Water Intelligence Another strong year for stakeholders

Water Intelligence plc (LON:WATR), a leading multinational provider of precision, minimally-invasive leak detection and remediation solutions for both potable and non-potable water, has provided an unaudited Trading Update for full year 2019.  Audited results for 2019 are expected during mid-May as traditionally released. 

As in prior years, the Company had a very strong 2019 as set forth below.  Based on analyst expectations, the Company’s results are approximately one year ahead of schedule and higher than market expectations for revenue and profits before tax adjusted. 

Highlights

·    Water Intelligence revenue growth was once again strong at 27% year-over-year reaching $32.4 million (2018: $25.5 million)

o Core business units – American Leak Detection (ALD) and Water Intelligence International (WII) – each grew strongly enabling a broader mix of residential, commercial and municipal offerings for both clean water and waste water

§ Implied total sales to customers approximately $120 million (implied gross sales from which franchise royalty is derived plus direct sales from corporate locations)

o ALD revenue grew 29% to $29.1 million (2018: $22.6 million)

§ Royalty income from franchisees grew in absolute terms by 4% to $6.5 million (2018: $6.3 million), despite continued franchise reacquisitions reducing the pool of royalty income

§ Business-to-business insurance channel grew 41% to $7.1 million (2018: $5.0 million); Selective franchise reacquisitions continue, increasing corporate presence for national account implementation

§ Corporate location sales grew 44% year over year to $14.5 million (2018: $10.1 million)

o WII revenue grew 14% to $3.3 million (2018: $2.9 million)

·    Water Intelligence statutory profits before tax grew strongly by 33% to $2.4 million (2018: $1.8 million)

o Corporate locations profit margins continue to scale to 13.5% in 2019 from 12% in 2018 despite reinvestment to sustain 44% sales growth

·    Water Intelligence profits before tax adjusted for non-core costs* and non-cash amortisation expense grew 36% to $3.4 million (2018: $2.5 million)

·    Water Intelligence Balance Sheet strong at 31 December 2019

o Cash:  $5.3 million

o Net Cash: +$1.8 million (Bank Debt of $3.5 million with amortization through 2022)

·    Technology reinvestment

o Commercial readiness of proprietary sewer diagnostic product

o Successful launch of e-commerce and video display technology via exclusive license from Entertainment AI plc

·    Equity Investment in Entertainment AI plc

o Capital Gain of $692,000 as of 31 December 2019

* Non-core costs include items such as legal expenses on transactions and investments, and share-based payments

Commenting on the Group’s performance, Executive Chairman, Dr. Patrick DeSouza remarked:

“We had another strong year for all of our stakeholders. First, our customers, especially our business-to-business national accounts, value our service footprint across the US and ready delivery of proprietary, minimally invasive solutions to water leaks. Second, our franchisees support our growth plans and the number of franchisees producing over one million in sales continues to increase.  Third, our shareholders continue to realize equity value from our growth trajectory in terms of both sales and profits.  Global market demand for water infrastructure solutions is only increasing and our company continues to scale.

We are pleased to underscore that over the last five years we have produced a very strong compounded annual growth of 35% in terms of sales and 33% in terms of profits before tax. 

We look forward to communicating an ambitious next five-year plan both at our annual franchise convention – this year in Scottsdale Arizona – in mid-March and in the pages of our Annual Report in May. We look forward to providing a preview at the Eighth Annual Investor Growth Forum in London on 11 February.”

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