20th Jun 2005 07:01
Wichford plc20 June 2005 20 June 2005FOR IMMEDIATE RELEASE WICHFORD PLC Placing of 55,555,556 New Ordinary Shares at 180p per share £100 million proceeds to be used to expand property portfolio Wichford plc ("Wichford" or the "Company"), a property investment company with aportfolio focused on UK investment property outside Central London occupied byUK Central Government bodies, today announces a placing of 55,555,556 newordinary shares to raise £100 million (before expenses). The net proceeds of the Placing will assist the Company to take advantage ofproperty acquisition opportunities which the Board believes will be availableand further the company's aim of building a well-diversified portfolio ofinvestment properties. The Placing is conditional upon the Board receiving approval from itsshareholders to disapply pre-emption rights and to grant the Board the necessaryauthority to allot the New Ordinary Shares. Resolutions regarding the Placingwill be voted on at an Extraordinary General Meeting to be held on 13 July 2005. Michael Sheehan, Chairman of Wichford plc, commented today, 'This Placing willprovide Wichford with the opportunity to build on its success since itsadmission to AIM last year. By purchasing new properties, we will be able toexpand the business and access further high-quality recurring revenue.' The Company has also today issued its interim results for the period to 31 March2005. Enquiries WichfordJamie Hambro Tel: 020 7747 5678Philip Cooper Tel: 020 7495 7111Richard Britten-Long Tel: 020 7333 0044 Citigate Dewe Rogerson Tel: 020 7638 9571Patrick Toyne-SewellGeorge Cazenove Notes to Editors Wichford plc listed on AIM in August 2004. The Company maintains a portfolio ofproperties across the UK with unit values usually between £3 million and £15million. Wichford's portfolio has a current gross asset value of approximately£210 million, of which £103.7 million worth has been acquired since theCompany's admission to AIM, and generates an annualised rental income of around£13.5 million. Wichford's properties are occupied by UK Central Government bodies and all areoutside Central London. Wichford is seeking to benefit from the Government'scommitment to act upon the recommendations of the Lyons Review (March 2004) thatabout 20,000 public sector jobs should be relocated outside London and theSouth-East of England over the next seven years. The Company's current portfoliohas a weighted average unexpired lease term in excess of 10 years. 1. Introduction and summary Wichford is an Isle of Man registered property investment company with aportfolio focused on UK investment property outside Central London occupied byUK Central Government bodies. In the eight months since its admission to trading on AIM, Wichford had acquiredapproximately £103.7 million of property, resulting in a portfolio of propertiesunder management with a gross asset value of approximately £227.5 milliongenerating an annualised rental income of approximately £15.5 million. This highquality recurring income, which should increase over the coming years as aresult of rent reviews, together with income from property sales, will, theDirectors believe, enable the Company to pay in due course a growing level ofdividends to Shareholders. The proceeds of the Placing of £100 million (before expenses) will enable theCompany to take advantage of property acquisition opportunities which the Boardbelieves will be available and further the Company's aim of building a welldiversified portfolio of investment properties. The Placing of 55,555,556 new Ordinary Shares at a price of 180p per share isconditional, inter alia, upon (i) the Company obtaining approval from itsshareholders to disapply pre-emption rights and to grant the Board the necessaryauthority to allot the New Ordinary Shares; and (ii) Admission. The Placing hasbeen fully underwritten by Evolution Securities pursuant to the terms of thePlacing Agreement. 2. Information on Wichford The Group's track record is demonstrated by its existing portfolio ofproperties. The portfolio comprises a core longer-term portfolio and an activelymanaged shorter-term portfolio. As at 28 April 2005, the core portfolio comprised 27 properties (totalling989,928 square feet) with a gross asset value of approximately £185.5 million,of which approximately £141 million has been funded by bank debt. That portfolioproduced a rental income of approximately £12.2 million (£12.67 per square foot)and had a weighted average unexpired term of the leases of approximately 11.84years. Since 28 April 2005, the Company has sold one property, in Reading, for aconsideration of £17.2 million. The proceeds of the sale have been retained incash and the Company is currently negotiating the purchase of replacementproperties having a broadly equivalent rental income. As at 28 April 2005, the active portfolio comprised 9 properties (totalling286,934 square feet) with a gross asset value of approximately £42 million, ofwhich approximately £28 million has been funded by bank debt. This portfoliocurrently produces a rental income of approximately £3.3 million (£11.49 persquare foot) and has a weighted average unexpired term of the leases ofapproximately 5.4 years. The active portfolio has high residual and alternativeuse values. 3. The Government-occupied property market It has been estimated that there is approximately 93 million square feet ofGovernment occupied property in the UK outside of Central London (Source:Capital Economics Ltd). Wichford is seeking to benefit from the Government'scommitment to act upon the recommendations of the Lyons Review (March 2004) thatabout 20,000 public sector jobs should be relocated outside London and the SouthEast of England over the next seven years. An investment in Wichford provides exposure to what the Directors believe to bea highly attractive and significant element of the commercial property marketand one in which there is considerable opportunity for further investment as UKCentral Government continues to migrate out of Central London and outsource itsoperations. 