Placing of new Ordinary Shares to raise c.£40.0m
31 January 2017
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION EU 596/2014 ("MAR"). IN ADDITION, MARKET SOUNDINGS (AS DEFINED IN MAR) WERE TAKEN IN RESPECT OF THE MATTERS CONTAINED IN THIS ANNOUNCEMENT, WITH THE RESULT THAT CERTAIN PERSONS BECAME AWARE OF SUCH INSIDE INFORMATION AS PERMITTED BY MAR. THAT INSIDE INFORMATION IS SET OUT IN THIS ANNOUNCEMENT AND HAS BEEN DISCLOSED AS SOON AS POSSIBLE IN ACCORDANCE WITH PARAGRAPH 7 OF ARTICLE 17 OF MAR. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THE INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS SHALL THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION IN RELATION TO THE COMPANY AND ITS SECURITIES.
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Mercia Technologies PLC
("Mercia", the "Company" or the "Group")
Placing of new Ordinary Shares to raise approximately £40.0million
Mercia Technologies, a national investment group focused on the creation, funding and scaling of innovative technology businesses with high growth potential from the UK regions, is pleased to announce a conditional placing of, in aggregate, 86,956,521 Placing Shares at 46 pence per Placing Share. The Placing Price represents a discount of approximately 8.9 per cent. to the closing mid-market price of 50.5 pence per Ordinary Share on 30 January 2017 (being the last practical date prior to the announcement of the Placing).
Once completed, the gross proceeds from the Placing will be approximately £40.0million. The primary purpose of the Placing is to accelerate the development of the Group's existing portfolio companies and to capture the opportunity to invest in new direct investment opportunities across its target sectors nationally and specifically within the UK regions. The number of opportunities has been significantly enhanced through the acquisition of Enterprise Ventures Group Limited in March 2016 which took the number of investee technology companies in the Group's third party managed funds from circa 35 to circa 150.
Together with the potential for a marked growth in capital deployment over the coming 12 to 24 months, the Directors are also optimistic about the commercial opportunities facing the Group's portfolio companies as a whole and their potential for delivering shareholder returns. The Directors therefore unanimously believe that the Placing will significantly enhance shareholder value over the medium term, via sustained growth in net asset value.
The allotment of the Placing Shares is conditional, inter alia, upon the Company obtaining approval of Shareholders to grant the Directors the authority to allot such Placing Shares and to disapply statutory pre-emption rights which would otherwise apply to such allotment. A General Meeting is therefore being convened at Forward House, 17 High Street, Henley-in-Arden, Warwickshire B95 5AA on 16 February 2017 at 10.00 a.m. for the purpose of considering, and if thought fit, passing the Resolutions.
The circular (the "Circular"), which will provide further details of the Placing and includes a notice convening the General Meeting, is expected to be sent to Shareholders and be available on the Company's website later today www.merciatech.co.uk.
Mark Payton, Chief Executive of Mercia Technologies PLC, commented:
"The Placing to raise circa £40.0million which we are announcing today is the next step in Mercia's exciting growth journey. Since IPO in December 2014, we have made substantial progress in establishing Mercia as a leading investor in innovative companies across the UK's capital-underserved regions. We have a growing portfolio of direct investments where we see significant exit potential in the years ahead, as recently demonstrated by the sale of Allinea Software to ARM, the world's leading semiconductor IP company. Moreover, we have a greatly enlarged pipeline of future investment prospects in our substantial managed funds, underpinning our confidence in the potential to increase capital deployment over the next few years in both new and existing 'Emerging Stars'. The Placing will support these growth ambitions, utilising our Complete Capital Solution to significantly enhance shareholder value in the medium term."
Enquiries:
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Mercia Technologies PLC Mark Payton, Chief Executive Officer Martin Glanfield, Chief Financial Officer
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+44 (0)330 223 1430
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Cenkos Securities plc Ivonne Cantu / Mark Connelly (NOMAD) |
+44 (0)20 7397 8900 |
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Russell Kerr / Michael Johnson (Sales)
Buchanan Bobby Morse / Victoria Hayns / Stephanie Watson www.buchanan.uk.com |
+44 (0)20 7466 5000 |
Defined terms used but not defined in this announcement have the meaning set out in the Circular.
