Decisive Dividend Corporation Announces Acquisition of Techbelt Limited

KELOWNA, BC, April 10, 2024 /CNW/ - Decisive Dividend Corporation (TSXV: DE) (the "Corporation" or "Decisive") is pleased to announce the acquisition of Techbelt Limited (the "Acquisition") for $6.3 million, from arm's length parties. Techbelt Limited ("Techbelt") is a manufacturer of polytetrafluoroethylene ("PTFE") conveyor belts, PTFE tapes, and PTFE materials which are used in a wide range of end markets including food and beverage, packaging, textiles, agriculture, and fast-moving consumer goods. Techbelt was founded in 2002 and is located in Huddersfield in the United Kingdom.

Highlights of the Acquisition

• Fully Funded: Fully funded through a drawdown on the Corporation's syndicated credit facility.
• Strong Business Fundamentals: Profitable and growing; manufactures consumable products that need to be replaced into less-cyclical markets; low capital intensity, niche market player with a solid reputation for quality; large addressable market, opportunities for product and geographic expansion.
• Additional wear-parts business servicing new industries: Enhances scale in Decisive's wear-parts product segment while introducing customers in the food and beverage, textiles, packaging, agriculture, and fast-moving consumer goods markets.
• Expands portfolio in the United Kingdom: Techbelt is Decisive's second acquisition in the United Kingdom.
• Earnings growth and accretion: Expected to be immediately accretive to Decisive and represents on a pro forma basis an aggregate increase to the Corporation's 2023 Pro Forma⁽⁴⁾ sales of 3% and an increase in Adjusted EBITDA⁽¹⁾ and Adjusted EBITDA⁽¹⁾ per share of 4%.

One of the vendors of Techbelt, Simon Sparkes, has committed to lead Techbelt for at least the next three years. Simon has extensive knowledge of the industry and business, having been with Techbelt since 2006.  

Techbelt management believes that its key competitive advantages are its ability to provide technical solutions for customers and its rapid turnaround for delivery of a broad range of products at high specification for markets with compliance and regulatory requirements.  

The Acquisition is anticipated to be immediately financially accretive to Decisive and is expected to result in an increase in sales, gross profit, profit, Adjusted EBITDA⁽¹⁾, and Adjusted EBITDA⁽¹⁾ per share. The Acquisition is subject to the terms and conditions of a share purchase agreement which was executed today and provides for a base purchase price of $6.3 million, subject to customary adjustments, plus up to an additional £2.2 million contingent on Techbelt achieving certain earnings targets over the next three years. 

On closing, the aggregate $6.3 million base purchase price was paid $5.7 million in cash (the "Cash Consideration"), and $0.6 million in Common Shares (the "Share Consideration"). The Cash Consideration was funded using the Corporation's syndicated credit facility. The Share Consideration was funded through the issuance of 57,879 common shares (representing $0.6 million divided by $10.41, being the volume weighted average trading price of the common shares for the 10-day trading period ended April 9, 2024). Upon completion of this acquisition, Decisive's cumulative acquisition funding mix for the 13 acquisitions it has completed to date remains in line with the Corporation's 50/50 long-term debt and equity funding target. The Corporation also remains conservatively leveraged with a pro forma senior debt to EBITDA ratio of 1.8 to 1, after debt funding two acquisitions to date in 2024.

Jeff Schellenberg, Chief Executive Officer of Decisive, noted:

"We are thrilled to add Techbelt, its leadership team, employees, and high-margin wear-part products to our growing portfolio of businesses. Having the opportunity to add another business that sells wear-parts is a great fit for our dividend paying model and aligns with our strategy of investing in industry verticals we have previously invested in. The customers these wear-parts are sold to operate in the food and beverage, packaging, textiles, agriculture, and fast-moving consumer goods industries, with locations in the United Kingdom, Europe, Asia, Oceania, North and South America and Africa, further diversifying our cash flow profile and expanding our non-North American revenue base. Finding another set of legacy minded business owners who care deeply about seeing the business they have built carry forward is extremely rewarding for us and we are pleased to welcome one of the vendors, Simon Sparkes, to our leadership group. Simon has committed to run the business for a minimum of three years, and the continuity that Simon's leadership provides will help maintain the trajectory of growth the business has been on under Simon's leadership, which is a critical piece of this deal to Decisive. We look forward to working with and supporting Simon and the whole Techbelt team to further build the business and take advantage of the market opportunities they have positioned the business for."

