Water Intelligence plc
Group Annual Report and Financial Statements for
the Year Ended 31 December 2022
Company number 03923150
Group Annual Report and Financial Statements
for the year ended 31 December 2022
Contents
Page
2 Company Information
3 Chairman’s Statement
6 Strategic Report
13 Directors’ Report
18 Corporate Governance Statement
23 Statement of Directors’ Responsibilities
24
Independent Auditors’ report to the members of Water Intelligence plc
29 Consolidated Statement of Comprehensive Income
30 Consolidated Statement of Financial Position
31 Company Statement of Financial Position
32 Consolidated Statement of Changes in Equity
33 Company Statement of Changes in Equity
34 Consolidated Statement of Cash Flows
35 Company Statement of Cash Flows
36 Notes to the Financial Statements
Water Intelligence plc
1
Company Information
Directors & Advisers
Directors
Executive Chairman
Patrick DeSouza
Non-Executive Director
Laura Hills
Bobby Knell Non-Executive Director
Michael Reisman Non-Executive Director
Non-Executive Director
C. Daniel Ewell
(Appointed 8, April 2021)
Registered Office
27-28 Eastcastle Street
London
United Kingdom
W1W 8DH
Company number
Registered in England and Wales number 03923150
Nominated adviser and broker WH Ireland Limited
24 Martin Lane
London
EC4R 0DR
Brokers
100 Bishopsgate
RBC Europe Limited
London
EC2M 1GT
Dowgate Capital Limited
15 Fetter Lane
London
EC4A 1BW
Independent Auditor
Registrar
Bankers
Crowe UK LLP
55 Ludgate Hill
London EC4M 7JW
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen West Midlands
B63 3DA
M&T Bank
265 Church Street
CITI Bank
CGC Centre,
Canary Wharf New Haven
London
E14 5LB
CT 06510
USA
Water Intelligence plc
2
Chairman’s Statement
Overview
Over the next decade, the water and wastewater industries will be transformed globally as a result
of stresses produced by climate change and growing populations. Both the US and EU are committed to
spending tens of billions annually to address problems of aging water and wastewater infrastructure. In
the US, the Infrastructure Investment and Jobs Act signed in November 2022 authorizes USD$55 billion in
spending on water initiatives over the next five years. The OECD estimates that the EU over the next
decade will need additional spending of approximately €290 billion to meet water and sanitation needs
under Directives covering Drinking Water and Urban Waste Water Treatment.
Water Intelligence is well-positioned to accelerate its growth trajectory to meet such market
demand. Over the last decade, the Group has grown quickly by attacking two critical infrastructure problems
occurring across the range of residential, commercial and municipal pipes: water loss from leakage and
wastewater overflow. Our compounded annual growth from 2017 to 2022 has been 32% in terms of revenue
and 37% in terms of statutory profit before taxes. And we have been able to achieve this record despite
various challenges brought on by Covid and now macroeconomic volatility in a post-Covid world.
The opportunity ahead for Water Intelligence is particularly exciting for two reasons: First, our
Group attacks these water infrastructure problems in a differentiated way by using proprietary technologies
to provide solutions that are minimally-invasive – akin to precision medicine but for pipes as opposed to
arteries. Second, the competitive landscape is largely fragmented, particularly on the residential side where
we are strong and have the leading national brand in the US through our subsidiary American Leak
Detection.
Our 2022 performance reaffirms our strong foundation and our growth plan. During 2022 Water
Intelligence grew each of its operating businesses: American Leak Detection (ALD) and Water Intelligence
International (WII). Broadly, we use the concept of network sales (“Network Sales”) to illuminate our market
capture. Network Sales measures total gross sales from all corporate operations and franchisees. For the
end-user/ customer, there is no distinction between our franchise-delivered and corporate-delivered
services because both operate under the same ALD brand with the same training and uniformed service
and provide the same menu of solutions. However, as an accounting matter, while corporate gross sales
are recorded directly by Water Intelligence, franchise gross sales are only reflected indirectly on Water
Intelligence IFRS accounts as franchisee royalty income, understating the Group’s actual market presence.
For 2022, Network Sales grew by 11% to $165 million (2021: $149 million).
2022 Financial Performance and KPIs.
Our IFRS Accounts follow. Water Intelligence revenue increased 31% to $71.3 million (2021: $54.5
million). We then evaluate such progress on our growth plan through key performance indicators (KPIs)
more fully reported in our Strategic Report as part of these Accounts. Four KPIs, identified below, reflect
our execution through franchise-operated and corporate-operated locations.
Our franchise System sales continue to grow despite the number of reacquisitions of franchise
locations during 2021. KPI #1 - ALD royalty income – is a proxy for System-wide franchise sales. Franchise
royalty decreased 1% to $6.7 million (2021: $6.8 million). Had those same locations remained as franchises
instead of being converted to corporate stores, royalty income would have grown by 8%. KPI #2 - Franchise-
related Activity - measures Group support of franchise growth through the sale of equipment and additional
territory and the development of channel sales such as insurance. Franchise-related Activity grew 9% to
$10.6 million (2021: $9.8 million).
Our corporate operations also grew both in the US and internationally even after one adjusts for
franchise reacquisitions. KPI #3 - US Corporate sales - grew 48% to $47.3 million (2021: $31.9 million). As
noted above, some of the US corporate store growth resulted from franchise reacquisitions converting
royalty income into direct revenue and profits from corporate operations. But even if we exclude those
acquired locations in 2021 and 2022 and just consider “same store” corporate sales, same store locations
Water Intelligence plc
3
Chairman’s Statement
grew 26% to $35 million (2021: $27.8 million). Same store numbers, underscore a key driver of our
reacquisition strategy: corporate reacquisition provides the location with additional working capital from the
Group’s more substantial balance sheet, further accelerating growth. KPI #4 - International Corporate sales
- grew by 9% to $6.7 million (2021: $6.1 million). It should be noted that the Group is supporting international
growth not only organically but also through acquisitions such as UK-based Wat-er-Save Limited in Q4
2021. Wat-er-Save enhances WII’s ability in the UK to execute not only its current municipal work but also
more residential and commercial work. It also prepares the way for an introduction into the UK market
during 2024 of our ALD brand which is more focused on minimally-invasive residential solutions. WII,
though smaller today than ALD in terms of sales, is leading the way in commercializing our waste water
solutions technology which segment is expected to grow strongly.
The above component lines of Group sales growth have increased Group profits. To make a like
for like comparison between 2022 and 2021 operating results, we must hold aside a one-time gain of $1.9
million during 2021. Holding that aside, earnings before interest, taxes and depreciation (EBITDA) grew
16% to $11.1 million (2021: $9.5 million). When EBITDA is also adjusted for non-cash expenses of share-
based payments and non-core or one-time costs, EBITDA Adjusted increased by 20% to $12.4 million
(2021: $10.3 million). Moreover, when profit before taxes (PBT) is adjusted for amortization, non-cash
share-based payments and non-core costs, PBTA grew 12.3% to $7.8 million (2021: $6.9 million).
As noted above, our business plan reflects not only current market capture but also seeks to better
position the Group for future market capture through targeted investment, especially given the forecasted
growth in the addressable market for the Group’s solutions over the next decade. First, we have invested
over $3 million in automating operations via Salesforce and associated applications. This set of applications,
when fully implemented, will ensure that both franchise and corporate locations are able to schedule and
dispatch trucks more efficiently both to provide the needed solution and then to also sell more follow-up
solutions for other homeowner needs, thus enabling Water Intelligence to scale operations more quickly
and capture more sales.
Second, to increase capture of market demand, we need to invest in hiring and training more
technicians on our proprietary technologies. Our trained technicians are our most important assets. Each
new technician requires training of up to eighteen months before that technician can reliably and comfortably
deploy our proprietary leak detection solutions by himself. During the training period, the compensation
expense for “technicians in training” is largely a drag. Though an expense today, like any asset, a fully
trained technician will return significant incremental revenue and profits each year over a career life cycle.
For 2022, we increased our investment in training headcount by approximately $1 million.
Our strong balance sheet with available cash and a comfortable debt repayment schedule supports
our reinvestment to sustain our growth trajectory and to increase market share. At year-end 2022, cash
stood at $23 million. Bank debt was approximately $17 million. Deferred payments from franchise
reacquisitions were approximately $12 million. Notably, total bank debt and deferred payments from
reacquisitions (approximately $29 million) are spread through 2027 with a blended fixed interest rate of
approximately 4.9%. The amount of bank debt and deferred payments coming due in 2023 is approximately
$9.2 million and well-covered by 2023 EBITDA which is anticipated to be above the $11.1 million generated
in 2022 and the $23 million in cash on the balance sheet at year-end 2022. Hence we have cash resources
available for further corporate development.
Direction
We believe that market demand for our services and products will continue to be strong despite
various macroeconomic scenarios ranging from stagflation to recession driven by higher interest rates.
Simply put, water and wastewater infrastructure continue to age, producing leaks and blockages that cannot
be ignored. We have the asset base to deliver on our vision of a “one stop shop” for minimally invasive
solutions to aging water and waste water infrastructure: a critical mass of approximately $165 million in
Network Sales; more than 150 operating locations from which to scale; national business channels in the
Water Intelligence plc
4
Chairman’s Statement
US, such as insurance, that leverage our sales footprint; and prior investments in new technology products
for customers and business automation for enhanced scheduling and delivery that now can be realized in
meeting increased market demand over the next decade. Onward with confidence.
Dr. Patrick DeSouza
Executive Chairman
20 June 2023
Water Intelligence plc
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Strategic Report
Business Review and Key Performance Indicators
The Chairman’s Statement, on pages 3 to 5, provides an overview of the year and an outlook for Water
Intelligence plc and its subsidiaries, together referred to as the “Group”. The business indicators offered
below are meant to capture for the Board not only the state of performance but also the evolution of our
business model as a platform company with multiple sales channels. As a “One-stop Shop” for our
growing base of customers, we offer a matrix of clean water and waste-water solutions for residential,
commercial and municipal infrastructure problems. With such offerings, we can both cross-sell services
from different business units or up-sell technology products from partners.
The Water Intelligence platform has two wholly-owned subsidiaries: American Leak Detection (ALD)
and Water Intelligence International (WII). These business units generated approximately $165 million
of gross sales to third-parties during 2022. The two subsidiaries are distinguished by the degree of
franchise-operated and corporate-operated locations and their respective priorities with respect to
residential, business-to-business and municipal customers.
ALD, our core business, is largely a franchise business with strategic corporate-operated locations. ALD
is a leader in using technology to pinpoint and repair water leaks without destruction. Solutions target
both residential and business-to-business customers, such as insurance companies, which value our
“minimally invasive” value proposition. During 2022 ALD generated approximately $158 million of gross
sales to end-users. That critical mass of gross sales is derived from direct sales via corporate-operated
locations and indirect sales measured by royalty income from franchisees, which, in turn, is based on
franchisee gross sales to end-users.
WII, our international based operation, focuses on municipal solutions to the world-wide problem of
failing water infrastructure. During 2022 WII generated approximately $7 million of sales to customers.
Like ALD, WII’s solutions are also technology-based. WII is exclusively a corporate-run unit that leads
the Group’s international expansion. WII does have the capability to execute ALD service offerings and
is currently doing so at our corporate-operated locations in Australia. WII also cross-sells complementary
municipal offerings and residential wastewater solutions to ALD customers in the US.
The Group’s business model and growth strategy is evaluated through key performance indicators
(KPIs). The KPIs capture both corporate-operated and franchise-operated organic growth from ALD
and WII solutions. They also capture acquisition-led growth, especially by selectively converting ALD
franchises into corporate-operated locations. Such re-acquisitions of franchisee operations enable some
amount of the approximately $100 million in highly profitable franchisee gross sales to end-users,
currently recorded as royalty income, to be converted to the Group’s direct Statement of Income. In
evaluating such acquisition-led growth, it is also important to separate continuing operating costs from
non-recurring costs or transaction costs. Finally, we have a KPI that provides guidance as to the
availability of capital to execute our growth plan. Because of the monthly recurring royalty income from
the franchise business, the Group is able to be efficient in its capital formation by mixing in non-dilutive
bank debt. As a result, the Group manages to the right balance in capital formation between debt and
equity by monitoring the level of bank borrowings.
Six key performance indicators (KPIs) are used by the Board to monitor the above described business
model: (i) growth in ALD franchise royalty income, (ii) growth in ALD franchise-related activities that
include both business to business sales and sales of parts and equipment , (iii) growth in ALD corporate-
operated locations in the United States, (iv) growth in WII corporate activities located outside the United
States, (v) non-core costs and (vi) net borrowings from banks which are subject to financial covenants.
These six indicators are reported to the Board and used to assist the Board in the management of the
business.
Evaluation of Strategic Plan Drawn From 6 KPIs:
i.
ii.
Royalty income is a measure of the health of the ALD franchise System which represents the
majority of gross sales under the ALD brand. The change in royalty income must be evaluated
against the number of franchise reacquisitions in any given year which reduces the pool of
available royalty income for the subsequent year.
Franchise-related Activities are a measure of the services and products sold by Corporate to its
franchises to fuel growth in the franchise System. ALD’s Business-to-Business Channel
Water Intelligence plc
6
Strategic Report
iii.
leverages for customers our national execution presence under one brand and is led by
insurance companies.
ALD Corporate-operated locations add to critical mass of Group revenue and profits. Selective
reacquisitions from our franchise System further unlock equity value for the Group in two ways.
First, reacquisitions set up corporate regional hubs from which corporate may help grow both
franchise and corporate units. Second, reacquisitions add growing revenue and profits directly
onto the accounts of the Group.
v.
iv. WII complements our ALD brand which is focused largely on residential and commercial
customers, by contributing municipal sales to the Group’s overall sales presence in the US and
international geographies.
Non-core costs (transactions costs and non-recurring costs) should be taken into account in
evaluating on-going operating performance.
Credit facilities enable the Group to fuel expansion and preserve shareholder equity. Because
of the quality of monthly recurring royalty income, the Group is attractive to banks enabling the
Group to optimize capital formation.
vi.
Franchise Royalty Income.
(i)
ALD is the Group’s core business generating approximately $158 million of corporate and franchisee gross
sales. During 2022 approximately $100 million of such gross sales may be attributed to the franchise
System. The Group derives royalty income from such gross sales. There are currently 82 franchises
operating in over 100 locations across 46 states of the US, with additional locations in Australia and Canada.
Some franchisees operate multiple locations in their territory.
Part of the Group’s growth strategy to unlock shareholder value by selectively reacquiring franchises and
operating the business as a corporate location. By executing such conversions, the Group is trading-off a
portion of the pool of available royalty income to directly aggregate and grow the underlying revenue and
profits from those locations. Royalty income in 2022 decreased in absolute terms by 1% compared with
2021. It is important to note that this small decline is attributable to a significant number of reacquisitions
during 2021 which had the effect of reducing the eligible pool of royalty income for 2022. Without such
reacquisitions in 2021, royalty income would have grown 8% indicating that on a like-for-like basis the
franchise System is still growing, driven especially by the growth of the insurance channel noted in KPI #2.
Performance from royalty income is as follows:
Total USA
International
Total Group Royalty Income
Profit before tax (see note 4)
Year ended
31 December
2022
$'000
6,637
110
6,747
1,957
Year ended
31 December
2021
$'000
6,699
105
6,803
1,809
Change
%
(1)%
5%
(1)%
8%
Franchise-related Activities.
(ii)
US franchise-related activities capture what Corporate Administration (“Corporate”) does to grow the
franchise System. It is also one indication of the reinvestment of franchisees in the Group’s growth plan.
Parts and equipment sold to franchisees by Corporate enables franchisees to further grow their respective
operations. For 2022, not captured within this subcategory are amounts paid by franchisees for licenses to
Salesforce and associated applications ($0.16 million) which is also part of their reinvestment in the Group’s
growth plan. If added to the parts and equipment sales subcategory, franchisee reinvestment in their
operations grew 3% to $0.83 million.
Water Intelligence plc
7
Strategic Report
Business-to-Business channels, such as insurance, capture the market demands of national customers.
These customers place significant value on ALD’s nationwide brand, service standardization and delivery
footprint – an important aspect of competitive strategy when one considers that the market for service
providers is fragmented. Jobs for franchisees are sourced by Corporate from insurance companies using a
centralized processing system. Important to note is that national channel jobs executed by Corporate
locations are not counted in the Group’s Business-to-Business sales. Hence the 11% growth of Business-
to-Business sales understates the contribution of insurance relationships for Network Sales.
Finally, Sales of Franchise Units represent the decision to develop a new territory through a franchisee as
opposed to corporate operations. It should be noted that the Group’s current priority is to add corporate-
operated locations as opposed to franchisee-operated locations. Given the rising value of franchise territory
given franchise reacquisitions, demand for additional territory is rising among franchisees. The Group
reviews annually its priority on new corporate locations as opposed to franchise locations.
Revenue from franchise-related activities in 2022 grew by 9% compared to 2021 largely because of the
growth of the Group’s business-to-business channel. Profits before tax grew 20% in 2022 compared with
2021 largely driven by the high margin surrounding the sale of franchise territory. Performance from
franchise-related activities are as follows:
Parts and equipment sales
Business-to-Business sales
Sales of Franchise Units
Total Revenue Franchise Activities
Profit before tax (see note 4)
Year ended
31 December
2022
$'000
668
9,893
63
10,624
965
Year ended
31 December
2021
$'000
806
8,941
23
9,770
805
Change
%
(17)%
11%
175%
9%
20%
US Corporate Operated Locations (ALD).
(iii)
Corporate-run locations, both greenfield and initiated after reacquisition of franchise locations, contribute
revenue and profits to the Group. In addition, such operations also support the franchise System with
strategy, marketing and execution support in further developing territories. Performance of US corporate-
run locations after reacquisition is also an indication of the success of the Group’s strategy to capture more
market demand for our minimally invasive leak detection and repair solutions. The Group directly operates
41 locations, an increase of 3 locations (2021: 38).
As set forth below, ALD Corporate-operated revenue grew 48% to $47.3 million (2021: $31.9 million).
Meanwhile profits before tax grew strongly by 37% to a $8.2 million (2021: $6.0 million). Such growth is a
result of both organic growth and the contribution of revenue and profits from franchisees reacquired during
the period. Much like the pro forma adjustment for royalty income in KPI #1 based on the number of
franchisees reacquired in the prior year, so also we can separate out corporate locations owned prior to
January 2021 so that a comparison may be made for “same store sales” as a measure of organic growth
post franchise reacquisition. Corporate-operated “same store” revenue grew 26% to $34.9 million (2021:
$27.8 million) and profit before tax grew 13% to $5.9 million (2021: $5.2 million).
