Epwin Group PLC said it has completed the acquisition of Poly-Pure Ltd for an initial cash consideration of £15mln on a debt-free and cash-free basis.
The company noted that Poly-Pure is a leading UK materials re-processor, recycling post-consumer and post-industrial PVC building materials, notably UPVC window frames. Established in 2018 and based in Norwich with 25 employees, Poly-Pure supplies re-processed PVC to a diverse customer base.
Epwin noted that in Poly-Pure's financial year ended July 31, 2022, it expects to report revenues of around £10 mln (£4.7mln in its financial year to July 31, 2021) and adjusted EBITDA of around £2.5mln (£0.4mln in the year to July 31, 2021). Underlying profit before tax for the year ended July 31, 2022, is expected to be £2.4mln. Poly-Pure has net assets on acquisition of approximately £3mln.
The company said the acquisition of Poly-Pure is expected to be margin accretive for Epwin at the adjusted EBITDA level and is expected to be immediately earnings enhancing.
In a statement, Jon Bednall, chief executive officer of Epwin, commented: "I am pleased to welcome Poly-Pure to Epwin. Poly-Pure is a high-quality, growing business and a strong strategic fit, which will enable us to further bolster our recycling capabilities and accelerate delivery of our sustainability agenda."
"We see good opportunities to derive synergistic benefits with our existing operations, increase the proportion of recycled material used in our products and further improve the already strong environmental credentials of the Group's products. The acquisition also furthers our strategy of broadening our materials capabilities for the future. We welcome Poly-Pure's management and employees to the Epwin Group," he added.
The company said the acquisition is a strong strategic fit based on the following factors:
- Growth opportunity: Poly-Pure has generated strong levels of revenue and EBITDA growth since its establishment, with a diverse and growing customer base and with a programme to expand its processing capacity. There is increasing industry focus on improving the use of reprocessed materials in manufacturing and Epwin believes there are a range of opportunities for Poly-Pure to continue to execute its growth plan;
- Cost synergies: Poly-Pure has the ability to provide Epwin with a further, cost-effective, supply of recycled PVC, with the potential for operational efficiencies and cost benefits;
- Sustainability: the acquisition, alongside Epwin's existing capital expenditure programme, accelerates the Group's ambitions to integrate an even greater proportion of recycled materials into its products;
- Material sourcing: Poly-Pure has strong links within the industry and a proven ability to source post-industrial and post-consumer recyclable building plastics materials. The greater ability to re-process waste materials provides Epwin with an additional source of raw material.
Transaction details
Epwin said the initial cash consideration represents a multiple of 6 times estimated 2022 adjusted EBITDA. Further deferred consideration may become payable, subject to an earnout mechanism, in equal instalments based upon the adjusted EBITDA of Poly-Pure in the three calendar years to December 31, 2023, December 31, 2024, and December 31, 2025, respectively, capped in aggregate at a further £15mln in cash which, if achieved, would equate to a December 31, 2025, adjusted EBITDA multiple after synergies of 3 times.
The company noted that the acquisition will be funded from existing group facilities. As of June 30, 2022. Epwin's covenant net debt was £7.3mln which represented 0.3 times adjusted EBITDA, providing the group with in excess of £65mln of headroom on its facilities.
It added that directors of Poly-Pure will remain with the business, working within Epwin's Extrusion and Moulding segment to ensure the group's recyclate requirements are serviced and maximised.
Epwin is a leading manufacturer of energy-efficient and low-maintenance building products, with significant market shares, supplying the Repair, Maintenance and Improvement (RMI), new build and social housing sectors.
In early trade on Monday, Epwin shares gained 0.7% at 73.50p.