TOMKINSONS PLC
2 September 1999
PART 1
Not for release, publication or distribution in, into or from
the US, Canada, Australia or Japan
Gaskell PLC
£12m recommended offer by N M Rothschild & Sons Limited
for Tomkinsons plc
and Gaskell's Interim Statement for the half year ended 2 July
1999
The boards of Gaskell and Tomkinsons announce the terms
of a £12.2 million recommended offer, to be made by Rothschild
on behalf of Gaskell, to acquire the whole of the issued and
to be issued share capital of Tomkinsons.
The Offer values each Tomkinsons Share at 180p and the
whole of the existing issued share capital of Tomkinsons at
approximately £11.7m based on a Closing Price of 116.5p per
Gaskell Share on 1 September 1999 (the latest practicable date
before this announcement).
The Offer is being made on the basis of 20 Offer Shares
and £29 in cash for every 29 Tomkinsons Shares. The Offer
includes a Mix and Match Election and a Loan Note Alternative
for the cash element.
The Offer represents a premium of approximately 19 per
cent. to the average Closing Price of a Tomkinsons Share of
150.8p for the 30 business days prior to 8 March 1999 (the day
prior to the announcement by the board of Tomkinsons that it
was in discussions which may or may not lead to an offer for
Tomkinsons) and a premium of 10 per cent. to the Closing Price
of 163.5p per Tomkinsons Share on 8 March 1999.
Gaskell has received irrevocable undertakings and
statements of intention to accept the Offer from the directors
and certain other shareholders of Tomkinsons in respect of
3,649,926 Tomkinsons Shares in aggregate, representing
approximately 56.4 per cent. of Tomkinsons' issued share
capital.
Full acceptance of the Offer, assuming exercise of all
outstanding options under the Tomkinsons Share Option Schemes
which are exercisable upon the Offer becoming unconditional,
would result in the issue of up to 4,681,544 Offer Shares,
representing approximately 19 per cent. of the issued ordinary
share capital of Gaskell (as enlarged by the Acquisition and
assuming no exercise of options under the Gaskell Share Option
Scheme), and the payment of cash consideration of up to £6.8m
(assuming no Tomkinsons Shareholders take up the Loan Note
Alternative).
Gaskell today announces its results for the half year
ended 2 July 1999, further details of which are set out in
Part 2 of this document.
The Offer Shares to be issued pursuant to the Offer will
be issued credited as fully paid. They will rank pari passu
in all respects with the existing Ordinary Shares, including
the right to receive all dividends and other distributions
declared, made or paid on or after the date hereof, save that
they will not rank for the interim dividend of 1.4p per
Gaskell Share in respect of Gaskell's current financial year
which was announced today.
Upon the Offer becoming unconditional in all respects,
Michael Hield, the current Chief Executive of Tomkinsons, and
Lowry Maclean, Non-executive Chairman of Tomkinsons, will be
joining the board of the Enlarged Group as Chief Executive and
a Non-executive Director respectively.
Upon the Offer becoming unconditional in all respects,
Gary Stokes will become Managing Director of Tomkinsons, which
will then be a subsidiary of Gaskell, and Jeremy Lancaster
will resign from the board of Tomkinsons.
The Directors believe that expansion of the Group's
product range and the achievement of greater critical mass
through the acquisition of another leading player in the
carpet manufacturing industry will increase Gaskell's share of
certain key existing markets and facilitate the penetration of
new sectors and will thus be beneficial to the future
development of the Group.
The Directors believe that Tomkinsons is an extremely
good fit with Gaskell and that the Acquisition provides an
opportunity for Gaskell to take a significant step forward in
the continued expansion of its business.
The Offer is conditional, inter alia, on the approval of
Gaskell Shareholders at an Extraordinary General Meeting.
The board of Gaskell is being advised by N M Rothschild &
Sons Limited in relation to the Offer.
The board of Tomkinsons is being advised by KPMG
Corporate Finance in relation to the Offer.
This summary should be read in conjunction with the
attached full announcement of the Offer.
Enquiries:
Ted Andrew Lowry Maclean
Chairman Chairman
Richard Hopkin Mike Hield
Finance Director Chief Executive
Gaskell PLC Tomkinsons plc
Tel: 01282 778027 Tel: 01562-820006
Paul Simpson Charles Cattaneo
Roger Hemming Colin Graham
N M Rothschild & Sons KPMG Corporate Finance
Limited
Tel: 0161-827 3800 Tel: 0121-232 3000
Ian Hunter Andy Yeo
Citigate Dewe Rogerson Buchanan Communications
Tel: 0121-631 2299 Tel: 0171-466 5000
(i) This announcement does not constitute an offer or
invitation to purchase any securities.
