REG - Essentra plc - Acquisition of the Wixroyd Group

EssentraAnnouncement

01/12/2022 07:00

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RNS Number : 1746I  Essentra plc  01 December 2022

 

ESSENTRA PLC

ACQUISTION OF THE WIXROYD GROUP

 

Essentra plc ("Essentra", the "Company" or the "Group"), a leading global
provider of essential components and solutions, is pleased to announce the
acquisition of Wixroyd Holdings Limited (the "Wixroyd Group"), a leading UK
supplier of industrial parts for the engineering sector, for an initial
consideration of £29.5m.

This is the first acquisition to be announced since Essentra outlined its new
strategy as a pure-play components business and continues a successful track
record of acquisitions in the components business over the last ten years. The
acquisition of the Wixroyd Group expands Essentra's capabilities in hardware
components and creates significant additional cross-selling opportunities
across a range of Essentra's current end markets with the initial focus on
Essentra's customer base in Continental Europe.

The acquisition fully supports the Company's strategy, as set out at the
recent Capital Markets Event, to accelerate and supplement organic growth
through value enhancing bolt-on acquisitions that expand its product, market
and geographic breadth. The acquisition is expected to be accretive to
adjusted(1) EPS in the first full year of ownership, with ROIC(2) expected to
exceed 15% within three years, and delivers profit margins significantly ahead
of the current Group level.

Based in Chichester, the Wixroyd Group comprises three leading UK brands of
differentiated mechanical components. With a 70 year history, it has earned a
reputation for high quality components delivered with an excellent level of
service to its 9,000 customers. The Wixroyd Group manufactures and supplies
one of the broadest ranges of innovative mechanical components, with an
extensive portfolio of over 100,000 products available across the online range
providing solutions for product design and engineering challenges.

The consideration payable for the Wixroyd Group comprises an initial cash
consideration of £29.5m and up to £7.0m deferred earn-out consideration on a
cash-free, debt-free basis. For the year ended 31 December 2021, the Wixroyd
Group generated revenue of £10.4m, and EBITDA of £2.6m. Based on the Wixroyd
Group achieving its forecast performance for the year ended 31 December 2022,
the initial consideration would represent an acquisition multiple of c.9x
EBITDA.

 

In determining the base case the Board expects a similar EBITDA performance in
2023 given the macro-economic environment. The deferred earn-out consideration
is conditional on achieving certain performance criteria for the 12 month
period commencing 1 January 2023, which would exceed the base case. The Board
expects revenue and purchasing synergies arising from the acquisition to
materially benefit performance from 2024 onwards.

 

The initial acquisition consideration, and any subsequent conditional
consideration will be financed from Essentra's existing cash flow and debt
facilities. Following the acquisition Essentra's balance sheet will remain
strong, with the proforma net debt position of the continuing components
business representing significantly less than 1.0x EBITDA, providing the
capacity to drive further organic and inorganic growth ambitions.

Scott Fawcett, Chief Executive Designate of Essentra plc, commented:

"I am delighted to announce the acquisition of the Wixroyd Group, which will
further strengthen Essentra's expertise and leading product portfolio to the
benefit of our customers. Our plan is to launch Wixroyd products to Essentra's
Continental European customers, further strengthening the breadth of our
offer.

This transaction is a great example of the Components' strategy in action as
we leverage our strong balance sheet and the significant opportunities for
product expansion in highly fragmented markets to accelerate our potential as
a pure-play components business."

Marcus Iafrate, MD of the Wixroyd Group, and Anthony Iafrate, Chair of the
Wixroyd Group, commented:

 

"The achievements of the Wixroyd team, and the role our products have played
in enabling design engineers across the UK to innovate and solve countless
engineering challenges, has been a great source of pride for both of us as we
have guided the Wixroyd Group over the last 30 years.

 

The next phase in Wixroyd's development is hugely exciting. We have seen
substantial growth in our business, predominately in the UK, and look forward
to scaling this to a wider, more international customer base, in the next
phase of our development. The culture of Essentra Components places the same
importance on people as we have at Wixroyd, which, along with the excellent
product and customer fit, makes this an exciting time in our company's
history."

