment. Moreover, we are
incorporating new lines of business driven by technology products
building upon our current lines that are characterized by service
delivery.
As stated in the 2016 update: "Each segment, franchise and
corporate, work synergistically." For 2017, one might add to that
phrase "including municipal now that Water Intelligence
International ("WII"), our UK-based business, has been working with
both American franchisees and our new corporate operation in Sydney
to layer-in municipal work on top of our leak detection service
offerings for residences and commercial properties."
Because of these synergies, we are now scaling faster on all
fronts. First, the evolution of our business-to-business insurance
channel has fed additional jobs to the entire franchise system.
During 2017 we established national accounts with two of the
leading insurance companies in the US and with American Pool
Enterprises. Franchise royalties, drawn from system-wide sales of
approximately $80 million, grew faster during 2017 by 7%
year-over-year to $6 million despite additional franchise
reacquisitions which reduced the pool of franchise sales. Second,
corporate operations, which include our WII municipal business,
grew at about 64% to above $8 million (2016: $4.9 million). Third,
franchisees continued to reinvest in growth leading to a rise in
equipment purchases to $1.2 million or an 11.6% increase.
Corporate Development
We are a technology company that delivers services. In providing
our current solutions, we use cutting-edge acoustic and infrared
technologies along with proprietary techniques. In the Outlook
Section of the Chairman's Statement for the 2016 Annual Report, we
indicated that to execute our vision of a multinational growth
company, we needed to invest in technology and in people. We also
pointed to renewables as a future growth path.
During 2017, we advanced corporate development in all of these
directions while continuing to relentlessly grow our core
businesses. We are deepening our technology profile across our
business lines - residential, commercial, municipal - to provide
for additional cross-sales opportunities whether organically or
together with our business partners. First, for our core American
Leak Detection business that services over 200,000 homes and a
business-to-business insurance channel, we are working with
partners such as Flo Technologies to sell innovative products for
the home. Second, for our core WII municipal business, we are now
initiating a renewables product solution to enhance our current
waste and waste water offerings and to complement our traditional
pipe leak detection and sewer asset surveys. Finally, we will be
communicating our brand and enabling e-commerce transactions using
cutting edge video and analytic technology with our partner
Tagasauris. Each of these three aspects of corporate development
reinforces our value proposition as a platform company that is on a
mission to help remedy water loss and contribute to a sustainable
global economy.
We recognize that we need additional talented leadership to
fulfil our vision. During 2017, to enhance our people-management
capabilities, we were pleased to have retired Admiral John Weigold
join our board. We are starting 2018 with another expansion of our
leadership pool. Robert Mitchell will move from being a board
member of Water Intelligence plc to an executive role as Chief
Strategy Officer of our new renewables line. Given his board
experience, I am confident that we will proceed in an accretive way
to link this new line to our UK-based municipal business and to the
work that our franchisees provide for US municipal customers. Laura
Hills will replace Robert Mitchell on the board pending completion
of regulatory checks. Laura is a prominent attorney in the US with
an expertise in renewables around the world. During 2018, we will
be announcing a world-class advisory board to further supplement
our leadership ranks so that we can attack the market along all of
business lines now in place and achieve our vision of true "One
Stop Shop".
Balance Sheet Supporting Continued Growth
Water Intelligence is well-positioned in its capital formation
to execute its growth plan and take advantage of our deeper
leadership capabilities. The Company's current cash position is
strong with approximately $775,000. Net debt is $1.2 million.
Amortization requirements for our debt are conservative given that
our annual royalty income is $6 million. Moreover, we have
significant capacity available with untapped credit lines. Our
acquisition line of credit has $0.9 million available and our
working capital line of credit has $0.27 million available.
Conclusion and Outlook.
We are on a mission to provide products and services solutions
for the global problem of water loss through leakage. Over the last
five years, we have built a platform company that has successfully
grown in three customer markets - residential, commercial,
municipal - and across multiple jurisdictions - US, UK, Australia,
Canada, and Belgium. We will continue to execute our growth plan in
these areas. Further, we are now leveraging our platform vision,
installed customer base, and technology profile through the
cross-sales of cutting-edge products for home water management and
sustainable solutions for non-potable water by-products. Global
market demand for our solutions is increasing given climate issues
and natural resource constraints. The wind is at our back, and we
hope to make a difference. We believe that 2018 will bring
significant additional revenue growth, both organically and through
selected re-acquisition of our franchises. Profits should also be
further enhanced by recent tax legislation in the US, which is
expected to materially reduce the Company's tax rate during 2018
and beyond.
Commenting on the Group's trading performance, Dr. Patrick
DeSouza, Executive Chairman of the Company, stated:
"Growth accelerated and our vision of a valuable platform
company that provides solutions all along the water value chain is
coming into fruition. From early warning and pinpoint leak
detection to remediation and renewable solutions, we stand ready
for all of our customers' needs. Our plan, now that we have all the
business lines in place and growing profitably, is simply to scale
by doing more of the same unlocking significant shareholder
value."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
For further information about this announcement please
contact:
Water Intelligence plc Patrick DeSouza, Executive Chairman Tel:
+1 203 654 5426
finnCap Ltd Adrian Hargrave / Giles Rolls (Corporate Finance)
Stephen Norcross (Corporate Broking) Tel: +44 020 7220 0500
This information is provided by RNS
The company news service from the London Stock Exchange
END
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