Disposal
April 22 2005 - 3:02AM
UK Regulatory
RNS Number:3917L
Birse Group PLC
22 April 2005
For Immediate Release 22 April 2005
Birse Group plc
Proposed disposal of the business and certain assets of The Cabin Company for
#6.25m
Birse Group plc ("Birse") announces that Birse and The Cabin Company Limited
("The Cabin Company"), a wholly owned subsidiary of Birse, have entered into a
conditional agreement for the disposal of the business and certain assets of The
Cabin Company to Speedy Space Limited ("Speedy Space"), a subsidiary of Speedy
Hire Plc ("Speedy") for a total consideration of #6.25 million payable in cash
on Completion.
Key points:
* Disposal of the business and certain assets of The Cabin Company,
which provides temporary site accommodation hire services, to Speedy Space
* Total consideration of #6.25 million payable in cash on Completion
* Net proceeds of #5.3 million to be used primarily to repay Group debt
* Disposal of this non-core activity will allow Birse to focus on its
growth operations in civil and process engineering and heavy plant hire
* Net assets the subject of the Disposal estimated at completion of
#4.6 million, with Birse to retain all cash and debtor and creditor balances
* Birse and Speedy to enter into a five year services agreement for
the supply of temporary site accommodation and storage services to the sites
of Birse and its subsidiaries
* Disposal is conditional upon Shareholder approval which will be
sought at an extraordinary general meeting to be convened
Commenting on the Disposal, Peter Watson, Executive Chairman said:
"As part of the Group's strategy, the Board has decided that The Cabin Company
is no longer core to the Group. The successful expansion of The Cabin Company
into third party contracts, which now accounts for approximately 45% of The
Cabin Company's turnover, leaves the business well placed for further expansion
under the ownership of a dedicated supplier of temporary site accommodation hire
services. The Disposal will realise value for and reduce the net indebtedness
of the Group and allow management to concentrate its resources on the continued
development of the Group's civil and process engineering operations and heavy
plant hire. The Board believes that the Disposal is in the best interests of
the Group and unanimously recommends that Shareholders vote in favour of the
Disposal."
Enquiries:
Birse Group plc Telephone: 01302 768 078
Peter Watson, Executive Chairman
Martin Budden, Group Managing Director
N M Rothschild & Sons Limited Telephone: 0113 200 1900
David Wilton
Stephen Griffiths
Financial Dynamics Telephone: 020 7831 3113
Sally Lewis
N M Rothschild & Sons Limited, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively for Birse and
no one else in connection with the Disposal and will not be responsible to
anyone other than Birse for providing the protections afforded to its customers
or for giving advice in relation to the Disposal.
Proposed disposal of the business and certain assets of The Cabin Company for
#6.25m
Introduction
Birse Group plc ("Birse") announces that Birse and The Cabin Company have
entered into a conditional agreement for the disposal of the business and
certain assets of The Cabin Company to Speedy Space for a consideration of #6.25
million payable in cash on Completion. In addition, on Completion, Birse will
enter into the Services Agreement. Further details of the Disposal, the Sale
Agreement and the Services Agreement will be set out in the Circular which will
be posted to Shareholders shortly.
In view of its size, the Disposal is conditional upon the approval of
Shareholders. This approval will be sought at the Extraordinary General Meeting,
notice of which will be set out in the Circular.
Background to and reasons for the Disposal
The Group's strategy is to focus on its core civil and process engineering
activities, including its rail infrastructure and heavy crane hire operations,
whilst reducing the scale of Birse Build to specialise in the local education
authority sector in the North of England. Accordingly, The Cabin Company is no
longer viewed as a core operation. The strong growth in third party contracts
within The Cabin Company highlights an opportunity for the Business to be
further developed under the ownership of a specialist provider of temporary site
accommodation hire services. In this context, the Board believes that the
Disposal will enable the Group to realise value for the Business from its sale
to a buyer that is focused on developing its future potential, whilst also
allowing Birse to reduce the indebtedness of the Continuing Group.
Information on The Cabin Company
The Cabin Company is a wholly owned subsidiary of Birse. The business was
established in 2001 for the purpose of acquiring the temporary site
accommodation hire services operations previously provided from within Birse
Construction. This created a clearer operational structure and also allowed and
encouraged the development of increased sales to external customers. This
development has proved to be successful and The Cabin Company now operates a
hire fleet of approximately 950 temporary site accommodation units and provides
related services, including installation and security, both to Birse and
external customers.
The turnover attributable to The Cabin Company for the year ended 30 April 2004
was #4.8 million (of which approximately 44 per cent. was attributable to third
party customers) (2003: #4.7 million, 23 per cent.). The profit before tax
attributable to The Cabin Company for the year ended 30 April 2004 was #0.6
million (2003: #1.5 million). The turnover and profit before tax attributable to
The Cabin Company for the six months ended 31 October 2004 was #2.6 million and
#0.4 million respectively.
