RNS Number:5627B
Alba PLC
06 August 2007
Disposal of Leisure division
Alba plc is a leading distributor in the UK and Europe of consumer electrical
and leisure goods, with a portfolio of brands that includes Alba, Bush, Grundig,
Breville and Hinari
The Board of Alba is pleased to announce that it has successfully completed
negotiations for the proposed sale of the Group's Leisure Division (the
'Proposed Disposal'). As a consequence, inter alia, of its size and the
involvement of certain members of the management of the Leisure Division with
the buyer of the Leisure Division, the Proposed Disposal is conditional, inter
alia, upon the approval of Shareholders.
KEY POINTS
* Proposed sale of the Leisure Division for a total consideration of £51.5m
to be paid in cash
* The purchaser is Rutland Partners a differentiated UK mid-market private
equity firm which typically invests in UK based or UK focused companies with
a value of £20-200 million
* The Group will retain ownership of its Rugby distribution centre
* The proceeds from the Proposed Disposal will allow the group to
significantly reduce debt
Extraordinary General Meeting
A notice convening an EGM will be set out in the Circular to be sent out shortly
to Shareholders. At the EGM, a resolution will be proposed to approve, inter
alia, the Proposed Disposal.
John Harris, Chairman, comments:
'The board believes the disposal of the Leisure Division to be in the best
interests of all Alba plc shareholders. We wish the management, staff and new
owners of the business every future success.
'Alba plc continues to focus on the restructuring of its Consumer Electronics
activities and having made much progress already we look forward to the future
with improved confidence'
6 August 2007
ENQUIRIES:
Alba plc Tel: 020 8238 7650
Daniel Harris, Chief Executive
Andrew Rose, Finance Director
College Hill Tel: 020 7457 2020
Anthony Parker
Gareth David
Alba plc
('Alba', the 'Company' or the 'Group')
Proposed Disposal of Leisure Division
Introduction
The Board of Alba, a leading distributor in the UK and Europe of consumer
electrical and leisure goods, is pleased to announce it has today agreed to sell
its Leisure Division (the 'Proposed Disposal') to Vine Mill Limited ('Newco'), a
company set up for the purposes of acquiring the Leisure Division, which is
controlled by Rutland Partners for a total consideration of £51.5 million in
cash. Due to, inter alia, its size and the involvement of certain members of the
management of the Leisure Division with Newco, the Proposed Disposal is
conditional upon Shareholder approval at an Extraordinary General Meeting.
2. Background to and Reasons for the Proposed Disposal
Alba is currently structured into two main divisions: Consumer Electronics and
Leisure.
The Leisure Division is a branded goods provider to the UK and Eire home
electrical product markets. Its product portfolio includes kitchen appliances
(e.g. microwaves, kettles), electrical hair care products (e.g. hairdryers),
vacuum cleaners and power and garden tools (e.g. drills, chainsaws). The Leisure
Division sells products under the following brands: Power Devil, Breville, Bush
Domestic Appliances and Hinari (owned brands) and Nicky Clarke, JCB and Dirt
Devil (licensed brands).
The Leisure Division was established as a separate division in April 2006. Its
products are marketed through distribution channels such as high street
retailers, supermarkets, mail order companies and internet retailers in the UK
and Eire and customers include high street names such as Tesco, Comet and Argos.
The Leisure Division currently operates from two Alba divisional offices and two
shared storage facilities in the UK. In addition it operates from two technical
facilities in China (one shared with Alba) and a shared office with Alba in Hong
Kong. Following the Proposed Disposal certain of these operations will be
separated and there will be some continued shared use of facilities.
In the financial year ended 31 March 2007 the Leisure Division generated sales
of £129.2 million and profit before tax of £10.6 million and had net assets of
£22.1 million and gross assets of £31.7 million. The Leisure Division employs in
excess of 225 people.
At the time of the Company's preliminary results announcement for the year ended
31 March 2006, the Board explained that due to rapid changes in its markets, the
Consumer Electronics Division was going through a period of transition and
restructuring to meet the demands of these market changes. These changes include
the increasing commoditisation of products and components which have impacted
margins and changes to consumer behaviour where products need to be seen to be
offering innovative characteristics or exceptional value. In contrast, the
Leisure Division has not experienced similar changes and continues to trade
well.
On 15 November 2006, the Company announced its interim results for the six
months ended 30 September 2006. In this announcement the Board stated that
against a background of continued difficult trading conditions for the Consumer
Electronics Division, the Board has put in place proposals which were expected
to realise value for Shareholders and might culminate in the disposal or
demerger of the Leisure Division.
On 24 May 2007, Alba announced that it had entered into an exclusivity agreement
with a potential purchaser of the Leisure Division.
On 17 July 2007, Alba announced its preliminary results for the financial year
ended 31 March 2007 in which Alba made a loss before tax of £44 million. The
Company also announced that negotiations regarding a disposal of the Leisure
Division were at an advanced stage.
As a result of offers received and to fund the losses made in the year to 31
March 2007, the Board has decided to sell the Leisure Division and to focus its
attention on the Consumer Electronics Division.
