Leeds-based Renew has agreed to acquire the entire issued share capital of J Browne Group Holdings for a cash consideration of £29.5m.
J Browne is a water focused engineering services business based in North London, operating throughout the South of England for Thames Water, Southern Water, Affinity Water and South East Water.
It delivers multi-disciplinary infrastructure and non-infrastructure services through a number of longstanding framework agreements, across all disciplines in the water sector. It also provides utility connections and infrastructure services to the developer market in London and the Home Counties.
In the year ended 31 March 2020, J Browne reported pre- tax profits of £5.5m on turnover of £79.2m (including share of joint ventures).
In its current financial year to 31 March 2021, the business has seen a reduction in activity due to the transition from AMP6 to AMP7 and is expected to report turnover of £63.3m, but this has now increased back to historic run-rate levels as activity has normalised in AMP7.
Renew said the acquisition will be an "excellent" strategic fit, adding material scale to Renew’s water business and brings new water clients into the group.
It said the water sector is an attractive market with £51bn committed by Ofwat to deliver service improvements as part of the current five year investment period (AMP7) which runs to 2025. The acquisition is expected to be immediately earnings enhancing and to deliver high single digit earnings accretion on a full year basis.
The consideration of £29.5m on a cash-free/debt-free basis will be funded by a combination of cash and the group’s existing revolving credit facility provided by HSBC and Natwest. There is no deferred consideration payable.
Renew also issued a trading update, saying that group trading for the first half of the year is expected to be ahead of the previous financial year and in line with management’s expectations.
It said the latest national lockdown has not had any material impact on trading and the group has seen good demand for its services across all markets. As a result, the board is confident it can deliver consensus expectations for the full year.
The firm's order book is underpinned by long term framework positions, including new awards during the first half of the year.
Paul Scott, chief executive of Renew, said: “This acquisition broadens Renew’s exposure to the UK water market and is consistent with our strategic objectives.
"This market offers attractive long term growth opportunities underpinned by committed regulatory spend and is a sector we understand well from our established relationships in other water regions.
"We have known Jeremy and his team for many years and have tracked how they have successfully grown a business with an excellent reputation for directly delivering reliable engineering services to a number of water companies across the south of England, including Thames Water, the largest in the UK.
"This is a business that shares the values of Renew and I am delighted to welcome the management and staff of J Browne to the Renew family.”
Jeremy Browne, chairman of J Browne, added: "Under Renew’s ownership, J Browne enters an exciting new stage for the business.
"It was critical for us to have an owner who shares the values that have contributed to our success and one which has demonstrated the necessary expertise to support our growth ambitions.
"The Renew business model and strategy fits perfectly with these aspirations and I believe the J Browne brand will continue to flourish alongside the many other highly respected Renew subsidiary businesses.”