TIDMWATR
RNS Number : 0428O
Water Intelligence PLC
30 September 2019
30 September 2019
Water Intelligence plc (AIM: WATR.L)
("Water Intelligence", "Group", or the "Company")
Interim Results
Water Intelligence plc (AIM: WATR.L) ("Water Intelligence",
"Group", or the "Company"), 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 Interim Results for the six months ended 30 June
2019.
Results are ahead of market expectations for annual revenue and
comfortably in-line with expectations for profit before tax. The
Company continues to perform strongly on its growth plan based on
key performance indicators ("KPIs") identified in more detail in
the Strategic Report to the Annual Accounts with 1H KPI results
discussed herein.
Financial Highlights
* Total revenue for the period increased 34% to $15.87
million (1H 2018: $11.80 million)
o Three-year 1H CAGR (compounded annual sales growth)
of 42% (1H 2016: $5.57 million)
o Major revenue streams growing strongly and consistently
with over $50 million in sales in 1H to third parties
(direct sales from corporate operations and gross sales
to customers from which franchise royalty income is
derived)
* Profit before tax comfortably in-line with analyst
expectations
o Statutory profit before tax up 20% to $1.51 million
(1H 2018: $1.26 million)
o Profit before tax adjusted for non-core and share-based
payments up 29% to $2.02 million (1H 2018: $1.57 million)
o Continued investment in hiring and technology R&D
* EPS Growth
o Adjusted 1H EPS up 17% to 10.6 cents (1H 2018: 9 cents)
o Statutory 1H EPS up 8% to 7.9 cents (1H 2018: 7.3
cents)
* Balance sheet strong
o Cash and equivalents remain strong at $6.03 million
(1H 2018: $6.15 million)
o Net Cash at $2.17 million (cash minus borrowings)
Corporate Developments
Strategic Highlights
* GBP3.2 million oversubscribed placing ato facilitate
growth plan
* Business-to-Business Channel grows across United
States:
o Addition of another leading national insurance customer
o Addition of a leading national home services customer
* UK-based Water Intelligence International accelerates
municipal work in the United States
* Laura Hills promoted to Vice Chairman
* Technology Advances (Subsequent Events during Q3)
o First commercial use of proprietary Orca product
at UK utility for sewer and wastewater diagnostics;
roll-out expected during Q4 in the United States
o Strategic relationship with Entertainment AI (EAI),
through an equity investment, as well as an agreement
for Water Intelligence to benefit from a royalty-free
license to use EAI's technology, which accelerates
WI's capabilities for on-line sale of water diagnostic
products that insurance companies and home services
customers promote complementing WI's leak detection
services business; see www.waterintelligence.co.uk
for illustration.
Franchise Reacquisitions - enabling the Group to add scale
financially and operationally:
-- On 5 February 2019, the Group announced the reacquisition
of its Ontario (Niagara) franchise
-- On 7 March 2019, the Group announced the reacquisition
of its South Atlanta and Southern Georgia franchise
-- On 28 March 2019, the Group announced the reacquisition
of its Orlando Florida franchise
-- On 13 June 2019, the Group announced the reacquisition
of its Tucson Arizona franchise
Dr. Patrick DeSouza, Executive Chairman of Water Intelligence,
commented:
"We are pleased, once again, with our consistency of delivery.
We had strong results in the first half with strong organic growth,
a healthy balance sheet and continued multinational expansion of
operations. Q3 has also started well. The Group has delivered
strong EPS growth while still making investments to sustain our
growth trajectory over the next three to five years.
Given the strong global market demand for water and
infrastructure services, we remain confident about the future and
our ambition to transform the water infrastructure services sector
and deliver real value to our shareholders."
