Shares in minimally-invasive leak detection company Water Intelligence (WATR:AIM) gained 6% to 519p after it reported 17% growth in full year sales to $37.9 million and pre-tax profit up 78% to $4.2 million, around 10% higher than consensus estimates.
The core business units American Leak Detection (ALD) and Water Intelligence International (WII) grew strongly with revenues up 15% and 27% respectively to $33.6 million and $4.3 million.
Excluding non-cash items and share-based payments, adjusted pre-tax profits grew by 49% to $5.1 million.
SCALING-UP
The company operates a franchised operation as well as corporate owned sites. The implied sales to customers from which royalties are earned plus direct sales from corporate locations surpassed $130 million, providing critical mass.
Despite reacquiring franchise operations, royalty income grew 3% to $6.7 million. By selectively reacquiring franchises the firm creates higher density of sales and a stronger presence for the ALD brand in key locations while reducing costs.
Increased scale drove an increase in corporate locations profit margins to 23% from 14% in 2019. Meanwhile, key insurance business-to-business channel revenues grew 20% to $8.5 million.
SOLID FINANCES
Water Intelligence had cash of $6.8 million at 31 December 2020 and net debt of $2 million. Post the period end the company extended its credit facility by $3.2 million, providing cash facilities of $10 million.
The conservative balance sheet allows the group to take advantage of demand for water infrastructure solutions around the world.
The company said it is evolving into a ‘valuable multinational distribution platform’ for technology products that address water infrastructure solutions.
WH Ireland commented, ‘In July, LSE recognised WATR’s status as an ESG investment by awarding the company the Green Economy Mark. With huge investments planned in green infrastructure, this puts WATR in a select and attractive investment category.’
