US Facility & Trading Update

9 Jan 2006 07:00

Smallbone PLC09 January 2006 SMALLBONE plc("Smallbone or "the Group") New Production facility for Paris Ceramics in the US andTrading update Smallbone plc, the supplier of luxury kitchens and stone flooring, is pleased toannounce that it is moving Paris Ceramics Inc's ("PCI") head office and mainwarehouse facility from Connecticut to Farmville, Virginia. The newly built52,000 sq ft premises will replace its 15,000 sq ft Newark warehouse and officesand will provide PCI with a state of the art stone cutting, processing andtreatment facility unrivalled in its market. This substantially enhancedvertical integration of the business brings PCI's operations more into line withthose of its fellow operating subsidiaries, Smallbone of Devizes and MarkWilkinson Furniture ("MWF"). The new facility is expected to be fullyoperational from 15 January 2006 and, through this move, PCI will be able toincrease production volumes; improve margins; and gain better control over thedevelopment and protection of its unique product offerings. The total cost of the new premises, production equipment and associatedrelocation costs will be approximately $2.6m, largely funded by grants and loansfrom local state government agencies together with capital equipment leasingfacilities. The annual servicing costs of these additional borrowings andadditional production staff costs will be more than covered by the savings frompremises costs in Connecticut together with savings in supplier costs due tomore in-house production. To ensure that PCI's management team are able to focuson bedding in the new facility and generating the planned margin improvements,the opening of two new US showrooms anticipated for PCI in 2006 will be delayedto 2007. An initial 17,000 sq ft of the new facility has been set aside for Smallbone, tosupply the anticipated increase in demand expected through the opening of theSmallbone flagship showroom in New York, in the first half of 2006, and theprojected roll out of the Smallbone showroom network in the US. As a result ofthis anticipated increase in demand in the US, a similar separate manufacturingfacility will also be considered for Smallbone, which management expect to berequired in the next couple of years. As a centre for raw lumber and furnituremanufacturing, Virginia is considered to be an ideal location for such afacility. The Directors are pleased to report that they anticipate trading to be in linewith their expectations for 2005 and have experienced a strong increase inoperating cash flow compared to 2004. The integration and trading of MarkWilkinson Furniture is going to plan although there has been a slower thananticipated reduction in their working capital requirements. Despitechallenging UK market conditions, particularly in the north, performances fromnew UK stores and export sales have been ahead of management expectations andmean that the Group starts 2006 with order book levels in line with theDirectors' plans. Charles Smallbone, Chairman and Chief Executive of Smallbone, commented: "This move is a very exciting step for the Group and paves the way for a similarSmallbone facility in the future. We are almost quadrupling our production andwarehousing space and making a considerable investment into advanced productiontechnologies for PCI, which we expect will improve its profitability in 2006 andbeyond. This move will also further enhance and expand our niche position,providing bespoke products to our clients across the Group. We believe that noother company in our field will be able to match the flexibility and uniquerange of options that we will be able to provide our clients. I am very pleased that we expect performance for 2005 to be in line with ourplans, especially against the background of challenging market conditions in theUK. We set ourselves some ambitious targets for 2005, even excluding theacquisition of Mark Wilkinson Furniture in June. Our core expansion strategy ofbroadening our distribution base by opening new showrooms has already started tobenefit the Group's performance as anticipated and Smallbone's forthcomingflagship New York showroom will be the first step into what we perceive as a bignew market opportunity for us in 2006 and beyond." 9 January 2006Enquiries: 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 Notes to editors: The Group is comprised of Smallbone of Devizes and Mark Wilkinson Furniture, twoof the UK's leading designers of bespoke kitchens, bathrooms and bedroomfurniture; and Paris Ceramics, a supplier of high quality stone primarilyoperating in the US. This information is provided by RNS The company news service from the London Stock Exchange