Marketing services provider Hasgrove is selling its European public affairs and strategic communications business Interel to its management for £9.25m in order to focus on its digital businesses.
The buyers are paying €9.55m (£8.45m) and assuming liabilities of €900,000 (£800,000). The initial cash payment is €7.64m (£6.76m) and the rest will be paid in two instalments on the first and second anniversaries of the deal. Interel paid a dividend of €1.512m (£1.228m) to Hasgrove in June.
Interel contributed £13.1m of Hasgrove’s 2010 revenues of £35.4m. The operating profit contribution was two-fifths of the £960,000 made by Hasgrove. The Landmarks corporate design business is not included in the sale. That has revenues of €1.4m.
Hasgrove had net debt of £6.7m at the end of 2010 so this should be wiped out and Hasgrove will be able to turn its attentions to acquiring additional digital communications businesses. Hasgrove also intends to increase its dividend.
At 69.5p a share, up 4p, Hasgrove is valued at £16.6m. In the short-term, the disposal will dilute earnings by around one-quarter.
House broker Peel Hunt has cut its 2011 pre-tax profit estimate from £4m to £3.2m and earnings per share will fall slightly. Earnings per share could fall further in 2012 if the proceeds are not reinvested. Peel Hunt is maintaining its dividend forecast at 2p a share, up from 0.5p a share in 2010. The dividend could rise to up to 5p a share in 2012. The policy of the board is dividend cover of at least two times.
The shares are trading on seven times 2011 prospective earnings, while the yield is 2.9%.
A trading statement will be published at the end of July.
Download the June 2011 edition of AIM Journal at http://www.hubinvest.com/AIMPDFJuly2011_22.pdf
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