(ii) The Offer Document will be posted in due course to
Tomkinsons Shareholders and, for information only, to
Gaskell Shareholders.
(iii)The full text of the conditions
and certain further terms of the Offer set out in
Appendix I form part of, and should be read with, this
announcement.
(iv) Appendix II contains definitions of the terms used in
this announcement.
(v) The making of the Offer and the availability of the Offer
Shares and Loan Notes to persons not resident in the
United Kingdom, or who are citizens, residents or
nationals of jurisdictions outside the United Kingdom, or
who are nominees of, or custodians or trustees for, any
such person may be affected by the laws of the relevant
overseas jurisdictions. Such persons should inform
themselves about and observe any applicable requirements.
(vi) The Offer will not be made, directly or indirectly, in or
into, or by use of the mails or any other means or
instrumentality (including, without limitation, facsimile
transmission, telex or telephone) of interstate or
foreign commerce of, or any facilities of a securities
exchange of, the US, or in or into Canada, Australia or
Japan and will not be capable of acceptance by any such
use, means, instrumentality or facilities or from within
the US, Canada, Australia or Japan. Accordingly, copies
of this announcement are not being mailed or otherwise
distributed or sent in or into or from the US, Canada,
Australia or Japan and persons receiving this
announcement (including custodians, nominees and
trustees) must not distribute or send it in, into or from
the US, Canada, Australia or Japan. Doing so may
invalidate any purported acceptance of the Offer.
(vii)N M Rothschild & Sons Limited,
which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting
exclusively for Gaskell PLC and no one else in connection
with the Offer and the other matters referred to herein
and will not be responsible to anyone other than Gaskell
PLC for providing the protections afforded to its
customers or for providing advice in relation to the
Offer and the other matters referred to herein.
(viii) KPMG Corporate Finance, a
division of KPMG which is authorised to carry on
investment business in the United Kingdom by the
Institute of Chartered Accountants in England and Wales,
is acting exclusively for Tomkinsons plc and no one else
in connection with the Offer and will not be responsible
to anyone other than Tomkinsons plc for providing the
protections afforded to its customers or for providing
advice in relation to the Offer.
(ix) N M Rothschild & Sons Limited has approved the contents
of this announcement as an investment advertisement
solely for the purpose of section 57 of the Financial
Services Act 1986.
Not for release, publication or distribution, in into or from
the US, Canada, Australia or Japan
Gaskell PLC
£12m recommended offer by N M Rothschild & Sons Limited
for Tomkinsons plc
and Gaskell's Interim Statement for the half year ended 2 July
1999
1. Introduction
The boards of Gaskell and Tomkinsons announce the terms
of a £12.2 million recommended offer, to be made by
Rothschild on behalf of Gaskell, to acquire the whole of
the issued and to be issued share capital of Tomkinsons.
The Offer values each Tomkinsons Share at 180p and the
whole of the existing issued share capital of Tomkinsons
at approximately £11.7 million, based on a Closing Price
of 116.5p per Gaskell Share on 1 September 1999 (the
latest practicable date before this announcement).
The Offer represents a premium of approximately 19 per
cent. to the average Closing Price of a Tomkinsons Share
of 150.8p for the 30 business days prior to 8 March 1999
(the day prior to the announcement by the board of
Tomkinsons that it was in discussions which may or may
not lead to an offer for Tomkinsons) and a premium of 10
per cent. to the Closing Price of 163.5p per Tomkinsons
Share on 8 March 1999.
Gaskell has received binding irrevocable undertakings to
accept the Offer from the directors and certain other
shareholders of Tomkinsons in respect of 201,443
Tomkinsons Shares in aggregate, representing
approximately 3.1 per cent. of Tomkinsons' issued share
capital. The terms of these irrevocable undertakings
require acceptance of the Offer even in the event of a
competing offer for Tomkinsons from a third party.
Certain other Tomkinsons Shareholders have given binding
irrevocable undertakings to accept the Offer in respect
of 1,355,576 and 922,907 Tomkinsons Shares, representing
approximately 20.9 and 14.3 per cent. respectively of
Tomkinsons' issued share capital. These undertakings
will cease to be binding in the event that a competing
offer is made which values each Tomkinsons Share at more
than 198p and 216p respectively.
