Silverwood Brands - Trading Update

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU WHICH IS PART OF DOMESTIC UK LAW PURSUANT TO THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION (AS DEFINED IN UK MAR) IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

DATE: 13 October 2022

Silverwood Brands plc

("Silverwood" or the "Company")

Trading Update,

Interim results for the period to 31 August 2022,

Notice of General Meeting,

Subscription and Loan Facility,

Completion of Nailberry Acquisition, and

Appointment of new Directors

Silverwood Brands plc, an enterprise company established to invest primarily in branded consumer businesses, today has earlier today published its interim results for the period to 31 August 2022 and issues a trading update. The Company is also pleased to announce a successful equity and debt fundraising amounting to £6 million, the proposed completion of the Nailberry acquisition and the appointment of two Directors to its Board of Directors. In order to accelerate the growth of the Company, the Company intends to increase its share issuance authorities and intends to hold a General Meeting, which is being held on 2 November 2022.

Interim results for the period to 31 August 2022

Following the Company's change of year end, as announced on 30 September 2022, Silverwood has earlier today published its interim financial results, covering the period from the Company's incorporation to 31 August 2022.

Shareholders are encouraged to read the Company's interim financial information in conjunction with the below highlights:

·     Silverwood raised gross proceeds of £1.99 million by way of a subscription for new ordinary shares with an issue price of 40 pence per share contemporaneously with its admission to trading on the Access Segment of the Aquis Stock Exchange Growth Market on 8 November 2021.

·     The Directors are pleased that the cost base was tightly managed, and the Company's acquisitions were structured to ensure that performance of the targets is demonstrated before full payment is made.

·     In June 2022, the Company acquired 100% of the issued share capital of Balmonds Skincare Limited ("Balmonds") which sells organic and skin friendly skin products.

·     Although the Company posted a small loss for the period, it has now established a solid platform to support future growth plans.

·     The Directors are carefully assembling a high calibre team of executives, non-executives and advisors to pursue those future growth plans.

Trading Summary

The year has resulted in an unaudited pre-tax loss of £300,000. This is in line with expectations and comprises of costs relating to the Company's IPO on the AQSE Growth Market, advisory fees, due diligence costs and costs related to the acquisition of Balmonds.

The Company has successfully maintained a tight control on central costs for the past year. In the year ahead, the Company expects its cost base to increase as more members will be added to its core management team.

As at the end of August 2022, the Company's cash position remains positive with an unaudited net cash position of £ 1.76m.

The Balmonds acquisition was completed in June 2022 and therefore contributed to the Company's consolidated financial statements for only two and a half months' trading of this brand.

Balmonds is trading well ahead of initial expectations, with sales trending at over double the prior year which has moved the business into profit. The Directors intend to reinvest these profits to support further growth in the brand, including a move to larger production premises once a suitable location has been found.

The purchase terms for Balmonds allowed for a substantial deferred element which would become due should the business meet agreed performance criteria at the three-year anniversary. This payment is structured as a proposed issue to the vendors of up to 3,205,360 Silverwood shares pro rata to their previous holdings in Balmonds with a deemed issued price of 85p per share assuming all performance criteria is met. Given the recent improvement in trade, the Directors currently expect to make this payment in full.

Outlook

The current economic conditions remain challenging. The effects of the pandemic and the unfortunate events in Ukraine have continued to weigh down on global economic activity. In the UK, the cost-of-living challenges and recent UK currency and political events have had an impact on the Company's operations.

The Company and management have had to adapt to the challenging environment, and this can be noted by management's ability to set up new sales channels in non-UK markets while growing UK-based production. This is expected to provide a buffer against the cost pressures of the Company's predominantly sterling cost base.

Ultimately, however, both Balmonds and Nailberry are small brands that sit within very large markets where there is ample room for them to grow. The Directors intend to focus on the existing sales and strategy targets for these brands and add profitable growth.

New Ventures

The Directors continue to be presented with interesting opportunities in the beauty and wellness space. Whilst most of these businesses do not meet Silverwood's acquisition criteria, certain opportunities appear attractive and management will continue to explore adding more brands to Silverwood's portfolio over the coming year.

Notice of General Meeting

In order to progress its growth strategy, the Company proposes to seek shareholder approval in order to allow the Company to issue new ordinary shares to satisfy potential acquisitions and future equity fundraisings. The General Meeting ("GM") is proposed to be held on 2 November 2022 at 11:00 a.m. at the offices of the Company's AQSE Corporate Adviser and Broker, VSA Capital at Park House, 16-18 Finsbury Circus, London EC2M 7EB.

A shareholder circular containing details of the shareholder authorities being sought together with the Notice of GM and a Proxy Form will be posted to shareholders in due course and will be available on the Company's website at https://www.silverwoodbrands.com/investors/.

Castelnau Subscription and Loan

Pursuant to agreements entered into on 12 October 2022 between the Company and Castelnau Group Limited ("Castelnau"), the closed-ended investment company trading on the Specialist Fund Segment of the London Stock Exchange and managed by Phoenix Asset Management Partners ("PAMP"),  Castelnau has agreed to subscribe for 2,285,715 new ordinary shares ("New Ordinary Shares") at a price of 70p per share, amounting to an aggregate of £1.6 million. In addition, Castelnau has agreed to provide the Company with an unsecured loan facility of approximately £4.4 million ("Loan").

