Operational highlights 2021
In 2021, Ekopak initiated its strategic transition to the Water-as-a-Service (WaaS) business model. This strategy was inspired by Ekopak’s intention to optimize the product mix in favor of those activities that offers the highest growth opportunities while generating the best margins and providing a high degree of predictability.
This strategic transition got off to a flying start in 2021. The WaaS business now represents 11% of Revenue but contributes 48% to the EBITDA for both business segments in 2021. Ekopak’s overall revenue witnessed a double digit growth (+19%) in 2021 compared to 2020. While the transition to the WaaS business model immediately picked up speed, the non-Waas business continued to grow as well.
The EBITDA of the combined WaaS/non-Waas business represents 15.5% margin on EUR 11.3 million revenue – more than double of the 6.9% margin of 2020. One-off expenses of EUR 0.6 million and corporate costs lead to an Operating Result of EUR -0.6 million and a Net Result of EUR -0.7 million.
WaaS business shifted into higher gear
While Ekopak’s WaaS business revenue already witnessed a remarkable growth in the first six months of 2021, it more than trippled in the second half of 2021: from EUR 0.3 million in 1H2021 to EUR 0.9 million in 2H2021. This results in a revenue of EUR 1.2 million for the full year – i.e. a 159% growth compared to 2020.
The signed WaaS contracts as at 31 December 2021 represent an undiscounted Total Contracted Value of EUR 28.6 million (billable over the period 2020-2034). This compares to an amount of EUR 17.8 million as at 31 December 2020 (billable over the period 2020-2031). The 61% increase demonstrates the success of the strategic transition to the WaaS business model.
The evolution of the EBITDA from the WaaS business kept pace with the revenue growth acceleration from 1H2021 to 2H2021, resulting in EUR 0.8 million for the full year 2021 and representing a solid 70% margin on revenue, i.e. above the 67% margin applied in our business plan.
The 2021 performance of this business segment underscores Ekopak’s key strategy to strengthen the WaaS pipeline as the basis for growth in recurring annual revenue, earnings and cash flows.
Solid non-WaaS business performance
The 18% decrease of the revenue from Ekopak’s non-WaaS business in the first half of 2021 has been more than offset by the impressive 50% revenue growth in the second half – thus resulting in a 11% growth for the full year 2021. This implies that Ekopak’s strategic transition from non-WaaS to WaaS can involve business growth in both segments at the same time.
The EBITDA of EUR 0.9 million for the non-WaaS business over the full year 2021 represents a margin of 9% of the corresponding revenue: a solid performance!
The future perspective for Ekopak’s non-WaaS business is illustrated amongst others by the contract with Vynova, for which the revenue is expected to be entirely recognized in the financial statements by the fourth quarter of 2022, i.e. upon completion of the water treatment installation at the site in Tessenderlo, Belgium. Vynova is an international chemical company active in the production of PVC and chlor-alkali products, which are used, among others, in the construction, medical, food and pharmaceutical industries.
Preparing for future growth
In April 2021, Ekopak has acquired iSERV with the aim to strengthen its platform in anticipation of future growth. iSERV is now integrated in the organization as the Water Treatment service provider for both Ekopak’s non-WaaS customers and its WaaS operations.
Along with the strategic transition from the non-WaaS to WaaS business model, Ekopak embarked on its geographic expansion with the creation of its first foreign subsidiary – a pilot project for more comprehensive mid-term plan.
In August 2021, Ekopak created its first ever foreign subsidiary, Ekopak France, and opened branches in Rouen and Lyon. From this base, Ekopak can maximally benefit from business opportunities in the major French water treatment market, the first market abroad that will now be intensively explored by the company. Revenue beyond Ekopak’s traditional home markets Belgium and Luxembourg, grew 87% and represents 12% of total Revenue in 2021.
Fully aware of the challenge to adequately manage the numerous business opportunities that present themselves, Ekopak has spent EUR 0.8 million (recognized in the Corporate reporting segment) for setting-up adequate systems and procedures, anticipating the continued future growth of the group as well as reflecting Ekopak’s commitment to live up to its sustainability strategy by initiating the implementation of the standards of the Global Reporting Initiative.