About Mercia Technologies PLC
Mercia is a national investment group focused on the creation, funding and scaling of innovative businesses with high growth potential from the UK regions. Mercia benefits from 18 university partnerships and six offices across the Midlands, the North of England and Scotland providing it with access to high quality, regional deal flow. Mercia Technologies PLC is quoted on AIM with the epic "MERC".
Mercia's 'Complete Capital Solution' initially nurtures businesses via its third party funds (with more than £228.0million under management) and then over time Mercia can provide further funding to its 'Emerging Stars' by deploying direct investment follow-on capital from its own balance sheet.
Since its IPO in December 2014, the Company has invested over £30.0million directly across its portfolio of 'Emerging Stars'.
ADDITIONAL INFORMATION
BACKGROUND TO, AND REASONS FOR, THE PLACING
Reproduced below without material adjustment is an extract from the Chair's letter to Shareholders, the full text of which will be contained in the Circular.
1. Background to, and reasons for, the Placing
1.1 The Mercia model
Mercia is a national investment company focused on the creation, funding and scaling of innovative businesses with high growth potential from the UK regions. Mercia uses its 'Complete Capital Solution' to initially nurture early stage businesses via its third party funds and then over time, as these businesses develop, to provide further funding to the most promising businesses ("Emerging Stars") using its own capital. This approach allows the Group to monitor and nurture a large pool of early stage businesses before committing its own capital to a small proportion of the managed funds' investee businesses, therefore substantially de-risking the Group's investment process in respect of its direct investment strategy.
Mercia's vision is to become a leader in its sector and to achieve this, the Company is:
· focusing on technology rich sectors with high growth potential in which the Group has developed significant expertise, namely Software & the Internet, Digital & Digital Entertainment, Electronics, Materials & Manufacturing/Engineering and Life Sciences & Biosciences;
· building a team of Investment Directors with significant industry and investment experience. With circa 60 employees, 26 of whom are threshold competent investment executives, Mercia benefits from a blended team of industry veterans, successful entrepreneurs and venture capitalists, providing the necessary insight to scale and exit investments across its selected sectors;
· seeking strategic syndication into the direct investments in which material equity positions have been established, thus achieving progressive valuations while retaining meaningful equity holdings until an appropriate exit path is chosen;
· expanding the size of its managed funds to invest in a sustainable pipeline of future 'Emerging Stars', whilst also generating fee income to materially offset the Group's operating costs;
· continually assessing its operating environment to evaluate acquisition opportunities of complementary businesses or investment assets;
· leveraging its relationships with universities, accelerators, incubators, other deal flow sources and its in-house business creation experience, to target known market opportunities; and
· operating in the capital-underserved regions of the Midlands, the North of England and Scotland where having a local presence provides a material advantage in identifying and supporting some of the most promising and innovative technology businesses.
Mercia aims to build a material stake when investing directly, typically between 20 to 40 per cent. before considering syndication. This enables Mercia to benefit from the value created in scaling the business and to exert a degree of influence as a principal shareholder.
Valuation approach
The Company conducts half yearly valuations of its portfolio based on International Private Equity and Venture Capital Valuation Guidelines (the "IPEV Guidelines"). In line with the IPEV Guidelines, investments are held initially at cost or the price of a recent funding round, with subsequent fair value movements triggered by external third party validation or comparable company metrics where available, once a portfolio company is in revenue growth or reaches profitability. In addition the Company may, from time to time, engage a professional adviser to provide an opinion on the valuation of a portfolio company, when there has been material commercial progress in the business and, in the absence of a recent funding round, the holding value is considered to be out of date. Similarly, in the event that an investee company is materially behind plan, Mercia may adjust, in accordance with its valuation policy, the equity valuation on a 25 per cent. declining basis, against the previously reported holding value. Individual portfolio company valuations are discussed and agreed with the Company's auditors as part of the annual statutory audit and interim results review process.
1.2 Mercia's 2014 IPO
At its IPO on 18 December 2014, Mercia successfully raised £70.0million gross proceeds with the specific proposed use of funds:
· 70 to 80 per cent. of funds to invest into existing or new direct investments, including sector consolidation platforms. By 31 March 2017 Mercia expects to have invested approximately 58 per cent. of the IPO proceeds into existing and new 'Emerging Stars' and have approximately 17 per cent. of the original IPO proceeds remaining; and
· 20 to 30 per cent. of funds for regional expansion, recruitment of experienced staff, working capital, IPO costs and selective complementary acquisitions. By 31 March 2017 Mercia expects to have spent approximately 25 per cent. of the IPO proceeds on its IPO costs, trading and acquisition activities.
