TIDMAMR
RNS Number : 8709B
Armour Group PLC
10 March 2014
Armour Group plc ("Armour" or the "Group")
Disposal and Notice of General Meeting
Armour Group plc announces the proposed disposal on a cash free
debt free basis of Armour's automotive division, including the
Nordic subsidiaries, to AAMP of America for a consideration of
GBP10.9 million payable in cash at completion. The sale is
conditional upon shareholder approval, for which a Notice of
General Meeting, to be held at 12.00 am on 27 March 2014 at the
offices of Arnold & Porter (UK) LLP, Tower 42, 25 Old Broad
Street, London, EC2N 1HQ, has today been posted to shareholders
setting out the details of the transaction.
The consideration of GBP10.9 million represents a multiple of
7.3 times the earnings before interest and tax for the year ended
31 August 2013 for the automotive division and will generate a
profit on sale of approximately GBP3.0 million. After costs and
repaying the Group's outstanding net debt, the Group will have a
net cash position of approximately GBP3.0 million.
The Board believes that the disposal represents a good
opportunity for the Group to realise value and create a stronger
financial platform from which the Group can move forward and
develop. The Board is unanimously recommending to shareholders the
approval of the resolution in the circular to proceed with the
disposal.
Following the disposal, the Group will continue with its
strategy developing organically the operations of Armour Home and
Armour Asia, focusing on the core brands, developing their product
portfolios and expanding their geographical reach, with the
necessary investment where appropriate. In addition to organic
development, the Group will seek suitable acquisitions to further
grow the Group.
George Dexter, CEO, commented:
"We are pleased to announce the proposed disposal of Armour
Automotive to AAMP of America on terms that we believe represents
good value to our shareholders. The Group's balance sheet will be
substantially strengthened with a net debt position of over GBP7
million becoming a net cash position of approximately GBP3 million
as a result of the disposal. Looking forward, the management focus
will be on progressing the recovery in Armour Home, continuing to
build our business in Asia and looking for new opportunities to
further expand the Group. The Board recommends that all
shareholders vote in favour of the disposal."
The shareholder circular will be posted on the Group's website,
www.armourgroup.uk.com.
Further Details:
Armour Group plc Tel: 01892 502700
George Dexter, Chief
Executive
John Harris, Finance
Director
---------------------------- -------------------
finnCap Limited Tel: 0207 220 0500
Geoff Nash
Ben Thompson
Stephen Norcross (Broking)
---------------------------- -------------------
Newgate Threadneedle Tel: 0207 653 9850
Graham Herring
Robyn McConnachie
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Letter from the Chairman of Armour Group Plc
Proposed Disposal of the Armour Automotive Division
Notice of General Meeting
Introduction
The Company on 10 March 2014 announced the proposed disposal of
the Armour Automotive Division. AAGL has entered into a conditional
sale and purchase agreement in respect of the disposal of the
Armour Automotive Division to AAMP for a total consideration
comprising a payment by AAMP to AAGL of GBP10.9m in cash with an
adjustment so that the Armour Automotive Division is transferred on
a cash-free debt-free basis and a normal level of working capital.
Further details of the Sale and Purchase Agreement are set out in
paragraph 3 below.
Completion of the Disposal constitutes a fundamental change of
business of the Company under Rule 15 of the AIM Rules.
Accordingly, the Disposal is conditional on Shareholder approval
and the circular sets out the reasons for and the principal terms
of the Disposal.
Background to and reasons for the Disposal
The Group has made significant progress over the past three
years as highlighted in the recent annual report. However, despite
the progress made and the improving economic outlook, the Group
continues to carry a substantial level of debt, which has been
holding back the development of the Group. The net debt at 31
August 2013 was GBP7.649m.
The Directors believe that the consideration payable by AAMP for
the sale and purchase of the Armour Automotive Division represents
a full price generating a profit on Disposal of approximately GBP3m
and is a good opportunity for the Group to pay down all of its
debt. The inflow of funds will leave the Group with a net cash
balance of approximately GBP3m, which in turn will significantly
enhance the Group's ability to develop and grow.
Following the Disposal, the Company will retain ownership of
Armour Home and Armour Asia, both of which are focused on
developing, marketing and selling consumer products for the home
entertainment and home office markets in the United Kingdom and
overseas.
Terms of the Disposal
AAGL, a wholly owned subsidiary of the Company, is the direct
and/or indirect owner (as appropriate) of the entire issued share
capital of AAL, Armour Nordic AS, Armour Nordic AB, Cactus Aerials
Limited and Continental Technologies & Investments Limited,
ownership of which will transfer to AAMP on successful completion
of the Disposal. The Directors believe that it will be beneficial
for the Company and its shareholders to proceed with the Disposal
and, accordingly, AAGL has entered into the Sale and Purchase
Agreement.
Given that the Armour Automotive Division in the year ending 31
August 2013 accounted for 45% of the Group's sales and 112% of the
Group's EBITDA, the sale of the Armour Automotive Division
represents a fundamental change of business for the purposes of
Rule 15 of the AIM Rules. Accordingly, the Disposal is conditional
on Shareholder approval being obtained at the General Meeting.
