Norcros to acquire South Africa's House of Plumbing
By Josh White
Date: Wednesday 16 Jan 2019
(Sharecast News) - Bathroom and kitchen products supplier Norcros announced on Wednesday that its subsidiary Norcros South Africa has entered into a conditional agreement to acquire 100% of the share capital of South Africa-based RAP Plumbing Supplies, trading as House of Plumbing.
The London-listed firm said House of Plumbing is a private company owned by the directors, a number of other employees and private investors, with the acquisition carrying a total consideration of up to ZAR 215m (£12.1m) on a debt-free and cash-free, normalised working capital basis.
It said the transaction remained subject to regulatory approval from the Competition Commission of South Africa.
Completion would follow once that approval is granted to the satisfaction of Norcros.
Of the total consideration, ZAR 172m would be settled in cash on completion, and up to a further ZAR 43m could be payable in two years via an earn-out mechanism.
The acquisition would be funded entirely from local cash resources and existing facilities, with the Norcros board expecting the transaction to be immediately earnings-enhancing.
Norcros described House of Plumbing as a market-leading supplier of specialist plumbing materials, focussed on the specification and commercial segments of the market, supplying plumbing contractors, maintenance plumbers, and the public.
The business operates from three branches in South Africa - its head office in Johannesburg, as well as Pretoria and Lephalale.
House of Plumbing employs 102 people and had an "experienced" management team, led by managing director Robin Roberson, all of whom would be staying with the business.
For the year ended 30 April, House of Plumbing's audited financial statements showed revenue of ZAR 392m, EBITDA of ZAR 33m, and profit before tax of ZAR 34m.
As at 30 April, the business had gross assets of ZAR 112m.
Norcros said House of Plumbing had continued to trade in line with its management's expectations for the eight months ended 31 December.
Its board said the acquisition of House of Plumbing was a further step in Norcros' growth strategy to expand its bathroom product portfolio, and followed on from a number of "very successful" acquisitions, most recently that of Merlyn, as well as the firm's sustained organic growth in South Africa.
House of Plumbing offered a range of complementary products, and further reinforced the group's strong positions in the commercial and specification segments of the market, and would benefit from the additional distribution channels, procurement experience and strong financial position of the enlarged group.
"I am excited by the acquisition of House of Plumbing as it will enhance our product offer to the important commercial and specification segments of the South African market where we have been successfully building our business," said Norcros group chief executive Nick Kelsall.
"The acquisition also offers a number of opportunities to drive growth through geographical expansion and through our existing distribution channels.
"I look forward to working with Robin and his team to further develop and grow the business."
Norcros also updated shareholders on its trading, saying it had continued to trade in line with the board's expectations in both the UK and South Africa since the announcement of its interim results on 15 November.
It said that, while the market environment remained challenging, it was confident that its market positions, its brands and the financial resilience of its diversified business model would continue to drive market outperformance, and would enable the group to make further progress in line with its expectations for the year to 31 March.
Norcros said it would announce a trading update for the year ending 31 March on 10 April.
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