Simon Sparkes, Managing Director of Techbelt noted:

"Myself and the whole Techbelt team are thrilled to be part of the Decisive family. Having spent the last 17 years building a business it was important that we find the right partner to continue our growth and take us to the next step. I'm passionate about our employees, customers and suppliers. We wanted to find a new owner with aligning values, who will allow us to continue with our own identity whilst providing us with the support and access to markets we have identified as growth opportunities. I look forward to the opportunities that Decisive will provide us in North America. A deeper and more localised access to this market has been a personal aspiration of mine for a number of years and I'm excited about what the future looks like for Techbelt."

The table below sets forth the pro forma combined financial information of Decisive, the applicable pre-acquisition periods for the acquisitions previously completed in 2023, and the acquisition of Techbelt, for the trailing twelve-month period ended December 31, 2023:

(Stated in thousands of dollars, except per share amounts)		Add
		pre-acquisition
		periods for
		Previously		Add
For the trailing twelve-month period		Acquired		12-months	Total
ended December 31, 2023	Decisive(2)	Businesses(3)	Pro Forma(4)	Techbelt(5)	Pro forma
Sales	134,881	17,078	151,959	5,198	157,157
Gross profit	52,763	9,544	62,307	2,127	64,434
Gross profit %	39 %	56 %	41 %	41 %	41 %
Profit	8,333	4,496	12,829	789	13,618
Per share basic	0.48		0.69		0.73
Adjusted EBITDA(1)	25,204	6,215	31,419	1,220	32,639
Per share basic	1.45		1.69		1.75

(1)	Adjusted EBITDA is not a recognized financial measure under International Financial Reporting Standards (IFRS) and therefore may not be comparable to similar measures presented by other issuers, but it is used by management to assess the performance of the Corporation. See "Non-GAAP Financial Measures" later in this press release for the full description of Adjusted EBITDA and a reconciliation of applicable IFRS measures to non-IFRS measures.
(2)	Based on Decisive's audited financial information reported for the year ended December 31, 2023.
(3)	Based on the unaudited financial information for the pre-acquisition period from January 1, 2023 to April 4, 2023 for each of Capital I Industries Inc., Micon Industries Ltd., and Procore International Radiators Ltd., and the unaudited financial information of Innovative Heating Technologies Inc. for the period from January 1, 2023 to July 18, 2023. See "Information Relating to the Acquisitions" later in this press release.
(4)	The Pro Forma amounts are based on Decisive's audited financial information reported for the year ended December 31, 2023, combined with the financial information for the pre-acquisition periods of Capital I Industries Inc., Micon Industries Ltd., Procore International Radiators Ltd., and Innovative Heating Technologies Inc. (the "Previously Acquired Businesses") described in (3) above.
(5)	Based on Techbelt's unaudited financial information for the period from January 1, 2023 to December 31, 2023. See "Information Relating to the Acquisitions" later in this press release.

About Decisive Dividend Corporation

Decisive Dividend Corporation is an acquisition-oriented company, focused on opportunities in manufacturing. The Corporation's purpose is to be the sought-out choice for exiting legacy-minded business owners, while supporting the long-term success of the businesses acquired, and through that, creating sustainable and growing shareholder returns. The Corporation uses a disciplined acquisition strategy to identify already profitable, well-established, high quality manufacturing companies that have a sustainable competitive advantage, a focus on non-discretionary products, steady cash flows, growth potential and established, strong leadership.

For more information on Decisive, or to sign up for email notifications of Corporation press releases, please visit www.decisivedividend.com.

Cautionary Statements

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Information Relating to the Acquisitions

This press release contains certain information (including historical financial information) relating to the Acquisition as well as pre-acquisition historical financial information relating to the Previously Acquired Businesses. The information (including financial information) contained herein with respect to the Acquisition, as well as pre-acquisition historical financial information relating to the Previously Acquired Businesses, is based upon information provided to Decisive by Techbelt and the Previously Acquired Businesses, and their respective management and previous shareholders and includes certain non-recurring and related-party private company transactions that have been excluded from the calculation of Adjusted EBITDA below. The financial information relating to the Acquisition and Techbelt, as well as pre-acquisition historical financial information relating the Previously Acquired Businesses, has not been audited.

Non-GAAP Financial Measures

In this press release, reference is made to "Adjusted EBITDA", which is not a recognized financial measure under IFRS, but is believed to be meaningful in the assessment of the Corporation's performance.

