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Sprue Aegis (LON:SPRP)

Share Price  125p (+13.6%) +15p

Bid/Offer 123p/127p  (current live dealing spreads)       NMS 1,500

Market Cap £57.3m                   No of Shares 45.9m

Enterprise Value £47.3m


Settlement Agreement and Notice of final results

Settlement and Notice of Results

Finally, Sprue managed to give shareholders the news they wanted. Clarity if nothing else! The final figure is a £3.8 million exceptional cost. Sprue's management was under immense pressure to sort this out before releasing final results.  Rumour and counter-rumour of all the cash being spent, with future unquantifiable legal costs and settlement costs to come. This further combined with an RNS release that they had dipped into £3 million credit facility was all just too much. Shareholders quite rightly got spooked.

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I previously wrote on Sprue a few weeks ago. Here is the link. So I don't want go over too much of the same ground again.

This morning, one paragraph in the settlement, the last one admittedly caught me unaware.

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 I'm taking this as the normal settling of account balances and not as any penalty settlement figure.

Share Price 3 Months Price Performance.

Share price collapsed to 140p level on April 19th, 2018 RNS.  The share price continued falling untill finding some support around 110p level. Even in recent days that support was being even tested.

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At first glance of RNS this morning, I thought it was a win for Sprue. In reality, it was at best a draw. The exceptional £3.8 million blows basically one year's earnings and has been a real stomach punch to management's credibility. Paying millions of pounds for products you can't sell and then having to pay for the privilege to destroy them means Sprue's legal position was weak.

In effect, Sprue broke the Distributive Agreement, albeit for 3,000 fire extinguishers allegedly labeled incorrectly deliberately. BRK should have been aware earlier and properly were but they only choose to use this information in the last few weeks of their Distribution Agreement.

This should not have been a problem within normal partners as it appeared marginal to their whole…

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