Financial effects of the Disposal
As at 31 October 2004, the Business had net assets with a book value of
approximately #4.6 million that will be disposed of under the terms of the
Disposal. The gross consideration to be received by Birse, before the payment of
tax and transaction expenses and the repayment of asset backed financing, will
be #6.25 million. In addition, the Group will retain approximately #0.3 million
of working capital that is not part of the Disposal. As a result of the
Disposal, the net assets of the Continuing Group are expected to increase by
approximately #0.5 million on Completion.
Principal terms of the Disposal
Under the terms of the Sale Agreement, The Cabin Company has conditionally
agreed to dispose of the Business, which is comprised of all fixed assets and
stock, for a consideration of #6.25 million payable in cash, on Completion. On
completion, #0.3 million is to be placed into a retention account and will be
released following verification of the existence and condition of the fixed
assets. The Continuing Group will retain all cash and debt and creditor
balances. The debtor and creditor balances to be retained by Birse are not
required for the ongoing operation of the Continuing Group. The Directors
estimate that as this working capital is collected over the coming months, an
additional net cash inflow to Birse of approximately #0.3 million will result.
Pursuant to the Sale Agreement, Birse will enter into the Services Agreement for
the continued supply of temporary site accommodation hire services to certain
subsidiaries of Birse by Speedy Space. Further details of the Sale Agreement
and the Services Agreement will be set out in the Circular.
Completion of the Sale Agreement is conditional upon the Disposal being approved
by Shareholders at the EGM.
Use of proceeds
Gross proceeds from the Disposal will be #6.25 million before the payment of tax
and transaction expenses. Net proceeds, after charging these costs, are expected
to be in the region of #5.3 million.
The net proceeds of the Disposal will be used to reduce bank loans, overdrafts
and asset finance leases by #4.3 million and increase current asset investments
by #1.0 million, being bank deposits with a maturity exceeding seven days.
Current trading and prospects
It is important that any commentary on the Continuing Group's current trading
and prospects is considered against the background of the Citibank Litigation
and the reorganisation of Birse Build.
The Group announced its interim results for the six months ended 31 October 2004
on 17 December 2004. The interim results included the following commentary on
the Citibank Litigation:
"In the Group's 2003/2004 Annual Report we provided the background to this
litigation which has evolved from an adjudication process which the adjudicator
determined on 24 February 2004. The details of that adjudicator's decision were
published by way of a Stock Exchange announcement at start of business on 25
February 2004. That announcement also stated that the adjudicator's decision was
open to challenge but only by reference to arbitration or litigation.
In last year's Annual Report we disclosed that such a challenge had been lodged
with The Technology and Construction Court. Since that time the litigation
process has continued to be managed by that Court. A final hearing is still
expected in the 2005/2006 financial year with a decision thereafter".
Since 17 December 2004, the Group has been informed that a final hearing will
commence in October 2005 with a decision thereafter. The Directors have been
advised that the Group has realistic prospects in the litigation of reducing the
award of #2.1 million made by the adjudicator in the adjudication.
The high cost associated with the extremely complex Citibank Litigation is one
of the reasons for the Directors' preferred option to secure a negotiated full
and final settlement. Whilst a professional dialogue continues between Citibank
and the Group, attempts to reach a solution have so far failed. It is important
therefore that the Directors continue to take action that they consider best
protects the position of the Group. Further details of the Citibank Litigation
will be set out in the Circular.
Birse Build, which is now focused on the local education authority sector in the
North of England, continues to progress in line with the Directors'
expectations. However, as described in the Group's interim results referred to
above, because of the costs associated with the reorganisation of Birse Build
combined with the work out to completion of low margin and other legacy
contracts in the Midlands and the South, Birse Build would continue to incur
material losses in 2004 / 2005. With regard to the wind down of certain
contracts in the Midlands and the South, of the three live contracts remaining
only one is expected to continue to any material extent beyond the current
financial year. Thereafter, the focus on these and other contracts completed
over the recent years, will switch from operational closure to commercial
closure. Until these legacy issues are resolved there is uncertainty for the
Group in relation to the performance of Birse Build.
With regard to the Civil Division and the Process Engineering Division, the
expected increase in opportunities for the second half and thereafter, have
materialised. However, given the concentration of contract start-ups in this
period, the result for the current year is particularly sensitive to the volume
of production output that can be achieved in this last quarter. The Civil
Division order book was further enhanced by two framework awards confirmed by
Network Rail on 22 February 2005. Network Rail announced that Birse Rail had
been awarded two five year Framework Contracts, one in relation to its existing
arrangements in the Midlands, the other, a new appointment in the North West.
Both contracts commenced on 1 April 2005 and Network Rail has projected a
combined turnover of #45 million in the first year of operation.
