22nd Jul 2005 07:00
Davis Service Group PLC22 July 2005 For immediate release 22 July 2005 The Davis Service Group Plc ("Davis" or "the Company") Return of capital of approximately £151 million and 5 for 6 share consolidation • Proposed return of capital of approximately £151 million by means of an issue of B shares, redeemable at 74 pence each • 5 for 6 share consolidation to assist in maintaining comparability of share price, earnings per share and dividend per share • Subject to shareholder approval at an extraordinary general meeting to be held on 15 August 2005 • Dealings to commence in consolidated ordinary shares at 8.00 a.m. on 19 August 2005 Commenting, Roger Dye, Chief Executive, said: "Following the sale of Elliott, which completed in May 2005, I am pleased toannounce the details of our proposed return of capital of approximately £151million to shareholders. The sale of Elliott completed the focusing of Davis's operations onto its coretextile maintenance activities and the newly focused group will continue topursue organic growth opportunities across its markets and, where appropriate,look to make targeted acquisitions." Enquiries: The Davis Service Group Plc +44 (0)20 7259 6663Roger Dye, Chief ExecutiveKevin Quinn, Finance Director Dresdner Kleinwort Wasserstein +44 (0)20 7623 8000Rosalind Hedley-MillerChristopher Baird Financial Dynamics +44 (0)20 7269 7291Richard MountainAndrew Lorenz This announcement is made by Davis and is the sole responsibility of Davis.Davis is exclusively responsible for the contents of this announcement andneither Dresdner Kleinwort Wasserstein Limited ("Dresdner Kleinwort Wasserstein") nor any person acting on Davis's behalf is responsible for or shall have anyliability for any information, representation or statement relating to Daviscontained in this announcement or any information previously published by or onbehalf of Davis or otherwise. Dresdner Kleinwort Wasserstein, which isauthorised and regulated by the Financial Services Authority, is acting forDavis and for no-one else in connection with the proposed return of capital toshareholders described in this announcement and will not be responsible toanyone other than Davis for providing the protections afforded to customers ofDresdner Kleinwort Wasserstein, or for affording advice in relation to thecontents of this announcement or any matters referred to herein. Prices and values of, and income from, shares may go down as well as up and aninvestor may not get back the amount invested. It should be noted that pastperformance is no guide to future performance. Persons needing advice shouldcontact an independent financial adviser. For immediate release 22 July 2005 The Davis Service Group Plc ("Davis" or "the Company") Return of capital of approximately £151 million and 5 for 6 share consolidation On 25 May 2005, Davis announced the sale of Elliott Group Limited (''Elliott''),its building systems business, and its intention, subject to shareholders'approval, to return up to £150 million to shareholders. Background to and reasons for the Return of Capital Since the £426 million acquisition of Sophus Berendsen A/S in 2002, Davis hasfocused on developing its core textile maintenance activities based in theUnited Kingdom, Eire and Continental Europe. On 21 January 2004, Davis completed the sale of HSS Hire Service Group plc (''HSS''), its tool hire business. Subsequent to the disposal of HSS and followingthe receipt of a number of approaches from third parties, Davis reviewed thestrategic options available to it in respect of Elliott. On 22 December 2004, Davis confirmed that it was in discussions with a number ofpotential purchasers of Elliott and, on 25 May 2005, Davis announced that it hadsold Elliott for total gross proceeds of £166 million. Elliott was purchased bya management buy-out vehicle backed by TDR Capital and funds associated with TDRCapital and other financial co-investors. Following the sale of Elliott, Davis continues to concentrate on developing thegroup's textile maintenance activities, both by pursuing organic growthopportunities across its markets and, where appropriate, looking to maketargeted acquisitions. As previously disclosed, Davis decided to make a cash transfer to the Davispension fund of £22.5 million to cover the potential deficit in the Davispension fund in respect of the past service of HSS staff (previously providedfor in Davis's 2003 results) and Elliott staff. The remaining net proceeds ofthe sale of Elliott were used initially to reduce group indebtedness. Having considered the capital requirements of the ongoing group, the Boardproposes that approximately £151 million be returned to shareholders by way ofan issue of redeemable B shares ("Return of Capital"). Details of the Return of Capital The Board believes that an issue of redeemable B shares provides a number ofbenefits for shareholders, including: • all shareholders are treated equally, pro rata to the size of their existing shareholdings in Davis; • the relative proportions of equity held by shareholders will not change as a result of the issue of the B shares or (other than in connection with the rounding down of fractional entitlements) the Consolidation; • the Return of Capital can be implemented