RNS Number:6940G
Gaskell PLC
28 January 2003
Issued by Citigate Dewe Rogerson, Birmingham
Date: 28 January 2003
Embargoed: 7.00am
GASKELL plc
Proposed Disposal of both the Gaskell Tile Division
and the Kidderminster Property
Summary
* Proposed Disposal of Gaskell's Tile Division for initial cash
consideration of #17m (plus up to #1m deferred) to Low & Bonar PLC
* Proposed Disposal of the Kidderminster Property for #3.1m
* The proceeds should strengthen significantly the financial position of
the Continuing Group by eliminating net debt and should provide funds and
flexibility to invest in opportunities for growth
* The proposed Disposals should allow Gaskell to restructure its cost
base, address its loss-making subsidiary, Tomkinsons, and fund the
Group's pension schemes on a continuing basis
* Warehousing and distribution agreement signed with Stoddard
International plc will serve to improve performance
* The Continuing Group will consist of Gaskell Carpets, a supplier and
distributor of contract and retail Axminster and tufted carpets and
Gaskell Textiles, a manufacturer and distributor of felt underlays and
non-woven floorcovering products
* The Board has now come to the conclusion that both of these Disposals
are essential in order to ensure a future for the Group
"Conditions in the floorcoverings industry remain difficult. Nevertheless with a
smaller, more focused Continuing Group, receiving closer management attention
and strategic direction following the removal of distractions relating to the
restructuring process, Gaskell's continuing operations should be in a position
to exploit the opportunities in this industry such as the potential to supply
new markets and renew capital expenditure, allowing the trading prospects of the
Group to meet the Directors' expectations."
Alan Chamberlain, Chairman
FULL STATEMENT ATTACHED
Enquiries:
Alan Chamberlain, Chairman
Gerry Wheeler, Chief Executive
Richard Hopkin, Group Finance Director Alan Cooke, Account Manager
Gaskell PLC Citigate Dewe Rogerson
Tel: 01254 236222 Tel: 0121 455 8370 / Mobile: 07767 771 533
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1. PROPOSED DISPOSAL OF BOTH THE GASKELL TILE DIVISION AND THE
KIDDERMINSTER PROPERTY
Gaskell announces that it has conditionally entered into an agreement and other
arrangements to sell the Gaskell Tile Division to Low & Bonar for a cash
consideration of #17m plus a deferred element of up to #1m dependent upon the
level of the audited operating profits (as adjusted) for the year to 31 December
2002 for the Gaskell Tile Division. Low & Bonar is an international group which
manufactures and supplies a wide range of products in the specialist materials
and plastics markets.
In addition, Gaskell further announces today that it has conditionally agreed to
sell the Kidderminster Property for a cash consideration of #3.1m to Lescren
Holdings Limited.
Gaskell also announces that Gordon Donald has resigned from the Board in view of
his position as Managing Director of the Gaskell Tile Division.
In view of their size, the proposed Disposals of both the Gaskell Tile Division
and the Kidderminster Property are conditional upon the approval of
Shareholders. The proposed disposal of the Gaskell Tile Division is also
conditional, in view of its size, upon the approval of shareholders of Low &
Bonar. There is no interconditionality between the proposed Disposals.
2. BACKGROUND TO AND REASONS FOR THE DISPOSALS
As Shareholders will be aware, the Board has, over the past year, been exploring
a wide range of restructuring options in order to secure the long term future of
Gaskell and to protect and maximise value for Shareholders. To secure these
objectives, Gaskell took a number of actions in 2002 to improve the Group's
financial position. Those included cost reduction programmes, the sale of
surplus plant and machinery, the sale of Crucial Trading on 31 May 2002, the
sale of Rhoden Mill on 6 August 2002 and the sale of Mid-Wales Yarns Limited on
19 August 2002. Further, the Board has recently started consultation with the
workforce at Tomkinsons in order to decide that company's future. In addition,
the distribution agreement reached with Stoddard, set out below, will also serve
to improve the Group's performance. These actions have hitherto mainly affected
the non-core operations of the Group. Notwithstanding the actions that have been
taken, the Directors have had to recognise fundamental issues that face Gaskell
itself as well as the industry in which Gaskell operates.
The principal issues are as follows:
* Gaskell's high level of debt is forecast to increase significantly in the
first quarter of 2003;
* There is no commitment from the Group's bankers that further facilities
will be available after January 2003;
* Gaskell's likely inability to raise debt from other sources;
* Poor investor sentiment towards smaller companies and Gaskell's poor
trading results over the last two to three years makes an equity issue
extremely difficult;
* The tough trading environment in the floorcoverings market continues as
evidenced by the closure of several businesses in the sector;
* Gaskell has significant Group pension scheme funding deficits; and
* Gaskell has no ability to invest in the growth businesses of the Group due
to the unsustainably high levels of debt.
continued...
