RNS Number:0797B
Newport Networks Group PLC
30 July 2007
Newport Networks Group PLC
("Newport" or the "Company")
Proposed placing of 200,000,000 New Ordinary Shares to raise #6.0 million
Summary of the Placing:
* Placing of 200,000,000 New Ordinary Shares at a placing price of 3p (the
"Placing") to raise #6.0 million (before expenses).
* Funds raised to be used to strengthen Newport's balance sheet and
provide working capital for the Group.
* The Company is addressing global opportunities and has built a sales
pipeline that the Directors are confident will lead to increasing revenues
commencing in the second half of this year.
* The Company now has four signed agreements with major NEVs and is in
advanced negotiations regarding an agreement with one of the world's
largest NEVs that is also a market leader in IMS solutions.
A circular containing a notice of extraordinary general meeting convened for
11.00 a.m. on 22 August 2007 will today be sent to shareholders of the Company
outlining the terms of the Placing and seeking Shareholder approval to, inter
alia, enable the Directors to allot the Placing Shares in connection with the
Placing.
Enquiries:
Newport Networks Group PLC Tel: 01291 435 700
John Everard, Chief Executive
John Ackroyd, Finance Director
Evolution Securities Tel: 020 7071 4300
Robert Collins/Tim Redfern/Neil
Elliot
*******************************************************************************
This summary should be read in conjunction with, and is subject to, the full
text of the attached announcement.
Evolution Securities Limited is acting as nominated adviser and broker to the
Company for the purposes of the AIM Rules. Evolution Securities Limited, which
is authorised and regulated in the United Kingdom by the Financial Services
Authority, is acting exclusively for the Company in relation to the Placing.
Evolution Securities Limited is not acting for any other person in connection
with the matters referred to in this announcement and will not be responsible to
anyone other than the Company for providing the protections afforded to clients
of Evolution Securities Limited or for giving advice in relation to the matters
referred to in this announcement.
This announcement, including the appendix, has been issued by the Company and is
the sole responsibility of the Company.
This announcement, including the appendix, does not constitute a prospectus or
listing particulars relating to the Company and has not been approved by the UK
Listing Authority, nor does it constitute or form any part of any offer or
invitation to purchase, sell or subscribe for, or any solicitation of any such
offer to purchase, sell or subscribe for, any securities in the Company under
any circumstances, and in any jurisdiction, in which such offer or solicitation
is unlawful. Accordingly, copies of this announcement, including the appendix,
are not being and must not be mailed or otherwise distributed or sent in or into
or from the United States, Canada, Australia or Japan or any other jurisdiction
if to do so would constitute a violation of the relevant laws of, or require
registration thereof in, such jurisdiction or to, or for the account or benefit
of, any United States, Canadian, Australian or Japanese person and any person
receiving this announcement, including the appendix, (including, without
limitation, custodians, nominees and trustees) must not distribute or send it,
in whole or in part, in or into or from the United States, Canada, Australia or
Japan.
*******************************************************************************
Newport Networks Group PLC
("Newport" or the "Company")
Placing of 200,000,000 New Ordinary Shares to raise #6.0 million
1. Introduction
The Board of Newport announces that it proposes to raise #6.0 million (before
expenses) by way of a placing of 200,000,000 New Ordinary Shares at a price of 3
pence per share. The net proceeds of the Placing will strengthen the Company's
balance sheet, enabling the Group to complete its current business plan, and
provide general working capital for the Group. The Placing is conditional, inter
alia, upon the Company obtaining approval from its Shareholders to grant the
Board authority to allot the Placing Shares and to disapply statutory
pre-emption rights which would otherwise apply to, inter alia, the allotment of
the Placing Shares. The Placing, which has been arranged and fully underwritten
by Evolution Securities pursuant to the terms of the Placing Agreement, is also
conditional upon Admission.
In addition, the Board is proposing a Capital Reorganisation of the Company's
share capital which in effect will reduce the nominal value of each ordinary
share from 5 pence to 0.1 pence. The Capital Reorganisation will provide the
Company greater flexibility to issue shares (which under company law may not be
issued at a price less than their nominal value). Further details of the Capital
Reorganisation are set out below.
2. Background Information and Rationale for the Placing
Since its admission to AIM, Newport has made considerable technical progress
developing additional core network products and software releases to address
fixed and mobile NGN networks. The Company has also generated a broad range of
sales opportunities across the Americas, Europe and Asia.
The market for carrier-scale Session Border Controllers (SBCs), of the type
developed by Newport, has been delayed, corresponding to the delay of major
projects undertaken by the tier-1 network operators. The consequence is that no
significant orders have been placed for the Company's SBC products, with a
direct effect on business levels and cash flow.
