REG - Victoria PLC - Acquisition of B3 Ceramics Danismanlik

VictoriaAnnouncement

10/11/2021 07:05

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20211110:nRSJ9166Ra&default-theme=true

RNS Number : 9166R  Victoria PLC  10 November 2021

For Immediate
Release
             10 November 2021

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.

 

 

Victoria PLC

('Victoria' or the 'Group')

Acquisition of B3 Ceramics Danismanlik ("Graniser")

 

A substantial low-cost manufacturing platform

 

Victoria PLC, (LSE: VCP) the international designers, manufacturers and
distributors of innovative flooring, is pleased to announce the further
expansion of its existing ceramic tile business and operations, having agreed
to acquire Graniser, a mid-market manufacturer and exporter of ceramic tiles
based in Izmir, Turkey (the "Acquisition").

 

Key terms of the Acquisition

 

·    Graniser prepares and files audited statutory financial accounts in
Turkey, which were audited by Deloitte from 2013 to 2019, with KPMG appointed
in 2020. The accounts are prepared in Turkish Lira, with c. 70% of Graniser's
revenue denominated in Euros.

·    For the 12 months ended 31 December 2020, Graniser generated audited
revenues of €59.3 million 1  (#_ftn1) (c. £52.8m1).  Current normalised
EBITDA is approximately €9 million (c. £7.7m2).

·    Total consideration to be paid on completion is €8.4 million (£7.1
m 2  (#_ftn2) ), which will be funded entirely from the Group's cash balances.
In addition, Graniser has approximately €39.8 million (c. £33.7m(2)) of net
debt (including shareholder loans), which will be repaid on completion.

·    Completion is subject to procedural approval by the Turkish
competition authorities and is expected to take place in December 2021.

 

On completion, the Acquisition will be immediately earnings accretive.

 

 

Overview of Graniser

 

Established in 1997, Graniser has been ultimately owned 75% by the Austrian
investment company, Bancroft Group and 25% by the European Bank of
Reconstruction and Development since 2012. It has robust financial reporting
structures in place and its financial statements have been audited by either
Deloitte or KPMG for the last eight years.

 

The company manufactures ceramic tiles from a single 75,000 square meter
production facility it owns, close to Izmir port, a major export hub. This
factory, which incorporates a cogeneration power plant to improve efficiency
and generate energy savings, has a current annual production capacity of 20.8
million square meters, which is not fully utilised, with the opportunity to
expand output considerably with limited capital expenditure. (By comparison,
Victoria's existing ceramic tile operations have an annual production capacity
of 52 million sqm).

 

Exports, predominantly to the USA, Israel, the UK, and Germany, accounted for
c. 63% of sales in 2020 and c. 75% is expected in 2021, resulting in a
significant proportion of Euro and US Dollar-denominated income and Turkish
Lira-denominated costs.

 

Graniser has an experienced and well-respected management team, which will be
fully integrated with Victoria's well-established ceramic tiles management
team.

 

Strategic rationale for the Acquisition

 

(a more detailed presentation is available on Victoria's website at
https://www.victoriaplc.com/reports/)

 

The acquisition of Graniser continues Victoria's successful strategy of
growing its business with earnings-accretive acquisitions, and using scale and
the Group's industry expertise to drive further profit increases via cost
savings and revenue growth.

 

1. Manufacturing diversification

·    Graniser diversifies Victoria's ceramic tiles manufacturing footprint
into a significantly lower energy, labour and raw material price environment,
alongside strict quality governance.

·    Targeted capex, identified during commercial due diligence, is
expected to deliver a >75% increase in Graniser's earnings over the next 3
years.

 

2. Commercial synergies

·    Graniser and Victoria Ceramics will benefit from exposure to each
other's commercial markets. Graniser will provide further export potential to
the Middle East (an 800 million(3) sqm per annum growing ceramics market) for
Victoria. Victoria's ceramic tiles division, in particular its Italian
operations, will open high-growth European DIY markets for Graniser.

·    The enlarged ceramic tile operations will leverage Victoria's
existing brand and design strengths with product ranges manufactured in a
low-cost environment to drive margins and top line growth.

·    Graniser will continue to operate an independent brand with its own
management team, reporting within the Group's ceramics management structure.

 

The Board believes that Graniser presents an excellent strategic fit with
Victoria's existing business and will have strong long-term growth prospects
as part of the Group.

 

Philippe Hamers, Group Chief Executive of Victoria, commented:

"Victoria's ceramic tiles business continues to go from strength to strength.
The low-cost manufacturing environment that Graniser offers will give Victoria
the ability to leverage its manufacturing expertise and brand strength to
further drive operating margins."

 

Geoff Wilding, Executive Chairman of Victoria, said:

"Following completion of the Acquisition, Victoria will have invested c. £201
million in the current financial year to add approximately £35 million of
EBITDA to the Group. Victoria's strategy of achieving scale through
acquisitions and using that scale to extract operational synergies continues
to deliver value for the Group and its shareholders.

 

We continue to have substantial amounts of capital to deploy and are in active
discussions with additional high-quality opportunities to grow our business.
Therefore, shareholders can expect further earning accretive acquisitions."

