De.Mem achieves record revenues of $9.1 million in H1 2021 with recurring revenues bolstering the balance sheet for future growth.

Water and wastewater treatment company De.mem (ASX:DEM) has announced record revenues in H1 2021 of $9.1 million, an approximate increase of 44% on H1 2020.

The revenue growth has been largely organic and includes a partial period contribution from the acquisition of Perth-based wastewater treatment company Capic, which was completed in April and is exceeding the company’s expectations.


Recurring revenue boosts growth

Recurring revenue continues to underpin De.mem’s overall growth including through Build, Own, Operate (BOO) and operations and maintenance contracts along with membrane replacement sales in existing facilities. Recurring revenue increased to approximately 65% of total revenues in H1 2021.

Specialty chemicals, pump sales and related services, through subsidiaries De.mem-Capic, De.mem Geutec GmbH (Geutec), Germany and De.mem Pumptech, Tasmania, are also pushing up revenue.

Geutec grew by around 46% to $1.48 million in H1 2021, up from $1.01 million in H1 2020. The growth was put down to Geutec’s successful cross-sell strategies, with strong demand for the company’s wider product range from its existing customer base in Germany.


Profit margins continue to grow

Gross margins continued increasing to 34% in H1 2021, up from around 32% in CY 2020. The growing profit margins were attributed to De.mem’s unique technology portfolio and high-value-add product and service offering.

De.mem’s competitive advantage is its proprietary and patented technology portfolio, comprising its suite of hollow fibre nanofiltration, ultrafiltration and microfiltration membranes.

The membranes are the key component of its integrated water and wastewater treatment systems and its BOO and service contracts.

De.mem manufactures its membrane technologies at its production site in Singapore. During H1 2021, De.mem moved to a new, larger site in Singapore, upgrading its membrane production capacity.


Record balance sheet to support future growth

De.mem had a record $9.9m cash and term deposits as of 30 June 2021 to support its future growth prospects, such as providing larger BOO contracts to enterprise level clients, including the customers of the Capic business.

De.mem commissioned two significant, industrial BOO projects during H1 2021, which are now fully operational and revenue generating. The company works with some of Australia’s biggest blue chips including Rio Tinto, AGL, and Coca Cola.

De.mem reported a reduced loss before income taxes of $1.6 million during the period, an improvement on $1.9 million recorded for H1 2020.

An adjusted EBITDA loss of $1.1 million was the same as H1 2020, reflecting De.mem’s ongoing investment into R&D, its manufacturing scale up in Singapore, which cost about $500,000, along with growth in sales and marketing team, costing about $600,000.


Strong growth forecast but COVID-19 lockdowns pose uncertainty

De.mem CEO Andreas Kroell said the company had made strong progress during the first half of calendar year 2021 and he thought their track record of organic growth was “outstanding”.  However, he warned that COVID-19 lockdowns for De.mem, like many organisations, may have an impact.

“Subject to any negative impact from the current COVID-19 situation in particular in Australia, the company is well placed for significant growth in CY2021,  given the strong base of the first half results, the strong  growth of recurring revenue segments, the growing contribution of recently acquired Capic and the historically stronger second half of the calendar year,” Kroell said.

De.mem’s share price was up 3.85% today to 27 cents.

This article was developed in collaboration with De.mem, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.