Table (iii) also enables us to illustrate the trade-off between franchise royalty growth and corporate-operated
growth by examining yield in terms of Group profit before tax. For 2022 US corporate locations profit before
tax amounted to $8.2 million. If the Group was a “franchise-only” business and the same $47.3 million of
sales to the same customers under the same ALD brand were executed by franchisees, the Group would
only receive approximately $0.93 million of the profit before taxes. ($47.3 million of sales multiplied by
6.75% average royalty fee equals approximately $3.19 million of royalty income; and $3.19 million is then
multiplied by 29% profit margin of royalty income - see KPI #1 – to yield $0.93 million of profit before tax to
the Group). Even at a much higher margin of managing the franchise System, corporate profits on direct
sales is higher; to be sure, depending on the location, such yield may require additional management costs.
Water Intelligence plc
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Strategic Report
Performance from corporate-operated locations is as follows:
Revenue
Locations owned prior to 1 January 2021
Year ended
31 December
2022
$'000
47,297
34,979
Year ended
31 December
2021
$'000
31,861
27,815
Change
%
48%
26%
Profit before tax (see note 4)
Locations owned prior to 1 January 2021
8,253
5,985
6,007
5,287
37%
13%
International Corporate Operated Locations (WII)
(iv)
The Group continues to strengthen its multinational presence through its UK-based WII subsidiary. WII
focuses largely on municipal solutions while maintaining core residential and commercial offerings. In the
UK, WII executes municipal work for all major utilities and residential and commercial projects through its
Wat-er-Save subsidiary. In this way, WII has multinational operating scope by managing corporate
locations established in Australia and Ontario, Canada after ALD franchisee reacquisitions.
WII sales grew 9% during 2022 to $6.7 million. (2021: $6.1 million) and profits decreased by 73% to $0.09
million (2021: $0.32 million). Much of the decline in profits is attributable to extraordinary conditions in
Australia during Q1 2022 identified below in non-core costs and initial investments in the UK Wat-er-Save
Services Limited during 1H 2022 after its acquisition in Q4 2021.
Performance from Water Intelligence International is as follows:
UK
Australia
Canada
Total Revenue from International
Corporate Activities
Profit before tax (see note 4)
Year ended
31 December
2022
$'000
3,437
2,038
1,191
6,666
86
Year ended
31 December
2021
$'000
2,384
2,614
1,111
Change
%
44%
(22)%
7%
6,109
9%
316
(73)%
Water Intelligence plc
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Strategic Report
Non-Core Costs.
(v)
During 2022, the Group incurred non-core costs relating to transactions or non-recurring expenses. As
discussed herein, understanding non-core costs, as distinct from continuing operating costs, helps the
Board evaluate capital allocation choices made to accelerate operations organically and to scale through
acquisition. In 2022, there were $840,000 of non-core costs (2021: $323,000).
Please see table below for details:
ADP software upgrade
Technology upgrades
Transaction-related legal and other costs
Australian flood conditions
Total
Year ended
31 December 2022
$’000
Year ended
31 December 2021
$’000
-
450
243
147
840
30
193
100
-
323
Net Bank Borrowings.
(vi)
Management of financial resources is important for making various decisions regarding the
reinvestment rate for the growth of operations. As noted herein, the monthly recurring income from
franchise royalty provides the Group with attractive attributes for using bank debt to complement
equity sources of capital. The Group’s objective for risk management purposes is to be prudent with
respect to bank financial covenants. Net cash after Bank Borrowings is positive and amortisation of
such debt extends through 2027.
Group
Lines of credit: acquisition and working capital
Bank borrowings
Less: Cash
Held in US Dollars
Held in £ Sterling
Held in CDN Dollars
Held in AU Dollars
Total Net Bank Borrowings/(Cash)
Year ended
31 December
2022
$'000
-
16,425
16,425
20,514
1,779
359
362
23,014
(6,589)
Year ended
31 December
2021
$'000
227
7,780
8,007
20,403
2,570
270
559
23,802
(15,795)
Water Intelligence plc
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Strategic Report
Principal Risks and Uncertainties
The Group’s objectives, policies and processes for measuring and managing risk are described in
note 23. The principal risks and uncertainties to which the Group is exposed include:
Market Risk
The Group’s activities expose it to the financial risk of changes in foreign currency exchange rates as
it undertakes certain transactions denominated in foreign currencies. There has been no change to
the Group’s exposure to market risks. The Group monitors exposure to foreign exchange rate changes
on a daily basis by a daily review of the Group’s cash balances in the US, UK , Canada and Australia.
Interest Rate Risk
The Group’s interest rate risk arises from its working capital and term loan borrowings.
Whilst borrowing issued at variable rates would expose the Group to cash flow risks, as at year -end,
the Company is only subject to a variable rate on its working capital line of credit. As of the report
date, all credit facilities in use are at fixed interest rates.
Credit Risk
The Group’s credit risk is primarily attributable to its cash and cash equivalents and trade
receivables. The credit risk on other classes of financial assets is considered insignificant.
Liquidity Risk
The Group manages its liquidity risk primarily through the monitoring of forecasts and actual cash
flows.
Covid-19 Risk
2022 represented the third year of the global pandemic. Some regulations eased while others
remained. The Group delivers water and wastewater solutions and is considered a supplier of
“essential services” under governmental policies covering shelter-in-place. The Group continually
evaluates health and safety protocols for our technicians. The Group has sufficient cash to execute its
plan and balance work protocols for the health and safety of all our stakeholders, especially our
technicians and our customers.
Other Risks
There is a risk that existing and new customer relationships and R&D will not lead to sales growth and
increased profits. The Group is reliant on a small number of skilled managers. The Group is reliant on
effective relationships with its franchisees, especially in the US. Finally, while not fully apparent during
2022, there are emerging risks given the sharp rise in interest rates during 2022 in the aftermath of
inflationary pressures, The Group is monitoring risks associated with stagflation or recession during
2023.
Corporate Governance statement S172 of the UK’s Companies Act
Each director must act in a way that, in good faith, would most likely promote the success of the Group for
the benefit of its stakeholders. The Board of Directors consider, both individually and together, that they
have acted in the way they consider, in good faith, would be most likely to promote the success of the
company for the benefit of its members as a whole (having regard to the stakeholders and matters
indicated in S172) in the decisions taken during the year ended 31 December 2022. Following is an
overview of how the Board performed its duties during 2022.
Shareholders and Banking Relationships
The Executive Chairman, Chief Financial Officer, members of the Board and senior executives on the
management team have regular contact with major shareholders and banking relationships. The Board
receives regular updates on the views of shareholders which are taken into account when the Board
makes its decisions. During February 2021 and March 2022, the Group expanded its credit facilities.
During July and November 2021, the Company raised capital largely from its current shareholders. The
Group received feedback during each process.
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Strategic Report
Employees
The Board recognizes the importance of skilled human capital for a technology and services-led business.
The Board works through its human resources director to provide on-going training and benefits. It also
provides advancement opportunities in its various corporate-operated locations. As noted herein, the
Group has taken a variety of steps to address the COVID-19 pandemic in terms of its employees and
stakeholders.
Franchisees
The Group holds an annual convention for its franchisees which includes education and training sessions.
During 2021, as a result of the pandemic, the Group did not hold its Convention but rather relied on video
conference meetings. During October 2022, the Group held its annual convention in Nashville,
Tennessee. Franchisees have an Advisory Committee that provides input to the Board with quarterly
meetings. Moreover, one of our Board members, Bobby Knell, successfully developed the Dallas
franchise and retired as one of our leading franchisees. He provides an additional channel for input from
the franchise System. Throughout the year, the Group continues to share best practices guidance with
franchisees in responding to various business topics including Covid-19 circumstances and now a
Salesforce.com implementation.
Customers
ALD has a reputation for high quality service delivery across the United States for over forty years. Given
the importance of our reputation with customers, especially insurance companies, the Board pays
significant levels of attention to the quality of our service delivery. Management gathers data that it
shares with the Board on customer satisfaction.
Community and Environment
The Group’s brand stands for the conservation of water and the importance of providing solutions to
potable and non-potable water leaks. Through our advertising and marketing the Group seeks to
communicate to the public both the importance of sustainability, particularly with respect to water loss
through leakage, and the importance for public health of remediating sewer blockages as consumers
dispose of sanitary wipes in toilets during Covid-19. The Group took an active role not only in providing
leak detection services to local government in Flint, Michigan – a community known for its lead in the
water crisis – but also in working to educate community members on the importance of on-going water
monitoring. The Board has sought to be active with respect to education and water. During 2019 and
2020, members of the Board have worked with Columbia University to contribute to its “Year of Water”
education campaign.
By order of the Board
Patrick DeSouza
Executive Chairman
20 June 2023
Water Intelligence plc
12
Director’s Report
The Directors present their report on the affairs of Water Intelligence plc and its subsidiaries, referred to as
the Group, together with the audited Financial Statements and Independent Auditors’ report for the year
ended 31 December 2022.
Principal Activities
The Group is a leading provider of minimally invasive leak detection and remediation services for potable
and non-potable water. The Group’s strategy is to be a “One-stop Shop” for services and product solutions
for residential, commercial and municipal customers.
Results
The financial performance for the year, including the Group’s Statement of Comprehensive Income and
the Group’s financial position at the end of the year, is shown in the Financial Statements on pages 29 to
35.
2022 was marked by sustained and balanced multinational growth for both ALD and WII. Total
revenue for Water Intelligence grew 31% to $71.3 million (2021: $54.5 million). ALD revenue grew
34% to $64.6 million (2021: $48.3 million). WII revenue grew 9% to $6.8 million (2021: $6.2 million).
The splits between ALD and WI revenue remained consistent during 2022 when compared with
2021 with approximately 91% of total revenue attributable to ALD and 9% of total revenue
attributable to WII.
Profit-based comparisons between 2022 and 2021 need to take into account a one -time profit before
tax gain of $1.9 million in 2021. Holding that one-time gain aside, statutory earnings before interest, taxes
and depreciation (EBITDA) grew 16% to $11.1 million (2021: $9.5 million). When EBITDA is adjusted for
non-cash expenses of share-based payments and non-core or non-recurring costs, EBITDA Adjusted
increased by 20% to $12.4 million (2021: $10.3 million). Statutory profit before taxes (PBT) decreased by
3% to $5.5 million (2021: $5.7 million). When profit before taxes is adjusted for amortization, non-cash
share-based payments and non-core costs, PBTA grew 12.3% to $7.8 million (2021: $6.9 million).
Going Concern
The Directors have prepared a business plan and cash flow forecast for the period to December 2024.
The forecast contains certain assumptions about the level of future sales and the level of margins
achievable. These assumptions are the Directors’ best estimate of the future development of the business.
The Group generates increasing levels of cash driven by its profitable and growing US-based business,
ALD. The Directors also note that the Group has diversified its operations with growth in WII. Moreover,
after oversubscribed capital raises in July and November 2021 and expansion of its credit facilities in
February 2021 and March 2022, the Directors believe that funding will be available on a case-by-case
basis for additional initiatives.
Cash at 31 December 2022 was $23 million (2021: $23.8 million). At 31 December 2022, total debt
(borrowings and deferred consideration from franchise acquisitions) was $29 million with amortisation
of such amount spread through 2027. Meanwhile, operating cash flows (EBITDA) in 2022 increased
by 16% to $11.1 million (2021: $9.5 million). Cash on the balance sheet plus an ability to generate
significant cash relative to the amount of debt that comes due in any one year between 2023 and
2027 are important variables for Director considerations. Moreover, the Directors consider various
scenarios that may influence cash availability such as inflationary pressures, the threat of recession
from rising interest rates and the use of cash for investments, such as Salesforce.com and related
software applications, geared to create operational efficiencies that enhance future organic cash
generation.
The Directors conclude that the Group will have adequate cash resources both to pursue its growth plan
and to accelerate execution if it so chooses. The Directors are satisfied that the Group has adequate
resources to continue in operational existence for the foreseeable future and accordingly, continue to
adopt the going concern basis in preparing the financial statements.
Water Intelligence plc
13
Director’s Report
Research & Development; Commercialization
The Group’s focus is currently on reinvestment for commercialization of technology and technology-
based products not pure R&D. Expenditure on pure research, all of which is undertaken by third
parties not related to the Group, was $0 (2021: $0). The Group remains committed to anticipate
market demands and has spent money on product development during the year which has been
capitalised.
Dividends
The Directors do not recommend the payment of a dividend (2021: $nil).
Share Price
On 31 December 2022, the closing market price of Water Intelligence plc ordinary shares was 660.0
pence. The highest and lowest prices of these shares during the year to 31 December 2022 were 1140.0
pence and 560.0 pence respectively.
Capital Structure
Details of the authorised and issued share capital are shown in Note 21. No person has any special
rights of control over the Company’s share capital and all issued shares are fully paid.
Future Developments
Future developments are outlined throughout the Chairman’s Statement on pages 3-5.
Financial Risk Management
Financial risk management is outlined in the principal risks and uncertainties section of the Strategic
Report on page 11.
Subsequent Events
On 7 February 2023, the Group announced the reacquisition of its Nashville, Tennessee franchise territory
within the Group’s ALD franchise business. The acquisition is pursuant to the Group’s growth strategy of
creating regional hubs and adds further corporate scale to operations in the Midwest, United States. The
cash consideration for the acquisition is $3.25 million based on a 2022 Adjusted Income Statement of $2.4
million in revenue and $550,000 in profit before tax and includes the transfer of all operating assets to the
Group.
Directors
The Directors who served the Company during the year and up to the date of this report were as
follows:
Executive Directors
Patrick DeSouza – Executive Chairman
Non-Executive Directors
Laura Hills
Bobby Knell
Michael Reisman
C. Daniel Ewell
The biographical details of the Directors of the Company are set out on the Corporate Governance section
of the report and on the Company’s website www.waterintelligence.co.uk
Water Intelligence plc
14
Director’s Report
Directors’ emoluments
2022
Salary, Fees &
Bonus
$
591,473
Benefits Redundancy
$
-
$
-
Total
$
591,473
Executive Directors
P DeSouza
Non-Executive Directors
L Hills
D Ewell
B Knell
M Reisman
49,231
-
-
-
640,704
* In lieu of cash compensation, all of the directors were awarded stock options with an exercise price of $8.18 as announced
on 7, February 2023. (See Note 7) The value of the options is as follows: P DeSouza $80k, L Hills $40k, D Ewell $40k, B
Knell $80k, M Reisman $40k, for a total of $280k. Options granted plus cash compensation above totals $920,704 which is t o
be compared to $889,385 in 2021
49,231
-
-
-
640,704
-
-
-
-
-
-
-
-
-
-
2021
Executive Directors
P DeSouza
L Hills
Non-Executive Directors
D Ewell
B Knell
M Reisman
Salary, Fees &
Bonus
Benefits Redundancy
$
$
$
639,381
125,000
30,000
40,000
40,000
874,381
15,004
-
-
-
-
15,004
-
-
-
-
-
-
Total
$
654,385
125,000
30,000
40,000
40,000
889,385
Directors’ interests
The Directors who held office at 31 December 2022 and subsequent to year end had the following direct
interest in the voting rights of the Company at 31 December 2022 and at the date of this report,
excluding the shares held by Plain Sight Systems, Inc.
Number of shares at
31 December 2022
% held at 31
December 2022
Number of shares at
20 June 2023
% held at
20 June 2023
Patrick
DeSouza*/**
Michael Reisman*
Laura Hills
Bobby Knell
Dan Ewell
4,867,110
184,126
122,723
27,000
33,670
27.83
1.05
0.70
0.15
0.18
4,867,110
184,126
122,723
27,000
33,670
27.83
1.05
0.70
0.15
0.18
*Included in the total above, Patrick DeSouza has (i) 180,000 Partly Paid Shares (2016), (ii) 750,000 (March 2018) (iii)
850,000 (May 2019) and (iv) 300,000 Partly Paid Shares (October 2020). These will not be admitted to trading or carry any
economic rights until fully paid.
*Patrick DeSouza and Michael Reisman are directors and shareholders in Plain Sight Systems, Inc.
Water Intelligence plc
15
Director’s Report
**Patrick DeSouza’s interests include 1,965,000 shares held by The Patrick J. DeSouza 2020 Irrevocable Trust U/A Dtd
11/23/2020 and 605,936 shares held in The Patrick J. DeSouza GRAT #1 U/T/A Dtd 11/23/2020
Share option schemes
To provide incentive for the management and key employees of the Group, the Directors award stock
options. Details of the current scheme are set out in Note 7.
Substantial Shareholders
As well as the Directors’ interests reported above, the following interests of 3.0% and above as at the date
of this report were as follows:
Plain Sight Systems, Inc.
Canaccord Genuity Group Inc.
Berenberg Asset Management
George D. Yancopoulos
Amati AIM VCT
Herald Investment Trust
Number of shares % held
13.90
2,430,410
12.21
2,134,432
7.21
1,259,992
5.04
880,920
4.66
814,660
3.67
642,526
Corporate Responsibility
The Board recognises its employment, environmental and health and safety responsibilities. It devotes
appropriate resources towards monitoring and improving compliance with existing standards. An
Executive Director has responsibility for these areas at Board level, ensuring that the Group’s policies
are upheld and providing the necessary resources.
Employees
The Board recognises that the Group’s employees are its most important asset.
The Group is committed to achieving equal opportunities and to complying with relevant anti -
discrimination legislation. It is established Group policy to offer employees and job applicants the
opportunity to benefit from fair employment, without regard to their sex, sexual orientation, marital
status, race, religion or belief, age or disability. Employees are encouraged to train and develop their
careers.
The Group has continued its policy of informing all employees of matters of concern to them as employees,
both in their immediate work situation and in the wider context of the Group’s well-being. Communication
with employees is effected through the Board, the Group’s management briefings structure, formal and
informal meetings and through the Group’s information systems.
Independent Auditors
Crowe UK LLP has expressed their willingness to continue in office. In accordance with section 489 of
the Companies Act 2006, resolutions for their re-appointment and to authorise the Directors to determine
the Independent Auditors’ remuneration will be proposed at the forthcoming Annual General Meeting.
Statement of disclosure to the Independent Auditor
Each of the persons who are directors at the time when this Directors' report is approved has
confirmed that:
•
•
so far as that Director is aware, there is no relevant audit information of which the Company and the
Group's auditor is unaware; and
that Director has taken all the steps that ought to have been taken as a director in order to be
aware of any relevant audit information and to establish that the Company and the Group's
auditor is aware of that information.
Water Intelligence plc
16
Director’s Report
By order of the Board
Patrick DeSouza
Executive Chairman
20 June 2023
Water Intelligence plc
17
Corporate Governance Statement
As a Board, we believe that practicing good Corporate Governance is essential for building a successful
and sustainable business in the long-term interests of all stakeholders. Water Intelligence’s shares are
listed on AIM, a market operated by the London Stock Exchange.