in an orderly and timely manner with a lower risk of market distortions than alternative methods; and • Shareholders will be able to redeem the B shares without incurring commission or dealing charges. Shareholders who wish to redeem their B shares after they are issued may do so.Alternatively, shareholders may, by validly electing to do so, hold their Bshares until a later date if that suits their own tax positions and/orindividual preferences. Summary of the Proposals The Return The Return of Capital is conditional upon the approval of shareholders whichwill be sought at an extraordinary general meeting of Davis to be held on 15August 2005. Shareholders will receive one B share for each Ordinary Share held at the recordtime which, subject to alteration, will be at 6:00 p.m. on 18 August 2005 ("theRecord Time"), and five consolidated shares for every six Ordinary Shares heldat the Record Time. The B shares, which will be paid up out of the Company'sshare premium account, will have a par value of 74 pence each and the aggregatepar value of the B shares issued will be approximately £151 million. The precisetotal nominal value of the B shares issued will depend on the number of OrdinaryShares in issue at the Record Time. Shareholders will have the following choices in respect of the B shares: Choice 1: Immediate 74 pence redemption Under this choice, B shares will be redeemed for 74 pence per B Share on oraround 26 August 2005. Choice 2: Deferred 74 pence redemption Shareholders who validly elect to retain some or all of their B shares will notreceive cash in respect of any retained B shares until a later date. Anon-cumulative preferential dividend at a rate per annum equal to 70 per cent.of six months LIBOR will be paid twice yearly in arrears on 30 April and 31October in each year (or, if any such date is not a business day, the nextbusiness day) on the par value of 74 pence per B share until the B shares areredeemed. Six months LIBOR was 4.6 per cent. on 21 July 2005, the latestpracticable date prior to publication of this announcement. The LIBOR rate willbe fixed, for the purposes of the preferential dividend, at the start of eachsix-month period to which the dividend relates. The first dividend will be paidon 30 April 2006 in respect of the period from and including the date followingthe date of issue of the B shares up to but excluding 30 April 2006. Shareholders will have the opportunity to have all or some only of theirretained B shares redeemed by Davis on 30 April and 31 October each year at 74pence per B Share. The first opportunity to have retained B shares redeemed willbe 30 April 2006. Shareholders should note that, if not redeemed earlier, the BShares may be redeemed by the Company (a) at any time if the nominal value of BShares remaining in issue falls below 15 per cent. of the aggregate nominalvalue of all of the B Shares originally issued, or (b) at any time after 30 June2006, in each case at 74 pence per B Share. Details of the procedure forredemption of the B shares will be set out in the circular to be sent toshareholders. The B shares will not be listed on the Official List and will not be admitted totrading on the London Stock Exchange. Although transferable, as there will be noformal market for the B shares, shareholders' ability to sell the B shares islikely to be limited. Overseas shareholders will be deemed (irrespective of any election they may maketo the contrary) to have opted for immediate redemption and will thereforereceive cash in respect of their B shares. Share certificates for B shares not redeemed on the first redemption date willbe issued. It will not be possible for shareholders wishing to hold any B sharesnot redeemed in uncertificated form through the CREST system. The redemption of the B shares either pursuant to the immediate 74 penceredemption or the deferred 74 pence redemption is subject to the Company havingat the time of redemption reserves available for distribution in excess of theaggregate par value of the B shares to be redeemed at that time. The directorsbelieve that, as at 30 June 2005, as derived from the unaudited financialstatements of the Company as at that date, the Company had sufficient reservesavailable for distribution for the redemption in full of all of the B shareseither pursuant to the immediate 74 pence redemption or the deferred 74 penceredemption. Consolidation of Ordinary Shares As part of the proposals, every six Ordinary Shares owned by a shareholder atthe Record Time will be consolidated into five consolidated ordinary shares. Theconsolidated ordinary shares will have in all material respects the same rightsas the ordinary shares, but the entitlement of holders of B shares to receivethe twice yearly non-cumulative preferential dividend set at 70 per cent. ofsix-months LIBOR on the par value of the B shares held will be in priority toany payment of dividends to the holders of consolidated ordinary shares inrespect of the relevant financial year. The consolidation is intended to: • result in a share price for ordinary shares that is not materially impacted by the Return of Capital; • assist in maintaining the comparability of future earnings per share amounts with previously reported earnings per share