Proposed Placing,Capital Reduction,Trading Update

RNS Number : 3649K

Restore PLC

14 July 2011

 



7:00am on 14 July 2011

Restore plc

("Restore" or the "Company")

Proposed Placing of New Ordinary Shares to raise £4.56 million,  Proposed Reduction of Capital and Trading Update

The Company is pleased to announce that it intends to raise £4.56 million (before expenses of approximately £110,000) to strengthen the Company's balance sheet through the release of the Company's liability to repay approximately £2.63 million of debt to Geraldton Services Inc ("Geraldton") and to provide working capital for growth, through the placing of 7,010,123 New Ordinary Shares at a price of 65p per share (the "Placing").

Restore also announces that it is proposing to seek shareholder consent to undertake a reduction of capital. As such it is proposed that the Company apply to the High Court for  permission to reduce its capital by way of cancellation of its share premium account.

Further details of the Placing and Capital Reduction are set out in a circular that has been posted to Shareholders today. The Placing is conditional on the approval of Shareholders at a General Meeting and admission of the new ordinary shares to trading on AIM and the Capital Reduction is conditional on the approval of Shareholders at a General Meeting, the approval of the High Court and compliance by the Company with procedure set out in the Companies Acts.  A copy of the circular will be made available on the Company's website at www.restoreplc.com

Background to the Placing and use of Proceeds

Restore announced a strong performance for the financial year ended 31 December 2010 with a return to profitability by the Group. For the year to 31 December 2010 adjusted profit before tax was £2.7 million, compared to a loss of £0.1 million in 2009. Adjusted operating profit more than doubled to £3.4 million (2009: £1.5m) on revenue which rose slightly to £27.7 million (2009: £27.0 million). In April 2011, Restore announced the acquisition of the business and certain assets of Sargents Logistics Limited and Sargents Archive Limited ("Sargents") to increase its document storage business and enter the office relocation market, followed by the acquisition of the business and assets of Management Archives in Leeds in June 2011 to increase the geographical coverage of its document storage business.

Net debt at the year-end was £12.3 million (2009: £21.6 million), including £2.3 million (2009: £10 million) of subordinated loans from Geraldton. Net bank debt at 31^st December 2010 was £10.0 million (2009: £11.6 million).

The Placing monies raised will strengthen the Company's balance sheet by reducing the indebtedness of the Group by the Geraldton debt of approximately £2.63 million as at the expected date of admission of the new ordinary shares to trading on AIM. In addition, the Placing will provide proceeds to allow the Company to take advantage of organic growth opportunities and potential acquisitions in the data management and broader support services sector as they arise.

The Placing will also widen the shareholder base of Restore which the Board believes will increase the marketability and valuation of the Company's shares.  

Three of the Directors, namely Sir William Wells, Dr. John Forrest and Harvey Samson, have agreed to subscribe for in aggregate 57,323 of the New Ordinary Shares in the Placing amounting to a total value of approximately £37,260.

Following completion of the Placing the revised shareholdings of the Directors will be as set out below.

Director	Number of Ordinary Shares held	Percentage of the Issued Share Capital (to 2 decimal places)
Sir William Wells	352,553	0.66%
Charles Skinner	511,415	0.96%
Andrew Wilson	46,461	0.09%
Dr. John Forrest	7,692	0.01%
Harvey Samson	15,385	0.03%

The issue of the New Ordinary Shares is conditional on the passing of the Resolutions and Admission. Admission is expected to take place on 2 August 2011.  The New Ordinary Shares will, upon issue, rank pari passu in all respects with the existing issued Ordinary Shares.

Following completion of the Placing, the Enlarged Share Capital will comprise 53,053,495 Ordinary Shares.

Background to the Capital Reduction

As at 31 December 2010 the Company had an aggregate negative balance on its retained earnings account and other reserves accounts of £41.8 million (''Balance'') and a share premium account of £52.3 million.

The share premium account is an undistributable reserve and, accordingly, the purposes for which the Company can use its share premium account are extremely restricted. In particular, it cannot be used for the purpose of making distributions to shareholders or to fund a buy back of the Company's shares.

However, with the consent of the High Court, the Company may reduce or cancel its share premium account such that the reserve arising can go straight to distributable reserves. In the present case, the Company proposes to give an undertaking to the High Court not to distribute the surplus arising until certain creditors of the Company have been satisfied.

Accordingly, in order to create sufficient distributable reserves to enable the Company to pay dividends and/or buy back Ordinary Shares in the future (although there is no current intention to do so) the Board has resolved to seek Shareholders' authority to reduce the Company's share premium account by £52.3 million. The reduction of the share premium account will eliminate the accumulated deficit and create distributable reserves (subject to the proposed undertaking).