With effect from September 2018, Water Intelligence has adopted the QCA Corporate Governance Code.
The Company has adopted a share dealing code for the Board and employees of the Company which is
in conformity with the requirements of Rule 21 of the AIM Rules for Companies. The Company takes steps
to ensure compliance by the Board and applicable employees with the terms of such code.
The following pages outline the structures, processes and procedures by which the Board ensures that
high standards of corporate governance are maintained throughout the Group.
Further details can be found on our website at www.waterintelligence.co.uk/corporate-Board-and-
governance.
Takeovers and Mergers
The Company is subject to The City Code on Takeovers and Mergers.
Board
The Board, chaired by Patrick DeSouza, comprises one executive and four non-executive directors and it
oversees and implements the Company’s corporate governance program. As Chairman, Dr. DeSouza is
responsible for the Company’s approach to corporate governance and the application of the principles of
the QCA Code. Michael Reisman and Dan Ewell are the Company’s independent directors. The Board is
supported by two committees: audit and remuneration. The Board does not consider that it is of a size at
present to require a separate nominations committee, and all members of the Board are involved in the
appointment of new directors.
Each Board member commits sufficient time to fulfil their duties and obligations to the Board and the
Company. They are required to attend at least 4 Board meetings annually and join regular Board calls that
take place between formal meetings and offer availability for consultation when needed.
Board papers are sent out to all directors in advance of each Board meeting including management
accounts and accompanying reports from those responsible.
Meetings held during the period between 1 January 2022 and 31 December 2022 and the attendance of
directors is summarized below:
Patrick DeSouza
Bobby Knell
Michael Reisman
Dan Ewell
Laura Hills
Board meetings
Possible (attended)
6/6
5/6
5/6
5/6
6/6
Audit committee
Possible (attended) Possible (attended)
Remuneration committee
2/2
2/2
2/2
2/2
Board Committees
The Board has established an Audit Committee and a Remuneration Committee with delegated duties and
responsibilities.
(a) Audit Committee
Dan Ewell, Non-Executive Director, is Chairman of the Audit Committee. The other member of the
Committee is Michael Reisman. The Audit Committee is responsible for ensuring that the financial
performance, position and prospects for the Company are properly monitored, controlled and reported on
and for meeting the auditors and reviewing their reports relating to accounts and internal controls.
(b) Remuneration Committee
Michael Reisman, Non-Executive Director, is Chairman of the Remuneration Committee. The other member
of the Committee is Bobby Knell. The Remuneration Committee is responsible for reviewing performance
Water Intelligence plc
18
Corporate Governance Statement
of Executive Directors and determining the remuneration and basis of service agreement with due regard
for the Combined Code. The Remuneration Committee also determines the payment of any bonuses to
Executive Directors and the grant of options.
The Company has adopted and operates a share dealing code for directors and senior employees on the
same terms as the Model Code appended to the Listing Rules of the UKLA.
Board Experience
All five members of the Board bring complementary skill sets to the Board. One director is female and four
are male. The Board believes that its blend of relevant experience, skills and personal qualities and
capabilities is sufficient to enable it to successfully execute its strategy. In addition, the Board receives
regular updates from, amongst others, its nominated adviser, legal counsel and company secretary in
relation to key rule changes and corporate governance requirements, as well as regular liaison with audit
firms both in the UK and the US in respect of key disclosure and accounting requirements for the Group,
especially as accounting standards evolve. In addition, each new director appointment is required to
receive AIM rule training from the Company’s nominated adviser at the time of their appointment.
Patrick J. DeSouza, Executive Chairman
Term of office: Appointed as Executive Chairman in July 2010.
Background and suitability for the role: Dr. DeSouza has been Chairman of American Leak Detection
since 2006 and Executive Chairman since its reverse merger to create Water Intelligence plc in 2010. He
has 25 years of operating and advisory leadership experience with both public and private companies in
the defence, software/Internet and asset management industries. Over the course of his career, Dr.
DeSouza has had significant experience in corporate finance and cross-border mergers and acquisition
transactions. He has practised corporate and securities law as a member of the New York and California
bars. Dr. DeSouza has also worked at the White House as Director for Inter-American Affairs on the
National Security Council. He is the author of Economic Strategy and National Security (2000). He is a
graduate of Columbia College, the Yale Law School and Stanford Graduate School.
Laura Hills, Non-Executive Director
Term of office: Appointed 7 June 2021 as Executive Director but returned to non-executive director which
she originally was appointed since 6 February 2018.
Background and suitability for the role: Laura has more than 30 years’ experience as a legal professional,
having spent 10 years working for Overseas Private Investment Corporation (OPIC), where she served as
Associate General for the agency’s finance program, supervising a team of lawyers on all finance
transactions ranging from micro-lending and small business to multi-creditor infrastructure project
financing in emerging market countries. In 2002, Ms. Hills founded Hills, Stern & Morley LLP, an emerging
markets legal firm based in Washington D.C. Laura sits on the Board of the Gerald Ford Presidential
Foundation. Laura brings considerable expertise in negotiating on infrastructure and renewables related
transactions globally. Moreover, Ms. Hills experience with non-profits assists the Board in fulfilling its
responsibility to advance the mission of Water Intelligence to support underserved communities globally.
Laura holds undergraduate, graduate and law degrees from Stanford University.
Bobby Knell, Non-Executive Director
Term of office: Appointed 7 June 2021, having previously been an executive director, non-executive
director since 17 January 2019.
Background and suitability for the role: The ALD franchise business is central to the operations and value
proposition of Water Intelligence. Bobby has served as a managing director at Water Intelligence
responsible for franchise relations for the last four years. Prior to this role, Bobby founded and grew the
Dallas franchise of American Leak Detection into a multi-million dollar operation, an operation now run by
Water Intelligence plc
19
Corporate Governance Statement
his son. His appointment furthers the alignment of strategy and interests between corporate operations
and the core American Leak Detection franchise business.
Michael Reisman, Independent Non-executive Director
Term of office: Appointed as a non-executive director on 30 July 2010.
Background and suitability for the role: Professor Reisman currently serves as Myres S. McDougal
Professor of International Law at the Yale Law School, where he has been on the faculty since 1965 and
has previously been a visiting professor in Tokyo, Berlin, Basel, Paris, Geneva and Hong Kong Professor
Reisman is the President of the Arbitration Tribunal of the Bank for International Settlements and a
member of the Advisory Committee on International Law of the Department of State. He has served as
arbitrator and counsel in many international cases. He was also President of the Inter-American
Commission on Human Rights of the Organization of American States. Because of his international legal
experience and the growing multinational character of the Company, Professor Reisman leads matters of
governance, corporate responsibility and remuneration. He is a graduate of Yale Law School.
C. Daniel Ewell, Independent Non-executive Director
Term of office: Appointed as a non-executive director on 8 April 2021
Background and suitability for the role: Dan Ewell is currently a Senior Advisor at Morgan Stanley, where
he has worked as an investment banker for over 33 years. Prior to assuming his current role, Mr. Ewell
served as Vice Chairman and Head of Western Region Investment Banking for Morgan Stanley. Dan has
extensive experience in advising companies and helping them grow through capital raising and strategic
transactions. His experience spans a range of sectors including consumer/retails, industrial, healthcare
and media/technology, and included companies with franchised business models. As the Group
continues to scale its operations internationally, it has a need to broaden its institutional and strategic
activity in capital markets. Mr. Ewell brings considerable expertise in this area. He is a graduate of
University of California, Berkeley, Yale Law School and Yale School of Management.
The Group has a non-Board Chief Financial Officer, Pat Lamarco Jr., who attends all Board meetings and
reports regularly to the Board and assists in the preparation of Board materials and in reviewing the
budget and ongoing performance.
The Company Secretary is responsible for ensuring that Board procedures are followed and that all
applicable rules and regulations are complied with. Adrian Hargrave currently performs the role of
Company Secretary, providing an advisory role to the Board. The Company Secretary is supported and
guided in this role by the Company’s legal advisors.
The Directors have access to the Company’s CFO, NOMAD, Company Secretary, lawyers and auditors
as and when required and are able to obtain advice from other external bodies when necessary.
Board Performance and Effectiveness
The performance and effectiveness of the Board, its committees and individual Directors is reviewed by
the Chairman and the Board an ongoing basis. Training is available should a Director request it, or if the
Chairman feels it is necessary. The performance of the Board is measured by the Chairman and Michael
Reisman, one of the non-executive directors, with reference to the Company’s achievement of its strategic
goals.
Water Intelligence plc
20
Corporate Governance Statement
Risk Management
The Directors recognise their responsibility for the Group’s system of internal control and have established
systems to ensure that an appropriate and reasonable level of oversight and control is provided. The
Group’s systems of internal control are designed to help the Group meet its business objectives by
appropriately managing, rather than eliminating, the risks to those objectives. The controls can only
provide reasonable, not absolute, assurance against material misstatement or loss.
The Executive Chairman with the assistance of the Company Secretary and the Chief Financial Officer
manages a risk register for the Group that identifies key risks in the areas of corporate strategy, financial,
clients, staff, environmental and the investment community. The Board is provided with a copy of the
register. The register is reviewed periodically and is updated as and when necessary.
Within the scope of the annual audit, specific financial risks are also evaluated in detail, including in
relation to foreign currency, interest rates, debt covenants, taxation and liquidity.
The annual budget is reviewed and approved by the Board. Financial results, with comparisons to budget
and latest forecasts are reported on a monthly basis to the Board together with a report on operational
achievements, objectives and issues encountered. Significant variances from plan are discussed at Board
meetings and actions set in place to address them.
Approval levels for authorisation of expenditure are at set levels throughout the management structure
with any expenditure in excess of pre-defined levels requiring approval from the Executive Chairman and
the Chief Financial Officer.
Measures continue to be taken to review and embed internal controls and risk management procedures
into the business processes of the organisation and to deal with areas of improvement which come to the
management’s and the Board’s attention. We expect the internal controls for the business to change as
the business expands both geographically and in terms of product development.
The Company’s auditors are encouraged to raise comments on internal control in their management letter
following their audit, and the points raised and actions arising are monitored through to completion by the
Audit Committee.
Corporate Culture
Corporate Responsibility
The Board recognises its employment, environmental and health and safety responsibilities. It devotes
appropriate resources towards monitoring and improving compliance with existing standards. There is a
professional Human Resources Director. Laura Hills is responsible for oversight at the Board level. Ms.
Hills ensures that the Group’s policies are upheld and providing the necessary resources. All members of
the Board have significant experience in matters of public policy.
Employees
The Board recognises that the Group’s employees are its most important asset.
The Group is committed to achieving equal opportunities and to complying with relevant anti-
discrimination legislation. It is established Group policy to offer employees and job applicants the
opportunity to benefit from fair employment, without regard to their sex, sexual orientation, marital status,
race, religion or belief, age or disability. Employees are encouraged to train and develop their careers.
The Group has an employee handbook that is provided to all employees upon starting their employment
within the Group.
The Group has continued its policy of informing all employees of matters of concern to them as
employees, both in their immediate work situation and in the wider context of the Group’s well-being.
Water Intelligence plc
21
Corporate Governance Statement
In addition, all directors and senior employees are required to abide by the Group’s share dealing code,
which was updated in 2016 to reflect changes made to legislation following the introduction of the Market
Abuse Regulation.
Audit Committee Annual Review
The role of the Audit Committee is to monitor the quality of internal controls and check that the financial
performance of the Group is properly assessed and reported on. It receives and reviews reports from the
Chief Financial Officer, other members of management and external auditors relating to the interim and
annual accounts and the accounting and internal control systems in use throughout the Group. The
members of the Audit Committee are Dan Ewell (Chairman) and Michael Reisman.
The Executive Chairman and Chief Financial Officer are invited to attend parts of meetings, with other
senior financial managers required to attend when necessary. The external auditors attend meetings to
discuss the planning and conclusions of their work and meet with the members of the Committee. The
Committee is able to call for information from management and consults with the external auditors directly
as required.
The objectivity and independence of the external auditors is safeguarded by reviewing the auditors’ formal
declarations, monitoring relationships between key audit staff and the Company and tracking the level of
non-audit fees payable to the auditors.
The Committee met twice during the year, to review the 2021 annual accounts and the interim accounts to
30 June 2022. The Committee reviewed with the independent auditor its judgements as to the
acceptability of the Company’s accounting principles.
Remuneration Committee Annual Review
The Remuneration Committee convenes not less than once a year and during the year it met on two
occasions. The Committee comprises Michael Reisman and Bobby Knell, with Michael Reisman as
Chairman. The Remuneration Committee is responsible for reviewing the performance of Executive
Directors and determining the remuneration and basis of service agreement. The Remuneration
Committee also determines the payment of any bonuses to Executive Directors and the grant of options.
Where appropriate the Committee consults the Executive Chairman regarding its proposals. No Director
plays a part in any discussion regarding his or her own remuneration.
Relations with Shareholders
The Company is available to hold meetings with its shareholders to discuss objectives and to keep them
updated on the Company’s strategy, Board membership and management.
The Board also welcome shareholders’ enquiries, which may be sent via the Company’s website
www.waterintelligence.co.uk.
Water Intelligence plc
22
Statement of Directors’ Responsibilities
Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance
with the Companies Act 2006 and for being satisfied that the Financial Statements give a true and fair
view. The Directors are also responsible for preparing the Financial Statements in accordance with UK
adopted International Accounting Standards.
Company law requires the Directors to prepare Financial Statements for each financial period which give
a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the
Company and the Group for that period. In preparing those Financial Statements, the Directors are
required to:
•
select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
•
•
state whether applicable accounting standards have been followed, subject to any material
departures disclosed and explained in the Financial Statements; and
prepare the Financial Statements on the going concern basis unless it is inappropriate to presume
that the Company and the Group will continue in business.
The Directors confirm that they have complied with the above requirements in preparing the
Financial Statements. The Directors are responsible for keeping ade quate accounting records that
are sufficient to show and explain the Company's transactions, disclose with reasonable accuracy
at any time the financial position of the Company and the Group, and to enable them to ensure that
the Financial Statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and Financial Statements are made
available on a website. Financial Statements are published on
the Group's website
(www.waterintelligence.co.uk) in accordance with legislation in the United Kingdom governing the
preparation and dissemination of Financial Statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Group's website is the responsibility of the Directors .
The Directors' responsibility also extends to the ongoing integrity of the Financi al Statements contained
there.
Water Intelligence plc
23
Independent Auditors’ report to the members of
Water Intelligence plc
Opinion
We have audited the financial statements of Water Intelligence plc (the “Parent Company”) and its
subsidiaries (the “Group”) for the year ended 31 December 2022, which comprise:
•
•
•
•
•
the Group statement of comprehensive income for the year ended 31 December 2022;
the Group and parent company statements of financial position as at 31 December 2022;
the Group and parent company statements of changes in equity for the year then ended;
the Group and parent company statements of cash flows for the year then ended; and
the notes to the financial statements, including significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group and parent
company financial statements is applicable law and UK-adopted international accounting standards.
In our opinion the financial statements:
• give a true and fair view of the state of the Group’s and of the Parent Company's affairs as at 31
December 2022 and of the Group’s profit for the period then ended;
• have been properly prepared in accordance with UK-adopted international accounting standards;
and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’
assessment of the Group’s and Parent Company’s ability to continue to adopt the going concern basis of
accounting included:
•
•
•
•
•
review and challenge of management’s going concern assessment and assumptions used
covering a minimum of 12 months from the date of approval of these financial statements;
tested mathematical accuracy of the model used by management in their assessment;
discussed with management and evaluated their assessment of the group and the company’s
liquidity requirement;
assessed the reasonableness of management’s budget/forecasts, including comparison to
actual results achieved in the year; and
Assessing the completeness and accuracy of the matters described in the going concern
disclosures within the significant accounting policies as set out in Note 3.
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the Group’s and Parent
Company's ability to continue as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Water Intelligence plc
24
Independent Auditors’ report to the members of
Water Intelligence plc
Our responsibilities and the responsibilities of the directors with respect to going concern are described in
the relevant sections of this report.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material
if it could reasonably be expected to change the economic decisions of a user of the financial statements.
We used the concept of materiality to both focus our testing and to evaluate the impact of misstatements
identified.
Based on our professional judgement, we determined overall materiality for the Group financial
statements as a whole to be $330,000 (2021: $398,000), based on approximately 6% of Group profit
before tax (2021: 7% of Group profit before tax after excluding the one-off gain of $1,869,800 recognised
in respect of the PPP loan forgiveness).
Materiality for the Parent Company financial statements was based on an asset-based figure which was
restricted to $100,000 (2021: $40,400) for the parent.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for
the audit of the financial statements. Performance materiality is set based on the audit materiality as
adjusted for the judgements made as to the entity risk and our evaluation of the specific risk of each audit
area having regard to the internal control environment. This is set at $231,000 (2021: $298,000) for the
group and $70,000 (2021 $30,300) for the parent.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for
related party transactions and directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of $16,500 (2021:
$19,900). Errors below that threshold would also be reported to it if, in our opinion as auditor, disclosure
was required on qualitative grounds.
Overview of the scope of our audit
The Group, parent company and UK subsidiaries are accounted for from a location in the UK, whilst its
material US subsidiaries and Australian subsidiary are accounted for from the US. Our audit was
conducted from the main operating location in the UK and component auditors were used to perform the
audit work in the US. We have planned, controlled, and reviewed the group audit under our direction. We
have remotely reviewed the US work to carry out our review of component auditor working papers and
have met with group management virtually.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified. These matters included those
which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
This is not a complete list of all risks identified by our audit.
Water Intelligence plc
25
Independent Auditors’ report to the members of
Water Intelligence plc
Key audit matter
How the scope of our audit addressed the key audit
matter
Revenue recognition
Our audit procedures included:
Revenue is recognised in accordance
with the accounting policy set out in the
financial statements in Note 3. The
Group has several different revenue
streams, some of which contain
judgements, particularly in recognising
when the performance obligations have
been satisfied. This is determined with
reference to the underlying contract with
the purchaser and the nature of the
service provided.
Impairment on goodwill and
indefinite life intangible assets
The carrying value of goodwill and
indefinite life intangible assets relates to
goodwill on franchisor activities, goodwill
on acquisitions and owned stores
goodwill for which an annual impairment
review is required to be performed.
Recoverability of these involves
judgement regarding the future
performance of the cash generating
units to which these assets are
allocated, consequently, we consider
their recoverability to have a higher risk
of material misstatement
This is set out in the financial statements
in Note 3 and 13.
• Validating that revenue is recognised in
accordance with the accounting policies;
• Evaluating that the accounting policies are
appropriate and in accordance with International
Financial Reporting Standard 15 ‘Revenue from
Contract with Customers’ and performed audit
procedures to provide evidence that revenue was
accounted for in accordance with the policy;
• Testing a sample of revenue transaction across
the operating companies of the Group across
each revenue stream by agreeing amounts to
supporting documentation, cash receipts and
ensuring the satisfaction of the relevant
performance obligation; and
• Assessing the appropriateness of the related
disclosures in the financial statements.
