Shares in leak detection company Water Intelligence (WATR:AIM) gained 1.9% on Tuesday to 504p after the company announced the reacquisition of Florida based franchise Melbourne on attractive terms.
Water Intelligence will pay $1.55 million over three years and the franchise management team are staying on board to run the operation and expand the depth of management at the American Leak Detection (ALD) company.
ACCELERATING GROWTH
The company said the deal will be immediately accretive to earnings and the purchase price of $1.55 million includes all assets including trucks and equipment. The acquisition represents 1.3 times revenues and 5.2 times pre-tax profits.
The deal is strategically important because it will link the current fast-growing corporate operations in Orlando to the north with Miami to the south.
Leak detection and repair demand is high in Florida due to the number of pools, rainy weather and high disposable income.
Linking the three operations is expected to lead to accelerated growth for the ALD business through meeting pent-up demand and achieving efficiencies from the increased scale of the combined operations.
Today’s deal follows-on from last week’s acquisition of its New Orleans and Louisiana franchise for $1.77 million and continues the execution of the company’s strategy to reacquire franchises that are accretive to earnings.
BROKER VIEW
Broker WH Ireland commented, ‘Beyond this morning’s reacquisition, and as noted last week, today’s RNS confirms that strong progress has continued in Q4 following a highly encouraging Q3 update where we upgraded our FY 2020E and FY 2021E profit forecasts by as much as 8%.
‘Water Intelligence was recently included in the MSCI World Micro Cap index and was also awarded the Green Economy Mark by the London Stock Exchange, underlining the company’s contribution to the green economy.’