For further information please contact:
Water Intelligence plc
Patrick DeSouza (Executive Chairman) Tel: +1 203 654
Adrian Hargrave (VP Corporate Development) 5426
Tel: 07775 701 838
WH Ireland Limited - NOMAD & Broker
Adrian Hadden Tel: 020 7220 1666
James Sinclair-Ford Tel: 020 3903 7721
Dowgate Capital
Stephen Norcross Tel: 07920 599 793
IFC Advisory Ltd Tel: 020 3934 6630
Graham Herring
Zach Cohen
Chairman's Statement
Overview
We continue to deliver on our stated objectives. Since 2014,
when we recorded $7.2 million in annual sales, we have repeatedly
indicated in the Chairman's Statement the priority of sustainable
multinational growth. During 2018, we passed $25 million worth of
sales while growing profits. We noted in the annual report our
strong compounded annual growth over both three and five years'
investment horizons. Now we aspire to pass, before the year-end,
our next milestone of $30 million in annual revenue while
increasing profits. Our Interim Results always provide our board,
management and shareholders with a good check on our progress on
the way to year-end targets. At 1H 2019, we remain pleased with our
continued growth results across various performance measures and
investment horizons and look forward to rapidly pushing through our
next milestone.
When 1H 2019 is compared with 1H 2018, our 34% revenue growth
and 20% statutory profit before tax growth (29% growth in adjusted
PBT) underscores our consistency of delivery. First, as discussed
below, our KPIs are all showing strength and our results provide an
excellent base upon which to scale our business. Second, to set the
stage for sustaining future growth, we increased reinvestment
during a busy 1H. These included: additional hires to support our
new national insurance account, our new national home services
account and increasing municipal work; four franchise
reacquisitions to unlock shareholder value; new technology products
to expand our 2020 offerings; and the required transactions costs
associated with a capital raise that provide more fuel. These
actions should reinforce our three-year (1H 2016 to 1H 2019)
compounded sales growth of 42% and statutory profit before tax
growth of 16%. As we execute for the remainder of 2019 and ramp up
for 1H 2020, our objective will be not only to continue our growth
path but also to add scale to our business in terms of new
operating geographies, additional product offerings and a
complementary on-line product sales business that leverages our
existing service delivery footprint across the United States.
We are ambitious and seek to take advantage of the tailwind
afforded us as global market demand for solutions to water loss is
growing irrespective of general political and economic conditions.
With our reinvestment, we are establishing Water Intelligence as a
distribution platform for products and services that can transform
the water infrastructure market.
Current Growth Path
Our current growth path has been built on a strategic
recognition that our core American Leak Detection franchise
business ("ALD") has structural attributes that form a strong base
from which to unlock significant shareholder value. Our 125+
operating locations - franchise and corporate - provide the Group
with a distribution platform for products and services across the
United States and in select areas of Australia, Canada and the UK.
In addition, our substantial and growing base of residential,
business and municipal customers enable opportunities for follow-up
sales with reduced customer acquisition costs. Most importantly, we
are the only nationwide (US) precision water leak detection company
in a marketplace characterized by local providers. Our
business-to-business customers, particularly insurance and property
management companies, appreciate both our value proposition of
minimally invasive leak detection and our ability to provide "a
one-stop shop" to deliver follow-on products and services for them
across the United States.
During the second quarter, we continued to build our
business-to-business channel adding two major customers: in May, a
national insurance company and, in June, a national home services
retailer. Both accounts will take full effect during 2H 2019 and 1H
2020. Our KPI of franchise-related activities (including the
business-to-business channel) grew by 60% during 1H to $4.07
million.
It should be emphasized that our national account structure
helps both franchise and corporate operated locations and expands
our total revenue mix. To gain perspective on the underlying
strength of this business-to-business channel, in 1H 2015 as we
were just putting in place our national channel structure,
franchise royalty income for the first half was $2.7 million.
Despite reacquiring franchises to unlock shareholder value and
having its collateral effect of reducing the pool of royalty
income, franchise royalty has continued to grow at 4% during 1H
2019 reaching $3.4 million.
This KPI of growing franchise royalty income is an important
indication of our strong base of operations. By itself, the
consistent growth of royalty income is a desirable asset for
financial valuation. Moreover, such royalty income is a proxy for
market presence in terms of sales to third parties under our ALD
brand. Total 1H sales to third parties, from which such franchise
royalty amounts are based, exceed $45 million. When combined with
1H US corporate-operated sales of $7 million discussed below, total
1H sales to third parties passed $50 million. While a good baseline
for critical mass of market presence, the size of the addressable
market in the US and worldwide indicates much room for continued
growth in building on our installed base.