• We reviewed management’s assessment of the
carrying value of the group’s intangible assets. In
considering this assessment, we evaluated:
• The discounted cash-flow forecasts for the group
and the relevant cash generating units. This
assessment included consideration of the key
assumptions, which principally included discount
rate and growth rates as discussed in Note 13;
• We have checked the arithmetic accuracy of the
forecast;
• Held discussion with management over plans and
intentions for the group;
• Applied stress tests to the model for reasonable
possible changes in the assumptions; and
• Performed a shadow calculation of the discount
rate by our internal valuation specialist.
Other information
The directors are responsible for the other information contained within the annual report. The other
information comprises the information included in the annual report, other than the financial statements
and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
Water Intelligence plc
26
Independent Auditors’ report to the members of
Water Intelligence plc
Our responsibility is to read the other information and, in doing so, consider whether the other information
is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our audit
•
•
the information given in the strategic report and the directors' report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the group and the parent company and their environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or
the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for
our audit have not been received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and
returns; or
•
certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 23, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below:
Water Intelligence plc
27
Independent Auditors’ report to the members of
Water Intelligence plc
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud, is detailed below however the primary responsibility for the prevention and detection of
fraud lies with management and those charged with governance of the Parent Company.
Based on our understanding of the Group and the Company and industry, discussions with management
and directors we identified financial reporting standards and Companies Act 2006 as having a direct effect
on the amounts and disclosures in the financial statements.
• As part of our audit planning process, we assessed the different areas of the financial statements,
including disclosures, for the risk of material misstatement. This included considering the risk of
fraud where direct enquiries were made of management and those charged with governance
concerning both whether they had any knowledge of actual or suspected fraud and their
assessment of the susceptibility of fraud. We considered the risk was greater in areas that involve
significant management estimate or judgement. Based on this assessment we designed audit
procedures to focus on the key areas of estimate or judgement, this included specific testing of
journal transactions, both at the year end and throughout the year.
• We used data analytic techniques to assist in identifying any unusual transactions or unexpected
relationships.
Owing to the inherent limitations of an audit, there is an unavoidable risk that some material
misstatements of the financial statements may not be detected, even though the audit is properly planned
and performed in accordance with the ISAs (UK).
The potential effects of inherent limitations are particularly significant in the case of misstatement resulting
from fraud because fraud may involve sophisticated and carefully organised schemes designed to conceal
it, including deliberate failure to record transactions, collusion or intentional misrepresentations being
made to us.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's
members those matters we are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company's members as a body, for our audit work, for this report, or for the opinions we
have formed.
THIS REPORT HAS NOT YET BEEN SIGNED
John Charlton
(Senior Statutory Auditor)
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
Date: 20 June 2023
Water Intelligence plc
28
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
Revenue
Cost of sales
Gross profit
Administrative expenses
– Other Income
– Share-based payments
– Amortisation of intangibles
– Other administrative costs
Total administrative expenses
Operating profit
PPP loan forgiveness
Finance income
Finance expense
Profit before tax
Taxation expense
Profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Other Comprehensive Income
Subsequently reclassified to the P&L
Exchange differences arising on translation of foreign
operations
Cash flow hedge movement
Not subsequently reclassified to the P&L
Fair value adjustment on listed equity investment (net of
deferred tax)
Total comprehensive profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Notes
4
Year ended
31 December
2022
$
Year ended
31 December
2021
$
71,333,461
54,543,408
(9,659,600)
(8,964,486)
61,673,861
45,578,922
7
13
23
8
9
10
130,405
(462,097)
(968,086)
(53,528,825)
)
(54,828,603)
6,845,258
-
229,550
(1,570,592)
69,484
(442,708)
(470,226)
(38,131,195)
)
(38,974,645)
6,604,277
1,869,800
51,092
(969,130)
5,504,216
7,556,039
(1,837,737)
(1,641,350)
3,666,479
5,914,689
3,566,540
99,939
3,666,479
5,764,952
149,737
5,914,689
(409,371)
(221,281)
448,177
-
(690,885)
(300,049)
3,014,400
5,393,359
2,914,461
99,939
3,014,400
5,243,622
149,737
5,393,359
Profit per share attributable to equity holders of Parent
Basic
Diluted
11
11
Cents
20.5
19.2
Basic adjusted for PPP loan forgiveness
Diluted adjusted for PPP loan forgiveness
The results reflected above relate to continuing activities.
The accompanying notes on pages 36 to 70 are an integral part of these financial statements.
20.5
19.2
11
11
Cents
36.1
33.3
24.4
22.5
Water Intelligence plc
29
Consolidated Statement of Financial Position
as at 31 December 2022
Notes
ASSETS
Non-current assets
Goodwill and indefinite life intangible assets
Listed equity investment
Other intangible assets
Interest rate swap
Property, plant and equipment
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity attributable to holders of the parent
Share capital
Share premium
Shares held in treasury
Merger reserve
Share based payment reserve
Foreign exchange reserve
Reverse acquisition reserve
Equity investment reserve
Cash flow hedge reserve
Retained earnings
Equity attributable to Non-Controlling
interest
Non-controlling Interest
Non-current liabilities
Borrowings
Deferred consideration
Deferred tax liability
Current liabilities
Trade and other payables
Borrowings
Deferred consideration
TOTAL EQUITY AND LIABILITIES
13
24
13
23
14
17
16
17
18
21
21
21
21
23
12
20
19
23
12
2022
$
2021
$
44,966,672
474,613
6,019,360
448,177
9,224,955
287,572
61,421,349
759,070
11,393,584
23,014,454
35,167,108
96,588,457
37,268,469
1,185,039
3,818,037
-
7,807,227
429,219
50,507,991
677,218
8,379,894
23,802,352
32,859,464
83,367,455
143,192
35,417,072
(1,139,404)
1,001,150
1,555,090
(1,504,863)
(27,758,088)
(644,213)
448,177
47,097,133
54,615,246
142,260
35,252,633
(468,427)
1,001,150
1,092,993
(1.095.492)
(27,758,088)
46,672
-
43,552,575
51,766,276
598,636
612,528
15,334,813
7,164,421
1,915,581
24,414,815
8,176,893
8,220,613
1,576,872
17,974,378
6,331,107
5,519,560
5,109,093
16,959,760
96,588,457
4,194,031
3,325,579
5,494,663
13,014,273
83,367,455
The financial statements of Water Intelligence plc, company number 03923150, were approved by the
Board of Directors and authorised for issue on 20 June 2023. They were signed on its behalf by:
Patrick De Souza
Executive Chairman
The accompanying notes on pages 36 to 70 are an integral part of these financial statements
Water Intelligence plc
30
Company Statement of Financial Position
as at 31 December 2022
ASSETS
Non-current assets
Investment in subsidiaries
Trade and other receivables
Listed equity investment
Current assets
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity attributable to holders of the parent
Share capital
Share premium
Shares held in treasury
Merger reserve
Share based payment reserve
Foreign exchange reserve
Equity investment reserve
Retained earnings
Non-current liabilities
Deferred tax liability
Current liabilities
Trade and other payables
TOTAL EQUITY AND LIABILITIES
Notes
2022
$
2021
$
15
17
24
6,626,279
22,605,908
474,613
7,411,852
23,270,653
1,185,039
29,706,800
31,867,544
17
18
4,349,554
1,384,624
4,781,282
1,865,798
5,734,178
6,647,080
35,440,978
38,514,624
21
21
21
143,192
35,417,072
(1,139,403)
1,001,150
1,555,090
(3,269,732)
(644,213)
2,406,266
35,469,422
142,260
35,252,633
(468,427)
1,001,150
1,092,993
(1,834,431)
46,672
3,154,925
38,387,775
(174,699)
(174,699)
(5,777)
77,943
(5,777)
19
146,255
132,626
146,255
35,440,978
132,626
38,514,624
The loss for the financial year in the financial statements of the parent Company was $ 748,659 (2021:
loss $808,865), which related entirely to Plc costs.
The financial statements of Water Intelligence plc, company number 03923150, were approved by
the Board of Directors and authorised for issue on 20 June 2023. They were signed on its behalf by:
Patrick De Souza
Executive Chairman
The accompanying notes on pages 36 to 70 are an integral part of these financial statements.
Water Intelligence plc
31
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
Share
Capital
$
Share
Premium
$
Shares
held in
Treasury
$
Merger
Reserve
$
Share
based
payment
reserve
$
Foreign
exchange
reserve
$
Reverse
Acquisition
Reserve
$
Equity
Investment
Reserve
$
Cash
Flow
Hedge
Reserve
$
Retained
Earnings
$
Non-
controlling
interest
$
Total
$
Total
Equity
$
As at 1 January 2021
116,212 12,091,069
(340,327) 1,001,150
650,285
(874,211)
(27,758,088)
346,721
- 37,787,623 23,020,434
346,124 23,366,558
Issue of Ordinary Shares
21,291 22,185,641
-
-
Options exercised
Share-based payment
expense
Share buyback
4,757
754,905
-
-
-
-
- 442,708
-
-
-
--
-
(466,551)
Sale of treasury share
-
221,018
338,451
-
-
-
-
-
-
- -
-
-
-
-
-
-
- -
-
-
-
-
-
-
-
-
-
-
-
- 22,206,932
-
759,662
-
442,708
(466,551)
559,469
-
-
-
-
-
-
-
-
-
-
-
-
116,667
116,667
5,764,952
5,764,952
149,737
5,914,689
-
(521,330)
-
(521,330)
- 22,206,932
-
-
-
-
759,662
442,708
(466,551)
559,469
-
(468,427) 1,001,150 1,092,993
-
(221,281)
-
(300,049)
(1,095,492)
(27,758,088)
46,672
- 43,552,575 51,766,276
612,528 52,378,804
-
-
-
-
-
-
-
-
-
Capital Contribution NCI
Profit for the year
Other comprehensive
income
As at 31 December 2021
-
-
-
-
-
-
-
-
142,260 35,252,633
As at 1 January 2022
142,260 35,252,633
(468,427) 1,001,150 1,092,993
(1,095,492)
(27,758,088)
46,672
- 43,552,575 51,766,276
612,528 52,378,804
Options exercised
932
164,439
(584,151)
-
-
-
-
Share-based payment
expense
Share buyback
Purchase non-controlling
interest
Dividend paid to non-
controlling interest
Profit for the year
Other comprehensive
income
As at 31 December 2022
-
-
-
-
--
- 462,097
- -
-
-
-
-
-
-
(86,826)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(418,780)
-
462,097
-
(86,826)
-
-
-
(418,780)
462,097
(86,826)
(21,983)
(21,983)
(76,017)
(98,000)
-
-
(37,812)
(37,812)
3,566,541
3,566,541
99,937
3,666,478
-
-
-
-
-
-
143,192 35,417,072
-
-
-
-
-
-
-
-
(1,139,404) 1,001,150 1,555,090
- -
(409,371)
-
(690,885)
448,177
-
(652,079)
-
(652,079)
(1,504,863)
(27,758,088)
(644,213)
448,177 47,097,133 54,615,246
598,636 55,213,882
The accompanying notes on pages 36 to 70 are an integral part of these financial statements
Water Intelligence plc
32
Company Statement of Changes in Equity
for the year ended 31 December 2022
Share
Capital
$
Share
Premium
$
Shares held
in Treasury
$
Merger
Reserve
$
Share
based
payment
reserve
$
Foreign
exchange
reserve
$
Equity
Investment
Reserve
$
Retained
(Losses)/
Earnings
$
Total Equity
$
116,212
12,091,069
(340,327)
1,001,150
650,285
(1,586,207)
346,721
3,963,790
16,242,693
21,291
22,185,641
4,757
754,905
-
-
-
(466,551)
-
-
221,018
338,451
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
442,708
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,206,932
759,662
442,708
(466,551)
559,469
(808,865)
(808,865)
(248,224)
(300,049)
-
(548,273)
142,260
35,252,633
(468,427)
1,001,150
1,092,993
(1,834,431)
46,672
3,154,925
38,387,775
142,260
35,252,633
(468,427)
1,001,150
1,092,993
(1,834,431)
46,672
3,154,925
38,387,775
932
164,439
-
-
-
-
-
-
-
-
(584,150)
-
(86,826)
-
-
-
-
-
-
-
-
462,097
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(418,779)
462,097
(86,826)
(748,659)
(748,659)
(1,435,301)
(690,885)
-
(2,126,186)
143,192
35,417,072
(1,139,403)
1,001,150
1,555,090
(3,269,732)
(644,213)
2,406,266
35,469,422
As at 1 January 2021
Issue of Ordinary Shares
Options exercised
Share-based payment expense
Share buyback
Sale of treasury shares
Loss for the year
Other comprehensive loss
As at 31 December 2021
As at 1 January 2022
Options exercised
Share-based payment expense
Share buyback
Loss for the year
Other comprehensive income
As at 31 December 2022
The following describes the nature and purpose of each reserve within owners’ equity:
Share capital
Share premium
Amount subscribed for share capital at nominal value.
Amount subscribed for share capital in excess of nominal value.
Shares held in treasury
Amounts received for buyback of shares
Merger reserve
Non-distributable reserve arising on reverse acquisition.
Share based payment reserve
Amounts recognised for the fair value of share options granted in accordance with IFRS 2.
Foreign exchange reserve
Foreign exchange differences on re-translation.
Equity investment reserve
Fair value adjustments on the listed equity investment (net of deferred tax).
Retained profits/(losses)
Cumulative net profits/(losses) recognised in the Financial Statements.
The accompanying notes on pages 36 to 70 are an integral part of these financial statements
Water Intelligence plc
33
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
Year ended
31 December
Year ended
31 December
2021
2022
Cash flows from operating activities
Profit before tax
Adjustments for non-cash/non-operating items:
Depreciation of plant and equipment
Amortisation of intangible assets
Share based payments
PPP loan forgiveness
Finance costs
Finance income
$
$
5,504,216
7,556,039
3,236,683
968,086
462,097
-
1,570,591
(229,550)
2,475,069
470,226
442,708
(1,869,800)
969,130
(51,092)
Operating cash flows before movements in working capital
11,512,123
9,992,280
Increase in inventories
Increase in trade and other receivables
(Decrease) / Increase in trade and other payables
Cash generated by operations
Income taxes paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of plant and equipment
Purchase of intangible assets
Acquisition of subsidiaries
Reacquisition of franchises
Purchase of listed equity investment
Purchase of non-controlling interest
Finance income
Net cash used in investing activities
(81,852)
(2,820,793)
1,932,825
(232,427)
(1,924,070)
(684,619)
10,542,303
7,151,164
(1,670,816)
(1,021,648)
8,871,487
6,129,516
(1,202,705)
(2,424,395)
(3,850,000)
(1,600,000)
(153,700)
(98,000)
229,550
(517,707)
(2,078,559)
(979,782)
(5,239,558)
-
-
51,092
(9,099,250)
(8,764,514)
Cash flows from financing activities
Issue of ordinary share capital
Premium on issue of ordinary share capital
Share buyback
Sale of treasury shares
Options exercised
Dividend paid to non-controlling interest
Finance costs
Proceeds from borrowings
Repayment of borrowings
Repayment of notes
Repayment of lease liabilities
-
-
(86,826)
-
(418,780)
(37,812)
(1,202,378)
12,356,696
(3,815,204)
(5,759,978)
(1,595,853)
21,291
22,185,641
(466,551)
559,469
714,950
-
(969,130)
3,200,000
(1,827,765)
(2,350,676)
(1,448,594)
Net cash (used)/generated from financing activities
(560,135)
19,618,635
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at end of year
The accompanying notes on pages 36 to 70 are an integral part of these financial statements
(787,898)
23,802,352
23,014,454
16,983,637
6,818,715
23,802,352
Water Intelligence plc
34
Company Statement of Cash Flows
for the year ended 31 December 2022
Cash flows from operating activities
Loss before tax
Adjustments for non-cash/non-operating items:
Share based payment expense
Operating cash flows before movements in working capital
Decrease/(Increase in trade and other receivables)
(Decrease)/Increase in trade and other payables
Cash used by operations
Income taxes paid
Net cash used by operating activities
Cash flows from investing activities
Purchase of listed equity investment
Net cash used in investing activities
Cash flows from financing activities
Issue of ordinary share capital
Premium on issue of ordinary share capital
Share buyback
Sale of treasury shares
Options exercised
Net cash generated from financing activities
(Decrease)/Increase in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at end of period
Year ended
31 December
2022
$
Year ended
31 December
2021
$
(748,659)
(808,865)
462,097
(286,562)
1,096,473
(631,779)
442,708
(366,157)
(20,934,141)
(215,442)
178,132
(21,515,740)
-
178,132
-
(21,515,740)
(153,700)
(153,700)
-
-
-
-
21,291
22,185,641
(86,826)
(466,551)
-
(418,780)
(505,606)
559,469
714,950
23,014,800
(481,174)
1,499,060
1,865,798
1,384,624
366,738
1,865,798
The accompanying notes on pages 36 to 70 are an integral part of these financial statements
Water Intelligence plc
35
Notes to the Financial Statements
1
General information
The Group is a leading provider of minimally invasive, leak detection and remediation services for potable
and non-potable water. The Group’s strategy is to be a “One-stop Shop” of water leak and repair solutions
(services and products) for residential, commercial and municipal customers.
The Company is a public limited company limited by shares. Domiciled in the United Kingdom and
incorporated under registered number 03923150 in England and Wales. The Company’s registered offic e
is 27-28 Eastcastle Street, London W1W 8DH.
The Company is listed on AIM of the London Stock Exchange. These Financial Statements were
authorised for issue by the Board of Directors on 20 June 2023.
2
Adoption of a new International Financial Reporting Standards
No new standards and interpretations issued by the IASB had a significant impact on the consolidated
financial statements.
Standards, amendments, and interpretations to published standards not yet effective
The Directors have considered those standards and interpretations, which have not been applied in the
financial statements but are relevant to the Group’s operations, that are in issue but not yet effective and
do not consider that they will have a material impact on the future results of the Group
3
Significant accounting policies
Basis of preparation
These Financial Statements of the Group and Company are prepared on a going concern basis, under
the historical cost convention and in accordance with UK adopted International Accounting Standards
(IFRS). The Parent Company’s Financial Statements have also been prepared in accordance with UK
adopted International Accounting Standards as applied by the Companies Act 2006.
The preparation of Financial Statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and factors that are
believed to be reasonable under the circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The Financial Statements are presented in US Dollars ($), rounded to the nearest dollar.