"Adjusted EBITDA" is defined as earnings before finance costs, income taxes, depreciation, amortization, foreign exchange gains or losses, other non-cash items such as gains or losses recognized on the fair value of contingent consideration items, asset impairment, share-based compensation, and restructuring costs, and other non-operating items such as acquisition costs.

Adjusted EBITDA is a financial performance measure that management believes is useful for investors to analyze the results of the Corporation's operating activities prior to consideration of how those activities are financed and the impact of non-operating charges related to planned or completed acquisitions, foreign exchange, taxation, depreciation, amortization, and impairment charges.

The most directly comparable financial measure is profit or loss. Adjusted EBITDA per share is also presented, which is calculated by dividing Adjusted EBITDA, as defined above, by the weighted average number of common shares of Decisive outstanding during the period.

While Adjusted EBITDA is used by management to assess the historical financial performance of the Corporation, readers are cautioned that:

• Non-IFRS financial measures, such as Adjusted EBITDA, are not recognized financial measures under IFRS;
• The Corporation's method of calculating Non-IFRS financial measures, such as Adjusted EBITDA, may differ from that of other corporations or entities and therefore may not be directly comparable to measures utilized by other corporations or entities;
• Non-IFRS financial measures, such as Adjusted EBITDA, should not be viewed as an alternative to measures that are recognized under IFRS such as profit or loss or cash from operating activities; and
• A reader should not place undue reliance on any Non-IFRS financial measures.

Set forth below are reconciliations of Non-IFRS financial measures to their most relevant IFRS measures.

(Stated in thousands of dollars)		Add
		pre-acquisition
		periods for
		Previously			Add
For the trailing twelve-month period		Acquired			12-months		Total
ended December 31, 2023	Decisive(2)	Businesses(3)	Pro Forma(4)		Techbelt(5)		Pro forma
Profit	8,333	4,496	12,829		789		13,618
Add (deduct):
Financing costs	3,795	27	3,822		55		3,877
Income tax expense	3,417	1,620	5,037		243		5,280
Amortization and depreciation	7,895	125	8,020		96		8,116
Acquisition costs & restructuring costs	1,001	-	1,001		-		1,001
Inventory fair value adjustments	28	-	28		-		28
Share-based compensation expense	745	-	745		-		745
Foreign exchange income	96	(12)	84		23		107
Interest and other income	(9)	(3)	(12)		(12)		(24)
Gain on sale of equipment	(97)	(38)	(135)		10		(125)
Non-recurring transactions	-	-	-		15		15
Adjusted EBITDA	25,204	6,215	31,419		1,220		32,639

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking information. These statements relate to future events or future performance. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on management's current beliefs, assumptions and expectations as to the outcome and timing of such future events.  Actual future results may differ materially. In particular, this press release contains forward-looking information relating to the future financial position, operations, business strategy, plans and objectives of the Corporation, and the potential impact, including growth expectations, of the Acquisition on the operations, financial condition, capital resources, business and dividend policy of the Corporation. Risk factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking information include, among other things: risks relating to acquisitions (as more particularly described under the heading "Risk Factors – Risk Related to Acquisitions" in the Corporation's most recent annual information form), as well as general economic conditions; pandemics; competition; government regulation; environmental regulation; access to capital; market trends and innovation; climate risk; general uninsured losses; risk related to acquisitions generally; dependence on customers, distributors and strategic relationships; supply and cost of raw materials and purchased parts; operational performance and growth; implementation of the growth strategy; product liability and warranty claims; litigation; reliance on technology, intellectual property, and information systems; availability of future financing; interest rates and debt financing; income tax matters; foreign exchange; dividends; trading volatility of Common Shares; dilution risk; reliance on management and key personnel; employee and labour relations; and conflicts of interest, all as more particularly described in the most recent annual management's discussion and analysis and annual information form of the Corporation available on the Corporation's profile at www.sedar.com. There can be no assurance as to the future financial performance of the Corporation or that the board of directors of the Corporation will declare or pay any dividends in the future or, if dividends are declared and paid, there can be no assurance as to the frequency or amount of such dividends. The Corporation cautions the reader that the risk factors referenced above are not exhaustive. The forward-looking information contained in this release is made as of the date hereof and the Corporation is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.

SOURCE Decisive Dividend Corporation

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