6th Mar 2009 12:30
Servoca Plc
("Servoca" or "the Company")
Placing to raise £5mand Proposed Share Capital Reorganisation
The Company is pleased to announce that it has raised £5 million (before expenses) by way of a conditional placing of 62,500,000 New Ordinary Shares at 8 pence per share. These funds will be used to replenish the cash spent on the restructuring and cost reduction programme, assist in funding the existing commitments under earn-out arrangements and provide additional working capital to fund the Group's planned growth.
The resolutions required to approve the Placing will be put to a General Meeting of Shareholders on 30 March 2009, notice of which has been sent to shareholders today. Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that such Admission will occur at 8.00 a.m. on 31 March 2009.
As part of the Placing, the Board has subscribed for 5,625,000 New Ordinary Shares totaling £0.45 million.
The 2008 results have also been announced today. The results showed good underlying growth marred by several one off costs and loss making businesses which have now been closed. The cost base has been realigned and the restructuring completed. This has transformed the performance of the Group and each division of the Group is now delivering profits.
The Group will continue to serve many areas of public sector recruitment that suffer from manpower supply shortages. The underlying growth in public sector recruitment remains strong and there will be a greater focus on profit delivery by the new management team.
Commenting on the Placing, Andrew Church, Chief Executive, commented:
"We are delighted to have raised significant funds in what continues to be a very difficult market. The proceeds will allow Servoca to continue its growth focused on its public sector markets. We have strengthened the Board and rationalised the business and I believe that Servoca now has a solid platform on which to build and deliver shareholder value and thus realise its full potential. We look to the future with confidence."
Enquiries:
Servoca
Andrew Church 020 7747 3030
FinnCap
020 7600 1658
Geoff Nash
Ed Frisby
Servoca Plc
("Servoca" or "the Company")
Placing to raise £5m
and Proposed Share Capital Reorganisation
The Company is pleased to announce that it has raised £5 million (before expenses) by way of a conditional placing of 62,500,000 New Ordinary Shares at 8 pence per share. These funds will be used to replenish the cash spent on the restructuring and cost reduction programme, assist in funding the existing commitments under earn-out arrangements and provide additional working capital to fund the Group's planned growth.
The resolutions required to approve the Placing will be put to a General Meeting of Shareholders on 30 March 2009, notice of which has been sent to shareholders today.
In addition, at the General Meeting the Independent Shareholders will be asked to waive an obligation on the New Concert Party which will arise under Rule 9 of the Takeover Code as a result of their subscription for New Ordinary Shares pursuant to the Placing.
Subject to the passing of all of the Resolutions at the General Meeting, Southwind Limited, a member of the New Concert Party has agreed to purchase all 7,287,775 of the Existing Shares currently held by Darren Browne, the former Chief Executive Officer, at the Placing Price. These Existing Shares will become New Ordinary Shares following the Reorganisation proposed at the General Meeting.
Background to and reasons for the Placing
In November 2008, following a period of significant organic and acquisitive growth, the Board embarked on a fundamental review of the Group's operations. The objective of the review was to focus efforts on those businesses best positioned to prosper in the current economic environment and to exit all loss-making businesses.
As part of this exercise, the executive management team was strengthened. In November 2008, Andrew Church was appointed Group Chief Executive. Andrew joined the Company from Lorien plc, where he held the position of Managing Director of its successful resourcing business. Andrew effected a considerable turnaround of the business during his tenure. In December 2008, Emma Sugarman, a founder of the Academics business, joined the Group board as an executive director. Prior to the review, in March 2008, Glenn Swaby, a qualified chartered accountant who had previously been an executive director responsible for the security division, was appointed Chief Financial Officer. Together with Miles Davies, an executive director, they are an experienced, enthusiastic and motivated team.
In January 2009, Windsor Recruitment & Training Ltd, a subsidiary of the Group, was placed into administration. Other poorly performing Group businesses have been downsized and closed and, in February 2009, the Company exited a new business start-up and settled material outstanding litigation in relation thereto.
The Group is now largely focused on two principal resourcing business areas: public sector education and healthcare, which the Directors believe will continue to perform well in the current economic climate. In addition, the Company will continue to operate its security-related businesses on a reduced cost basis.
