SYDNEY, AUSTRALIA: Adairs Limited (ASX: ADH) has agreed to purchase Focus on Furniture, a vertically integrated omni-channel furniture retailer operating in Australia, for an Enterprise Value (EV) of $80 million on a debt free basis.

The price paid equates to an EV/EBIT multiple of 2.4x FY21 actual EBIT ($32.8 million).

Without assuming any synergies, the acquisition is expected to be immediately EPS accretive and deliver pro forma double-digit EPS accretion1 in FY23 (first full year of ownership) and beyond.

The acquisition has a clear strategic fit, with attractive growth potential:

• Strongly profitable furniture retailer with revenue of $150m+ in Australia (FY21) through a network of 23 stores and a small but growing online channel;

• Growth opportunities from a national store roll out, online growth and category/range expansion;

• Vertically integrated, omni channel furniture and bedding retailer, operating in close adjacency to Adairs’ existing businesses;

• Complementary customer product overlap with opportunities to leverage strengths in store expansion, product development and last mile delivery capability;

• Increases the Group’s exposure to the bulky furniture category (an $8.3bn+ market);

• Established operating infrastructure, capable management team, supplier base and store network from which to build out a national omni-channel business;

• Further develops the Group as a leading homewares and home furnishings omni-channel retail group operating across Australia and New Zealand.

Focus will continue to operate independently of Adairs, with its existing management team continuing under new contracts.

Total consideration comprises $74.0 million in cash and a $6.0 million placement of ordinary shares in Adairs to the major shareholder and continuing Focus CEO, Rob Santalucia, which are escrowed until the release of the FY23 Adairs Limited results.

Speaking on the acquisition Mark Ronan, Group CEO and Managing Director, said: “This is an exciting and strategically significant development for the Adairs Group. Focus builds out our product offering in the key area of home furniture and increases the exposure we have to that market by almost three times. The Adairs Group now comprises a highly profitable and aligned portfolio of brands with significant growth potential targeting the middle market in the Home category in Australia and New Zealand.

The acquisition will be earnings per share accretive from day one and we see strong growth opportunities that have the potential to drive sales of $250m+ over the next 5 years.

Focus is led by a highly capable leadership group, and a passionate, service-orientated team in its stores, warehouses and support office. We are excited to welcome them to the Adairs Group family and believe that together we can continue to build a truly great business.”

The Acquisition will be effective from 1 December 2021.

Adairs is a leading specialty retailer of home furnishings in Australia and New Zealand with a national footprint of stores across a number of formats and a large and growing online channel. www.adairs.com.au