Smaller Companies: Caverdale gears up with Trust Parts acquisition

CAVERDALE, the tiny Luton-based motor dealer whose shareholder list reads like a roll call of the seriously rich, will today take an important step towards achieving its long-term growth ambitions.

Two years ago, the company underwent a pounds 2m management buy-in led by Arild Nerdrum, the Norwegian banker, and Damian Aspinall, son of the casino and zoo owner, John.

The plan - also backed by Sir James Goldsmith, the billionaire, and James Packer, the Australian media tycoon's heir - was aimed at developing Caverdale into a prominent motor dealer and car parts supplier within five years.

That objective should get a considerable boost after it announces the acquisition of Trust Parts, a privately owned supplier to the motor trade, for close to pounds 1m in cash.

The purchase is the fourth made by Caverdale's new management team and comes a month after it returned to the black with taxable profits of pounds 663,000 for the half-year to 30 June, against a pounds 272,000 loss last time.

Trust Parts operates a fleet of 70 vans supplying consumables to small manufacturers, workshops and garages. Based in Swindon, it also has 11 franchisees and is regarded as one of the three biggest suppliers of its type in Britain.

However, its activities are highly complementary to Caverdale's existing van-based supplies business, Allied Components. By merging the two, Caverdale would create a nationwide sales network, making it the UK's largest supplier with one-fifth of a pounds 90m-a-year market.

Although Trust Parts incurred a small loss on sales of pounds 4m last year, it is understood to have returned to profits in the current year. Its net assets at the end of last October amounted to about pounds 980,000.

Under the terms of the deal Caverdale will pay an initial sum of about pounds 750,000. The balance is due next year and will be subject to a valuation of Trust's assets and trade debts.

Meanwhile, Caverdale is also known to be in acquisition talks to build its motor retailing side, which has grown susbtantially in the past two years.

At present it comprises eight sites covering seven marques including Citroen, Land-Rover and Mazda. Thanks to acquisitions, the division's annual sales are now running at pounds 45m against the group's entire turnover of pounds 13m last year.

As a result, the division is likely to contribute to a sharp improvement in the group's performance. Carr Kitcat & Aitken, the company broker, is forecasting group taxable profits of pounds 1.4m for the year to 31 December compared with a pounds 408,000 loss in 1992.

At 11p the shares are trading on about 12 times prospective earnings, a substantial discount to the sector, which has seen a strong run due to robust demand for new cars.

Some analysts believe Caverdale's shares have been left behind partly because it not yet well known in the City. However, its improving prospects and a high-profile shareholder base could soon change perceptions.