The consideration of £51.5 million will be adjusted to take account of the
working capital and indebtedness of the Leisure Division at Completion. From
this sum £4.2 million will be held in escrow on the terms of the retention under
the Sale and Purchase Agreement. The cash element of the consideration which is
payable at Completion of £51.5 million (will, after expenses), enable the
Company to repay a significant amount of its outstanding debt and provide
resources to improve the profitability of the Consumer Electronics Division.
Once the performance of Consumer Electronics Division has returned to acceptable
levels the Board intends to examine ways of returning part of the proceeds of
the disposal of the Leisure Division to Shareholders.
Completion of the Proposed Disposal is conditional upon, inter alia, the
approval of Shareholders.
3. Information on Newco and Rutland Partners
Newco is a newly incorporated company that has been formed for the purposes of
implementing the Proposed Disposal. Newco is controlled by Rutland Partners.
Rutland Partners is a UK mid-market private equity partnership focused on the
acquisition of UK businesses where it can actively engage to improve
performance, enable restructuring or assist with strategic change and typically
invests £10-50 million of equity. Rutland Partners do not focus on any
particular industry but consider individual investments across most sectors on
their own merits.
4. Use of Proceeds
The Board proposes that the Cash Proceeds, net of costs, received by Alba from
the Proposed Disposal will be used to repay a significant amount of its
outstanding debt and provide resources to improve the profitability of the
Consumer Electronics Division.
Once the performance of the Consumer Electronics Division has returned to
acceptable levels the Board proposes to examine methods by which part of the
proceeds of the disposal of the Leisure Division may be returned to
Shareholders.
5. Current Trading
The text of the Interim Management Statement released today is stated below.
Overview
In line with the Group's new business plan, sales for the three months to June
30 2007 have been 36% lower than in the previous corresponding period last year,
but with improved margins. Stock levels at June 30 were 40% lower than at the
same date last year with net bank debt of £58.5m (2006: £82.5m).
UK Consumer Electronics
The Group has restructured the operations considerably and the new
organisational structure is now in place and working well from a single office
at Elstree, Hertforshire. New business has been obtained from significantly
wider distribution channels.
Grundig MultiMedia BV
The Company is starting to see an improved performance particularly with regard
to product reliability and a corresponding lower rate of returns which is
enabling both sales growth and margins to be in line with budgets.
Far East
Sales overall continue to be influenced by developments in the UK Consumer
Electronics Division. The Medical Electrical Devices business continues to
develop strongly.
Leisure Division
The Board announced on 3 August 2007 the proposed sale of the Leisure Division
for £51.5m in cash, which is subject to Shareholder approval at an EGM.
For the three months to end June, performance, in a subdued market environment,
has been towards the low end of the range of management expectations.
Management and Board
Sir Digby Jones resigned as non-executive Director on his appointment to a role
in Government. David Allen stepped down as an executive Director whilst
negotiations continued with regard to the sale of the Leisure Division. A
search for new non-executive directors is underway.
Current trading and prospects
The Board maintains its previously stated position with regard to expectations
for current year trading and future prospects.
Trading in the current financial year is in line with the Board's expectations
and the new business plan. The benefits to be accrued from the restructuring and
re-positioning programme are expected to become apparent in the second half of
the current financial year.
The Board believes that Alba plc has fundamentally changed the way it manages
its business. Brands & product ranges are focused, customer partnerships have
been strengthened and operational efficiency is now market leading.
Having refocused the brands and removed a significant amount of the fixed cost
base, the Board expects the company to experience a strong recovery in margins
in the current financial year. Whilst revenues are expected to fall, the
business model is expected to remain cash generative.
Over the course of the next three years the Board believes that value will be
created and realised for shareholders through organic growth, recovery in
margins and the proceeds received from the sale of non-core assets.
6. Related Parties
Due to the involvement of certain members of the management team of the Leisure
Division with Newco, and certain other arrangements between Alba and Newco, the
Proposed Disposal is being treated as a related party transaction.
7. Working Capital
The Group has for many years financed itself using uncommitted letters of credit
and bank facilities that are subject to on demand repayment. As at 31 July 2007
the Group had available to it a total of approximately £150 million unsecured on
demand facilities from 12 banks. Many of these banks have been lenders to the
Group for over 10 years.
a) if the Proposed Disposal does not complete
If the Proposed Disposal does not complete by 31 August 2007 the Board is not at
present in a position to confirm that the Group will have sufficient bank
facilities to support its expected levels of trading for the next 12 months from
the date of this document given that approximately £40 million of the Group's
facilities are due to expire on this date. Therefore as at the date of this
document the Group does not have sufficient working capital for the next 12
months under its current facilities in the event that the Proposed Disposal does
not complete.
The Group's seasonal working capital cycle peaks in the months of August to
November as stock is ordered on letters of credit in advance of the Christmas
period and the debt associated with the letters of credit is repaid as the
Group's customers pay for their purchases. The Group is presently projecting to
require facilities of up to approximately £140 million in the event that the
Proposed Disposal does not complete and the Board takes no action to address its
position.