Going concern
The Directors have prepared a business plan and cash flow forecast for the period to December 2024. The
forecast contains certain assumptions about the level of future sales and the level of margins achievable.
These assumptions are the Directors’ best estimate of the future development of the business. The Group
generates increasing levels of cash driven by its profitable and growing US-based business, ALD. The
Directors also note that the Group has diversified its operations further with growth in WII. Moreover, after
oversubscribed capital raises in July and November 2021 and expansion of its credit facilities in February
2021 and March 2022, the Directors believe that funding will be available on a case-by-case basis for
additional initiatives.
Water Intelligence plc
36
Notes to the Financial Statements
Cash at 31 December 2022 was $23 million (2021: $23.8 million). At 31 December 2022, total debt
(borrowings and deferred consideration from franchise acquisitions) was $29 million with amortisation of
such amount spread through 2027. Meanwhile, operating cash flows (EBITDA) in 2022 increased by 16%
to $11.1 million (2021: $9.5 million). Cash on the balance sheet plus an ability to generate significant
cash relative to the amount of debt that comes due in any one year between 2023 and 2027 are important
variables for Director considerations. Moreover, the Directors consider various scenarios that may
influence cash availability such as inflationary pressures, the threat of recession from rising interest rates
and the use of cash for investments, such as Salesforce.com and related software applications, geared
to create operational efficiencies that enhance organic cash generation.
The Directors conclude that the Group will have adequate cash resources both to pursue its growth plan and
to accelerate execution if it so chooses. The Directors are satisfied that the Group has adequate resources to
continue in operational existence for the foreseeable future and accordingly, continue to adopt the going
concern basis in preparing the financial statements.
Basis of consolidation
The Group financial statements consolidate the accounts of Water Intelligence plc and all of its subsidiary
undertakings made up to 31 December 2022. The Consolidated Statement of Comprehensive Income
includes the results of all subsidiary undertakings for the period from the date on which control passes.
Control is achieved where the Group (or one of its subsidiary undertakings) obtains the power to govern
the financial and operating policies of an investee entity so as to derive benefits from its activities.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.
The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued
and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair values at
the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of
acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired,
the difference is recognised directly in the income statement.
The acquisition of ALDHC in 2010 was accounted for as a reverse acquisition. The assets and liabiliti es
revalued at their fair value on acquisition therefore related to the Company. Both a merger reserve and
a reverse acquisition reserve were created 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.
Inter-company transactions and balances and unrealised gains or losses on transactions between Group
companies are eliminated in full.
Parent Company income statement – UK head office only
The Company has taken advantage of Section 408 of the Companies Act 2006 in not presenting its own
Statement of Comprehensive Income. The Company’s loss after tax for the year ended 31 December
2022 is $748,658 (2021: $808,865).
Inventories
The inventories, consisting primarily of equipment, parts, and supplies, are recorded at the lower of cost
(FIFO) or net realisable value.
Defined contribution pension scheme
Water Intelligence International provides a government run pension scheme under UK legislation.
Employees have the opportunity to opt in or opt out. It is compulsory for companies to offer this to their
employees. This was implemented on 1 November 2017.
Taxation
Income tax expense represents the sum of the current tax and deferred tax charge for the year.
Water Intelligence plc
37
Notes to the Financial Statements
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as
reported in the Statement of Comprehensive Income because it excludes items of income or expense
that are taxable or deductible in other periods and it further excludes items that are never taxable or
deductible. The Group’s and Company's liability for current tax is calc ulated using tax rates that have
been enacted or substantively enacted by the year end.
Deferred tax
Deferred income taxes are provided in full, using the liability method, for all temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements.
Deferred income taxes are determined using tax rates that have been enacted or substantially enacted
and are expected to apply when the related deferred income tax asset is realised or the related deferred
income tax liability is settled.
The principal temporary differences arise from depreciation or amortisation charged on assets and tax
losses carried forward. Deferred tax assets relating to the carry forward of unused tax losses are
recognised to the extent that it is probable that future taxable profit will be available against which the
unused tax losses can be utilised. The carrying amount of deferred tax assets is reviewed at each balance
sheet date and reduced to the extent that it is probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
Foreign currencies
Functional and presentational currency
(i)
Items included in the Financial Statements are measured using the currency of the primary economic
environment in which each entity operates
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in the income statement.
(ii) Group Companies
The results and financial position of all the Group entities that have a functional currency different from
the presentational currency are translated into the presentational currency as fol lows:
(a)
(b)
(c)
assets and liabilities for each statement of financial position presented are translated at closing rate
at the date of the statement;
the income and expenses are translated at average exchange rates for period where there is no
significant fluctuation in rates, otherwise a more precise rate at a transaction date is used; and
all resulting exchange differences are recognised in other comprehensive income.
Leases
The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right of
use lease is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any
lease payments made at or before commencement date plus any initial direct costs incurred and an estimate
of costs to dismantle and remove the underlying asset. The right-of-use asset is subsequently depreciated
using the straight-line method from the commencement date to the earlier of the end of the useful life of the
right-of-use asset or the end of the useful life of the right-of-use asset or the end of the lease term. The lease
liability is initially measured at the present value of the lease payments that are not paid at the commencement
date discounted using the Group incremental borrowing rate.
Water Intelligence plc
38
Notes to the Financial Statements
Revenue recognition
IFRS 15 (Revenue from Contracts with Customers) came into effect on 1 January 2018. Under IFRS 15,
revenue is recognized when a customer obtains control of a good or service and thus has the ability to
direct the use and obtain the benefits from the good or service.
Nature of the Business
Water Intelligence plc operates through two wholly-owned subsidiaries: American Leak Detection (ALD) and
Water Intelligence International (WII). Both subsidiaries provide precision water leak detection and repair
services. The services that are performed for various customers are discrete activities - locating a water leak
or fixing a leak. The services are not bundled. Each service has a price established in a rate book. Depending
on customer preference, a service technician may stop after locating the leak. The customer would pay a fee
for that service. Or following the leak detection service, the technician may also provide repair services for
separate fee depending on what is contracted for by the customer. Service jobs are typically short in duration,
usually 1-2 hours for a leak detection service. ALD delivers these services through corporate locations and
franchise locations across the United States and in Canada and Australia. WII operates outside the United
States, mainly in the UK, and delivers services only through corporate locations.
Customers and Sources of Revenue
Residential.
Both ALD and WII provide services to residential customers. Service technicians, whether from franchise-
operated locations or corporate-operated locations, provide services to homeowners. When the service is
delivered, the homeowner is invoiced immediately upon completion of the service. The price of the service
is a fixed call-out charge for the technician to come to the house and an hourly charge based on the time
it takes to find the leak. Revenue is recognized upon completion of the service.
Business-to-Business.
ALD has written national contracts with nationwide insurance companies. The insurance company, as
ALD’s customer, receives claims from homeowners or property management for water -related damage.
The insurance company contracts directly with ALD headquarters. ALD headquarters, as the principal,
takes liability risk for performance of the service jobs and for providing to insurance companies certain
management services. A national price book is established as part of the national contract. After the leak
detection service is performed, report from ALD headquarters is delivered to the insurance company and
the insurance company is also invoiced for the job. Service is deemed complete upon delivery of the report
and invoice. Revenue is recognized upon delivery of the report and invoice.
Municipal.
WII headquarters or ALD headquarters will contract with a municipality to provide leak detection services.
Such leak detection services largely consist of surveying kilometers of pipe. During such surveys, a
designated distance is covered each day with a daily rate per technician per kilometer covered. A report
is prepared for the municipality weekly. When the report is delivered, the service is deemed complete with
respect to the distance covered. The municipality will be billed for the week’s work when the report is
conveyed. Revenue is recognized upon the delivery of the report.
Franchise Sales, Equipment and On-going Royalty Payments.
ALD is a franchisor and leak detection services are delivered not only by corporate -operated locations but
also by ALD’s franchise System. Franchisees are independently owned and operated.
The franchise System has the following characteristics for revenue recognition. ALD sells franchises to
third parties. A franchise is an exclusive territory in which a franchis ee is authorized to deliver ALD
services, mainly leak detection and repair. ALD headquarters provides training and advice to support the
delivery of services by franchisees.
The franchise sale is documented by means of a ten-year license agreement that is renewable for ten-year
increments based on certain conditions derived from franchisee performance. The agreement has three
Water Intelligence plc
39
Notes to the Financial Statements
main components. First, the agreement provides for the payment of an upfront fee in exchange for the
exclusive territory and training. The upfront fee is non-refundable. ALD revenue is recognized with respect
to most of the upfront fee at the Closing of the franchise sale. The remaining portion of the upfront fee is
recognized as revenue over time using a straight-line method to reflect the delivery of franchisor services
over the ten-year period. Second, the franchise agreement provides that the franchisee may purchase
proprietary equipment from ALD and more general equipment from ALD -approved third parties. There is a
price book. ALD revenue is recognized upon the delivery of equipment to franchisees and an invoice for
the equipment. Third, in accordance with the franchise license agreement, each franchise pays a royalty
fee to ALD each month based on a percentage of the franchisee’s gross sales for that month. Each month,
a franchise files a royalty report and pays the royalty amount. ALD revenue is recognized upon the receipt
of the royalty report.
In respect of the sale of franchise territories, the Group will monitor on an ong oing basis the correct
apportionment for each such sale between recognition of upfront fees and fees which are deferred over
the length of the franchise agreement. This year such sales were not a material part of the Group’s revenue
or income.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when
the Group becomes a party to the contractual provisions of the instrument.
Investments in equity instruments are initially designated at FVTOCI and are initially measured at fair
value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising
from changes in fair value recognised in other comprehensive income and accumulated in the
investment’s revaluation reserve. The cumulative gain or loss is not reclassified to profit or loss on
disposal of the equity investments, instead, it is transferred to retained earnings.
The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate,
including interest rate swaps.
Derivatives are recognised initially at fair value at the date a derivative contract is entered into and are
subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is
recognised in profit or loss immediately unless the derivative is designated and effective as a hedging
instrument, in which event the timing of the recognition in profit or loss depends on the nature of the
hedge relationship.
Loans and receivables
Trade receivables, loans, and other receivables held with the objective to collect the contractual cash
flows are classified as subsequently measured at amortised cost. These are initially measured at fair value
plus transaction costs. At each period end, there is an assessment of the expected credit loss in accordance
with IFRS 9, with any increase or reduction in the credit loss provision charged or released to other selling
and administrative expenses in the statement of comprehensive income.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks, and other short
term highly liquid investments with original maturities of three months or less.
Impairment of financial assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held
at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows
due in accordance with the contract and all the cash flows that the Group expects to receive, discounted
at an approximation of the original effective interest rate. The expected cash flows will include cash flows
from the sale of collateral held or other credit enhancements that are integral to the contractual t erms.
The Group always recognises lifetime ECLs for trade receivables and contract assets. ECLs on these
financial assets are estimated using a provision matrix based on the Group’s historical credit loss
Water Intelligence plc
40
Notes to the Financial Statements
experience, adjusted for factors that are specific to the debtors, general economic conditions and an
assessment of both the current as well as the forecast conditions at the reporting date, including time
value of money where appropriate.
For all other financial instruments, the Group recognises lifetime ECL when there has been a significant
increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has
not increased significantly since initial recognition, the Group measures the loss allo wance for that
financial instrument at an amount equal to 12‑month ECL.
Financial liabilities
Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and
are subsequently measured at amortised cost using the effective interest method.
Equity instruments
An equity instrument is any instrument with a residual interest in the assets of the Company after deducting
all of its liabilities. Equity instruments (ordinary shares) are recorded at the proceeds received, net of
direct issue costs.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged,
cancelled or they expire.
Property, plant and equipment
All property, plant and equipment is stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets as
follows:
Equipment and displays:
Motor vehicles:
Leasehold improvements:
5 to 7 years
5 years
7 years or lease term, whichever is shorter
The asset’s residual values and economic lives are reviewed, and adjusted if appropriate, at each
reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount. Assets that are no longer of
economic use to the business are retired.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and
are recognised within other (losses) or gains in the income state ment.
Goodwill
Goodwill represents the excess of the fair value of the consideration over the fair values of the identifiable
net assets acquired.
Goodwill arising on acquisitions is not subject to amortisation but is subject to annual impairment testing.
Any impairment is recognised immediately in the Consolidated Statement of Comprehensive Income and
not subsequently reversed.
Other intangible assets
Intangible assets are recorded as separately identifiable assets and recognised at historical cost less any
accumulated amortisation. These assets are amortised over their definite useful economic lives on the
straight-line method.
Amortisation is computed using the straight-line method over the estimated definite useful lives of the
assets as follows:
Water Intelligence plc
41
Notes to the Financial Statements
Covenants not to compete
Customer lists
Salesforce CRM platform
Trademarks
Patents
Product development
Years
1-6
5
5
20
10
4
Any amortisation is included within administrative expenses in the statement of comprehensive income.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually,
either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed
annually to determine whether the indefinite life continues to be supportable. If not, the change in useful
life from indefinite to finite is made on a prospective basis.
The asset’s residual values and economic lives are reviewed, and adjusted if appropriate, at each balance
sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and
are recognised within other (losses) or gains in the Statement of Comprehensive Income.
Research and development
Research expenditure is recognised as an expense when incurred. Costs incurred on development
projects (relating to the design and testing of new or improved products) are recognised as intangible
assets when the following criteria are fulfilled.
•
It is technically feasible to complete the intangible asset so that it will be available for use or resale;
• Management intends to complete the intangible asset and use or sell it;
•
•
•
•
There is an ability to use or sell the intangible;
It can be demonstrated how the intangible asset will generate possible future economic benefits;
Adequate technical, financial and other resource to complete the deve lopment and to use or sell the
intangible asset are available; and
The expenditure attributable to the intangible asset during its development can be reliably measured.
Other development expenditures that do not meet these criteria are recognised as an expense in the
period incurred. Development costs previously recognised as an expense are not recognised as an asset
in a subsequent period. Capitalised development costs are recorded as intangible assets and are
amortised from the point at which they are ready for use on a straight-line basis over the asset’s estimated
useful life.
Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that is
subject to risks and returns that are different from those of other business segments.
Impairment reviews
Assets that are subject to amortisation and depreciation are reviewed for impairment when events or
changes in circumstances indicate that the carrying amount may not be fully recoverable. Assets that are
not subject to amortisation and depreciation are reviewed on an annual basis at each year end and, if there
is any indication that an asset may be impaired, its recoverable amount is estimated. The recoverable
amount is the higher of its net selling price and its value in use. Any impairment loss arising f rom the review
is charged to the Statement of Comprehensive Income whenever the carrying amount of the asset exceeds
its recoverable amount.
Share based payments
The Group has made share-based payments to certain Directors and employees and to certain advisers by
way of issue of share options. The fair value of these payments is calculated either using the Black Scholes
option pricing model or by reference to the fair value of any fees or remuneration settled by way of granting of
Water Intelligence plc
42
Notes to the Financial Statements
options. The expense is recognised on a straight-line basis over the period from the date of award to the date
of vesting, based on the best estimate of the number of shares that will eventually vest.
Critical accounting estimates and judgements
The preparation of Financial Statements in conformity with UK adopted International Accounting
Standards.requires the use of judgements together with accounting estimates and assumptions that affect
the reported amounts of assets and liabilities and the reported amounts of income and expenses during the
reporting period. Although these judgements and estimates are based on management’s best knowledge of
current events and actions, the resulting accounting treatment estimates will, by definition, seldom equal the
related actual results.
The key judgements in respect of the preparation of the financial statements are in respect of the accounting
for acquisitions, determination of separately identifiable assets on acquisition, the determination of cash
generating units, the evaluation of segmental information, the evaluation of whether there is any indication
of any impairment in investments, intangibles, goodwill or receivables and whether deferred tax assets
should be recognized for tax losses.
The estimates and assumptions that have a risk of causing material adjustment to the carrying amounts of
assets and liabilities within the next financial year are the fair value of assets arising on acquisition (see note
12), carrying value of the goodwill, the carrying value of the other intangibles (see note 13) and the carrying
value of the investments. Please see relevant notes for these areas.
4
Segmental Information
In the opinion of the Directors, the operations of the Group currently comprise five operating segments, being
(i) Franchise royalty income, (ii) Franchise-related activities (including product and equipment sales, business-
to-business sales and sales of franchises), (iii) US corporate operated locations, (iv) International corporate
operated locations and (v) Head office costs. 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 now separated into the four income generating segments (items (i) to (iv)), and items that do
not fall into these segments have been categorized as unallocated head office costs (v).
The Group mainly operates in the US, with operations in the UK and certain other countries especially
Canada and Australia. No single customer accounts for more than 10% of the Group's total external
revenue.
The following is an analysis of the Group’s revenues and profits from operations and assets by business
segment.
Revenue
Franchise royalty income
Franchise related activities
US corporate operated locations
International corporate operated locations
Total
Year ended
Year ended
31 December
31 December
2022
$
6,746,928
10,624,268
47,296,711
6,665,554
71,333,461
2021
$
6,803,489
9,769,657
31,861,087
6,109,175
54,543,408
Water Intelligence plc
43
Notes to the Financial Statements
Year ended
Year ended
31 December
31 December
2022
$
1,956,609
964,667
8,252,651
85,599
(4,915,011)
-
(840,299)
5,504,216
2021
$
1,808,730
805,171
6,007,153
315,740
(2,927,132)
1,869,800
(323,423)
7,556,039
Year ended
Year ended
31 December
31 December
2022
$
29,945,794
3,166,036
47,356,148
16,120,479
96,588,457
2021
$
27,869,663
2,452,933
43,050,953
9,993,906
83,367,455
Year ended
Year ended
31 December
31 December
2022
$
942,911
25,175
968,086
2021
$
466,217
4,009
470,226
Year ended
31 December
2022
Year ended
31 December
2021
$
-
-
2,665,878
570,805
3,236,683
$
-
-
2,009,350
465,719
2,475,069
Profit/(Loss) before tax
Franchise royalty income
Franchise related activities
US corporate operated locations
International corporate operated locations
Unallocated head office costs
PPP loan forgiveness
Non-core costs
Total
Assets
Franchise royalty income
Franchise related activities
US corporate operated locations
International corporate operated locations
Total
Amortisation
US corporate operated locations
International corporate operated locations
Total
Depreciation
Franchise royalty income
Franchise related activities
US corporate operated locations
International corporate operated locations
Total
Water Intelligence plc
44
Notes to the Financial Statements
Finance Expense
US corporate operated locations
International corporate activities
Unallocated head office costs
Total
Geographic Information
Year ended
31 December
2022
$
Year ended
31 December
2021
$
756,164
11,282
803,146
1,570,592
484,047
13,719
471,364
969,130
As noted herein, the Group has two wholly-owned subsidiaries – ALD and WII. ALD, the Group’s core
business, has US franchise-operated and corporate-operated locations and international franchises in
Australia and Canada. Meanwhile, WII has corporate -operated activities outside the US. We may
also regroup the same information into US and Outside the US to capture the Group’s effort to be
multinational company. For 2022, outside the US sales have grown 9% to $6.7 million (2021: $6.2
million). Sales in the US have grown 34% to $64.5 million (2021: $48.3 million). The percentage of
International sales to total sales has decreased to 9% (2021: 11%).
