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CEPS PLC - Merger of Davies Odell with Vale Brothers

RNS Number : 1548J
18 December 2020

18 December 2020






("CEPS" or the "Company")



Merger of Davies Odell with Vale Brothers

The Board of CEPS is pleased to announce that its subsidiary company, Davies Odell Limited ("Davies Odell"), has undertaken a merger with Vale Brothers Limited ("Vale Brothers").  This merger has been achieved by the incorporation of a new company, Vale Brothers Holdings Limited ("VBH"), which has acquired 100% of the share capital of both Davies Odell and Vale Brothers.

Davies Odell has of late been loss-making and despite much effort and investment has been unable, to date, to move into sustained profitability.

Vale Brothers is larger in terms of turnover than Davies Odell (for the year ending 31 December 2019 turnover was £4.6m and £3.6m respectively) and manufactures and supplies a range of branded products for the equestrian market. In this respect there is an interesting overlap with Davies Odell which has a complementary range of products addressing the same markets.

As at 31 December 2019, the unaudited accounts of Vale Brothers showed net assets of £577,000 with a loss before tax of £263,000 for the year ending 31 December 2019. As at 30 June 2020, the unaudited management accounts of Vale Brothers showed net assets of £373,000. In comparison, as at 31 December 2019, Davies Odell had audited net assets of £551,000 (adjusted for the write-back of the intercompany balance with CEPS) with a loss before tax of £184,000 for the year ending 31 December 2019.  As at 30 June 2020, the unaudited management accounts of Davies Odell showed net assets of £445,000 (adjusted for the writeback of the intercompany balance with CEPS).

Andrew Gregory, the Managing Director of Davies Odell, is leaving the business to facilitate the merger, but has entered into a two-month part-time consultancy role from 1 January 2021 to facilitate an orderly handover.  A component part of the arrangements to rationalise the senior management team include the acquisition by CEPS of the 15% of the share capital of Davies Odell owned by Andrew Gregory for £100,000, following which CEPS owns 100% of the share capital of Davies Odell. Further to the announcement of 5 November 2020, Andrew Gregory also repaid his outstanding loan and associated legal costs with Davies Odell.  Immediately following the acquisition of the 15% minority shareholding in Davies Odell by CEPS, in a share for share exchange VBH issued 67,000 ordinary shares (67%) and £800,000 of loan stock to the shareholders of Vale Brothers in exchange for 100% of Vale Brothers and 33,000 ordinary shares (33%) and £405,000 of loan stock to CEPS in exchange for 100% of Davies Odell. The loan stock bears a coupon of 3%.  From completion, Davies Odell is, therefore, no longer treated as a subsidiary of the Company, but is part of VBH which is to be treated as an associate of the Company. David Horner, Chairman of CEPS, will become a director of VBH representing CEPS' interests.

The Directors believe that there will be a number of economies of scale which can be achieved by combining Davies Odell with Vale Brothers as well as the potential for development of new products marketed by the enlarged sales team.  In addition, the shareholders of VBH are firmly of the view that opportunities will materialise in the medium term to consolidate the market segments in which it operates.  

The purchase by CEPS of the 15% minority shareholding in Davies Odell from Andrew Gregory and repayment by him of the loan and associated legal costs as well as the entering into of a consultancy agreement for two months as detailed above is deemed to be a Related Party Transaction pursuant to AIM Rule 13 (the "Transaction"), as the Transaction is with a subsidiary company director.  The directors of the Company who are considered independent for the purposes of the Transaction (being the whole Board), having consulted with the Company's nominated adviser, Cairn Financial Advisers LLP, consider that the terms of the Transaction are fair and reasonable insofar as the Company's shareholders are concerned.


As an addition to this announcement, it is important, and useful, to note that the merger of Davies Odell with Vale Brothers has completed the recent restructuring of the CEPS Group which commenced in October 2019 with the purchase by the now 55% owned Signature Fabrics Limited (which operates through its 100% owned subsidiary Friedman's Limited) of 90% of Milano International Limited through wholly owned Milano International Holdings Limited (a company set up specifically to acquire Milano International Limited). Milano International Limited is a manufacturer of lycra garments and, in particular, branded gymnastic leotards. 


This was followed, in January 2020, by the removal of the CEM group of companies and Travelfast Limited (trading as Sampling International) by way of administration. 


In March 2020, Hickton Group Limited (now owned as to 54.7% by the Company) was set up to acquire 100% of Hickton Holdings Limited, 100% of Cook Brown Building Control Limited and 100% of Cook Brown Energy Limited. These acquisitions were of key strategic import to the Company.  Hickton Group Limited also holds 100% of Hickton Holdings Limited, which in turn holds 100% of Hickton Consultants Limited which in turn holds 100% of BRCS (Building Control) Limited.


In October 2020, CEPS formed Aford Awards Group Holdings Limited (now a 75% subsidiary of the Company), to facilitate the purchase of CEPS' then 70% owned subsidiary Aford Awards (Holdings) Limited, which held 100% of Aford Awards Limited, in order to change the senior management team, issue them with loan notes and shares and increase the shareholding in Aford Award (Holdings) Limited to the now 100%.  The new management team remains highly motivated and incentivised to develop this area of the business.


The Directors believe that the merger, as set out above, of Davies Odell with Vale Brothers will produce significantly better results than Davies Odell has done historically on its own.


As a result of the restructuring, the CEPS Group now comprises three subsidiaries, and an associate stake in a business, which the Directors believe is positioned for improved results.


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


The Directors of the Company accept responsibility for the content of this announcement





David Horner, Chairman


+44 1225 483030


Cairn Financial Advisers LLP

James Caithie / Sandy Jamieson / Ludovico Lazzaretti


+44 20 7213 0880



Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect", ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.


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