30th Nov 2006 08:18
Wren Homes Group PLC30 November 2006 For release 30 November 2006 Wren Homes Group plc (WHG.L) £5.8m Placing by J.M. Finn and Admission to AIM Wren Homes Group plc, ("Wren"), the housing developer which has a strategy ofspecialising in apartment developments for the 'active' retirement market, withoperations around the southern M25 corridor, announces that trading in itsordinary shares has commenced on AIM today, following the publication of itsAdmission document. Highlights *Move up to AIM from PLUS markets *Placing by J.M. Finn, Broker and Nominated Adviser to the Company, of 8,333,333new Ordinary shares of 10p each at a price of 36p per share with institutionalinvestors to finance expansion and fund more developments simultaneously *Sale of 7,777,778 shares to investors by the founders Paul Treadaway and PeterWest, respectively Chief Executive and Chairman of the Company, through J.M.Finn, representing 19.2% of the enlarged issued share capital, to enhanceliquidity of the Ordinary shares *Following record results in the year ended 31 July 2006, the Company hascontinued to trade strongly *Copies of the Admission document are available free of charge from theCompany's registered office and the offices of JM Finn at Salisbury House,London Wall, EC2M 5TA until 31 December 2006. Paul Treadaway, Managing Director of Wren, commented: "We are delighted with the strong level of support. Wren Homes intends toconcentrate on developing apartments for 'active' retired people, as opposed tothose requiring care. The Directors believe that the identified changes to theUK's demographic pattern has and will result in an increase in demand by the growing numbers of over sixties forretirement apartments". EnquiriesWren Homes Group plc Paul Treadaway, Managing Director Tel: 01372 742 244 JM Finn Clive Carver/Matthew Robinson/Charles Cunningham Tel: 0207 628 9688 Adventis PR Peter Binns/Tarquin Edwards Tel: 020 7034 4760 / 020 7034 4758 INTRODUCTION Wren is an established housing developer that has a strategy of specialising inapartment developments for the 'active' retirement market. In the year to 31July 2006 Wren made a profit before tax of £1.716 million on turnover of £3.350million. Wren has now raised additional capital to finance its expansion, and transferredto AIM from PLUS Markets. At the same time the two founding directors, whobetween them owned over 86 per cent. of the Existing Ordinary Shares have soldsome of their holding pursuant to the Placing, representing 19.2 per cent. ofthe Enlarged Issued Share Capital, to enhance liquidity of the Ordinary Shares. WREN HOMES BUSINESS History Wren Estates Limited (Wren Estates), the principal trading company in the Group,was founded in 1994 by Peter West and Paul Treadaway, both of whom have manyyears experience in the house building industry, and who continue to serve asExecutive Chairman and Managing Director respectively. Initially, Wren Estates concentrated on assembling sites for residentialdevelopment and, after obtaining planning permission, sold the sites on to housebuilders. The strategy then, and still employed by Wren, is to identifylocations within an existing built-up area containing houses with very largegardens. Wren approaches the owners of such properties and endeavours to obtainoptions to purchase either some or all of the property, along with adjoiningproperties, to create a site suitable for the erection of new houses or flats. The price offered to the house owners may be greater than the existing usemarket value, providing an incentive for a house owner to enter into the optionagreement. The options are only exercised by Wren after planning permission isobtained. In 1997, Wren decided to build residential properties on some of the sites ithad assembled with a view to obtaining the benefit of the house builder's profitinstead of simply selling on the sites. Since 2000, Wren has built and soldapproximately 36 houses, bungalows and flats in and around areas of Kent andSurrey in or close to the borders of Greater London. In 2001, Peter West and Paul Treadaway "reversed" their holding company, WrenHomes plc, together with Wren Estates, into Sardis International plc ("Sardis"),an OFEX traded shell company. Sardis (with which neither Peter West nor PaulTreadaway were then connected) had encountered financial difficulties, which hadbeen resolved by its shareholders and creditors agreeing to a companyvoluntarily arrangement. Following the reverse, Peter West and Paul Treadawaybecame the majority holders of Sardis which was re-named Wren Homes Group plc. The shares of the Company have been traded on OFEX (now PLUS Markets) since 2001and will continue to be so traded until immediately