9th Aug 2007 07:01
Servocell Group PLC09 August 2007 Servocell Group Plc ("Servocell" or "the Company") Servocell is a provider of Active Latch technology that controls, with lowenergy inputs, the movement or motion of mechanisms. Servocell is exploiting itsActive Latch technology in the global locks market. Trading Update On 22 June 2007, the Board advised shareholders that it had embarked upon areview to assess its sales and marketing strategies, operational and technicalactivities and existing resource deployment. This review is now substantiallycomplete. Progress has been achieved resolving product development issues with theCompany's first "Ready to Go" application and production is expected to commencein October. However, additional technical issues have recently emerged. TheCompany has already identified solutions which the Directors anticipate willtake approximately six months to deliver. Until then, these issues areexpected to limit a proportion of available applications for the first "Ready toGo" products and affect sell-through of the Company's products with existingcustomers. Lock manufacturer projects continue to progress but are taking longer to reachproduction than expected. The Board believes this is the nature of the decisionmaking and product development processes of the large OEMs and has adjusted itsbusiness plan to reduce dependence on these activities. "Ready to Go" productswill be the main focus of future development efforts, though orders will betaken from large OEMs as commercially appropriate. These various delays to achieving volume production will further impact expectedrevenues both in 2007 and 2008 which will be significantly lower than expectedat the time of the trading update announced in 30 May 2007. These revenuedelays continue to adversely affect the Company's cash resources. A costreduction programme is being implemented and the Board will continue to keepcosts of the Group under detailed review. On 3 July 2007, the Company announced the appointment of Stephen Russell asinterim Chief Financial Officer due to the sudden ill health of Steve Weaver.Stephen Russell has been working on a part time consultancy basis. DuringSteve's ongoing absence, Mike Hartley, Executive Chairman will be takingresponsibility at the Board for financial matters. The Board wishes Steve acontinued speedy recovery. In order to fund the Company's working capital requirements, a £1 million loan("the Loan") has been agreed with one of the Company's major shareholders,Greenbrook Industries Limited ("Greenbrook"). The Loan is a related partytransaction, pursuant to Rule 13 of the AIM Rules for Companies, due toGreenbrook being a substantial shareholder in the Company and Richard Greenbeing a director of both Servocell and Greenbrook and interested in shares inGreenbrook. Accordingly, the Loan is conditional upon the related partyconditions of Rule 13 of the AIM Rules for Companies having been met and theCompany is in discussions with its nominated adviser in this respect. The Loan, if approved, can be drawn down in not less than £50,000 increments atthe Company's discretion, providing certain warranties can be met at eachdrawdown and that not more than £600,000 is drawn down prior to 1 November 2007.Simon Powell and Steve Weaver have both agreed to enter into lock-inarrangements in favour of Greenbrook preventing both Simon Powell and SteveWeaver selling shares in the Company held by them on or before 20 March 2006,prior to the repayment of the Loan and these lock-in arrangements are acondition precedent to drawdown. The Loan bears interest at the rate of 15 percent. per annum on amounts drawn. Amounts due to Greenbrook are to be securedby way of fixed and floating charges over all of the assets of the Company andits subsidiaries pursuant to a composite debenture. The Company has not yetgranted this security but will be required to do so as a condition precedent todrawdown. The Loan is repayable on the earlier of one year for first drawdownor an equity capital raising event and, in the case of an equity capitalraising, Greenbrook shall have the right to convert all or some of the amountborrowed plus any interest payable into fully paid shares in the Company to beissued at the issue price. It is anticipated that the Company will need to raise additional equity financeprior to December 2007 to fund future working capital requirements. Servocell's Executive Chairman, Mike Hartley commented: "Servocell's patented technology has enabled the development of a great suite of"Ready to Go" products which deliver unique lock solutions. Our focus is tobring these to market as quickly as possible, delivering volume production andsales and, thereby, comparable shareholder value." For further information please contact: Mike Hartley, Executive Chairman, Servocell Group plc 01279 621 500 Gregor Paterson, Analyst, Brewin Dolphin Securities 0845 213 4211Jon Fitzpatrick, Corporate Finance, Brewin Dolphin Securities 0845 213 4222 Shane Dolan, Biddicks 0207 448 1000 About Servocell Servocell is a provider of Active Latch technology that controls with low energyinputs the movement or motion of mechanisms, such as locks. The Group's devicesare underpinned by piezo ceramic actuators, which are well established in manyapplications such as reversing sensors for motor vehicles. Through significantinvestment, Servocell has developed a unique low-cost methodology for creatingactuators which give relatively large movement at a low power input. TheCompany has applied this technology into modules under the Active Latch brandfor sale into lock manufacturers' products. More recently, to fully exploit application of the technology, the Group hasbeen developing a range of "Ready to Go" products under the Cabinet Latch andActive Escutcheon brands. These are being sold primarily through majordistributors and where appropriate as private label lock manufacturer'sproducts. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Servelec Group