A major cost reduction programme was implemented last autumn which reduced the
Company's monthly overheads by approximately 50 per cent. In addition, the
Company revised both market and product focus as detailed below.
The Placing is being undertaken to enable the Company to complete its business
plan. The net proceeds of the Placing will strengthen the balance sheet which
the Directors believe will also enhance the Company's credibility with its
channel partners and tier-1 customers, as well as providing additional working
capital.
As at the date of this announcement, the Company's current net cash position is
approximately #0.35 million. In the event that Shareholders do not approve the
Resolutions, the Placing will not proceed and the Board will need to consider
alternative sources of funding, which may or may not be forthcoming.
3. Market and Strategy
During the summer of 2006, the Company revised its market and product
development strategy in response to the delays in the implementation of Next
Generation Networks (NGNs) and corresponding delays in the market for its
carrier scale SBCs.
The product portfolio has now been extended to address the current market demand
for smaller products and the emerging demand for products that are compatible
with distributed network architectures. Such IMS related products allow networks
to be designed with centralised signalling processing (using either Border
Controllers or direct softswitch control) and remote media processing using
Border Gateways. The Newport SBC, Border Controller and Border Gateway product
functions can now be realised using the larger 1460 platform or the smaller 310
platform to suit both current and future customer requirements.
The Company also continues to develop further functions and features across the
product portfolio in response to direct customer requirements. For example, the
Company's current development of high capacity voice transcoding is particularly
important when interconnecting fixed line and mobile networks, where a
transcoding capability is required to ensure the correct inter-working of a wide
range of customer terminal devices.
From a sales strategy perspective, the Company is primarily focussing on the
AsiaPacific, European and CALA (Caribbean and Latin American) regions. With the
revised and extended product portfolio, the Company's sales teams have been
successful in developing further NEV channel partnerships that are now helping
to grow the pipeline of business prospects. The NEV channel partners represent a
very efficient route to market for the Newport products given their large sales
and support resources and existing customer base.
4. Competition
The Company has a number of competitors in the integrated SBC marketplace,
including Acme Packet, NexTone and Covergence. Some of the router vendors have
also included SBC functionality on their router platforms. Newport believes that
it has a lead in carrier class SBCs and border gateways that positions the
Company favourably, especially for the PSTN replacement market.
5. Current trading and prospects
Key ingredients relating to the Company's extended product portfolio and
channels to market are now in place to facilitate the growth of the business
following the Placing.
While the revenues during the period since the cost reduction programme last
year have been small, the Group's sales teams have been working steadily to
develop further key NEV channel partnerships. The Company is addressing global
opportunities and has built a sales pipeline that the Directors are confident
will lead to increasing revenues commencing in the second half of this year.
Newport recently announced a strategic partnership agreement with UTStarcom and
its associated live IP Interconnect trial with an operator in China. The Company
also announced the deployment of the 1460 SBC by Chungwa Telecom in Taiwan, that
includes the provision of Lawful Intercept (LI) facilities for their IP based
services. LI is becoming a mandatory requirement in many countries around the
world.
Including the UTStarcom agreement, the Company now has four signed agreements
with major NEVs. Newport is in advanced negotiations regarding an agreement with
one of the world's largest NEVs that is also a market leader in IMS solutions.
This relates to Newport's development of Border Gateway products for integration
by the NEV into its overall IMS product portfolio. Given the profile of the NEV
in the IMS market, the Directors believe that the Border Gateway business
associated with this opportunity is likely to provide Newport with a substantial
base level of revenues in 2008 and enhance revenues significantly during 2009
and beyond as IMS based NGNs are implemented. The Directors expect this
agreement to be signed by the end of September 2007, however, there can be no
certainty that negotiations will reach a satisfactory outcome in this timeframe
or at all.
The Directors believe that the Placing proceeds, in combination with the lower
cost base, current inventories and extended product portfolio will allow the
Company to capitalise on the above opportunities. Also, the Directors believe
that the strengthening of the balance sheet will enhance Newport's credibility
with current and potential channel partners and customers.
In summary, the Directors believe that, subject to the Placing, Newport is well
placed to achieve significant sales of its carrier-scale products as tier-1
operators move to deployment of NGN infrastructures. The 1460 has a high
performance signalling and media processing capability, which is required for
efficient IP multimedia networking. This, added to the recent introduction of
the 310, a small SBC (using the same technology as the 1460), allows the
distributed architecture properties of the product line to be much more
effective in NGN infrastructures. With many major NEVs offering the products,
the Company is now better positioned to address the business opportunities
worldwide.