The restructuring and cost reduction exercise has resulted in significant exceptional and restructuring costs. Accordingly, the preliminary announcement of the results for the year to 30 September 2008 announced today shows a loss before taxation and goodwill impairment of approximately £4.0 million.
Shareholders should be aware that the Directors believe that the Group will not have adequate working capital if the Resolutions are not passed and/or the Placing does not proceed, and thus will not be able to continue to trade.
Current Trading and Prospects
The 2008 results showed good underlying growth marred by several one off costs and loss making businesses which have now been closed. The cost base has been realigned and the restructuring completed. This has transformed the performance of the Group and each division of the Group is now delivering profits.
The Group will continue to serve many areas of public sector recruitment that suffer from manpower supply shortages. The underlying growth in public sector recruitment remains strong and there will be a greater focus on profit delivery by the new management team.
We have new additions to the Board and Servoca has a strong platform on which to build and deliver shareholder value and realise its full potential.
The Placing
The Company intends to raise £5 million (before expenses) pursuant to the Placing. Pursuant to the terms of the Placing Agreement, FinnCap has conditionally agreed, as agent for the Company, to place 62,500,000 New Ordinary Shares with institutional investors and certain members of the New Concert Party. The Placing has not been underwritten by FinnCap. The Placing Agreement is conditional upon, inter alia, the Resolutions being duly passed at the General Meeting and Admission becoming effective on or before 8.00 a.m. on 31 March 2009 (or such later time and/or date as the Company and FinnCap may agree, but in any event by no later than 8.00 a.m. on 30 April 2009).
The Placing Price represents a discount of approximately 36 per cent. to the closing middle market price of an Existing Share of 12.5 pence on 5 March 2009, being the last practicable date prior to the publication of the Circular.
The net proceeds of the proposed Placing, being approximately £4.9 million, will, in the Directors' opinion, provide sufficient funds to complete the restructuring and cost reduction programme, assist in funding the existing commitments relating to earn-out payments due in connection with already acquired businesses, and allow planned growth in the education and healthcare markets.
Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that such Admission will occur at 8.00 a.m. on 31 March 2009.
The Placing Shares will, when issued, rank pari passu in all respects with the New Ordinary Shares including the right to receive dividends and other distributions declared or made following Admission.
Proposed Option Awards
The Company proposes to grant share options to certain members of its management team over, in aggregate, up to 10 per cent. of the ordinary share capital of the Company as enlarged by the issue and allotment of the Placing Shares. It is anticipated that the majority of such options will be awarded in the next 12 months.
The Takeover Code
Rule 9
The Takeover Code governs, inter alia, transactions which may result in the change of control of a public company to which the Takeover Code applies.
Under Rule 9 of the Takeover Code (the "Code"), any person who acquires an interest (as defined in the Code) in shares, which taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares.
Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of such company but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interest in shares are acquired by any such person.
An offer under Rule 9 must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares in the company during the twelve months prior to the announcement of the offer.
The New Concert Party
For the purposes of the Takeover Code, persons acting in concert comprise persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition by them of shares in a company, to obtain or consolidate control of that company.
Historically, as a result of a number of transactions between the members of the Old Concert Party and the Company, the members of the Old Concert Party had been considered to be acting in concert in respect of their holdings in the Company's shares. Certain members of the Old Concert Party are now no longer considered to be acting in concert for the purposes of the Takeover Code, however, Retro Grand Limited, Seraffina Holdings Limited and Southwind Limited (together with their respective related parties) are deemed to be continuing to act in concert for the purposes of the Takeover Code.
The New Concert Party is currently beneficially interested in an aggregate of 14,367,977 Existing Shares, representing approximately 29.9 per cent. of the entire existing issued capital of the Company.
Conditional upon the passing of the Resolutions at the General Meeting and Admission, Southwind Limited has also agreed to purchase Darren Browne's, the former Chief Executive Officer of the Company, entire holding of 7,287,775 Existing Shares at the Placing Price.
Potential voting rights of the New Concert Party
If the Whitewash Resolution is passed at the General Meeting and on the assumption that:
the voting rights attributable to the New Ordinary Shares held by the New Concert Party following Admission, would constitute approximately 59.2 per cent. of all the voting rights in the Company.
The Directors who own Existing Shares have confirmed that, having considered the Proposals, they will each vote in favour of the Resolutions.
The Panel has agreed, however, to waive the obligation of the New Concert Party to make a general offer that would otherwise arise as a result of the Proposals, subject to the approval of Independent Shareholders. Accordingly, Resolution 1 is being proposed at the General Meeting and will be taken on a poll. The New Concert Party and Darren Browne will not be entitled to vote on the Whitewash Resolution.
Following completion of the Proposals and the sale of the shares by Darren Browne to Southwind Limited, the members of the New Concert Party wil between them hold more than 50 per cent. of the Company's voting share capital and (for so long as they wil continue to be treated as acting in concert) may accordingly increase their aggregate interest in shares without incurring any obligation under Rule 9 to make a general offer, although individual members of the New Concert Party will not be able to increase their percentage of shares held, through or between a Rule 9 threshold without the Panel's prior consent.
Further details of the New Concert Party and their respective interests in the ordinary share capital of the Company are set out in the Circular.
Given that the Proposals are required to be implemented in order to provide the Company with the additional funds necessary to continue to sustain its business, the Directors consider the Rule 9 Waiver to be in the best interests of the Company and the Shareholders as a whole, and recommend that you vote in favour of the Waiver Resolution.
Intentions of the New Concert Party
The New Concert Party is not intending to seek any changes to the Board and has confirmed that it would be its intention that, following the increase in its proportionate shareholding as a result of the participation in the Placing, the business of the Company would be continued in substantially the same manner as it is at present, with no major changes. With this in mind, there will be no repercussions on employment or the location of the Company's places of business and no redeployment of the Company's fixed assets. The New Concert Party is also not intending to prejudice the existing employment rights, including pension rights, of any of the employees or management of the Group nor to procure any material change in the conditions of employment of any such employees or management.
Capital Reorganisation
The Placing Price represents a discount to the current 10 pence nominal value of an Existing Share. However, company law prohibits the issue of shares at a price below their nominal value and, accordingly, a share capital reorganisation will be necessary in order to undertake the Placing. It is therefore proposed to reorganise the share capital of the Company by subdividing each issued Existing Share into one New Ordinary Share of 1 pence and one Deferred Share of 9 pence.
The New Ordinary Shares will have the same rights (including voting and dividend rights) as each Existing Share has at present. No new certificates will be issued in respect of the New Ordinary Shares and existing share certificates in respect of Existing Shares will be valid and will continue to be accepted as evidence of title for the New Ordinary Shares.
In order to effect the Reorganisation, the Articles will need to be amended to include the rights of the Deferred Shares, which will be minimal thereby rendering them effectively valueless.
The rights attaching to the Deferred Shares can be summarised as follows:
they do not entitle holders to receive any dividend or other distribution or to receive notice or, speak or vote at general meetings of the Company;
on a return of assets on a winding up, they only entitle the holder to the amounts paid up on such shares after the repayment of £10 million per New Ordinary Share;
they are not freely transferable;
the creation and issue of further shares which rank equally or in priority to the Deferred Shares or the passing of a resolution of the Company to cancel the Deferred Shares or to effect a reduction of capital shall not constitute a modification or abrogation of their rights; and
the Company shall have the right at any time to purchase all of the Deferred Shares for an aggregate consideration of £ 1.00.
No application will be made for the Deferred Shares to be admitted to trading on AIM or any other stock exchange. No share certificates will be issued for any of the Deferred Shares. There are no immediate plans to purchase or to cancel the Deferred Shares, although the Directors propose to keep the situation under review.
Related Party Transactions
As a part of the Placing, the following Shareholders, all of whom are related parties for the purposes of the AIM Rules by virtue of the size of their interests in Existing Shares, or because they are Directors, have indicated that they will subscribe for Placing Shares as follows:
|
Name |
Interest in Existing Shares |
Percentage of voting rights in respect of Existing Shares |
Number of Placing Shares subscribed |
Percentage of voting rights in respect of issued share capital following completion of the Placing* |
|
Andrew Church |
- |
- |
1,250,000 |
1.1 |
|
Emma Sugarman |
- |
- |
1,250,000 |
1.1 |
|
John Foley |
1,235,000 |
2.6 |
3,125,000 |
3.9 |
|
Retro Grand Limited |
2,000,000 |
4.2 |
- |
1.8 |
|
Seraffina Holdings Limited |
8,120,929 |
16.9 |
- |
7.3 |
|
Southwind Limited |
4,247,048 |
8.8 |
43,802,658 |
50.1* |
* Includes the 7,287,775 New Ordinary Shares to be sold to Southwind Limited by Darren Browne on the day of Admission, subject to the passing of all the Resolutions.
The Board considers, having consulted with the Company's Nominated Adviser, FinnCap, that the subscription by these Shareholders is fair and reasonable so far as Shareholders are concerned. Each Director (as applicable) abstained from the assessment of the reasonableness of their own subscription.
General Meeting
Set out in the Circular is a notice convening the General Meeting to be held on 30 March 2009 at the offices of Memery Crystal LLP, 44 Southampton Buildings, London, WC2A 1AP at 11.00 a.m., at which the Resolutions will be proposed for the purposes of implementing the Proposals.
Recommendations The Waiver
The Directors, who have been so advised by FinnCap, consider that the Proposals are fair and reasonable and are in the best interests of the Company and the Independent Shareholders as a whole and accordingly unanimously recommend Independent Shareholders to vote in favour of the Whitewash Resolution to be proposed at the General Meeting as they intend to do in respect of their beneficial holdings amounting, in aggregate, to 2,124,098 Existing Shares, representing approximately 4.4 per cent. of the existing issued ordinary share capital of the Company. In providing advice to the Directors, FinnCap has taken into account the Directors' commercial assessments.
The Reorganisation
The Directors consider the Proposals to be in the best interests of the Company and its Shareholders as a whole and accordingly unanimously recommend Shareholders to vote in favour of the Share Authority Resolution and Resolution 3 to be proposed at the General Meeting as they intend to do in respect of their beneficial holdings amounting, in aggregate, to 2,124,098 Existing Shares, representing approximately 4.4 per cent. of the existing issued ordinary share capital of the Company.
PLACING STATISTICS
|
Number of Existing Shares in issue |
48,120,331 |
|
Number of New Ordinary Shares in issue following the Sub-Division |
48,120,331 |
|
Number of Deferred Shares in issue following the Sub-Division |
48,120,331 |
|
Number of Placing Shares |
62,500,000 |
|
Number of New Ordinary Shares in issue following Admission |
110,620,331 |
|
Number of share options in issue *Excludes Proposed Option Awards |
3,741,980* |
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
|
2009 |
|
|
Latest time and date for receipt of white Form of Proxy in respect of the GM |
11.00 a.m. on 28 March |
|
Latest time and date for receipt of blue Form of Proxy in respect of the AGM |
11.15 a.m. on 28 March |
|
General Meeting |
11.00 a.m. on 30 March |
|
Annual General Meeting Record date for the Reorganisation |
11.15 a.m. on 30 March 30 March |
|
Admission and dealings in the New Ordinary Shares to commence on AIM |
8.00 a.m. on 31 March |
|
CREST accounts to be credited for Placing Shares in uncertificated form |
31 March |
|
Posting of share certificates for Placing Shares |
by 9 April |
DEFINITIONS
The following definitions, which are taken from the circular to shareholders dated 6 March 2009 are used throughout this announcement.