1.3 Progress since IPO
Mercia has benefitted from accelerated expansion since its debut on AIM via a combination of organic and acquired growth as follows:
· university partnerships have grown from nine to 18;
· direct investment portfolio has grown from 11 to 26 companies as at 30 September 2016;
· direct investment value has grown from £9.0million to £46.6million as at 30 September 2016;
· over £30.0million has been invested across its portfolio of 'Emerging Stars';
· acquisition of Enterprise Ventures: one of the leading providers of investment capital for SMEs in the North of England, Enterprise Ventures was acquired on 9 March 2016 for a total consideration of up to £11.0million plus £2.0million of net cash. The acquisition has resulted in:
o managed funds growing from circa £22.0million to circa £228.0million;
o materially increased trading revenue with the majority of the Group's operating costs now being covered by the total revenues being generated;
o pipeline of new potential direct investments (via the Group's managed funds) growing from circa 35 companies to circa 150;
o office locations which provide access to, and management of, early-stage deal flow have grown from two to six; and
· experienced investment team and professional back office staff numbers have grown from circa 10 at IPO to circa 60, including Enterprise Ventures' staff, reflecting the planned scaling of the Group.
Mercia's objective of creating a stable, sustainable and scalable infrastructure has been successfully achieved. In parallel, the Directors are focused on building value from the direct investment portfolio to realise shareholder value over the medium term. Given the time frame to maximise the value of an investment, Mercia's strategy is to hold investments for the medium to long term, while taking advantage of value crystalisation opportunities that may arise.
First exit
The sale of Allinea Software Limited ("Allinea") to ARM Limited ("ARM") in December 2016 for a total cash consideration of up to £18.1million is a good illustration of the Company's strategy. Allinea is a leading provider of software tools for developing and optimising high performance computing applications. In 2009, Mercia identified the investment opportunity and led the funding of a management buyout of Allinea from a University of Warwick spinout. Over a period of seven years, with backing from Mercia, Allinea was scaled into a profitable, cash generative and dividend paying business before being sold to ARM, the world's leading semiconductor IP company. This first full cash divestment demonstrates how Mercia can create significant value through its Complete Capital Solution, delivering a return of circa 1.7x on Mercia's total investment cost and an immediate realised gain of £0.7million, compared with the holding value of £1.9million as at 30 September 2016.
1.4 Mercia's direct investment portfolio
The 26 direct investments (including Allinea) were held at a combined value of £46.6million on 30 September 2016. Of those, the 18 leading direct investments accounted for £45.7million (98.0 per cent.) of the total carrying value of the portfolio, with 77.8 per cent. of the carrying value found within the top 10 assets. In the period from IPO to 30 September 2016 across the entire portfolio, £7.6million (25.4 per cent.) has been invested in the Software & the Internet sector, £9.8million (32.6 per cent.) in Digital & Digital Entertainment, £7.8million (25.9 per cent.) in Electronics, Materials & Manufacturing/Engineering and £4.8million (16.0 per cent.) in Life Sciences & Biosciences. The continual monitoring and balancing of the direct investment portfolio (by value and number) ensures that no single company or sector overweighs the portfolio and therefore the exposure to any one sector is mitigated. As at 30 September 2016, the number of portfolio companies in each sector were:
· Software & the Internet - six;
· Digital & Digital Entertainment - five;
· Electronics, Materials & Manufacturing/Engineering- seven; and
· Life Sciences & Biosciences - eight.
The direct investment portfolio, often benefiting from strong corporate partnerships, has significantly grown since IPO. Net fair value gains in the most recent interim results period were £2.8million and since IPO, net fair value gains have totalled £7.6million.
Recent progress by 13 of the Group's leading direct investments is summarised below.
Software & the Internet
The Gartner Worldwide IT Spending Forecast (a leading indicator of technology trends across the hardware, software, IT services and telecom markets) provides a sense of scale to this sector, estimating that worldwide IT spend is forecast to total $3.5trillion in 2017. Global enterprise software market is worth c$357billion (Gartner), information security market is worth c$75.0billion (Gartner) and the artificial intelligence market is expected to be worth $70.0billion in next five years (Bank of America Merrill Lynch).