 

Notes:

 

1.     The term adjusted excludes the impact of amortisation of acquired
intangible assets and adjusting items

2.     ROIC is calculated as adjusted operating profit expressed as a
percentage of invested capital. Invested capital is defined as initial
consideration and capex investment, plus associated acquisition transaction
fees and integration costs

 

 Investor enquiries:                                Media enquiries:

 Essentra plc                                       Tulchan Communications LLP

 Claire Goodman, Group Investor Relations Manager   Olivia Peters

 Jack Clarke, Chief Financial Officer               Lisa Jarrett-Kerr

 Emma Reid, Head of Governance                      Tel: +44 (0)20 7353 4200

 Tel: +44 (0)1908 359100

 

Additional information

The acquisition constitutes a Class 2 transaction for the purposes of the UK
Financial Authority's Listing Rules. Total gross assets excluding cash and
goodwill as of 31 December 2021 were £9.5m.

 

More information on Wixroyd Group can be found on its website at
https://www.wixroyd.com/en (https://www.wixroyd.com/en) .

 

Cautionary forward-looking statement

This announcement contains forward-looking statements based on current
expectations and assumptions. Various known and unknown risks, uncertainties
and other factors may cause actual results to differ from any future results
or developments expressed or implied by the forward-looking statement. Each
forward-looking statement speaks only as of the date of this announcement. The
Company accepts no obligation to revise or publicly update these
forward-looking statements or adjust them to future events or developments,
whether as a result of new information, future events or otherwise, except to
the extent legally required.

The release, publication or distribution of this announcement in jurisdictions
other than the United Kingdom may be restricted by law and, therefore, any
persons who are subject to the laws of any jurisdiction other than the United
Kingdom should inform themselves about, and observe, any applicable
requirements. Any failure to comply with these requirements or restrictions
may constitute a violation of the securities laws or regulations of any such
jurisdiction. This announcement has been prepared for the purposes of
complying with English law and the UK Listing Rules and the information
disclosed may not be the same as that which would have been disclosed if this
announcement had been prepared in accordance with the laws and regulations of
any jurisdiction outside of England.

No profit forecasts or estimates

No statement in this announcement is intended as a profit forecast or estimate
for any periods.

Notes to Editors

About Essentra plc

Essentra plc is a FTSE 250 company and a leading global provider of essential
components and solutions. As a result of the completion of the sale of
Packaging to the Mayr-Melnhof Group, the Group is now organised into two
global divisions. Essentra focuses on the light manufacture and distribution
of high volume, enabling components which serve customers in a wide variety of
end-markets and geographies.

Headquartered in the United Kingdom, Essentra's global network extends to 32
countries and includes over 4,500 employees, 24 principal manufacturing
facilities, 28 sales & distribution operations and two research &
development centres. For further information, please visit www.essentraplc.com
(http://www.essentraplc.com) .

Essentra Components

Essentra Components is a global market leading manufacturer and distributor of
plastic injection moulded, vinyl dip moulded and metal items. Operating in 25
countries worldwide, 12 manufacturing facilities and 23 sales &
distribution centres serving c.80,000 customers with a rapid supply of low
cost but essential products for a variety of applications in industries such
as equipment manufacturing, automotive, fabrication, electronics, medical and
renewable energy.

Essentra Filters

Essentra Filters is the only global independent cigarette filter supplier.
Currently headquartered in Singapore, the division has 12 sites across nine
countries, including two innovation centres, providing a flexible
infrastructure strategically positioned to serve the tobacco sector. The
business supplies a wide range of value-adding high-quality innovative
filters, packaging solutions to the roll your own segment and analytical
laboratory services for ingredient measurement to the industry. Essentra's
offering also includes Heat Not Burn and e-cigarette solutions to the rapidly
evolving market for Next Generation Products. The division also includes the
Tear Tapes business, which is globally recognised as the leading manufacturer
and supplier of pressure-sensitive tear tapes, that are largely used in the
tobacco, e-commerce, food and beverage and specialist packaging sectors.

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