RNS Number:9962Q
Multi Group PLC
16 October 2003
This announcement, which is the sole responsibility of Multi Group Plc ("Multi",
"Company", or "Group"), has been approved by Corporate Synergy PLC solely for
the purpose of Section 21 of the Financial Services and Markets Act 2000.
This announcement does not constitute an offer to sell or issue, or the
solicitation of an offer to buy or subscribe for ordinary shares in Multi
("Multi Shares") in any jurisdiction in which such offer, issue or solicitation
is unlawful. Neither the existing Multi Shares nor the new Multi Shares have
been, or will be, registered in the United States under the United States
Securities Act 1933, as amended, nor under the securities laws of any state of
the United States, any province or territory of Canada, Australia, Japan or the
Republic of Ireland. Accordingly, subject to certain exceptions, neither the
existing Multi Shares nor the new Multi Shares may be offered, sold, resold,
delivered, transferred, directly or indirectly in or onto the United States,
Canada, Australia, Japan or the Republic of Ireland, or for the account or the
benefit of, any resident of Canada, Australia, Japan or the Republic of Ireland
or any US Person.
Corporate Synergy PLC, which is authorised and regulated in the United Kingdom
by the Financial Services Authority, is acting exclusively for Multi as
financial adviser (within the meaning of the Rules of the Financial Services
Authority) and no-one else in connection with the proposals described below and
is not advising any other person or treating any other person as its client in
relation thereto and will not be responsible to anyone other than Multi for
providing the protections afforded to clients of Corporate Synergy PLC or for
providing advice in relation to the Proposals, the contents of this announcement
or any other matters referred to herein.
Multi Group Plc
Proposed Placings, Open Offer, Capital Reorganisation, Waiver of Rule 9 of the
City Code on Takeovers and Mergers and Admission to the Alternative Investment
Market
Multi's shares were suspended from trading on the London Stock Exchange on 28
March 2003 pending clarification of the Company's financial position. The
Company is today pleased to announce proposals to raise #1.57 million before
expenses by way of the issue of New Ordinary Shares of 0.1p each at 1p ("the
Issue Price") comprising (i) the proposed issue of 135,000,000 New Ordinary
Shares to Southwind Limited ("the Placing") and (ii) the proposed issue of
22,476,929 New Ordinary Shares to certain directors of the Group and others ("
the Secondary Placing") and up to an additional #465,000 by way of a
non-underwritten open offer to existing shareholders ("Open Offer"). As this
fund raising will clarify the Company's financial position, the Directors have
requested that the suspension be lifted and accordingly trading in the existing
Ordinary Shares will resume with effect from tomorrow, 17 October 2003. The net
proceeds of the Placing, Secondary Placing and Open Offer, estimated to be a
minimum of #1.4 million, will be used to provide working capital and to
strengthen the balance sheet of the Group.
As part of the process of refinancing, the Company is also proposing to
restructure the board of directors and to appoint a new Executive Chairman,
Oliver Cooke, ("the Proposed Director") who will be responsible for refocusing
the Group on its core area of expertise, the hiring of small tools to the
construction industry and for returning the Group to profitability.
In order to implement the Placing, the Secondary Placing and Open Offer, the
Company is proposing a reorganisation of its share capital to reduce the nominal
value of its ordinary shares from 5p to 0.1p.
A waiver of Rule 9 of the City Code on Takeovers and Mergers ("Code") is also
required as the Concert Party comprising Southwind Limited, Oliver Cooke and
Michael Jackson will, following completion of the Proposals, own or have rights
over an aggregate maximum of 68.4 per cent. of the issued ordinary share capital
of the Company as would be enlarged by the exercise of the Proposed Director's
option, assuming the minimum subscription under the Open Offer.
Finally, it is also proposed that a new share option scheme be introduced to
provide an appropriate incentive for management and key staff.(together, the "
Proposals")
Shareholders should be aware that, in the event that the Proposals do not
proceed, it is likely that the Group will be forced to cease trading within as
little as three months of such event and there is likely to be little or no
return to shareholders in these circumstances.
Background to and reasons for the Proposals
The Company started trading in 1992 with three depots providing small tool hire
to the construction industry within the M25 area. It has since developed a
network of 11 permanent and 3 temporary depots spread throughout the country.
In 1998 Multi's shares were listed on the London Stock Exchange. In late 2000
Multi acquired Eurogen Systems Limited, which offers financial software for
companies in the hire industry. Following this acquisition the Board took a
strategic decision to invest in the development of a new generic asset hire
management software package to meet a perceived gap in the market. In early 2003
a fully functional version of the core hire module product was finally released
and it has now been installed with its first major customer, a large
international bulk hire company.
The Directors and Proposed Director continue to believe that there is
significant potential for future sales of the new product. However they have
concluded that the original strategy was flawed in that the cost of developing
the product proved to be significantly greater than had originally been
anticipated and this has been a considerable drain on the Group's resources.
During the same period the Group undertook significant capital expenditure in
expanding its depot network and in acquiring a number of ancillary businesses.
The severe depletion of the Group's cash resources caused by these events gave
rise to uncertainty regarding its financial position and led to the suspension
of the Company's shares from trading on the Official List on 28 March 2003
whilst it investigated ways of raising new funds to restore its financial
position.
Since March the Directors have explored a number of refinancing proposals,
including an outright sale of the Group, and have concluded that the proposed
Placing, Secondary Placing and Open Offer are the best means available of
restoring the finances of the Company and ensuring that the Group can continue
to trade for the foreseeable future.
The audited results for the year ended 31 December 2002 and the unaudited
interim results for the six months ended 30 June 2003 have been announced today.
The publication and filing of the accounts had been delayed by the fundamental
uncertainty regarding the Company's financial position, which will be resolved
by the proposals announced today.
Strategy
The Directors and the Concert Party have concluded that, in the current
circumstances, in order to safeguard the future of the Group the following
strategic steps need to be taken:
(i) refinance the Group by way of the Placing, the Secondary Placing and the
Open Offer;
(ii) revise the management structure of the Group, splitting operational and
corporate responsibility as described in the section below entitled "Management
Structure";
(iii) dispose, refinance or cease non-core activities of the Group;
(iv) reduce the Group's ongoing operating costs; and
(v) refocus on and grow the Group's core area of expertise in particular the
business carried out by MER.
Current trading and prospects
2002 was a challenging year for the Group, particularly in the South East where
there was a marked decline in construction activity and an increase in the level
of competition. Despite this, revenues from depots opened in Manchester,
Birmingham and Liverpool, together with revenuesfrom software sales enabled the
Group to report turnover for the year of #15.8 million, an increase of 25 per
cent. over the previous year. Gross profit also rose by 14 per cent. to #10.3
million. However, operating expenses rose by 67 per cent. to #13.2 million
(including amortisation). These increased costs, when combined with a one-off
exceptional charge of #2.6 million to cover the cost of a repudiated insurance
claim and an accelerated write off of goodwill and research and development
costs, led to the Group reporting a loss before taxation for the year of #3.1
million. At 31 December 2002 the Group had net assets of #3.0 million and net
indebtedness of #4.0 million.
Trading conditions during the first half of the current year did not improve.
The results for this period were adversely affected by lost business in the
software division as a result of the suspension of the Company's shares and by
significant additional costs arising from the refinancing process.
The Directors consider the performance of the hire division to have been largely
satisfactory given the difficulties faced by the Group with revenue growth from
the newer depots continuing to make up for flatter performance from the older
depots. However, the software division has continued to trade at a loss.
Following a review undertaken last year the Directors have decided that no
additional development funding will be provided to the software division from
the Group's resources and the division is being actively marketed to potential
purchasers. On 13 October 2003 the Group agreed to dispose of the assets,
software and intellectual property relating to Genesys, the original Unix based
program developed by Eurogen, to Toga Sales Limited.
As at 31 December 2002, the Group owed approximately #500,000 in taxes and
National Insurance to the Inland Revenue that were overdue for payment.
Following the suspension of the Company's shares on 28 March 2003, the Crown
agreed to withhold requests for payment of current and future PAYE until such
time as the Group's financial position could be clarified. In May 2003 and then
subsequently in October 2003, the Company reached agreement with the Crown to
pay PAYE and National Insurance owed at a rate of #100,000 per month from
December 2003, with a single initial payment of #250,000 in November 2003.
Agreement was also reached in May 2003 to pay outstanding VAT in a number of
instalments, fully discharging the debt by November 2003. As at the date of this
document the total amounts owed to the Crown are approximately #2.1 million.
The table below has been extracted, without material adjustment, from the
audited accounts of the Group for the three years ended 31 December 2002 and the
unaudited interim accounts for the six months ended 30 June 2003.
Six months
ended Year ended Year ended Year ended
30 June 31 December 31 December 31 December
2003 2002 2001 2000
#'000 #'000 #'000 #'000
Turnover 7,362 15,848 12,685 8,647
Gross profit 5,141 10,321 9,055 5,879
Operating (loss)/profit before
goodwill amortisation and
exceptional charges (1,032) 99 1,546 1,134
Goodwill amortisation - (209) (205) (4)
Exceptional Charges - (2,604) - -
Operating (loss)/profit (1,032) (2,714) 1,341 1,130
(Loss)/Profit on ordinary activities
before taxation (1,152) (3,057) 1,135 1,048
(Loss)/Profit on ordinary activities
after taxation (1,052) (2,926) 775 823
Pence Pence Pence Pence
(Loss)/Earning per share - Basic (2.34) (6.56) 1.92 2.08
- Diluted (2.34) (6.56) 1.90 2.03
#'000 #'000 #'000 #'000
Tangible assets 6,647 7,412 7,365 5,089
Debtors 4,431 5,660 4,152 2,891
Cash at bank and in hand 179 12 21 43
Total assets less current liabilities 3,300 3,995 6,930 6,106
Net assets 2,065 3,117 5,491 4,810
Since 30 June 2003, trading conditions for the Group have remained difficult.
The hire division is performing substantially in line with expectations whilst
the software division continues to trade at a loss.
The Directors and Proposed Director believe that completion of the Proposals and
implementation of the strategy outlined above will enable the Group to return to
profitability in the medium term. For this reason the Directors and Proposed
Director consider that the prospects for the Group following completion of the
Proposals are good.
Placing to Southwind Limited ("Southwind")
The Company is proposing to raise #1.35 million through the issue of 135,000,000
New Ordinary Shares at 1p per share to Southwind, representing between 53.9 per
cent. and 62.5 per cent. (depending on the take up under the Open Offer) of the
Enlarged Share Capital. Southwind is a company owned by the trustees of a trust
for the benefit of the minor children of Mr A. L. R. Morton.
Secondary Placing
Two of the Directors, Andrew Brundle and Keith Ferguson together with a key
member of the management team have irrevocably undertaken to take up their full
entitlement under the Open Offer, amounting to, in aggregate 2,746,671 New
Ordinary Shares and, together with a new investor, Michael Jackson, have
conditionally agreed to subscribe for up to an additional 22,476,929 New
Ordinary Shares at 1p per share pursuant to the Secondary Placing to raise
approximately #225,000 for the Company. The Secondary Placing is deemed to be a
related party transaction under the Listing Rules due to the participation of
certain of the Directors, and is therefore conditional on Shareholder approval.
The Secondary Placing is in addition to the Placing and the individuals named
above will not have the benefit of the warranties and indemnities given to
Southwind by the Company in the Placing Agreement.
As the Secondary Placing is conditional upon shareholder approval, the above
named individuals will not be recommending the Secondary Placing to Shareholders
(in the case of Andrew Brundle and Keith Ferguson) and will abstain, and take
all reasonable steps to ensure that their associates abstain, from voting upon
it. The aggregate shareholding of the above named individuals at the date of
this document is 2,746,671 Ordinary Shares, representing 5.9 per cent. of the
issued ordinary share capital of the Company.
The Open Offer
The Company also proposes to raise up to approximately #465,000, before
expenses, by the issue of up to 46,458,997 Open Offer Shares pursuant to the
Open Offer.
Qualifying Shareholders may apply for any number of Open Offer Shares, up to an
aggregate of 46,458,997, under the Open Offer, at the Issue Price. Applications
will be satisfied in full up to each Qualifying Shareholder's pro rata basic
entitlement being:
1 Open Offer Share for every 1 Ordinary Share
registered in their name at the close of business on 10 October 2003 and so in
proportion for any greater number of Ordinary Shares then held.
Applications for in excess of a Qualifying Shareholder's pro rata entitlement
will be satisfied at the absolute discretion of the Directors and if valid
applications are received for in excess of 46,458,997 Open Offer Shares in
aggregate, excess applications will need to be scaled back.
The Open Offer has not been underwritten. However, the Company has received
irrevocable undertakings from the Directors and one other key employee to apply
for an aggregate of 12,098,071 Open Offer Shares, comprising the 11,264,187 Open
Offer Shares to which they are entitled and 833,884 Open Offer Shares as excess
applications, representing 26.0 per cent. of the Open Offer Shares and a maximum
of 5.6 per cent. of the Enlarged Share Capital.