Mercia focuses principally on application software and security solutions targeting businesses with the potential for fast growing, scalable revenues.
Science Warehouse Limited
Founded in 2000 and a Leeds University spinout, Science Warehouse delivers a cloud-based procurement, catalogue and spend analysis platform with a highly intuitive user interface, ensuring customers have control of the purchasing cycle from requisition to payment, helping deliver cost savings and manage spend. Its core vertical markets are in further education and health services. The Science Warehouse business continues to make progress. The company has experienced encouraging results in Australia where it recently opened a sales office.
Ton UK Limited - trading as Intelligent Positioning
Intelligent Positioning is a developer of real-time search intelligence and search engine optimisation analytics solutions for businesses. The company helps businesses to optimise their web presence through detailed and actionable reports on search ranking performance against key competitors. It works with agencies and leading brands to help them enhance their online presence. Customers include L'Oreal, Financial Times, Invesco Perpetual and Legal & General. The company is seeing revenue growth and the team has recently opened a new sales office in New York and has started to make inroads into the much larger US market.
Digital & Digital Entertainment
The global digital games market is forecast to grow from close to $81.3billion in 2014 to $113.0billion in 2018, making it the largest market in the entertainment sector (Newzoo/Ukie). The total virtual reality ("VR") market is expected to be worth $30.0billion by 2020. China is now the largest single games market.
The UK is recognised globally as a centre of real expertise in game development, publishing and creativity and we continue to see a strong flow of opportunities. Examples within Mercia's direct investments in this sector include:
nDreams Limited
nDreams was founded in 2006 by Patrick O'Luanaigh, the creative director of Tomb Raider, as a game and experiences developer. Created initially to provide content for Sony PlayStation Home virtual world (a virtual 3D social gaming platform for the PlayStation 3), Mercia later leveraged this expertise through its managed funds to position nDreams as one of the first organisations to move into software development purely for VR.
In the last six months the management team has made excellent progress building out a portfolio of games and experiences for both high end and mobile VR, including the successful launch of The Assembly in July 2016 which made it to number one in the Oculus VR charts. Meanwhile, development continues on many fronts including two exclusive titles for the new Google VR platform, Daydream. One of the titles was released simultaneously with the platform launch in late 2016.
VirtTrade Limited
VirtTrade has developed an engine that takes the principle of a traditional printed trading card collection and turns it into an interactive digital trading experience. This results in the players being able to trade one digital card for many globally in an open market. Unlike traditional trading cards, the VirtTrade platform can take live data feeds from the player, the brand or IP owner and the outside world. This enriches the trading experience as well as providing some exciting and novel opportunities.
In the last six months VirtTrade has continued to build on its global relationship with Panini, which has recently released the 2017 version of its digital collectible app NFL GRIDIRON, making it to number one in the US sports IOS charts just two weeks after release. Panini has provided marketing support for the title through the months to Christmas. The updated and improved NBA Dunk app was also released before Christmas plus one other new title.
Edge Case Games Limited
Edge Case Games was established in June 2014 as a new business under Mercia's guidance using seed and early stage finance through its third party funds and is a free to play, games-as-a-service business. The business, which is led by industry veterans James Brooksby and Chris Mehers, operates in the massive multiplayer online ("MMO") sub-sector of the gaming market. The team successfully took 'Fractured Space', their space PC game, out of Steam's 'Early Access' and into a full launch in September 2016. Early download and sales data have been strong with average revenue per paying customer as high as $20 and the company achieved more than 150,000 unique installs of the innovative game during the first week following the launch as a free to play title.
Electronics, Materials & Manufacturing/Engineering
Manufacturing in the UK contributes 11 per cent. of UK Gross Value Added, employing over 2.6million people. Over recent years there has been a resurgence of advanced manufacturing in the UK and this is evidenced by the many examples of innovation in the areas of material and hardware technology throughout the UK regions where Mercia is active.
Smart Antenna Technologies Limited
A University of Birmingham spinout, Smart Antenna Technologies is developing multi-function antenna solutions for mobile phones, tablets, laptops and smart TVs and its highly scalable technology has the potential to lower costs, reduce size, increase frequency range and offer much needed performance gains over existing designs and technologies. In the last six months the management team has continued to engage with leading global manufacturers of portable devices.
