Chamberlin Plc Regulatory News (CMH)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU NO. 596/2014) AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 (AS AMENDED) ("MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

21 February 2024

Chamberlin plc

("Chamberlin", the "Company" or the "Group")

Sale of Petrel Limited

Chamberlin plc (AIM: CMH.L), the specialist castings and engineering group, is pleased to announce that it has entered into an agreement for the conditional sale of Petrel Limited ("Petrel") to Project Apollo Limited (the "Purchaser"), a subsidiary of Longacre Group, for a total cash consideration of £3 million (on a cash free, debt free and normalised working capital basis) ("Headline Consideration") (the "Disposal").

The sale of Petrel will provide the Group with the financial resources and balance sheet strength that it needs to focus on its core iron foundry and machining operations at Chamberlin and Hill Castings Ltd ("CHC") and Russell Ductile Castings Ltd ("RDC"), and for both businesses to pursue their respective strategies with greater impetus. The Board believes this is the start of an exciting new chapter for the Company as it moves forward with improved working capital resources to invest in the development of steel production at RDC and spheroidal graphite iron production at CHC.

The proceeds of the Disposal are expected to both reduce the Group's liabilities by approximately £2.6 million and contribute an exceptional profit of no less than £2.0 million, in FY24.

Completion of the Disposal is solely conditional upon the Purchaser being satisfied that Petrel has ceased to participate in, and is no longer an employer in, the Chamberlin and Hill Staff Pension and Life Assurance Scheme ("Chamberlin DB Pension Scheme"), which is expected to occur within the next three business days. In order to fund the satisfaction of this condition, the Purchaser has agreed to pay £0.85 million of the Headline Consideration upon entering into the Disposal arrangements (being an amount which has been confirmed by the actuary of the Chamberlin DB Pension Scheme). A separate announcement will be released by the Company once the Disposal has completed.

The remaining Headline Consideration will then become payable immediately on completion but with £0.25 million of the Headline Consideration being deferred, contingent upon the completion of certain dilapidation works by Chamberlin in respect of the property in which Petrel operates and will sub-let from Chamberlin following completion ("Property") (such works being expected to complete before the end of April 2024).

The Headline Consideration of £3 million (which is subject to adjustments for net debt and normalised working capital immediately prior to completion) represents approximately 83.6% of Chamberlin's market capitalisation based on the closing mid-market price of 2.0 pence per ordinary share as at 20 February 2024.

As well as satisfying Petrel's statutory liability to the Chamberlin DB Pension Scheme, the net proceeds of the Disposal will also be used to pay £0.65 million to HSBC to reduce the Group's debt (namely its asset finance loan and invoice finance facility) and release certain charges over the shares and assets of Petrel, with the balance of the net proceeds, assuming the deferred consideration is paid in full, of approximately £1.1 million being applied to the Group's growth strategy and working capital. 

The Chamberlin DB Pension Scheme deficit has been reduced from £5.5 million in March 2019 to approximately £0.4 million following completion of the Disposal with the deficit recovery plan reduced from 13 years to 4 years. 

Petrel is a specialist industrial (hazardous area) manufacturer and distributor of lighting and electrical installation products with customers being supplied with ATEX approved products throughout the UK, EU and International markets in key sectors including oil & gas, petrochemical, marine and defence. Petrel employs 25 staff from its premises in Kitts Green, Birmingham, all of whom will be retained under the ownership of Project Apollo Limited. Petrel's turnover in the year to 31 May 2023 was £3.83 million and profit before tax was £0.56 million. The book value of Petrel's assets as at 31 May 2023 was £4.5 million.

The agreement governing the Disposal contains market standard warranties and restrictive covenants in favour of the Purchaser. Further, Chamberlin has agreed to provide an indemnity (capped at the Headline Consideration) as a result of any liability incurred by Petrel in respect of the Chamberlin DB Pension Scheme following completion, as well as an indemnity (capped at £0.175 million) as a result of any liability incurred by Petrel in respect of Chamberlin's agreed dilapidation liability over the Property. The agreement also contains market standard termination rights governing the period between exchange and completion. Chamberlin has also agreed to enter into, on completion of the Disposal, a six-month transitional services agreement with Petrel in order to support its transition away from the Chamberlin group of companies.

Keith Butler-Wheelhouse, Chairman, commented:

"This exciting transaction will enable the Group to grow and develop its core business operations from a stronger financial footing. We believe that Longacre Group are the ideal new owner for the business and are well positioned to support Petrel and the ongoing development of its strategy." 

This Announcement is released by Chamberlin plc and contains inside information for the purposes of Article 7 of MAR, and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

For the purposes of MAR, Article 2 of Commission Implementing Regulation (EU) 2016/1055 and the UK version of such implementing regulation (as amended), the person responsible for arranging for the release of this Announcement on behalf of the Company is Kevin Price, Chief Executive Officer.

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