prior to admission to AIM. In 2004, following a Directors' review of the Group's strategy, it was decidedthat the Group should endeavour to enter the "active retirement" homes market.Since then, Wren has been instrumental in the development and completion of WrenCourt, Warlingham, Surrey, a property comprising 28 retirement apartmentsfurther details of which are set out below ("Wren Court"). Strategy The Group's strategy is: * to concentrate on the housing market for the 'active' retired, whilst takingadvantage of more generalist residential development opportunities when theypresent themselves; *to keep business functions, which the Directors perceive to be key, in-house,including land acquisition, quality control on building contracts and sales andmarketing of completed developments, whilst outsourcing other functions such asplanning, the design and build of developments and legal services; *to expand the Group by further strengthening the in-house management team andthe financial resources available to the Group, in order to enable it toundertake more developments simultaneously over a wider geographical area. Retirement Housing Market Wren has identified retirement housing as a niche in the property developmentmarket. The UK has both a growing and an ageing population. One in six are nowaged 65 or over and the Office of National Statistics is projecting that thepercentage of older people is set to continue to rise during the first half ofthis century. The Directors believe that the identified changes to the UK's demographicpattern has and will result in an increase in demand by the growing numbers ofover sixties for retirement apartments. Wren Homes intends to concentrate on developing apartments for 'active' retiredpeople, as opposed to those requiring care. Purchasers of the apartments may bethose who have recently retired, whose children no longer live at home and whomight benefit from the release of capital provided by moving to smalleraccommodation. Current and future development projects Wren Homes has the following portfolio of residential work-in-progress rangingfrom completed developments currently being marketed, through developmentscurrently under construction to projects over which options to buy are held. Completed developments currently being marketed Wren Court, Warlingham, Surrey Wren Court at Warlingham was completed in September 2006. Having sold on theland in 2005, Wren acted as developers on behalf of the land owner and hascontractually retained a substantial interest in the profits it believes will begenerated from the sale of the apartments. As at the date of this document, the sale of 4 of the 28 retirement flats hasbeen completed, with offers received on a further 6. The completed scheme willallow Wren to use it as a "show piece" for further retirement developmentschemes. The average asking price of apartments for this scheme is around£350,000. Developments currently under construction or where construction is contracted Wren is currently building, under an outsourced design and build contract, ascheme of 8 traditional apartments in Kenley, Surrey with sales of the unitsexpected to commence in the Spring of 2007. The Directors anticipate that theaverage asking price of these units will be around £360,000. Construction of a further development in Warlingham, Surrey of 31 retirementapartments and two bungalows is planned to begin early in 2007. Wren havingassigned the benefit of its options to acquire the land, is acting as developerand has retained a substantial interest in the profit it believes will begenerated. Wren expects to commence marketing the apartments in the Summer of2007. Land over which options to buy are held Wren holds options over land on a potential 12 sites which, if planningpermission was obtained, in the opinion of the directors, could lead to thedevelopment of approximately 280 residential units, the majority of which couldbe retirement homes. The Directors believe that Wren's option approach to building a land bank shouldenable it to construct increasing numbers of residential properties, especiallyretirement homes, over the next few years. Competition There are a number of residential property development companies operating inthe same geographical areas as Wren Homes. Of those companies which specialisein retirement housing, the Directors believe the largest to be McCarthy & Stone,which was until recently listed on the London Stock Exchange. Other competitorsidentified by the Directors as specialising in retirement homes include: PegasusRetirement Homes, English Courtyard, Churchill Retirement and Beechcroft Homes. FINANCING PROPERTY DEVELOPMENT The business of residential property development