The Directors believe that Newport is able to achieve significant revenues and
ongoing business growth from an increased product range with more channels to
market and with good market timing for NGN technology deployment.
6. Interim Results
The Company has today announced its interim results for the six months ended 30
June 2007. In summary, the loss after tax for the six months to 30 June 2007 was
#4.0 million compared to a loss of #6.9 million in the six months to 30 June
2006. Revenue for the six months to 30 June 2007 was #76,000 compared to
#758,000 in the six months to 30 June 2006. An R&D Tax Credit claim for the year
to 31 December 2006 has been agreed with the HM Revenue & Customs ("HMRC") and a
repayment of #1,377,000 was received in June 2007. At 30 June 2007, the
Company's cash resources were #691,000 and as at 26 July 2007 (being the latest
practicable date prior to this announcement) these amounted to approximately
#350,000.
7. Details of the Capital Reorganisation
On 26 July 2007, being the latest practicable date prior to this announcement,
the Existing Ordinary Shares were trading at a discount to their nominal value
(being 5 pence per share). The Company is not permitted under English company
law to issue shares at a discount to their nominal value. Therefore, in order to
facilitate the Placing, it is proposed that each issued Existing Ordinary Share
will be sub-divided into one New Ordinary Share and one Deferred Share and the
authorised but unissued Ordinary Shares will be subdivided into New Ordinary
Shares. In the absence of any other factors affecting the Company's share price,
the sub-division is not expected to result in a change between the market price
of the Existing Ordinary Shares and the New Ordinary Shares. The Deferred Shares
will in effect be worthless. The Capital Reorganisation will enable the Placing
to be effected and will apply to those Shareholders on the register of members
of the Company as at the close of business on 22 August 2007.
Effect of the Capital Reorganisation on Existing Ordinary Shares
Save in respect of their nominal value, there will be no differences between the
rights attaching to the Existing Ordinary Shares and the New Ordinary Shares.
The sub-division will not affect the voting rights of holders of Existing
Ordinary Shares. The sub-division will be made by reference to holdings of
Existing Ordinary Shares on the register of members of the Company as at the
close of business on 22 August 2007.
Application will be made for admission of the New Ordinary Shares to trading on
AIM. It is expected that the dealings and settlement in CREST in the Existing
Ordinary Shares will continue until the close of business on 22 August 2007.
Subject to the necessary approval at the EGM, Admission of the New Ordinary
Shares is expected to occur at 8.00 a.m. on 23 August 2007.
No share certificates in respect of the New Ordinary Shares arising as a result
of the Capital Reorganisation will be issued and the Company's registrars will,
following the sub-division, register transfers of the New Ordinary Shares
against certificates in respect of the Existing Ordinary Shares.
Shareholders who hold their Existing Ordinary Shares in uncertificated form will
have their CREST accounts credited with the New Ordinary Shares as soon as
practicable after Admission.
The Deferred Shares have no voting rights, no rights to dividends and negligible
rights on a return of capital. The Deferred Shares will not be listed on any
stock exchange and will not be freely transferable. No share certificates will
be issued for any of the Deferred Shares. The Company will have the right at any
time to purchase all of the Deferred Shares for an aggregate consideration of
#1. There are no immediate plans to purchase or to cancel the Deferred Shares,
although the Directors propose to keep the situation under review.
Effect of Capital Reorganisation on Newport Share Option Schemes
There will be no adjustment (by reason of the sub-division as opposed to the
Placing) to the number of equity shares in the Company in issue following the
Placing (as the number of issued New Ordinary Shares will be the same as the
number of issued Existing Ordinary Shares). Accordingly, no change will be made
to the number of Existing Ordinary Shares over which options have been granted
or the exercise price of those options under the Newport Networks Group PLC
Enterprise Management Incentive Share Option Scheme or the Newport Networks
Group PLC Consultant Share Option Scheme (unless HMRC requires an adjustment in
relation to those schemes it has approved).
8. The Placing
The Company proposes to raise approximately #5.65 million (net of expenses)
through the issue of the Placing Shares at the Placing Price. The Placing Price
represents a discount of 22.68 per cent. to the closing middle market price of
3.88 pence per Existing Ordinary Share on 26 July 2007, being the last
practicable date prior to this announcement. The Placing Shares will represent
approximately 54.56 per cent. of the Company's issued ordinary share capital
immediately following Admission.
