TIDMVCP
RNS Number : 8175C
Victoria PLC
23 June 2021
For Immediate Release
23 June 2021
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
Victoria PLC
('Victoria' or the 'Group')
Acquisition of Cali Bamboo Holdings Inc.
North America Distribution Expansion
Victoria PLC, (LSE: VCP) the international designers,
manufacturers and distributors of innovative flooring, is delighted
to announce the further expansion of its existing North American
distribution business with the acquisition of Cali Bamboo Holdings
Inc. ("Cali").
Cali is an exceptionally high-growth US-based business that has
achieved an organic CAGR of 17% for the past five years via its
online B2C customer acquisition model, data-driven analytics, a
high-touch consultative sales team, and direct delivery capability,
alongside B2B channels.
Key terms of the Acquisition
-- For the 12 months ended 30 April 2021, Cali generated
unaudited total revenues of US$171.6 million (GBP124.3m(1) ) (Y/E
31 December 2020: US$151.1m) and normalised EBITDA of US$13.8
million (GBP10.0m(1) ) (2020: US$11.7m).
-- Total consideration paid was US$76.1 million (GBP55.1m(1) )
and was funded entirely from the Group's cash balances. In
addition, Cali had approximately US$27.8 million (GBP20.1m(1) ) of
net debt, which was repaid on completion.
-- Victoria's leverage remains in line with our stated financial policy.
The acquisition of Cali will be immediately
earnings-accretive.
Strategic rationale for the Acquisition
The integration of Cali with Victoria's existing business will
create opportunities for value-creating revenue synergies by
expanding Victoria's US distribution, where the Group currently
sells c. US$33 million of flooring each year.
However, very significantly, the acquisition also gives Victoria
access to the intellectual property and online management
experience of Cali, which the Group will leverage to partner with
its key retailers to accelerate growth in its existing UK,
European, and Australasian markets .
Established in 2004, Cali is a multi-channel US flooring
distributor with 49.5% of revenue from direct to consumer and
direct to contractor channels driven by the Cali website, 29.0% of
revenue from speciality retailers (B2B), and 21.5% of revenue from
consumers via national home centres. This direct customer access,
combined with Cali's bespoke data analytics capabilities, enables
informed decisions about new products and channel-specific
marketing initiatives that allows Cali to constantly tune its
channel and product mix to better address ever changing customer
needs. The result has been consistent revenue and profitability
growth in excess of industry averages and across economic
cycles.
There are several distinct aspects to Cali's business model that
gives Victoria's board confidence that a high growth rate can be
maintained:
-- Cali's fast growing direct to consumer/contractor business is
highly profitable on a first order basis and increasingly benefits
from a growing mix of repeat professional customers (today 47% of
contractor/professional sales are repeat orders up from 28% in
2017). Unit economic measures like LTV / CAC (LifeTime Value /
Customer Acquisition Cost) and fully costed ROAS (Return On Average
Sale) are very attractive on an absolute basis and well above
industry benchmarks from other D2C verticals.
-- For the past 3 year's Cali's direct to consumer/contractor
channel has benefitted from consistent increases in average order
value and customer lifetime value alongside declining CAC. This
highlights Cali's "headroom" to efficiently increase advertising
spend to accelerate growth. Victoria plans to make use of Cali's
high cash conversion and continue investing aggressively in digital
marketing channels to further accelerate profitable growth and
continue to build out its e-commerce capabilities.
-- The Cali lifestyle brand and sustainability-themed product
portfolio resonates in particular with Millennials, the largest US
demographic, now entering their peak home-buying years (38% of home
sales in 2019 were to Millennials). The business's brand and
genuine customer care appeals to this large group of customers as
evidenced by a Net Promotor Score of 81 - higher than many leading
brands, including Amazon, Starbucks, Netflix, and Sony. (Source:
Customer Guru)
-- 51.9% of Cali's revenues are in the US's highest growth
flooring product category of LVT/LVP (Luxury Vinyl Tile/Luxury
Vinyl Plank), with the balance consisting of engineered hardwoods,
composite decking, and other items.
-- Cali has coverage across the US, which is a c. US$29 billion
flooring market (Freedonia) . Online sales, which are still only 4%
of the total residential market, are growing at 11% per annum (
Flooring Weekly) and we believe Cali's historical investment into
performance marketing knowhow and fulfilment infrastructure makes
them well positioned to capture a substantial portion of the
flooring market as online penetration increases.
Like all companies acquired by Victoria, Cali will continue to
operate with a high degree of autonomy under experienced and
committed managers, led by CEO Renee Thomas Jacobs, whilst
benefiting from access to an even wider range of products to
support its rapid growth.
The Acquisition of Cali is another step in Victoria's strategy
of growing its business with earnings accretive acquisitions, and
then using available synergies to drive further increases in margin
and revenue across the Group. The Board believes that Cali 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 successfully selling a significant amount of
product into the US$29 billion - and growing - US market for many
years. The acquisition of Cali represents a step-change for the
Group presenting both revenue synergies alongside meaningful
exposure to the fast-growing online sales channel. We will also be
using the knowledge and online systems developed by Cali to partner
with our existing key retailers in the UK, Europe, and Australia to
accelerate our growth and earnings in these markets.
Cali has a very high-quality management team who are passionate
about the business and the result is indisputable: it has been
organically growing revenues at more than 17% annually for the last
five years with strong operating cash conversion."
Geoff Wilding, Executive Chairman, said:
"Victoria has now invested a little over GBP160 million in the
current financial year to add approximately GBP27 million of EBITDA
to the Group. This is a significant acquisition for Victoria and
helps towards our objective of increasing our commitment to North
America where the practical support and deep sector experience of
Koch Equity Development has proven invaluable.
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 acquisitions."
(1) Applying a GBP:USD exchange rate of 1.38
(2) Leverage ratios calculated in-line with the Group's debt
facilities
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
Geoff Wilding, Executive Chairman
Philippe Hamers, Group Chief Executive
Michael Scott, Group Finance Director +44 (0) 1562 749 610
N+1 Singer (Nominated Adviser and Joint
Broker)
Rick Thompson, Phil Davies, Alex Bond +44 (0) 207 496 3095
Berenberg (Joint Broker)
Ben Wright, Mark Whitmore, Tejas Padalkar
Peel Hunt (Joint Broker)
Adrian Trimmings, Andrew Clark +44 (0) 203 207 7800
Buchanan Communications (Financial PR) +44 (0) 207 418 8900
Charles Ryland, Chris Lane, Vicky Hayns,
Tilly Abraham +44 (0) 20 7466 5000
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 and Australia
and employs approximately 3,800 people
across more than 25 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 .)
About Cali
Cali was founded in 2004 by two college
friends who, while on a surfing trip to
Hawaii and cutting bamboo as a casual job,
thought that bamboo could and should be
used as a building product in place of
traditional trees. Not only is bamboo the
fastest growing plant on earth and rapidly-renewable,
it could also help reduce global warming
and save animal habitat loss.
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
. (Further information about Cali can be
found on its website www.calibamboo.com
.)
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