 

 

(1) Applying a GBP:EUR exchange rate of 1.18

(2) Leverage ratios calculated in-line with the Group's debt facilities

(3) Freedonia Global Flooring Report

 

 The person responsible for arranging the release of this announcement on
 behalf of the Company is Michael Scott, Group Finance Director.

 For more information contact:

Victoria PLC                                                   +44 (0) 1562 749 610

 Geoff Wilding, Executive Chairman

 Philippe Hamers, Group Chief Executive

 Michael Scott, Group Finance Director

 Singer Capital Markets (Nominated Adviser and Joint Broker)    +44 (0) 207 496 3095

 Rick Thompson, Phil Davies, Alex Bond

 Berenberg (Joint Broker)                                       +44 (0) 203 207 7800

 Ben Wright, Mark Whitmore, Tejas Padalkar

                                                                +44 (0) 207 418 8900

 Peel Hunt (Joint Broker)

 Adrian Trimmings, Andrew Clark                                 +44 (0) 20 7466 5000

 Buchanan Communications (Financial PR)

 Charles Ryland, Chris Lane, Vicky Hayns, Tilly Abraham

 

About Victoria

 Established in 1895 and listed since 1963 and on AIM since 2013 (VCP.L),
 Victoria PLC, is an international manufacturer and distributor of innovative
 flooring products. The Group, which is headquartered in Kidderminster, UK,
 designs, manufactures and distributes a range of carpet, flooring underlay,
 ceramic tiles, LVT (luxury vinyl tile), artificial grass and flooring
 accessories.

 Victoria has operations in the UK, Spain, Italy, Belgium, the Netherlands, the
 USA, and Australia and employs approximately 4,000 people across more than 26
 sites. Victoria is the UK's largest carpet manufacturer and the second largest
 in Australia, as well as the largest manufacturer of underlay in both
 regions.

 The Group's strategy is designed to create value for its shareholders and is
 focused on consistently increasing earnings and cash flow per share via
 acquisitions and sustainable organic growth. (Further information about
 Victoria can be found on its website, www.victoriaplc.com
 (http://www.victoriaplc.com) .)

 About Graniser

 Graniser was established in 1997 and is engaged in the business of
 manufacturing and distributing ceramic and porcelain floor and wall tiles.
 Since then, the business has developed as a US-wide online flooring product
 designer and distributor with an absolute commitment to customer service and
 environmental sustainability.

 Graniser has its headquarters in Izmir/Turkey and has a capacity of more than
 20 million sqm (across 11 kilns and 20 production lines). Graniser produces
 and sells single and double - fired wall, floor and glazed tiles in various
 sizes and over 5,000 varieties from its factory which is near Izmir, in the
 Aegean Region, Turkey and serving customers around the world.

 It is a major exporter of ceramic tiles, accounting for c.7% of Turkey's total
 ceramic exports.

 Further information about Graniser can be found on its website
 https://www.graniser.com.tr/en (https://www.graniser.com.tr/en) .

 

 About Victoria

 Established in 1895 and listed since 1963 and on AIM since 2013 (VCP.L),
 Victoria PLC, is an international manufacturer and distributor of innovative
 flooring products. The Group, which is headquartered in Kidderminster, UK,
 designs, manufactures and distributes a range of carpet, flooring underlay,
 ceramic tiles, LVT (luxury vinyl tile), artificial grass and flooring
 accessories.

 Victoria has operations in the UK, Spain, Italy, Belgium, the Netherlands, the
 USA, and Australia and employs approximately 4,000 people across more than 26
 sites. Victoria is the UK's largest carpet manufacturer and the second largest
 in Australia, as well as the largest manufacturer of underlay in both
 regions.

 The Group's strategy is designed to create value for its shareholders and is
 focused on consistently increasing earnings and cash flow per share via
 acquisitions and sustainable organic growth. (Further information about
 Victoria can be found on its website, www.victoriaplc.com
 (http://www.victoriaplc.com) .)

 About Graniser

 Graniser was established in 1997 and is engaged in the business of
 manufacturing and distributing ceramic and porcelain floor and wall tiles.
 Since then, the business has developed as a US-wide online flooring product
 designer and distributor with an absolute commitment to customer service and
 environmental sustainability.

 Graniser has its headquarters in Izmir/Turkey and has a capacity of more than
 20 million sqm (across 11 kilns and 20 production lines). Graniser produces
 and sells single and double - fired wall, floor and glazed tiles in various
 sizes and over 5,000 varieties from its factory which is near Izmir, in the
 Aegean Region, Turkey and serving customers around the world.

 It is a major exporter of ceramic tiles, accounting for c.7% of Turkey's total
 ceramic exports.

 Further information about Graniser can be found on its website
 https://www.graniser.com.tr/en (https://www.graniser.com.tr/en) .

 

 1  (#_ftnref1) 2020 Revenue of 477.1mm Turkish Lira converted to EUR and GBP
at 2020 average rate of 8.04 TL/EUR and 9.03 TL/GBP, respectively.

 2  (#_ftnref2) Converted to GBP at a rate of 1.18 GBP/EUR.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  ACQBMBFTMTJBMRB