Interim Management Statement and Directorate Change
Flying Brands Limited ("Flying Brands" or the "Group") announces its new banking arrangements and a further property disposal. It also reports its Interim Management Statement for the period 1 July 2011 to 2 November 2011 and announces a change of Group Finance Director.
On 27 October 2011 the Group agreed with Barclays Wealth an extension to its current overdraft facility from £800,000 to £1,475,000. The interest rate on this is 4% above base rate and is secured against the Group's freehold property in Jersey. The arrangement cost for this facility was £30,000. The amount is repayable on demand but the facility will expire during December 2011.
On 2 November 2011, the Group obtained a waiver from Barclays Wealth for the breach of its banking covenants on its treasury loan facility for the quarter ending 30 September 2011. It is intended to repay the balance of this term loan facility amounting to £1.5m out of the proceeds of the proposed property disposals summarised below.
Disposal of Meadow Springs Property
The Board is pleased to announce that terms have been agreed to sell the Group's glasshouse premises at Meadow Springs (the "Glasshouse") to Jersey Choice Limited ("Jersey Choice") which trades as Jersey Plants Direct. The Glasshouse has a current book value of £1.15m and is used during the Spring gardening season to grow bedding plants. Following the sale of the Glasshouse the Group will retain all its growing and dispatch operation at Retreat Farm, Jersey.
The consideration agreed is £1.225m to be satisfied in cash at completion.
The sale of the Glasshouse will reduce the Group's overheads by £0.2m per annum. The Group will reorganise its remaining growing operation to maximise capacity. However, as a result of the sale, some bedding plants may be purchased from third party suppliers. It is anticipated that this would lead to an increase in the cost of sales in 2011 by £0.15m.
There will be a small profit on the disposal of the Meadow Springs Property of £0.04m as the consideration of £1.225m less the cost of disposal of £0.04m will be in excess of the book value of the Meadow Springs Property which at 30 June 2011 was £1.17m.
The purchase agreement is conditional upon completion of normal Jersey conveyancing formalities and upon completion of the purchaser's funding arrangements.
The sale is a Class 1 transaction and is therefore subject to shareholder approval under the UKLA Listing Rules.
Disposal of Retreat Farm Property
The Group also announced on 26 September that terms have been agreed to sell a part of its premises at Retreat Farm (the "Property") to J.A.J. Properties Limited ("J.A.J. Properties") a Jersey-based property developer. The Property has a current book value of £0.4m and consists of unutilised office space and employee accommodation which do not generate any profit for the Company. The Property is surplus to the requirements of the Company and incidental to the activities of the business and the proposed sale will not in any way affect the Group's growing and dispatch operation that is carried out from nearby but separate properties.
The consideration agreed is £2.1m to be satisfied in cash at completion plus 10% of any eventual development profits.
The purchase agreement is conditional upon completion of normal Jersey conveyancing formalities but is not conditional upon receipt of planning permission for development of the Property. J.A.J. Properties has paid a deposit of £500,000 that is refundable only in the event of the conditions not being satisfied.
A circular detailing the property transactions and a notice of an extraordinary general meeting will be sent to shareholders in due course with the aim of completing the sales in November 2011.
Overall Group sales, for the three months ended 30 September 2011 including discontinued business were £4.6m (2010: £6.0m).
Q3 2011 Q3 2010
Bedding plants 1.5 2.2
Bird seed 0.6 0.8
Hardware 0.4 0.1
Direct to consumer 1.6 1.9
Other 0.1 0.1
Entertainment Division 0.3 0.4
Total on-going business 4.5 5.5
Discontinued operations 0.1 0.5
Total Group sales 4.6 6.0
The Group experienced difficult trading conditions in our core bedding plants business in the Autumn season. The Autumn marketing campaign was more closely targeted towards Autumn ordering customers than in previous years. However, the cool summer weather resulted in demand for Autumn bedding plants being suppressed. Margins were affected by the need to sell products at a discount earlier than planned to stimulate sales and ensure that stock surpluses were minimised.
The bird seed business performed ahead of management expectations. This market remains highly competitive and with increasing raw material prices has seen margins tighten during the period.
After a satisfactory performance in the first half of the year, Garden Centre Online saw weaker demand. As with the bedding plant business, the cool summer resulted in lower demand and increasing pressure on margins as competitors discounted product to clear ranges for the next season.
The Group's direct-to-consumer business continues to be affected by weak consumer spending. In response to this the management team has focussed on quality, value for money products and improving efficiency.
The business continues to develop a number of partnerships with other retailers that operate in similar consumer markets or sell complementary products. These partnerships are in the early stage of development but are likely to deliver additional revenues in the next 12 months.
As stated in the trading update issued on 23 September, trading in the three months to 30 September was significantly below management expectations.
At 30 September the Group had an overdraft of £0.3m (2010: gross cash of £2.8m). The net debt position at 30 September was £2.0m compared to £0.2m in 2010.
Flying Brands Limited has accepted the resignation of Anthony Gee as Group Finance Director and Company Secretary. Anthony is resigning for personal reasons.
Stuart Dootson will be appointed to the Board as an Executive Director with immediate effect and will act as Group Finance Director and Company Secretary. Anthony will continue to work in the business for a period to ensure a smooth handover of duties.
Mr Dootson was an executive director of Carbo Plc from November 2002 until it went into administration in March 2005. No further information is required to be disclosed pursuant to Listing Rule 9.6.13.
For further information, please contact:
Flying Brands Limited 01245 228 300
Stephen Cook, Chief Executive
Stuart Dootson, Group Finance Director
Smithfield Consultants 020 7360 4900
Notes to editors
Jersey based Flying Brands Limited (LSE: FBDU) is a multi brand and multi channel home shopping specialist. Founded in 1981, it was admitted to the Official List of the London Stock Exchange in 1993. The Group operates the following divisions:
· Gifts (Flying Flowers, Flowers Direct and Drake Algar making the company one of the UK'sleading florists)
· Garden (Gardening Direct, one of the UK's largest mail order bedding plants and gardening products operations; Garden Bird Supplies, a leading provider of food and accessories for birds and other wildlife; Garden Centre Online an internet retailer of garden hardware products)
· Entertainment (Listen2, a mail order audio books, nostalgic music, DVD and video home shopping retailer)
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