REG - Victoria PLC - Acquisition

VictoriaAnnouncement

19/10/2022 07:00

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RNS Number : 3304D  Victoria PLC  19 October 2022

 For Immediate Release  19 October 2022

 

Victoria PLC

('Victoria', the 'Company', or the 'Group')

 

Acquisition of International Wholesale Tile

Further Growth in North America

 

 

Victoria PLC (LSE: VCP) the international designers, manufacturers and
distributors of innovative flooring, is pleased to announce further growth of
its North American division with the acquisition of ("the Acquisition")
Florida-based flooring distributor, International Wholesale Tile LLC ("IWT").

 

Key terms of the Acquisition

 

·    For the 12 months ended 31 March 2022, IWT generated unaudited
revenues of $63.2 million 1  (#_ftn1) (c. £55.4m1) and normalised EBITDA of
approximately $7.0 million (c. £6.2m(1)).

·    The total consideration paid on completion was $28.5 million (£24.9
m1).

·    A further, capped, contingent payment is payable over the next four
years, conditional upon the business achieving certain growth and earnings
targets.

·    Post-completion leverage remains in line with the Group's stated
financial policy.

 

The Acquisition will be immediately earnings and cash flow accretive.

 

Overview of IWT

Established in 1994, IWT is a specialty distributor of ceramic & porcelain
tiles, natural stone, luxury vinyl tiles ("LVT"), and decorative glass tiles
as well as an array of tile and stone installation systems.

 

Revenue has grown consistently over the last 10 years (CAGR of 11.6%). IWT's
management lead a team of c.122 employees and have committed to continue to
manage the business for a minimum term of four years.

 

IWT sources product from suppliers in Europe, Asia, and South America and
distributes from a company operated, 220,000 square foot distribution facility
located in Palm City (about 80 miles north of Fort Lauderdale) to more than
1,700 dealers in Florida and across the United States. Key markets are
residential repair and remodel, and new construction applications. Most
customers have been with IWT for more than 10 years, providing a stable base
of recurring revenue.

 

US Market Overview

 

It is important to appreciate that the United States is not a homogenous
market. Whilst the country overall is experiencing subdued economic growth at
present, some markets - including Florida - are seeing continued strong growth
due to internal migration of high-income households (>$120,000pa salary 2 
(#_ftn2) ), and a favourable tax and business environment.

 

All of the 10 fastest growing counties in the U.S. in 2021-2022 are in
Florida 3  (#_ftn3) and in 2021, the real Gross Domestic Product (GDP) of
Florida increased by 6.9% 4  (#_ftn4) - growth that has continued into 2022.

 

This population and GDP growth is directly impacting flooring demand within
the state and benefitting IWT.

 

Strategic rationale for the Acquisition

 

The acquisition of IWT continues Victoria's winning strategy of growing its
business in North America via the acquisition of successful distributors
selling the same categories of product as the Group manufactures and sells in
Europe. While, as always, IWT (and our manufacturing operations) will remain
commercially independent, there will be meaningful commercial synergies and
efficiencies for Victoria from this acquisition.

 

Including IWT, Victoria's North American-derived revenues will exceed $400
million, comprising c.27% of the Group's income.

 

1. Distribution diversification

·    IWT further increases Victoria's ceramic tiles distribution footprint
in the very large (c.$29 billion) and resilient US flooring market.

·    Florida, and the other geographies serviced by IWT, are growth
markets -- outpacing the US as a whole.

 

2. Significant commercial synergies

·    Significant demand exists for European flooring in the US and IWT
will have improved access to Victoria's production output in Spain, Italy, and
Turkey enabling it to offer a better and more extensive range of tiles to its
customers. This is expected to lead to market share gains and superior
financial performance over time.

·    Furthermore, the additional volume will benefit the income and
earnings of the factories, who will secure the manufacturing margin.

 

The Acquisition of IWT is another step in Victoria's strategy of growing its
business with earnings accretive acquisitions, and then using available
synergies to drive significant benefits to our customers and excellent
financial results for Victoria's shareholders. The Board believes that IWT
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, commented:

"Victoria has been profitably selling a significant amount of product into the
US$29 billion - and growing - US market for many years. The acquisition of
Cali in July 2021 has proven to be very successful and IWT is a further step
for Victoria into North America.

 

We were particularly attracted by the passion of IWT's management team and
their operational philosophy, which prioritises customer service - ensuring
product is in stock and providing rapid delivery. These are values we share at
Victoria and which have driven our market outperformance in recent years."

 

Geoff Wilding, Executive Chairman, said:

"Whilst the Board remains mindful of the macroeconomic headwinds across the
globe, it maintains a long-term view in its mission to create wealth for
shareholders. Consequently, when very attractive acquisition opportunities
arise, we simply focus on ensuring we are buying high quality, resilient
businesses at valuations that provide a margin of safety for our shareholders.
We believe IWT represents such an opportunity with its steady growth over an
extended period, high quality management, and significant synergy
opportunities."

 

 

 

For more information contact:

 

 Victoria PLC                                                   +44 (0) 1562 749 610

 Geoff Wilding, Executive Chairman

 Philippe Hamers, Group Chief Executive

 Brian Morgan, Chief Financial Officer

 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, Richard Bootle

                                                                +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, Jack Devoy

 

 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,
 Turkey, the USA, and Australia and employs approximately 6,500 people across
 31 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) .)

 

 1  (#_ftnref1) .GBP/USD: 1.14

 2  (#_ftnref2) Florida Department of Financial Services

 3  (#_ftnref3) U.S. News & World Report

 4  (#_ftnref4) Statista Services

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