Certain other Tomkinsons Shareholders have notified
Gaskell that it is their intention to accept the Offer in
respect of their holdings of Tomkinsons Shares, amounting
to 1,170,000 Tomkinsons Shares, representing 18.1 per
cent. in aggregate of Tomkinsons' issued share capital.
In total therefore, Gaskell has received irrevocable
undertakings and statements of intention to accept the
Offer in respect of 3,649,926 Tomkinsons Shares,
representing approximately 56.4 per cent. of Tomkinsons'
issued share capital.
The directors of Tomkinsons, who have been so advised by
KPMG Corporate Finance, consider the terms of the Offer
to be fair and reasonable so far as Tomkinsons
Shareholders are concerned. In providing advice to the
directors of Tomkinsons, KPMG Corporate Finance has taken
into account the commercial assessments of the directors
of Tomkinsons.
The directors of Tomkinsons have unanimously recommended
that Tomkinsons Shareholders accept the Offer, as they
have irrevocably undertaken to do in respect of their own
beneficial holdings amounting to 62,825 Tomkinsons Shares
(representing approximately 1.0 per cent. of the issued
share capital of Tomkinsons).
The board of Gaskell is being advised by Rothschild in
relation to the Offer.
Gaskell today announces its results for the half year
ended 2 July 1999, further details of which are set out
in Part 2 of this document.
2. The recommended offer
On behalf of Gaskell, Rothschild will offer to acquire
all of the Tomkinsons Shares, subject to the conditions
and on the terms set out in the Offer Document and the
Form of Acceptance, on the following basis:
20 Offer Shares and £29 in cash for every 29 Tomkinsons
Shares
and so in proportion for any other number of Tomkinsons
Shares held. The Offer includes the Mix and Match
Election, as detailed in paragraph 3 below, and a Loan
Note Alternative for the cash element, as detailed in
paragraph 4 below.
The Offer extends to all Tomkinsons Shares
unconditionally allotted or issued and fully paid on the
date of the Offer, together with any further such shares
which are unconditionally allotted or issued and fully
paid whilst the Offer remains open for acceptance (or
before such earlier date as Gaskell may, subject to the
City Code, decide), including any such shares which are
so unconditionally allotted or issued and fully paid
pursuant to the exercise of options outstanding under the
Tomkinsons Share Option Schemes.
Full acceptance of the Offer, assuming exercise of all
options under the Tomkinsons Share Option Schemes which
are exercisable upon the Offer becoming unconditional,
would result in the issue of up to 4,681,544 Offer
Shares, representing approximately 19 per cent. of the
issued ordinary share capital of Gaskell (as enlarged by
the Acquisition and assuming no exercise of options under
the Gaskell Share Option Scheme), and the payment of cash
consideration of up to £6.8 million (assuming no
Tomkinsons Shareholders take up the Loan Note
Alternative).
The Tomkinsons Shares will be acquired by Gaskell under
the Offer fully paid and free from all liens, equities,
charges, encumbrances, rights of pre-emption and other
third party rights or interests of any nature whatsoever
and together with all rights attaching thereto, including
the right to receive and retain all dividends and other
distributions declared, made or paid on or after 2
September 1999, being the date of this announcement.
The Offer Shares to be issued pursuant to the Offer will
be issued credited as fully paid and free from all liens,
equities, charges, encumbrances and other interests.
They will rank pari passu in all respects with the
existing Ordinary Shares, including the right to all
dividends and other distributions declared, made or paid
on or after 2 September 1999, being the date of this
announcement, save that they will not rank for the
interim dividend of 1.4p per Ordinary Share in respect of
Gaskell's current financial year which was announced
today and which will be paid to Shareholders on 22
October 1999.
Application will be made to the London Stock Exchange for
the Offer Shares to be admitted to the Official List.