The key terms of the Sale and Purchase Agreement are as
follows:
-- the consideration comprises a payment on completion of the
Disposal by AAMP of GBP10.9m in cash with an adjustment so that the
Armour Automotive Division is transferred on a cash-free debt-free
basis and subject to normalised working capital, intra-group
trading and actual net debt adjustments following agreement of the
completion statement;
-- the agreement is conditional on approval of the Disposal by
the Shareholders and, if that approval is not obtained by 18 April
2014, the Sale Purchase Agreement will terminate;
-- warranties and indemnities being given by AAGL to AAMP as to
the operations of the Armour Automotive Division (which will be
limited by disclosures) and covenants from the Ongoing Group to
AAMP not to, inter alia, compete with the Armour Automotive
Division for a period up to 3 years following Completion shall be
included in the Sale and Purchase Agreement;
-- the obligations of AAGL under the Sale and Purchase Agreement
are guaranteed by the Company and the obligations of AAMP under the
Sale and Purchase Agreement are guaranteed by Audax AAMP Holdings,
Inc.; and
-- AAMP has certain rights to terminate the Sale and Purchase
Agreement if: (i) there is a material breach of the warranties
given by AAGL at the date of the Sale and Purchase Agreement or
when given at Completion or a material breach of certain covenants
given by AAGL relating to the conduct of the business of the Armour
Automotive Division prior to Completion; and (ii) if the Directors
change their recommendation.
In addition to the Sale and Purchase Agreement, the parties
will, prior to Completion, need to prepare, agree and enter into a
number of ancillary agreements and other ancillary documents which
are to be delivered on Completion pursuant to the Sale and Purchase
Agreement.
Current Trading and Prospects
After five months trading of the new financial year, the Group
is profitable on an operating level and sales are up 4% year on
year. The core UK retail markets for both the automotive and home
divisions have been patchy in terms of demand, with sales of our
key brands to our major retail customers performing well. However,
as expected sales into the independent retail channel within the UK
have been more challenging. In export markets, the Group's sales in
both divisions have delivered good year on year growth, with
existing customers expanding their business and new markets being
opened up. This export sales growth reflects our strategy of
broadening the Group's international reach. In Asia, the Group's
operation has had a slower start to the new financial year,
although it is anticipated that this will be recovered in the
second six months.
Looking forward, the Ongoing Group's UK markets are expected to
improve, although this improvement will be slow and potentially
challenging at times. Internationally, sales are expected to
continue to grow at an above average rate.
The Directors acknowledge that for the period immediately
following the Disposal to 31 August 2014 the Ongoing Group is
unlikely to be profitable at an underlying trading level. The core
trading component within the Ongoing Group is Armour Home, which
whilst profitable, is still in recovery and is unlikely to be in a
position to fully offset the costs of the corporate head office in
the period to 31 August 2014. In due course, the Board believes
that Armour Home's recovery will be of a sufficient scale to more
than cover all the corporate head office costs. However, the
Directors recognise that following the Disposal, a review of the
cost base will be necessary in order to accelerate the return to
profit of the Ongoing Group's underlying trading.
Proposed Strategy Post Disposal
Following the Disposal, the Directors will continue with their
strategy to develop the Ongoing Group organically, focusing on the
core brands, developing its product portfolios and expanding its
geographical reach, with necessary investment where
appropriate.
Investment in new product development will continue to be a key
part of the growth strategy for the Ongoing Group and over the
coming twelve months there are a number of important new product
launches scheduled that are expected to deliver incremental growth
in both sales and profits.
Alongside new product development, the other fundamental element
of the growth strategy for the Ongoing Group is the further
expansion of international sales. This will be delivered through
the development of new markets and implementing changes in existing
markets that accelerate sales growth.
In addition to organic development, the Directors will seek
suitable acquisitions that they believe will create shareholder
value.
Financial Position of the Company following the Disposal
Following the Disposal the Company will have cash of
approximately GBP3m, net of transaction costs in relation to the
Disposal of approximately GBP0.35m.
Irrevocable Undertaking
Irrevocable undertakings to vote in favour of the Resolution
have been received in respect of 46,532,144 Ordinary Shares
representing approximately 47.95 per cent. of the Company's
existing ordinary share capital.
Remaining Business of the Company
If the Resolution is passed and the Disposal approved then,
following settlement of all costs associated with the Disposal, the
Directors estimate that the Company will have total cash available
to it of approximately GBP3m. The Ongoing Group will consist of the
Armour Home and the Armour Asia which together accounted for
GBP17.6m of sales and GBP122,000 of profit from operations (before
central costs) in the year to 31 August 2013.
Recommendation
The Directors believe that the Disposal is in the best interests
of the Company and would promote the success of the Company for the
benefit of its Shareholders as a whole. Accordingly, the Directors
unanimously recommend that Shareholders vote in favour of the
Resolution to be proposed at the General Meeting as they intend to
do so in respect of their own beneficial shareholdings,
representing approximately 33.56 per cent. of the Company's
existing ordinary share capital.
Yours sincerely,
Bob Morton
Chairman
This information is provided by RNS
The company news service from the London Stock Exchange
END
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