The Open Offer Shares will rank pari passu in all respects with the New Ordinary
Shares arising from the Capital Reorganisation, including the right to receive
all dividends and other distributions hereafter declared, made or paid.
The Open Offer is conditional, inter alia, upon:
* the passing of the Resolutions at the EGM; and
* Admission.
The latest time and date for application and payment in full for Open Offer
Shares under the Open Offer is 3.00 pm on 11 November 2003.
Issue Price
The Placing, Secondary Placing and Open Offer are being made at a price of 1p
per share, which represents a discount of 89.8 per cent. to the mid market price
at which the Ordinary Shares were suspended from trading on 28 March 2003. The
Issue Price represents a premium of 0.9p to the nominal value of the New
Ordinary Shares.
Waiver of the Requirement Under Rule 9 of the Code
Under Rule 9 of the Code ("Rule 9"), any person, or group of persons acting in
concert, who acquires, whether by a series of transactions over a period of time
or not, shares which taken together with shares already held by him or shares
held or acquired by persons acting in concert with him, carry 30 per cent. or
more of the voting rights of a company which is subject to the Code, is normally
required by the Panel on Takeovers and Mergers to make a general offer in cash
to acquire the remaining shares in that company to all its shareholders at not
less than the highest price paid by him or any persons acting in concert with
him within the preceding twelve months.
Mr Oliver C Cooke has been deemed by the Panel to be acting in concert with
Southwind as his appointment to the position of Executive Chairman is, inter
alia, conditional upon the approval of the Waiver and he has been instrumental
in introducing Southwind, who will be the controlling shareholder in the Company
following completion of the Proposals. Mr Michael E W Jackson has been deemed
by the Panel to be acting in concert with the Proposed Director by way of their
long standing friendship and the introduction of the Proposed Director to Mr A L
R Morton, who in turn introduced the Proposed Director to Southwind.
Upon completion of the Proposals, the Concert Party will be interested in
145,000,000 New Ordinary Shares representing between 57.9 per cent. and 67.1 per
cent. of the issued ordinary share capital of the Company (depending on the take
up under the Open Offer) and hold options to subscribe for a further 9,000,000
New Ordinary Shares. The maximum possible aggregate holding of the Concert Party
is therefore 154,000,000 New Ordinary Shares, representing a maximum of 68.4 per
cent. of the issued ordinary share capital of the Company as would be enlarged
by the exercise of the Proposed Director's option, assuming minimum subscription
under the Open Offer.
Under the Code a person, or persons acting in concert, who owns shares
controlling more than 50 per cent. of the voting rights of a company is free to
acquire further shares in the company without the need to make a general offer
to other shareholders. Following the Proposals the Concert Party will therefore,
under the rules of the Code, be able to purchase further shares in the Company
without making a general offer to all other shareholders to acquire their
shares. As both the Proposed Director and Mr Jackson will each hold an
individual interest of less than 30 per cent. of the issued share capital of the
Company following the Waiver, they will still be required to make a general
offer for the Company if they individually acquire an interest in 30 per cent.
or more of the issued share capital of the Company. Southwind will be interested
in more than 50 per cent. of the issued ordinary share capital of the Company
following the waiver and so is able to acquire additional shares without any
obligation to make a general offer for the Company.
The Panel has agreed, subject to the passing of Resolution 1 set out in the
notice of EGM by a simple majority of votes cast on a poll by Shareholders to
waive any obligation on the Concert Party to make a general offer to
Shareholders under Rule 9 of the Code, which may otherwise arise upon the
allotment to Southwind of the Placing Shares and allotment to Mr Jackson of New
Ordinary Shares pursuant to the Secondary Placing or the exercise by Mr Cooke of
his share options.
The Panel has ruled that as Andrew Brundle and Keith Ferguson are investing in
the Company pursuant to the Secondary Placing, which is, inter alia, conditional
on approval of the Waiver, they are not capable of giving an independent
recommendation to Shareholders regarding the proposed waiver of Rule 9 of the
City Code as set out in Resolution 1 to be proposed at the EGM. Therefore, only
I, as the Independent Director, will be recommending Resolution 1 and have
irrevocably undertaken to vote in favour of this Resolution in respect of my
shareholding of 8,492,516 Ordinary Shares, representing 18.3 per cent. of the
issued ordinary share capital of the Company at the date of this document.
Management Structure
Following completion of the Proposals, the management structure of the Group
will be changed to comprise an executive board (being the statutory board of the
Company), with responsibility for all corporate matters, and a management board
with responsibility for the day to day running of the business. Russell
Bracegirdle and Keith Ferguson will step down as directors of the Company and
will join the newly formed management board.
