GCISupreme acquires Clearly Drinks for £15m
Another day, another compelling M&A deal.
The latest being today's £15m (cash/debt free) acquisition by () from PE house NorthEdge Capital of Clearly Drinks (CD) who own the Perfectly Clear, Northumbria Spring and Revolution Waves soft drinks brands (re spring water, energy, isotonic, vitamin, coffee, mixers and tonic).
Elsewhere CD (founded in 1885) is also an established maker of private label and 3rd party beverages for a host of supermarkets (eg Waitrose, Aldi, Tesco, Sainsbury’s and Farm Foods) and international organisations.
So why enter the drinks market?
Well not only is this a large (UK est £9.6bn), profitable (10+% EBIT margins), resilient and expanding (GDP+) industry, but also the transaction immediately adds another synergistic growth platform to 's established portfolio of leading UK ambient and non-perishable FMCG brands across Vaping, Sports and Nutrition, Batteries and Lighting.
Additionally, it boosts non-vape annualised sales to >£100m, whilst equally fitting neatly into 's well-oiled distribution/supply chains and offering significant cross/upselling potential to boot.
But that's not all. The financials are attractive too.
Here in Dec FY23, Clearly Drinks delivered £3m (£0.6m 2022) of adjusted EBITDA on revenues up 13% to £22.4m (£19.7m) with further growth anticipated this year.
This means the £15m price was executed on a modest 5x trailing EV/EBITDA, which compares favourably to listed peers AG Barr (IRU-BRU owner) and Nichols (Vimto) who currently trade on 9x-10x EBITDA multiples.
Plus, the purchase should be both earnings enhancing and crucially value accretive, underpinned by robust asset backing given CD sported £10m of tangible fixed accounts as at Dec'22 (£1.2m land and buildings and £8.9m of plant and equipment) - reflecting its 150,000 sq. ft. freehold facility in Sunderland, which houses 3 natural spring water boreholes and a modern, fully automated production line.
CEO Sandy Chadha commenting: "We are delighted to be acquiring Clearly Drinks Ltd, a high-quality manufacturer and brand owner of soft drinks, which I believe delivers a significant component of our broader diversification strategy. is gaining a strong additional [growth] pillar... alongside significant opportunity to develop and capitalise on cross and upsell opportunities."
Looking ahead Equity Research have a fair value of 225p/share after upgrading their FY'25 turnover, adjusted EBITDA, EBIT, and EPS forecasts to £239.7m, £37.0m, £31.6m, and 19.8p/share respectively. As such, the stock (at 140p) trades on attractive 7.1x PER & 4.5x EBITDA multiples, and pays a 4.9p dividend (3.5% yield).
Finally, the consideration has been funded from 's own cash resources, leaving proforma net debt (pre IFRS 16) at an estimated £10m (or 0.3x EBITDA). FY'24 prelims are due out on Tuesday 4th July.
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