Total Revenue
Year ended 31 December 2022
Year ended 31 December 2021
US
$
International
$
Total
$
US
$
International
$
Total
$
6,636,512
110,416
6,746,928
6,698,729
104,760
6,803,489
10,624,268
- 10,624,268
9,769,657
-
9,769,657
47,296,711
- 47,296,711 31,861,087
- 31,861,087
-
6,665,554
6,665,554
-
6,109,175
6,109,175
64,557,491
6,775,970 71,333,461 48,329,473
6,213,935 54,543,408
Franchise royalty
income
Franchise related
activities
US Corporate
owned Stores
International
corporate activities
Total
5
Expenses by nature
The Group’s operating profit has been arrived at after charging:
Raw materials and consumables used
Employee costs
Depreciation charge
Amortisation charge
Marketing costs
R&D
Foreign exchange (gain)/loss
Year ended
31 December
2022
$
4,826,483
29,050,991
Year ended
31 December
2021
$
1,954,849
24,226,020
3,236,683
2,475,069
Note
6
968,086
213,260
-
38,896
470,226
293,036
-
1,624
Water Intelligence plc
45
Notes to the Financial Statements
Auditors remuneration
Fees payable to the Company’s auditor for audit of
Parent Company and Consolidated Financial
Statements
Fees payables to the Company’s auditor for other
services (assurance related services)
Year ended
31 December
2022
$
Year ended
31 December
2021
$
54,000
54,000
-
-
The Group auditors are not the auditors of the US subsidiary companies. The fees paid to the auditor of
the US subsidiary companies were $214,863 (2021: $158,614) for the audit of these companies and
$40,499 (2021: $38,899) for other services.
6
Employees and Directors
The Employees and Directors of the Company contribute to the execution and management of the
business.
Short-Term employee benefits
Directors fees, salaries and benefits
Employee wages and salaries
Employer payroll taxes
Long-Term employee benefits
Share based payments
Information regarding Directors’ emoluments are as follows:
Short-Term employee benefits
Directors’ fees, salaries and benefits
Employer payroll taxes
Year ended
31 December
2022
Year ended
31 December
2021
640,704
25,809,809
2,138,381
874,381
21,313,711
1,595,220
462,097
442,708
29,050,991
24,226,020
Year ended
31 December
2022
$
Year ended
31 December
2021
$
640,704
20,039
660,743
889,385
22,079
911,464
The highest paid Director (Executive) received emoluments of $591,473 (2021: $654,385).
In lieu of cash compensation, all of the directors were awarded stock options with an exercise price of $8.18 as announced on 7,
February 2023. (See Note 7) The value of the options is as follows: P DeSouza $80k, L Hills $40k, D Ewell $40k, B Knell $80k,
M Reisman $40k, for a total of $280k. Options granted plus director’s fees, salaries and benefits above totals $920,704 which is
to be compared to $889,385 in 2021
Water Intelligence plc
46
Notes to the Financial Statements
The average number of employees (including Directors) in the Group during the year was:
Directors (executive and non-executive)
Management
Field Services
Franchise Support
Administration
Year ended
31 December
2022
Year ended
31 December
2021
5
44
271
19
97
436
5
48
223
20
83
379
7
Share options
The Company grants share options at its discretion to Directors, management and advisors. These are
accounted for as equity settled options. Should the options remain unexercised after a period of ten years
from the date of grant the options will expire unless an extension is agreed to by the Board. Options are
exercisable at a price equal to the Company’s quoted market price on the date of grant or an exercise price
to be determined by the Board.
Details for the share options and warrants granted, exercised, lapsed and outstanding at the year-end are as
follows:
Outstanding at beginning of year
Granted during the year
Forfeited/lapsed during the year
Exercised during the year
Outstanding at end of the year
Exercisable at end of the year
Number of
share
options
2022
2,238,000
95,000
(35,000)
(70,000)
2,228,000
627,500
Weighted
Number
average
of share
exercise
options
price ($)
2022
2021
5.74 1,907,500
12.04
555,500
-
12.56
2.36
(225,000)
6.02 2,238,000
1.59
682,500
Weighted
average
exercise
price ($)
2021
3.92
10.66
-
2.54
5.74
1.58
Fair value of share options
During the year, the Group granted 95,000 Share Options pursuant to certain Acquisitions, with exercise
prices ranging from £8.17 to £11.09 ($10.30 to $12.50).
The fair value of options granted during the current year has been calculated using the Black Scholes model
which has given rise to fair values per share ranging from $2.03 to $3.21. This is based on risk-free rates of
2.81% to 3.15% and volatility of 46.8% to 47.9%.
The Black Scholes calculations for the options granted during the year resulted in a charge of $462,097 (2021:
$442,708) which has been expensed in the year.
The weighted average remaining contractual life of the share options as at 31 December 2022 was 6.20
years (2021: 7.10 years).
Water Intelligence plc
47
Notes to the Financial Statements
Options arrangements that exist over the Company’s shares at year end and at the time of the report are
detailed below:
Grant
ALDHC Plan
2013 Directors
2015 Options
2016 Directors
2016 Employee
2016 Employee
2018 Acquisition
2019 Employee
2019 Acquisition
2020 Employee
2020 Acquisition
2021 Acquisition
2021 Directors
2021 Acquisition
2021 Acquisition
2022 Acquisition (1)
2022 Acquisition (2)
2023 Directors (3)
2023 Acquisition (4)
Total
At report
date
67,500
100,000
117,500
100,000
25,000
82,500
135,000
425,000
50,000
485,000
25,000
45,500
300,000
100,000
75,000
20,000
75,000
105,000
25,000
2,358,000
2022
67,500
100,000
117,500
100,000
25,000
82,500
135,000
425,000
50,000
485,000
25,000
45,500
300,000
100,000
75,000
20,000
75,000
-
-
2,228,000
2021
Exercis
e price
Exercise period
To
From
Date of
Grant
67,500 01/12/2013
100,000 01/08/2013
122,500 08/06/2015
100,000 13/06/2016
25,000 19/12/2016
132,500 19/12/2016
135,000 06/03/2018
425,000 04/04/2019
50,000 04/04/2019
500,000 31/07/2020
25,000 30/09/2020
45,500 01/01/2021
01/12/2023
$1.14 01/12/2013
01/08/2023
$1.30 01/08/2013
08/06/2025
$0.67 08/06/2015
13/06/2026
$1.26 13/06/2016
19/12/2026
$1.24 19/12/2019
$1.56 19/12/2019
19/12/2026
$3.15 06/03/2021 06/03/2028
04/04/2029
$6.24 04/04/2023
04/04/2029
$4.59 04/04/2023
31/07/2030
$5.60 31/07/2024
30/09/2030
$6.20 30/09/2024
01/01/2031
$6.80 01/01/2025
15/03/2031
300,000 15/03/2021 $10.40 15/03/2025
100,000 20/04/2021 $11.38 20/04/2025
20/04/2031
110,000 01/07/2021 $12.56 01/07/2025
01/07/2031
- 31/05/2022 $10.30 31/05/2026
31/05/2032
- 30/06/2022 $12.50 30/06/2026
30/06/2032
- 06/02/2023
06/02/2033
$8.18 06/02/2027
- 06/02/2023
06/02/2033
$8.18 06/02/2027
2,238,000
All share options are equity settled on exercise. The amounts at the Report Date reflect all share options
that have been either exercised or forfeited.
(1) On 31 May 2022, certain vendors, retained as employees, were granted options to purchase 20,000 New Ordinary Shares at
a price of $10.30 pursuant to an acquisition in 2022. These options have a four-year vesting requirement.
(2) On 30 June 2022, certain vendors, retained as employees, were granted options to purchase 75,000 New Ordinary Shares at
a price of $12.50 pursuant to the acquisition of a franchise acquired in 2022. These options have a four -year vesting
requirement.
(3) On 6 February 2023, in lieu of compensation board members received options to purchase 105,000 New Ordinary Shares at
a price of $8.18. These options have a four-year vesting requirement.
(4) On 6 February 2023, certain vendors, retained as employees, were granted options to purchase 25,000 New Ordinary Shares
at a price of $8.18 pursuant to the acquisition of a franchise acquired in 2023. These options have a four -year vesting
requirement
Patrick DeSouza received (i) 180,000 Partly Paid Shares at an exercise price of $1.07 during 2016, (ii) 750,000 Partly Paid Shares
at an exercise price of $2.71 in March 2018, (iii) 850,000 Partly Paid Shares at an exercise price of $4.82, in May 2019 and (iv)
300,000 Partly Paid Shares at an exercise price of $6.13 in October 2020 in connection with capital raising and bank financings.
These Partly Paid Shares carry voting rights but will not be admitted to trading or carry any economic rights until fully pai d.
8
Finance income
Interest income
Water Intelligence plc
48
Year ended
31 December
2022
Year ended
31 December
2021
$
229,550
$
51,092
Notes to the Financial Statements
9
Finance expense
Interest expense
Interest on lease liabilities
Total interest expense
10
Taxation
Group
Current tax:
Year ended
31 December
2022
$
1,381,162
Year ended
31 December
2021
$
832,144
189,430
1,570,592
136,986
969,130
Year ended
31 December
2022
Year ended
31 December
2021
$
$
Current tax on profits in the year
1,261,955
1,084,021
Prior year over provision
Total current tax
Deferred tax current year
Deferred tax prior year
Deferred tax (credit)/expense (note 20)
Income tax expense
-
1,261,955
575,782
-
575,782
1,837,737
-
1,084,021
557,329
-
557,329
1,641,350
The tax on the Group's loss before tax differs from the theoretical amount that would arise using the
weighted average tax rate applicable to profits of the consolidated entities as follows:
Profit before tax on ordinary activities
Tax calculated at domestic rate applicable profits in
respective countries
(2022: 24.8% versus 2021: 23.6%)
Tax effects of:
Non-deductible expenses
GILTI Inclusion
PPP loan forgiveness
Other tax adjustments, reliefs and transfers
State taxes net of federal benefit
Adjustment in respect of prior year
Changes in rates
5,504,216
7,556,039
1,242,058
1,457,165
95,621
-
-
154,095
339,601
(696)
7,058
136,081
47,262
(392,688)
136,062
263,377
2,794
(8,703)
Taxation expense recognized in income statement
1,837,737
1,641,350
The Group is subject to income taxes in multiple jurisdictions. Significant judgment is required in
determining the worldwide provision for income taxes. There are many transactions and calculations for
which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due.
As also set forth, in Note 20, at the balance sheet date, the Group’s UK trading operations had unused tax
losses of £3,449,063 (2021: £3,739,716) available for offset against future profits. £862,266 (2021: £934,929)
represents unrecognized deferred tax assets thereon at 25%. The deferred tax asset has not been
recognized due to uncertainty over timing of utilization.
Water Intelligence plc
49
Notes to the Financial Statements
The effective rate for tax for 2022 is 24.8% (2021: 23.6%).
11
Earnings per share
The profit per share has been calculated using the profit for the year and the weighted average number
of ordinary shares outstanding during the year, as follows:
Basic
Profit for the year attributable to equity holders of the Parent ($)
Weighted average number of ordinary shares
Diluted weighted average number of ordinary shares
Profit per share (cents)
Diluted profit per share (cents)
Adjusting for the PPP loan forgiveness has the following effect:
Profit per share (cents)
Adjusted Profit per share (cents)
Diluted profit per share (cents)
Adjusted Diluted profit per share (cents)
12
Acquisitions
These can be summarised as follows:
Year ended
31 December
2022
$
3,566,540
17,360,189
Year ended 31
December
2021
$
5,764,952
15,972,588
18,554,459
20.5
19.2
17,286,616
36.1
33.3
-
20.5
-
19.2
(11.7)
24.4
(10.8)
22.5
On 19 January 2022, the Group announced the reacquisition of its Fort Worth, Texas franchise territory within
the Group’s ALD franchise business. The Fort Worth operation is fast-growing and expected to accelerate
further by adding new service locations in north and west Texas during 2022. Moreover, this reacquisition
reinforces the Group’s strategy of establishing regional corporate hubs in the US that have scale to fuel growth
in nearby corporate and franchise locations. The purchase price of $7.7 million in cash is to be paid over three
years. The purchase price is based on 2021 pro forma of $3.6 million in revenue and $1.2 million in profit before
tax.
On 12 May 2022, the Group announced the reacquisition of its American Leak Detection Central Texas
franchise territory within the Group’s ALD franchise business. The franchise includes the cities of Abilene,
Lubbock and Midland which are west of recently launched corporate-operated locations of Fort Worth (via
franchise acquisition) and Wichita Falls (greenfield). The purchase price of $0.75 million in cash is based on
the franchise’s 2021 Statement of Income of $0.65 million in revenue and $0.21 million in profit before tax.
On 16 June 2022, the Group announced the acquisition of Shanahan Plumbing LLC. The acquisition builds
upon the Group’s growing ALD operations in Connecticut and New York. The purchase price of $1.0 million in
cash is based on Shanahan Plumbing’s 2021 Statement of Income of $1.9 million and $0.2 million in adjusted
profit before tax.
Water Intelligence plc
50
2022 Acquisitions
Fair value of assets and
liabilities acquired
Equipment
Vehicles
Non-compete
Liabilities / Other
Net assets acquired
Consideration
Cash
Note payable
Total consideration
Intangible assets arising on
acquisition (see note 13)
Notes to the Financial Statements
Sub. Aqu.
Fort Worth
Central
Texas
Shanahan
Adjustments
Totals
$
$
$
366,109
330,877
132,434
(140,080)
38,562
50,480
30,000
-
689,340
119,042
3,850,000
700,000
3,850,000
50,000
143,931
175,220
60,000
572,711
951,862
900,000
100,000
$
-
-
-
-
-
$
548,602
556,577
222,434
432,631
1,760,244
50,000
(41,553)
5,500,000
3,958,447
7,700,000
750,000
1,000,000
8,447
9,458,447
7,010,660
630,958
48,138
8,447
7,698,203
The intangible assets arising on the above acquisitions of $7,698,203 is included in additions to goodwill and indefinite life intangible assets for owned & operated stores
(see note 13).
Following acquisitions all Franchises are classed as one cash generating unit therefore cannot s eparately disclose revenue and profit for each individual franchise .
Water Intelligence plc
51
2021 Acquisitions
Fair value of assets and
liabilities acquired
Equipment
Vehicles
Non-compete
Liabilities / Other
Net assets acquired
Consideration
Cash
Note payable
Non-controlling interest
Total consideration
Intangible assets arising on
acquisition (see note 13)
$
-
-
-
116,667
116,667
-
-
Notes to the Financial Statements
Sub. Aqu.
Intelliditch
Sub. Aqu.
Wat-er-
save
Clermont
Reno
Las Vegas
and
Phoenix
Daytona
Medford
PlumbRight
Adjust-
ments
$
$
$
$
$
$
$
11,199
34,077
41,553
539,854
26,250
54,868
30,000
133,100
108,734
60,000
447,000
490,628
120,000
40,595
163,455
104,434
90,000
84,957
30,000
-
(13,001)
(560,250)
-
(35,000)
74,305
90,231
70,000
-
626,684
111,118
288,833
497,378
235,029
243,412
234,536
Totals
$
895,904
967,929
441,553
48,269
2,353,655
6,741,835
$
-
-
-
-
-
-
1,502,277
330,000
21,000
3,000,000
900,000
41,553
330,000
267,833
7,150,842
1,850,000
116,667
-
-
-
-
-
688,559
688,559
-
300,000
375,000
(100,000)
10,603,787
-
-
116,667
116,667
1,543,830
660,000
288,833
10,150,842
2,750,000
1,377,117
675,000
(100,000)
17,462,288
-
917,146
548,882
-
9,653,464
2,514,971
1,133,705
440,464
(100,000)
15,108,633
Water Intelligence plc
52
Notes to the Financial Statements
The amount of deferred consideration for 2022 acquisitions as well as the remaining deferred
consideration for acquisitions made in 2018, 2019, 2020 and 2021 can be summarized as follows:
Current
South Florida
Tucson
Minneapolis
San Jose
Seattle
Melbourne, Florida
Baton Rouge
Clermont
Las Vegas and Phoenix
Daytona
Medford
PlumbRight
Fort Worth
Year ended
31 December
2022
$
28,101
113,550
327,670
49,074
100,000
350,000
175,000
-
1,640,698
850,000
-
175,000
1,300,000
Year
acquired
2018
2019
2020
2020
2020
2020
2020
2021
2021
2021
2021
2021
2022
Year ended
31 December
2021
$
26,465
109,650
327,670
223,976
450,000
400,000
175,000
330,000
1,713,343
850,000
688,559
200,000
-
Total current deferred consideration
5,109,093
5,494,663
Non-Current
South Florida
Tucson
Minneapolis
San Jose
Seattle
Melbourne, Florida
Baton Rouge
Reno
Las Vegas and Phoenix
Daytona
PlumbRight
Fort Worth
Year ended
31 December
2022
$
89,341
48,468
-
72,386
300,000
-
-
-
3,954,226
150,000
-
2,550,000
Year
acquired
2018
2019
2020
2020
2020
2020
2020
2021
2021
2021
2021
2022
Year ended
31 December
2021
$
117,439
162,018
327,672
125,985
300,000
350,000
175,000
50,000
5,437,499
1,000,000
175,000
-
Total non-current deferred consideration
7,164,421
8,220,613
Water Intelligence plc
53
Notes to the Financial Statements
13
Intangible assets
The calculation of amortisation of intangible assets requires the use of estimates and judgement, related
to the expected useful lives of the assets.
An impairment review is undertaken annually or whenever changes in circumstances or events indicate
that the carrying amount may not be recovered.
Goodwill and other indefinite life intangible assets
Group
Cost
At 1 January 2021
Additions
At 31 December 2021
Additions (see note 12)
Goodwill
Acquisitions
$
Goodwill relating
to Owned &
Operated stores
$
Goodwill on
franchisor
activities
$
3,306,821
917,146
4,223,967
7,010,660
19,797,533
14,191,487
33,989,020
687,543
636,711
-
636,711
-
At 31 December 2022
11,234,627
34,676,563
636,711
Totals
$
23,741,065
15,108,633
38,849,698
7,698,203
46,547,901
Impairment
At 1 January 2021
Impairment in year
1,506,229
75,000
-
1,581,229
-
- -
-
At 31 December 2021
1,506,229
75,000
-
1,581,229
Impairment in year
-
-
At 31 December 2022
1,506,229
75,000
Carrying amount
-
-
-
1,581,229
At 31 December 2021
2,717,738
33,914,020
636,711
37,268,469
At 31 December 2022
9,728,398
34,601,563
636,711
44,966,672
The increase in carrying value of Goodwill Acquisitions at 31 December 2022 relate to goodwill additions
arising on the acquisitions outlined in Note 12 above during 2022.
