Water Intelligence (LON:WATR) came to the Aim market in 2010, through a reverse takeover of Qonnectis plc. Its principle asset is the American Leak Detection (ALD) business, which it operates on both a franchisee and corporate-owned basis.
Background
As described in the 2010 prospectus:
http://www.waterintelligence.c...
“ALD focusses on the accurate, non-destructive detection of all types of leaks including hidden water and sewer leaks, together with repair and other related services. ALD’s service technicians utilise proprietary training and specialist equipment such as infrared cameras and acoustic devices to pinpoint leaks, employing less invasive methods to find the source of the leak compared to breaking or drilling holes in walls and floors. Because leaking water can travel along water lines or leaks may be pinhole size along a water pipe, in many instances, ALD’s service offerings have the potential to reduce the repair costs for the consumer compared with typical plumbing solutions as they do not rely on a “trial-and-error” method of exposing whole sections of pipes to detect leaks”.
Also taken from the prospectus:
“[ALD] believes that its competitive advantages include its full range of service offerings, its brand and over 30 years of experience, the specialised equipment it uses, the training it provides its franchise owners and technicians working from business run directly by ALD, its marketing system and the key relationships it has with channel partners such as insurance and restoration companies. For certain segments of its business, ALD may face competition from others, including independent plumbers, repair services, other leak detection companies and services”.
“[ALD] is aware of certain other companies or businesses that offer leak detection services. However, as far as it is aware, these businesses tend to be small owner-run operations without the franchise or branding presence of ALD”.
The Franchisee Business
The ALD franchisee business is the core business of Water Intelligence.
ALD’s revenue model is principally derived from franchise royalties. Franchisees pay monthly royalties based on a percentage of gross monthly sales, ranging from 6% to 10%. It also derives revenue from the sale of new franchises and supplying its franchisees with revenue and equipment at a modest mark-up.
As of year-end 2016, ALD had 96 franchisees, the vast majority being in the USA. System-wide sales for 2016 were approximately $75m, generating franchise royalty income to the Group of $5.5m.
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