-3-
Of these, the most critical issue facing Gaskell is the high level of debt
within the Group which is now unsustainable since Gaskell is in breach of its
banking covenants. The Directors have concluded that Gaskell must make the
proposed Disposals in order to generate sufficient working capital for its
funding requirements. Total bank borrowings as at 31 December 2002 amounted to
#10.5m. Further, the Group's borrowings are forecast to rise during the first
quarter of 2003, due to normal seasonal reductions in activity levels and
further costs associated with the restructuring of the Group's loss making
subsidiaries and other deferred liabilities.
The Group's bankers have deferred an #850,000 medium term loan repayment due on
31 December 2002 until 31 January 2003. However as indicated in the trading
statement issued on 23 December 2002, the bank's agreement to provide further
facilities beyond January 2003, including a further deferral of the medium term
loan repayment, sufficient to meet Gaskell's requirements, is dependent upon the
proposed Disposals outlined herein which, in the Directors' opinion, represent
the most appropriate way to address the Group's financial difficulties. The
possibility of raising debt from other sources has been investigated but the
Directors believe that it is extremely unlikely that the Group will be able to
raise sufficient debt in time to resolve these issues. In the Interim Statement
issued on 18 September 2002 the Chairman indicated that, in order to address
these issues, Gaskell was considering a wider restructuring than had previously
been anticipated. The Board has now come to the conclusion that Gaskell must
sell its core tile division, as well as the Kidderminster Property and that both
of these Disposals are essential in order to ensure a future for the Group. The
proposed Disposals outlined herein should:
* Strengthen significantly the financial position of the Continuing Group by
eliminating net debt;
* Provide Gaskell with the funds and flexibility to invest in opportunities
for growth in the Continuing Group;
* Allow Gaskell to restructure its cost base resulting in significant annual
overhead savings;
* Allow the Group to address its loss making subsidiary, Tomkinsons;
* Allow the Group to fund its pension schemes on a continuing basis; and
* Provide Gaskell with the best option for maximising Shareholder value.
An extensive marketing exercise has been undertaken to sell both the Gaskell
Tile Division and the Kidderminster Property, with the aim of securing best
value for Shareholders. In the Board's opinion, both Low & Bonar's offer for
the Gaskell Tile Division and Lescren Holdings Limited's offer for the
Kidderminster Property reflect good value for both of these assets.
3. INFORMATION ON THE GASKELL TILE DIVISION
The Gaskell Tile Division comprises Gaskell's contract and commercial carpet
tile sales and manufacturing operations. The three business units which make up
the Gaskell Tile Division are described below:
Bamber Carpets - A manufacturer of high
performance carpet tiles and tufted carpet cloths for use primarily in
commercial markets, based in Bamber Bridge, Preston. Products are sold to other
members of the Group and also to external customers and distributors.
Modulus Flooring Systems - A distributor and seller of carpet
tiles to contract and commercial customers, based in Kingston, London. The
majority of products are sourced from within the Gaskell Tile Division.
continued...
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Gaskell Carpet Tiles - A distributor and seller of
carpet tiles to contract and commercial customers, based in Clayton-le-Moors,
Lancashire. The company has no manufacturing of its own, but sources and
distributes products both from within the Gaskell Tile Division and from
external suppliers.
In the year ended 31 December 2001, the Gaskell Tile Division generated turnover
of #28.6m and operating profit before central costs of #4.0m. At that date the
Gaskell Tile Division's net assets were #9.5m.
4. INFORMATION ON THE KIDDERMINSTER PROPERTY
The Kidderminster Property comprises a single site developed with a complex of
industrial buildings of varying ages currently occupied by Tomkinsons.
Following the reduction in activities at Tomkinsons, the sale of Crucial Trading
and the recent consolidation of the Gaskell wool rich operations with those of
Gaskell Carpets, the Board concluded that a sale of the Kidderminster Property
should be investigated. Consequently, Matthews & Goodman, a firm of national
property advisers, was instructed to market the property, through which the
offer from Lescren Holdings Limited was developed.
The Directors consider that a consideration of #3.1m reflects the value of the
property to the Group. There is a possibility of a further payment if Lescren
Holdings Limited (having obtained planning permission) develop the Kidderminster
Property for any non-industrial use or dispose of the property with the benefit
of such planning. A Valuation Report on the property by Matthews & Goodman has
been prepared and is available for inspection.