Impression Technologies Limited
Impression Technologies is involved in the forming of complex, high strength, lightweight, ductile components used in the automotive, rail and aerospace industries. The company's patented heat treatment, forming and in-die quenching (HFQ®) technology was developed by Impression Technologies, building on founding research at the University of Birmingham and Imperial College. The result is complex but lightweight aluminium components which do not compromise the strength or metallurgical properties of the material. The business has begun production at its new pilot pressing facility.
Warwick Audio Technologies Limited
A University of Warwick spinout, Warwick Audio Technologies has developed and patented a new style of electrostatic speaker. This speaker is extremely lightweight, thin, flexible and produces a very high quality audio sound. The novel manufacturing process pioneered with this design enables these speakers to be produced reliably at scale to a very high standard, with consistent performance. This makes them potentially one of the most cost-effective Hi-Res audio transducers on the market. In the last six months, the company has worked on delivering its product to the headphone market, initially focusing on the audiophile segment with a wired at-home product. Over the next 12 months, it will turn its focus to the wireless closed back premium portable segment, where the company believes that major opportunities lie in creating a premium product for the iPhone 7 and other portable players. In the long term, the company will look to expand into other markets where the characteristics of its technology deliver benefits, in particular the automotive market. The company has recently announced the appointment of former BOSE VP, Gary Waters, to the board as a non-executive director.
sureCore Limited
sureCore was established under the direction of Enterprise Ventures and is an example of a startup which was specifically built by the investment team leveraging its expansive networks. It is led by a team of industry experts with a combined experience of nearly 100 years. The company develops and licenses low power and low operating voltage embedded memory ("SRAM") IP designs for the semiconductor industry. sureCore is addressing the growing demand for more memory and lower power consumption in leading edge devices, such as those serving the networking space as well as the Internet of Things ("IoT") and wearable and consumer/handheld products. In the last six months the company has received verbal confirmation from a large Japanese customer of its intention to license the technology for its next product development.
Life Sciences & Biosciences
The Life Sciences & Biosciences sector is of particular interest to Mercia with 98 per cent. of the medical technology (MedTech) sector in the UK driven by SMEs (Office for Life Sciences). One subsector of strong interest to Mercia is diagnostics, with the worldwide in vitro diagnostics ("IVD") market being estimated to be worth $71billion globally by 2020. This means that there are a wealth of investment opportunities in this subsector.
Concepta plc
Like sureCore, Concepta is an example of a startup established by the Enterprise Ventures investment team and its professional networks. The company is developing a portfolio of women's health diagnostics which monitor pregnancy, fertility and menopause. This is initially targeted at the Chinese market but will have the potential for rollout to the rest of the world. The choice of China as the initial market reflects the core management strength and knowledge of the Chinese consumer diagnostic market and a clear market need as the current gold-standard western-developed devices are not currently available. The last six months have been extremely busy following the company's successful admission to AIM, which took place in July 2016. The focus for the management team is now the siting of a new manufacturing plant in Yorkshire and the launch of MyLotus in China later this year and, subsequent to CE marking, targeting its launch in the UK and Europe in 2017.
Oxford Genetics Limited
Oxford Genetics has rapidly grown into one of the leading players in synthetic biology and is a specialised contract research organisation offering services to support the discovery, development and production of biologics, gene and cell therapies. The company has expertise in designing DNA, optimising expression of proteins, cell line development and improving viral gene delivery systems. In the last six months the team has moved to new purpose fitted 6,000 sq ft facilities, achieved ISO quality status, expanded its commercialisation and management teams and its board and is now providing services to a number of pharmaceutical clients. Over the next 12 months the company aims to license its technologies in the rapidly expanding markets of cell and gene therapy.
The Native Antigen Company Limited
Based on technology and expertise from the University of Birmingham, Native Antigen is another business created under the guidance of Mercia. The company specialises in the research, development and scale-up manufacturing of highly pure viral and bacterial native antigens. It trades with over 50 organisations worldwide with exports accounting for 90 per cent. of its sales, much of which is annual repeat business. Revenues continue to grow and this year doubled, taking the business into profitability and cash generation. The next step for the business is to further develop its growth opportunities and explore related applications of its technology, with a strong focus on the infectious disease sector.
