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RNS Number : 1162F
Polypipe Group PLC
25 October 2018
25 October 2018
Polypipe Group PLC
Acquisition of Manthorpe Building Products
Polypipe Group plc ("Polypipe"), a leading manufacturer of
plastic piping and ventilation systems for the residential,
commercial, civils and infrastructure sectors, today announces the
acquisition of Manthorpe Building Products Holdings Limited,
("Manthorpe") a leading designer and manufacturer of moulded and
extruded plastic and metal products to the UK and Irish residential
and RMI markets, together with associated freehold land and
buildings, for a total cash consideration of GBP52 million on a
cash and debt free, normalised working capital basis.
Key highlights
-- Manthorpe is a leading provider of moulded and extruded
plastic and metal products in the UK and Ireland, with a solid
track record of growth, profitability and successful cash flow
generation
-- Good strategic fit, broadening Polypipe's UK residential
offering in the water and climate management sectors, with
differentiated, patented value-adding products
-- Manthorpe and Polypipe have common end users (house
developers and RMI) and routes to market (merchants and specialist
distributors)
-- Potential for cost and revenue synergies identified
-- Well-invested business with state-of-the-art facilities
-- Expected to be EPS accretive and deliver returns in excess of
the cost of capital in the first full financial year of
ownership
Commenting on the acquisition, Martin Payne, Polypipe Chief
Executive Officer, said:
"The acquisition of Manthorpe Building Products is a perfect fit
for us, expanding our product platform and market reach in the UK
and Irish residential and RMI markets, which, like other parts of
our business, are being positively impacted by legislative change.
Manthorpe will be integrated into Polypipe's Residential Systems
segment, where we will leverage the capabilities and synergies of
the combined group to drive growth. We are delighted to welcome
Manthorpe's management and employees to Polypipe and look forward
to accelerating the strategic development of the enlarged
group."
The Manthorpe business
Manthorpe is a leading designer and manufacturer of moulded and
extruded plastic and metal products to the UK and Irish residential
and RMI markets. It sells products across twelve distinct
categories, in total producing c. 400 SKUs, with the key revenue
contributors being dry fix roofing, residential slot and channel
drainage, air leakage, roof ventilation, and loft doors and access
panels. It has a strong reputation for developing and patenting
innovative new products using advanced processes and technology to
provide market leading solutions.
The business is based in Ripley, Derbyshire, UK, from where it
sells to a diverse customer base of merchants and specialist
distributors across the UK and Ireland, who in turn serve multiple
end users such as house developers, roofing contractors and RMI
markets. It has approximately 100 employees across sales, R&D,
despatch and manufacturing functions.
Manthorpe has a solid track record of growth, profitability and
successful cash flow generation. Based on management accounts, it
generated revenue of GBP16.4 million and adjusted EBITDA of GBP6.3
million for the twelve months ending 30 April 2018.
Acquisition rationale
The acquisition is in line with Polypipe's strategy of
broadening its market reach in water and climate management
solutions, providing a "one stop shop" for our customers, and
exploiting the key growth drivers of legislative tailwinds and
legacy material substitution. Manthorpe is well-positioned to
capitalise on these growth drivers given its range of
differentiated, specifiable, value-adding product solutions. Its
offering is complementary to Polypipe's existing capabilities and
will further Polypipe's market leading positions in the water and
climate management spaces.
Polypipe's management expects that the two companies will be
able to leverage their respective technical, selling and
distribution capabilities and expertise to accelerate the combined
company's growth. There are opportunities for both cost and revenue
synergies, including, but not limited to, a broader combined
product offering and raw material savings.
It is anticipated that the operational management of Manthorpe
will remain with the combined business.
Terms of the transaction
The total consideration of GBP52 million on a cash and debt
free, normalised working capital basis comprises the entire issued
share capital of Manthorpe which will be acquired from the Pochciol
family for GBP44 million, and the freehold land and buildings
currently occupied by Manthorpe from Manthorpe Limited, a business
also owned by the Pochciol family, for GBP8 million. The
transaction will be funded by a combination of existing cash from
the balance sheet and drawdown from existing debt facilities. As at
30 April 2018, Manthorpe had gross assets amounting to GBP13.6
million, which together with the land and buildings acquired
separately for GBP8 million, means the total gross assets acquired
in this transaction is GBP21.6 million. The transaction was signed
and completed on the same day.
The Company expects the acquisition to be earnings accretive in
the first full year of ownership, delivering an attractive return
on investment in excess of its cost of capital. Year end 2018
proforma leverage(1) of the combined group is expected to be in the
region of 1.7 times EBITDA.
(1) Proforma leverage is defined as post acquisition net debt
divided by a full 12 month EBITDA of the combined entity.
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) No 596/2014. Upon
the publication of this announcement via a regulatory information
service, the inside information is now considered to be in the
public domain.
Current trading
Polypipe's trading to date in the second half of the financial
year has been in line with the Board's expectations. Polypipe's
scheduled trading update for the ten month period ending 31 October
2018 is on 20 November 2018.
Conference call for analysts and investors
Polypipe will hold a conference call and webex presentation for
investors and analysts at 9am UK time on 25 October 2018. The
dial-in details and webex URL are below:
Participant dial in: +44 (0) 2071 928000
Conference ID: 1298655
Webex
URL:https://webconnect.webex.com/webconnect/onstage/g.php?MTID=e948c5e43be100cc11b790a02c64eea8a
The presentation to accompany this call is available on the
Reports, results and presentations page on Polypipe's website at
http://investors.polypipe.com/.
Contacts
Polypipe 44 (0) 1709 770 000
Martin Payne, Chief Executive Officer
Paul James, Chief Financial Officer
Brunswick 44 (0) 20 7404 5959
Nina Coad
Nick Beswick
IMPORTANT NOTICE
This announcement includes certain forward-looking statements
which are based on Polypipe's or, as appropriate, its directors'
current expectations and projections about future events. These
forward-looking statements speak only as of the date of this
announcement and are subject to risks, uncertainties and
assumptions about Polypipe, the Group and Manthorpe Building
Products. The events or circumstances referred to in the
forward-looking statements may differ materially from those
indicated in these statements, and you should not place undue
reliance on these forward-looking statements as a prediction of
actual results or otherwise. Nothing in this announcement should be
taken as a forecast, estimate or projection of the future financial
performance of Polypipe, the Group or Manthorpe Building Products.
No undertaking is given to publicly update or revise any such
forward-looking statement, whether as a result of new information,
future events or otherwise.
NOTES TO EDITORS
Polypipe is the largest manufacturer in the UK, and among the
ten largest manufacturers in Europe, of plastic piping systems for
the residential, commercial, civils and infrastructure sectors by
revenue. It is also a leading designer and manufacturer of energy
efficient ventilation systems in the UK.
The Group operates from 17 facilities in total, and with over
20,000 product lines, manufactures the UK's widest range of plastic
piping systems for heating, plumbing, drainage and ventilation. The
Group primarily targets the UK and European building and
construction markets with a presence in Italy and the Middle East
and sales to specific niches in the rest of the world.
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 or visit www.rns.com.
END
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