Victoria PLC Acquisition of B3 Ceramics Danismanlik (9166R)

TIDMVCP

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 EUR59.3 million [1] (c. GBP52.8m 1 ). Current normalised EBITDA is approximately EUR9 million (c. GBP7.7m 2 ).

-- Total consideration to be paid on completion is EUR8.4 million (GBP7.1 m [2] ), which will be funded entirely from the Group's cash balances. In addition, Graniser has approximately EUR39.8 million (c. GBP33.7m(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. GBP201 million in the current financial year to add approximately GBP35 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 
  Geoff Wilding, Executive Chairman 
  Philippe Hamers, Group Chief Executive 
  Michael Scott, Group Finance Director       +44 (0) 1562 749 610 
 
  Singer Capital Markets (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, 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 .) 
  About Graniser 
  G raniser 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 
  .

[1] 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] Converted to GBP at a rate of 1.18 GBP/EUR.

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