Silverwood intends to drawdown the full facility of £4.4 million to enable the completion of the proposed acquisition of Nailberry by the Company which was announced on 30 September 2022. The Loan is repayable on the first anniversary of draw down  with an annual interest rate of 15% accruing daily. The Loan becomes immediately repayable in the event that Mr Andrew Gerrie is no longer a director of Silverwood.  In addition, it includes provisions for usual events of default at which time Castelnau may by notice declare the Loan and all accrued interest is immediately due and payable. 

As a result of the Company's executive director, Andrew Gerrie, also being a non-executive director of PAMP, Castelnau will be deemed to have joined the Original Concert Party described in the Company's Admission Document dated 20 May 2022 (which, for ease of reference, can be found at https://www.silverwoodbrands.com/publications-presentations-and-supporting-documents/ ), increasing the Concert Party's holding from 73.24% to 77.66% of the Company's issued share capital.

The impact of Castelnau's investment into the Company is detailed below:

*Alison Hawksley's and Andrew Gerrie's shareholding comprises shares held in their respective own names, held jointly as well as shares held by Silver Americum Limited, a company in which Andrew Gerrie holds a 20% stake and Alison Hawksley holds a 20% stake.

Following the issue of the New Ordinary Shares, increasing the Concert Party's shareholding in the Company to 77.66% of the Company's voting rights, for so long as the Concert Party hold more than 50% of the Company's voting share capital and its members are presumed to be acting in concert, they may increase their aggregate interests in the Ordinary Shares in the Company without incurring any obligation under Rule 9 to make a mandatory offer for the remaining shares, although individual members of the Concert Party, with the exception of Andrew Gerrie and Alison Hawksley, would not be able to increase their percentage interest in the Ordinary Shares of the Company through 30%, or between 30% and 50%, without the consent of the Panel.

Completion of the Nailberry Acquisition

As per the announcement from 30 September 2022, the Directors are delighted with the exchange of contracts for the purchase of Nailberry, the trading name of NBY London Ltd.

On 30 September 2022, the Company announced the conditional acquisition of Nailberry subject to certain financing arrangements being completed. The Company is pleased to advise the financing arrangements have now been completed allowing the Company to proceed with the completion of the acquisition of Nailberry.  The Company intend to complete the Nailberry Acquisition as soon as possible and it will make another announcement once it has been completed.

Appointment of Directors

The Company is pleased to announce the appointment of Sonia Hully to the Board of Directors as an Executive Director with effect of the completion of the Nailberry Acquisition. Sonia Hully is the founder and CEO of NBY London Limited which owns the Nailberry brand.

Ms Hully has extensive experience in the consumer and beauty sectors. She started Nailberry with the opening of a renowned salon in Chelsea she successfully sold in 2016 and quickly expanded in the products category such as the award-winning breathable Nail polish and Nail care for the last 8 years.

Ms Hully started her career in the capital markets for Societe Generale, Prebon Yamane and Eurobrokers.  Since leaving the financial industry, she has been involved as an interior designer in the development of several luxury properties and as an entrepreneur, philanthropist, and venture capital investor, focusing on energy transition, sustainability, and animal rights. Ms Hully's experience will not only enrich Silverwood's Board of Directors for her knowledge of the consumer sector but also for her experience in entrepreneurial management and finance and her values.

The Company is also pleased to announce the appointment of Tanith Dodge to the Board of Directors as a Non-Executive Director with immediate effect.

Ms Dodge is an International Business Leader working as a member of senior executive teams and providing a commercial approach to the business and people agenda and has over 35 years of experience working as an HR Director across a broad sector of international businesses. Her previous positions included Group HR Director Bicester Village Collection, a member of the Management Committee and Group HR Director at Marks and Spencer Group PLC and at WH Smiths PLC. Tanith has held senior HR roles at Intercontinental Hotels, Diageo, Prudential PLC and Allied Domecq. Her current board experience includes Independent Non-Executive Chairperson of Samarkand Group PLC, Interim Chairperson and Senior Independent Non-Executive Director at Robert Walters PLC. In addition, she is a member of the Advisory Council for PriceWaterhouseCoopers responsible for advising internal business leaders on a range of business matters. She has also been a director of Regents Inns Plc and Busy Bees Plc and is a former Trustee of Ambitious About Autism and also Kids Out and a former board member of CIPD.  

In respect of both Ms Dodge and Ms Hully, there is no other information to be disclosed pursuant to Rule 4.9 of the AQSE Growth Market Access Rulebook.

Settlement and dealings

Application has been made to the Aquis Stock Exchange for the admission to trading on the Aquis Stock Exchange Growth Market ("Admission") of the New Ordinary Shares. It is expected that Admission of the New Ordinary Shares will become effective at 8.00 a.m. on or about 21 October 2022.

The New Ordinary Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares including the right to receive dividends and other distributions declared following Admission.

Following the issue of the New Ordinary Shares, the enlarged share capital of the Company will be 13,817,062 Ordinary Shares. The above figure 13,817,062 may be used by shareholders as the denominator for the calculations by which they can determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

Andrew Gerrie, Executive Director of Silverwood, commented:

"I am pleased with the progress we have been making and today's announcement highlights growing momentum in building a group focused on health and healthy brands. I am also pleased for our two new and experienced members to join our Board of Directors."

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Forward Looking Statements

This announcement contains forward-looking statements relating to expected or anticipated future events and anticipated results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, competition for qualified staff, the regulatory process and actions, technical issues, new legislation, uncertainties resulting from potential delays or changes in plans, uncertainties resulting from working in a new political jurisdiction, uncertainties regarding the results of exploration, uncertainties regarding the timing and granting of prospecting rights, uncertainties regarding the Company's ability to execute and implement future plans, and the occurrence of unexpected events. Actual results achieved may vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors.