LTS Litho Supplies

RNS Number:5335M
Litho Supplies PLC
25 January 2008



LITHO SUPPLIES Plc

Trading update and Acquisition Announcement


The board of Litho Supplies Plc announces that trading in the second half of the
year ended 31 December 2007 was impacted by reduced confidence following the
uncertainties in the financial markets with the resulting effect that the profit
before tax for the year will be less than market expectations.



The sale of equipment in particular was difficult in the second half with many
customers deferring the decision to invest.  Whilst there was a slightly
stronger finish to the year with equipment sales, there was considerable
competitive pressure on gross margins on these sales.



The board is addressing the cost base of the Group and has closed a distribution
unit in the Midlands consolidating the logistics of the operation within another
warehouse in the company; regrettably this did involve some staff redundancies.
The full benefit of this cost saving will be effective from quarter two in 2008.



The bad debt charge was also slightly higher in the second half of 2007 in
comparison to the first half and we continue to apply stringent credit control
procedures in order to minimise this charge in the future.



The board has reviewed and will continue to further address the cost base of the
business in 2008 as the dynamics of the market that we serve changes.



We are also at an advanced stage of testing and implementing a new computer
system in order to streamline and improve business efficiencies; the benefits of
this system are anticipated to commence towards the end of 2008.



We have invested in a number of new business initiatives during 2007 that add to
our existing market with the addition of dedicated sales personnel.  One such
initiative was complemented as previously announced on 23 October 2007 by the
purchase of Graphica Plus Limited, trading as Andersons.  This company sells
equipment and consumable media to the expanding signage and point of sale
markets and also supplies the advertising and proofing markets  A great deal of
management time has been invested in this business since acquisition and the
warehouse and distribution side of the company has been successfully integrated
within existing Litho Supplies distribution units.  Due to these initial
integration costs, benefits from the acquisition are anticipated to commence
during quarter two of 2008.



We also invested in sales personnel for the office equipment market in various
parts of the UK in 2007.  We have had some success in certain areas but in the
areas where we have not achieved an acceptable rate of return, the sales
initiative and related costs have not been continued.



The balance sheet of the Group remains strong and the final dividend will be
recommended by the board taking into consideration the distributable profits of
the company and the cash requirements.



Acquisition Announcement



The board is pleased to announce that on 24 January 2008 it acquired through
Litho Supplies (UK) Limited the whole of the issued share capital of Payrite
Services Limited, its main trading subsidiary Graphic Arts Equipment Limited and
the remaining 49% of the share capital of Shinohara (UK) Limited. (Litho
Supplies (UK) Limited already owns the other 51% of the share capital of
Shinohara (UK) Limited).



Graphic Arts Equipment's principal activity is the sale, installation and
servicing of leading lines of printing and finishing equipment with exclusive
distribution agreements for Horizon and Perfecta in the UK and Ireland.
Shinohara (UK) Limited markets, sells and services the Shinohara Printing Press.



The consideration for the acquisition is as follows:



-         Initial consideration of �1.4 million payable on completion

-         �200,000 worth of shares in Litho Supplies Plc based on the average
          mid-market price of the Company's shares over the previous seven 
          business days

-         Deferred performance-related consideration in the three years
          following completion capped in total at �700,000 to be satisfied in 
          cash.



Application will be made for the new ordinary shares to be admitted to the
Official List.



The value of the gross assets being acquired per the 30 April 2006 audited
accounts is �3,709,824.



The audited profit before tax for the year ended 30 April 2006 was �172,670.



The board of Litho Supplies Plc is delighted that the vendors and directors of
the companies being acquired, Mr A E Hards and Mr B P Godwyn, are to continue
with the businesses.



Both parties agree that there are significant cross-selling opportunities and
other potential synergies between Litho Supplies and the companies being
acquired.





For further information, please contact:


Mr Michael Hammond, Chief Executive:                    Tel: 01332 873921
Mr Eddie Williams, Sales Director:                      Tel: 01332 873921
Mr Gerry Mitchell, Financial Director:                  Tel: 0117 9724455

Mr John Wakefield, Blue Oar Securities Plc:             Tel: 0117 9330020
Mr Marc Davies, Blue Oar Securities Plc:                Tel: 0117 9330020




                      This information is provided by RNS
            The company news service from the London Stock Exchange
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