KELVINSIDE, the investment holding company set up by Mr Brian Molloy, a former director of James Crean and a number of institutional investors, has acquired Retail Advertising Services (RAD), a Chester based design and print company.
This is its first investment worth a total of £2.5M and Kelvinside is now talking to some 40 other companies, Mr Molloy said this weekend. "The deal flow is very healthy." No deals, however, are imminent but Kelvinside intends to make a number of further investments. "There is a good strong market out there," he said.
RAD employs 60 people at two plants; one in Chester and one in Merseyside. It generates annual sales of £3.5 million and provides litho, silk screen print and advertising services. It was set up by Mr Alan Sharp who had a 60 per cent stake and is "staying on as chairman for a few years", said Mr Molloy. Other shareholders were two senior executives who had 5 per cent each and the remaining 30 per cent was held by a group of Chester investors.
The senior management were remaining with company, having signed three year service contracts. The consideration has not been disclosed but the total investment is £2.5 million. That includes capital investment which is being injected into the Chester company. Kelvinside intended to expand RAD which already conducts business throughout Britain.
Both sales and profit were said to have been growing. Profits are understood to be in the region of £250,000 so it looks as if Kelvinside made the purchase at a favourable profit multiple.
Kelvinside was financing the deal from internal cash sources and from borrowings. It was set up by Mr Molloy and Mr Fred Rangolan, former managing director of Droyhurst, the Colchester based commercial printing subsidiary of Inishtech (itself a subsidiary of Crean) with an equity capital of £5 million. They have a 14 per cent stake between them. Institutional investors are among the largest shareholders but Mr Tom Toner, the former chairman of Inishtech, now a director of Kelvinside, is a small shareholder.
Kelvinside has the capacity to do one or two further deals before going to its shareholders for further fund. It is not the company's intention to issue new Kelvinside shares to pay for acquisitions Mr Molloy said. The target date to provide an exit mechanism is between six and seven years time.
Mr Molloy was credited with the rapid expansion of Inishtech in the paper and packaging sector. Between 1989 and his resignation last June, Inishtech made 19 acquisitions, 11 of which became core operating subsidiaries and eight were smaller bolt on subsidiaries. Inishtech's profit grew from £500,000 in 1989 to £9. million.
The more important yardstick was earnings per share which went up from 7.2p in 1988 to £45.3p, a compound growth rate of 30 per cent per annum.
Would he not find it a daunting task to emulate? "That is not our objective, we are starting with a relatively small fund (£5 million) and we will take it from there," Mr Molloy said.