The Group's KPIs with respect to corporation operations also
show strength in supporting our base of operations and complement
our franchise KPIs. Corporate operations show increasing
contributions to critical mass of sales, amounts of profits and
development of neighbouring franchise locations across the US,
Australia and Canada. First, sales from US corporate-operated
locations grew 56% to $7 million (1H 2018: $4.48 million). As
important, margins from such locations grew to 19%, contributing
$1.33 million to the Group's profit before tax. To illustrate the
unlocking of shareholder value year over year, for 1H 2018, US
corporate-operated locations achieved 12% margin yielding $513,000
for the Group's profits before tax. Growth in corporate operations
have been fueled by strategic reacquisitions of franchises to first
leverage and then grow existing location's revenue and profits.
Corporate locations owned before January 1, 2018 have organically
grown post reacquisition by 24%. (1H 2019: $4.52 million vs. 1H
2018: $3.66 million). As we continue to execute our strategic plan,
our objective is to have an optimal balance between growing
franchise royalty income and corporate-generated profits which
together will produce risk-adjusted shareholder value.
Strategic reacquisitions of franchises not only unlock
shareholder value (19% corporate operated profit margin vs. 6-10%
franchise royalty on gross sales) but also reinforce overall
execution because corporate locations can support regional growth
of franchises with marketing and new offerings. During 1H 2019, we
continued to develop our complementary corporate-operated
locations. We executed four reacquisitions in three different
geographic regions of our Group's sales and distribution footprint.
Our Ontario, Canada reacquisition will support franchise and
corporate growth in eastern Canada and north-eastern US. Our South
Atlanta and Orlando reacquisitions will support franchise and
corporate growth in south-eastern US. Our Tucson reacquisition will
support franchise and corporate growth in the south-western US.
These reacquisitions will continue to reinforce our seamless
national structure.
More broadly, we have also increased the introduction of
municipal work in different regions of the US through our WII
subsidiary. We believe that over time such municipal work will add
a layer of growth to our ALD franchise business that will
supplement current residential and business-to-business leak
detection offerings. While WII produced municipal business for US
locations, 1H sales for WII and its international corporate
operated locations declined 9% to $1.38 million (1H 2018: $1.47
million). However, WII's sales pipeline is strong for the full-year
and the decline is based on the timing of recognizing sales, as
well as not allocating a contribution to WII's work in generating
municipal jobs for US corporate locations.
Scaling the Group's Business
Given the size of the global addressable market and pressing
demand for solving water issues - potable and non-potable - the
Group believes it can build on its growing base. We aim to create
further value by using our structural advantages outlined above -
nationwide sales and distribution across the US - to further scale
our business adding ever more efficient revenue growth producing
higher yields. As noted above, we began to add scale during 1H 2019
by layering-in a new municipal service offering in the US driven by
our UK-based WII subsidiary. Given the tens of thousands of water
districts in the US, the national operational presence of
sister-company ALD enables reduced customer acquisition costs for
WII bids in local jurisdictions for more municipal contracts.
During 1H, we introduced WII's proprietary Orca product for sewer
and wastewater diagnostics at trade shows and regional ALD
franchise meetings. During 2H, WII has started commercializing its
proprietary Orca product for sewer and wastewater diagnostics with
the ALD system.
With respect to our technology strategy, we can further leverage
our multinational operational footprint to achieve rapid scale by
creating an on-line sales strategy for water monitoring and
water-related products. Our physical touchpoints, servicing
approximately 200,000 locations annually support follow-through
product sales and installation of home services products. In
particular, we have noted that our national insurance partners not
only want ALD to pinpoint and fix water leaks but also would like
ALD's help in minimizing catastrophic damage from water leaks. Our
gain of a national home services retailer in June with a digital
marketing budget in the tens of millions will be synergistic with
our on-line sales launch.
In January 2018 we began our on-line technology strategy by
announcing a partnership with Flo Technologies ("Flo"), a Los
Angeles-based technology company that make a water monitoring
product for residences. The objective of this partnership was for
ALD to help sell and, importantly install the Flo device using our
network of technicians. The Flo product would provide a wireless
advance alert of the likely presence of a leak to ALD. ALD would
earn product commissions and services fees for installation. Given
ALD's market presence across 46 states, our Group could help any
number of product companies install systems for homeowners. In our
2018 Annual Report, we identified the $13 billion insurance market
for such products as "Insuretech."