Medherant Limited
Medherant is a University of Warwick spinout and is an IP-rich business focused on developing a transdermal drug delivery patch, known as the TEPI Patch®, for the widely used pain management drugs Ibuprofen and methyl salicylate. The technology was co-developed with Bostik using their latest proprietary adhesive technology. The patch will also provide wider drug delivery opportunities across a number of pharmaceutical areas. As a result of the patch's ease of manufacture, efficient drug delivery and reduced use of material, the technology also has the potential to remove huge cost burdens from healthcare systems.
1.5 Third party funds
Mercia differentiates itself from its comparators through the scale and varied nature of its third party managed funds, which total circa £228.0million, supporting the early stage investment activity of the Group. Mercia's third party funds are generating a pipeline of potential new direct investments for the Group and importantly the revenues generated therefrom contribute materially to covering the Group's operating costs. This ensures that the vast majority of the Group's cash is deployed into direct investment activity rather than funding operating losses, which lease directly to net asset erosion.
Looking forward, in addition to the Company's ability to raise and deploy Enterprise Investment Scheme ("EIS") and Seed EIS investment capital at a growing rate of circa £10.0million per annum, Mercia is also participating in the bidding process to manage certain public sector supported regional funds such as those connected to the Northern Powerhouse, Midlands Engine Room and North East investment funds. The Board believes that this pipeline of managed funds provides a sustainable investment platform for Mercia.
1.6 Current trading and outlook
The Group announced its most recent interim results on 10 November 2016. Financial performance was on plan for the six months to 30 September 2016, with the Group reporting revenues of £2.9million (2015: £0.7million), mainly generated from its fund management activities. The Group reported a profit after tax of £1.1million for the period. Since then, on 16 December 2016, Mercia has also announced its first cash exit, with the sale of Allinea achieving a return of 1.7x on Mercia's total investment cost and an immediate realised gain of £0.7million, compared with the holding value of £1.9million as at 30 September 2016.
Central to Mercia's investment philosophy are three consistent themes; ambition, expertise and sustainability. The Directors have significant ambition to scale Mercia through informed decision making, resulting in a sustainable business model and a growing portfolio capable of delivering long term shareholder value. Since IPO Mercia has established itself as a leading investor in the Midlands and the North of England with a regional infrastructure capable of accessing and building dynamic, ambitious businesses within Mercia's sectors of focus, leveraging its deal flow networks and university partnerships. Mercia has also commenced its investment activities in Scotland via its Edinburgh office.
The Directors are optimistic about the commercial opportunities facing the Group's portfolio companies as a whole and their potential for delivering shareholder returns.
1.7 Reasons for the Placing
The Directors believe that there are significant opportunities to invest in both existing and new 'Emerging Stars'. Since their initial funding, a number of the Company's 'Emerging Stars' would now benefit from further capital to scale globally. In addition, the pipeline of potential direct investments from the Group's managed funds was materially expanded with the acquisition of Enterprise Ventures. As a result it is envisaged that there will be a marked growth in capital deployment over the coming 12 to 24 months.
In summary, the net proceeds of the Placing will enable Mercia to:
· scale the growth of its existing direct investments;
· add new direct investments from the greatly expanded managed funds portfolio;
· where appropriate and value enhancing, continue to appraise complementary acquisition opportunities; and
· fund Mercia's relatively low net operating costs.
In addition, the Directors believe that liquidity in the Company's shares may be enhanced following the Placing as a result of the enlarged share capital and shareholder register.
The Board believes that the strategic direction of the Group has now been set, with a greatly enlarged pipeline of future investment prospects and a growing portfolio of direct investments with significant exit potential in the years ahead, as demonstrated by the recent sale of Allinea. The Directors unanimously believe that the Placing will significantly enhance shareholder value over the medium term, via sustained growth in net asset value.
2. The Placing
86,956,521 Placing Shares have been placed with placees at the Placing Price to raise gross proceeds of approximately £40.0million. The Placing is not underwritten. The Placing Price of 46 pence per Share represents a discount of approximately 8.9 per cent. to the closing mid-market price of 50.5 pence per Ordinary Share on 30 January 2017 (being the last practical date prior to the announcement of the Placing).
The Placing of the Placing Shares is conditional, inter alia, on the approval of Resolutions 1 and 2 at the General Meeting of the Company to be held at 10.00 a.m. on 16 February 2017 and upon Admission of the Placing Shares to trading on AIM. It is expected that Admission of the Placing Shares will occur on 17 February 2017.
The Directors intend to vote in favour of each of the Resolutions in respect of their aggregate beneficial interest of 67,348,065 Ordinary Shares, representing approximately 31.5 per cent. of the Existing Ordinary Shares.
The Placing Shares issued pursuant to the Placing will, when issued, be credited as fully paid and will rank pari passu in all respects with the Existing Ordinary Shares including the right to receive all dividends and other distributions declared, made or paid after their date of issue.
3. Use of proceeds
The Placing is expected to raise gross proceeds of approximately £40.0million.
The expected application of funds raised in the Placing through to 31 March 2019, after expenses, is as follows:
· at least 90 per cent. to invest into existing and new direct investments, including sector consolidation platforms; and
· up to 10 per cent. to fund net operating costs.
4. The Placing Agreement
Pursuant to the terms of the Placing Agreement, Cenkos, as agent for the Company, conditionally agrees to use its reasonable endeavours to place the Placing Shares on a non-underwritten basis at the Placing Price.
The Placing Agreement contains certain warranties from the Company in favour of Cenkos in relation to, inter alia, certain 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 including, without limitation, in the event of a material breach of the Company to comply in any material respect with its obligations under the Placing Agreement, the occurrence of a force majeure event or a material adverse change in the financial condition of the Group. Under the terms of the Placing Agreement the Company has agreed to pay Cenkos commissions based on the number of Placing Shares which are the subject of the Placing. Cenkos has elected to utilise approximately 70 per cent. of its commissions to subscribe for Placing Shares in the Placing.
5. Admission and dealings
Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. The Placing Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive dividends and other distributions declared following Admission. It is expected that Admission will become effective and that dealings in the Placing Shares will commence on 17 February 2017.
6. General Meeting
A notice convening the General Meeting to be held at Forward House, 17 High Street, Henley-in-Arden, Warwickshire B95 5AA, at 10.00 a.m. on 16 February 2017 is set out at the end of the Circular. At the General Meeting, the following Resolutions will be proposed:
Resolutions relating to the Placing (Resolutions 1 and 2)
Resolutions 1 and 2 will be proposed to grant the Directors the authority to allot the Placing Shares (which are equivalent to approximately 28.9 per cent. of the Enlarged Share Capital) without first offering them to existing Shareholders on a pre-emptive basis.
The Directors believe it would not be in the Shareholders' best interests to incur the significant additional expense that would be required to implement a fully pre-emptive offer of Ordinary Shares to Shareholders. The Directors have therefore concluded that seeking general authority from Shareholders to issue the Placing Shares other than on a pre-emptive basis is the most flexible and cost effective method available to the Company.
Resolutions relating to general authority to allot Ordinary Shares and waiver of pre-emption rights (Resolutions 3 and 4)
Resolutions 3 and 4 will, if passed, renew the authorities given to the Directors to allot Ordinary Shares on a non-pre-emptive basis at last year's annual general meeting on 19 September 2016, but reflecting the increased number of Ordinary Shares comprised in the Enlarged Issued Share Capital broadly on the same terms as the equivalent resolution passed at that meeting.
The authority sought under these Resolutions will expire at the earlier of the conclusion of the annual general meeting of the Company in 2017 or 30 September 2017.
7. Directors' participation in the Placing
The Directors are subscribing for the following Ordinary Shares pursuant to the Placing:
|
Director |
No. of Ordinary Shares subscribed for pursuant to the Placing |
Resulting holding of Ordinary Shares |
% of Enlarged Share Capital |
|
Susan Searle |
54,348 |
1,097,388 |
0.37% |
|
Mark Payton |
32,609 |
6,655,472 |
2.21% |
|
Martin Glanfield |
32,609 |
293,369 |
0.10% |
|
Matthew Mead |
32,609 |
75,730 |
0.03% |
|
Jonathan Diggines |
54,348 |
857,919 |
0.29% |
|
Ray Chamberlain |
2,450,056 |
60,824,766(1) |
20.23% |
|
Ian Metcalfe |
32,609 |
132,609 |
0.04% |
|
Martin Lamb |
32,609 |
132,609 |
0.04% |
(1) Ray Chamberlain will be personally interested in 6,149,752 Ordinary Shares at Admission. The remaining 54,675,014 Ordinary Shares at Admission will be held by Forward Innovation Fund (34,072,336 Ordinary Shares), Croftdawn Limited (3,994,786 Ordinary Shares), Mercia Growth Nominees Limited (126,436 Ordinary Shares) and Forward Nominees Limited (as nominee for certain members of the Chamberlain family (including Ray Chamberlain)) (16,481,456 Ordinary Shares).
8. Related party transactions
Woodford Investment Management and Invesco Perpetual have conditionally subscribed for 31,375,000 Placing Shares and 26,130,000 Placing Shares respectively at the Placing Price. The subscription of Placing Shares by Woodford Investment Management and Invesco Perpetual are related party transactions pursuant to the AIM Rules. Cenkos, the Company's nominated adviser, considers that the terms of the subscriptions by Woodford Investment Management and Invesco Perpetual in the Placing are fair and reasonable insofar as the Shareholders are concerned.
EXPECTED TIMETABLE
|
Publication of the Circular |
31 January 2017 |
|
Latest time and date for receipt of Forms of Proxy |
10.00 a.m. on 14 February 2017 |
|
General Meeting |
10.00 a.m. on 16 February 2017 |
|
Admission of Placing Shares |
8.00 a.m. on 17 February 2017 |
|
Expected date for CREST accounts to be credited in relation to Placing Shares |
17 February 2017 |
|
Despatch of definitive share certificates (where applicable) in relation to Placing Shares |
by 24 February 2017 |
Notes:
1. Certain of the events in the above timetable are conditional upon, amongst other things, the approval of the Resolutions at the General Meeting.
2. If any of the events contained in the timetable should change, the revised times and dates will be notified by means of an announcement through a Regulatory Information Service
IMPORTANT INFORMATION
The distribution of the announcement and the offering of the Placing Shares in certain jurisdictions may be restricted or prohibited by law or regulation. Persons distributing the announcement must satisfy themselves that it is lawful to do so. No action has been taken by the Company or Cenkos Securities plc ("Cenkos") that would permit an offering of such shares or possession or distribution of the announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession the announcement comes are required by the Company and Cenkos to inform themselves about, and to observe, such restrictions.
The announcement contains (or may contain) certain forward-looking statements with respect to certain of the Company's plans and its current goals and expectations relating to its future financial condition and performance and which involve a number of risks and uncertainties. The Company cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "predict" or other words of similar meaning. Examples of forward-looking statements include, amongst others, statements regarding or which make assumptions in respect of the planned use of the proceeds for the Placing, the Group's liquidity position, the future performance of the Group, future interest rates and currency controls, the Group's future financial position, plans and objectives for future operations and any other statements that are not historical fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, economic and business conditions, the effects of continued volatility in credit markets, market-related risks such as changes in interest rates and foreign exchanges rates, the policies and actions of governmental and regulatory authorities, changes in legislation, the further development of standards and interpretations under IFRS applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS, the outcome of pending and future litigation or regulatory investigations, the success of future acquisitions and other strategic transactions and the impact of competition. A number of these factors are beyond the Company's control. As a result, the Company's actual future results may differ materially from the plans, goals, and expectations set forth in the Company's forward-looking statements. Any forward-looking statements made in the announcement by or on behalf of the Company speak only as of the date they are made. These forward-looking statements reflect the Company's judgement at the date of the announcement and are not intended to give any assurance as to future results. Except as required by the Financial Conduct Authority ("FCA"), the London Stock Exchange plc, the AIM Rules or applicable law, the Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in the announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.
Cenkos, which is authorised and regulated in the United Kingdom by the FCA and is a member of the London Stock Exchange, is the Company's nominated adviser and broker for the purposes of the AIM Rules in connection with the Placing and, as such, its responsibilities as the Company's nominated adviser under the AIM Rules for Nominated Advisers are owed solely to the London Stock Exchange and are not owed to the Company or to the Directors or to any other person or entity in respect of their reliance on any part of the announcement.
Cenkos is acting for the Company and no one else and will not be responsible to any other person for providing the protections afforded to customers of Cenkos nor for providing advice in relation to the contents of the announcement or any matter referred to herein. No representation or warranty, express or implied, is made by Cenkos for the accuracy of any information or opinions contained in the announcement or for the omission of any material information. Cenkos expressly disclaims all and any responsibility or liability, whether arising in tort, contract or otherwise, which it might otherwise have in respect of the announcement.
This information is provided by RNS
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