In addition, in relation to the Kidderminster Property, Gaskell has signed an
agreement with Stoddard to combine the warehousing and distribution functions of
the two companies under the remaining operations of Tomkinsons. In order to do
this, Gaskell will lease-back approximately 113,000 sq. ft. of the Kidderminster
Property comprising the modern warehousing element and a modern stores unit. The
value of this lease has been taken into account in the Valuation Report produced
by Matthews & Goodman. This agreement, together with the consultation process
referred to above, should enable Gaskell to reduce costs and restructure
Tomkinsons to the extent that is appropriate for the reduced activity levels
that are now planned for that business.
5. SUMMARY OF THE PROPOSED DISPOSALS
Gaskell Tile Division
Pursuant to the Tile Disposal Agreement and Arrangements entered into on 27
January 2003, Gaskell will conditionally dispose of the Gaskell Tile Division,
for an initial consideration (before costs) of #17m payable in cash at
completion and deferred consideration of up to #1m contingent upon the level of
the audited operating profits (as adjusted) achieved in the year to 31 December
2002 by the Gaskell Tile Division, to Low & Bonar. Gordon Donald has resigned
from the Board in view of his position as Managing Director of the Gaskell Tile
Division. Gordon Donald will remain as Managing Director of the Gaskell Tile
Division and will join Low & Bonar. Gordon Donald has played no part in the
negotiations with Low & Bonar other than to assist in the normal course of due
diligence.
continued...
-5-
Kidderminster Property
Pursuant to the Property Disposal entered into on 27 January 2003, Tomkinsons
has conditionally agreed to dispose of the Kidderminster Property for an
aggregate consideration of #3.1m to Lescren Holdings Limited. Additional
consideration will become payable by Lescren Holdings Limited if it develops the
Kidderminster Property for non-industrial use or if it disposes of the property
with the benefit of planning permission within seven years from completion. In
such circumstances the amount payable to Tomkinsons will be 50% of the amount by
which the sale proceeds or redeveloped market value exceeds #3.1m (less certain
costs of Lescren Holdings Limited).
The Disposal Agreements and Arrangements are conditional upon the proposed
Disposals being approved by Shareholders at an Extraordinary General Meeting.
6. SUMMARY OF THE CONTINUING GROUP
The business units which will form the basis for the Continuing Group, following
the approval of the proposed Disposals, are described below:
Gaskell Carpets - A designer, supplier and distributor
of contract and retail Axminster and tufted carpets primarily to the leisure and
healthcare sectors, and also to selected commercial markets. The business also
now includes the recently transferred operations of the Gaskell wool rich brand.
Gaskell Textiles - A manufacturer and distributor of
felt underlays and non-woven floorcovering products. The business also provides
fibrebonded carpets and tiles and non-woven textile materials for a diverse
range of applications.
Tomkinsons - Subject to the outcome of the
consultation process recently started at the company, Tomkinsons will be
restructured to reflect the new warehousing and distribution agreement reached
with Stoddard and a reduced level of manufacturing activity.
7. USE OF PROCEEDS
The proceeds from the proposed Disposals, net of associated costs, total
approximately #20m and will be used as to #10.5m to eliminate Gaskell's net
borrowings, approximately #2m to fund the further restructuring of the Group and
#4m for working capital requirements during 2003 and particularly in the first
quarter of the year. The amount applied to fund the further restructuring will
be used to complete the reduction of the cost base at Tomkinsons and to reduce
the head office and other administrative operations. Once this is completed,
your Board hopes to renew capital investment in Gaskell Carpets and Gaskell
Textiles, in order to return these businesses to profitability. The proceeds
will also be applied to fund the Group's pension schemes on a continuing basis.
8. CURRENT TRADING AND PROSPECTS
At the time of the Group's Interim Statement announced on 18 September 2002, the
Chairman said that the first quarter of 2002 had been particularly problematic,
following a decline in both retail and contract orders towards the end of the
previous year, and also that the Group incurred operating losses in the first
half of 2002. In the period from 1 July 2002 these problems were, to some
extent, reversed due to the exit from certain loss making activities and an
upturn in performance in the Gaskell Tile Division. However, trading levels in
both the Continuing Group and the Gaskell Tile Division are still below
historical levels and are not of a level sufficient to resolve the Group's
problems. Further, the Group's report and accounts for the year to 31 December
2002 are likely to reflect further impairment provisions and additional
restructuring costs incurred in the second half of the year.
continued...
-6-
Following the completion of the proposed Disposals outlined herein Gaskell,
although smaller, should have the resources to invest in Gaskell Textiles and
Gaskell Carpets, as well as enabling the Group to tackle the ongoing losses at
Tomkinsons. Further action will be taken to reduce the Group's cost structure
to the extent that it is more appropriate for a small public company.