3. The Mix and Match Election
Tomkinsons Shareholders who validly accept the Offer may
elect, subject to availability as specified below, to
vary the proportions in which they receive Offer Shares
and cash or Loan Notes in respect of their holdings of
Tomkinsons Shares. However, the maximum number of Offer
Shares to be issued under the Offer and the maximum
amount of cash consideration payable under the Offer will
not be varied as a result of elections made under the Mix
and Match Election. Accordingly, Gaskell's ability to
satisfy elections made under the Mix and Match Election
will be dependent upon the extent to which other
Tomkinsons Shareholders make offsetting elections. To
the extent that the elections cannot be satisfied in
full, they will be scaled down on a pro rata basis. To
the extent that the elections can be satisfied,
Tomkinsons Shareholders will receive Offer Shares instead
of cash and vice versa on the basis of a price of 116.5p
per Offer Share. As a result, Tomkinsons Shareholders
who make elections under the Mix and Match Election will
not necessarily know the exact number of Offer Shares or
the amount of cash they will receive until settlement of
the consideration under the Offer, although an
announcement will be made, when the Offer becomes or is
declared wholly unconditional, of the approximate extent
to which elections under the Mix and Match Election will
be satisfied.
Further details of the Mix and Match Election will be set
out in the Offer Document.
4. The Loan Note Alternative
Tomkinsons Shareholders who validly accept the Offer may
elect to receive Loan Notes instead of all or part of the
cash consideration to which they would otherwise be
entitled under the terms of the Offer on the following
basis:
for every £1 of cash consideration
£1 nominal of Loan Notes
The Loan Notes will be issued in amounts and integral
multiples of £1 nominal value and any fractional
entitlement will be disregarded. The Loan Notes will
bear interest at the rate of 1 per cent. per annum below
LIBOR payable half yearly in arrears on 1 April and 1
October in each year, with the first payment being due on
1 April 2000. They will be repayable at the option of
the noteholder on 1 October 2000 or on any subsequent
interest payment date, either in full or in integral
multiples of £10,000. Any outstanding Loan Notes will be
repaid in full on 1 October 2004. Payment of principal
(but not interest) under the Loan Notes will be
guaranteed by Barclays Bank PLC.
The Loan Notes will be transferable in integral multiples
of £1. No application will be made for the Loan Notes to
be listed or dealt in on any stock exchange. Teather &
Greenwood, Gaskell's stockbroker, has advised that, based
on market conditions as at 1 September 1999 they
estimate that the value of the Loan Notes, if they had
been in issue on that date, would have been not less than
98p per £1 of nominal value.
Further details of the Loan Note Alternative will be set
out in the Offer Document.
5. Background to and reasons for the Offer
Gaskell's strategy is to focus on those key market
sectors in which it believes it can achieve leadership,
to improve the quality of its assets and to generate a
continual improvement in shareholder value. The
Directors believe that expansion of the Group's product
range and achievement of greater critical mass through
the acquisition of another leading company in the UK
carpet manufacturing industry will increase its share of
certain key existing markets and facilitate the
penetration of new sectors and will thus be beneficial to
the future development of the Group.
In addition, the Acquisition is consistent with the
Board's strategy of developing a high quality business
supplying a broad range of floorcoverings into chosen
market sectors in which Gaskell is already, in the main,
well positioned. The Directors believe that the
Acquisition represents a step forward in the pursuit of
Gaskell's strategy and will create sustainable value for
Gaskell Shareholders because:
Tomkinsons' businesses are complementary to those of
Gaskell, both in terms of product ranges and markets served,
and represent an extremely good fit;
Tomkinsons' strength in its chosen residential markets
for textile floorcoverings will be combined with Gaskell's
strong position in the contract and commercial carpet markets;
the Acquisition will increase the Enlarged Group's
profile and presence in the UK floorcoverings marketplace;
duplications in administration, production and
distribution will be rationalised, reducing overhead costs and
releasing resources for reinvestment in growing the Enlarged
Group;
additional synergistic benefits will be gained from
increased scale, improved buying power, and the Enlarged
Group's ability to market a wider portfolio of brands; and
the acquisition of Tomkinsons will also provide Gaskell
with greater scope and strength with which to distribute its
products into continental European and other overseas markets.
Accordingly, the Directors believe that the Acquisition
is an extremely good fit with Gaskell and provides an
opportunity for it to take a significant step forward in
the continued expansion of its business, leaving it
better placed to play an active part in any future
consolidation of the floorcoverings sector.
The Board expects that, subject to the successful
integration of Tomkinsons and the achievement of
envisaged cost savings and synergies, the Acquisition
will enhance Gaskell's earnings per share, adjusted for
the effect of exceptional items, in the first full
financial year of ownership.
The foregoing statement should not be interpreted as
meaning that the future adjusted earnings per share of
the Enlarged Group, will necessarily match or exceed the
historic published earnings per share of Gaskell.
