News blog
Ultimate Finance Group
- BY: Andrew Hore |
- POSTED: 17/10/2010 |
Ultimate Finance Group is acquiring Ashley Commercial Finance for an initial £4.75m.
Ashley and Ultimate are both factoring and invoice discounting business but Ashley specialises in smaller businesses. Ultimate’s average loan per client is more than £100,000, while Ashley’s is £16,000. Ashley used to lose clients when they got bigger but they can now be passed onto Ultimate. Ashley’s loan book was £4.4m at March 2010.
Demand for factoring and trade finance remains strong and the recent attempts by the banks to suggest that they are interested in small businesses is unlikely to make much difference.
Ashley made a profit of £726,000 on revenues of £3.04m in the year to March 2010. Higher admin expenses mean that the profit has declined in the past couple of years. More than one-half of the revenues come from factoring fees.
The initial consideration is £3.7m in cash and £1.05m in shares. Deferred consideration of £2.7m could be paid depending on performance. Ultimate will pay another £6 for each £1 of profit in excess of £850,000 in the year to October 2011 and the same ratio for profit in excess of £1.1m in the year to October 2012. There is a maximum of £1.35m payable in each year. Some of this could be paid in shares if Ultimate wants to.
Ultimate is raising £1.83m net at 12p a share in order to help finance the cash part of the acquisition consideration. An acquisition finance facility provided by Lloyds provides a further £2m.
Ultimate believes that it can save £400,000 in annual costs. Ashley’s office in Cheadle will be closed and the operations moved in with Ultimate in Manchester. Both firms have Lloyds as their lender and will end up with a combined Lloyds facility of £34m.
The current share price is 14.75p. At the placing price of 12p a share, the enlarged Ultimate will be valued at £5.97m.
A general meeting will be held on 28 October to give shareholders the opportunity to agree to the deal.
Download the October edition of AIM Journal at http://www.hubinvest.com/AIMPDFOctober2010_13.pdf
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