Issue of Equity
June 12 2003 - 3:34AM
UK Regulatory
For immediate release
Not for release, publication or distribution in or into the United States,
Canada, Australia, the Republic of Ireland and Japan.
12 June 2003
Scipher plc
Placing and Open Offer to Raise �7.5 million
Notice of Extraordinary General Meeting
Transfer from the Official List to the Alternative Investment Market
SUMMARY
* Placing and Open Offer proposed to raise approximately �7.5 million before
expenses (approximately �7.0 million net)
* Proceeds to be used to provide additional working capital to allow the
Company to realise further value from the technology businesses it has
created
* Proposed transfer to AIM
* Placing and Open Offer conditional on approval at EGM on 7 July 2003 and
admission to AIM on 11 July 2003
FIRM PLACING
* �6.5 million to be raised through Firm Placing
* 130 million New Ordinary Shares at 5p per share
* Firm Placing fully underwritten by Evolution Beeson Gregory
OPEN OFFER
* Up to �1.07 million to be raised by way of Open Offer
* Up to 21,334,309 New Ordinary Shares at 5p per share
* On the basis of 1 New Ordinary Share for every 5 Existing Ordinary Share
held on 9 June 2003
TRANSFER TO AIM
* Scipher to transfer to AIM from the Official List to reduce costs of
maintaining a stock market listing and effecting corporate transactions
* Trading on AIM expected to commence on 11 July 2003
Dr Ken Gray, Executive Chairman, said:
"Our strategy continues to be based on the exploitation of IP and the drive for
positive cash flow and profitability, by growing revenue in our New Business
activities and focusing our attention on those businesses which are central to
Scipher's future progress, namely Patent Licensing, Displays and Secure
Identification. We believe that the funds raised from this transaction will
allow the Company to realise these aims."
Enquiries
Scipher plc
Dr Ken Gray, Chairman Tel: 020 8848 6555
Chris Mutter, Finance Director Tel: 020 8848 6500
Michael Kendon, Investor Relations Tel: 020 8848 6444
Evolution Beeson Gregory
Nick Rogers Tel: 020 7071 4389
Tim Redfern Tel: 020 7071 4312
Financial Dynamics
James Melville-Ross Tel: 020 7831 3113
Juliet Clarke Tel: 020 7831 3113
Not for release, publication or distribution in or into the United States,
Canada, Australia, the Republic of Ireland and Japan.
12 June 2003
Scipher plc
Firm Placing of 130,000,000 New Ordinary Shares
and Open Offer of up to 21,334,309 New Ordinary Shares
at 5 pence per New Ordinary Share
Notice of Extraordinary General Meeting
Transfer from the Official List to the Alternative Investment Market
Introduction
Your Board announced today that it proposes to raise up to �7.57 million before
expenses (approximately �7.0 million net of expenses) by way of an issue of new
Ordinary Shares at 5p per share. Of this gross amount, �6.5 million is proposed
to be raised by way of the Firm Placing and up to approximately �1.07 million
by way of the Open Offer. The funds raised will provide additional working
capital to allow the Company to realise further value from the technology
business it has created. Of the New Ordinary Shares, 130,000,000 have been
placed firm, to attract investment both by existing Shareholders and new
institutional investors and the balance of 21,334,309 New Ordinary Shares are
being offered to Qualifying Shareholders under the Open Offer on the basis of:
1 New Ordinary Share for every 5 Existing Ordinary Shares held on the Record
Date.
Qualifying Shareholders may apply for Open Offer Shares in excess of their
Basic Entitlement but such excess application will only be satisfied to the
extent that other Qualifying Shareholders do not apply for their Basic
Entitlements. The Issue Price represents a discount of 41.18 per cent. to the
closing mid-market price of 8.5p per Existing Ordinary Share on 11 June 2003,
being the last dealing day prior to the date of the announcement of the Issue.
The Firm Placing has been fully underwritten by Evolution Beeson Gregory.
Further details of the Open Offer, which has not been underwritten, are set out
in the document sent to Shareholders today. Any Open Offer Shares not taken up
by Qualifying Shareholders may be placed by Evolution Beeson Gregory, as agent
for the Company, at a price per New Ordinary Share of no less than the Issue
Price. The Issue is conditional, inter alia, upon the approval of Shareholders
to be sought at the EGM convened for 7 July 2003 and Admission.