requires substantial sums to beexpended in purchasing land and then completing the construction of thebuildings before they can be sold. The Company has both an overdraft facilitywith Bank of Scotland and specific advances have been received in connectionwith specific development projects. Whilst banks traditionally play a role in the financing of property development,smaller companies such as Wren have traditionally had to have had recourse toother funding sources to enable them to carry through developments. In addition, the Company currently has a loan outstanding from an unrelatedprivate source, for £500,000, which will be repaid out of the proceeds of thePlacing. In addition, the Company has, as mentioned above, entered into agreements underwhich the Company having sold the land for the developments at the Wren Court,Warlingham, Surrey and options over other land at Warlingham, Surrey is actingas developer and has retained a substantial interest in the profit it believeswill be generated. FINANCIAL INFORMATION The financial information set out below has been extracted, without adjustment,from the Accountants' Report set out in Part III of this document. Prospectiveinvestors should read the entirety of this document and not rely on thesummarised information below. Year ended 31 July 2004 2005 2006 £'000 £'000 £'000Turnover 2,181 2,363 3,350Gross Profit 289 1,591 2,152(Loss)/Profit before taxation (176) 1,137 1,716Net Assets 3,372 4,284 6,029 CURRENT TRADING AND PROSPECTS In the period since the 31 July 2006 the Company has continued to tradestrongly. DIRECTORS AND MANAGEMENT Peter James West, Executive Chairman Peter, aged 61 years, began to train as a surveyor but subsequently joined hisfamily's development company, Jack West & Sons Ltd., which he ran between 1964and 1986 until deciding to specialize in land assembly and acquisition. He setup the land department for, Alan De Maid plc, a major chain of estate agents, in1986, then was appointed as a land buyer for Farrell Boland Plc between1989-1991. He founded Wren Homes with Paul Treadaway in 1994. Until 2005 Peter was a member of the board of Tonbridge and Malling HousingAssociation and Honorary Treasurer and Chairman of the Finance Committee. Theassociation owns and manages over 6,500 housing units. Paul Arthur Treadaway, Managing Director Paul, aged 55, has over 25 years experience in residential construction anddevelopment. Initially a site agent for Thorpe Bros. of Wimbledon, he worked hisway up to assume executive roles in a number of building and developmentcompanies (including Taylor Woodrow 1980-1982 and Kent Homes 1982-1984) dealingwith private and social housing. In 1985 Paul founded and was appointed managingDirector of Farrell Boland Plc, a construction company specialising in publicsector building and refurbishment, and Finbury Ltd a residential house builder(both of which failed during the severe 1989 recession). Paul founded Wren Homeswith Peter West in 1994 Philip Self ACA, Finance Director Philip, aged 41, is a chartered accountant with nearly 20 years experience incorporate accountancy, audit and tax. He was appointed Partner of Turpin,Barker, Armstrong, a Surrey based accountancy practice in 1997, and in 2003established a practice specialising in accountancy, business and tax advice forowner managed businesses. Philip became Wren Homes Group's part time FinanceDirector in January 2004. Brian Kenneth Clark Nathan, Non-executive Director Brian, aged 66, has more than 30 years experience as a company director. In 1971Brian founded Brandon Hire, a power tool hire company which under his executivechairmanship grew to 45 outlets in the UK and was sold to Wolseley Plc for £72million in 2006. Brian has acted as advisor to, investor in or director of, alarge number of early stage start-up companies including estate agency andproperty management businesses. Other Senior Employees Jason Quantrill, Land Manager Jason joined Wren in 2002 as Land Manager. Previously, Jason worked inresidential estate agency from 1984 to 1996 with several companies includingMann & Co, National Counties and Lancasters. In 1996 Jason helped set upSheridan Homes, a residential house builder, and worked as a director withresponsibility for site finding. Gerald Richardson, Project Manager Gerry joined Wren as Project Manager in 2000. He previously worked for a numberof construction companies and ran his own building company. Jon Murphy, Sales Manager Jon joined Wren as Sales Manager in 2005. Jon had previously worked for severalestate agents including Mann & Co., Ludlow Thompson and ChestertonsInternational. In 1999 Jon started his own estate agency company, JMG Ltd,combining both sales and lettings which