6. Financial effects of acceptance
The following table shows, for illustrative purposes
only, and on the bases and assumptions set out in the
notes below, the financial effects of acceptance of the
Offer on capital values and gross income for a holder of
1,000 Tomkinsons Shares, if the Offer becomes or is
declared unconditional in all respects:
(a) Capital value £
Market value of 690 Offer Shares(1) and cash 1,804
Less: Market value of 1,000 Tomkinsons Shares(2)1,635
________
Increase in capital value 169
________
Representing an increase of approximately 10.3%
(b) Gross income £
Gross dividend income from 690 Offer Shares(3) 34.50
Gross income from cash consideration(4) 54.00
________
Total gross income 88.50
Less: Gross dividend income from 1,000 Tomkinsons
Shares(5) 138.89
________
Decrease in gross income 50.39
________
Representing a decrease of approximately 36.3%
Notes:
(1) The market value of an Offer Share is based on
the Closing Price of 116.5p on 1 September
1999, being the business day prior to this
announcement.
(2) The market value of a Tomkinsons Share is based
on the Closing Price of 163.5p on 8 March 1999,
being the business day prior to the
announcement by the board of Tomkinsons that it
was in talks which may or may not lead to an
offer for Tomkinsons.
(3) The gross dividend income on Offer Shares is
based on the aggregate of (i) the final
dividend of 3.1p per Gaskell Share in respect
of the year ended 31 December 1998; and (ii)
the interim dividend of 1.4p per Gaskell Share
declared in respect of Gaskell's current
financial year, together, in each case, with an
associated tax credit of 10/90ths of the amount
paid.
(4) The gross income on cash consideration has been
calculated on the assumption that the cash is
reinvested to yield approximately 5.40 per
cent. per annum, being the FTSE Actuaries
average gross redemption yield for medium
coupon British Government securities of
maturities of 5 to 15 years on 1 September
1999, the last practicable date prior to this
announcement.
(5) The gross dividend income on Tomkinsons Shares
is based on the aggregate of (i) the final
dividend of 8.0p per Tomkinsons Share in
respect of the year ended 3 October 1998, and
(ii) the interim dividend of 3.5p per
Tomkinsons Share in respect of Tomkinsons'
current financial year, together with an
associated tax credit of 20/80ths of the amount
paid in respect of the final dividend and
10/90ths of the amount paid in respect of the
interim dividend.
(6) Save as referred to in notes 3 and 5 above, no
account has been taken of any liability to
taxation nor the treatment of fractions in
assessing the financial effects of acceptance
of the Offer.
(7) No account has been taken of elections for the
Loan Note Alternative or elections made under
the Mix and Match Election.
7. Information on Gaskell
Gaskell is involved in the manufacture, marketing and
distribution of carpets, carpet tiles, underlays and
other non-woven textiles. The Group employs over 700
people and operates from a total of seven sites,
primarily in the North West of England.
The Group, with almost 100 years of carpet manufacturing
experience, supplies a broad range of textile
floorcovering products including fibre-bonded, tufted and
Axminster ranges. Gaskell's products are predominantly
supplied to the contract and commercial markets in the UK
and internationally, with certain floorcoverings also
sold into the retail market.
For the half year ended 2 July 1999, Gaskell reported a
profit before taxation of £1.8 million (1998: £2.3
million) on turnover of £26.0 million (1998: £26.9
million), with earnings per share of 6.2p (1998: 8.0p as
restated following the Share Sub-division). The Board
has today declared an interim dividend of 1.4p per
Ordinary Share (1998: 1.2p as restated following the
Share Sub-division) in respect of Gaskell's current
financial year. The net assets of the Gaskell Group as
at 2 July 1999 were £18.7 million (1998: £16.4 million).
For the year ended 31 December 1998, Gaskell reported a
profit before taxation of £5.1 million (1997: £3.7
million) on turnover of £52.6 million (1997: £48.8
million), with earnings per share of 17.6p (1997: 12.9p
as restated following the Share Sub-division) and a final
dividend of 3.1p per Ordinary Share making 4.3p per
Ordinary Share for the full year (1997: 1.5p and 2.1p
respectively as restated following the Share Sub-
division). As at 31 December 1998, the Gaskell Group had
net assets of £17.7 million (1997: £15.0 million).
8. Information on Tomkinsons
Tomkinsons is involved in the manufacture and
distribution of carpets and natural floorcoverings to the
residential and commercial markets. Tomkinsons has been
established for 130 years and its shares were admitted to
the Official List of the London Stock Exchange in 1959.
