28th May 2012 11:20
Journey Group plc ("Journey" or the "Company")
Reduction of Capital
The Company announces that it has today published a circular to shareholders containing details of a proposed Capital Reduction to create in due course positive distributable reserves in the Company. The proposals are conditional on the passing of the Resolution set out in the notice of General Meeting and subsequent Court approval.
A General Meeting has been convened to seek shareholder consent to the proposals for 11.00am on 13 June 2012.
The following text is taken from the Chairman's letter, as extracted from the circular.
1. Introduction
The Company's audited accounts for the year ended 31 December 2011 showed it to have a deficit on its profit and loss account of £26,276,000 which has arisen as a result of past cumulative losses incurred. The Company is not able to pay any dividends out of future profits until this deficit is eliminated.
The Directors propose to cancel the Company's share premium account and capital redemption reserve. Subject to the approval of Shareholders and the confirmation of the Court, the cancellation of the Company's share premium account and capital redemption reserve will eliminate the current deficit on the Company's profit and loss account and create (subject to any special reserve - please refer to section 5 of this letter for more details) positive distributable reserves which may in due course facilitate the payment of any future dividends by the Company to Shareholders.
The purpose of this document is to explain the background to and reasons for these proposals and to seek Shareholder approval for the Resolution relating to the Reduction of Capital which is being proposed at the General Meeting of the Company to be held at 11:00 a.m. on 13 June 2012 at The Encompass Centre, International Avenue, Heston, Middlesex TW5 9NJ.
2. Background
The Companies Act 2006 only permits a company to make distributions to its shareholders out of its profits available for that purpose. Such profits are broadly a company's accumulated realised profits so far as not previously utilised by distribution or capitalisation less its accumulated realised losses. As at 31 December 2011, the Company had an accumulated deficit on its profit and loss account of £26,276,000. Accordingly, the Company is precluded from making future distributions to its Shareholders until such deficit is eliminated.
As at 31 December 2011, there was £36,497,000 standing to the credit of the Company's share premium account and £24,000 standing to the credit of the Company's capital redemption reserve. The share premium account and capital redemption reserve are non-distributable reserves and the Company is therefore unable to use the amounts standing to the credit of such accounts for the purpose of making distributions to Shareholders.
While the Company cannot use the amounts standing to the credit of the share premium account and capital redemption reserve when making distributions to its Shareholders, the Companies Act 2006 does permit the Company (subject to the approval of Shareholders and the consent of the Court) to cancel its share premium account and capital redemption reserve and credit the resulting sums to the Company's profit and loss account where they will be set off against the existing deficit.
Subject to the approval of Shareholders and the consent of the Court, the Reduction of Capital will result in sufficient sums being credited to the Company's profit and loss account to: (i) eliminate the accumulated deficit; and (ii) to create reserves that the Company may be able to use for the purpose of making any future distributions to the Shareholders.
It should be noted that the Reduction of Capital is not being undertaken in order to permit any specific, planned distribution to the Shareholders immediately following the Reduction of Capital but rather to facilitate any distribution to Shareholders that the Company may choose to make in the future following the Reduction of Capital.
If the Resolution is not passed and/or the Court confirmation is not obtained, it will not be possible for the Company to make dividend payments or other distributions to Shareholders for the foreseeable future.
3. Cancellation of the Company's share premium account and capital redemption reserve
The Board is seeking the approval of Shareholders for the cancellation of the entire share premium account of the Company. As at 31 December 2011, the amount of the share premium account was £36,497,000. This sum has arisen by the Company having issued shares at a premium to their nominal value from time to time.
The Board is also seeking the approval of Shareholders for the cancellation of the capital redemption reserve of the Company. As at 31 December 2011, the amount of the capital redemption reserve was £24,000. This sum has arisen by the Company redeeming or purchasing its shares out of distributable profits from time to time.
The cancellation of the Company's share premium account and capital redemption reserve will only become effective if (in this order): (i) the Resolution is approved by Shareholders at the General Meeting; (ii) confirmation is given by the Court; and (iii) the Court order and a statement of capital are delivered to and registered by Companies House.