The Placing Agreement
Pursuant to the terms of the Placing Agreement, Evolution Securities has
conditionally agreed to use its reasonable endeavours, as agent for the Company,
to place the Placing Shares at the Placing Price with certain institutional and
other investors. The Placing has been fully underwritten by Evolution
Securities. The Placing Agreement is conditional upon, inter alia, the
Resolutions being duly passed at the EGM and Admission becoming effective on or
before 8.00 a.m. on 23 August 2007 (or such later time and/or date as the
Company and Evolution Securities may agree, but in any event by no later than
8.00 a.m. on 31 August 2007).
The Placing Agreement contains warranties from the Company in favour of
Evolution Securities in relation to, inter alia, the accuracy of the information
contained in this document and certain other matters relating to the Group and
its business. In addition, the Company has agreed to indemnify Evolution
Securities in relation to certain liabilities it may incur in respect of the
Placing. Evolution Securities has the right to terminate the Placing Agreement
in certain circumstances prior to Admission, in particular, for force majeure or
in the event of a material breach of the warranties set out in the Placing
Agreement.
Under the Placing Agreement and subject to it becoming unconditional in all
respects and not being terminated in accordance with its terms, the Company has
agreed to pay Evolution Securities a commission of 5 per cent. on the value at
the Placing Price of the Placing Shares, together with all reasonable expenses
and any applicable value added tax.
Settlement and dealings
Application will be made to the London Stock Exchange for the Placing Shares to
be admitted to trading on AIM. It is expected that such Admission will become
effective and that dealings will commence on 23 August 2007.
The Placing Shares will, when issued, rank pari passu in all respects with the
New Ordinary Shares, including the right to receive dividends and other
distributions declared following Admission. It is expected that CREST accounts
will be credited on the day of Admission and that share certificates (where
applicable) will be dispatched by first class post by 6 September 2007.
Directors' participation in the Placing
Sir Terence Matthews, John Everard, John Ackroyd, Simon Gibson and Lord
Rowe-Beddoe have agreed to subscribe for 81,362,900, 1,000,000, 1,000,000,
166,666 and 333,333 Placing Shares respectively at the Placing Price. This
represents a total of 41.93 per cent. of the Placing Shares.
For the purposes of AIM Rules, the placing of 81,362,900 Placing Shares with Sir
Terence Matthews is classified as a related party transaction. The Directors,
with the exception of Sir Terence Matthews, consider, having communicated with
Evolution Securities, the Company's nominated adviser, that the terms of the
transaction are fair and reasonable insofar as Shareholders are concerned.
9. Use of Proceeds
The net proceeds of the Placing will be approximately #5.65 million. The
proceeds will be used to strengthen the Group's balance sheet and to satisfy the
general working capital requirements of the Group following Admission.
10. Working Capital
In the opinion of the Directors and following completion of the Placing, the
working capital available to the Group is sufficient for the Group's present
requirements, that is for at least 12 months following Admission.
However, Shareholders should be aware that the Group's currently monthly cash
expenditure is approximately #670,000 and, in the event that the Board's revenue
expectations are not met, the Company may require additional funding sooner than
anticipated, which may or may not be forthcoming.
11. Extraordinary General Meeting
The Circular to be sent out to Shareholders today contains a notice convening
the EGM to be held on 22 August 2007 at the offices of Speechly Bircham LLP at 6
St. Andrew Street, London EC4A 3LX at 11.00 a.m. at which the Resolutions, all
of which are inter-conditional, will be proposed for the purposes of
implementing the Placing and the Capital Reorganisation.
12. Employee share options
The Directors consider share options a necessary and important way of rewarding,
retaining and attracting key company personnel. Consequently, it is proposed
that upon successful completion of the Placing, the Directors will make further
awards of share options to all employees, including the executive Directors. The
total share option pool after making this award will not exceed 5 per cent. of
the Company's enlarged issued ordinary share capital.
PLACING STATISTICS
Placing Price 3p
Number of Existing Ordinary Shares 166,582,833
Number of Placing Shares being placed on behalf of the 200,000,000
Company
Estimated proceeds receivable by the Company, net of #5.65 million
expenses
Number of New Ordinary Shares in issue following Admission 366,582,833
Number of Placing Shares as a percentage of the enlarged 54.56 per cent.