The executive board will therefore comprise Oliver Cooke, as Executive Chairman
and Andrew Brundle, as Group Financial Director. It is intended that two
suitable new non-executive directors will be appointed to the executive board of
the Company as soon as practicable following completion of the Proposals.
Adoption of new share option scheme
As at the date of this document the Directors and other employees hold options
to subscribe for an aggregate of 2,588,329 Ordinary Shares (representing 5.6 per
cent. of the issued share capital of the Company at the date of this document)
at an exercise price of between 9.577p and 15.25p. The options are expected to
be significantly out of the money following implementation of the Proposals and
accordingly provide no meaningful incentive. Accordingly, in recognition of the
importance of certain individuals considered to be key to the future development
of the business and to provide an appropriate incentive to them, it is proposed
that, following completion of the Proposals, the Existing Share Option Scheme be
cancelled and that the 2003 Share Option Scheme be adopted.
In addition to the 2003 Share Option Scheme, the Company is proposing to grant
an option to the Proposed Director to subscribe for 9,000,000 New Ordinary
Shares at 1p per share at any time between Admission and 16 November 2013. The
grant of this option is conditional upon the passing of the Resolutions and
Admission. Further details of the option are set out in paragraph 5(c) of Part
VII of this document.
Cancellation of listing on Official List and admission to AIM
As part of the review of the Group's operating costs the Directors have
evaluated the advantages and disadvantages of retaining a full listing on the
Official List. It is their belief that the transaction and other costs resulting
from the continuing obligations of a fully listed company are disproportionately
high for a company of Multi's size.
This, together with the tax incentives available to qualifying AIM companies,
has led your Board to conclude that the interests of the Company and its
Shareholders would be better served by moving from the Official List to AIM.
Accordingly, the Directors have applied to the UKLA for the listing of the
Ordinary Shares on the Official List, and to the London Stock Exchange for
trading in the Ordinary Shares on the London Stock Exchange's markets for listed
securities, to be cancelled at the close of business on 14 November 2003, being
the day of the EGM to approve the Proposals.
Application will be made for the New Ordinary Shares to be admitted to trading
on AIM. It is expected that the New Ordinary Shares will be admitted to trading
on AIM and that dealings will commence on 17 November 2003.
Capital Reorganisation
Company law prevents a company from issuing shares at a discount to the nominal
value of its shares. Since the Issue Price of 1 pence per share is below the
current nominal value of the Ordinary Shares, the Capital Reorganisation needs
to be implemented to enable the Placing, the Secondary Placing and the Open
Offer to proceed. It is proposed that:
* each issued Ordinary Share will be subdivided into one New Ordinary
Share of 0.1 pence and one Deferred Share of 4.9 pence;
* each unissued Ordinary Share will be subdivided into 50 New Ordinary
Shares of 0.1 pence each; and
* each Deferred Share may be transferred to the Company or its nominee
for nil consideration.
New share certificates will be issued in respect of the New Ordinary Shares
issued pursuant to the Open Offer, Placing and Secondary Placing following
completion of the Proposals. The existing share certificates representing
Ordinary Shares will continue to be valid immediately following the passing of
the Resolutions at the EGM. No share certificates will be issued in respect of
the Deferred Shares.
Extraordinary General Meeting
The above proposals are conditional on, inter alia, the approval of Shareholders
which is to be sought at an EGM convened for 10.05 am on 14 November 2003 or, if
later, immediately following the conclusion of the annual general meeting of the
Company to be convened for 10.00 am on the same day. At the EGM the following
Resolutions will be proposed:
1. To approve the Waiver;
2. To:
* sub-divide each issued Existing Ordinary Share into one New Ordinary
Share and one Deferred Share;
* sub-divide each authorised but unissued Existing Ordinary Share into
fifty New Ordinary Shares;
* amend the Articles of Association of the Company to set out the rights
attaching to the Deferred Shares;
* authorise the Directors to allot New Ordinary Shares;
* disapply Section 89(1) of the Act to authorise the Directors to allot
New Ordinary Shares for cash non-pre-emptively;
* approve the adoption of the 2003 Share Option Scheme; and
* approve the grant of an option to the Proposed Director;
3. To approve the Secondary Placing.
A prospectus of the Company dated today detailing the above proposals and
setting out the procedure for application for Open Offer Shares has been sent to
Shareholders.
This information is provided by RNS
The company news service from the London Stock Exchange
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