Strategic Minerals Regulatory News (SML)

16 Jun 2005 07:01

Smallbone PLC16 June 2005 Smallbone Plc ("Smallbone" or "the Group") Acquisition of Mark Wilkinson Furniture Limited for £5.6 million Smallbone Plc, the supplier of luxury kitchens and stone flooring, todayannounces the acquisition of Mark Wilkinson Furniture Limited ("MWF"), themanufacturer of creatively designed kitchen furniture, for a total maximumconsideration of £5.6million. Details of the acquisition: • Acquisition of MWF for a maximum consideration of £5.6 million including the repayment of directors' loans totalling £1.03 million and a deferred payment of up to £0.1 million, which may become payable in cash over the next six months. • MWF are manufacturers of creatively designed, high-quality, bespoke kitchen, bedroom and bathroom furniture with 8 directly operated showrooms in the UK and a network of dealerships in the US, UK, Russia and Europe. • The brand will be managed as a separate business within the Smallbone Group. • Upon completion of the acquisition Mark Wilkinson and Cynthia Wilkinson will join the Board of Smallbone as executive directors. • The management believe that major synergies can be derived from the acquisition, such as the introduction of Smallbone's stone flooring and granite worktop business across the MWF network which will positively impact gross margins. Rationale for the transaction The acquisition will create one of Europe's largest bespoke furnituremanufacturers with an estimated market share of 15%, increased marketpenetration and the financial strength to grow more rapidly into new markets,such as the US, where the Group already operates its Paris Ceramics business. There are immediate benefits that can be derived by the introduction of theGroup's range of stone flooring products into the MWF sales offering, togetherwith the gross margin benefits of using the Group's in-house granite worktopproduction facility rather than buying in from third party suppliers. Inaddition, the Directors believe that further margin improvements and overheadsavings can be obtained from the enhanced purchasing power of the enlarged groupand through the adoption of the best operational practices from both businesses. MWF will remain an independent business within the Smallbone Group, retainingits own brand identity name and its operational and manufacturing departments.This will allow both the MWF and Smallbone brands to continue to develop as twoseparate entities. Both brands are expected to reap the benefits of being partof the enlarged Group, being better able to implement their expansion plans togain future growth. Information on MWF MWF is a producer of high quality and innovative kitchen, bedroom and bathroomfurniture. The company was incorporated in 1984 and is based in Bromham inWiltshire and employs approximately 290 employees. MWF currently operates 8 showrooms located in Holland Park Avenue, London, St.John's Wood, London, St. Albans, Maidenhead, Bromham, Knutsford, Tunbridge Wellsand Leamington Spa. The company is also anticipating opening a ninth showroomin Harrogate in October 2005. In addition, MWF sells its products throughdealerships in the US, UK, Russia and Europe. In the year ended 31 December 2004, MWF had revenues of £19.25 million,achieving a profit before taxation of £0.28 million. At 31 December 2004, MWFhad net assets of £1.18 million. Consideration The maximum consideration payable is £5.6 million including the repayment ofdirectors' loans totalling £1.03 million and a deferred payment of up to £0.1million payable in cash over the next six months. Of the £5.5 million initialpayment, £1.8 million will be satisfied by the issue of 3,074,160 new ordinaryshares at 58.5 pence per ordinary share, £0.5 million is payable in bankguaranteed loan notes payable on 31 December 2006 and £3.2 million (includingthe directors' loan repayment of £1.03 million) is payable in cash. A furtherdeferred consideration of up to £0.1 million may become payable over the nextsix months. On completion of the acquisition Mark and Cynthia Wilkinson will become thesecond largest shareholders in Smallbone with a holding of approximately 8.3%. These new ordinary shares will rank pari passu with the existing ordinary sharesof the Company, and trading is expected to commence on 17 June 2005. Board Changes On completion of the acquisition Mark and Cynthia Wilkinson will join the boardof Smallbone Plc as Executive Directors. With the increased size of the enlarged Group, Gordon Montgomery, who has beenthe Group's part time Finance Director, has also been appointed as full timefinance director of Smallbone plc with immediate effect. Current Trading and Outlook Current trading across all the Group companies is encouraging with the orderbook for the existing Smallbone Group standing at just over £16.1m at the end ofMay 2005, 15% ahead of the prior year period. MWF's order book is also ahead ofits prior year period. Smallbone's planned showroom roll-out is progressing well with St.John's Woodhaving opened in May 2005 and Glasgow anticipated to open at the beginning ofJuly. A lease has also been signed on a prestigious site in Manhattan for aflagship New York showroom to open in early 2006. Smallbone's new Walnut andSilver Kitchen range launched successfully in January this year, and there-launch programme for Smallbone Bedrooms and Bathrooms, anticipated at the endof the year is well advanced. The refurbishment of Bedroom and Bathroom showroomin Knightsbridge, London is due to commence within the next 12 weeks. Trading inthe US for Paris Ceramics is also well ahead of last year. The directors believe that the enlarged group is well placed with the positivestate of current trading and the enhanced prospects available to the Groupfollowing the acquisition of MWF. Charles Smallbone, Chairman of Smallbone Plc, commented: "I am personally very excited by this deal which will create one of Europe'slargest bespoke furniture manufacturers. Mark and I were partners 25 years agoat the very start of Smallbone and since then he has also done a fantastic jobof building his own company up to the position it enjoys today. We are bothextremely ambitious about growing these two unique businesses and thecombination of our skills will undoubtedly benefit our customers andshareholders alike." Mark Wilkinson comment: "This deal combines two of the of the highest regarded kitchen manufacturingbrands under one umbrella creating a unique business. Our trend setting designsmade through intelligent manufacturing, combined with the Smallbone traditionswill fashion a Group of unrivalled expertise and quality. I am very muchlooking forward to working closely with Charlie again as part of the Group afterso many years." 16 June 2005 Enquiries: SMALLBONE plc Tel: +44 (0)1380 729090Charles Smallbone, Chairman & Chief ExecutiveGordon Montgomery, Finance Director COLLEGE HILL Tel: +44 (0)207 457 2020Nick Elwes / Kate Pope The following additional information is now disclosed in accordance with Rule(f) of Schedule Two of the AIM Rules: Mark Roger Wilkinson (age: 54)Current directorships Previous directorshipsMark Wilkinson Furniture Limited Devizes Development PartnershipThe Independent Parent Partnership Scheme DDP (Trading) Limited(Wiltshire)One Hundred Percent Mark Wilkinson LimitedMark Wilkinson Home Limited888 Red LimitedCDM (1991) LimitedMark Wilkinson Furniture (Workshops) LimitedNigel Roberts & Associates Limited Cynthia Jean Wilkinson (age: 55)Current directorships Previous directorshipsMark Wilkinson Furniture Limited -One Hundred Percent Mark Wilkinson LimitedMark Wilkinson Home Limited888 Red LimitedCDM (1991) LimitedMark Wilkinson Furniture (Workshops) LimitedNigel Roberts & Associates LimitedThe Furniture Installation Company Limited Summary Details of Service Contracts Mark Roger Wilkinson and Cynthia Jean Wilkinson Mark and Cynthia Wilkinson have entered into service agreements with the Companyfor an initial fixed term of 12 months and can be terminated thereafter on 12months' written notice. Remuneration for both Mark and Cynthia Wilkinson is£50,000 per annum. They are both entitled to a company car. The Company confirms that there is no further information required to bedisclosed under the AIM Rules. This information is provided by RNS The company news service from the London Stock Exchange