Likewise Group - acquisition makes it the leading distributor of floor coverings in the UK
Last week we looked at floor coverings business Likewise Group (AIM:LIKE) and mentioned possible opportunities for the firm in the midst of the administration of key competitor Headlam Group. Likewise has acted fast, today announcing the acquisition of a number of assets from Headlam for total consideration of £14.9 million (plus VAT) in cash.
The business
Likewise Group was formed in 2018 with the intention of obtaining a meaningful share of the UK flooring distribution market. As of today, the firm is a leading wholesale distributor of floor coverings, rugs and matting products, serving customers throughout the UK via a number of regionally branded businesses. Growth over the years has been driven by a number of accretive acquisitions of regional wholesale distribution businesses as well as the establishment of new distribution centres and hubs throughout the country. The firm’s main customers are independent flooring retailers and contractors. Its current goal is to upscale capacity so it can reach annual sales of £300 million; the previous £200 million target looks set to be achieved this financial year.
Get our research notes free, the day they're published
In-depth coverage of UK small caps and junior miners. Email only, unsubscribe any time.
The acquisition
At the centre of the acquisition is Headlam's 90,000 sq. ft. freehold distribution centre at Thatcham, near Newbury, which transfers to Likewise together with its operating assets and inventory held on site. Thatcham adds a freehold distribution centre to the group's national network, strengthening coverage in the South of England.
Likewise has also acquired the trade and assets of two specialist businesses: Crucial Trading and Concept Floors, as well as the principal intellectual property. 110 employees at Thatcham, Crucial Trading and Concept Floors are expected to transfer to the enlarged group.
Other than the inventory held at Thatcham, Likewise is not buying Headlam's inventory outright. Instead, it will help the joint administrators sell the current inventory over a nine-month period through its sales and distribution network. This will be done in an orderly manner so as not to disrupt the UK floor coverings market. Proceeds will be shared between Likewise and the joint administrators. Likewise will occupy Headlam's Coleshill site under a nine-month exclusive licence to help facilitate the inventory agency agreement.
Likewise Group share price chart since IPO
Numbers
The £14.9 million (plus VAT) consideration is to be funded entirely from existing cash resources, which were boosted this summer following a £32.5 million placing. An on-account payment of £2.3 million (plus VAT) as part of the inventory agency arrangement is also being made.
Unfortunately, as the assets have been acquired out of administration, separate revenue and profit/loss figures attributable to them are not available. However, Likewise flagged that the acquired assets and inventory agency agreement are not expected to make a material contribution to profitability in the remainder of the current financial year ending 31st December 2026, but are expected to provide a positive contribution in FY2027.
New market leader
Following Headlam's administration and this acquisition, Likewise believes it is the largest floor coverings distributor in the UK, with an enlarged brand portfolio, additional freehold distribution capacity and a broader customer base. It will further support the goal of achieving £300 million of revenue in the medium term.
This is a huge turnaround in the flooring market, with former market leader Headlam being replaced by relative newcomer Likewise in little more than eight years. In stark contrast to Likewise’s fortunes, Headlam today confirmed its intention to delist from the market and said that it is unlikely there will be any return of capital to shareholders.
The markets have reacted well to the deal, with Likewise shares trading up by 6.9% at 38.5p as we write.
Sign up to receive our full investment research notes on small cap growth companies, as soon as they are published.
Disclosures
Likewise is not a corporate client of Optimo Research Ltd.
Disclaimers
This article, and all articles on the Optimo Research blog, are for information purposes only. Our blog articles do not constitute an investment recommendation or personal advice. Nothing in our blog articles should be construed as an offer or the solicitation of an offer to buy or sell securities by us and, as we have no knowledge of your individual situation and circumstances, you should not make any investment decision without consulting a fully qualified financial adviser. Your capital is at risk by investing in the financial instruments issued by the companies discussed. For full disclosures, disclaimers and risk warnings click here.