In conjunction with the Issue, the Board has also resolved to transfer the
Company's listing from the Official List to AIM. This is expected to reduce the
Company's costs of maintaining a stock market quotation and effecting corporate
transactions in the future.
Unaudited Preliminary Results for the Year ended 31 March 2003
The unaudited preliminary results for the year ended 31 March 2003 were
announced today.
Having seen revenue growth of 31% in the first three quarters of the year, it
was disappointing that this growth did not carry through into the fourth
quarter. Sales which were expected in the last quarter were delayed owing to
reluctance by customers to finalise contracts in the economic uncertainty of
the period. As a result, the Company's available cash resources came under
strain. Scipher continued to reduce its cost base and employ strong working
capital controls and, on 19 May 2003, renegotiated its banking facilities. New
business recorded revenue of �16.7 million for the year (FY2002: �16.5 million)
and represents 82% of Scipher's total revenue (FY2002: 78%).
The impact on cash of the shortfall in sales has been reduced by the ongoing
actions taken to reduce costs throughout the year and in particular during the
second half of the year. This control over indirect costs underlies the
improvement in operating results. Earnings before interest, taxes, depreciation
and amortisation ("EBITDA") loss reduced by 20% to �5.1 million in the year
(FY2002: �6.4 million loss).
On 1 July 2002, Scipher completed the sale and leaseback of its headquarters
building for a gross cash consideration of �16.9 million. The proceeds from the
sale and leaseback delivered �6.5 million net cash back into the business after
repaying bank loans and the mortgage on the building.
Current trading and prospects of the Group
In the Company's preliminary results for the year ended 31 March 2003,
announced today, Scipher reported total revenue of �20.4 million. This result
was in line with the trading statement issued by the Company on 1 April 2003
with revenues in line with the previous financial year.
Since 31 March 2003, certain orders which had been delayed have been received
including a contract valued at �2 million for the supply of advanced multimedia
delivery systems for Satellite Information Systems Limited. Other smaller
orders which have been received include those with British Airports Authority
for a close circuit television system and Sensotec for the supply of carbon
monoxide detectors.
In the current market environment, whilst the Group maintains an encouraging
orderbook, Scipher is maintaining a tight focus on costs, reducing headcount
levels and overhead expenditure.
Reasons for the Issue and Use of Proceeds
The Company has recently restructured its cost base. Notwithstanding this
reduction, the Company needs further funds to provide additional working
capital to allow the Company to realise further value from the technology
business it has created. On 19 May 2003, the Company renegotiated its bank
facilities and covenants which the Directors believe, after taking into account
the net proceeds of the Firm Placing of approximately �6 million, will provide
sufficient working capital for the Group's present requirements, that is, for
at least 12 months from the date of Admission.
In the event that the Issue does not proceed for any reason, the Company's cash
requirements will quickly exceed its current bank facility and the Company will
be in breach of its existing banking arrangements. Accordingly, the Directors
would need to address alternative funding sources, including further sources of
equity, disposals of certain assets and debt funding as a matter of urgency in
the short term. In the event that such alternative funding sources were not
forthcoming, then the Group may be unable to continue to trade.
Under the Issue, 14.1 per cent. of the New Ordinary Shares are being offered to
Qualifying Shareholders pursuant to the Open Offer and 85.9 per cent. is being
placed firm with institutional investors to provide such investors with
certainty as to the minimum number of New Ordinary Shares they will receive.
The Directors believe that this has been an important factor in attracting
these investors to support the Issue. The Directors also consider that all
Shareholders should have the opportunity to participate in the Issue and
consequently the Issue also includes the Open Offer.
Strategy
Scipher's strategy continues to be based on the exploitation of IP and the
drive for positive cashflow and
profitability. The Company intends to achieve this in two ways:
First, to drive revenue from its "New business" activities (defined as those
activities that have been established since Scipher was formed in 1996), which
now comprise over 80% of Scipher's revenues. These businesses have been
identified by the Board as being central to the Group's future success and have
achieved a compound average growth rate ("CAGR") of 36% revenue growth from the
year ended 31 March 2000 to the year ended 31 March 2003. Maintaining this
revenue growth is fundamental to Scipher achieving positive cash generation.
Second, to focus attention on the Patent Licensing, Displays and Secure
Identification businesses which have achieved a CAGR of 42% in new business
revenue from the year ended 31 March 2000 to the year ended 31 March 2003. The
Board sees these particular businesses as being central to Scipher's future
progress. In addition, the performance of 3D Sound, Communications and
Technology Generation underlines the Company's ability to create and manage
successful businesses.
