Acquisition

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] (c. £55.4m1) and normalised EBITDA of approximately $7.0 million (c. £6.2m¹).

·    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]), 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] and in 2021, the real Gross Domestic Product (GDP) of Florida increased by 6.9%[4] - 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."

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