Conditions in the floorcoverings industry remain difficult. Nevertheless with a
smaller, more focused Continuing Group, receiving closer management attention
and strategic direction following the removal of distractions relating to the
restructuring process, Gaskell's continuing operations should be in a position
to exploit the opportunities in this industry such as the potential to supply
new markets and renew capital expenditure, allowing the trading prospects of the
Group to meet the Directors' expectations.
The Directors are of the opinion that following the proposed Disposals, taking
into account bank and other facilities available to the Continuing Group, the
Continuing Group has sufficient working capital for its present requirements,
that is, for at least the next 12 months from the date of this document.
Shareholders should be aware that both of the proposed Disposals will need to be
approved for Gaskell to have sufficient working capital for its present
requirements, that is for at least the next 12 months from the date of this
document. Both of the proposed Disposals are required to be approved so that
Gaskell is able to meet its funding requirements. The Group's bankers have not
indicated that any additional funding will be available and the Board believes
that both of the proposed Disposals are essential to address this need.
In the event that either or both of the proposed Disposals is not approved,
Gaskell will not have sufficient working capital for its present requirements,
that is for at least the next 12 months from the date of this document. In that
event, the Directors would need to urgently reassess their plans and attempt to
develop revised proposals immediately which could include an equity issue to a
strategic investor, a refinancing of the whole Group with an alternative bank or
further asset disposals to provide Gaskell with working capital sufficient for
its needs. There can be no assurance that the Company would secure any such
funding and, from discussions so far, it is believed to be extremely unlikely
that the Company will be able to do so. In such circumstances the Group's
bankers have indicated that they would seek to appoint a firm of accountants
immediately to review the options available to them, one of which may be to
begin insolvency procedures.
9. EXTRAORDINARY GENERAL MEETING
The proposed Disposals are conditional upon the approval of Shareholders. An
Extraordinary General Meeting of the Company will be held at The Dunkenhalgh
Hotel, Blackburn Road, Clayton-le-Moors, Accrington, Lancashire, BB5 5JP at
10.00 a.m. on 14 February 2003, at which resolutions will be proposed to approve
each of the Disposals.
10. VOTING INTENTIONS
Shareholders who hold 25.1 per cent of the issued share capital of Gaskell have
given irrevocable undertakings to vote in favour of the resolutions at the
Extraordinary General Meeting.
-7-
.
DEFINITIONS
"Bamber Carpets" Bamber Carpets Limited
"Board" or "Directors" The Directors of Gaskell
"Continuing Group" The Group following completion of the proposed Disposals
"Disposals" The disposals of the Gaskell Tile Division and the Kidderminster Property
"Disposal Agreements and The Tile Disposal Agreement and Arrangements and the Property Disposal
Arrangements" Agreement
"EGM" or "Extraordinary General The Extraordinary General Meeting to be held on 14 February 2003, notice of
Meeting" which is set out at the end of this document
"Gaskell" or "Company" Gaskell plc
"Gaskell Carpets" Gaskell Carpets Limited
"Gaskell Carpet Tiles" Gaskell Carpet Tiles Limited
"Gaskell Textiles" Gaskell Textiles Limited
"Gaskell Tile Division" The Gaskell tile operations, comprising the business and assets of Bamber
Carpets Limited, Modulus Flooring Systems Limited and Gaskell Carpet Tiles
Limited
"Group" Gaskell and its subsidiary undertakings
"Interim Statement" The interim statement for the Group for the six month period ended 30 June
2002
"Kidderminster Property" The freehold property at Duke Place, Churchfields, Kidderminster and also
known as land and buildings on the east side of Clensmore Street,
Kidderminster
"Low & Bonar " Low & Bonar PLC
"Modulus Flooring Systems" Modulus Flooring Systems Limited
"Ordinary Shares" Ordinary Shares of 5p each in the share capital of Gaskell
"Property Disposal The conditional agreement dated 27January 2002 between (1) Tomkinsons, (2)
Agreement" Gaskell, (3) Lescren Holdings Limited and (4) Lousada plc.
"Shareholders" The holders of Ordinary Shares
"Stoddard" Stoddard International plc
"Tile Disposal Agreement and The conditional agreement dated 27 January 2003 between, inter alia, (1)
Arrangements" Gaskell and (2) Low & Bonar
"Tomkinsons" Tomkinsons Carpets Limited
"Valuation Report" Valuation report on the Kidderminster Property prepared by Matthews & Goodman
This information is provided by RNS
The company news service from the London Stock Exchange
END
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