Water Intelligence reacquires Minneapolis franchise

Leak detection and remediation company Water Intelligence announced the reacquisition of its franchise in Minneapolis, Minnesota on Tuesday, within its American Leak Detection (ALD) subsidiary.

The AIM-traded firm said it was a “significant” reacquisition, that would enable it to add further scale to Water Intelligence, both operationally and financially.

It said the acquisition was accretive to shareholder value, and built on a long-term growth strategy that, in the last five years, had produced compounded annual growth of 35% in terms of revenue and 33% in terms of profit before taxes.

Operationally, the group said it was looking to reinforce ALD's brand leadership across the United States, with the brand currently operating in 46 states, generating more than $125m in sales to third parties.

Its solutions are delivered by franchise locations and corporate locations operating under the same brand.

Water Intelligence explained that franchise reacquisitions in strategic locations facilitated its ability to grow regional geographies faster, through more centralised marketing and management.

Operationally, the reacquisition of Minneapolis created a corporate base in the upper midwest region, with the board confirming that the current franchise team would be staying in place to grow the business faster, with additional working capital.

Minneapolis would also provide the group a regional hub to cross-sell solutions from its UK-based municipal business to ALD's customers.

During 2019, the company reportedly executed several significant municipal contracts in the upper midwest.

Financially, for the 2019 financial year, Minneapolis generated around $0.99m of sales and $0.32m of pre-tax profits.

Through the first quarter, the team there was apparently on track to produce similar strong results in 2020 for the group's profit and loss statement.

As it noted in its first quarter update, demand for ALD's water and wastewater infrastructure services remained strong, given its solutions were considered ‘essential services’ amid the Covid-19 coronavirus pandemic.

The firm said the purchase price for the reacquisition, including all assets to conduct operations, was around $1.3m, to be paid evenly over four years.

“We seek to distinguish ourselves among companies operating in the Covid-19 marketplace,” said executive chairman Patrick DeSouza.

“We plan to accelerate our growth plans during Q2 given our success in navigating during the first quarter.

“Global market demand for solutions to water loss from leakage and to health issues from failing wastewater infrastructure is strong and continues to grow.”

Dr DeSouza said the firm was continuing to execute its growth plan of gaining national accounts to scale its sales footprint, reacquiring franchises selectively to add operational and financial scale, and introducing new technology-based products to leverage its market-making capabilities.

“We look forward to working more closely with the team in Minneapolis to realize accelerated growth.”

At 1327 BST, shares in Water Intelligence were down 2.02% at 267p.