27th Jun 2007 07:02
Debt Free Direct Group PLC27 June 2007 DEBT FREE DIRECT GROUP PLC("Debt Free Direct", the "Company" or the "Group") Further to the announcement relating to the acquisition of Clear Start UK Ltd ("Clear Start") released yesterday, the Company announces the following: Application for Admission In accordance with the terms of the acquisition of Clear Start, the Company hasmade application to the London Stock Exchange for 4,159,671 ordinary shares of1p each in the Company ("Ordinary Shares") to be admitted to trading on AIM.Admission of these shares is expected to occur on 29 June 2007. Posting of circular A circular proposing resolutions to be considered at an Extraordinary GeneralMeeting of the Company was dispatched to shareholders yesterday. A copy of theChairman's letter to shareholders which forms Part I of the circular is includedbelow. The Circular is available on the Company's website at http://www.debtfreedirect.co.uk/pr.php "To the shareholders of Debt Free Direct Group plc Dear Shareholder Proposed cancellation of the share premium account of the Company and authorityto make market purchases of Ordinary Shares 1. Introduction Earlier today, the Company announced that it had entered into an agreement toacquire the entire issued share capital of Clear Start. The consideration forthe acquisition will be settled by the issue of new Ordinary Shares in theCompany. The number of Ordinary Shares issued as consideration initially will be4,159,671. The Directors expect the acquisition to be earnings enhancing andbelieve that, in order to maximise earnings enhancement, it is in the bestinterests of Shareholders for the Company to purchase up to 4,500,000 OrdinaryShares currently in issue, from Shareholders, for cancellation. The Directorsbelieve that the most effective method of effecting such purchase of Shares isby way of an on market share buyback programme, to be executed by NumisSecurities Limited acting as agent for the Company. Since the Company's cashreserves are insufficient to fund such a buyback in full, the Company intends tofund the buyback with a new debt facility of approximately £16 million. In order to effect the buyback of Shares, the Company must first createsufficient distributable reserves to allow the purchase of Shares. It isproposed that such distributable reserves shall be created by cancelling theCompany's share premium account. The initial number of Ordinary Shares issued to shareholders of Clear Start hasbeen agreed on the assumption that the share buyback programme proceeds and thatat least 4,159,671 Ordinary Shares are purchased by the Company. To compensatethe Clear Start shareholders for the diluting effect of the share buybackprogramme not being implemented, or not being implemented in full, up to amaximum of 490,968 additional Ordinary Shares would, in such circumstances, beissued to them. The Clear Start Shareholders may become entitled to additional consideration inthe form of a maximum of a further 2,363,940 Ordinary Shares in the Companydepending upon the performance of the share price of the Company over the nexttwo years. The purpose of this document is to provide you with information in relation tothe proposed cancellation of the share premium account of the Company and torecommend that you vote in favour of the resolutions at the EGM to cancel theCompany's share premium account and to authorise the Company to make marketpurchases of its own Shares. It is proposed that the Company will use the distributable reserves created bythe cancellation of the share premium account to fund the buyback of Shares andfor general corporate purposes. If approved, the Cancellation of the SharePremium Account will increase the distributable reserves of the Company byapproximately £13.7 million. 2. Current Trading In the Company's preliminary results for the year ended 30 April 2007, whichwere announced earlier today, Andrew Redmond, Chief Executive Officer commented: "The latter half of the financial year under review has been a turbulent timefor all companies operating in the IVA market, as highlighted by the demise of anumber of Debt Free Direct's competitors. I will not be surprised if furtherfall out occurs. Our own trading in the second half of the financial year hasbeen impacted by increased competition, creditor reluctance to accept IVAs, andconsumer unease caused by alarmist press coverage. Debt Free Direct entered the new financial year trading at run rates in linewith those achieved in the latter half of the previous financial year. However,with our advertising "share of voice" now improving and, with signs of renewedunderstanding within the creditor community, we are well positioned to build ourvolumes once more. Whilst fee levels have not, as yet, been impacted by creditorpressure, it is clear that their long term intention is to ensure theirreduction. Debt Free Direct does, however, have the largest "bank" of IVAs,which will not be impacted by any change in fee levels and is, therefore, wellplaced to cope with the changes ahead. In view of potential changes to fee structures and continued uncertaintysurrounding advertising costs, it is too early to provide detailed guidance onthe current financial year. Nevertheless, I remain confident that we are stillon track to achieve our vision of becoming the most respected provider of adviceand solutions to over-indebted consumers and that this achievement will maximiseshareholder value." 