REG - Water Intelligence - Strategic Reacquisition of Dallas, Texas Franchise

Water IntelligenceAnnouncement

04/11/2024 07:00

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RNS Number : 7837K  Water Intelligence PLC  04 November 2024

 

 

Strategic Reacquisition of Dallas, Texas Franchise

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 the strategic reacquisition of its franchise in Dallas, Texas within
the Group's core American Leak Detection ("ALD") subsidiary.

Key terms of the Acquisition

The transaction involves consideration of both cash and stock options.  $12
million in cash is spread through 2027 and based on performance of $2.3
million in adjusted profits for 2027.  $5 million was paid at Closing based
on a trailing twelve months pro forma of $6 million in sales and $1.0 million
in adjusted profits and $0.3 million in total assets. $2.5 million is
scheduled to be paid in 2025 based on a pro forma with increasing profit
before tax.  Options for 200,000 ordinary shares are issued in amounts and at
exercise prices as follows: 100,000 at $6.25 per share; 35,000 at $7.50 per
share; 35,000 at $8.75 per share; and 30,000 at $10.00 per share respectively
and vest over 4 years. The purchase price includes all assets required to
conduct operations, including trucks and equipment. The transaction is
accretive for the Group's shareholders.

Strategic rationale for the Acquisition Including Appointment of CEO for ALD

Today's transaction is strategic for the Group.  First, and most importantly,
Will Knell, owner of the Dallas franchise is appointed CEO of ALD, the Group's
core subsidiary representing approximately 85% of the Group's revenues. Mr.
Knell has significant experience in operations and is well respected among the
franchise System having previously been awarded Franchisee of the Year.  The
Dallas franchise represents the single largest location in terms of sales in
the entire franchise System and is fast growing.  Second, strategically there
are significant operating synergies between the Dallas location and ALD's
neighboring corporate-operated location in Fort Worth, Texas.  Integration of
both operations will create cost savings.  Moreover, in terms of future
revenue growth and scale, the Dallas-Fort Worth metroplex is expected to rival
New York and Los Angeles in size and concentration of disposable income by
2030.  Third, the Group plans to move the headquarters of ALD to Dallas
during 2025 and to build a training center similar to the one the Group opened
in Bridgeport, Connecticut during Q3.  The centrality of the Dallas / Fort
Worth location in the United States will enable the Group to accelerate its
strategic growth plan organically and with its national partners especially
insurance companies and technology product companies.

2025 and Capital Allocation Plan

The Group has sufficient resources on hand to execute its growth plan;
moreover, the Group remains under-levered enabling it to apply more capital to
accretive opportunities that may emerge.  With today's acquisition, the Group
has strengthened its management team and execution capabilities to advance
more rapidly both organic growth and additional acquisitions for 2025 pursuant
to its previously announced capital allocation plan.

Executive Chairman, Dr. Patrick DeSouza commented: "When we provided our
Interim Update in September, we indicated that we were confident about the
future and that our Next 50 Initiative would put an accelerated growth plan in
place. Today's announcement reinforces that message because beyond the
strategic nature of the Dallas reacquisition, we are advancing the execution
leadership of the Group in a significant way.

Congratulations to Will Knell who is an outstanding leader and a perfect fit
for the future of the Group.  Our entire franchise System, representing over
$100 million in gross sales to customers is excited by the appointment of Will
and an updated growth plan that we will be unveiling prior to year-end.
Will's appointment and the move of ALD's headquarters to Dallas is a great way
to kick-off our Next 50 Initiative named after our fiftieth anniversary
celebration of the establishment of ALD two weeks ago at the Group's annual
convention."

Will Knell, CEO of American Leak Detection added:  "I truly appreciate the
confidence that the Board, management and our franchise System have in me.
On previous occasions, including most recently at our fiftieth anniversary
celebration of American Leak Detection, I have met with some of our
institutional and individual investors and welcome their support and the
opportunity that our team has to deliver for our shareholders.

Our Dallas franchise operation and the neighboring corporate-operated location
in Fort Worth have served as a model testing site for the various technology
investments that the Group has made ranging from Salesforce to LeakVue.
Leveraging our strong results and our operating experience as "super-users",
we expect to help the Group scale with these investments and realize gains in
organic growth in 2025 and beyond.

It is very exciting to help the Group transform water infrastructure services
as a platform or "one stop shop" across the United States and, along with my
colleagues in the UK, Ireland, Canada and Australia."

 The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article
17 of the UK MAR. Upon the publication of this announcement, this inside
information is now considered to be in the public domain.

 

Enquiries:

Water Intelligence plc

Laura Bass, Director, Strategic
Finance
Tel: +1 203 584-8240

 
 

 

Grant Thornton UK LLP - Nominated Adviser
                   Tel: +44 (0) 20 7383 5100

Philip Secrett

Harrison Clarke

Ciara Donnelly

RBC Capital Markets - Joint Broker
 
Tel: +44 (0)20 7653 4000

Jill Li

Elizabeth Evans

Daniel Saveski

Dowgate Capital Ltd - Joint Broker
 
Tel: +44 (0)20 3903 7715

Stephen Norcross

 

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