Goodwill and indefinite life intangible assets on owned & operated stores comprises legacy owned stores
together with additions arising from reacquisitions of franchise operations from 2015 through 2022. Details on
additions in 2022 can be found in note 12 above.
Where appropriate consideration of separately identifiable intangible assets has been considered in the
evaluation of the fair value of assets acquired and the determination of the fair value of goodwill arising. For
the acquisitions in 2015 - 2022 relating to the reacquisition of franchises, it is considered that the value being
attributed to the purchase consideration relates to the synergies with surrounding franchises, obtaining wider
geographical coverage directly within the Group, the focus to seize potential opportunity within a wider
business strategy for revenue and earnings growth and the ability to expand new service offerings. Where
appropriate, consideration of separate intangibles, such as covenants not to compete, are evaluated.
Water Intelligence plc
54
Notes to the Financial Statements
There is no separately identified intangible considered to arise from the customer list of a franchise
reacquired given the terms of the franchise agreement and on that these customers continue to be
customers of the Group’s products and services before and after the reacquisition.
An impairment review is undertaken annually or whenever changes in circumstances or events indicate
that the carrying amount may not be recovered. For the purpose of impairment testing, goodwill or
indefinite life intangible assets are allocated to appropriate cash generating units which can be
summarised as follows:
Goodwill on Acquisitions is allocated to separate cash generating units.
Goodwill or indefinite life intangible assets on owned & operated stores is allocated to cash generating
units that are expected to benefit from the synergies of the combination.
Goodwill on Franchisor Activities is considered to be related to a single cash generating unit by reference
to revenues and activities derived from the franchise r oyalty income and franchise related activities
segments (see note 4).
The cash generating units to which goodwill or indefinite life intangible assets have been allocated are
tested for impairment annually. If the recoverable amount of the cash generating unit is less than its
carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro -rata on the basis of the carrying amount
of each asset in the unit. An impairment loss recognised for goodwill is not recovered in a subsequent
period.
The key assumptions/inputs used for the impairment assessment based on the forecast cash flow and
revenues for 2022 were as follows:
Discount rate
Short term revenue growth
Long term revenue growth
Tax rate
Discount rate sensitivity step
Perpetual growth rate sensitivity step
%
15
5
3.5
25
2
1
This has resulted in no material impairment charge being required in 2022 (2021: $nil).
Based upon the sensitivity analysis had the estimated discount rate used been 2% higher and the perpetual
revenue growth rate used been 1% lower in these calculations the Group would still not have incurred any
material impairment for any of the categories of goodwill or indefinite life intangible assets.
Water Intelligence plc
55
Notes to the Financial Statements
13
Intangible assets continued
Other Intangible assets table
Product
development
$
Covenants
not to compete
$
Customer
Lists
Trademarks
Patents
$
$
$
Salesforce
$
Enterprise
Solution
Development
$
Cost
At 1 January 2021
Additions
Disposals
At 31 December 2021
Additions
Disposals
At 31 December 2022
Accumulated amortisation
At 1 January 2021
Amortisation expense
Disposals
Exchange differences
At 31 December 2021
Amortisation expense
Disposals
Exchange differences
At 31 December 2022
Carrying amount
At 31 December 2021
At 31 December 2022
164,880
515,351
(164,880)
515,351
598,058
-
1,113,409
164,880
-
(164,880)
-
-
-
-
-
-
515,351
1,113,409
424,328
446,553
(200,000)
670,881
222,434
-
893,315
193,101
91,976
(200,000)
(188)
84,889
167,818
-
113
252,819
585,992
640,496
132,857
-
-
132,857
572,711
-
705,568
132,857
-
-
-
132,857
25,454
-
-
158,311
5,233,817
-
-
5,233,817
-
-
5,233,817
3,881,749
261,691
-
-
4,143,440
261,691
-
-
4,405,131
-
116,667
-
116,667
18,242
-
134,908
-
5,833
-
-
5,833
8,469
-
19
14,321
-
1,558,208
-
1,558,208
1,758,095
-
3,316,304
102,000
-
102,000
-
-
102,000
Total
$
6,057,883
2,636,779
(364,880)
8,329,782
3,169,540
-
11,499,322
-
34,000
4,406,587
129,851
-
-
129,851
479,154
-
-
609,005
(19,125)
-
-
14,875
25,500
-
-
40,375
470,226
(364,880)
(188)
4,511,745
968,086
-
131
5,479,962
-
1,090,377
110,833
1,428,357
87,125
3,818,037
547,257
828,686
120,588
2,707,298
61,625
6,019,360
All intangible assets have been acquired by the Group.
The calculation of amortisation of intangible assets requires the use of estimates and judgement, related to the expected useful lives of the assets.
An impairment review is undertaken annually or whenever changes in circumstances or events indicate that the carrying amount may not be recovered.
Water Intelligence plc
56
Notes to the Financial Statements
14
Property, plant and equipment
Cost
At 1 January 2021
Acquired on acquisition
of subsidiary
Additions
Purchase ROU Vehicles
Exchange differences
Disposals
At 31 December 2021
Acquired on acquisition
of subsidiary
Additions
Purchase ROU Vehicles
Exchange differences
Disposals
At 31 December 2022
Accumulated
depreciation
At 1 January 2021
Acquired on acquisition
of subsidiary
Eliminated on disposals
Purchase ROU Vehicles
Depreciation expense
Exchange differences
At 31 December 2021
Eliminated on disposals
Purchase ROU Vehicles
Depreciation expense
Exchange differences
At 31 December 2022
Carrying amount
At 31 December 2021
At 31 December 2022
Equipme
nt &
displays
$
Motor
Vehicles
$
Leasehold
Improvem-
ents
$
Buildings
$
Right of
Use
Vehicles
$
Right of
Use Offices
$
Total
$
3,052,181 2,326,504
83,672
156,242
1,448,967
1,677,576
8,745,143
77,684
115,371
1,587,515
-
(23,687)
-
789,876
280,124
(39,043)
(122,810)
-
4,148
-
-
-
-
-
-
17
-
-
-
193,055
1,947,086
(280,124)
(1,517)
-
899,061
-
(7,754)
(538,979)
5,227,687
-
(71,984)
(661,789)
4,693,694 3,350,021
87,820
156,259
3,114,413
2,029,904 13,432,111
366,109
330,877
-
-
-
-
696,986
781,433 1,008,632
315,140
(72,121)
(187,367)
5,732,225 4,745,181
-
(79,908)
(29,103)
-
-
-
(15,000)
72,820
-
-
(7,354)
-
1,005,570
(315,140)
(3,055)
-
148,905
3,801,787
1,427,888
-
(21,887)
(1,032,961)
4,223,523
-
(184,325)
(1,264,431)
2,402,944 16,903,863
1,241,197
66,485
781,762
81,294
-
-
705,334
(10,728)
(91,014)
256,007
560,828
(16,485)
2,002,288 1,572,391
(115,844)
315,140
795,269
(34,097)
2,893,168 2,532,859
(8,790)
-
946,921
(47,251)
23,085
-
-
-
15,789
-
38,875
(7,046)
-
16,026
-
47,855
50,764
-
-
-
12,086
(63)
62,787
-
-
4,127
(2,301)
64,613
762,433
-
713,681
-
3,572,921
147,778
-
(256,007)
428,548
(270)
934,704
-
(315,140)
643,364
(1,253)
1,261,677
(449,014)
-
752,483
(3,312)
1,013,838
(953,584)
-
830,975
(12,491)
878,737
(540,027)
-
2,475,069
(30,858)
5,624,883
(1,085,264)
-
3,236,683
(97,393)
7,678,909
2,691,406 1,777,630
2,839,057 2,212,322
48,945
24,965
93,472
84,292
2,179,709
2,540,111
1,016,067
1,524,208
7,807,227
9,224,955
Water Intelligence plc
57
Notes to the Financial Statements
15
Investment in subsidiary undertakings
Company
Cost
At 31 December 2021
Exchange difference
At 31 December 2022
Impairment
At 31 December 2021
Exchange difference
At 31 December 2022
Carrying amount
At 31 December 2021
At 31 December 2022
Subsidiary
Undertakings
$
13,812,758
(785,573)
13,027,185
6,400,906
-
6,400,906
7,411,782
6,626,279
The Directors annually assess the carrying value of the investment in the subsidiary and in their
opinion no impairment provision is currently necessary. See notes 12 and 13 for the assumptions and
sensitivities in assessing the carrying value of the goodwill and acquired intangible assets that
underpins the varying value of the investments.
The net carrying amounts noted above relate to the US incorporated subsidiaries.
The subsidiary undertakings during the year were as follows:
Water Intelligence International Limited*
(leak detection products and services)
Wat-er-save Services Limited
Water Intelligence Australia Pty
American Leak Detection Holding Corp.
(holding company of ALD Inc.) *
American Leak Detection, Inc. (leak
detection product and services)
Canadian Leak Detection, Inc.
Qonnectis Group Limited (dormant)
NRW Utilities Limited (Dormant)
Registered office address
27-28 Eastcastle Street,
London, United Kingdom,
W1W 8DH
Agriculture house, Acland Rd,
Dorchester DT1 1EF
1 Farrer Place, Sydney, NSW
2000
199 Whitney Avenue, New
Haven, Connecticut 06511 US
199 Whitney Avenue, New
Haven, Connecticut 06511 US
8-4696 Bartlette Rd.
Beamsville, Ontario L0R 1B1
27-28 Eastcastle Street,
London, United Kingdom,
W1W 8DH
27-28 Eastcastle Street,
London, United Kingdom,
W1W 8DH
Country of
incorporation
England and
Wales
Australia
US
US
Canada
England and
Wales
England and
Wales
Interest
held
%
100%
100%
100%
100%
100%
100%
* Subsidiaries owned directly by the Parent Company. These subsidiaries – WII and ALDHC –
represent the two principal business lines of the Parent Company. Wat-er-save, Water Intelligence
Australia, Canadian Leak Detection and American Leak Detection Inc. are also wholly-owned by the
two principal subsidiaries and indirectly owned by the Parent.
The Company’s strategy involves acquisitions, especially of franchisees. Not all acquisitions are 100%
owned. American Leak Detection had a 60% stake in a reacquired franchise in Bakersfield, California.
Water Intelligence plc
58
Notes to the Financial Statements
American Leak Detection purchased the remaining 40% in 2022. American Leak Detection also has
a 51% stake in a former franchise located in Denver, Colorado. Finally, American Leak Detection
owns 75% of the IntelliDitch subsidiary that was set up as part of the acquisition of IP assets from
FastDitch in 2021.
16
Inventories
Group Inventories
Group
Year ended
31 December
2022
$
759,070
Year ended
31 December
2021
$
677,218
During the year ended 31 December 2022, an expense of $9,659,600 (2021: $8,964,486) was
recognized in the Consolidated Statement of Comprehensive Income, including business to business
expenses of $9,142,777 (2021: $8,288,217). There has been no write down of inventories during
2022.
17
Trade and other receivables
Trade notes receivable
Due from Group undertakings
Group
Company
Year ended
31 December
2022
$
287,572
-
Year ended
31 December
2021
$
429,219
-
Year ended
31 December
2022
$
Year ended
31 December
2021
$
- - -
22,605,908
23,270,653
All trade notes receivables are due within five years from the end of the reporting period.
Group
Company
Trade receivables
Prepayments
Due from Group undertakings
Accrued royalties receivable
Trade notes receivable
Other receivables
Due from related party
Year ended
31 December
2022
$
7,211,414
2,061,459
-
566,731
256,613
988,215
309,152
Year ended
31 December
2021
Year ended
31 December
2022
Year ended
31 December
2021
$
4,414,329
1,928,308
-
513,853
194,590
997,708
331,106
$
-
19,745
4,329,809
-
-
-
-
$
-
110,916
4,670,366
-
-
-
-
4,781,282
Current portion
11,393,584
8,379,894
4,349,554
Trade receivables disclosed above are classified as loans and receivables and are therefore
measured at amortised cost. The Directors consider that the carrying amount of trade and other
receivables approximates their fair value.
Accrued royalties receivable are never reclassified to trade receivables as, should any royalties be
withheld or unpaid, the Group has the right to take back the relevant franchise.
The average credit period taken on sales is 39 days (2021: 39 days).
Water Intelligence plc
59
Notes to the Financial Statements
The carrying amounts of the Group’s trade and other receivables are denominated in the following
currencies:
US Dollar
UK Pound
Australian Dollar
Canadian Dollar
Year ended
31 December
2022
Year ended
31 December
2021
$
10,261,789
807,038
286,546
38,211
11,393,584
$
7,153,573
905,624
286,597
34,100
8,379,894
The maximum exposure to credit risk at the reporting date is the carrying value of each class of
receivable mentioned above.
18
Cash and cash equivalents
Cash at bank and in hand
19
Trade and other payables
Trade payables
Accruals and other payables
Due to Group undertakings
Group
Company
Year ended
31 December
2022
Year ended
31 December
2021
Year ended
31 December
2022
Year ended
31 December
2021
$
23,014,454
$
$
$
23,802,352
1,384,624 1,865,798
Group
Company
Year ended
31 December
2022
Year ended
31 December
2021
Year ended
31 December
2022
Year ended
31 December
2021
$
1,519,128
4,811,979
-
6,331,107
$
723,458
3,470,573
-
4,194,031
$
305
145,950
-
146,255
$
6,881
125,745
-
132,626
Trade payables and accruals principally comprise amounts outstanding for trade purchases and
ongoing costs and are payable within 3 months. The average credit period taken for tra de purchases
is 16 days (2021:16 days).
20
Deferred Tax
The analysis of deferred tax liabilities is as follows:
Group
2022
$
2021
$
Deferred tax (liability)/assets
(1,915,581)
(1,576,872)
Water Intelligence plc
60
Notes to the Financial Statements
The movement in deferred tax liabilities is as follows:
2022
Temporary differences:
Net operating profit (loss) (non-
current)
Short term temporary differences
2021
Temporary differences:
Net operating profit (loss) (non-
current)
Short term temporary differences
Recognized in
the income
statement
$
Recognized in
Other
Comprehensive
Income
$
-
-
-
-
Opening
balance
$
-
-
Closing
balance
$
-
-
(1,576,872)
(1,576,872)
(575,782)
(575,782)
237,073
237,073
(1,915,581)
(1,915,581)
Recognized in
the income
statement
$
Recognized in
Other
Comprehensive
Income
$
-
-
-
-
Opening
balance
$
-
-
Closing
balance
$
-
-
(957,170)
(957,170)
(557,329)
(557,329)
(62,373)
(62,373)
(1,576,872)
(1,576,872)
Deferred tax recognized in OCI is purely related to the revaluation of the listed shares.
As also set forth, in Note 20, at the balance sheet date, the Group’s UK trading operations had unused
tax losses of £3,449,063 (2021: £3,739,716) available for offset against future profits. £862,266 (2021:
£934,929) represents unrecognized deferred tax assets thereon at 25%. The deferred tax asset has not
been recognized due to uncertainty over timing of utilization.
21
Share capital
The issued share capital in the year was as follows:
Group & Company
At 31 December 2021
At 31 December 2022
Group & Company
At 31 December 2021
At 31 December 2022
Ordinary Shares
Number
17,366,688
17,358,688
Shares held in
treasury Number
51,000
129,000
Total Number
17,417,688
17,487,688
Share capital
$
142,260
143,192
Share premium
$
35,252,633
35,417,072
Shares in
Treasury
$
(468,427)
(1,139,404)
At various times during 2022, the Company bought 8,000 shares into treasury at a purchase price
range of 815p to 895p.
Water Intelligence plc
61
Notes to the Financial Statements
On 19 August 2022, the Company issued 70,000 shares pursuant to an exercise of options. These
shares were re-purchased which resulted in a $584k increase to treasury shares.
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.
22 Lease liability
Lease liabilities in statement of financial position
Amounts due within one year
Amount due after more than one year
Amount recognized in the statement of
comprehensive income
Interest on leasehold liabilities
Amount recognized in the statement of
cash flows
Repayment of lease liabilities
23
Financial instruments
Year ended
31 December
2022
$
Year ended
31 December
2021
$
1,427,510
2,593,065
1,161,879
2,048,288
4,020,575
3,210,167
189,430
136,986
1,595,853
1,448,594
Market risk (including foreign currency risk management)
Interest rate risk
The Group has exposure to the following key risks related to financial instruments:
i.
ii.
iii. Credit risk
iv.
Liquidity risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s
objectives, policies and processes for measuring and managing risk, and the Group’s management
of capital. Further quantitative disclosures are included throughout these consolidated Financial
Statements.
The Directors determine, as required, the degree to which it is appropriate to use financial instruments
or other hedging contracts or techniques to mitigate risk. The main risk affecting such instruments is
foreign currency risk which is discussed below. Throughout the year ending 31 December 20 22 no
trading in financial instruments was undertaken (2021: none). The Group did enter into interest rate
swap agreements as detailed in the derivatives section below.
The Group uses financial instruments including cash, loans, as well as trade receivables and
payables that arise directly from operations.
Water Intelligence plc
62
Notes to the Financial Statements
Due to the simple nature of these financial instruments, there is no material difference between book
and fair values. Discounting would not give a material difference to the results of the Group and the
Directors believe that there are no material sensitivities that require additional disclosure.
Fair value of financial assets and financial liabilities
The estimated difference between the carrying amount and the fair values of the Group’s financial
assets and financial liabilities is not considered material.
Credit risk
The Group’s principal financial assets are bank balances, cash, cash equivalents, trade and other
receivables. The Group’s credit risk is primarily attributable to its trade receivables and cash and
cash equivalents. Receivables are regularly monitored and assessed for recoverability. The Group
has no significant concentration of credit risk as exposure is spread over a number of customers. As
at 31 December 2022, 45.28% was held with one counterparty with a credit rating of Aa3 and a further
43.28% was held with another counterparty with a credit rating of A+.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses
a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses,
trade receivables have been grouped based on the shared credit risk characteristics and the days
past due. The expected loss rates are based on the historic payment profiles of sales and the credit
losses experienced within this period. The historical loss rates are adjusted to reflect current and
forward-looking information.
As the Group does not hold any collateral, the maximum exposure to credit risk is represented by the
carrying amount of the financial assets as at the end of each reporting period.
