26th Oct 2006 08:00
Brulines (Holdings) PLC26 October 2006 Press Release 26 October 2006 Brulines (Holdings) plc ("Brulines" or "the Company") First day of dealings on AIM Brulines (Holdings) plc ("Brulines" or the "Company"), the leading provider ofvolume and revenue protection systems for draught alcoholic drinks in the UKLicensed on-trade, particularly the tenanted pub sector, today announcescommencement of dealings of its Ordinary Shares on AIM, a market operated by theLondon Stock Exchange plc. RSM Robson Rhodes Corporate Finance is the NominatedAdviser and Cenkos Securities is Broker to the Company. The stock market EPIC is BRU.L Placing StatisticsPlacing Price 123 penceNumber of Placing Shares 6,504,065Number of Sale Shares 9,402,533Number of Ordinary Shares in issue immediately following Admission 23,999,125 Market capitalisation at the Placing Price £29.5 millionPercentage of issued share capital immediately following Admission subject to the Placing 66.3% Estimated net proceeds of the Placing receivable by the Company £7.0 million Reasons for Admission to AIM and use of proceeds of the Placing The Directors believe that Admission to AIM will assist the Company in achievingits growth aspirations. The net proceeds from the Placing are estimated toamount to approximately £7.0 million and will be used as follows: • £4.1 million to enable the Company to repay founder Derrick Collin's loan note which was issued by the Company to finance part of the consideration payable for the acquisition of Brulines; and • £2.9 million to repay bank debt and to provide working capital for the Company and its subsidiaries (together the "Group") for future growth. The Directors believe that Admission will: • strengthen the Company's balance sheet; • raise the profile of the Group; • enable the Group to recruit, retain and incentivise staff; and • better position the Company to take advantage of both organic and acquisition opportunities for growth as they arise. Commenting on the decision to float, James Dickson, Chief Executive of Brulines(Holdings) plc, said: "I am delighted that the Brulines IPO has been completedso successfully and with strong institutional demand resulting in a totalfundraising of £19.5 million, which was at the higher end of our expectations.It was particularly encouraging in what we understand to be challenging marketconditions. The listing will enable us to take the Company onto its next stageof development, advance our customer offering and capitalise on the growthopportunities within our market. We look forward to working with our newshareholders in the future." Brulines' advisers also included lawyers Gordons LLP and Baker Tilly asreporting accountants. - Ends - For further information:Brulines (Holdings) plcJames Dickson, Chief Executive Tel: +44 (0) 1642 358 [email protected] Foster, Finance Director Tel: +44 (0) 1642 358 [email protected] www.brulines.com Additional contact details:RSM Robson Rhodes Corporate FinanceNeil Crawford, Corporate Finance Tel: +44 (0) 113 225 [email protected] www.rsmi.co.ukCenkos SecuritiesNicholas Wells Tel: +44 (0) 20 7397 8900 www. cenkos.com Media enquiries:AbchurchSarah Hollins / Justin Heath Tel: +44 (0) 113 203 [email protected] www.abchurch-group.com Photography Photography to accompany the release is available in electronic form; pleasecontact Louise Thornhill on 0113 203 1345 or [email protected] Introduction The Group is the leading provider of volume and revenue protection systems fordraught alcoholic drinks for the UK Licensed on-trade, in particular thetenanted pub sector. The business concept was founded in the early 1990s by Derrick Collin andBrulines was bought out by its management in May 2005. The principal activity of the Group is to measure, remotely harvest, audit andact on important operational data, primarily for owners of licensed premises butalso for licensees. The Dispense Monitoring division, which represents theGroup's core product, measures the actual volume of liquid dispensed each houragainst legitimate deliveries and protects the pub owners from the potentialloss of revenue from 'buying out'. Dispense Monitoring systems have beeninstalled in over 16,000 sites as at 31 July 2006. Typically Brulines sells itsDispense Monitoring units to customers and then enters into a three to six yearcontracts to provide data management and associated services. During the current financial year, the Group has developed its BQM (brandquality monitoring) product into commercial trials with three customers. BQMprovides a mechanism for owners of licensed premises to measure