Balance sheet situation illustrates careful management of resources
The proceeds of the successful IPO lead to a significant strengthening of Equity on the balance sheet at 31 December 2021. Equity represents EUR 58.6 million on a balance sheet total of EUR 67.4 million. The appropriation of Equity is carefully considered, as indicated by the fact that between 30 June 2021 and 31 December 2021 Equity has only slightly evolved from EUR 59.1 million to EUR 58.6 million.
Total liabilities at 31 December 2021 amount to EUR 8.8 million versus EUR 6.9 million at 31 December 2020. This increase is mainly related to Trade, tax and other payables, reflecting the growth of Ekopak’s business.
The growing business is also reflected in the evolution of the Assets. The EUR 4.3 million increase of the amount for Property, plant and equipment (between 30 June and 31
December 2021) mainly refers to water treatment installations for the WaaS operations (EUR 3.7 million). The increase of the business size of Ekopak also involves an increase of the amounts for Inventories and Trade receivables.
Cash and cash equivalents and other current assets evolved from EUR 50.0 million at 30 June 2021 to EUR 42.1 million at 31 December 2021. In addition to the costs associated with the IPO, the acquisition of iServ also led to a reduction in the cash position. Moreover, several installations for WaaS-
projects have been paid in cash in 2021, although a sale-and-lease-back approach for large WaaS project still remains under review for the future. Again, this illustrates that Ekopak’s cash resources are well managed.
Business Outlook 2022
The proceeds from the IPO are managed with consideration and enable Ekopak to further fund its growth strategy. In 2022 Ekopak will definitely continue to put these resources to work in order to create shareholder value.
Since revenue from WaaS contracts is only recognised as of the moment that the installation becomes operational, a substantial part of WaaS contracts signed in 2021 is not yet included in the FY2021 figures. On an annualised basis (i.e. assuming that contracts are operational for 12 months), the signed WaaS contracts as at 31 December 2021 represent a secured* annual turnover of over EUR 2.8 million in 2022. This excludes the potential uplift revenue that comes on top of the minimum contracted annual revenue of the existing contracts as well as the revenue from new WaaS contracts that will be concluded in 2022.
The accelerated market acceptance of the innovative WaaS concept leads to a solid triple digit growth forecast for this segment in 2022.
Based on the encouraging performance of the non-Waas segment in the second half of 2021, Ekopak aims for a double digit revenue growth for this segment in 2022.
Ekopak is also very ambitious for its 2022 business in France. The French subsidiary that was created in August 2021 is gaining traction and has already convinced a number of high-end customers of Ekopak’s solutions, which is very encouraging for the future.
It goes without saying that possible shifts from new customers between WaaS and non-WaaS could impact the forecasted figures for the rebalanced revenue mix WaaS/non-WaaS for 2022 and thus also for the group’s total revenue and profitability. While Ekopak has not identified an immediate impact on its business from the current turbulent political and economic environment, these factors too, further complicate a more precisely calculated growth forecast than indicated above.
Ekopak has made a strong start in 2022 and feels confident that this momentum will continue. In January, we announced that we have signed a Memorandum of Understanding with PMV and water-link to set up a joint venture, that will convert the treated waste water from Antwerp households into cooling water for companies in the Port of Antwerp by 2025. The joint venture, in which Ekopak will have a 51% stake, is named Waterkracht (‘water power’) and is a leading example of public-private partnership. If all goes according to plan, 20 billion litres of water will be recycled each year as of 2025. Just a few weeks later, we revealed our plans to construct a new building, comprising an office building and a factory workshop, on a plot of approximately 2.1 hectares on an industrial zone in Deinze, Belgium. The current Ekopak head offices in Tielt, the office in Ghent and the warehouse in Roeselare will be integrated into this new site, which is conceived as a sustainable building and will meet environmental specifications that go beyond those legally required. Ekopak anticipates to move into the new premises in the spring of 2024.
The company has the necessary resources at its disposal, has mapped out the right strategy, has tapped into the major French market and, above all, can rely on the WaaS business model that has conclusively demonstrated its value in 2021.
Ekopak is not directly exposed by the war in Ukraine. The group has neither in Ukraine nor in Russia any installations and is not exploring these geographic markets for its business. Ekopak does not procure any equipment, key components and ingredients from these countries. It cannot be excluded that Ekopak may be affected indirectly from this situation, more specifically when major customers would be affected, which could over time result in delayed orders. We cannot estimate the impact the macro economical situation might have in the future.