Marlwood Plc

March 26, 2010 10:00 ET

Update re disposal of Stock Clearance Division



Marlwood  Plc  (Marlwood, the Company or the Group), the Cayman Stock Exchange (CSX) listed holding company of New
BAI  International  Limited  and  The New Licence Factory Limited ("The Licence Factory")  clearance  and  branded
merchandise  retail businesses, recently announced it had has entered into a conditional agreement to  dispose  of
the stock clearance business (Business) of New BAI to Brennan Atkinson International Limited (a company controlled
by  MA  Abramson)  for  a  consideration in respect of certain assets of GBP2,500,000,  to  be  satisfied  by  the
assignment of certain debts; and a further cash consideration for the stock based on an agreed stock valuation. We
now  set  out  financial information pertaining to the transaction in order that the suspension of  the  Company's
shares can be lifted.

Further details and definitions are set out below.

For  the reasons set out below the Proposed Disposal is a related party transaction. Pursuant to rules imposed  by
CSX,  where the Company and/or a member of its group is to enter into any significant sale or purchase transaction
with  a  "related  party" (i.e. directors, significant shareholders or other parties that  may  exert  significant
influence  on  the  company),  prior majority shareholder approval is required of the  transaction  at  a  General
Meeting.  Any  shareholders that are connected with the related party are excluded from voting on the  Resolution,
being Hannah Martin and BAI, in respect of which MA Abramson has a beneficial interest.

A  shareholder circular will be distributed setting out the particulars of the Proposed Disposal and  the  reasons
why  the  Directors believe that the terms of the Proposed Disposal are fair and reasonable as far as Shareholders
are  concerned, and the strategy of the Company going forward and why they believe that the resolutions should  be
approved by Shareholders.

Notice of the General Meeting at which the shareholders can vote on the Proposed Disposal will be set out in the

1.      Background and reasons for the Proposed Disposal

Following the completion of the listing of Marlwood plc, the Board have considered how best to capitalise  on  the
Group's current position and how best to generate shareholder value.

The  underlying  aim  of  the Board has been to focus on the licence business and grow the  revenues  and  profits
derived from these activities through organic expansion as well as via acquisition.

The  'clearance'  division  is  widely regarded as a sector in decline, due  in  the  main  to  the  changes  that
manufacturers,  wholesalers  and retailers have implemented as to how they manage  their  production  volumes  and
inventory levels, as well as their changes in buying practices.

In  addition,  due  to  the  nature  of the 'clearance' sector, the 'clearance' business  does  not  benefit  from
significant  levels  of  repeat business and turnover is heavily reliant on the Group's  ability  to  continuously
source  one-off  'spot' deals at the right price and with a willing end customer. The deal-driven  nature  of  the
business makes it very reliant on the 'trader instincts' of one or two individuals in the group and also makes  it
a  difficult business to grow or develop. Furthermore, due to the necessity to pay for clearance deals  up  front,
whilst  at  the  same time having to offer credit to customers, the business can be working capital intensive  and
banks are becoming less inclined to finance this type of trade.

In  contrast to this, the 'licence' business has significant growth opportunities and has already signed a  number
of  new  licence agreements with RAC, Gotcha, Maralyn Monroe and Bang on the Door to expand its product  offering.
It  also has two new licences in development which have already been circulated to a number of key retailers  such
as WH Smith, BHS, Debenhams, Avon and Tesco, who have all responded positively. The two new brands are:

-   Pineapple - a classic  brand based on its dance heritage has now become a lifestyle offer which has
    initially been applied to bags, sunglasses and watches
-   Kangol - a British clothing brand established in 1938 which has been endorsed by a number of celebrity
    patrons including Run DMC, The Notorious B.I.G, Liam Gallagher, Samuel L Jackson and Eminem.  The licence has been
    applied to a range of luggage items in a similar style to the existing Head product range.
-   Further licences are at development stage and are about to be issued for retail feedback, including  Fila
    (for bags, accessories and men's gifts),
-   Lipsy - a British celebrity favourite clothing brand specialising in copying the hottest catwalk looks at
    high street prices.  The brand will enable the Group to enter the fashion arena and increase the exposure in the
    15-25 year old category.

The  Group  is  also keen to grow via an acquisition strategy, where it will take over established companies  with
their own strong product ranges and high quality customer accounts, which should compliment those of Marlwood,  as
well as offering valuable cross-selling opportunities and cost-saving synergies.

