Company Announcements

7 October 2019

CEPS PLC

 ("CEPS" or the "Company")

Acquisition by Signature Fabrics Limited of Milano International Limited, trading as Milano-Pro Sport

CEPS announces that its subsidiary company, Signature Fabrics Limited ("Signature"), has acquired 90 per cent of the issued share capital of a newly incorporated company, Milano International Holdings Limited ("MIHL"), which has been formed to acquire 100 per cent of the issued share capital of Milano International Limited ("Milano"), trading as Milano Pro Sport, for a consideration of £1,850,000.  The vendors, founders and shareholders of Milano, Paul Pendergest and Lesley Pendergest ("Vendors"), will hold 10 per cent of the issued share capital in MIHL.  The transaction was completed on 4 October 2019. 

Milano was established in 1996 and is based in Preston, Lancashire.  The company is one of the leading providers in the design and manufacture of athletic and gymnastic leotards and costumes. 

David Kaitiff, founder and Managing Director of Friedman's Limited ("Friedman's"), the trading company of Signature, will be the Chief Executive Officer of Milano and Neil Fox, Managing Director of Milano, will remain in his position.  Paul Pendergest will be acting as a consultant to Milano.

Milano is profitable and cash generative.  In the year ended 31 May 2018, Milano's unaudited accounts show sales were £1,683,570, EBITDA was £110,462 and profit before taxation was £92,881.  EBITDA reflects significant one-off costs to the business during that reporting period.  At 31 May 2018, net assets were £288,408.  Trading performance and net assets of Milano for the year to 31 May 2019 have been in line with management's expectations for the period.

The acquisition of Milano fits with Friedman's strategy of broadening its service offering into complementary areas, working with a management team that is committed to developing the business further. It is expected that both businesses will benefit from the relationship moving forward. 

The Directors of CEPS believe that the acquisition of Milano by Signature will be a valuable addition to CEPS.

The consideration for the acquisition of Milano was funded jointly by CEPS (£1,000,000) and Friedman's (£700,000).  The Vendors' total consideration of £1,850,000 was made up of £1,580,000 cash at completion and, in addition, MIHL issued £160,000 of Vendor Loan Notes, £100,000 of Shareholder Loan Notes and 10,000 ordinary shares issued at a price of £1 per share. The Vendors have provided CEPS with appropriate warranties and indemnities.

Third party loan and related party transaction

CEPS has taken out a loan from a third party for £2,000,000 ("Loan"), part of which will be used to fund the acquisition of Milano.  The Loan Agreement was entered into on 18 September 2019 in advance of the acquisition, and carries interest at an annual rate of 10 per cent. accruing daily and payable in arrears on 31 March, 30 June, 30 September and 31 December. The Loan is repayable on or before 31 October 2020 and may be repaid in one or more instalments after 30 June 2020.

CEPS' obligations in respect of the Loan have been guaranteed by Mr David Horner, a director of the Company as the provision of the guarantee is considered to be a related party transaction under AIM Rule 13. Mr Horner is not receiving any benefit from the provision of the guarantee.

The independent directors consider, having consulted with Cairn Financial Advisers LLP, the Company's Nominated Adviser, that the terms of the guarantee are fair and reasonable insofar as the Company's shareholders are concerned.

The announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

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