Tomkinsons operates from three production sites in the
UK, employing approximately 470 people. Tomkinsons'
principal operations are as follows:-
Tomkinsons Carpets - a manufacturer of Axminster and
tufted carpets at Kidderminster, which are distributed mainly
to independent specialist carpet retailers;
Steeles Carpets - a distributor of Axminster, Wilton and
tufted carpets for supply into contract and export markets;
Crucial Trading - an importer and distributor of natural
fibre floorcoverings including jute, sisal, seagrass and coir;
and
Mid-Wales Yarns - a spinner of woollen and semi-worsted
yarns based in Powys, supplying the majority of Tomkinsons'
yarn requirements.
For the six months ended 3 April 1999, Tomkinsons
reported a profit before taxation of £855,000 (1998:
£962,000) on turnover of £14.4 million (1998: £14.9
million), with earnings per share of 9.2p (1998: 10.3p).
Tomkinsons has declared an interim dividend of 3.5p per
share (1998: 3.5p) in respect of its current financial
year and the net assets of the Tomkinsons Group as at 3
April 1999 were £17.0 million (1998: £16.4 million).
For the 53 weeks ended 3 October 1998, Tomkinsons
reported a profit before taxation of £2.0 million (1997:
£1.7 million) on turnover of £30.5 million (1997: £27.5
million), with earnings per share of 21.4p (1997: 17.8p)
and a final dividend of 8.0p per share making 11.5p for
the full year (1997: 8.0p and 11.5p respectively). The
net assets of the Tomkinsons Group as at that date were
£16.6 million (1997: £16.0 million).
9. Current trading and prospects
In its interim results for the half year ended 2 July
1999, released today, Gaskell announced that despite
difficult trading conditions encountered during the first
six months, the Board was confident that the Group will
benefit from an increase in market activity. This
increase is expected to arise from a recovery in the UK
economy, of which there have been recent signs. These
more favourable conditions, together with the Group's
recent success in winning substantial new sales contracts
and the introduction of new products and equipment,
should help to ensure a more satisfactory future for the
Group.
For the six months ended 3 April 1999, Tomkinsons
reported a decline in sales of 3.8 per cent. compared to
the previous year. This performance reflected the
difficult market conditions during the period and was
consistent with the deterioration in consumer demand
being reported by the major home furnishing retailers.
Since the interim announcement, as reported in the
trading statement released on 20 August 1999, trading had
fallen further behind such that sales for the ten months
to 31 July 1999 were 6.6 per cent. lower than last year,
albeit on an equivalent number of sales weeks the
shortfall was 4.4 per cent.. There has been little
evidence of improvement in the retail sector during
recent months, though traditionally demand for
residential carpets is at its lowest during the summer.
The Board believes that, in spite of the difficult
trading conditions recently experienced, the prospects of
the Group will be significantly enhanced by the
Acquisition, given the strength of the industrial logic
behind the deal and the benefits to be gained through
synergies and cost savings. The Enlarged Group will be a
stronger competitor than either Gaskell or Tomkinsons
individually, and better able to exploit opportunities
arising as a result of market changes and rationalisation
within the industry.
10. Management and employees
On 18 June 1999, Gaskell announced that Gerard Cahill had
advised the Board of his intention to take early
retirement and step down as Chief Executive of the Group
with effect from 30 June 2000. The Board and Mr Cahill
have agreed that as the Company is now entering into a
new stage of its ongoing development, the announcement of
the Acquisition represents an appropriate time to bring
forward Mr Cahill's retirement and this became effective
at the close of business on 1 September 1999. It has
been agreed that, upon the Offer being declared
unconditional in all respects, Michael Hield, currently
Chief Executive of Tomkinsons, will join the Board of
Gaskell as Chief Executive of the Enlarged Group. At the
same time, Lowry Maclean, currently Non-executive
Chairman of Tomkinsons, will also join the board of
Gaskell as a Non-executive Director.
Upon the Offer becoming unconditional in all respects,
Gary Stokes, currently Finance Director of Tomkinsons,
will become Managing Director of Tomkinsons, which will
then be a subsidiary of Gaskell and Jeremy Lancaster will
resign as a director of Tomkinsons.
The board of Gaskell has confirmed that the existing
rights of all directors, management and employees of the
Tomkinsons Group, including pension rights, will be fully
safeguarded.
