6th Feb 2009 07:00
Smallbone PLC
("Smallbone" or "the Company")
Trading statement and new financing package
Appointment of Christopher Peacock as President and CEO of Smallbone Holdings USA
Trading statement
Whilst Smallbone has felt the effects of the recent challenging trading environment, particularly in order intake in the last quarter of 2008, the Group ended 2008 with a forward order book of £39 million, only 6 per cent. below the comparative order book at the end of 2007. The Directors are pleased to report that good progress has been made, and continues to be made, in cutting production capacity and overheads across all its operations in order to generate positive cash flow and profitability in 2009, even assuming that demand levels do not improve.
Group sales increased by 10 per cent. in 2008 to £61.8 million (2007: £56.0 million) largely due to the inclusion of four months figures from the acquisition of Christopher Peacock Cabinetry in September 2008. However, due to the increased cost base of the larger Group and the write-off of restructuring costs, the Directors expect that earnings before interest, depreciation and amortisation ("EBITDA") for 2008 will approximate to 45 per cent. of 2007's EBITDA of £5.1 million. Net interest costs are expected to be in line with management forecasts of £0.6 million.
Financing package to provide additional working capital
The Directors of Smallbone are pleased to announce that the Company has put in place a fully committed financing package to provide up to £5.9 million of additional working capital to support its ongoing operations during the challenging economic climate.
The Company has agreed terms with its existing lender, Barclays Bank ("Barclays"), for an extension of its current debt facility and a deferral of loan repayments. Under the terms of the agreement, Barclays will provide an additional £1.0 million of new funds to the previous facility, defer £1.0 million of loan repayments that were due between December 2008 and September 2009, and have amended £1.5m of overdraft facility to become term loan. The covenants attached to the new and existing debt facilities have been reviewed and are now appropriate for the future development of the business.
In addition, Barclays Ventures will be granted 1,000,000 warrants over Ordinary Shares of 5p each in the Company ("Ordinary Shares") with an exercise price of 5 pence per Ordinary Share. The warrants will expire on 31 December 2011 and can be exercised at any point up until that date. Barclays will also be paid a fee, in cash, of 6 per cent. of the Company's market capitalisation at the time when certain payment triggers are satisfied. These triggers are that: the Company is sold; the Company refinances its outstanding bank debt; or, as a longstop date, 31 December 2011.
In addition to these agreements, the Company has today issued £1.0 million of 2011 convertible loan stock (secured but ranking behind Barclays) to 2005 Pekak Limited Partnership. This is being structured as an acquisition by Smallbone of the shares of a newly formed company, Hallco 1657 Limited, which is wholly owned by 2005 Pekak Limited Partnership and whose only asset is £1m in cash. The terms of the convertible loan stock are as follows:
The principal amount of the loan stock is convertible into 3,333,333 Ordinary Shares at 30 pence per Ordinary Share at the option of 2005 Pekak Limited Partnership at any time up until 31 December 2011. If the loan stock is not converted by 31 December 2011, the principal of the loan stock will be repaid at this point together with all interest outstanding (as described below).
The loan stock attracts interest at a rate of 16 per cent. per annum until it is converted or redeemed by the Company. Any interest payable on the loan stock up until 31 December 2010 will roll up and be paid out on 31 December 2011. Any interest payable between 1 January 2011 and 31 December 2011 will be paid quarterly during 2011.
In addition, the Company has agreed with the Inland Revenue the deferral of payments of £2.9 million of tax liabilities. This will now be repaid by the Company in 12 equal instalments at the end of each month, commencing 28 February 2009.
The maximum dilution of existing issued share capital as a result of the issuance of warrants and convertible loan stock will be approximately 14.8 per cent.
Appointment of Christopher Peacock as President and CEO of Smallbone Holdings USA
The Directors of Smallbone are pleased to report that Christopher Peacock has agreed to assume the position and duties of President and Chief Executive Officer of Smallbone Holdings USA.
The issuance of the convertible loan stock to 2005 Pekak Limited Partnership, of which Christopher Peacock is a partner, is deemed to be a related party transaction under the AIM Rules for Companies. The Directors of the Company consider, having consulted with the Company's nominated adviser, Teathers, that the terms of the agreement are fair and reasonable insofar as shareholders are concerned.
Charles Smallbone, Executive Chairman & Chief Executive, commented:
"Along with many global brands, we recognise that we are facing the most challenging trading environment that we have seen for many years. This committed financing package provides us with the flexibility to ensure that the Group can maintain its pre-eminent market position through these tough conditions.
We have world-class brands and a robust business with solid foundations from which to make the most of opportunities as they arise. We have built our businesses in varying and different economic conditions since the late 1970's. As a result, we remain confident in the Group's future performance in the longer term."
6 February 2009
Enquiries:
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Smallbone PLC |
01380 729 090 |
|
Charles Smallbone Gordon Montgomery |
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Teathers |
020 7426 9000 |
|
Shaun Dobson / Dan Webster |
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|
College Hill Mark Garraway / Kate Rock |
020 7457 2020 |
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