he sold in 2005. REASONS FOR AND DETAILS OF THE PLACING Under the Placing Agreement J M Finn has agreed, as agent for the Company andthe Selling Shareholders, to use reasonable endeavours to procure placees forthe Placing Shares. The Placing of 16,111,111 Ordinary Shares at 36 pence per share comprises8,333,333 new ordinary shares being issued by the Company and 7,777,778 SaleShares being sold by the Selling Shareholders. The aggregate proceeds of thePlacing will be approximately £5.8 million before expenses, of which £2.55million net of expenses will be receivable by the Company. The SellingShareholders comprise Peter West (who is selling 3,888,889 Sale Shares) and PaulTreadaway (who is selling 3,888,889 Sale Shares). The Selling Shareholders haveagreed to meet any liability to stamp duty or stamp duty reserve tax at thebasic rate arising on the sale of their Sale Shares in accordance with the termsof the Placing Agreement. The Company will not receive any proceeds from theplacing of the Sale Shares. J M Finn had received conditional commitments frominstitutional and other investors for 16,111,111 Placing Shares at the PlacingPrice pursuant to the Placing. The Placing Shares will rank pari passu with the existing Ordinary Sharesincluding the rights to all dividends and other distributions declared paid ormade after the date of issue. The Placing has not been underwritten. The Placing is conditional, inter alia, upon Admission and the Placing Agreementbecoming unconditional and not being terminated in accordance with its terms. USE OF PROCEEDS The Company intends to apply the net proceeds from the issue of the PlacingShares: * to enable it to finance more developments simultaneously; and * to repay a £500,000 loan. DEALING RESTRICTIONS At Admission, the Directors will own an aggregate of 20,074,390 Ordinary Shares,representing approximately 49.7 per cent. of the Enlarged Issued Share Capitalof which Peter West and Paul Treadaway will own 9,990,013 Ordinary Shares each. Each of the Directors has undertaken (save in certain limited circumstances) notto dispose of any Ordinary Shares for a period of one year following Admissionand, for a further year, only to sell any Ordinary Shares on an orderly marketbasis through the Company's broker. CREST CREST is a paperless settlement system enabling securities to be evidencedotherwise than by acertificate and transferred otherwise than by a writteninstrument in accordance with the CREST Regulations. The Existing Ordinary Shares are eligible for CREST settlement. Accordingly,following Admission, settlement of transactions in the Ordinary Shares may takeplace within the CREST System if the relevant shareholder so wishes. CREST is a voluntary system and Shareholders who wish to receive and retainshare certificates will be able to do so. SHARE OPTION SCHEME Following Admission, the Company will be giving consideration to theintroduction of a share option scheme for its employees and future employees(but excluding Peter West and Paul Treadaway) in order to provide an incentivefor them and to retain their services. Further information on this proposal willbe notified to shareholders in due course. It is not expected that options willbe granted over more than 5 per cent of the Enlarged Issued Share Capital. CORPORATE GOVERNANCE The Directors intend to comply with such parts of the Combined Code of thePrinciples of Good Governance and Code of Best Practice as is recommended by theQuoted Companies Alliance as applicable to smaller quoted companies and so faras is practicable for a company of this size. The Directors have established an audit committee and remuneration committee: The audit committee, which comprises Brian Nathan and Peter West, is responsiblefor ensuring that the financial performance, position and prospects of theCompany are properly monitored and reported on and for meeting the auditors andreviewing their reports relating to accounts and internal controls. The remuneration committee, which also comprises Brian Nathan and Peter West,will review the remuneration of executive Directors, determine the payment ofbonuses and the future allocation of share options. The Directors intend to appoint an additional non-executive director who will beappointed to both committees referred to above within three months of Admission. DIVIDEND POLICY It is the current intention of the Company to commence the payment of dividendsfor the year ending 31 July 2007, subject to the availability of sufficientdistributable reserves and bearing in mind the financial resources then requiredfor the development of the Group. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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