11. Tomkinsons Share Option Schemes
If the Offer becomes or is declared unconditional in all
respects, Gaskell will make appropriate proposals to
participants in the Tomkinsons Share Option Schemes.
12. Extraordinary General Meeting
The Offer will be conditional, inter alia, on the
approval of Gaskell Shareholders at an extraordinary
general meeting which will be convened for the purpose of
passing a resolution required to approve and implement
the Offer. The directors of Gaskell will, and have
received confirmation from Edinburgh Fund Managers PLC
that it will, procure that the votes attaching to the
Gaskell Shares in which they are respectively
beneficially interested, amounting to, in aggregate,
approximately 17.3 per cent. of the issued ordinary share
capital of Gaskell, will be cast in favour of such
resolution.
Eaglet Investment Trust plc is a substantial shareholder
in both Gaskell and Tomkinsons as a result of its
discretionary holdings of 3,799,448 Gaskell Shares
(representing 19.05 per cent. of Gaskell's issued
ordinary share capital) and 1,355,576 Tomkinsons Shares
(representing 20.94 per cent. of Tomkinsons' issued share
capital). For the purposes of the Listing Rules, Eaglet
Investment Trust plc is considered to be a related party
of Gaskell. As such, it will abstain, and has undertaken
to take all reasonable steps to ensure that its
associates will abstain, from voting at the extraordinary
general meeting on the resolution required to approve and
implement the Offer.
13. General
The Offer will be on the terms and will be subject, inter
alia, to the conditions which are set out in Appendix I
hereto and those terms which will be set out or referred
to in the Offer Document and such further terms as may be
required to comply with the City Code.
The Offer Document will be posted in due course to
Tomkinsons Shareholders and, for information only, to
Gaskell Shareholders.
The directors of Gaskell accept responsibility for the
information contained in this announcement, other than
that relating to Tomkinsons, the directors of Tomkinsons
and their immediate families and persons connected with
them. To the best of the knowledge and belief of the
directors of Gaskell (who have taken all reasonable care
to ensure that such is the case), the information
contained in this announcement for which they are
responsible is in accordance with the facts and does not
omit anything likely to affect the import of such
information.
The directors of Tomkinsons accept responsibility for the
information contained in this announcement relating to
Tomkinsons, the directors of Tomkinsons and their
immediate families and persons connected with them. To
the best of the knowledge and belief of the directors of
Tomkinsons (who have taken all reasonable care to ensure
that such is the case), the information contained in this
announcement for which they are responsible is in
accordance with the facts and does not omit anything
likely to affect the import of such information.
Gaskell PLC
Interim Results
for the half year ended 2 July 1999
Statement by the Chairman, Mr Ted Andrew
The Company has experienced difficult trading conditions in
both contract and retail markets during the first six months.
This has resulted in a reduction in pre-tax profits from
£2.26m to £1.80m. Despite this the Board is optimistic about
the future of the Company and is keen to take advantage of any
upturn in demand as it arises. It has therefore continued to
invest in new products and equipment in an effort to gain
additional market share and increase sales.
Turnover growth was again achieved in the office sector,
partly reflecting the recent acquisition of several contracts
with major end users. In addition, export sales showed signs
of a welcome recovery, despite the continued strength of
sterling. In contrast, however, a slight slowdown in activity
was encountered in the retail and leisure sectors particularly
in the first quarter, resulting in an overall decrease in
sales of 3% in the first six months to £26.0m. The overall
gross margin fell by approximately 1% in the current year due
primarily to adverse changes in sales mix. Various cost
reduction initiatives continue to be pursued and these are
expected to bear fruit in the months ahead. The Group's
overhead base expanded primarily as a result of further
investment in both people and facilities. As a result of
these various factors, operating profit fell from £2.37m to
£1.93m. Interest charges increased marginally to £130,000
(1998: £106,000) and, after adjusting for the ordinary share
split in late 1998, earnings per share fell in the first half
from 8.0p to 6.2p.
The Group incurred a net cash outflow of £0.52m in the period,
although the gearing level of 18% is only marginally above
that at the start of the financial year. Again strong
positive cashflow was generated from operating activities,
despite an increase in working capital of £0.54m, primarily to
support new product launches. The Group's capital expenditure
of approximately £2m included a number of major items of plant
and equipment to assist the improvement of manufacturing
efficiencies. Total proceeds of £0.47m were generated from
the sale of surplus fixed assets, including the Lee Mill,
Bacup property, with minimal impact on the profit and loss
account.