|
"Admission" |
admission of the New Ordinary Shares to be issued pursuant to the Placing to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules |
|
"AIM" |
the AIM Market operated by the London Stock Exchange |
|
"AIM Rules" |
the AIM rules for companies published by the London Stock Exchange from time to time |
|
"AGM" or "Annual General Meeting" |
the annual general meeting of the Company convened for 11.15 a.m. on 30 March 2009, and any adjournment thereof |
|
"AGM Notice" or "Notice of Annual General Meeting" |
the notice convening the AGM |
|
"Articles of Association" or "Articles" |
the articles of association of the Company |
|
"Capita Registrars" |
a trading name of Capita Registrars Limited, the Company's Registrar |
|
"certificated form" or "in certificated form" |
an ordinary share recorded on a company's share register as being held in certificated form (namely, not in CREST) |
|
"Circular" |
Circular to Shareholders dated 6 March 2009 |
|
"Company" or "Servoca" |
Servoca Plc |
|
"Deferred Shares" |
deferred shares of 9 pence each in the capital of the Company, arising pursuant to the Sub-Division |
|
"Directors" or "Board |
the directors of the Company, or any duly authorised committee thereof |
|
"Existing Deferred Shares" |
the 3,760,000,000 deferred shares of 0.1p each in the authorised but unissued share capital of the Company on 5 March 2009 |
|
"Existing Shares" |
the 48,120,331 Ordinary Shares in issue as at 5 March 2009, all of which are admitted to trading on AIM |
|
"Form of Proxy" |
the form of proxy for use in connection with either the GM or AGM as the context shall require |
|
"GM" or "General Meeting |
the general meeting of the Company convened for 11.00 a.m. on 30 March 2009, and any adjournment thereof |
|
"GM Notice" or "Notice of GM" |
the notice convening the GM |
|
"Group" |
the Company, its subsidiaries and its subsidiary undertakings as at 5 March 2009 |
|
"Independent Shareholders" |
the Shareholders other than the New Concert Party and Darren Browne |
|
"London Stock Exchange" |
London Stock Exchange plc |
|
"New Concert Party" |
together Retro Grand Limited, Seraffina Holdings Limited and Southwind Limited |
|
"New Ordinary Shares" |
new ordinary shares of 1 pence each in the capital of the Company, to be issued pursuant to the Placing and arising pursuant to the Sub-Division |
|
"Old Concert Party" |
together Antony Berry, Geoff Brown, Louise Brown, Darren Browne, Diane Browne, John Browne, Oliver Cooke, Miles Davis, Michael Jackson, Dallas Ross, Pat Ross, Retro Grand Limited, Seraffina Holdings Limited and Southwind Limited |
|
"Ordinary Shares" |
ordinary shares of 10 pence each in the capital of the Company |
|
"Panel" |
the Panel on Takeovers and Mergers |
|
"Placing" |
the conditional placing of the Placing Shares pursuant to the terms of the Placing Agreement |
|
"Placing Agreement" |
the conditional agreement dated 6 March 2009 and made between the Company and FinnCap in relation to the Placing |
|
"Placing Price" |
8 pence per Placing Share |
|
"Placing Shares" |
the 62,500,000 New Ordinary Shares to be allotted and issued pursuant to the Placing |
|
"Proposals" |
the Placing, the proposed Reorganisation and the Waiver |
|
"Proposed Option Awards" |
the proposed awards of options over up to 7,320,053 New Ordinary Shares |
|
"Reorganisation" |
the proposed reorganisation of the share capital of the Company pursuant to Resolution 2 set out in the GM notice |
|
"Resolutions" |
the resolutions set out in the GM Notice |
|
"Rule 9" |
Rule 9 of the Takeover Code |
|
"Share Authority Resolution" |
the resolution to sub-divide the issued and unissued Ordinary Shares, consolidate and convert the Existing Deferred Shares into New Ordinary Shares, amend the Articles and grant to the Directors the authority to allot New Ordinary Shares to be proposed at the General Meeting and set out in the Notice of General Meeting as Resolution 2 |
|
"Shareholders" |
holders of Ordinary Shares or New Ordinary Shares (as the case may be) |
|
"Sub-division" |
the proposed sub-division of each of the issued Existing Shares into one New Ordinary Share and one Deferred Share and the proposed sub-division of each authorised but unissued Existing Share into ten New Ordinary Shares |
|
"Takeover Code" |
the City Code on Takeovers and Mergers |
|
"UK" |
the United Kingdom of Great Britain and Northern Ireland |
|
"uncertificated" or "in uncertificated form" |
an ordinary share recorded on a company's share register as being held in uncertificated form in CREST and title to which, by virtue of the Uncertificated Securities Regulations 2001, may be transferred by means of CREST |
|
"Waiver" |
the waiver granted by the Panel (subject to the passing of the Whitewash Resolution) in respect of the obligation of the New Concert Party to make a mandatory offer under Rule 9 of the Takeover Code in connection with the Placing |
|
"Whitewash Resolution" |
the ordinary resolution of the Independent Shareholders concerning the waiver of obligations under Rule 9 of the Takeover Code to be proposed at the General Meeting in connection with the issue of New Ordinary Shares to certain members of the New Concert Party pursuant to the Placing and set out in the Notice of General Meeting as Resolution 1 |
Related Shares:
Servoca