TIDMMMC
RNS Number : 0207T
Management Consulting Group PLC
29 June 2018
This announcement contains inside information
29 June 2018
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR
DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR
INTO THE UNITED STATES, JAPAN, CANADA, AUSTRALIA, NEW ZEALAND OR
THE REPUBLIC OF SOUTH AFRICA.
THIS ANNOUNCEMENT, WHICH DOES NOT CONSTITUTE A PROSPECTUS OR
PROSPECTUS EQUIVALENT DOCUMENT, IS NOT AN OFFER TO SELL OR
THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES, AND NEITHER
THIS
ANNOUNCEMENT NOR ANYTHING HEREIN FORMS THE BASIS FOR ANY
CONTRACT OR
COMMITMENT WHATSOEVER.
Management Consulting Group PLC
("MCG" or the "Company")
Proposed Placing and Open Offer of 1,000,050,372 New Ordinary
Shares
to raise approximately GBP10 million
Placing and Open Offer
The Board announces that the Company is today launching a
Placing and Open Offer to raise proceeds of approximately GBP8.5
million net of expenses under the Placing and Open Offer.
The Placing and Open Offer will result in the issue of
1,000,050,372 additional New Ordinary Shares in the Company at an
issue price of 1 penny per New Ordinary Share representing up to
196 per cent. of the Existing Ordinary Share Capital. The Open
Offer is being made on the basis of 45 Open Offer Shares for every
23 Existing Ordinary Shares held by Qualifying Shareholders on the
Record Date with the option for Qualifying Shareholders to apply
for Excess Shares (subject to availability and provided such
Qualifying Shareholder has agreed to take up their Open Offer
Entitlement in full) up to a maximum number of Excess Shares equal
to two times such Qualifying Shareholder's Open Offer
Entitlement.
The Open Offer and Excess Application Facility represent a
pre-emptive offering that is being made to all Qualifying
Shareholders (including BlueGem, Aberforth, Fidelity, Lombard Odier
and Richard Griffiths, each of which have made commitments pursuant
to the Subscription Agreements). The terms of the Subscription
Agreements do not afford any of BlueGem, Aberforth, Fidelity,
Lombard Odier and Richard Griffiths any rights to subscribe for
additional Ordinary Shares in preference to the other Qualifying
Shareholders. Rather, BlueGem, Aberforth, Fidelity, Lombard Odier
and Richard Griffiths have each irrevocably undertaken to take-up
their respective Open Offer Entitlements in full and BlueGem,
Lombard Odier and Richard Griffiths have agreed between them to
subscribe for up to 337,100,225 further of the New Ordinary Shares
being offered pursuant to the Open Offer by making applications for
Excess Shares pursuant to the Excess Application Facility.
It is noted that the Directors who will receive Open Offer
Entitlements have irrevocably undertaken to exercise their Open
Offer Entitlements in full and that Nick Stagg has irrevocably
undertaken to apply for 2,670,597 Excess Shares. When taken
together with the irrevocable commitments of BlueGem, Aberforth,
Fidelity, Lombard Odier and Richard Griffiths, it is by this
mechanism that the Company is ensured that all of the Open Offer
Shares will be subscribed for. Once the estimated total costs and
expenses of the Placing and Open Offer of approximately GBP1.5
million are taken into account, the net proceeds to the Company
will be approximately GBP8.5 million.
In addition, the PH Placing constitutes a firm placing to Pamela
Hackett on a non pre-emptive basis, which will result in the issue
of 5,341,195 New Ordinary Shares. The rationale for the PH Placing
is to align Pamela Hackett's interests with those of Shareholders.
As Pamela Hackett is Proudfoot Chief Executive and is also proposed
to join the Board of Directors of the Company, the PH Placing is
subject to the approval of Shareholders pursuant to Listing Rule
11.
The issue price of 1 penny per Ordinary Share represents a
discount of 68 per cent. to the Closing Price of the Ordinary
Shares on 28 June 2018 (being the last Business Day prior to the
date of this announcement). The Issue Price represents a discount
of 78 per cent. to the average Closing Price for the period of 90
Business Days up to and including 28 June 2018.
In accordance with the requirements of Listing Rule 9.5.10,
shareholder approval is required to issue the New Ordinary Shares
at a discount greater than 10 per cent. to the Closing Price on the
last Business Day prior to the date of this announcement.
Shareholders should be aware that the Board is of the view that it
was necessary to set the issue price at this level to ensure the
success of the Placing and Open Offer.
In addition, the Placing and Open Offer requires Shareholder
approval: (i) of the terms of the Placing and Open Offer and to
direct the Directors to implement the Placing and Open Offer; (ii)
to grant the Directors authority to allot and issue the New
Ordinary Shares; (iii) to disapply statutory pre-emption rights;
(iv) to allot the New Ordinary Shares at the Issue Price; and (v)
to approve the Rule 9 Waiver (as defined below).
The Board believes that there is a material risk that, in the
absence of the Placing and Open Offer, the Group will not have
sufficient working capital for its present requirements, that is,
for at least 12 months from the date of the Prospectus. The factors
influencing the size and timing of any shortfall in working capital
are dependent upon ongoing negotiations around the release of the
KS Funds (as described below) which is subject to the status of any
new, active or potential claims arising.
Specifically, if the Placing and Open Offer does not proceed,
then there is a risk that the Group may experience a liquidity
shortfall of GBP0.2 million in February 2019, followed by further
shortfalls of GBP0.2 million in June and July 2019, respectively.
There is then a projected major shortfall of GBP2.5 million in
August 2019. Were the Board to become aware that a near-term
liquidity shortfall was likely to occur, with no reasonable
prospect of remedy, the Board would need to consider whether there
was a reasonable prospect of avoiding insolvent liquidation, and
the Board might at such time conclude that the Group should take
immediate steps to enter into an insolvency process.
The Directors and the Proposed Director believe that the Placing
and Open Offer is the only viable fundraising option to address the
working capital shortfall which was announced by the Company on 23
April 2018. The Directors and the Proposed Director have considered
alternative fundraising options but as the Group does not have
assets of which it can dispose, and, as access to debt financing is
restricted due to the Group's perceived level of credit risk and
the consequent prohibitively high cost of such debt financing, the
Placing and Open Offer is the only option available to the Company
within the required timeframe. The Group has already taken steps to
reduce its capital expenditure and the Directors and the Proposed
Director do not believe there is scope to implement further capital
expenditure reductions within the required timeframe.
The Directors who will receive Open Offer Entitlements have each
irrevocably agreed, subject to certain exceptions, not to dispose
of any interest in any Ordinary Shares held by them until the
earlier of them ceasing to be a member of the Board and the date
falling eighteen months from Admission. The commitments of the
Directors given pursuant to the Directors' Irrevocables demonstrate
their confidence in the future of the Company and help ensure that
their interests remain aligned with those of Shareholders
generally.
Prospectus and notice of General Meeting
In connection with the Placing and Open Offer, the Company also
today announces that a prospectus relating to the Placing and Open
Offer (the "Prospectus") is expected to be approved by the FCA
later today.
The Prospectus is expected to be posted to Shareholders today
and it will include a notice convening a General Meeting of the
Company to be held at the offices of Baker & McKenzie LLP, 100
New Bridge Street, London EC4V 6JA at 11.00 a.m. on 18 July
2018.
In addition, the Prospectus is expected to be available to view
on the Company's website (www.mcgplc.com) later today. Copies of
the Prospectus will then be available from the registered office of
the Company at St Paul's House 4th Floor, 10 Warwick Lane, London
EC4M 7BP and will also be available for inspection up to Admission
at the offices of Baker & McKenzie LLP at 100 New Bridge
Street, London EC4V 6JA.
Timetable
Each of the times and dates in the table below is indicative
only and may be subject to change. Please read the
notes for this timetable set out below.
