Ceps Regulatory News (CEPS)

4 December 2019

CEPS PLC

 ("CEPS" or the "Company")

Update on CEPS' investment in the CEM group of companies

The Board of CEPS announces that, for the reasons explained below, it expects to exit its investment in the CEM group of companies ("the CEM Group") which comprises two operating subsidiaries, CEM Press Limited ("CEM") and Travelfast Limited (trading as Sampling International) ("Sampling"). CEM is 97.86% owned by CemTeal with the remaining 2.14% being owned by a private shareholder and Sampling is 100% owned by CemTeal.

CEPS owns 80% of CemTeal, the remaining 20% being owned by management and external shareholders.

Sampling was acquired on 27 March 2019 for an aggregate consideration of £1,200,009 payable in cash over three years based on performance. However, due to the deferred and performance related nature of the consideration, only £9 has been paid to date. As explained in the announcement of its acquisition, the decision to acquire Sampling was to introduce a complementary business within the CEM Group with a view to creating one of the largest individual pattern book and shade card makers in the UK with two production facilities. Under a new management structure, it was hoped that the CEM Group would continue to expand and grow offering a breadth of services to customers.

Despite management's efforts and cash injections from CEPS since March 2019 as stated below, it has not been possible to achieve the envisaged savings and efficiencies from consolidating CEM's and Sampling's operations and streamlining processes.

As at 31 December 2018, prior to the acquisition of Sampling, the consolidated net liabilities of CemTeal were £2,960,000. CemTeal's turnover in the year was £2,824,000 and the consolidated operating loss was £495,000. Hence, if CemTeal had been excluded from the 2018 results, CEPS consolidated revenue from continuing operations would have reduced from £18,474,000 to £15,606,000, but operating profit from continuing operations would have increased from £391,000 to £886,000. In addition, in the year ended 31 December 2018, the CEPS Board decided to write-off completely the value of the intangibles in CemTeal. Consequently, there was a customer list impairment exceptional item of £588,000 which also impacted negatively on CEPS' overall profitability. In the year to date, the loss before tax of CemTeal and its subsidiaries, excluding Sampling, was £954,000 based on management accounts to 31 October 2019.

From the date of acquisition to 31 October 2019, unaudited management accounts show that Sampling made a loss before tax of £236,000 and net liabilities were £636,000 as at this date.

The Company was owed, after impairment, £2,100,000 at 31 October 2019 by the CEM Group. This largely comprises the cash injected into the CEM Group since the acquisition of Sampling of £1,805,000.

Moorfields Advisory Limited ("Moorfields") has been engaged by the CEM Group to provide advice and outline the options available given its current financial position. Moorfields has recommended an accelerated marketing process for the businesses with a view to effecting their sale as going concerns if possible and has been engaged to oversee this process.

Interested parties requiring further information on the sale process itself should contact Moorfields as follows:

Moorfields Advisory Limited

88 Wood Street

London

EC2V 7QF

Principal Contact: Tom Straw

Direct Dial: +44 (0)207 186 1148

Switchboard: +44 (0)207 186 1144

Fax: +44 (0)207 186 1177

Email: tstraw@moorfieldscr.com

Since the sale process will necessarily be conducted over an accelerated timescale, interested parties are encouraged to pursue this opportunity as a matter of urgency.

Once the outcome of the sale process for the CEM Group is clear a further announcement will be made.

CEPS' trading to date in 2019, excluding the CEM Group, is ahead of the Board's expectations in all but one subsidiary.

The announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Enquiries