Victoria Regulatory News (VCP)

For Immediate Release 13 February 2017 

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Victoria PLC

('Victoria' or the 'Group')

Acquisition of Avalon BV & GrassInc. BV

Entry into the European Flooring Market with a new high growth product

Victoria PLC, (LSE: VCP) the international designers, manufacturers and distributors of innovative floor coverings, is delighted to announce the acquisition of Avalon BV ("Avalon") and GrassInc. BV ("GrassInc") ("the Acquisitions"), the Netherlands-based designers, producers, and distributers of artificial grass for a total initial cash consideration of €11.2 million (£9.7m1) and deferred consideration of €5.1 million (£4.4m1) to be funded from cash and the Group's existing bank facilities. Additional contingent cash consideration is payable dependent on certain financial targets being met over the next four years.

The Acquisitions will be immediately earnings-accretive.

Established in 2010 (Avalon) and 2011 (GrassInc.) the Acquisitions primarily supply artificial grass for domestic and landscaping purposes across Europe. This 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 Acquisitions generated unaudited total revenues of €20.4 million (£17.6m1) and EBIT of €4.2 million (£3.6m1). Total net assets acquired on completion were approximately €5.7 million (£4.9m1).

Victoria's net debt to EBITDA ratio3 remains less than 2x following completion.

Strategic rationale for the Acquisitions

The Acquisitions continue Victoria's strategy of growing its business with earnings-enhancing acquisitions, and then using available synergies to drive further increases in profits. The Board believes that the Acquisitions present an excellent strategic fit with Victoria's existing business and will have strong long term growth prospects as part of the Group.

There is significant opportunity for a number of commercial, operational and financial synergies, which are expected to create value for Victoria's shareholders:

· The production of artificial grass is almost identical to carpet manufacturing, using the same machinery, the same processes, and similar fibres.

· There is significant existing and growing demand in the UK for artificial grass. Victoria has a very strong distribution network - it sells to over 3,000 independent retailers - and we believe there is a real opportunity to grow the revenues of the Acquisitions by accessing that distribution network with both branded and white-label artificial grass products.

· These Acquisitions better position Victoria with its large European peers, the majority of which already own capabilities in this field.

· The existing experienced management teams will remain with the business for a minimum term of four years. Like all companies acquired by Victoria, the Acquisitions will continue to operate with a significant degree of autonomy, whilst benefiting from being part of a much larger group in their ongoing drive for profitable growth.

· The Board does not envisage significant integration costs arising from the Acquisitions.

· 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.

As such, the Acquisitions are expected to be immediately earnings enhancing and opportunities to improve margins and revenues will be pursued at the earliest opportunity.

The enlarged Group now has approximately 1,800 employees and operates from 12 sites in the UK & Europe, and five in Australia.

Key terms of the Acquisitions

The total consideration for the Acquisitions comprises:

· Initial cash consideration of €11.2 million (£9.7m1);

· Deferred cash consideration of €5.1 million (£4.4m1) payable in instalments over four years;

· Contingent cash consideration of up to approximately €8.8 million (£7.6m1) dependent on improved EBITDA and other criteria over the next four years.

The Acquisitions are being funded entirely from cash and the Group's existing bank facilities.

Geoff Wilding, Chairman of Victoria PLC, commented:

"This represents the first of several acquisitions we will be making in Europe and it elevates our status as being a supplier of innovative flooring products to our growing customer base. There is already significant demand from our existing UK customers for artificial grass, which is currently being met by our competitors and we are therefore confident there are material revenue synergies for Avalon and Grass Inc. from our UK operations.

Philippe Hamers, Victoria's incoming CEO, has enormous experience of taking European-manufactured flooring product into the UK and we look forward to the earnings-enhancing revenues this acquisition will bring while we continue to actively search for valuable acquisitions of this kind across Europe."

For more information contact:

1. Exchange rate £1:€1.16

2. Source: AMI Research

3. Net debt / EBITDA as measured in relation to the Group's bank facility covenants

About Victoria PLC

Established in 1895 and listed since 1963 and on AIM since 2013 (VCP.L), Victoria PLC, is an international manufacturer and distributor of innovative flooring products. The Group, which is headquartered in Kidderminster, designs, manufactures and distributes a range of carpet, underlay, artificial grass and flooring accessories. In addition, it markets and distributes a range of complementary LVT (luxury vinyl tile) and hardwood flooring products produced by third-party manufacturers. Victoria has operations in the UK, the Netherlands and Australia and employs approximately 1,800 people across 17 sites. Victoria is the UK's largest carpet manufacturer and the second largest in Australia.

The Group's strategy is designed to create wealth for its shareholders, focussed on constantly increasing earnings per share via acquisitions and sustainable organic growth. Growth for the Group is fundamentally driven by three aims:

· achieving a leading position in UK, Europe and Australia;

· continuing to seek and deliver cross-business synergies to drive like-for-like margin improvement; and by

· consolidating a fragmented market place with earning-enhancing acquisitions.

The Group's subsidiaries, as set out segmentally, include: