TIDMHYR
RNS Number : 4512N
HydroDec Group plc
06 September 2013
6 September 2013
Hydrodec Group plc
("Hydrodec", the "Company" or the "Group")
Acquisition of the business and assets of OSS Group Limited
Hydrodec Group plc (AIM: HYR), the cleantech industrial oil
re-refining group, is pleased to announce the acquisition of the
principal business and assets of OSS from the administrators of OSS
Group Limited (and certain of its affiliates) for a purchase price
of GBP4.65 million in cash.
OSS Business
The OSS business is the UK's largest collector, consolidator and
processor of used lubricant oil and seller of processed fuel oil,
processing approximately 60 million litres of used oil in 2012.
It has a national network of oil storage and transfer stations,
currently serviced by a fleet of more than 90 trucks which collect
used oil and other garage workshop waste from over 30,000
customers.
Used oil is converted into processed fuel oil at OSS's plant at
Stourport and principally sold on to the UK quarry and power
industry. OSS's existing senior management team led by Iain Lees
will be joining Hydrodec together with approximately 200 existing
employees.
The current OSS business generated revenues of GBP28.5 million
in 2012 and a normalised EBITDA(1.) of approximately GBP1 million;
the net asset value of the acquired assets is assessed at
approximately GBP4.5 million.
The purchase price is being financed by way of a short term
revolving credit facility. Management expect the transaction to be
EBITDA accretive to the Hydrodec Group within two months of the
acquisition (after transaction costs have been incurred) and
accretive to earnings overall in 2014.
Rationale for the Transaction
The combination of OSS's access to used oil together with its
operating capability makes it an ideal partner for Hydrodec to
utilise Hydrodec's existing transformer oil technology and to
develop and deploy its new lubricants re-refining technology in the
UK:
-- It provides a platform to import Hydrodec's SUPERFINE(TM) for
sale in the UK together with a capability to collect used
transformer oil from the UK power companies and overseas;
-- It will underpin the development of Hydrodec's new lubricants technology in the UK;
-- Once Hydrodec's new technology has been deployed in the UK,
it offers the potential to provide over 60 million litres per annum
of feedstock which the Group intends to re-refine into a high grade
lubricant base oil; and
-- It provides a platform to develop other opportunities to
consolidate the oil collection and re-refining market in the UK and
Europe.
Financing of the Acquisition
Following consideration of possible funding options, and in
light of the timing and completion logistics involved in the
structure of this particular transaction, the Board has approved
financing of the acquisition through the drawdown of funds made
available under a short term revolving credit facility (the
"Facility") provided by Andrew Black, a non-executive director of
the Company. The Facility is for up to GBP7.5 million and the
balance (not required for the acquisition and related costs) will
be available to provide additional working capital to the OSS
business. Interest is payable at 7 per cent per annum on drawn-down
funds and there is a GBP10,000 arrangement fee. The Facility has a
term of 6 months, repayable at any time by the Company. It is
initially unsecured but if not repaid within 90 days from the
initial drawdown security will be granted over the shares of
Hydrodec (UK) Limited, a newly incorporated subsidiary of the Group
which has acquired the OSS assets. The Board stated at the time of
the interim results in July that active consideration is being
given to the Company's debt position with a number of options being
explored for managing the balance sheet. This remains a priority
for the Board in 2013.
As a director of the Company, Andrew Black's provision of the
Facility constitutes a related party transaction for the purposes
of the AIM Rules. The directors, with the exception of Mr Black,
consider, having consulted with the Company's Nominated Adviser,
Peel Hunt LLP, that the terms of the Facility are fair and
reasonable insofar as Shareholders are concerned.
Commenting on the acquisition, Ian Smale, Chief Executive of
Hydrodec, said: "OSS offers a very exciting new market entry that
delivers the key elements of our business development strategy - a
strong position in the used oil value chain, a profitable platform
for growth with genuine business optionality, and the capability to
accelerate deployment of our existing transformer oil technology as
well as assist in our technology development.
The choice of the UK is deliberate, and we believe that
Hydrodec's technology together with the OSS operating platform can
offer a transformational solution to a UK environmental problem and
in due course offer the potential to extend into other attractive
European markets.
We believe we can integrate OSS swiftly and in a way that makes
the transaction accretive to EBITDA this year and accretive to
earnings overall in 2014. A key component of this is the high
quality management and staff that will join the Hydrodec team. I
see this as the next step (after the US strategic partnership
announced in April this year) of several we are seeking to take in
order to transform Hydrodec's scale and profitability, and to
normalise our balance sheet."
(1.) Normalised EBITDA: earnings before interest, tax,
depreciation and amortisation adjusted to exclude exceptional and
one-off items.
For further information please contact:
Hydrodec Group plc 020 7907 9220
Ian Smale, Chief Executive
Chris Ellis, Chief Financial Officer
Peel Hunt LLP
(Nominated adviser and broker) 020 7418 8900
Richard Kauffer
Daniel Harris
Vigo Communications (PR adviser
to Hydrodec) 020 7016 9570
Patrick d'Ancona
Chris McMahon
Cautionary statement:
This announcement contains certain forward-looking statements
with respect to the operations, performance and financial condition
of Hydrodec. By their nature, future events and circumstances can
cause results and developments to differ from those anticipated.
Nothing in this announcement should be construed as a profit
forecast. No undertaking is given to update the forward-looking
statements whether as a result of new information, future events or
otherwise.
Notes to Editors:
Hydrodec's technology is a proven, highly efficient, oil
re-refining and chemical process initially targeted at the
multi-billion US$ market for transformer oil used by the world's
electricity industry. Spent oil is currently processed at two
commercial plants with distinct competitive advantage delivered
through very high recoveries (near 100%), producing 'as new' high
quality oils at competitive cost and without environmentally
harmful emissions. The process also completely eliminates PCBs, a
toxic additive banned under international regulations.
Hydrodec's plants are located at Canton, Ohio, US and Young, New
South Wales, Australia and its shares are listed on the AIM Market
of the London Stock Exchange. For further information, please visit
www.hydrodec.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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