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Water Intelligence reacquires franchise in San Jose, California

By Josh White

Date: Tuesday 02 Jun 2020

Water Intelligence reacquires franchise in San Jose, California

(Sharecast News) - Leak detection and remediation company Water Intelligence announced the reacquisition of its San Jose franchise in California on Tuesday, within its American Leak Detection (ALD) subsidiary.
The AIM-traded firm said San Jose was the second significant reacquisition that it had made in the second quarter while navigating the Covid-19 coronavirus crisis.

It said the first one in Minneapolis provided a regional corporate base in the upper Midwest, where the group had been successful in cross-selling municipal leak detection solutions from its UK-based Water Intelligence International operations.

The reacquisition of San Jose, meanwhile, was described as "exceptionally strategic", in that it would enable the firm to have a regional corporate base in Silicon Valley.

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

ALD operates in 46 US states, and generates more than $125m (£99.66m) in sales to third parties.

The board said its solutions were delivered by franchise locations and corporate locations operating under the same brand.

As part of its long-run growth strategy, the group was looking to reinforce ALD's brand across the US through reacquisitions of selected franchises, and the establishment of regional corporate operations.

Water Intelligence said a corporate presence in Silicon Valley would enable it to advance its innovation plans, and to build on research and development relationships that it had at Stanford University.

Corporate operations would also reinforce the growth of two already successful, multi-million dollar franchises in the San Francisco and Berkeley geographies of the Bay Area.

Financially, for 2019, San Jose franchise operations generated around $0.7m in sales and $0.2m in pre-tax profits.

The purchase price for the reacquisition, including all assets to conduct operations such as trucks and equipment, was about $1.05m, to be paid over three years.

"We continue to distinguish ourselves among companies operating in the Covid-19 marketplace," said executive chairman Dr Patrick DeSouza.

"We are accelerating our growth plans during Q2 given our success in navigating the crisis during the first quarter."

"Water and wastewater solutions are 'essential services', and we continue to operate in line with shelter-in-place policies."

Dr DeSouza said global market demand for solutions to water loss from leakage, and to health issues from failing wastewater infrastructure, was "strong", and continuing to grow.

"The reacquisition of San Jose is very strategic.

"The group's solutions are driven by cutting-edge technologies.

"With a corporate presence in Silicon Valley, we plan to extend our leadership in bringing further innovation to solve the world's water and wastewater problems."

At 1330 BST, shares in Water Intelligence were down 2.36% at 273.4p.

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