Meanwhile the Board recognises that the present challenging market conditions
for new technology spend are likely to continue for some time, along with
lengthened sales cycles. Consequently, it will continue its policy of stringent
cost management.
Transfer to AIM
The Directors consider that a transfer to AIM is in the interests of the
Company and Shareholders as a whole and believe that it has a number of
advantages. The Board expects that trading on AIM is more likely to bring the
Company to the attention of specialised smaller company investors. The Board
also anticipates that, as an AIM quoted company, savings will be made in the
costs of administration and in effecting corporate transactions due to the less
onerous regulations on AIM, with a consequential reduction in the costs
associated with being a listed public company. As a result, the Ordinary Shares
of the Company will be delisted from the Official List upon completion of the
Issue and the Company has made application for its entire issued share capital
following the Issue to be admitted to trading on AIM. The cancellation of the
listing on the Official List is conditional on completion of the Issue.
The AIM Rules require that the Company appoints a nominated adviser and broker
before its Ordinary Shares are admitted to trading on AIM. Evolution Beeson
Gregory has agreed to act as nominated adviser and broker to the Company.
The Board is aware that there are circumstances which can prohibit Shareholders
from investing in shares quoted on AIM. The shares of a company quoted on AIM
cannot be held in Personal Equity Plans or Individual Savings Accounts.
Shareholders are advised to review their position in this respect as soon as
possible. These matters are explained in more detail in the document sent to
Shareholders today. Application has been made for the Existing Ordinary Shares
and New Ordinary Shares to be admitted to trading on AIM and for the
cancellation of the Company's Existing Ordinary Shares on the Official List. It
is expected that the listing of the Existing Ordinary Shares on the Official
List will be cancelled from 8.00 a.m. on 11 July 2003 (being 20 business days
from the date of this announcement). It is expected that the entire issued
share capital of the Company, including the New Ordinary Shares, will be
admitted to trading on AIM and that dealings will commence at 8.00 a.m. on 11
July 2003. Existing share certificates in issue in respect of Existing Ordinary
Shares will remain valid following Admission.
Principal terms of the Issue
Under the Issue, the Company intends to raise up to �7.57 million (before
expenses), comprising �6.5 million by way of the Firm Placing and up to
approximately �1.07 million under the Open Offer. Qualifying Shareholders are
being given the opportunity to participate in the fundraising by way of the
Open Offer, which is being made by Evolution Beeson Gregory on the Company's
behalf.
Open Offer
Qualifying Shareholders are being offered the opportunity to subscribe at the
Issue Price for Open Offer
Shares under the Open Offer on the basis of:
(a) 1 Open Offer Share for every 5 Existing Ordinary Shares held or deemed to
be held at the Record Date and so in proportion for any other number of
Existing Ordinary Shares then held (the ``Basic Entitlement''); and
(b) further Open Offer Shares in excess of their Basic Entitlement (although
such Open Offer Shares will only be allotted to the extent that not all
Qualifying Shareholders apply for their Basic Entitlement).
Individual entitlements will be rounded down to the nearest whole number of
Open Offer Shares. Fractional entitlements to Open Offer Shares will not be
allocated.
Qualifying Shareholders who so wish may apply for Open Offer Shares in excess
of their Basic Entitlement. Applications in excess of the Basic Entitlements
will only be satisfied to the extent that applications by other Qualifying
Shareholders are made for less than their Basic Entitlements and may therefore
be scaled down. Allocation of Open Offer Shares in respect of these excess
applications will be made entirely at the discretion of Evolution Beeson
Gregory and the Directors.
The Open Offer is not underwritten. Any Open Offer Shares not taken up by
Qualifying Shareholders may be placed by Evolution Beeson Gregory, as agent for
the Company and for the benefit of the Company, at a price per New Ordinary
Share no less than the Issue Price.
To be valid, completed Application Forms and payment in full must be received
by 3.00 p.m. on 3 July 2003. Application Forms are personal to Qualifying
Shareholders and may not be transferred except to satisfy bona fide market
claims. Qualifying Shareholders should be aware that the Open Offer is not a
rights issue, and therefore any Open Offer Shares not applied for under the
Open Offer will not be sold in the market for their benefit. Further details of
the terms and conditions of the Placing and Open Offer are set out in the
document sent to Shareholders today.