During Q3, Water Intelligence took a major step forward to
accelerate our on-line product and services strategy and add
further scale to the business. Insurance companies, as noted above
with the burgeoning "Insuretech" market, are trying to incentivize
homeowners to buy technology products to minimize water-related
claims. To this end, we established a strategic partnership with a
newly-listed AIM company - Entertainment AI plc ("EAI"). EAI owns a
technology company - Tagasauris Inc - with which Water Intelligence
has previously worked. EAI's technology enables consumers to watch
any type of video, see a product - such as a Flo device - and then
purchase that product with one click. For example, a homeowner,
watching a "How to" channel on YouTube (one of YouTube's biggest
content programs worldwide) to see how to deal with a water leak,
will be served a Flo YouTube video among other product videos and
with one click purchase the product. With the EAI technology, ALD
could operate its own sustainability/water channel and directly
sell Flo or any home services products and then install the
products capturing both sales commission and services revenue. As
part of the strategic partnership, Water Intelligence has invested
in EAI and also gained an exclusive, global, perpetual,
royalty-free license to use EAI's proprietary AI and machine
learning technologies to deploy for the areas of water and home
services. In this way, Water Intelligence anticipates it can add
on-line operational scale and add significant value to
business-to-business customers in our growing insurance
channel.
Conclusion
1H 2019 reinforced the sustainability of our upward journey. We
continue to deliver on our stated objectives both financially and
operationally. Given ever-growing global market demand of water and
infrastructure services where 15-40% of daily water usage is lost
through leakage, we are confident in the opportunity ahead to
become a distribution platform for products and services and
transform the water infrastructure services industry.
Patrick DeSouza
Executive Chairman
September 30, 2019
Interim Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2019
Six months Six months Year ended
ended ended 31
30 June 30 June December
2019 2018 2018
------------------------------------ ------ ------------- ------------ -------------
Notes $ $ $
------------------------------------ ------ ------------- ------------ -------------
Unaudited Unaudited Audited
Revenue 3 15,867,440 11,804,104 25,466,651
Cost of sales (3,658,507) (2,345,976) (5,669,616)
------------------------------------ ------ ------------- ------------ -------------
Gross profit 12,208,933 9,458,128 19,797,035
Administrative expenses
* Other income (1,403) 560 48,027
* Share-based payments (81,657) (48,195) (104,652)
* Amortisation of intangibles (159,475) (162,380) (327,201)
* Other administrative costs (10,350,375) (7,894,390) (17,450,905)
------------------------------------ ------ ------------- ------------ -------------
Total administrative
expenses (10,592,910) (8,104,405) (17,834,731)
------------------------------------ ------ ------------- ------------ -------------
Operating profit 1,616,023 1,353,723 1,962,304
Finance income 31,871 11,906 28,003
Finance expense (135,277) (103,532) (235,957)
------------------------------------ ------ ------------- ------------ -------------
Profit before tax 3 1,512,617 1,262,097 1,754,350
Taxation expense (396,950) (315,524) (468,624)
Profit for the period 1,115,667 946,573 1,285,726
Attributable to:
Equity holders of
the parent 1,115,460 950,242 1,294,701
Non-controlling interests 207 (3,669) (8,975)
------------------------------------ ------ ------------- ------------ -------------
1,115,667 946,573 1,285,726
Other comprehensive
income
Exchange differences
arising on translation
of foreign operations (19,050) (359,023) (439,517)
Total comprehensive
income for the period 1,096,617 587,550 846,209
------------------------------------ ------ ------------- ------------ -------------
Earnings per share Cents Cents Cents
------------------------------------ ------ ------------- ------------ -------------
Basic 4 7.9 7.3 9.7
------------------------------------ ------ ------------- ------------ -------------
Diluted 4 7.4 7.1 9.1
------------------------------------ ------ ------------- ------------ -------------
Consolidated Statement of Financial Position as at 30 June
2019
At At At
