Coral Products acquires Ecodeck Grids in £5.6m deal

Plastic products specialist Coral Products announced the acquisition of Ecodeck Grids for up to £5.6m on Wednesday.

The AIM-traded firm said the consideration would be satisfied by the initial payment of £3.35m in cash, the issue of 6,250,000 shares at a price of 16p each, and an earn-out of up to £1.25m.

It said a first earn-out would be payable for the year ending 31 January 2023 of an additional £3 for every £1 of profit before tax above £1m, to a maximum payment of £1.15m.

A second earn-out would be payable in the form of a profit share of 10% of the profit before tax for the three months from 1 February to 30 April 2023 if the profit before tax exceeded £1.5m for the year ending 30 April.

Finally, a third earn-out would be payable in the form of a profit share of 10% of the profit before tax in excess of £1.5m for the year ending 30 April 2024.

Coral said the maximum amount of the second and third earn-out considerations would not exceed £0.1m.

The cash for the acquisition was being satisfied from the group's existing resources, and the consideration shares would be settled from the 1,914,945 shares held in treasury and the issue of 4,335,055 new shares.

Coral said Ecodeck supplies a range of building and landscape products from driveway grids and gravel pathway grids, to plastic shed bases and grass grid reinforcement.

The range of products were said to be “environmentally and eco-friendly”, being made from 100% recycled plastic.

It was currently owned by Matthew and Kelly Staples, and is based in Sutton-in-Ashfield, Nottinghamshire, where it would continue to operate.

As per the unaudited financial statements for the year ended 30 January, Ecodeck's sales were £6.8m, profit after tax was £0.9m, and the net asset value totalled £1.9m.

“This acquisition further reinforces our focus on niche, specialist operators in the plastics sector,” said executive chairman Joe Grimmond.

“We have an opportunity to leverage Ecodeck's on-line platform for other group eco-friendly products.

“We see significant scope to add value as we integrate the business into the group - the acquisition continues to broaden our group's product offering and greatly enhances our available market opportunities.”

Grimmond said the firm expected the acquisition to be earnings-enhancing in its first year.

At 1014 BST, shares in Coral Products were up 1.9% at 14.16p.

Reporting by Josh White at Sharecast.com.