Having  considered  the inherent limitations to the 'clearance' business, as well as the attractive  opportunities
that  exist  in the 'licence' business, the Board have decided that it would be in the interests of the  Group  to
dispose of the 'clearance' division and replace it with a suitable acquisition in the 'licence' sector. With  this
in  mind  the Directors made enquiries to the founder of the clearance business, Martin Abramson (MA), to  explore
whether he would be interested in buying this division out of the Group.

The  Board  are  of the opinion that the consideration of GBP2.5million, based upon the clearance division's  loss
making  performance  over recent years, would represent a significant premium over market  value  and  generate  a
'profit  on  disposal' for the Group. In addition the clearance stock held by Marlwood will be sold separately  at
cost under terms to be agreed, whereas the debtors and creditors would remain with Marlwood. The stock is expected
to be valued at approximately GBP300,000

Post  Completion,  Benjamin David Holdings Limited ("BDH"), a Gibraltan company controlled  by  MA,  will  provide
consultancy and advisory services to New BAI for an annual retainer of USD160,000 for the first two years  of  the
term  of  the  agreement and USD100,000 for the third year of the agreement, plus commission paid at 2.5%  of  any
purchases  New  BAI  or  any of its subsidiaries makes.  BDH will be reimbursed for all accommodation  and  travel
expenses incurred on authorised trips to the Far East, subject to a maximum of USD6,000 per trip and for a maximum
of  two  trips  per year. The existing consultancy agreement between Marlwood and BDH will be terminated.  Further
details of these agreements can be found in the circular.

The  financial effect of the Proposed Disposal of the clearance division will enable a number of cost  savings  to
the Group due to the proposed terms requiring MA to take over the cost base of this division, including the staff,
marketing, travel and other associated overhead costs thereby significantly reducing the running expenses  of  the
Group.   The  Board, after making due and careful enquiry believe these cost savings will result in a  significant
increase to EBITDA.

2.      Principal terms of the Proposed Disposal
The  conditional  agreement  entered  into in relation to the sale of  the  stock  clearance  business  is  for  a
consideration of GBP2,500,000, in respect of the contracts; engagements and arrangements to which the business  is
a  party  and  which  relate  exclusively  to the business; the customer  advances;  the  goodwill;  the  business
intellectual property; the books and records and all other property and assets owned the New BAI International and
used in connection with the business.

The GBP2,500,000 consideration will be satisfied by the Buyer as follows:
(a)     the  assumption by the Buyer of the obligation to pay the aggregate amount of GBP965,722 owed by  The  New
        Licence Factory to the preference shareholders of Hannah Martin; and

(b)     the assumption by the Buyer of the obligation to pay the sum of GBP1,534,278 owed by New BAI to M&K.

A further cash amount will be paid for the stock based on an agreed stock valuation.

The  sale  excludes  the  trade  debts, cash, fixed assets, VAT records, certain excluded  contracts  and  certain
excluded stocks.

Completion of the sale and purchase is conditional:

i.      on  the shareholders of Marlwood passing a resolution to approve the Proposed Disposal in accordance  with
        the requirements of the CSX rules at a General Meeting; and
ii.      on  the  consent  to  the sale by GE Commercial Finance Limited (GE) and confirmation  from  it  that  the
        business and assets are released from the security held by GE and may be sold to the Buyer.

3.      Financial Information
The financial information on the business being disposed of is set out below.

4.      Management changes
As  a  result  of  the  Proposed Disposal, Elliot Basso's employment will be transferring to the  Buyer.  He  will
consequently be resigning as a director of the Group and its Subsidiaries.
5.      Related parties

New BAI, the seller in the Proposed Disposal, is a Subsidiary of the Company.

BAI  is  the wholly owned subsidiary of Hannah Martin. MA, via personal shareholdings and interests in trusts  and
other corporate entities, is the ultimate controlling shareholder of Hannah Martin. Both BAI and Hannah Martin are
significant shareholders in the Company. However, the Buyer is also an entity ultimately controlled by MA,  making
this  a  related party transaction. As such, due to their connection with MA, Hannah Martin and BAI will  each  be
excluded from voting on the Resolution.

6.      Risk Factors

Shareholders should consider fully the risk factors associated with the Proposed Disposal and the Continuing Group
in the circular which will be sent to shareholders shortly.