4. Background to and reasons for the Placing The Company has made significant progress in the ten months since its admissionto trading on AIM and fundraising of £30 million. It is now almost fullyinvested, ahead of schedule, and has secured well priced and competitive debtfinance representing approximately 75 per cent. of gross asset value. TheDirectors believe that Wichford has established strong credibility in thecommercial property market. Furthermore, the Directors believe that, based onthe financial performance to date, the Company is on track to meet its dividendexpectations for the period ending 30 September 2005 set at the time of theadmission to trading on AIM. Further details of the Company's dividend policyare set out below. The Company proposes to raise £100 million of new equity pursuant to the Placingand expects to fully invest this amount no later than March 2006. Additionaldebt finance may also be raised once the equity is invested, but the timing andamount will be dependent upon market conditions. The Directors believe that the Company and Shareholders will benefit from thePlacing for, inter alia, the following reasons: • The increased size of the Company's property portfolio will facilitate the active management of the portfolio in order to capture value enhancement opportunities, including rent reviews, lease extensions and renewals, and property sales • It will lead to economies of scale and the improvement of the Company's negotiating position • It will potentially provide access to additional financing options which are only available on account of the increased size of the property portfolio, including securitization of debt or bond issuance • It will enhance the net asset value per share of the Company • It should increase analyst interest and coverage of the Company's activities which may also lead to greater liquidity in the market for the Company's Ordinary Shares. 5. Debt financing Wichford already enjoys strong relationships with its principal property bankerswho offer attractive terms including competitive borrowing margins, relativelyhigh loan to value ratios and restrictive covenants that are compatible withfacilities of these types. The Company has negotiated, in principle, a newsenior debt facility with Lehman Brothers, which the Directors consider willprovide any additional debt financing required by the Company. 6. Dividend policy The Directors believe that, on the basis of the financial performance to dateand the current forecast for the remainder of the year, the proposed dividend of9 pence per share on Qualifying Shares for the period to 30 September 2005 willbe earned. The Placing Shares will not rank for entitlement to this dividendpayment, but will be eligible for any future dividends. Subject to market conditions and to identifying and acquiring properties whichfit the Company's acquisition strategy by March 2006, the Board expects to beable to recommend the payment of a total dividend of not less than 9 pence pershare in respect of the year ending 30 September 2006. 7. The Placing On 20 June 2005, the Company and Evolution Securities entered into the PlacingAgreement, pursuant to which Evolution Securities agreed to use reasonableendeavours to place the Placing Shares at the Placing Price on behalf of theCompany. The total proceeds of the Placing, before expenses, are £100 million.Expenses are estimated to be approximately £2.62 million. The Placing has beenunderwritten by Evolution Securities. The proceeds of the Placing will be used to fund the purchase of additionalinvestment properties, as well as for general working capital requirements ofthe Group. The Placing is conditional upon, inter alia, the passing of theResolutions and Admission becoming effective. The Placing Shares are or will be in registered form and, on Admission, willrank pari passu with the existing issued Ordinary Shares, except they will notrank for any dividend or other distribution declared, paid or made in relationto any financial period of Wichford ending on or before 30 September 2005 andthe holder of any such Placing Shares shall not be entitled to any suchdividend. The Placing Shares will rank in full for dividends and otherdistributions declared, paid or made in relation to any financial period ofWichford ending after 30 September 2005 in respect of the ordinary share capitalof the Company. On Admission, the Company will have 97,325,697 Ordinary Shares in issue and amarket capitalisation of £175.19 million at the Placing Price. The 55,555,556Placing Shares will represent 57.08 per cent. of the Enlarged Issued ShareCapital. Application will be made to the London Stock Exchange for the new OrdinaryShares to be admitted to trading on AIM. It is expected that Admission willoccur on 14 July 2005. The Company reserves the right to issue up to one million additional newOrdinary Shares to existing Shareholders. 8. Current trading and prospects Since 31 March 2005, the Group has completed 3 further property purchases for aconsideration of £16.62 million, of which £4.5 million was satisfied by theissue of Ordinary Shares, and one sale (King's House, Reading) with grossproceeds of £17.2 million (realising a profit on sale of £1.8 million). The increased level of capital resources available to the Company following thePlacing should, the Directors believe, result in increased earnings forShareholders in due course, although the introduction of International FinancialReporting Standards may have an adverse effect on the level of distributableprofits. The information on Wichford relating to its property portfolio is based on theposition of the Group as at 28 April 2005. As stated above, since 28 April 2005,one property (King's House, Reading) has been sold. 9. Modification of investment policy It is sometimes the case that Government occupied buildings contain an elementof commercial/non-Governmental use, often of a retail nature. Opportunities alsosometimes arise to invest in properties occupied by non-departmental publicbodies which, the Directors believe, provide a similar quality of covenant toGovernment occupied properties. Therefore, in order to ensure that the Company'sinvestment policy is not unduly restrictive, a resolution will be proposed atthe EGM to allow the Group to acquire properties which are occupied bynon-departmental public bodies or buildings where part of the income is derivedfrom non-Governmental entities. This ability will be restricted such that therental income from entities other than Government or non-departmental publicbodies will represent no more than 5 per cent. of the Group's total rentalincome or 20 per cent. of the rental income from a single property. 10. Extraordinary General Meeting The circular to be sent to Shareholders today contains a notice convening an EGMto be held on 13 July 2005 at the offices of Simcocks Advocates Limited,Ridgeway House, Ridgeway Street, Douglas, Isle of Man IM99 1PY at 12 noon, atwhich the Resolutions will be proposed for the purposes of implementing thePlacing. The Resolutions will be proposed as an ordinary resolution to increasethe authorised share capital of the Company; an ordinary resolution to authorisethe Directors to allot Ordinary Shares for the purposes of the Placing andgenerally; a special resolution to disapply Shareholders' pre-emption rights forthe purposes of the Placing and generally; and an ordinary resolution to amendthe Company's investment policy. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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