Subsidiaries' Performance
Gaskell Textiles Limited achieved increased turnover at
£12.8m, as a result of sales growth in its UK Tile and Export
business. In contrast, the sales of the Automotive, Underlay
and Special Products divisions all fell slightly in difficult
market conditions. The Tile division benefited from several
major contracts, including those with Boots, Lloyds TSB and
the Inland Revenue. In addition, its traditional contractor-
led business also remained strong, with its product portfolio
enhanced by the relaunch of the Fiesta and Primera ranges and
the introduction of a cushion-back' option, Softbac, for its
various tile products. Export sales benefited from the recent
development of a number of new accounts and agencies, together
with increased exhibition and other marketing activity in this
area. Gaskell Textiles has undertaken a number of major
capital projects in the first half of 1999 following the
extension of its Clayton Park facility. The commissioning of
a new calendering machine and an additional felt set were both
successfully completed during the period, while the new
backing plant is due to be fully installed by October. In
June the Company also finalised the acquisition of an airlaid
felt production line, which will result in the launch of the
new Airbounce underlay at the Harrogate Show in September. In
recognition of its improved quality standards, the Company
achieved ISO 9001 and has recently been recommended for
registration under the environmental standard ISO 14001.
Gaskell Carpets Limited reported sales of £8.7m, with all
divisions performing slightly below the 1998 level. The UK
Contract division encountered some deferral of expenditure in
the leisure market, partly due to the extensive corporate
activity in the brewery sector. However, there are clear
signs of a recovery in demand in the traditionally strong
final quarter, particularly in view of the Millennium
celebrations. The current installation of the new high speed
Axminster loom is also expected to increase sales and improve
operational efficiencies. Retail turnover has held up
relatively well. The recent launch of the new Chelsea House
product and the recolouration of the Summer Gardens range
should help to give further impetus to this division in the
months ahead.
Overall activity levels at Bamber Carpets Limited fell due to
reductions in both external and intra Group business.
Turnover decreased by 9% to £7.5m due to some destocking by
fellow Group companies and trading difficulties encountered by
certain third party customers. However, the Company continues
to benefit from both further cost reduction initiatives,
including recent improvements to the latex backing line, and
the acquisition of a substantial new external customer.
Modulus Flooring Systems Limited has achieved a welcome
recovery in 1999 following the problems experienced during the
second half of the previous year. The appointment of a new
Managing Director and the resultant implementation of a new
corporate strategy have helped to restore sales in the period
to £2.7m, close to the level achieved during a strong first
half of 1998. In addition, there has been a marked
improvement in gross margin, due to better discount control
and an improved sales mix. The launch of additional new
products and new sampling materials should help to enhance the
Company's offer in the months ahead.
Dividends
The Board has continued its progressive dividend policy,
despite the prevailing trading environment, in declaring an
interim ordinary dividend of 1.4p (1998 as restated: 1.25p).
This dividend, which represents a 12% increase over the
previous year, will be payable on 22 October 1999 to
shareholders registered at the close of business on 17
September 1999.
Year 2000
The Board has considered the risks associated with the Year
2000 issue. As previously reported, the Group has agreed
contracts for the supply of new computer hardware and software
to cover all of its key business systems at a capital cost of
approximately £800,000. The new systems are expected to bring
substantial benefits to the business by providing increased
functionality and a fully integrated solution not currently
available to the Group. The implementation project is now
well underway and is expected to be substantially completed
during the third quarter of 1999. The suppliers of this
computer equipment have informed the Group that such equipment
is Year 2000 compliant. A review of the remaining hardware
and software, including that related to design and
manufacturing equipment, and of the major customers and
suppliers has been undertaken by project teams in each Group
Company and is close to completion. The costs arising from
this review are not expected to be material in relation to the
Group's overall results and are being expensed as incurred.
There can be no absolute assurance that the steps taken by any
company will successfully avoid difficulties associated with
the Year 2000 issue. However, the Board believes that it has
taken all reasonable steps to protect the Group.
Prospects
Despite the difficult trading conditions encountered,
particularly during the first quarter, the Board is confident
that the Group will benefit from any increase in market
activity which is expected to arise from a recovery in the UK
economy, of which there have been recent signs. These more
favourable external conditions, together with the Group's
recent success in winning substantial new sales contracts and
the introduction of new products and equipment, should all
help to ensure a satisfactory future for the Group.
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