REG - Water Intelligence - Reacquisition of Las Vegas and Phoenix Franchises

Water IntelligenceAnnouncement

08/07/2021 07:00

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RNS Number : 5447E  Water Intelligence PLC  08 July 2021

 

Water Intelligence plc

Reacquisition of Las Vegas and Phoenix Franchises

Water Intelligence plc (AIM: WATR.L) ("Water Intelligence" or "Group"), a
leading multinational provider of precision, minimally-invasive leak detection
and remediation solutions for both potable and non-potable water is pleased to
announce that it has reacquired two major franchises - Las Vegas and Phoenix -
within the Group's American Leak Detection subsidiary ("ALD").  Today's set
of acquisitions is the largest that the Group has executed to date and
reinforces its strong growth trajectory both financially and operationally.

Financially, the acquisition will be earnings enhancing for shareholders.
The combined purchase price of $10.3 million will be paid over four years and
includes all assets to conduct operations including trucks and equipment. The
purchase price is based on combined 2020 full-year results of approximately
$5.75 million in sales and $1.6 million in adjusted profits.  Both locations
are continuing to grow in 1H 2021.  Given the Group's available cash reserves
and bank facilities, the Group has sufficient capital to fund the acquisitions
and execute on its growth objectives.

The franchise leadership team, led by Keith Ozawa, will remain in place to run
the operation and to provide senior leadership in helping the Group execute
its growth plan. The purchase price assumes a minimum level of profits for the
next three-years and provides stock options as part of the transaction for
75,000 ordinary shares, at the current market price, in order to align
incentives. These options vest in full on the fourth anniversary of grant.

Water Intelligence has strong market demand for its solutions. The Group is
seeking to add to its supply of trained technicians across the United States
to address customer demand, especially from its insurance channel, and the
resulting backlog of work.  Mr. Ozawa has been involved over the last two
years in assisting the franchise System secure more trained technicians.  He
will work closely with John Spenard, the Group's newly appointed Chief People
Officer.

Demand in Las Vegas and Phoenix is especially strong for ALD water leak
detection and repair services, due to a variety of factors such as heat,
drought, the number of swimming pools and higher income levels. Strategically,
these reacquisitions follow the May reacquisition of its Reno, Nevada
franchise and the Group's prior reacquisition of its franchise in Tucson,
Arizona.  It enables ALD to link existing corporate operations - Las Vegas
with Reno and Phoenix with Tucson.  Such operational scale is expected to
contribute to both growth and efficiencies. In addition, today's
reacquisitions reinforce the corporate strategy of creating regional hubs to
help grow both corporate and franchise operations and also to integrate
UK-based Water Intelligence International's municipal offerings in the United
States.

Today's two reacquisitions bring the total number of transactions year-to-date
to seven.  By themselves, Las Vegas, Phoenix and last week's reacquisition of
the Northeast Florida franchise add approximately $8 million in annual sales
and $2 million of annual adjusted profits to the Group's pro forma financials
based on 2020 annual results for these franchises.  The Directors believe
that there is scope for further growth as additional technicians are deployed.

The Group seeks to maintain a strong growth trajectory as it focuses on market
capture in a large addressable market. With respect to organic growth, as
announced earlier this week, the Group has won its broadest mandate for an
insurance national account to provide water leak detection and repair
solutions.

ALD is delivering "essential services" to consumers, businesses and
municipalities to address their water infrastructure problems.  Market demand
is acyclical and growing stronger as the price of water is rising, especially
given droughts in the western part of the United States and the aftermath of
the big freeze in the southern parts of the country.

Keith Ozawa, Executive Vice President and former franchise owner for Las Vegas
and Phoenix commented: "I am excited to contribute leadership to drive the
further rapid growth of our American Leak Detection brand.  Customers,
especially insurance companies, are demanding our minimally invasive water
leak detection solutions. One key to our success, for franchise owners and
corporate managers alike, is our ability to attract and train talented women
and men who are passionate about leveraging technology to solve our nation's
and the world's water infrastructure issues."

Executive Chairman, Dr. Patrick DeSouza commented: "I am very pleased with our
start to 3Q. We have achieved our broadest mandate for an insurance national
account and executed our biggest franchise reacquisition in line with our
strategic growth plan.  I am excited about working with Keith.
Notwithstanding Covid, Water Intelligence aims to deliver a strong trajectory
because our solutions are in high demand around the world as communities look
to preserve our most precious resource."

 

The information communicated in this announcement is inside information for
the purposes of Article 7 of Regulation 596/2014

Enquiries:

 Water Intelligence plc
 Patrick DeSouza, Executive Chairman               Tel: +1 203 654 5426
 RBC Capital Markets - Joint Broker                Tel: +44 (0)20 7653 4000
 Jill Li

 Elizabeth Evans
 WH Ireland Limited - NOMAD & Joint Broker         Tel: +44 (0)20 7220 1666
 Adrian Hadden
 James Sinclair-Ford
 Matthew Chan                                                      Tel:  +44 (0)20 3903 7721

 Dowgate Capital Ltd - Joint Broker

Stephen Norcross

 

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