the quality ofdraught alcoholic products being served on their premises. On 31 August 2006,Machine Insite Limited (a newly formed wholly owned subsidiary of the Group) ("Machine Insite") acquired the trade and assets of Corporate Management Services(International) Limited ("CMS") which is involved in the monitoring of AWP(fruit and gaming) machines. The Group enjoys strong client relationships, reflecting high levels of customerservice, with its principal customers having signed three to six yearall-inclusive support service contracts covering telecommunication costs,service, warranty and the provision of data management and analysis. Since the appointment of James Dickson as Managing Director in March 2003, thebusiness has had a strong financial record in terms of revenue growth,profitability and cash generation, with a significant and growing level ofturnover arising from support service contracts, as well as an experiencedmanagement team. Key Strengths The Directors believe that the key strengths of Brulines are as follows: • Dominant market leader in volume and revenue protection systems for draught alcoholic drinks for the tenanted pub sector with high barriers to entry; • Strong recurring revenue stream and cash generation; • Significant growth opportunities in similar UK and international markets; • New technology in Brand Quality Monitoring & AWP machine data capture; • Experienced and dynamic Board and management team; and • Strong financial track record. Summary Trading Record The Company was established for the purposes of effecting the management buy-outof Brulines Limited and has acted purely as a holding company. The consolidatedresults of the Group, which are set out in the Admission Document, represent theresults of the Group for the period from 19 May 2005 (the date of the managementbuy-out) to 31 March 2006. The underlying business of the Group has been operated through Brulines Limitedand the following is a summary of the trading results of Brulines Limited forthe three years ended 31 March 2006. These figures have been extracted withoutadjustment from the financial information as set out in the Admission Document. Year ended 31st March 2004 2005 2006 £'000 £'000 £'000Turnover 6,847 9,159 12,035Gross Profit 3,265 4,520 5,566Operating Profit 1,081 1,967 2,681 Industry Background Following a monopolies inquiry into the brewing industry, the UK governmentintroduced the Beer Orders Act in 1989 in order to control vertical linksbetween the large brewers and pub retailing with the aim of widening consumerchoice. Under the terms of the Beer Orders Act, the major brewers with estates in excessof 2,000 were required either to cease brewing or to free the majority of theirtenanted pub estate from any purchasing Tie. As a result of the Beer Orders Act, the major brewers started to dispose of asubstantial proportion, if not all, of their estates and independent Pubcos wereformed to acquire these estates, many of which were tenanted estates. The nature of a tenancy requires the tenant firstly to pay a below market rentto the Pubco and secondly to purchase, inter alia, beer through the Tie. ThePubco's income stream is therefore very dependent on the level of deliveries toits tenants of products governed by the Tie. The price at which a tenant, through the Tie, has agreed to purchase beer isfrequently more expensive than those prices for beer available within thewholesale drinks market, thereby creating an incentive for tenants to purchasebeer in contravention of the Tie. The Directors believe that Pubcos are aware that unauthorised supply is agrowing concern and that they have largely developed a zero-tolerance attitudetowards buying-out. Historically, the only information available to the Pubcoswas the volume of beer that had been legitimately purchased by its tenantsthrough the Tie and not the level of sales made by its tenants. The potential effect of unauthorised supply for Pubcos can be threefold: loss ofvolume discount reduced rent and lower property values resulting from 'apparent'under trading. Current Trading and Prospects The Group continues to trade strongly with sales of over 2,000 new DispenseMonitoring units in the first four months of the current financial year,primarily coming from the Enterprise roll out and the Punch replacement andupgrade programme. The Directors are also encouraged by further new installations from othercustomers such as Belhaven, Eldridge Pope, Camerons and, in particular, UnionPub Company which has agreed to roll out Dispense Monitoring installationsacross the whole of its tenanted