REG - John Lewis Of Hunger - Sale & leaseback,proposed delisting & tender offer

John Lewis of HungerfordAnnouncement

11/05/2023 07:00

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RNS Number : 0183Z  John Lewis Of Hungerford PLC  11 May 2023

The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.

10 May 2023

John Lewis of Hungerford plc

(the "Company")

Sale and leaseback of property, intention to seek cancellation of trading on
AIM and intention to undertake a tender offer to buy back shares in the
Company.

Sale of property and lease back

John Lewis of Hungerford Plc (AIM: JLH), the specialist manufacturer and
retailer of kitchens, bedrooms and freestanding furniture, is pleased to
announce the successful exchange of contracts of a sale and leaseback
transaction in respect of its freehold purpose-built factory and
administrative headquarters in Wantage, Oxfordshire (the "Property").

TOF Corporate Trustees Limited ("TOF Corporate Trustees"), which is the Oxford
Endowment Fund, a commercial subsidiary of the University of Oxford, has
agreed to pay a total net cash consideration of £3.0 million for the
Property. This is significantly higher than the Property's net book value of
£2.2 million in the Company's balance sheet at 30 June 2022, following a
formal revaluation exercise completed during the audit in November 2022. The
Company expects to complete on the transaction within two weeks and the gross
proceeds are expected to be received by the Company at this time. The Company
has agreed a protected lease with TOF Corporate Trustees, pursuant to which
the Company will lease the Property for an initial term of 15 years and the
Company will retain the security of tenure and the right to renew.  The
annual rent payable by the Company pursuant to the lease will be
£192,000.

On 30 June 2020 the Company announced it had entered into a financing facility
with Devon & Cornwall Securities Limited for £1.079 million (the
"Facility"), which was drawn down immediately. This Facility was secured
against the Property. £1.079 million of the net proceeds receivable by the
Company (expected to be £2.95 million after legal and agents fees) will be
used to redeem the Facility, together with approximately £50,000 of early
repayment penalties. In line with current rates of inflation, the interest
rate on the Facility is currently close to 15%.  The interest saved as a
result of the sale and leaseback of the Property, together with expected rates
of interest earned on the funds, will largely offset the rent payable on the
new lease, with the Company's balance sheet materially strengthened.

A portion of the funds received will support the Company's strategic
development plan targeted at growing the Company's business. This will include
funding upgrades to capital assets, ensuring the Company can continue its high
standard of delivery to its customers, together with a review of the showroom
portfolio.

Intention to seek the cancellation from trading on AIM

 

The Company also announces that it intends to seek shareholder approval for
the cancellation of the Company's ordinary shares from trading on AIM
("Cancellation"). The Directors consider that the limited free float and
liquidity of its ordinary shares, together with costs associated with having
the Company's shares admitted to trading on AIM ("Admission") are not
commensurate with the associated benefits of Admission to the Company.

 

The considerable cost associated with maintaining the Company's admission to
trading on AIM (such as nominated adviser and broker fees, London Stock
Exchange fees and the costs associated with being a quoted company in having
higher level corporate governance and audit scope) are, in the Directors'
opinion, disproportionately high, compared to the benefits. The Board have
identified circa £250,000 of direct costs related to Admission.

 

The Board further believes that the additional indirect costs associated with
management time invested in the legal and regulatory burden associated with
maintaining Admission is, in the Directors' opinion, disproportionate to the
benefits to the Company.

 

The Company intends to convene a general meeting shortly, at which it will
propose a resolution to approve the Cancellation in accordance with Rule 41 of
the AIM Rules for Companies.  For Cancellation to become effective, the
Company will require not less than 75% of the votes cast by shareholders on
the resolution at the general meeting to be in favour of approving the
Cancellation.  A circular setting out, inter alia, the rationale for
seeking Cancellation, along with a notice of general meeting, will be prepared
by the Company and posted to shareholders in due course. Following the
proposed Cancellation, the Company intends to re-register as a private limited
company.

 

Share buyback through a tender offer

 

Once re-registered as a private limited company, the Company intends to
undertake a share buyback through the implementation of a tender offer through
which the Company will offer to purchase, as principal, the Company's shares
so as to provide those shareholders who wish to sell shares in the Company the
opportunity to do so. Any shares successfully tendered for, would be
subsequently cancelled.  In order to return surplus cash to shareholders by
way of a tender offer, the Company will need to undertake a capital
reorganisation involving the reduction of the share premium account and
revaluation reserves of the Company, and the creation of distributable
reserves.  Once the capital reorganisation is completed, the revised capital
structure will need to be formally audited. The Company expects to complete
the tender offer following the conclusion of the year-end audit.

 

The Directors currently anticipate that any tender offer made would be for
approximately 10 per cent of the Company's ordinary shares, around 1.5p per
share, reflecting the Company's average share price over the most recent
4-week period.  The Directors and several of the largest shareholders have
indicated that they do not intend to tender their shares.

 

With the Board focused on returning the business to sustained profitability,
the Company expect to improve this further through the cost savings made from
Cancellation, together with a materially improved balance sheet. It is the
intention of the Company to distribute a proportion of its profits on an
ongoing basis in future years through a combination of further tender offers
and/or dividend payments. The Company also intends to introduce a matched
bargain system, to help facilitate purchases or sales of shares once a private
company.

 

Further announcements will be made in due course.

 

Kiran Noonan, Chief Executive Officer and acting Chairman, commented:

 

"The sale and leaseback transaction with TOF Corporate Trustees secures a
strong strategic partnership with a fund committed to developing the Grove
Business Park. As the Company continues to grow, we look forward to working
closely with TOF Corporate Trustees to develop our property requirements over
the coming years.

 

"The proposed cancellation of trading in our shares on AIM is a key part of
the Board's plan to ensure management time is exclusively focused on the
progress of the Company."

 

Enquiries:

 John Lewis of Hungerford                                                                                          01235 774300
 plc

 Kiran Noonan - Chief Executive Officer and Acting Chairman

 Allenby Capital Limited (Nominated Adviser and Broker)                                                            020 3328 5656

 Nick Naylor / George Payne (Corporate Finance)

 Matt Butlin / Amrit Nahal (Sales and Corporate Broking)

 

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