30 June 30 June 31 December
2019 2018 2018
------------------------------ ------ ------------- ------------- -------------------
Notes $ $ $
------------------------------ ------ ------------- ------------- -------------------
Unaudited Unaudited Audited
ASSETS
Non-current assets
Goodwill 9,045,858 5,342,609 6,254,967
Other intangible assets 2,527,911 2,333,312 2,423,565
Property, plant and
equipment 2,168,062 1,438,034 1,732,527
Trade and other receivables 688,442 138,140 618,005
------------------------------ ------ ------------- ------------- -------------------
14,430,273 9,252,095 11,029,064
------------------------------ ------ ------------- ------------- -------------------
Current assets
Inventories 443,903 477,496 451,465
Trade and other receivables 5,977,998 3,729,167 4,211,981
Cash and cash equivalents 6,034,649 6,152,778 5,016,406
------------------------------ ------ ------------- ------------- -------------------
12,456,551 10,359,441 9,679,852
------------------------------ ------ ------------- ------------- -------------------
TOTAL ASSETS 3 26,886,824 19,611,536 20,708,916
------------------------------ ------ ------------- ------------- -------------------
EQUITY AND LIABILITIES
Equity attributable
to holders of the parent
Share capital 5 113,152 101,915 101,915
Share premium 5 9,569,988 6,893,752 6,887,739
Shares held in treasury 5 - - -
Merger reserve 1,001,150 1,001,150 1,001,150
Share based payment
reserve 321,453 183,283 239,740
Other reserves (762,304) (662,704) (743,198)
Reverse acquisition
reserve 5 (27,758,089) (27,758,088) (27,758,088)
Retained profit 34,361,736 32,972,134 33,246,277
------------------------------ ------ ------------- ------------- -------------------
16,847,086 12,731,442 12,975,535
------------------------------ ------ ------------- ------------- -------------------
Equity attributable
to Non-Controlling interest
Non-controlling interest 100,706 105,805 100,499
------------------------------ ------ ------------- ------------- -------------------
Non-current liabilities
Borrowings 2,735,931 2,297,928 1,448,303
Deferred consideration 6 697,915 916,798 879,307
Deferred tax liability 700,378 430,757 316,221
------------------------------ ------ ------------- ------------- -------------------
4,134,224 3,645,483 2,643,831
------------------------------ ------ ------------- ------------- -------------------
Current liabilities
Trade and other payables 2,536,015 1,632,342 2,550,280
Borrowings 1,123,925 404,185 989,736
Deferred consideration 6 2,144,868 1,092,279 1,449,035
5,804,808 3,128,806 4,989,051
------------------------------ ------ ------------- ------------- -------------------
TOTAL EQUITY AND LIABILITIES 26,886,824 19,611,536 20,708,916
------------------------------ ------ ------------- ------------- -------------------
Interim Consolidated Statement of Changes in Equity
For the six months ended 30 June 2019
Share Share Shares Reverse Merger Share Other Retained Total Non-controlling Total
Capital Premium held Acquisition Reserve based Reserves Profit interest Equity
in Reserve payment
treasury reserve
$ $ $ $ $ $ $ $ $ $ $
----------------- -------- ---------- ---------- ------------- ---------- -------- ---------- ----------- ----------- ---------------- -----------
As at 1 January
2018 65,305 980,436 (210,150) (27,758,088) 1,001,150 135,088 (303,681) 32,021,892 5,931,952 39,158 5,971,110
Issue of
ordinary shares 36,610 5,913,316 210,150 6,160,076 6,160,076
Share based
payment
expense - - - - - 48,195 - - 48,195 - 48,195
Profit for the
period - - - - - - - 950,242 950,242 (3,669) 946,573
Purchase of
non-controlling
interest (29,684) (29,684)
Equity
contributions 100,000 100,000
Other
comprehensive
income - - - - - - (359,023 - (359,023) - (359,023)
As at 30 June
2018
(unaudited) 101,915 6,893,752 - (27,758,088) 1,001,150 183,283 (662,704) 32,972,134 12,731,442 105,805 12,837,247
----------------- -------- ---------- ---------- ------------- ---------- -------- ---------- ----------- ----------- ---------------- -----------
Issue of
ordinary shares - (6,013) - - - - - - (6,013) - (6,013)
Purchase of
non-controlling
interest - - - - - - - (70,316) (70,316) - (70,316)
Share-based
payment
expense - - - - - 56,457 - - 56,457 - 56,457
Profit for the
period - - - - - - - 344,459 344,459 (5,306) 339,153
Other
comprehensive
loss - - - - - - (80,494) - (80,494) - (80,494)
As at 31
December 2018