If the Proposed Disposal does not complete by 31 August 2007, the Group will
therefore need to agree before the end of August, an extension of its current
facilities with its existing bankers or alternatively put in place secured asset
based facilities with new lenders in respect of which the Company has reached an
advanced stage in its discussions. At present the Board is confident that it
will be able to obtain ongoing facilities either from its existing banks or from
new lenders. The Board cannot at present state the terms under which such
ongoing facilities would be provided.
Additional courses of action including the disposal of one or more of its
properties (which were valued at a total of £23.8 million at 31 March 2007); the
sale of its shareholding in Grundig Multimedia BV; and agreeing changes in
trading terms with the Group's customers and suppliers and hence reducing the
size of facilities it requires are also options available to the Group. While
such courses of action are not at present being formally progressed the
Directors are confident that they could be achieved in the short-term although
it is unlikely that any of these actions could be effected by the end of August
such as to reduce the amount of facilities required at that date.
The Board expects that the Group would be able to continue to trade but this
statement is dependent upon the successful outcome of discussions with current
and/or prospective lenders which by their very nature are uncertain. While the
Directors are confident that these discussions would be successful and/or the
alternative actions would be successful, if these discussions were not to be
successful and the alternative actions were not to be sufficient the Group would
be unable to trade and would become insolvent.
b) if the Proposed Disposal does complete
The Board is of the opinion, that after taking into account the Net Proceeds and
the bank facilities available to the Continuing Group, the Continuing Group has
sufficient working capital for its present requirements that is for at least 12
months from the date of publication of this document.
8. Extraordinary General Meeting
A circular to be sent to Shareholders containing a notice of an extraordinary
general meeting of the Company to approve, inter alia, the Proposed Disposal and
the Sale and Purchase Agreement will be published shortly.
The Directors have irrevocably undertaken to vote in favour of the resolution at
the extraordinary general meeting in respect of the 3,579,691 Ordinary Shares
(which represents approximately 6.98 per cent. of the ordinary issued share
capital of the Company) which they beneficially own. In addition a number of
members of the families of John Harris and Daniel Harris (both directors of
Alba) and their family trusts have irrevocably undertaken to vote in favour of
the resolution at the extraordinary general meeting in respect of the 13,626,250
Ordinary Shares (which represents approximately 26.58 per cent. of the ordinary
issued share capital of the Company) which they beneficially own. Certain
institutional Shareholders who hold in total 9,241,193 Ordinary Shares
(representing approximately 18.03 per cent. of the issued share capital of the
Company) have also irrevocably undertaken to vote in favour of the resolution at
the extraordinary general meeting. Accordingly Shareholders holding a total of
26,447,134 Ordinary Shares (representing approximately 51.60 per cent. of the
issued share capital of the Company) have irrevocably undertaken to vote in
favour of the resolution at the extraordinary general meeting.
Definitions
''Cash Proceeds'' means the sum of £51.5 million payable in cash by Newco on completion
of the Proposed Disposal
''Circular'' the circular to Shareholders
''Company'' or ''Alba'' Alba plc
''Completion'' completion of the Proposed Disposal
''Consumer Electronics means the business carried on by Harvard International at the date of
the Intragroup Transfer Agreement other than the Leisure Division
Division''
''Directors'' or ''Board'' the current Directors of the Company
'EGM' the Extraordinary General Meeting of the Company
''Harvard International'' Harvard International Limited
''Harvard Maritime'' Harvard Maritime Limited
''Harvard Hong Kong'' Harvard International (Hong Kong) Limited
'Hinari' Hinari Limited
''Intragroup Transfer the Intragroup Transfer Agreement to be entered into between Harvard
Hong Kong (1), Harvard Maritime (2) and Pulse Hong Kong on completion
Agreement'' of the Proposed Disposal in respect of the transfer of the leisure
business carried on by Harvard Hong Kong and Harvard Maritime
'Leisure Division' Pulse Home Products and its subsidiaries Viva, Dreamland Appliances
Limited, Hinari and Pulse Hong Kong held by it, and the leisure trade
and business of each of Harvard International, Harvard International
(Hong Kong) Limited and Harvard Maritime Limited
''Net Proceeds'' the Cash Proceeds net of expenses
'Newco' Vine Mill Limited
'Ordinary Shares' issued fully paid ordinary shares of 10 pence each in the share
capital of the Company
''Proposed Disposal'' the Proposed Disposal of the Leisure Division
''Pulse Home Products'' Pulse Home Products Limited
''Pulse Hong Kong'' Pulse Home Products (Hong Kong) Limited
'Rutland Partners ' Rutland Partners LLP
''Sale and Purchase Agreement'' the agreement dated 3 August 2007 between the
Company and Newco in
respect of the sale and purchase of Pulse Home Products and in respect
of the sale and purchase of the leisure business and assets of Harvard
International
''Shareholders'' holders of Ordinary Shares
''Viva'' Viva (Consumer Products) Limited
This information is provided by RNS
The company news service from the London Stock Exchange
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