estate. The Group's ongoing high levels of new system sales are substantially increasingthe business' proportion of recurring income streams from associated supportservice contracts. The Directors anticipate continued high levels of new salesand further growth in the level of support service income as Brulines'installation base increases. As at 31 July 2006, the Group had over 16,000Dispense Monitoring System installations. Following development of its BQM process, the Group has commercial trialsongoing, with initial results being positive. Further trials of BQM have beensecured with managed house operators and the Group has been encouraged byinterest from Punch following successful BQM trials. Furthermore, Brulines isactively involved with Cask Marque in ongoing initiatives on beer quality. On 31 August 2006, the Group's subsidiary Machine Insite completed theacquisition of the trade and certain of the assets of CMS, a machine managementbusiness with whom Brulines has developed an AWP machine data management andanalysis product and service with web based technology, resulting in newbusiness gains for Machine Insite. Dividend Policy The declaration and payment of future dividends is subject to the Group'sunderlying profitability, working capital future prospects and other factorsdeemed to be relevant at the time. Notwithstanding the above, the Directors believe that the business iscash-generative and intend to adopt a progressive dividend policy. TheDirectors intend that the first dividend to be paid by the Company will be afinal dividend in respect of the year ending 31 March 2007. Directors James William Dickson, BSc, MBA, Chartered Director, aged 47 (Chief Executive) Prior to joining Brulines in 2003, James had worked in the brewing industrysince 1990. Following an MBA at IMD, Lausanne in 1989 he joined Scottish &Newcastle, where he held several posts including Operations Director, andNational Account Director for Pub Groups and Wholesalers. In 1997 James joinedWhitbread as UK Dispense Director before being appointed Marketing & SalesDirector for Heineken. Mark Hardwick Foster, FCA, aged 44 (Finance Director) Mark joined the Company in January 2006, having previously been Finance Directorof Harrison & Clough Limited, a large independent distributor of fasteners andhand tools. Prior to this, Mark had worked as a Financial Controller in NationalPower plc, and Chief Financial Accountant at Pubmaster Limited (acquired in 2003by Punch). Mark trained and qualified as a Chartered Accountant with KPMG. Markis also responsible for the Group's company secretarial, human resourcesdepartment and central support services department. Duncan James Noble, aged 32 (Operations Director) Duncan joined Brulines as Operations Director in July 2003 and was made aDirector of Brulines in December 2003. Prior to joining Brulines, Duncan hadheld management roles with Ericsson which he joined after spending 6 years inthe British Army. In addition to being Operations Director, Duncan is alsoresponsible for the Information Technology and Brand Quality Monitoringdepartments. Duncan was made a Director of the Group in May 2006. James Newman, FCA, MCT, aged 56 (Non-executive Chairman) James, who was appointed Non-Executive Chairman of the Group in May 2006, wasChairman of Waste Recycling Group plc until its takeover in July 2003. He waspreviously Deputy Chief Executive and Group Finance Director of Kelda Group plc,and before that Group Finance Director of various public companies, includingBRIDON plc and Watmoughs (Holdings) plc. He is currently non-executive Chairmanof Straight plc and Infoserve Group plc, and is a non-executive director ofDignity plc, Scott Wilson plc and a number of other companies. He is also aGovernor of Sheffield Hallam University. He is a Chartered Accountant and amember of the Association of Corporate Treasurers. Stewart Gilliland, BA (Hons), aged 49 (Non-Executive Director) Stewart joined the Company as a Non-Executive Director on 2 May 2006. In 1984following sales roles with Pedigree pet foods, Stewart joined Whitbread's beerdivision where he held senior sales and marketing roles, becoming ChiefExecutive Officer of this division when the business was acquired by InterbrewUK in 2001. In September 2003 he was appointed President Canada, and in January2005 was promoted to Zone President Western Europe, leaving the InBEV businessin January 2006 to return to the UK where he is now Chief Executive of MullerDairy (UK) Limited. - Ends - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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