(audited) 101,915 6,887,739 - (27,758,088) 1,001,150 239,740 (743,198) 33,246,277 12,975,535 100,499 13,076,034
----------------- -------- ---------- ---------- ------------- ---------- -------- ---------- ----------- ----------- ---------------- -----------
Issue of
ordinary shares 11,237 2,682,249 - - - - - - 2,693,486 - 2,693,486
Share based
payment
expense - - - - - 81,713 - - 81,713 - 81,713
Purchase of - - - - - - - - - - -
non-controlling
interest
Equity - - - - - - - - - - -
contributions
Profit for the
period - - - - - - - 1,115,460 1,115,460 207 1,115,667
Other
comprehensive
income - - - - - - (19,106) - (19,106) - (19,106)
----------------- -------- ---------- ---------- ------------- ---------- -------- ---------- ----------- ----------- ---------------- -----------
As at June 2019
(unaudited) 113,152 9,569,988 - (27,758,088) 1,001,150 321,453 (762,304) 34,361,737 16,847,086 100,706 16,947,792
----------------- -------- ---------- ---------- ------------- ---------- -------- ---------- ----------- ----------- ---------------- -----------
Interim Consolidated Statement of Cash Flows
For the six months ended 30 June 2019
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018
2018
------------------------------------------- -------------- ------------ -------------
$ $ $
------------------------------------------- -------------- ------------ -------------
Unaudited Unaudited Audited
Cash flows from operating activities
Profit before tax 1,512,617 1,262,097 1,754,350
Adjustments for non-cash/non-operating
items:
Depreciation of plant and equipment 257,940 146,448 355,897
Amortisation of intangible assets 159,475 162,380 327,201
Share based payments 81,657 48,195 104,652
Interest paid 135,277 103,532 235,957
Interest received (31,871) (11,906) (28,003)
------------------------------------------- -------------- ------------ -------------
Operating cash flows before movements
in working capital 2,115,094 1,710,746 2,750,054
------------------------------------------- -------------- ------------ -------------
(Increase)/Decrease in inventories 7,562 (117,523) (91,492)
Increase in trade and other receivables (1,836,453) (987,917) (1,950,597)
Decrease in trade and other payables (33,318) (150,349) 682,256
Cash generated by operations 252,885 454,957 1,390,221
------------------------------------------- -------------- ------------ -------------
Income taxes (12,793) - (267,636)
------------------------------------------- -------------- ------------ -------------
Net cash generated from operating
activities 240,092 454,957 1,122,585
------------------------------------------- -------------- ------------ -------------
Cash flows from investing activities
Purchase of plant and equipment (493,047) (822,023) (789,591)
Purchase of intangibles (243,023) (128,650) (352,574)
Acquisition of Franchises (740,225) (330,174)
Reacquisition of Franchises (1,757,451) (867,000) (1,762,917)
Interest received 31,871 11,906 28,003
------------------------------------------- -------------- ------------ -------------
Net cash used in investing activities (3,201,875) (1,805,767) (3,207,253)
------------------------------------------- -------------- ------------ -------------
Cash flows from financing activities
Issue of ordinary share capital 11,237 36,610 36,610
Premium on issue of ordinary share
capital 2,682,249 5,913,316 5,907,302
Share buy-back - 210,150 210,150
Interest paid (135,277) (103,532) (235,957)
Proceeds from borrowings 1,854,936 926,472 926,472
Repayment of borrowings (433,118) (254,196) (518,270)
Net cash generated by/(used in) financing
activities 3,980,026 6,728,821 6,326,307)
------------------------------------------- -------------- ------------ -------------
Net (decrease)/increase in cash and
cash equivalents 1,018,243 5,378,011 4,241,639
Cash and cash equivalents at the
beginning of period 5,016,406 774,767 774,767
Cash and cash equivalents at end
of period 6,034,649 6,152,778 5,016,406
------------------------------------------- -------------- ------------ -------------
Notes to the Interim Consolidated Financial Information
for the six months ended 30 June 2019
1 General information
The Group is a leading provider of non-invasive, leak detection
and remediation services. The Group's strategy is to be a provider
of "end-to-end" solutions for the problem of water loss through
leakage. The Group is a "one-stop shop" for residential, commercial
and municipal customers whether for potable or non-potable water
issues.
