Proposed Placing to raise £7.5 million

For immediate release 7 March 2014

Redhall Group plc

("Redhall", the "Company" or the "Group") 

Proposed Placing to raise £7.5 million

and

Notice of General Meeting 

Redhall Group plc (AIM: RHL), the specialist engineering support services group, is pleased to announce its intention to raise £7.5 million (before expenses) through a placing of 19,230,769 new Ordinary Shares of 25 pence in the capital of the Company at a price of 39 pence per share. The new Ordinary Shares are being placed with new and existing institutional and other shareholders by Arden Partners and Charles Stanley Securities.

Transaction Highlights

· Placing of 19,230,769 new Ordinary Shares at a price of 39 pence per new Ordinary Share to raise £7.5 million gross

· Proceeds to be used to recapitalise the Company's balance sheet and for general working capital

· The recapitalisation of the balance sheet, combined with the recent resolution of legacy issues and restructuring of the business by Redhall's new management team, is expected to allow the Company to capitalise on significant opportunities in its key end markets

· Redhall Directors have subscribed for a total of 307,691 new Ordinary Shares in the Placing, at a total price of £120,000

· The 19,230,769 new Ordinary Shares to be issued in connection with the Placing are equivalent to approximately 39.2 per cent. of the Company's enlarged issued ordinary share capital immediately following completion of the Placing

· The Placing Price represents a discount of approximately 7.1 per cent. to the closing price of Redhall's ordinary shares of 42 pence on 6 March 2014

Completion of the proposed Placing is subject inter alia to shareholder approval, which will be sought at a General Meeting of the Company to be held at Squire Sanders, 2 Park Lane, Leeds, at 12.30pm on Wednesday 26 March 2014 following the Company's Annual General Meeting at 12.00 noon. Dealings in the new Ordinary Shares issued in the Placing are expected to commence on Thursday 27 March 2014.

A circular providing further details of the Placing will be sent to Shareholders later today. Once it has been posted, a copy of the Circular will be made available on the Company's website at www.redhallgroup.co.uk. Certain extracts from the circular are set out below.

Redhall's Chief Executive, Richard Shuttleworth, said:

"We are delighted by the positive response from new and existing investors to this fundraising, which has the potential to be transformational for Redhall by recapitalising our balance sheet. This fundraising will give us the opportunity to deliver our strategy, which focuses on the Company's core strengths in niche manufacturing and specialised contracting. We see significant opportunities open to us in our key markets and the Company is now well positioned for future growth."

Contact details:

Proposed Placing to raise £7.5 million

 and Notice of General Meeting

1. Introduction

The Company is pleased to announce that it intends to raise £7.5 million (before expenses) through the placing (the "Placing") of 19,230,769 new Ordinary Shares of 25 pence in the capital of the Company at a price of 39 pence per share, with institutional and other shareholders by Arden Partners and Charles Stanley Securities.

Set out below are further details of the Placing, including the background to and reasons for it, and an explanation as to why the Independent Directors consider it to be in the best interests of the Company and are seeking your approval of the Resolutions at the GM to enable the Company to issue the Placing Shares.

2. Redhall Group

The Redhall Group is a multi-disciplinary engineering business offering design, manufacture, installation, maintenance and decommissioning services to its blue chip customers in the nuclear, oil and gas, petrochemical and food process sectors. The Group's services are delivered through its directly employed workforce at locations based close to its clients to develop the longstanding key customer relationships that underpin the business. Redhall's key manufacturing activities are centered around three locations at Bolton, Bristol and Newcastle which deliver key products to customers in the UK and overseas. The Group's products are tested and certified to national and international standards (approved by Lloyd's Register for blast containment and HM Government for security/containment). The Group's contracting activities are based on key client sites at Sellafield, Aldermaston (AWE), Barrow (BAE), Pembroke (Valero), York (Nestlé) amongst others and reflect long-standing relationships.

3. Redhall management's key business goals

The Group's aim is to achieve a balanced portfolio of business, in terms of both contracting and manufacturing services, and drive revenue and profits growth of 35 per cent. over the medium term with a five per cent. operating margin target. In addition the Group will strive to maintain its impressive safety record. The Board also plans to further develop its market leading products and services to meet customer requirements and in doing so create an intelligent organisation with innovation and continuous improvement at the heart of its culture, alongside its safety record.

4. Reasons for the Placing

The Company has embarked upon the Placing in order to recapitalise its balance sheet, seeking a more appropriate balance between debt and equity funding and to provide additional working capital for the Group as the benefits of the restructuring and new strategy summarised above lead to anticipated increases in revenues. In addition the Placing will introduce further institutional shareholders to support the Company's future growth. The fundraising is being undertaken by way of a Placing to avoid the potential additional complexity and costs of a pre-emptive issue.

5. Use of proceeds

Bank indebtedness at 30 September 2013 was £19.1 million. The Company will apply part of the Placing proceeds and all of the net funds received from the Vivergo settlement as previously announced to reduce the outstanding debt with HSBC. The Board is in constructive discussions with HSBC to extend and improve the Group's banking arrangements to facilitate the future growth of the business and allow it to capitalise on the significant opportunities in its key end markets. The Placing will also provide additional working capital for the Company to meet the anticipated growth in sales over the medium term.

6. Current trading and prospects

Current trading is in line with the Board's expectations, with a good start to the first quarter of the financial year which has been maintained so far into the second quarter. Management perceives significant opportunities in key markets which should result in a growing order book over coming months and the Directors believe that the Group is now well positioned to take advantage of the opportunities that lie before it.

