Acquisition of Alderburgh group of companies
1 October 2019
Polypipe Group PLC
Acquisition of ALDERBURGH Group of companies
Polypipe Group plc ("Polypipe", the "Company" or the "Group"), a leading provider of sustainable water and climate management solutions for the built environment, today announces the acquisition of the Alderburgh Group of companies ("Alderburgh"), a leading designer, manufacturer and installer of plastic injection moulded stormwater attenuation tanks, structural waterproofing and geocellular membranes, gas barrier and ventilation materials, supplying the UK, Irish and Scandinavian markets, for a total cash consideration of £14 million on a cash and debt free, normalised working capital basis.
Key highlights
§ A good strategic and cultural fit, broadening Polypipe's Water Management Systems (WMS) offer, in particular the Versavoid stackable attenuation cell system and Pluvial cube system, complementing Polypipe's Polystorm and Permavoid ready-assembled attenuation systems
§ A solid track record of growth, profitability and successful cash flow generation
§ Through its Solutek specialist installation service, provides Polypipe exposure to the high-growth supply and fit market for assemble on site systems, having to date competed mostly in the supply-only part of the market
§ Versavoid and Pluvial cube are made from recycled plastic, increasing the Group's overall use of recycled materials and reinforcing its ESG credentials
§ 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 our 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 Alderburgh is another step forward in the Group's stated strategy of filling product gaps and adjacencies, expanding our platform and market reach in the UK, and providing a "one stop shop" for our customers. Like other parts of our business, the Water Management Systems market is being positively impacted by legislative change, and this acquisition gives Polypipe further exposure to this growing segment of the market. Alderburgh will be integrated into Polypipe's Commercial and Infrastructure Systems segment, where we will focus the capabilities and synergies of the combined group to drive growth. We are delighted to welcome Alderburgh's management and employees to Polypipe. With our solid organic growth drivers, successful acquisitions track record, and a continued healthy pipeline of bolt on acquisitions, the Board believes we have a clear, deliverable strategy that will continue to create excellent shareholder value."
The Alderburgh business
Alderburgh is a leading designer, manufacturer, and installer of plastic injection moulded stormwater attenuation tanks, structural waterproofing and geocellular membranes, gas barrier and ventilation materials, supplying mainly to the to the UK market.
Alderburgh sells products across six distinct categories, with c.80% of revenues derived from its geocellular attenuation systems, the stackable Versavoid system, and the Pluvial cube system. These products help address the requirements of the Sustainable Urban Drainage regulations by creating load-bearing tanks underground to store stormwater and let it drain away naturally, rather than letting stormwater rush into the watercourse creating flood events downstream.
Unlike Polypipe's Polystorm and Permavoid systems which are manufactured as single finished cells, Alderburgh's Versavoid system is a stackable system, which means individual parts of the cell can be nested for transportation and assembled on site, which in certain situations can provide a more cost effective and lower carbon emission solution. Furthermore, through its Solutek specialist installation service, Alderburgh offers a supply and fit solution to customers, something that has become increasingly popular in recent years and that to date Polypipe has not participated in.
The business is based in Rochdale, Lancashire, UK, where it has a 68,000 sq ft manufacturing facility mainly injection moulding the geocellular attenuation cells. It has approximately 100 employees across sales, R&D, despatch and manufacturing functions.
Alderburgh has a solid track record of growth, profitability and successful cash flow generation. For the year to 30 September 2019, the business is forecast to generate revenue of £17.0 million and adjusted EBITDA of £2.1 million.
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. Furthermore, it provides exposure to the emerging high-growth supply and fit market, which Polypipe can leverage further. Alderburgh is well-positioned to capitalise on these growth drivers given its range of differentiated, value-adding product and service offering that is complementary to Polypipe's existing capabilities and will enhance Polypipe's market-leading positions in the water and climate management spaces.
Polypipe's management expects that acquiring Alderburgh will enable both companies to leverage their respective technical, selling and distribution capabilities and expertise to accelerate 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 Alderburgh will remain with the combined business.
Terms of the transaction
The total consideration of £14m million on a cash and debt free, normalised working capital basis comprises the entire issued share capital of Alderburgh Ltd., Alderburgh Ireland Ltd., Solutek Environmental Ltd. and Environmental Sustainable Solutions Ltd. from Peter Davidson and others. The transaction will be funded by a combination of existing cash from the balance sheet and drawdown from existing debt facilities, with proceeds paid on completion.
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.
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
Dan Roberts
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 the Alderburgh Group of companies. 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 the Alderburgh Group of companies. 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 Group plc ("Polypipe", the "Company" or the "Group"), a leading provider of sustainable water and climate management solutions for the built environment, 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 18 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, the Netherlands and the Middle East and sales to specific niches in the rest of the world.
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