Event Time and/or Date
Record Date for entitlement 6.00 p.m. 25 June 2018
under the Open Offer
---------------------------
The publication of the 29 June 2018
Prospectus, Application
Form, and form of proxy
---------------------------
Ordinary Shares marked 8.00 a.m. on 29 June 2018
"ex-entitlement" by the
London Stock Exchange
---------------------------
Open Offer Entitlements 2 July 2018
and Excess Open Offer Entitlements
credited to stock accounts
of Qualifying CREST Shareholders
in CREST
---------------------------
Recommended latest time 4.30 p.m. on 6 July 2018
for requesting withdrawal
of the Open Offer Entitlements
and Excess Open Offer Entitlements
from CREST
---------------------------
Latest time and date for 3.00 p.m. on 10 July 2018
depositing the Open Offer
Entitlements and Excess
Open Offer Entitlements
into CREST
---------------------------
Latest time and date for 3.00 p.m. on 11 July 2018
splitting Application Forms
(to satisfy bona fide market
claims only)
---------------------------
Latest time and date for 11.00 a.m. on 16 July 2018
receipt of Forms of Proxy
---------------------------
Latest time and date for 11.00 a.m. on 16 July 2018
receipt of completed Application
Forms and payment in full
under the Open Offer and
settlement of relevant
CREST instructions (as
appropriate)
---------------------------
General Meeting 11.00 a.m. on 18 July 2018
---------------------------
Announcement of results 18 July 2018
of General Meeting
---------------------------
Results of Placing and 18 July 2018
Open Offer announced through
a Regulatory Information
Service
---------------------------
Admission and commencement 8.00 a.m. on 19 July 2018
of dealings in the New
Ordinary Shares
---------------------------
New Ordinary Shares in 19 July 2018
uncertificated form expected
to be credited to accounts
in CREST
---------------------------
Expected despatch of definitive Within five (5) Business
share certificates for Days of Admission
the New Ordinary Shares
in certificated form
---------------------------
Notes
(1) Reference to times in this timetable are to London time unless otherwise stated.
(2) The times and dates set out in the expected timetable of
principal events above and mentioned throughout this announcement
may be adjusted by the Company, in which event details of the new
times and dates will be notified to the FCA, the London Stock
Exchange and, where appropriate, Qualifying Shareholders. In
particular, in the event that withdrawal rights arise under Section
87Q of FSMA prior to Admission the Company and Peel Hunt may agree
to defer Admission until such time as such withdrawal rights no
longer apply.
(3) Different deadlines and procedures for return of forms may apply in certain cases.
Management Consulting Group
PLC
020 7710
Nick Stagg 5000
Peel Hunt
020 7418
Justin Jones 8900
Sam Cann
The person arranging release of this announcement on behalf of
the Company is Nick Stagg, the Chairman and Chief Executive of the
Company.
IMPORTANT NOTICES:
This announcement is an advertisement and does not constitute a
prospectus or prospectus equivalent document. Nothing in this
announcement should be interpreted as a term or condition of the
Placing and Open Offer. Investors should not subscribe for or
purchase any New Ordinary Shares referred to in this announcement
in connection with the Placing and Open Offer except on the basis
of information contained in the Prospectus.
This announcement does not constitute or form a part of any
offer to sell or subscribe for, or solicitation of an offer to buy
or subscribe for, securities in any jurisdiction in which such
offer or solicitation is unlawful and, in particular, is not for
distribution in or into the United States, Canada, Australia, New
Zealand, the Republic of South Africa or Japan, or any country or
territory where to do so may contravene local securities laws or
regulations (each, a "Restricted Territory"). The securities
mentioned herein have not been, and will not be, registered under
the United States Securities Act of 1933, as amended (the "US
Securities Act") or under any applicable securities laws of any
state, province, territory, county or jurisdiction of any
Restricted Territory.
The information in this announcement must not be forwarded,
distributed or sent, directly or indirectly, to any other person
and must not be reproduced in any manner whatsoever. Any
forwarding, distribution, reproduction, or disclosure of this
information in whole or in part is unauthorised. Failure to comply
with this directive may result in a violation of the US Securities
Act or the applicable laws of other jurisdictions.
This announcement has been prepared for the purposes of
complying with the applicable laws and regulations of the United
Kingdom and the information disclosed may not be the same as that
which would have been disclosed if this announcement had been
prepared in accordance with the laws and regulations of any
jurisdiction outside of the United Kingdom.
This announcement has been issued by, and is the sole
responsibility of, the Company.
Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated
by the FCA in the United Kingdom, is acting as sponsor in
connection with the publication of the Prospectus and sole
financial adviser in connection with the Rule 9 Waiver. Peel Hunt
is acting exclusively for the Company and no one else in connection
with such matters and will not be responsible to anyone other than
the Company for providing the protections afforded to their
respective clients, or providing any advice in relation to the
Placing and Open Offer, the contents of this announcement or any
matters referred to herein, and will not regard any other person
(whether or not a recipient of the Prospectus) as a client in
relation to the Placing and Open Offer.
