Victoria buys Netherlands-based artificial grass makers

AIM-listed floor coverings distributor Victoria has acquired Netherlands-based designers and producers of artificial grass, Avalon and GrassInc, for €11.2m and a deferred consideration of €5.1m, in a deal that is expected to be immediately earnings-enhancing.

Victoria said the acquisition continue its strategy of growing its business with earnings-enhancing deals and then using available synergies to drive further increases in profits.

It said the two companies present “an excellent strategic fit with Victoria's existing business and will have strong long term growth prospects as part of the group”.

The purchase, which will be funded from cash and existing bank facilities, includes an additional contingent cash consideration payable dependent on certain financial targets being met over the next four years.

Established in 2010 and 2011, Avalon and GrassInc primarily supply artificial grass for domestic and landscaping purposes across Europe, which Victoria said is a very high growth - and high margin - segment of the flooring market.

Total European demand for artificial grass was approximately 50 million square metres in 2015, with the market for domestic grass forecast to grow 15% year on year through to 2019 and landscaping forecast demand to grow 11% year on year through to 20192.

For the year ended 31 December 2016, the companies generated unaudited total revenues of €20.4m and earnings before interest and tax of €4.2m.

In terms of synergies, Victroria noted the production of artificial grass is almost identical to carpet manufacturing, using the same machinery, the same processes, and similar fibres.

In addition, it pointed out there is significant existing and growing demand in the UK for artificial grass.

“In line with the group's growth strategy, these acquisitions represent Victoria's first entry into the European flooring market, offering cross-border collaboration on sales and distribution experience. It furthermore extends the group's capabilities in another type of flooring, artificial grass, which is a very high growth flooring segment in UK and Europe.”

At 0756 GMT, the shares were down 0.9% to 460p.