The Placing, which is scheduled to complete before the Capital Reduction becomes effective, will result in the Company's share premium account being increased by £4.2 million to £56.5 million. It is not proposed to reduce the Company's share premium account by that additional £4.2 million.

The reduction of share premium account would reduce this account to £4.2 million. However, the Capital Reduction would leave the Company's net assets unchanged and the underlying book value of the Company's assets would be unaffected.

In addition to the approval of Shareholders, the Capital Reduction requires the approval of the High Court.  The reduction of the Company's share premium account will only take effect if confirmed by the High Court and upon the Court Order and statement of capital (approved by the High Court) being registered by the Registrar of Companies. The Company proposes to give an undertaking to the Court not to distribute the surplus of the reserve arising from the Capital Reduction until certain of the Company's creditors at the date of the Capital Reduction have been paid of, consented, or otherwise been adequately protected. With other creditors, the Company proposes to either obtain their consent or satisfy the High Court that there is no real likelihood that the Capital Reduction would result in the inability of the Company to discharge those debts of the Company when they fall due. Your Board is satisfied that this is the case.

General Meeting

The General Meeting of the Company is to be held at 8.30am on 1 August 2011 at Marble Arch Tower, 55 Bryanston Street, London W1H 7AA.

The Placing Agreement

Cenkos has entered into a Placing Agreement with the Company whereby it has agreed to use its reasonable endeavours, as agent for the Company, to procure placees for 7,010,123 Ordinary Shares.

The placing of the New Ordinary Shares is conditional upon, inter alia, Admission on or before 8.00am on 2 August 2011 (or such later time and/or date as the Company and Cenkos may agree but in any event by no later than 8.00am on 16 August 2011).

The Placing Agreement contains warranties from the Company in favour of Cenkos in relation to, inter alia, the accuracy of the information in this document and other matters relating to the Company and its business. In addition, the Company has agreed to indemnify Cenkos in relation to certain liabilities it may incur in respect of the Placing.  Cenkos has the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event of a material breach of the warranties.

Dealings

Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM.  It is expected that Admission will occur on 2 August 2011.

The New Ordinary Shares will, when issued, rank pari passu in all respects with the existing issued Ordinary Shares including the right to receive dividends and other distributions declared following the relevant admission.

Recommendation and related party transaction

Geraldton Services Inc is considered a related party under the AIM Rules for Companies and is expected to subscribe for 4,047,645 New Ordinary Shares in the Placing.  A total of approximately £2.63 million of the placing proceeds will be used to extinguish its debt with Restore in full. The subscription is considered a related party transaction under the AIM Rules for Companies. The Directors, having consulted with Cenkos, Restore's Nominated Adviser, consider the proposals set out in this circular and Geraldton's subscription for 4,047,645 New Ordinary Shares to be fair and reasonable so far as shareholders are concerned.

Accordingly, the Directors recommend Shareholders to vote in favour of the Resolutions to be proposed at the General Meeting, as they intend to in respect of their shareholdings of 876,183 existing Ordinary Shares, representing approximately 1.9 per cent. of the current issued ordinary share capital of the Company.

Trading Update

Trading in the first six months of 2011 has been in line with expectations. Restore's core document storage activities remain robust.  The acquisitions made over the last 9 months are contributing to Group profitability, exceeding management's expectations.  Sargents, the relocation and document storage business acquired in April 2011, is on track to make a material contribution to Group profits in the current year.  Peter Cox Limited, our damp-proofing and timber treatment business, has performed in line with budget, despite a weakening in its market in the second quarter related to the sharp drop in housing transactions.

Commenting on the proposals and the trading update Charles Skinner, Chief Executive of Restore plc, said:

"This proposed placing further strengthens our balance sheet with the repayment of the outstanding subordinated debt, together with additional capital to take advantage of the many growth opportunities in our sector. Combined with the recent debt refinancing announced at the end of June, we now have significant funds readily available for development both organically and through acquisition.

The capital restructuring would give us the capacity to pay dividends and buy in shares should the Board feel this is appropriate.

I am pleased to confirm that current trading is in line with expectations with recent acquisitions contributing strongly to the Group performance. Overall, Restore plc is increasingly well-positioned for strong, profitable growth."

Enquiries

Restore plc
Charles Skinner, Chief Executive Harvey Samson, Finance Director	Tel: [phone] Tel. [phone]
Cenkos Securities
Nicholas Wells / Elizabeth Bowman	Tel: [phone]
Threadneedle Communications
John Coles	Tel: [phone]

 

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