TIDMGRA
RNS Number : 1842L
Grafenia plc
17 July 2017
This announcement contains information which, prior to its
disclosure, was considered inside information for the purposes of
Article 7 of Regulation (EU) No 596/2014 (MAR).
Grafenia plc
("Grafenia", the "Group" or "Company")
Earnings Enhancing Acquisition of Image Everything Limited
("Image")
Grafenia plc (AIM: GRA) is pleased to announce that it has
acquired the entire share capital of Image Everything Limited, a
leading large format sign manufacturer and exhibition contractor.
The vendors (Neil Cousins, John Fitzgerald and David Brunt) will
remain with Image, leading the team and further developing the
business as part of Grafenia. There are no changes to the board of
Grafenia plc.
The total consideration, to be satisfied in cash and loan notes,
will be up to GBP3.0m. The acquisition is cash flow generative and,
once fully integrated, is expected to be earnings enhancing
The initial consideration, paid on completion, comprises cash of
GBP1.15m, together with vendor loan notes of GBP1.25m (together the
"Initial Consideration"). A further GBP0.6m is payable contingent
upon the achievement of certain targets relating to the future
financial performance of Image (the "Earn-out"). Further
information on the terms of the acquisition is set out below.
About Image
Image is based in Manchester, England and was founded in 1998.
It currently has 41 employees. The Company provides clients with
merchandising, retail graphics, site branding, signage, promotional
advertising and exhibition solutions.
Over the past fifteen years, Image has invested in state of the
art digital print and finishing equipment to remain at the
forefront of the large format printing and display market. It
offers a wide variety of products and services, promoted in an
industry leading 'Definitive Buyers' Guide. This covers simple
banners and pop ups, to full building wraps (even going as big as a
castle), fleet vehicle wrapping, stadium branding and nationwide
sign roll-out projects. Clients range from independent businesses
and SMEs to blue-chip household names, such as Manchester City
Football Club, English Rugby and Center Parcs. Image provides a
'full service' package for clients, with conceptual design,
detailed project planning, site survey, manufacture and national
installation.
The business operates from a 60,000 sq ft facility near the
Trafford Centre in Manchester. Inside, there's state-of-the-art
large format digital printing and finishing equipment, alongside
traditional disciplines, such as precision joinery, in-house
painting and steel fabrication. Image has created a highly
professional work environment, which underpins its everyday
commitment to exceptional customer service and design
innovation.
In the year ended 31 May 2016 Image delivered revenue of
GBP4.81m, a profit before tax of GBP0.43m, and closing net assets
of GBP0.23m. The unaudited management accounts for year ended 31
May 2017 reported revenue in excess of GBP5.53m and profit before
tax of GBP0.59m, with net assets being unchanged. Image has started
the new year with a strong order book.
Acquisition Rationale
The graphics market has converged. Sign businesses sell print,
web designers sell signs and printers sell websites. In this
converged marketplace, we aim to extend the range of signage
services we sell through our Nettl and printing.com networks. We
want to help clients fulfil more of their display, exhibition and
signage needs.
The acquisition of Image, given its size, is a significant
further step in our sign roll-up strategy. It enables us to scale
our business more quickly.
Image provides a complementary range of products to those we
already make. The acquisition adds additional manufacturing
facilities and capability. There's limited overlap and the
acquisition will provide cross-selling opportunities for the
enlarged Group. Our aim is to reliably deliver more of what clients
need, from within our supply chain.
The management team of Image has established and developed a
business with a strong reputation for reliable customer service. By
joining the Grafenia Group and exploiting opportunities within the
network, the Board believes it can assist Image to grow to the next
level.
Given the geographic proximity to our main production facility,
there could be an opportunity in the future to combine our
manufacturing.
Terms of the Acquisition
The GBP1.15m cash element of the Initial Consideration is being
funded from a combination of existing cash resources and GBP0.9m of
asset finance facilities from Close Brothers Limited, provided by
way of a sale and leaseback of certain fixed assets of the enlarged
Group.
The vendor loan notes of GBP1.25m are repayable in monthly
instalments over a period of approximately 2 years.
The Earn-out of up to GBP0.6m will be satisfied in cash, if
payable, and comprises:
-- GBP0.2m dependent on Image achieving certain earnings targets
for the 12 months following acquisition; and
-- GBP0.4m dependent on Image achieving certain earnings targets for the subsequent 12 months.
Peter Gunning, CEO of Grafenia, commented: "Neil, John, Dave and
the team have built a great business together. When we shared our
sign roll-up plans with them, there was a natural click. It's
refreshing to meet a team with the same determination to deliver
reliable service to clients. They truly centre their entire
business around their clients and doing whatever it takes, no
matter how tricky, to get the job done.
When we first met, it was immediately obvious that the culture
at Image is similar to Grafenia's. The more we've got to know the
people, the clearer cultural alignment we've found.
Despite us being in the same neighbourhood and same market,
there's hardly any overlap in the products we currently make and
sell to our clients. It just makes sense to combine our two
businesses and present clients with a more joined-up
experience.
Image's size means we have instant capacity to scale our signs
business and centrally produce a new range of signage and display
products.
In turn, this makes our Nettl partner offering more compelling.
It moves us closer to our aim of developing Nettl into the leading
network of web, print and sign studios in the UK and further
afield."
Neil Cousins, joint founder of Image, said: "The UK has huge
potential for brand development across all sectors. Our vision is
to supply a full range of commercial support products and services,
from websites to commercial signage, and everything in-between, to
satisfy that need.
Joining forces with Grafenia is an organic fit and provides us
with the catalyst to reach more customers, with more solutions, at
a much faster pace.
Grafenia's vision for a nationwide network of Nettl studios was
exciting to us and we see a unique opportunity and a moment in time
to scale and develop something truly special together".
For further information:
Grafenia plc
Peter Gunning (CEO) 07973 191 632
Alan Roberts (Finance
Director) 0161 848 5713
N+1 Singer (Nominated
Adviser)
Richard Lindley / James
White 0207 496 3000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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