3. The Proposals Cancellation of Share Premium Account Subject to the approval of Shareholders and Court Approval, the Company's sharepremium account (standing at £13,777,240 as at 25 June 2007) will be cancelled.The reserve created will constitute a realised profit and be transferred to theprofit and loss account of the Company and create additional distributablereserves. The Cancellation of Share Premium Account will not reduce the netassets of the Company. It is currently expected that the Court's sanction of the cancellation of theshare premium account of the Company will be sought at a hearing on Wednesday22nd August 2007 and, if the Court's sanction is granted on that date, theCancellation of Share Premium Account is expected to become effective onThursday 23rd August 2007 (being the date on which it is anticipated that thecourt order will be registered with the Registrar of Companies). The Court will be concerned to protect the interests of creditors of the Companyas at the date the Cancellation of Share Premium Account becomes effective. Theprecise form of creditor protection will be determined by the Court and theCompany will take such steps as it thinks appropriate in order to satisfy theCourt in that regard. Authority to make market purchases of own Shares The Company is, in addition, seeking authority to purchase Shares in the marketto enable it to conduct the proposed share buyback. The Board is seeking authority to purchase up to 4,500,000 Shares in the market,representing approximately 11.97 per cent. of the issued share capital of theCompany at not more than 105 per cent of the average middle market price of aShare for the five days preceding the purchase and not less than 1p per Sharefor purchases of Shares under this authority. Any Shares purchased under theshare buyback will be cancelled and the number of shares in issue reducedaccordingly. The authority will expire on the earlier of the Company's annual general meetingin 2008 and 17 January 2009. The amount of the reserve arising on the proposed Cancellation of Share PremiumAccount may be greater than the final amount required to buy back Shares underthe share buyback. In this event the additional distributable reserves will beavailable for other corporate purposes of the Company. 4. Directors' intentions In the unlikely event that Shareholders do not take up the opportunity toparticipate in the share buyback, Directors (other than the executive Directors)might be requested to make Shares available in order to ensure the success ofthe share repurchase programme. 5. Shareholder approval Implementation of the Proposals requires the passing by Shareholders ofResolutions 1 and 2 to be proposed at the Extraordinary General Meeting whichhas been convened for 1pm on Wednesday 18th July 2007. Notice of the Extraordinary General Meeting is set out at the end of thisdocument. Descriptions of the Resolutions to be proposed at the ExtraordinaryGeneral Meeting are set out below. Resolution 1 to be proposed at the Extraordinary General Meeting Resolution 1, which is to be proposed as a special resolution and which is setout in the notice of Extraordinary General Meeting, will, if passed (and subjectto receipt of Court Approval), cancel the share premium account of the Company. Resolution 2 to be proposed at the Extraordinary General Meeting Resolution 2, which is to be proposed as a special resolution and which is setout in the notice of Extraordinary General Meeting, will, if passed, generallyand unconditionally authorise the Board for the purpose of section 166 of theCompanies Act 1985 to make one or more market purchases of Shares provided that: (a) the maximum aggregate number of Shares authorised to be purchased is 4,500,000, representing 11.97 per cent, of the Company's issued share capital; (b) the minimum price which may be paid for such shares is 1p per Share (exclusive of expenses); (c) the maximum price (exclusive of expenses) which may be paid for a Share shall be not more than an amount equal to 105 per cent of the average of the middle market price of a Share as derived from the Official List of the London Stock Exchange for the five business days immediately preceding the date on which the Share is purchased; and (d) unless previously renewed, varied or revoked, the authority conferred shall expire on the earlier of the holding of the Company's annual general meeting for 2008 and 17 January 2009. All previous authorities to make market purchases of Ordinary Shares (to theextent unused) will be revoked. 6. Further Information with respect to the Proposals and action to be taken Your attention is drawn to the financial information set out in Part II of thisdocument. Shareholders will find enclosed a Form of Proxy for use in connection with theExtraordinary General Meeting. Whether or not you intend to attend the EGM, youare requested to complete and return the Form of Proxy so as to be received byCapita Registrars at Capita Registrars, Proxy Department, The Registry, 34Beckenham Road, BR3 4ZB not later than the close of business on 16th July 2007.Completion and return of the Form of Proxy will not prevent you from attendingand voting in person at the EGM should you wish to do so. 7. Recommendation The Board considers the Proposals to be in the best interests of the Company andShareholders as a whole. Accordingly, the Board unanimously recommends thatShareholders vote in favour of the Resolutions to be proposed at theExtraordinary General Meeting as they intend to do in respect of their ownbeneficial holdings of 11,530,405 Ordinary Shares, representing in aggregate30.67 per cent. of the issued share capital of the Company. Yours faithfully, Jeffrey Michael BlackburnChairman" Enquiries: Debt Free Direct Group plcAndrew Redmond, Chief Executive Officer 0845 296 0100Paul Latham, Finance Director 0845 296 0200 Numis Securities 020 7260 1000Iain McDonald, Corporate BrokingLee Aston, Corporate Finance Financial DynamicsEd Gascoigne-Pees 020 7269 7132Nick Henderson 020 7269 7114 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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