4. General Meeting and action to be taken
The cancellation of the Company's share premium account and capital redemption reserve each require the approval of Shareholders by special resolution in general meeting. Accordingly, set out at the end of this document is a notice convening a General Meeting of the Company to be held at 11:00 a.m. on 13 June 2012 at The Encompass Centre, International Avenue, Heston, Middlesex TW5 9NJ at which the Resolution set out in such notice to approve the Reduction of Capital will be proposed.
The Resolution to approve the Reduction of Capital is a special resolution requiring a majority of not less than 75% of the votes cast.
A Form of Proxy for use by Shareholders in connection with the General Meeting accompanies this document. Whether or not you intend to be present at the General Meeting, please complete and return the Form of Proxy in accordance with the instructions printed on it as soon as possible and, in any event, so as to reach the Company's registrars, Capita Registrars, at PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU by no later than 11 a.m. on 11 June 2012. Completion and return of the Form of Proxy will not exclude Shareholders from attending and voting in person at the General Meeting.
5. Application to the Court
If Shareholders approve the Resolution at the General Meeting, the Board intends to make an application to the Court promptly following the General Meeting to sanction the Reduction of Capital. To this end, provisional dates have been obtained for hearing the Company's application. These dates are subject to change depending on the Court's timetable, but the present timetable provides for the final hearing of the Company's application to take place on 11 July 2012.
Prior to confirming the cancellation of the share premium account and the capital redemption reserve, the Court will need to be satisfied that the creditors of the Company at the Effective Date are not prejudiced by the same. The Company will put in place such form of creditor protection as is appropriate to satisfy the Court in this regard, which may include, amongst other things, the Company: (i) seeking consent from certain creditors; and/or (ii) giving an undertaking to the Court to create a special, non-distributable reserve of a sum equal to the reserves created by the Capital Reduction after the deficit on the profit and loss account of the Company has been extinguished, with any such reserve to remain until the relevant creditors of the Company at the date of the Capital Reduction who are not protected at the date of the Capital Reduction by other means have been otherwise protected or discharged. Whilst any special reserve remains, any dividends paid by the Company must be paid out of profits of the Company earned post the date of the Capital Reduction. In this respect, and as a result of the Capital Reduction, future profits of the Company earned after the Effective Date would be available for the Company to use for the purposes of paying future dividends, if appropriate.
The precise form of creditor protection is a question for the Court and the Company will give such creditor protections as the Court requires and the Company's lawyers advise are appropriate.
6. Effect of the Reduction of Capital
Subject to Shareholder approval and Court consent, the amounts resulting from the cancellation of the Company's share premium account and capital redemption reserve will be credited to the Company's profit and loss account to eliminate the deficit and create (subject to the Court's sanction) distributable reserves that the Company will be able to use when making any future distributions to Shareholders.
The Reduction of Capital does not involve any distribution or repayment of capital or share premium by the Company and will not reduce the underlying net assets of the Company.
7. Recommendation
The Directors consider that the Reduction of Capital is in the best interests of the Company and Shareholders as a whole. Accordingly the Directors unanimously recommend Shareholders to vote in favour of the Resolution as they intend to do in respect of their own beneficial holdings of 6,691,466 Ordinary Shares, representing approximately 2.16% of the Company's issued Ordinary Share capital.
Yours faithfully
Stephen YappExecutive Chairman
Terms used and not defined in this announcement bear the same meaning given to them in the circular dated 28 May 2012.
A copy of the circular will be available to view shortly on the Company's website in accordance with AIM Rule 26: www.journeygroup.plc.uk
For further information please contact:
Stephen Yapp Tel: +44 (0) 20 8606 2000
Journey Group plc
Carl Fry Tel: +44 (0) 20 8606 2000
Journey Group plc
Singer Capital Markets Limited (Nomad & Broker) Tel: +44 (0) 20 3205 7500
Jonathan Marren
Matt Thomas
Related Shares:
JNY.L