issued ordinary share capital
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Extraordinary General Meeting 11.00 a.m. on 22 August
2007
Admission and dealings in the Placing Shares
expected to commence on AIM 8.00 a.m. on 23 August
2007
Expected date for CREST stock accounts to be
credited for Placing Shares in uncertificated form 23 August 2007
Expected date for posting of share certificates for 6 September 2007
Placing Shares by
DEFINITIONS
The following definitions apply throughout this announcement unless the context
otherwise requires:
"Admission" admission of the Placing Shares to trading on AIM
becoming effective in accordance with Rule 6 of
the AIM Rules
"AIM" the AIM market operated by the London Stock
Exchange
"AIM Rules" the AIM rules for Companies published by the
London Stock Exchange from time to time
"Capital the proposed capital reorganisation, as detailed
Reorganisation" in paragraph 7 of this announcement
"certificated form" an ordinary share recorded on a company's share
or register as being held in certificated form (namely, not
"in certificated in CREST)
form"
"Circular" the circular posted to shareholders today
containing details of the Placing, the Capital
Reorganisation and the Notice of EGM
"Company" or Newport Networks Group PLC
"Newport"
"CREST" the relevant system (as defined in the
Uncertificated Securities Regulations 2001) in
respect of which Euroclear is the operator (as
defined in those regulations)
"Deferred Shares" deferred ordinary shares of 4.9 pence each in the
capital of the Company, to be created pursuant to
the Capital Reorganisation
"Directors" or the directors of the Company or any duly
"Board" authorised committee thereof
"EGM" the extraordinary general meeting of the Company
to be held at the offices of Speechly Bircham LLP
at 6 St. Andrew Street, London EC4A 3LX at 11.00
a.m. on 22 August 2007 (or any adjournment
thereof)
"EGM Notice" the notice convening the EGM which is set out in
the Circular
"Euroclear" Euroclear UK & Ireland Limited, the operator of
CREST
"Evolution Evolution Securities Limited, the Company's
Securities" nominated adviser and broker
"Existing Ordinary the Ordinary Shares in issue at the date of this
Shares" document, all of which are admitted to trading on
AIM
"Group" the Company, its existing subsidiaries and
subsidiary undertakings
"London Stock London Stock Exchange plc
Exchange"
"New Ordinary Shares" ordinary shares of 0.1 pence each in the capital
of the Company, to be created pursuant to the
Capital Reorganisation
"Ordinary Shares" ordinary shares of 5 pence each in the capital of
the Company
"Placing" the conditional placing of the Placing Shares by
Evolution Securities, as agent on behalf of the
Company, pursuant to the Placing Agreement
"Placing Agreement" the conditional agreement dated 30 July 2007 and
made between Evolution Securities and the Company
in relation to the Placing
"Placing Price" 3 pence per Placing Share, being the price at
which each Placing Share is to be issued under the
Placing
"Placing Shares" the 200,000,000 New Ordinary Shares to be issued
pursuant to the Placing
"Resolutions" the resolutions to be proposed at the EGM as set
out in the EGM Notice
"Shareholders" holders of Ordinary Shares and/or New Ordinary
Shares, as the context may require
"UK" the United Kingdom of Great Britain and Northern
Ireland
"US" or "United the United States of America, each State thereof,
States" its territories and possessions (including the
District of Columbia) and all other areas subject
to its jurisdiction
"uncertificated" or an ordinary share recorded on a company's share
"in uncertificated register as being held in uncertificated form in
form" CREST and title to which, by virtue of the
Uncertificated Securities Regulations 2001, may be
transferred by means of CREST
"$" US Dollars, the lawful currency of the United
States
GLOSSARY
Border Controller a device that processes SIP (Session Initiated
Protocol) signalling and controls the
establishment of media paths via a Border
Gateway.
Border Gateway a device that establishes media path
connections under the control of a Border
Controller or a softswitch
1460 Session Border the Newport Networks Group PLC 1460 Session
Controller or Newport Border Controller product.
1460
IMS IP Multimedia Subsystem.
IP internet protocol. A specification that
defines a method by which information is sent
over data networks.
NEV network equipment vendor.
Operator an organisation that provides a service via
the Internet or any other public
communications network.
PSTN public switched telephone network.
session border session border controllers provide security,
controller or SBC quality and call accounting in public,
internet-based communications. They are
intelligent agents that sit within the edges
of carrier networks and carry out the
following functions: (i) ensure control of the
movement of traffic between networks
("peering"); (ii) provide intelligent
transportation of data within carrier
networks; (iii) allow traffic to flow securely
across the internet and through firewalls at
the local level ("access"); and (iv) monitor
traffic flows for charging purposes.
tier 1 tier 1 internet service provider is a
telephone company or internet service provider
IP network which connects to the rest of the
internet only via a practice known as
"peering". Tier 1 refers to the position at
the top level of the hierarchy of network
providers; i.e. the tier 1 providers own the
physical medium over which information is
carried, as well as the network equipment
which manages that information.
VoIP voice over IP. A general term for the
technologies that use the IP's Packet-Switched
connections to send voice information that
would have traditionally been carried over the
dedicated Circuit- Switched connections of the
PSTN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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