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 2018. No new
IFRS standards, amendments or interpretations became effective in
the six months to 30 June 2019 which had a material effect on this
interim consolidated financial information.
This interim consolidated financial information for the six
months ended 30 June 2019 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 2018, 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 2019 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 2018 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 2019 was GBP1 = US$
1.27602 (30 June 2018: GBP1 = US$ 1.31515).
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 2018.
3 Segmental information
In the opinion of the Directors, the operations of the Group
currently comprise four operating segments: (i) franchise
royalties, (ii) franchise-related activities including
business-to-business sales and product and equipment sales, (iii)
corporate-operated locations (US and international) and (iv)
international corporate (business-to-business) led by UK-based
Water Intelligence International.
The Group mainly operates in the US, with operations in the UK
and certain other countries. In the six months to 30 June 2019,
90.16% (1H 2018: 87.54%) of its revenue came from the US based
operations; the remaining 9.84% (1H 2018: 12.46%) 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):
- Franchisor royalty income;
- Franchise-related activities (including 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
which reflect non-core costs largely associated with the Group's
acquisition strategy.
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 2019 30 June 2018 2018
$ $ $
Unaudited Unaudited Audited
------------------------------ --------------- --------------- -------------
Franchise royalty income 3,435,521 3,312,163 6,264,839
Franchise related activities 4,066,198 2,541,485 6,153,652
US corporate operated
locations 6,984,962 4,479,349 10,140,892
International corporate
operated locations 1,380,759 1,471,107 2,907,268
------------------------------- --------------- --------------- -------------
Total 15,867,440 11,804,104 25,466,651
------------------------------- --------------- --------------- -------------
Profit before tax Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
$ $ $
Unaudited Unaudited Audited
------------------------------ --------------- --------------- -------------
Franchise royalty income 796,929 732,506 1,447,989
Franchise related activities 394,489 195,509 484,036
US corporate operated
locations 1,090,578 513,182 1,213,304
International corporate
operated locations 73,826 74,903 31,219
Unallocated head office
costs (577,357) (142,854) (1,135,435)
Non-core costs (265,848) (111,149) (286,762)
------------------------------- --------------- --------------- -------------
Total 1,512,617 1,262,097 1,754,350
------------------------------- --------------- --------------- -------------
Assets Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
$ $ $
Unaudited Unaudited Audited
------------------------------ --------------- --------------- -------------
Franchise royalty income 9,737,259 9,309,020 8,946,370
Franchise related activities 1,007,599 993,248 1,764,171
US corporate operated
locations 10,700,439 5,881,437 7,648,032
International corporate
operated locations 5,441,527 3,427,831 2,350,344
------------------------------- --------------- --------------- -------------
Total 26,886,824 19,611,536 20,708,917
------------------------------- --------------- --------------- -------------
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-related
operations and corporate-related operations. ALD has both U.S.
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. As noted herein, the Group's vision is to
become a multinational growth company. As set forth below, the
Group has shown growth in both US and International dimensions.
Total Revenue
Six months ended 30 June Year ended 31 December
2019 2018
Unaudited Audited
US International Total US International Total
$ $ $ $ $ $
----------------------- ----------- -------------- ----------- ----------- -------------- -----------
Franchise royalty
income 3,361,886 73,635 3,435,521 6,087,083 177,756 6,264,849
Franchise related
activities 4,066,198 - 4,066,198 6,153,652 - 6,153,652
US corporate operated
locations 6,984,962 - 6,984,962 10,140,892 - 10,140,892
International
corporate operated
locations - 1,380,759 1,380,759 - 2,907,268 2,907,268
----------------------- ----------- -------------- ----------- ----------- -------------- -----------
Total 14,413,046 1,454,394 15,867,440 22,381,627 3,085,024 25,466,651
----------------------- ----------- -------------- ----------- ----------- -------------- -----------
4 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 2019 30 June 2018 2018
Unaudited Unaudited Audited
-------------------------- --------------- --------------- -------------
Earnings attributable
to shareholders of
the Company ($) 1,115,460 950,242 1,294,701
Weighted average number
of ordinary shares 14,127,248 13,038,975 13,401,624
Diluted weighted average
number of ordinary
shares 15,096,052 13,432,889 14,304,790
--------------------------- --------------- --------------- -------------
Earnings per share
(cents) 7.9 7.3 9.7
--------------------------- --------------- --------------- -------------
Diluted earnings per
share (cents) 7.4 7.1 9.1
--------------------------- --------------- --------------- -------------
5 Share capital
On 10 May 2019, the Group announced that it had strengthened its
capital base in order to support its growth plans. It raised
approximately $4.1 million through the sale of 513,402 new ordinary
shares and 350,000 new ordinary shares from the exercise of
Director Options) in a placing and subscription. Such equity
issuance was oversubscribed.
The issued share capital at the end of the period was as
follows:
Group & Company
Ordinary
Shares of 1p each
Number
-------------------- -------------------
At 30 June 2019 16,947,371
At 30 June 2018 15,233,969
-------------------- -------------------
At 31 December 2018 13,883,969
-------------------- -------------------
The total number of Ordinary Shares of 1p each in the table
above includes 2,200,000 of Partly Paid Shares of 1 penny each
which are not admitted to trading on AIM. The total number of
Partly Paid Shares at 30 June 2018 and 31 December 2018 was
1,350,000.
Group & Company Share Capital Share Premium
$ $
-------------------- ------------- -------------
At 30 June 2019 113,152 9,569,988
At 30 June 2018 101,915 6,893,752
-------------------- ------------- -------------
At 31 December 2018 101,915 6,887,739
-------------------- ------------- -------------
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.
6 Reacquisition of franchisee territories in the period
On 5 February 2019, the Company announced a series of corporate
activity, including the acquisition of Ontario (Niagara) franchise,
expanding the Group's corporate presence into Canada and upstate
New York; the sale of a new franchise territory for Youngstown,
Ohio and financial support to a franchisee in Idaho, accelerating
its expansion into municipal offerings. In addition, the formal
launch of the ORCA municipal sewer product into the United States
was announced.
On 7 March 2019, the Company announced the acquisition of its
South Atlanta and Southern Georgia franchise. This territory will
be used to create a regional corporate presence to help accelerate
development of south-eastern franchises.
On 28 March 2019, the Company announced the acquisition of its
Orlando, Florida franchise. The acquisition enables the Group to
set up another regional office in Florida to support the growth of
the ALD business throughout the southeast United States. Together,
Orlando and Miami provide a critical mass of operating personnel to
grow the entire southeast United States providing residential,
commercial and municipal solutions. During 2H, the Company will be
opening a Water Intelligence International office in either Miami
or Orlando in order to advance the Group's municipal line of
business.
On 13 June 2019, the Company announced the reacquisition of its
Tucson, Arizona franchise ("Tucson") within the Group's American
Leak Detection subsidiary ("ALD"). Tucson is a significant
reacquisition that enables the Group to leverage an already strong
business to add further scale to Water Intelligence, both
operationally and financially. The demographics and economy of
Tucson are fast growing and a prime area for accelerated growth for
both the Group's American Leak Detection and Water Intelligence
International businesses. Water issues are proliferating throughout
the southwest of the United States. With a regional corporate
office in Tucson, there is an opportunity also to significantly
grow various neighboring franchise locations enhancing royalty
income. The current franchise team will be staying in place to grow
the business faster with added working capital from ALD. Moreover,
because the current team has experience with sewer and wastewater
solutions, Tucson shall be one of the introductory sites in the US
for deployment of Water Intelligence International's proprietary
Orca product.
7 Subsequent events
On 30 August, Water Intelligence issued 40,000 shares to
employees who exercised their option to acquire shares at 100
pence.
On 12 September, Water Intelligence announced a strategic
relationship with Entertainment AI (EAI). Water Intelligence will
invest GBP416,666. This money had previously been deposited in an
escrow account and as such was recognised in the balance sheet as
at 30 June 2019 in trade and other receivables. In addition, Water
Intelligence will receive from EAI an exclusive, global,
royalty-free license to use EAI proprietary technology to enable
Water Intelligence on-line sales from videos.
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.
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.
END
IR LLFVLALIAFIA
(END) Dow Jones Newswires
September 30, 2019 02:01 ET (06:01 GMT)
Water Intelligence (LSE:WATR)
Gráfica de Acción Histórica
De Feb 2024 a Mar 2024
Water Intelligence (LSE:WATR)
Gráfica de Acción Histórica
De Mar 2023 a Mar 2024