Firm Placing
The Firm Placing will raise �6.5 million (before expenses) which represents
approximately 85.9 per cent. Of the total funds being raised for the Company
pursuant to the Issue assuming the Open Offer is subscribed for in full. The
Firm Placing has been fully underwritten by Evolution Beeson Gregory.
General
The Issue is conditional, inter alia, upon:
(i) the passing of the Resolution at the Extraordinary General Meeting;
(ii) the Placing and Open Offer Agreement having become unconditional in all
respects (otherwise than in respect to Admission) and not having been
terminated in accordance with its terms; and
(iii) Admission becoming effective by not later than 8.00 a.m. on 11 July 2003
or such later time and/or date as the Company and Evolution Beeson Gregory may
agree being not later than 8.00 a.m. on 31 July 2003.
Directors' Intentions
Dr Gray, Dr Vaidya, Mr duPont, Mr Stern, Mr Henderson, and Mr Pearce (together
with their connected persons and related trusts) have undertaken to subscribe
for a total of 12,800,000 Firm Placing Shares at the Issue Price. This
represents 4.96 per cent. of the enlarged issued share capital following the
Issue (assuming the Open Offer is subscribed for in full). Further details are
set out in the document sent to Shareholders today.
Extraordinary General Meeting
A notice of an Extraordinary General Meeting to be held at 4.00 p.m. on 7 July
2003 at Scipher plc, CRL Dawley Road, Hayes, Middlesex UB3 1HH is set out in
the document sent to Shareholders today. At this meeting, resolutions will be
proposed to:
(i) increase the Company's authorised share capital from �2,000,000 to �
5,000,000 by the creation of an additional 300,000,000 new Ordinary Shares;
(ii) authorise the Directors to allot up to an aggregate nominal amount of �
2,930,000 in connection with the Issue and otherwise up to an aggregate nominal
amount equal to one third of the issued share capital of the Company
immediately following completion of the Issue;
(iii) disapply Shareholders' statutory pre-emption rights in relation to:
(a) the Issue;
(b) in connection with a rights issue, open offer or similar pro rata issue;
and
(c) the allotment (otherwise than pursuant to (a) and (b) above) for cash up to
an aggregate nominal amount equal to 10 per cent. of the issued share capital
of the Company immediately following completion of the Issue; and
(iv) amend certain of its Share Option Schemes. At present, Scipher cannot
grant further share options under its 1998 Approved Share Option Plan, its 1999
Unapproved Share Option Plan and its 1999 Sharesave Scheme as this would
infringe the overall scheme limits on the number of shares that can be placed
under option. Scipher is therefore asking shareholders to remove all the
existing limits on the number of shares that can be issued or are capable of
issue on the exercise of options granted under the Scipher 1998 Approved Share
Option Plan, the Scipher 1999 Unapproved Share Option Plan and the Scipher
Sharesave Scheme (subject to Inland Revenue approval where appropriate).
Assuming these amendments are approved by shareholders, Scipher proposes to
grant further share options under its existing schemes over approximately 8 per
cent. of the enlarged share capital to employees in order to incentivise them.
Recommendation
If the Issue does not proceed for any reason, the Directors will need to
address alternative funding sources, including further sources of equity,
disposals of certain assets and debt funding as a matter of urgency in the
short term. In the event that such alternative funding sources were not
forthcoming, then the Group may be unable to continue to trade. The Directors
believe that the Issue and the transfer to AIM are in the best interests of the
Company and its Shareholders as a whole. Accordingly, the Directors unanimously
recommend Shareholders to vote in favour of the resolutions to be proposed at
the EGM, as they intend to do in respect of their own beneficial shareholdings,
being in aggregate 13,279,241 Ordinary Shares (representing 12.45 per cent. of
the existing issued ordinary share capital of the Company).
Expected timetable of principal events
2003
Record date for the Open Offer 9 June
Latest time and date for splitting Application Forms 3.00 p.m. on 1 July
(to satisfy bona fide market claims only)
Latest time for receipt of completed Application Forms 3.00 p.m. on 3 July
and payment in full in respect of the Open Offer
Latest time for receipt of Proxy Forms 4.00 p.m. on 5 July
Extraordinary General Meeting 4.00 p.m. on 7 July
Admission and dealings commence on AIM and Ordinary 8.00 a.m. on 11 July
Shares de-listed from the Official List
Delivery in CREST of New Ordinary Shares to be held in 8.00 a.m. on 11 July
uncertificated form
Despatch of definitive share certificates in respect 18 July
of New Ordinary Shares to be held in certificated form
END