As at 31 December 2022, trade receivables of $1,948,729 (2021: $438,284) were past due but not
impaired. These relate corporate store customers for whom there is no history of default. The ageing
analysis of these trade receivables is as follows:
Ageing of past due but not impaired receivables
60-90 days
90+ days
Average age (days)
Year ended
31 December
2022
Year ended
31 December
2021
$
331,989
1,616,740
1,948,729
95
$
196,106
242,178
438,284
95
The Group believes that no impairment allowance is necessary in respect of trade receivables that
are past due but not impaired. This is based on the Group’s good historic track record of collection
for all such receivables.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Group. The Group seeks to limit credit risk on liquid funds through trading only with
counterparties that are banks with high credit ratings assigned by international credit rating agencies.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The exposure to
credit risk at the year-end was in respect of the past due receivables that have not been impaired are
disclosed in note 17.
Water Intelligence plc
63
Notes to the Financial Statements
Categories of financial instruments
Group
Company
Year
ended
31
December
2021
$
Year ended
31 December
2022
$
-
23,014,454 23,802,352
8,379,894
11,393,584
429,219
287,572
-
Year ended
31 December
2022
$
-
1,384,624
4,349,554
22,605,908
Year ended
31
December
2021
$
-
1,865,798
4,781,282
23,270,653
6,331,107
5,519,560
15,334,813
5,109,093
7,164,421
4,194,031
3,325,579
8,176,893
5,494,663
8,220,613
146,255
-
-
-
-
132,626
-
-
-
-
Loans and receivables
Cash and cash equivalents
Trade and other receivables – current
Trade and other receivables – non-
current
Financial Liabilities measured at
amortised cost
Trade and other payables
Borrowings – current
Borrowings – non-current
Deferred consideration – current
Deferred consideration – non-current
Borrowings
Bank Debt
The Group has a commercial banking relationship with M&T Bank (M&T) with various facilities: a working
capital line of credit (“WCL”); acquisition lines of credit (“ALOCs”), and term loans (“Term Loans”).
A $2,000,000 WCL is secured by substantially all of the assets of the Group. On December 4, 2021, the WCL
was extended to a maturity date of December 5, 2023 and bore an annual variable interest rate equal to
equal to LIBOR plus 3.00%. In March 2022, the WCL was amended to change the variable interest rate to
which the outstanding balance shall bear interest to SOFR plus 3.00%. At December 31, 2022 and 2021,
the interest rate was 4.17% and 4.00%, respectfully. Monthly interest only payments on any unpaid
balance were made during 2022 and 2021 until the WCL was fully paid off in May 2022. The balance
outstanding at December 31, 2022 and 2021 was $0 and $226,737, respectively and is included within
line of credit on the consolidated balance sheets.
In October 2020, M&T provided the Group with a term loan in the amount of $4,607,000 (“Term Loan”). The
Term Loan bears interest at a rate equal to 3.58% and requires installments consisting of principal of $85,315
plus accrued interest to be paid monthly beginning in November 2020 until maturity in May 2025. The loan is
secured by substantially all of the assets of the Group. The balance outstanding at December 31, 2022 and
2021 was $2,474,130 and $3,497,907, respectively and is included within notes payable on the balance sheets.
In October 2020, M&T provided the Group with an ALOC (“ALOC”) in the amount of $6,000,000. The ALOC has
a two year draw period. The line bears interest at a rate equal to LIBOR plus 3.00%. As of December 31, 2022
and 2021, the interest rate was 3.59% and requires installments of principal and interest amounting to $39,816
to be paid per month beginning in November 2020 until maturity in October 2025. As part of the agreement, the
ALOC advance would be converted into a term loan if any ALOC advance exceeded $500,000 or automatically
at the end of each draw period. Upon conversion, the term loan would bear interest at a rate per annum equal to
three (3) percentage points in excess of M&T’s five year cost of funds interest rate; with a floor of 3.25%. ALOC
is secured by substantially all of the assets of the Group. The balance outstanding at December 31, 2022 and
2021 was $1,353,751 and $1,831,546, respectively and is included within notes payable on the balance sheets.
In February 2021, the Group was advanced $3,200,000 from the ALOC which converted the ALOC into a new
term loan (“New Term Loan”). The New Term Loan bears interest at a rate equal to 3.64% and requires
installments consisting of principal and interest amounting to $53,333 to be paid monthly beginning in March
Water Intelligence plc
64
Notes to the Financial Statements
2021 until maturity in February 2026. The New Term Loan is secured by substantially all of the assets of the
Group. The balance outstanding at December 31, 2022 and 2021 was $2,026,667 and $2,666,667, respectively
and is included within notes payable on the balance sheets.
In March 2022, M&T provided the Group with a new ALOC (“New ALOC”) in the amount of $15,000,000. The
New ALOC has a two year draw period. As part of the agreement, M&T advanced the Company $9,463,647
related to the New ALOC. The line bears interest at a rate equal to 5.39% and requires installments consisting
of principal of $157,727 plus interest to be paid monthly beginning in April 2022 until maturity in March 2027. In
May 2022 and December 2022, the Company was advanced $600,000 and $2,125,000, respectively, from the
New ALOC. The advances bear interest at a rate equal to 2.85% plus SOFR and require monthly installments
consisting of interest only to be paid until the end of the first draw period. As part of the agreement, the New
ALOC advances would be converted into a term loan automatically at the end of each draw period. Upon
conversion, the term loan would bear interest at a rate per annum equal to three (3) percentage points in excess
of SOFR. The New Term Loan is secured by substantially all of the assets of the Group. The balance
outstanding at December 31, 2022 and 2021 was $10,769,100 and $0, respectively and is included within notes
payable on the balance sheets. The New ALOC has related swap agreements which mature at the same time
as the underlying loans.
As noted above, the Group expanded its credit facilities in March 2022. The interest rate for the new acquisition
line of credit was established using the SOFR index. Additionally, the existing working capital line of credit
interest rate was amended upon renewal in December 2021 to be calculated using the SOFR index. Therefore,
the Group will not be impacted by the IBOR reform.
In connection with the M&T line of credit, ALOC, and term note facilities, the Group is required to comply with
certain financial and non-financial covenants. The most restrictive of these covenants includes a debt service
coverage ratio to be tested quarterly and a maximum total funded debt to EBITDA ratio minimum to be tested
quarterly. The Group was in compliance with those requirements at December 31, 2022.
PPP Program - The Paycheck Protection Program (PPP) brought much needed relief to business owners
affected by the coronavirus. Not only does this loan program provide funding to help cover payroll and other
expenses, but if used for qualifying purposes, part or all of the loan can be forgiven. ALD applied for and
received funding of $1,869,800 under this program in April 2020. The Group received notification from the
SBA on March 31, 2021 that the full advance of $1,869,800 was forgiven. The gain on the loan forgiveness
was recognized in 2021, with the related expenses recognized in 2020.
Financial Instruments
Working Capital Line of Credit
External borrowings
Less: Loan Closing Costs
Lease Liabilities
Total
Current
Non-Current
Year ended
31 December
2022
Year ended
31 December
2021
$
-
$
-
Year ended
31 December
2022
$
-
4,162,819
2,224,161
12,869,822
(70,769)
(60,461)
1,427,510
1,161,879
(128,074)
2,593,065
Year ended
31 December
2021
$
226,737
6,056,902
(155,034)
2,048,288
5,519,560
3,325,579
15,334,813
8,176,893
Capital risk management
In managing its capital, the Group’s primary objective is to maintain a sufficient funding base to enable
working capital, research and development commitments and strategic investment needs to be met
and therefore to safeguard the Group’s ability to continue as a going concern in order to provide
returns to shareholders and benefits to other stakeholders. In making decisions to adjust its capital
Water Intelligence plc
65
Notes to the Financial Statements
structure to achieve these aims, through new share issues, the Group considers not only its short-
term position but also its long term operational and strategic objectives.
The capital structure of the Group currently consists of cash and cash equivalents, short and medium
term borrowings and equity comprising issued capital, reserves and retained earnings. Other than
with respect to Bank Debt, the Group is not subject to any externally imposed capital requirements.
See KPI on page 10.
Significant accounting policies
Details of the significant accounting policies including the criteria for recognition, the basis of
measurement and the bases for recognition of income and expense for each class of financial asset,
financial liability and equity instrument are disclosed in Note 3.
Foreign currency risk management
The Group undertakes transactions denominated in foreign currencies (other than the functional currency
of the Company and its UK operations, being £ Sterling), with exposure to exchange rate fluctuations.
These transactions predominately relate to royalties receivable in the US denominated in currencies other
than US$ being Canadian Dollars, Australian Dollars and Euro; royalties from such outside US sources in
2022 were $110,416 (2021: $104,760). No foreign exchange contracts were in place at 31 December 2022
(2021: Nil).
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary
liabilities were:
Group
Company
Year ended
31 December
2022
Year ended
31 December
2021
Year ended
31 December
2022
$
$
$
Year ended
31 December
2021
$
3,462,037
4,288,235
28,340,086
29,917,733
1,066,160
1,146,338
146,255
132,626
Assets
Sterling, Australian and
Canadian Dollars
Liabilities
Sterling, Australian and
Canadian Dollars
As shown above, at 31 December 2022 the Group had Sterling, Australian and Canadian denominated
monetary net assets of $3,462,037 (2021: $4,288,235). If the foreign currency weakens by 10% against
the US dollar, this would decrease net assets by $346,204 (2021: $428,824) with a corresponding impact
on reported losses. Changes in exchange rate movements resulted in a loss from exchange differences
on a translation of foreign exchange of $409,340 in 2022 (2021: gain of $221,281), resulting primarily from
the share issuance from prior years in Pound Sterling and subsequent intercompany transfers accounted
in US Dollars.
Interest rate risk management
The Group is potentially exposed to interest rate risk because the Group borrows and deposits funds
at both fixed and floating interest rates. However, at the year end, the majority of borrowings are
subject to fixed rates with only the WCL subject to variable rates. The fixed rate borrowings at the
year-end are $14,108,798 (2021: $8,065,568) and the variable rate borrowings are $2,725,000 (2021:
$226,767) The variable rate borrowings from 2022 were converted to fixed rates early 2023 and were
only variable for 3 months. The 2021 variable rate loan was paid in full during 2022.
Interest rate sensitivity analysis
Water Intelligence plc
66
Notes to the Financial Statements
The losses recorded by both the Group and the Company for the year ended 31 December 2022 would not
materially change if market interest rates had been 1% higher/lower throughout 2022 and all other variables
were held constant.
Liquidity risk management
Ultimate responsibility for liquidity management rests with management. The Group’s practice is to
regularly review cash needs and to place excess funds on fixed term deposits for periods not exceeding
one month. The Group manages liquidity risk by maintaining adequate banking facilities and by
continuously monitoring forecast and actual cash flows.
The Directors have prepared a business plan and forecast for the period to 31 December 2024. The
forecast contains certain assumptions about the level of future sales and the level of margins achievable.
These assumptions are the Directors’ best estimate of the future development of the business. The
Directors acknowledge that the Group in the near-term trading is primarily reliant on cash generation from
its predominantly US-based corporate-operated profits and franchisee royalty income.
The following tables detail the Group’s remaining contractual maturity for its non -derivative financial
liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted
cash flows of financial liabilities based on the earliest due repayment dates. The table shows principal
cash flows.
Group
0-6
months
$
6-12
months
$
1-2 years
2-5 years
>5 years
Total
$
$
$
$
2022
Payables
Lease liabilities
Borrowings
Deferred consideration 3,245,144 1,863,949 7,136,582
-
-
663,870
654,271 1,929,195
2,045,305 2,046,745 7,520,762 5,220,986
27,839
6,331,107
773,239
-
-
6,331,107
-
4,020,575
- 16,833,798
- 12,273,514
Group
0-6
months
$
6-12
months
$
1-2 years
2-5 years
>5 years
Total
$
$
$
$
2021
Payables
Lease liabilities
Borrowings
Deferred consideration 4,558,239
4,194,030
607,899
-
-
610,493
553,980 1,437,794
1,092,915 1,070,785 4,769,556 1,359,050
936,424 6,099,351 2,121,262
-
-
4,194,030
-
3,210,166
-
8,292,306
- 13,715,276
Interest expected to be paid on liabilities are shown in the table below
Group
2022
Payables
Lease liabilities
Borrowings
Deferred consideration
0-6 months
$
6-12 months
$
>12 months
$
Total
$
-
88,330
250,918
207,290
-
71,020
213,702
172,976
-
174,210
521,472
239,386
-
333,559
986,092
619,651
Derivatives
The Group recognized that there was inherent risk related to interest rates in the economic
environment. Therefore, the Group utilized interest rate swaps to fix its future rates and thereby
eliminated the risk against the numerous increases in interest rates that occurred.
Water Intelligence plc
67
Notes to the Financial Statements
The Group entered into a swap agreement with M&T Bank which fixed the Daily Simple SOFR
interest at 2.39% through March 30, 2027. The interest rate swap had a notional amount of
$9,463,647, an effective date of March 30, 2022, and a fair value of $285,618 at December 31, 2022,
which was included as an asset on the balance sheets.
The Group entered into an additional swap agreement with M&T Bank which fixed the Daily Simple
SOFR interest at 2.68% through March 30, 2028. The interest rate swap had a notional amount of
$5,536,353, an effective date of March 30, 2023, and a fair value of $162,559 at December 31, 2022,
which was included as an asset on the balance sheets.
The 2022 interest rate swaps meet the criteria necessary to qualify as effectiv e cash flow hedges as
defined in the accounting standards. Accordingly, the Group has reflected the changes in the fair
value within other comprehensive income in the statement of comprehensive income.
Fair values
The Directors consider that the carrying amounts of financial assets and financial liabilities
approximate their fair values.
Reconciliation of liabilities arising from financing activities
The changes in the Group’s liabilities arising from financing activities can be classified as fol lows:
At 1 January 2022
Cash flows
- Repayment
- Proceeds
Non-cash
- New Leases
- Reclassification
As at 31 December 2022
At 1 January 2021
Cash flows
- Repayment
- Proceeds
Non-cash
- New Leases
- PPP loan
forgiveness
- Reclassification
As at 31 December 2021
Long-term
borrowings
$
6,128,605
(3,815,204)
12,356,696
-
(1,928,349)
12,741,748
Long-term
borrowings
$
5,848,261
(1,827,765)
3,200,000
Short-term
borrowings
$
2,163,701
Lease
Liabilities
$
3,210,167
Total
$
11,502,473
-
-
(1,595,853)
-
(5,411,057)
12,356,696
-
1,928,349
4,092,050
2,406,261
-
4,020,575
2,406,261
-
20,854,373
Short-term
borrowings
$
2,941,610
Lease
Liabilities
$
1,763,433
Total
$
10,553,304
-
-
(1,448,594)
-
(3,276,359)
3,200,000
-
(420,031)
-
(1,449,769)
2,895,328
-
2,895,328
(1,869,800)
(671,860)
6,128,605
671,860
2,163,701
-
3,210,167
-
11,502,473
Water Intelligence plc
68
Notes to the Financial Statements
24
Fair value measurement
The following table provides the fair value measurement hierarchy for assets measured at fair value:
Fair value measurement using
Assets measured at fair value
Date of valuation
Listed equity investments
Quoted
process
in active
markets
(Level 1)
$
Total
$
SEEEN investment 31 December 2022
474,613
474,613
SEEEN investment 31 December 2021
1,185,039
1,185,039
Derivative financial assets
Significant
observabl
e inputs
(Level 2)
Significant
unobserva
ble inputs
(Level 3)
$
-
-
$
-
-
-
-
Interest rate swap 31 December 2022
Interest rate swap 31 December 2021
448,177
-
-
-
448,177
-
To estimate fair value, the lower end of the bid-offer spread as at 31 December 2022 was used to
calculate the value of the holding. There is an active market for the Group's liquid equity investment.
25
Contingent liabilities
The Directors are not aware of any material contingent liabilities.
26
Related party transactions
PSS was one former owner of ALDHC until the reverse merger in 2010 that created Water
Intelligence. PSS is now a significant shareholder of Water Intelligence and hence is a related party
to the Company. PSS provides a technology license to Water Intelligence and ALD on terms
favourable to Water Intelligence and ALD. The license is royalty-free for the first $5 million of sales
for products developed with PSS technology. PSS also guarantees the bank debt of Water
Intelligence as described below.
During the normal course of operations, there are intercompany transactions among PSS, Water
Intelligence plc, ALDHC and ALD. In previous years, PSS charged administrative fees to the
Company to cover activities taken on behalf of company business, includi ng research. The financial
results of these related party transactions are reviewed by an independent director of Water
Intelligence plc, the parent of ALDHC and ALD.
As described in Note 23, the Company's parent (and the Company as co-borrower) have different
credit facilities with M&T Bank. For the PSS guarantee, ALDHC pays 0.75% per annum based on
the outstanding balance of the loan calculated at the end of each month. Interest charged on the
PSS receivable will match the interest rate charged by the bank. The monthly charge for the PSS
guarantee would not change and would be offset against amounts owed by PSS. The charge will be
Water Intelligence plc
69
Notes to the Financial Statements
eliminated should the guarantee no longer be required by the bank. Interest income related to the
PSS receivable amounted to $19,089 and $18,937 for the years December 31, 2022 and 2021,
respectively. The guarantee fee expense for the PSS guarantee amounted to $ 99,146 and $67,000
for the years ended December 31, 2022 and 2021, respectively. During 2022 the Company paid
expenses on behalf of PSS in the amount of $58,104. The related receivable/prepaid balance
remaining is $309,152 and $331,106 at December 31, 2022 and 2021, respectively.
During the year, the Company had the following transactions with its subsidiary companies:
Water Intelligence International Limited
Balance at 31 December 2021
Net loans to subsidiary
Other expenses recharged and exchange differences
Balance at 31 December 2022
ALDHC
Balance at 31 December 2021
Loans prepaid by WI capital raise
Balance at 31 December 2022
ALD Inc.
Balance at 31 December 2021
Loans incurred due to WI capital raise
Loans paid to WI
Other expenses recharged and exchange differences
Balance at 31 December 2022
27
Subsequent events
$
4,670,366
-
(340,556)
4,329,809
$
-
-
-
$
23,270,653
-
-
(664,745)
22,605,908
On 7 February 2023, the Group announced the reacquisition of its Nashville, Tennessee franchise territory
within the Group’s ALD franchise business. The acquisition is pursuant to the Group’s growth strategy of
creating regional hubs and adds further corporate scale to operations in the Midwest, United States. The
cash consideration for the acquisition is $3.25 million based on a 2022 Adjusted Income Statement of $2.4
million in revenue and $550,000 in profit before tax and includes the transfer of all operating assets to the
Group.
28
Control
The Company is under the control of its shareholders and not any one party. The shareholdings of the
directors and entities in which they are related are as outlined within the Director’s Report.
Water Intelligence plc
70