amounts; • assist in maintaining the comparability of future dividend per share amounts with previously reported dividend per share amounts; and • maintain the intrinsic value of share options that have previously been granted. If a shareholder's holding of ordinary shares is not exactly divisible by six,their entitlement to consolidated ordinary shares will be rounded down to thenearest whole consolidated ordinary share. In order to save administrativeexpenses, shareholders will not be entitled to remaining fractionalentitlements. The cash value of such fractional entitlements will be less than£5 per shareholder. Any fractional entitlements arising under the consolidationwill be aggregated and sold in the market for the benefit of the Company. Holders of Ordinary Shares whose holdings are registered in CREST willautomatically have their consolidated ordinary shares credited to their CRESTaccount on 19 August 2005. It is expected that definitive share certificates inrespect of the consolidated ordinary shares will be despatched by 26 August 2005to shareholders who hold their Ordinary Shares in certificated form. Followingthe consolidation, certificates in respect of Ordinary Shares will no longer beof value and, on receipt of certificates for the consolidated ordinary shares,should be destroyed. Financial effects of the Return of Capital The effect of the proposals and the sale of Elliott is that the consolidated netassets (under IFRS) of Davis would, on a pro forma basis as at 31 December 2004,decrease by approximately £91 million such that the consolidated net assets ofDavis would on a pro forma basis be approximately £353 million. Further, as aresult of the Return of Capital and the sale of Elliott, the pro forma debt/equity ratio for Davis will increase from 56 per cent. to approximately 70 percent., a level which the Board currently considers appropriate. Current trading and prospects On 29 June 2005, the Company announced its pre-close trading statement. Otherthan the impact of the proposals stated in this announcement, there has been nomaterial change in the Board's view of the Group's current trading and outlooksince that date. Dividends The Board intends, on a per share basis, to continue with its existing dividendpolicy. Further information Appendix I to this announcement details the expected timetable of principalevents. A circular to shareholders providing further information on the Return ofCapital, and containing a notice of the extraordinary general meeting to be heldat 11:00 a.m. on 15 August 2005 at the offices at Dresdner Kleinwort Wassersteinat 20 Fenchurch Street, London EC3P 3DB, will be posted to shareholders, alongwith a form of proxy in respect of that meeting and (other than overseasshareholders) a form of election in respect of the B share redemption. - END - This announcement is made by Davis and is the sole responsibility of Davis.Davis is exclusively responsible for the contents of this announcement andneither Dresdner Kleinwort Wasserstein Limited ("Dresdner Kleinwort Wasserstein") nor any person acting on Davis's behalf is responsible for or shall have anyliability for any information, representation or statement relating to Daviscontained in this announcement or any information previously published by or onbehalf of Davis or otherwise. Dresdner Kleinwort Wasserstein, which isauthorised and regulated by the Financial Services Authority, is acting forDavis and for no-one else in connection with the proposed return of capital toshareholders described in this announcement and will not be responsible toanyone other than Davis for providing the protections afforded to customers ofDresdner Kleinwort Wasserstein, or for affording advice in relation to thecontents of this announcement or any matters referred to herein. Prices and values of, and income from, shares may go down as well as up and aninvestor may not get back the amount invested. It should be noted that pastperformance is no guide to future performance. Persons needing advice shouldcontact an independent financial adviser. Appendix I: Expected Timetable of Principal Events Last time for receipt of forms of proxy for the EGM 11.00am on 13 August 2005 Voting record time for the EGM 11.00am on 13 August 2005 EGM 11.00am on 15 August 2005 Last date for dealings in Ordinary Shares 18 August 2005 Return record time 6.00pm on 18th August 2005 Dealings commence in consolidated ordinary shares 8.00am on 19 August 2005 CREST accounts credited with consolidated ordinary shares 19 August 2005 Last time for receipt of forms of election 4.30pm on 22 August 2005 Despatch of share certificates in respect of consolidated ordinary By 26 August 2005shares and in respect of B Shares for those electing for deferred 74pence redemption CREST accounts credited and despatch of cheques in respect of B Shares 31 August 2005for those electing for immediate 74 pence redemption All references to time are to UK time unless otherwise stated. The dates and times are based on theCompany's current expectation and may be subject to change. If the dates and times do change,Shareholders will be notified by an announcement on the Regulatory News Service of the London StockExchange. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Berendsen