Nine Months Trading Update;
Capital Allocation Update
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 Q3 Trading Update for
the nine month period ended 30 September which is in-line with
market expectations. The Group is also pleased to provide an
execution update on its capital allocation plan and contribution to
growth in 2025 and beyond.
Financial
Highlights
·
Revenue increased by 10% to $63.5 million (Q3
2023: $57.8 million)
o Franchise
royalty decreased by 3% to $5.2 million (Q3 2023: $5.3 million)
reflecting franchise acquisitions removing available income from
franchise royalty streams
o Franchise-related activities (franchise sales, equipment
sales, business-to-business channels) decreased by 5% to $8.3
million (Q3 2023: $8.8 million)
§ Insurance
business-to-business channel decreased by 6% to $7.8 million (Q3
2023: $8.2 million)
o US
Corporate sales increased by 13% to $42.7 million (Q3 2023: $37.9
million)
o International Corporate sales rose by 26% to $7.3 million (Q3
2023: $5.8 million)
·
Statutory PBT grew by 7% to $6.1 million (Q3 2023:
$5.7 million)
·
Adjusted PBT (before non-cash expenses of
amortization and share-based payments; and non-core costs)
increased by 6% to $7.7 million (Q3 2023: $7.3 million)
·
Statutory EBITDA rose by 12% to $10.9 million (Q3
2023: $9.8 million)
·
Adjusted EBITDA (before non-cash share-based
payments; and non-core costs) rose by 11% to $11.9 million (Q3
2023: $10.7 million)
·
Adjusted PBT and Adjusted EBITDA Margins were
steady
o Adjusted
PBT margins remained at 12%
o Adjusted
EBITDA margins remained at 19%
·
Balance sheet strong as at 30 September
2024
o Cash and
equivalents at $12.7 million
o Total Debt
of $23.6 million at fixed annual rate of 6.35%
o Net Debt
to Statutory EBITDA TTM ratio: 0.84
Capital Allocation through
November
In the 2023 Annual Report released
in June, the Group communicated a Growth Strategy and Capital
Allocation Plan that had four prongs: (i) Organic growth of current
minimally invasive leak detection and repair solutions to capture
more market share; (ii) Organic growth of new proprietary
technology offerings in which it previously invested; (iii)
Acquisition-led growth prioritizing its highly profitable American
Leak Detection (ALD) franchise locations and fast growing
third-party companies complementary to the Group; and (iv) share
repurchases to provide liquidity for shareholders.
During Q3 and through November 2024,
the Group executed on each prong of its Capital Allocation plan and
expects to achieve strong 2025 growth trajectory as a
result.
(i) Increase
in Free Cash Flow. In August, the Group refinanced its
Credit Facilities with M&T Bank increasing free cash flow to
invest in growth; the Group remains under-levered as with a
Net Debt to EBITDA TTM Ratio of 0.84, enabling room for further
non-dilutive financing.
(ii) Organic
Growth for 2025. In July the Group launched its
state-of-the-art training center in Bridgeport, Connecticut in
order to pursue organic growth. The Group is currently hiring
and training technicians in the Bridgeport facility to execute
increasing backlog during 2025; in particular, the Group is also
planning the US rollout of Pulse - the Group's patented sewer
diagnostic device which has already contributed to the growth of
Water Intelligence International's UK municipal
business.
(iii) Acquisitions. In August the Group acquired a
fast-growing Irish plumbing company and is currently adding for
2025 American Leak Detection service offerings for the Irish
market; in November, the Group reacquired its ALD Dallas franchise
and currently is linking Dallas operations with its corporate
location in Fort Worth for scale contributing in 2025 both added
revenue and efficiencies. The Group plans to move the future
national headquarters of ALD to its Dallas-Fort Worth
hub.
(iv) Share
Repurchases. Pursuant to authorization by shareholders
in September 2024 to repurchase shares, the Group has now initiated
repurchases during October and November.
(v) Next 50
Growth Plan; Leadership Change. Launched five-year
growth plan at October's Franchise Convention marking the
50th Anniversary of the founding of ALD. Announced
Will Knell, former Dallas franchise owner and leading franchise
operator as CEO of the Group's ALD core subsidiary to execute its
2025 and beyond growth plan.
Commenting on the Group's
performance, Executive Chairman, Dr. Patrick DeSouza
remarked:
"We have a had a busy Q3 and
start to Q4. We continue to grow and our team is executing
along all facets of a capital allocation plan that is expected to
produce accelerated growth in 2025. Our balance sheet remains
strong, enabling us to continue to drive growth from our capital
allocation plan. We appreciate the continued support of our
shareholders and will be calibrating the delivery of our growth
plan with better communication on the value of our shares given the
headwinds facing the AIM market."
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