7.      Definitions

"BAI"                               BAI  International Limited a company registered in England and Wales under
                                    registered  number 2378676, with registered address Unit  38   Newby  Road
                                    Industrial Estate, Unit 38 Newby Road, Hazel Grove, Stockport SK7 5AS

"Business Purchase Agreement"       the  agreement  to be entered into between New BAI and the Buyer,  setting
                                    out the terms of the Proposed Disposal

"Buyer"                             Brennan  Atkinson International Limited, a company registered  in  England
                                    and  Wales  under registered number 6958643, with registered  address  4th
                                    Floor,  Blackfriars  House, Parsonage, Manchester, Greater  Manchester  M3

"Company" or "Marlwood" or "MW"     Marlwood   plc,  a  company  incorporated  in  England  and  Wales   under
                                    registered  number  6676987, with registered address  14  Kinnerton  Place
                                    South, London SW1X 8EH

"Completion"                        completion  of  the  Proposed Disposal, in accordance  with  the  Business
                                    Purchase Agreement

"Consideration  Shares"             the  630,000,000 new Ordinary Shares issued to the Vendors  on  completion
                                    of the Acquisitions as fully paid

"CSX"                               The Cayman Islands Stock Exchange

"CSX Rules"                         The  Listing  Rules produced by the CSX for issuers whose  securities  are
                                    listed on the CSX as amended from  time to time

"Directors"                         Andrea  Conrad,  Vincent Bloom, Pamela Hulme, Michael  Bozman  and  Elliot

"Disposed Assets"                   the  assets  of  the Group proposed to be sold pursuant  to  the  Proposed

"Further Consideration Shares"      up  to  189,000 new Ordinary Shares to be issued to the Vendors  depending
                                    on  the  results of the Group for the two years ended 31 December 2011  to
                                    be credited as fully paid

"Group" or "Continuing Group"       the  Company, The New Licence Factory, The Licence Factory (HK),  New  BAI
                                    and IdealDeal following completion of the Proposed Disposal

"Hannah Martin"                     Hannah  Martin  Holdings  Limited a company incorporated  in  England  and
                                    Wales  under  registered number 3581073 with registered  address  Unit  38
                                    Newby  Road  Industrial  Estate Hazel Grove  Stockport  SK7  5AS.   Hannah
                                    Martin has been the non-trading parent company of BAI since 10 March  2004
                                    and the non-trading parent company of The License Factory since 2007

"IdealDeal"                         IdealDeal  Limited,  a  company incorporated in England  and  Wales  under
                                    registered  number  5509651 with registered address Unit  38,  Newby  Road
                                    Industrial Estate, Hazel Grove, Stockport SK7 5AS

"M&K"                               M&K  International  Limited, a company incorporated in England  and  Wales
                                    under  registered  number  2559650, with  registered  address  4th  floor,
                                    Blackfriars House, Parsonage, Manchester M3 2JA

"New BAI" or "New BAI               New  BAI  International  Limited, a company incorporated  in  England  and
International"                      Wales  under registered number 6742339, with registered address  Unit  38,
                                    Newby Road, Hazel Grove, Stockport SK7 5AS

"Ordinary Shares"                   ordinary shares of 0.1p each in the capital of the Company

"Proposed Disposal"                 the  disposal  of New BAI's clearance business, details of which  are  set
                                    out in this document

"Shareholders"                      the  persons who are registered as the holders of the Ordinary Shares from
                                    time to time
"Subsidiary(ies)"                   any  subsidiary or subsidiary undertaking as defined in sections 1159  and
                                    1161 of the 2006 Companies Act

"TLFHK" or "The Licence Factory     The  Licence Factory (HK) Limited, a company registered in Hong Kong  with
(HK)"                               registered  number 1181306, with registered address Room  1602,  Carnarvon
                                    Plaza, 20 Carnarvon Road, Tsimshatsui, Kowloon, Hong Kong

"The License Factory"               The  License Factory Limited a company incorporated in England  and  Wales
                                    under  registered number 5788104, with registered address Unit  38,  Newby
                                    Road, Hazel Grove, Stockport SK7 5AS

"TNLF"   or   "The   New   Licence  The  New  Licence Factory Limited, a company incorporated in  England  and
Factory"                            Wales  under registered number 06844369, with registered address Unit  38,
                                    Newby Road, Hazel Grove, Stockport SK7 5AS

"Vendors"                           Hannah Martin and BAI collectively


A summary of the historical turnover and gross profit levels for each trading division is presented below.
                                                                Year ended 31 Dec
                                                   2006            2007           2008            2009
                                                Audited         Audited        Audited       Unaudited
                                                GBP'000         GBP'000        GBP'000         GBP'000
Clearance                                        11,072          8,418          7,669           4,814
Licensed goods                                    3,775          7,283          8,086           4,142
                                                 ______          _____          _____           _____
Total                                            14,847         15,701         15,755           8,956
                                                 ======         ======         ======           ===== 

