Water Intelligence: Audited Full-Year 2024 Results & Launch of 'Next 50' Growth Strategy
#WATR Like ‘Rome’, great businesses aren’t built in a day. It requires not only hard work and precise execution, but also a long term mindset and strategic clarity to grow profits and stay ahead of the game across the economic cycle.
To me, one stock that fits the bill is Water Intelligence– a ‘one stop shop’ for all things leak detection, repair & preventative maintenance, operating in the US (2/3rds franchised), UK, Ireland, Canada and Australia.
In October the group turned 50 – a major milestone. Yet rather than resting on its laurels, the Board have been crafting the Next 50 years. Further developing its differentiated & scalable tech services (TES) platform which is being rolled out over a wider geographical, partner & customer footprint. Whilst at the same time cross-fertilising best practise (eg using Dallas as a template for other franchisees), and mining operational data to enhance the proposition.
Fine, but how is the group performing?
Well yesterday #WATR released in line FY’24 results and a positive outlook. Posting Dec FY24 revenues, adjusted EBITDA, PBT and EPS of $83.3m (+10%, est 3.8% LFL), $14.2m (+12%), $8.4m (-4%) and Est 39 cents (+8%) respectively, despite incurring extra costs (eg training) on launching several new services/products.
Currently the firm generates around $175m of ‘full network sales’ (ie including franchisees), alongside delivering 17% EBITDA margins. Closing Dec’24 with $14.3m of net bank debt with a further $4.5m of (non contingent) deferred consideration relating to previous deals. Since then, this balance has risen to 1.37x net bank debt / EBITDA due to further M&A vs 1.1x as at yearend.
Going forward, #WATR is primed to deliver double digit top & bottom line growth, driven by its best-in-class tech solutions that save water, minimize sewage spills, cut the cost of insurance bills and reduce regulatory fines. Augmented by mopping up smaller rivals and franchisees, who may lack critical mass, expertise, resources and national coverage. More broadly too, the outlook is underpinned by several secular tailwinds, such as global warming, aging infrastructure & climate change (eg water conservation & stormwater damage). Executive Chairman, Patrick DeSouza commenting: “We are confident that by leveraging our Dallas Template and scalability of our TES platform, we can deliver enhanced organic growth and supplement such organic growth with faster integrations from acquisitions”. Finally house broker Dowgate Capital
is forecasting FY25 turnover, EBITDA, PBT & EPS to come in at $97.0m (+16.4%), $17.5m (+16.6%), $11.2m (+23%) and 44.3 cents (+13.5%). In turn putting the stock on modest PE and EBITDA multiples of 10.7x and 5.8x – which appears far too cheap for an economically resilient, tech-enabled platform stock. In comparison, Dowgate Capital and @rbccm have Price Targets of 850p and 800p/share.
Disclosure: I own shares in Water Intelligence, who are also a Vox Markets client.
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