Acquisitions

RNS Number : 7965F

CEPS PLC

11 March 2020

 

CEPS PLC

 ("CEPS" or the "Company")

Acquisition by Hickton Group Limited of Cook Brown Building Control Limited and Cook Brown Energy Limited

The Board of CEPS is pleased to announce that it has today completed the acquisition of Cook Brown Building Control Limited ("CBBC") and Cook Brown Energy Limited ("CBE") (the "Acquisitions").

CBBC is a leading provider of building control services in England, operating from its Bristol Head Office, with additional facilities in London, Birmingham, Leeds and Tewkesbury. The owners of CBBC are driven by improving standards across UK construction and it is expected that the service provision moving forward will be incremental to the services provided by BRCS and complementary to the clerk of works, quality assurance, role performed by Hickton Consultants Limited ("HCL") which are in turn, wholly-owned by Hickton Holdings Limited ("HHL"). CBBC commenced trading in 2014 and has enjoyed rapid growth since that time. CBE was under common ownership, and is a much more recently established business, providing a range of energy consultancy services.

CBBC and CBE are each profitable, cash generative and have enjoyed consistent performance of sales and EBITDA over recent years. Based on unaudited management accounts for the year ended 31 December 2019, combined sales were £3,135,313 and underlying EBITDA was £552,000. CBBC's unaudited filed accounts for the year ended 31 December 2018 reported sales of £1,692,836 and profit before tax of £7,719. Net assets were £7,720. CBE's unaudited filed accounts for the period from commencement of trading on 19 October 2017 to 31 December 2018 were abbreviated and did not include an income statement. Net liabilities at 31 December 2018 were £21,684.

The vendors of CBBC and CBE are James Cook and Matthew Brown. The combined consideration for the Acquisitions is £3,530,445 and comprises a cash payment on completion of £1,870,445 plus a further £760,000 of 5% fixed rate loan notes to be paid in equal instalments over the next three years and a further £875,000 of 8% fixed rate loan notes also payable in equal instalments in years 4 to 6 following completion. In addition, the vendors of CBBC and CBE are being issued £25,000 of shares in Hickton Group Limited ("HGL"), a new sub-holding company formed by CEPS to own all of the Group's building service companies comprising CBBC, CBE, HCL and BRCS. The vendors are providing the usual warranties and indemnities.

The combined Cook Brown businesses have been on a rapid growth path, and the 2019 underlying profits are expected to be more representative of the future incremental earnings being acquired. The earnings multiple, having adjusted for free cash being acquired, is believed to be attractive compared to recent transactions in the building control sector.

The Acquisitions are being funded from existing cash resources within HHL and CBBC, supplemented by a new £2,000,000 term loan bank facility provided to Hickton Group Limited.

James Cook and Matthew Brown will remain in their roles, as well as assuming executive responsibility for the existing Corporate Approved Inspector business within HHL and BRCS. They will work alongside the current HHL Managing Director, Tony Mobbs, and newly appointed Finance Director, Janet Pryke, as the new HGL leadership team.

No further investment is expected to be required from CEPS to undertake these transactions. CEPS' equity holding in HGL moves to 54.7%, from its previous 52.4% stake in HHL.

The Acquisitions fit with HGL's strategy of broadening its service offering into complementary areas, working with management who are committed to developing their business further. It is expected that each group company will benefit from the relationship moving forward.  The Directors of CEPS believe that the Acquisitions will be a valuable addition to the CEPS group of companies.

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

Enquiries

CEPS PLC Vivien Langford, Group Finance Director	[phone]
Cairn Financial Advisers LLP Tony Rawlinson / James Caithie Ludovico Lazzaretti	[phone]

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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