BPH Equipment has accelerated the concentration of its crane fleet on hydraulic
equipment and has, in effect, traded with a reduced operational and capital base
compared with prior periods. Having a smaller fleet focusing on fewer market
sectors can make the business susceptible to short term downward fluctuations in
its customers' activity levels. Turnover in the third quarter was therefore
below expectations although there are some signs of a recovery by the end of the
current financial year.
In line with established seasonal patterns and the concentration of contract
start ups in the Civil Division and the Process Engineering Division, the
Group's net indebtedness has increased from the #8.8 million at 31 October 2004
as reported in the Group's interim results for the six months ended 31 October
2004. At 31 March 2005 (being the latest practicable date prior to the release
of this announcement) the Group's net indebtedness was #18.4 million, as
extracted from the Group's underlying accounting records without material
adjustment, which represents an increase of #9.6 million. In the corresponding
period of the preceding financial year, the Group's net indebtedness, as
extracted from the Group's underlying accounting records, increased by #23.1
million from a net cash position of #11.9 million as at 31 October 2003, to net
indebtedness of #11.2 million as at 31 March 2004.
As referred to above, prospects for the current financial year are sensitive to
the volumes of production achieved by the Civil Division and the Process
Engineering Division in the last quarter and will be affected by the shortfall
in BPH Equipment's turnover in the second half. However, with record order book
and enquiry levels in its core operations, the quality of recent contract wins
and taking into account the Disposal, the Directors believe that the Continuing
Group can maintain its forward momentum, whilst the Directors continue to pursue
a satisfactory conclusion to the Citibank Litigation.
DEFINITIONS
The following definitions apply throughout this announcement unless the context
otherwise requires:
"Birse" or "Company" Birse Group plc;
"Birse Build" Birse Build Limited, a subsidiary of Birse Construction;
"Birse Civils" Birse Civils Limited, a subsidiary of Birse Construction;
"Birse Construction" Birse Construction Limited, a subsidiary of Birse;
"Birse Group" or " the Company and its subsidiaries;
Group"
"Birse Process Birse Process Engineering Limited, a subsidiary of Birse Construction;
Engineering"
"Birse Metro" Birse Metro Limited, a subsidiary of Birse Construction;
"Birse Rail" Birse Rail Limited, a subsidiary of Birse Construction;
"Birse Water" Birse Water Limited, a subsidiary of Birse Construction;
"Board" or
"Directors" the board of directors of the Company and "Director" shall mean any one of them;
"BPH Equipment" BPH Equipment Limited, a subsidiary of Birse;
"Business" the business and certain assets of The Cabin Company;
"Circular" the circular to Shareholders describing the Disposal which is expected to be sent to Shareholders
shortly;
"Citibank Litigation" the process of litigation with CIB Properties Limited (a Citibank group company) arising from the
adjudication relating to the termination of the contract for construction services for a new data
centre facility at Riverdale, Lewisham;
"Civil Division" Birse Rail, Birse Civils and Birse Metro;
"Completion" completion of the Disposal pursuant to the Sale Agreement;
"Continuing Group" the Birse Group following Completion;
"Disposal" the proposed disposal of the business and certain assets of The Cabin Company pursuant to the Sale
Agreement;
"Extraordinary the extraordinary general meeting of the Company, notice of which will be set out in the Circular;
General Meeting" or
"EGM"
"Framework Contracts" 5 year contracts awarded by Network Rail for certain civil engineering works relating to its rail
infrastructure assets;
"FSA" or "Financial the Financial Services Authority;
Services Authority"
"Network Rail" a publicly funded body responsible for the UK's rail infrastructure;
"Ordinary Shares" ordinary shares of 10 pence each in the capital of the Company;
"Process Engineering Birse Water and Birse Process Engineering;
Division"
"Rothschild" N M Rothschild & Sons Limited, which is authorised and regulated by the FSA;
"Sale Agreement" the conditional agreement dated 21 April 2005 between The Cabin Company, Birse, Speedy Space and
Speedy relating to the Disposal;
"Services Agreement" the letter of agreement to be entered into on Completion between Birse, certain subsidiaries of
Birse and Speedy Space relating to the supply of services by Speedy Space to Birse and certain
subsidiaries of Birse;
"Shareholders" holders of Ordinary Shares;
"Speedy" Speedy Hire Plc;
"Speedy Space" Speedy Space Limited, a subsidiary of Speedy;
"The Cabin Company" The Cabin Company Limited, a subsidiary of Birse;
"The Technology and The Technology and Construction Court of the High Court of Justice.
Construction Court"
This information is provided by RNS
The company news service from the London Stock Exchange
END
DISSEMSMESISEDL
Birse (LSE:BIE)
Historical Stock Chart
From Apr 2024 to May 2024
Birse (LSE:BIE)
Historical Stock Chart
From May 2023 to May 2024