Gross profit                                                                             
Clearance                                         4,025          2,711          2,665            1,531
Licensed goods                                    1,336          2,819          2,745            1,268
                                                  _____          _____          _____            _____
Total                                             5,361          5,530          5,410            2,799
                                                  =====          =====          =====            =====

Gross margins (%)                                                                        
Clearance                                         36.4%          32.2%          34.8%            31.8%
Licensed goods                                    35.4%          38.7%          34.0%            30.6%
                                                  _____         _____           _____            _____
Total                                              36.1%         35.2%           34.3%           31.3%
                                                  =====         =====           =====            =====
It has not been possible to produce a meaningful historic analysis of the EBITDA or Profit Before Tax between the
clearance  business and the licence business due to the major restructuring of the cost base of the  Group  during
2007 and 2008, where there were major changes in personnel, infrastructure facilities and premises, due in part to
the refocus of the Group towards the licence business. Because of these changes the allocation of overhead between
the  clearance  business  and  the  licence business prior to 2009 would be arbitrary  and  the  resultant  profit
calculations would not provide accurate comparables.

The  analysis  above  illustrates the historical profitability of each division and indicates that  the  clearance
business  has  historically generated consistent margins for the Group.  As set out in detail  in  the  Chairman's
Statement  the 'clearance' division is widely regarded as a stagnated sector , and the deal driven nature  of  the
sector  coupled with the working capital restraints it can impose have led the Board to consider the  disposal  of
this  risky business strategy.  In contrast to this the Board consider the licence sector offers a number  of  new
and exciting opportunities for the Group which should enable improved profitability levels in future years.

                                                                   Year ended 31 Dec 2009
                                                                Unaudited management accounts
                                                   Clearance        Licensed        Marlwood          Total
                                                    GBP'000         GBP'000         GBP'000         GBP'000
Turnover                                              4,814           4,142            -              8,956
Cost of sales                                        (3,283)         (2,874)           -             (6,157)
                                                     ______          ______         ______           ______

Gross profit                                          1,531           1,268            -              2,799

Gross margin                                          31.8%           30.6%            -              31.3%
Distribution costs                                    (198)           (160)            -               (358)
Administrative expenses                             (1,928)         (1,202)           (73)           (3,202)
                                                    ______           ______         ______           ______

EBITDA                                                (595)            (94)           (73)             (761)
Depreciation                                           (48)            (41)            -                (89)
                                                    ______           ______         ______           ______

Operating profit                                      (643)           (135)           (73)             (850)
Interest payable and similar charges                  (167)           (144)            -               (311)
                                                   _______          _______         ______           ______

Profit before tax                                    (810)            (279)           (73)           (1,161)
                                                   =======          =======         ======          =======
The  injection of additional working capital into the business from the date of admission to the CSX has  resulted
in  the post acquisition profits recovering to become in line with those seen in the comparable 2008 period.  This
is evidenced by the sales levels achieved in Q4 2009 which were GBP3.63 million compared to GBP5.33 million in the
9  months  to 30 September 2009.  The clearance business, in particular, benefited from the injection  of  working
capital  as stock deals, which had intentionally been delayed until Admission of the Company to CSX, due  to  cash
flow  constraints, were subsequently crystallised during the following three months. This was in contrast  to  the
licence  business where the recovery is more gradual due to the time lags in ordering stock from the Far  East.  A
summary of the unaudited management accounts for the period from admission to 31 December 2009 is presented below.

                                                         Period from acquisition to 31 Dec 2009
                                                  Clearance       Licensed        Marlwood           Total
                                                    GBP'000        GBP'000         GBP'000         GBP'000
Turnover                                             2,290          1,953            -              4,243
Cost of sales                                       (1,294)        (1,350)           -             (2,644)
                                                   _______         _______        _______          _______

Gross profit                                           996            603            -              1,599
Gross margin                                          43.5%          30.1%           -               37.7%
Distribution costs                                    (71)            (57)           -               (128)
Administrative expenses                              (517)           (374)          (73)             (964)
                                                   _______         _______        _______          _______

EBITDA                                                408             172           (73)              507
Depreciation                                          (13)            (11)           -                (24)
                                                  _______          _______        _______          _______

Operating profit                                      395             161           (73)              483 
Interest payable and similar                          (17)            (14)           -                (31)
                                                  _______         _______         _______          _______

Profit before tax                                     378             147           (73)              452
                                                  =======         =======         =======          =======

The Directors of the Company take responsibility for this announcement.

For further information, please contact:
Marlwood plc                                                                       
Pam Hulme, Managing Director                                       +44 161 487 5130

Corporate Advisor                                                                  
Nick Michaels, Alfred Henry Corporate Finance Limited              +44 207 251 3762

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