The current year has started well, with the Group's core markets showing good growth opportunities supported by an opening order book of £111 million and further significant awards anticipated. The Company has announced plans to move to new manufacturing facilities in Bolton which will be expected to improve operational efficiency and increase capacity from 2015, and the Government's nuclear new build programme is expected to provide incremental growth opportunities in 2016 and beyond.

Divisional outlook - Manufacturing

The Manufacturing division is a high quality niche manufacturer selling into resilient end markets with significant identified prospects. In Defence, the Group has a number of opportunities for door contracts (estimated revenue of £20 million) and equipment fit out (which comprise glove boxes, waste racks and containers and which are estimated to be worth £24 million of sales over the next six years).

In Nuclear Decommissioning opportunities include provision of glove boxes and other mechanical equipment under the Dounreay framework (estimated to be worth £7 million over the next three years) as one of three framework contractors and waste containers and waste racks and containers at Sellafield. The Group also has opportunities in the Infrastructure markets (for example Crossrail and other prestigious London projects) and, in the oil and gas sector, a dual opportunity in projects via the Heerema framework and blast containment on new oil and gas installations.

Management's aim in this manufacturing division is to double turnover and increase operating margin to double digits in the medium term.

Divisional outlook - Nuclear

The Nuclear division is a specialist mechanical and electrical contractor to the civil and defence nuclear sectors with long established site presence. The Group is a strategic partner of AWE at Aldermaston with a long term relationship and strategic position on the site. In addition the long term committed clean-up strategy at Sellafield and ring fenced funding for decommissioning and waste management provides the Group with further opportunities there and at Magnox sites. The Group continues its long standing operations on site at Barrow closely with its client BAE Systems, where there is a committed submarine programme to Boat 6; good prospects for Boat 7 and in addition the Successor class submarine main gate decision is expected to be made post the 2015 general election.

Further opportunities include EDF's plant life extension programme to existing nuclear stations and nuclear new build opportunities (the latter of which has not been included in the short-term management projections). Management is targeting 50 per cent. revenue growth and operating margin improvement to 5 per cent. in the medium term in this division.

Divisional outlook - Engineering

The Engineering division is a mechanical and electrical contractor to blue chip clients providing industrial processes across a broad range of sectors including oil and gas, petrochemical, chemical, pharmaceutical, telecoms and food. The ageing infrastructure of a number of clients' assets is driving increased maintenance and project spend. The growth of shale gas and power generation (excluding nuclear), together with offshore oil and gas, also provides future opportunities. The Group is also encouraged that the tankage market is still showing signs of growth.

The food market is also experiencing an upturn manifested in, for example, investment of £75 million by Mondelez at its Bournville operations. The upgrade and maintenance of the telecoms network infrastructure provides further growth opportunities for the Group.

Management's target is to grow the business organically in a controlled manner and increase operating margins to 4.5 per cent. in this division.

7. Details of the Placing and the Placing Agreement

The Placing will raise gross proceeds of £7.5 million through the issue by the Company of 19,230,769 new Ordinary Shares at a price of 39 pence per share.

The Placing is conditional, inter alia, upon:

· the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms;

· the passing of the Resolutions at the General Meeting; and

· Admission.

The Placing Shares represent, in aggregate, approximately 64.4 per cent. of the Company's existing issued share capital and approximately 39.2 per cent. of the issued share capital of the Company immediately following completion of the Placing. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that Admission will take place on 27 March 2014. The Placing Shares will rank pari passu with the Existing Ordinary Shares.

Certain of the Directors (being the Participating Directors) have subscribed for Placing Shares as follows:

Placing Agreement

The Placing Agreement contains customary warranties given by the Company to Arden Partners, Charles Stanley Securities and Altium as to matters relating to the Group and its business and a customary indemnity given by the Company to Arden Partners, Charles Stanley Securities and Altium in respect of liabilities arising out of or in connection with the Placing. Arden Partners, Charles Stanley Securities or Altium are entitled to terminate the Placing Agreement in certain limited circumstances prior to Admission, including circumstances where any of the warranties are found not to be true or accurate or were misleading in any respect or the occurrence of certain force majeure events or the Resolutions not being passed at the General Meeting. The Placing Shares are not being made available to the public and are not being offered or sold in any jurisdiction where it would be unlawful to do so.

8. Resolutions

The Resolutions to be proposed at the General Meeting are, in summary, as follows:

1) grant authority to the Directors under section 551 of the Act, to allot Ordinary Shares up to a maximum aggregate nominal amount of £4,807,692.25 being the maximum required for the purposes of issuing the Placing Shares; and

2) empower the Directors, under section 570 of the Act, to allot the Placing Shares on a non pre-emptive basis

9. Recommendation and irrevocable undertakings

The Independent Directors unanimously recommend that Shareholders vote in favour of the Resolutions, as they intend to do in respect of their own beneficial holdings which amount in aggregate to 1,310,130 Ordinary Shares, representing approximately 4.39 per cent. of the existing issued Ordinary Share capital of the Company. In addition the Company has secured irrevocable undertakings to vote in favour at the General Meeting from the Participating Directors and other shareholders amounting to 5,969,803 Ordinary Shares in aggregate, representing approximately 20.0 per cent. of the existing Ordinary Share capital.

Expected timetable of Principal Events

 Placing Statistics

Definitions

The following definitions apply throughout this announcement unless the context requires otherwise: