McLernon Group of Companies

MSD Limited (to be formed) is currently a Group of companies made up of a retail company with three retail outlets (Topstone Holdings Pty Ltd ATF McLernon Unit Trust t/a McLernons Supply + Demand [O'Connor, Welshpool, Joondalup]), an import wholesale company ( MSD Wholesale Pty Ltd), a cabinet making factory (MSD Cabinets Pty Ltd), an auctioneering business (Portacorp Pty Ltd) and a share holding ( Via MSD National Pty Ltd) in a Hong Kong registered exporting agent (Kingfeng Export Corporation Limited) that owns an office furniture manufacturing company in China. Please see structure tree above.

Peter McLernon is the sole director of each of the Group's companies and through his family trust sole or major shareholder of each company. Peter McLernon's background has been as a principal in small business in Western Australia for over thirty years. He founded and owned WA Scrap Metals in Gnangarra, Commercial Sales and Salvage in Northbridge and Direct Office Furniture in West Perth. Throughout most of this time he has been a licensed Second Hand Dealer and/or Auctioneer. During this period he also served as Managing Director of Countrywide Credit Limited and The Life Insurance Policy Exchange Pty Ltd based in both Perth and Sydney offices.

The McLernon Group of Companies was founded by Peter McLernon in the year 2000. The Group started as a sole trader family business selling mainly used office furniture, shelving and shop fittings from premises in Welshpool, Perth, Western Australia. Stock was purchased locally from auctions and directly from businesses upgrading, moving or closing down. The intention was to become the largest dealer in second hand commercial goods in Western Australia and this aim was quickly achieved.

As clientele grew, demand for new products to compliment the available second hand stock expanded. Lines of new stock, purchased from local wholesalers were progressively added to the large stocks of second hand goods carried by the business. We quickly began to take a profitable share of the new market away from our retail competitors.

The original store in Welshpool was doubled in size to cope with the increase in stocks and sales and in July 2004 additional premises were leased in O'Connor. Also in 2004 we began to import new stock lines directly from China, Taiwan and the UAE. Our strategy in China was to use a local agent to increase quality controls and liaise with local manufacturers. We set up a strategic alliance with a PRC national partner based in Shenzhen in Southern China who had a Hong Kong registered export agency, Kingfeng Export Corporation Limited.

The premises in O'Connor were used as a combined import warehouse and retail outlet. In October 2006 MSD Wholesale Pty Ltd was established to sell imported products to the retail stores and to begin making wholesale sales to outside retail businesses. Also in 2006 MSD Cabinets Pty Ltd was establish to provide custom built furniture for our customers. This meant that we could provide a more complete service to our office furniture customers and begin to do on site and fit out work. We also were now supplying up to 90% of our own product brands for our retail stores.

In 2005 McLernon's Supply + Demand Auction Division (Portacorp Pty Ltd) was established to give added benefit to our clients wishing to dispose of assets. The Auction division is a fully licensed auction house capable of conducting all classes of auctions anywhere in Western Australia. The auction business also holds a contract to dispose of the West Australian Governments surplus IT equipment.

Also in 2005 Megajet Pty Ltd was formed to buy, refurbish and on sell second hand IT equipment. This business was closed in 2006 and the IT business folded into the retail business so that new and refurbished IT and business equipment is now sold through our retail stores. The combination of new and used office furniture, shelving and storage systems, shop fittings and IT and business equipment allows us to provide a one stop shop for most commercial business requirements.

Growth in Western Australia

In Jan 2006 a small office furniture business was purchased in Joondalup giving us three stores in strategic central, southern and northern suburban locations, increasing the viability of our marketing campaign and increasing volumes sold by our wholesale division. It is our intention to open at least two more metropolitan branches in the second half of 2008 to continue the expansion of our market share in each of the four product categories.

We will also continue to grow our share of the office furniture and shelving wholesale market in WA. In December 2008 the wholesale business was moved into a dedicated 7000 sq meter warehouse in O'Connor to allow for increased container traffic and future expansion. This also increased the amount of retail floor space at the O'Connor store which will be taken up by our expanded new range together with more second hand stock.

International Growth

In March 2007 we established MSD National Pty Ltd and it then purchased a 50% share in the agency business (Kingfeng Export Corporation Limited) and together with our Chinese partner began to export office furniture to Australia, the UK and USA.

In November 2007 a one third share of Kingfeng Export Corporation Limited was sold to Office Interiors Limited, a United Kingdom based retailer of new and used office furniture with four retail branches. Kingfeng Export Corporation Limited is currently incorporating a wholly owned PRC company to begin the manufacture of office furniture in Southern China in its own right. Office furniture from this company will be exported through Kingfeng to Australia, the UK and other countries. Our Chinese partner will also begin to sell to the huge local Chinese market.

Growth in Australia

During the first half of 2008 the potential for franchising branches as a way of growing further in WA and expansion into other states was canvassed. Franchising may form part of the future of the Group in some instances, however it has been concluded that most of the growth for the business will come from purchase and acquisition of existing businesses both in Western Australia and in all other states.

An overview of the new and used office furniture and shelving industry and used IT industry across Australia shows a fragmented retail industry with most businesses confined to one to three stores within each state. Very few are based in more than one state and many are family owned businesses struggling to compete with other medium sized importers who have the capacity to import stock. The way is open for a truly national office furniture commercial retail chain.

It is the intention of the company to establish through purchase, acquisition and amalgamation at least twenty five stores across Australia in the next three to five years. These will be followed by wholesale and cabinet works in each state as required to service branches.

It was decided in 2008 to establish MSD Limited and list the company on the Australian Small Scale Offerings Board as a means of bridging the gap between being a small family owned business and becoming a public company listed on the ASX. Funding provided by this initial listing in July 2008 will finance the planned Australia wide growth of the business and also allow for acquisition by offer of shares in the company to owners of existing office furniture businesses.

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McLernon Group of Companies

Profiles

Peter McLernon

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Contact

36-48 Welshpool Rd, Welshpool WA 6106
Tel: (08) 9470 9997 Fax: (08) 9470 9119
Email: mail@mclernons.com.au
Branch Opening Times: Mon/Fri 8.30am - 5pm
Saturday 9am to 1pm

Perth

Social and Community Entrepreneurs

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