Manufacturer’s share price up 25% after legal dispute settled
Sprue Aegis’s share price rebounded from an all-time low after it revealed it had reached an agreement with BRK Brands over claims of a breach of contract.
The manufacturer’s shares rose 25% after the stock market announcement and it ended the week at 126p. However that remains a long way below the 190p level it was trading at before BRK’s claims were made in March.
BRK terminated its distribution agreement claiming Coventry-based Sprue Aegis had committed a breach which “severely damages BRK”. An agreement had been in place since 2010, but in March 2017 Sprue received 12 months’ written notice. Days before the notice period ended, BRK claimed a breach by Sprue that was “not curable” and that BRK shall not be purchasing any stocks of unsold products.
The gross book value of the disputed stock of unsold BRK products was £4.3m at March 31. An agreement has now been reached which will see BRK buy from Sprue all BRK inventory manufactured from January 2017 for £1.02m. Sprue will pay its outstanding balance of £11.0m by Christmas Eve this year.
Graham Whitworth, executive chairman of Sprue, said: “I am pleased to announce that we have reached agreement with BRK following the termination of the DA [distribution agreement] and MA [manufacturing and supply agreement], which deals with all outstanding matters and enables us both to move on with our respective businesses without the risk of legal claims.”
Sprue now expects to publish its audited results for 2017 tomorrow, having delayed publication until the BRK claims were resolved.
The accounts will now include a £3.8m exceptional charge, which includes £3.4m to write down the book value of the remaining BRK inventory, provisions of £0.2m to cover the disposal of other BRK inventory and £0.2m to cover the group’s legal and professional fees caused by the claim.