3rd Oct 2022 14:38
(Alliance News) - Brickability Group PLC on Monday said it has acquired ET Clay Products for a consideration of GBP11.6 million.
The building material company said this was via an acquisition of 100% of the share capital of E.T. Clay Products Ltd and Heritage Clay Tiles Ltd.
In the eyes of Shore Capital, the buy is further evidence that the firm offers a "holy trinity of value, growth and financial quality".
ET Clay Products was established over 25 years ago, and is a specialist spullier of UK and importer clay facing bricks. It also supplies "high quality handmade and handcrafted clay roof tiles", Brickability explains.
The purchase will see the firm bring in more customers, especially in the merchants channel.
"The acquisition of ET Clay Products provides another important step in the growth of our Import Division by further expanding the supply base of the group through new access to a range of overseas manufacturers," said Chief Executive Officer Alan Simpson.
In the year to June 30, ET Clay Products brought in revenue of GBP44.3 million and adjusted earnings before interest, tax, depreciation and amortisation of around GBP3.0 million.
"We think this looks an attractive, earnings accretive deal which is consistent with management's strategy to grow out its footprint in the core clay bricks and tiles distribution business, as well as expanding into niche growth areas congruent to the core," said Shore Capital.
The consideration will be satisfied through an initial cash payment of GBP8.1 million, with a deferred consideration of GBP3.5 million to be paid in cash over the next three years, subject to meeting performance targets.
"Excluding the earn-out, the takeout entreprise value/Ebitda multiple is 2.7 times and pro-forma FY22 net debt/EBITDA is 0.20 times (pre-IFRS 16). Including the earn-out component, the takeout entreprise value/Ebitda multiple is 3.9 times and pro-forma FY22 net debt/Ebitda is 0.25 times (pre-IFRS 16)," it explained.
The broker said the firm's merger & acquisition strategy creates "significant" shareholder value, with its operations focused on niche markets.
"Excluding the impact of ET Clay, Brickability trades on a price-to-earnings ratio of 7.3 times and a post-IFRS 16 EV/Ebitda of 5.4 times (both FY23F) which does not, in our view, fully capture the group's high sustainable return on equity (FY23F: 20%) and growth trajectory," Shore Capital argued.
Shares in Brickability were up 0.3% at 74.20 pence each in London on Monday afternoon.
Shore Capital holds the stock at 'buy at 74p', with a discount cash flow valuation of 130p per share.
By Elizabeth Winter; [email protected]
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