Findel Education sold to management in £30m cash deal

Studio Retail Group plc, the Accrington-based online value retail business, has agreed the sale of Findel Education Limited in a management buyout deal worth £30m in cash.

The Hyde-based business has been sold to West Moorland 221 Limited, a newly-formed company owned by investment funds managed by Endless.

In addition to the acquisition price, the group has made available a working capital facility of £2m to Findel Education.

The net cash proceeds will be used to make a voluntary payment to Studio Retail Group’s defined benefit pension fund of £9m, with the remainder used to reduce group net debt.

The disposal will simplify the group’s operations and allow management to focus on the fast growing Studio business.

Following a transformational year for Studio, the group intends to continue to pursue and accelerate its strategic vision of becoming the leading online value retailer with an integrated financial services offer.

Findel Education is a leading supplier of resources and equipment to schools in the UK and overseas.

As at September 25, 2020, Findel Education had gross and net assets of £81.6m and £17.2m, respectively, and generated profit before tax of £2m for the year ended March 27, 2020.

Studio Retail Group chief executive, Paul Kendrick, said: “Under SRG’s ownership, Findel Education has transformed itself from a catalogue retailer to an online first business and we are confident that it will continue on the next phase of its digital transformation under the ownership of Endless. We are thankful to all of our colleagues at Findel Education for all their hard work and wish them all the best for the future.”

Findel will be managed by managing director Chris Mahady, deputy managing director and chief financial officer Mark Whittaker, and chief techology officer, Martin Jones.

Chris Mahady said: “We are pleased to have secured the investment from Endless and strongly believe that, together, we can develop the company at pace, through investing in our brands and capabilities in the wider schools and nurseries marketplace.

“We would also like to thank Studio Retail Group for the support they have given Findel Education during their ownership.”

Andrew Ross, partner at Endless, said: “We are delighted to be backing Chris, Mark, Martin and the entire Findel Education team to deliver our exciting shared vision for the business and look forward to working closely with them in the coming years.

“We would also like to thank Studio Retail Group for the support they have given Findel Education during their ownership.”

Endless said the deal further adds to its excellent track record of carving out businesses from corporate sellers.

The Endless deal team was led by Andy Ross and David Isaacs with support from Adam Keasey, Stefan Nowakowski and Linda Nguyenova on financial due diligence.

Endless was advised by Walker Morris (legals) led by Debbie Jackson and Adrian Moss, Alantra (corporate finance) led by Keith Pickering, Palladium (digital diligence) led by Dan Shreeve and KPMG (tax) led by Steve Heath.

Studio retail was advised by a team from Squire Patton Boggs led by Jane Haxby and Rebecca Meyers.

A proposed £50m sale of Findel to Wakefield-based YPO collapsed in November 2020 following an objection by the Competition and Markets Authority.

Studio Retail Group also said the sale concludes its strategic review, including the possible sale of the group, which was announced last December.

It said, despite engaging extensively with many parties, discussions did not progress beyond receiving qualified, indicative and non-binding expressions of interest for the company, which is no longer available for sale, although the board received multiple offers to acquire the group’s educational resources business, resulting in today’s deal.

In a separate trading update today, Studio Retail Group said its traditionally quieter final quarter was “exceptionally strong”.

Product sales in in the fourth quarter were 88% ahead of the prior year, with gross margin rates from product sales in this period 650% higher than the equivalent period last year. This performance contributed to product sales growth of 43% for the full year, with gross margin rates up 290% year-on-year, a record breaking performance.

Over the period, government support in relation to the COVID-19 pandemic was either repaid or not claimed and had no impact on profitability.

The business said it has seen a step-change in its active customer base this year.

The total customer base of 2.5m is up 36%, with more than 1.5m active credit account customers, up 15%. The proportion of sales coming from the Studio App, downloaded by more than a million customers, has increased to in excess of 25% during quarter four.

Based on the unaudited draft results, the adjusted profit before tax from continuing operations for fiscal year 2021 is expected to be in the region of £48-50m, up 75% – 83% on £27.3m in 2020.

This step change in the group’s financial position as a result of the recent trading performance and sale of Findel Education will now allow Studio to evaluate a range of options to continue to grow the business and enhance shareholder value.

Paul Kendrick said: “Studio has seen strong trading during the financial year ending 26 March 2021 whilst successfully managing the operational challenges of the pandemic, which, along with the sale of Findel Education, creates a step change in our financial position. We start the new financial year from a position of focus and strength, with the growth in our customer base demonstrating the success of our leading online value retail and integrated financial services offer.”