No representation or warranty, express or implied, is or will be
made as to, or in relation to, and no responsibility or liability
is or will be accepted by either Peel Hunt or by any of their
respective affiliates or agents as to or in relation to, the
accuracy or completeness of this announcement or any other written
or oral information made available to or publicly available to any
interested party or its advisers, and any liability therefor is
expressly disclaimed.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS:
This announcement includes forward-looking statements. The words
"believe", "anticipate", "expect", "intend", "aim", "plan",
"predict", "continue", "assume", "positioned", "may", "will",
"should", "shall", "risk" and other similar expressions that are
predictions of or indicate future events and future trends identify
forward-looking statements. These forward-looking statements
include all matters that are not historical facts. In particular
statements regarding the Company's strategy, dividend policy and
other future events or prospects are forward-looking statements.
You should not place undue reliance on forward-looking statements
because they involve known and unknown risks, uncertainties and
other factors that are in many cases beyond the Company's control.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. The Company
caution's you that forward-looking statements are not guarantees of
future performance and that the Company's actual results of
operations, financial condition and the development of the industry
in which the Company operates may differ materially from those made
in or suggested by the forward-looking statements contained in this
announcement. The cautionary statements set out above should be
considered in connection with any subsequent written or oral
forward-looking statements that the Company, or persons acting on
its behalf, may issue.
These forward-looking statements reflect the Company's judgment
at the date of this announcement and are not intended to give any
assurances as to future results. Save as required by MAR, the
Listing Rules, Disclosure Guidance and Transparency Rules and/or
the Prospectus Rules or other applicable law or regulation, the
Company undertakes no obligation to update these forward-looking
statements, and will not publicly release any revisions it may make
to these forward-looking statements that may result from events or
circumstances arising after the date of this announcement. The
Company will comply with its obligations to publish updated
information as required by law or by any regulatory authority but
assumes no further obligation to publish additional
information.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, JAPAN,
CANADA, AUSTRALIA, NEW ZEALAND OR THE REPUBLIC OF SOUTH AFRICA.
PROPOSED PLACING AND OPEN OFFER
1. INTRODUCTION
The Board today announces that it has conditionally raised
proceeds of approximately GBP8.5 million net of expenses under the
Placing and Open Offer. The Placing and Open Offer will result in
the issue of 1,000,050,372 additional New Ordinary Shares in the
Company at an issue price of 1 penny per New Ordinary Share
representing up to 196 per cent. of the Existing Ordinary Share
Capital. The Open Offer is being made on the basis of 45 Open Offer
Shares for every 23 Existing Ordinary Shares held by Qualifying
Shareholders on the Record Date with the option for Qualifying
Shareholders to apply for Excess Shares (subject to availability
and provided such Qualifying Shareholder has agreed to take up
their Open Offer Entitlement in full) up to a maximum number of
Excess Shares equal to two times such Qualifying Shareholder's Open
Offer Entitlement.
The Open Offer and Excess Application Facility represent a
pre-emptive offering that is being made to all Qualifying
Shareholders (including BlueGem, Aberforth, Fidelity, Lombard Odier
and Richard Griffiths, each of which have made commitments pursuant
to the Subscription Agreements). The terms of the Subscription
Agreements do not afford any of BlueGem, Aberforth, Fidelity,
Lombard Odier and Richard Griffiths any rights to subscribe for
additional Ordinary Shares in preference to the other Qualifying
Shareholders. Rather, BlueGem, Aberforth, Fidelity, Lombard Odier
and Richard Griffiths have each irrevocably undertaken to take-up
their respective Open Offer Entitlements in full and BlueGem,
Lombard Odier and Richard Griffiths have agreed between them to
subscribe for up to 337,100,225 further of the New Ordinary Shares
being offered pursuant to the Open Offer by making applications for
Excess Shares pursuant to the Excess Application Facility.
In addition, it is noted that the Directors who will receive
Open Offer Entitlements have irrevocably undertaken to exercise
their Open Offer Entitlements in full and that Nick Stagg has
irrevocably undertaken to apply for 2,670,597 Excess Shares. When
taken together with the irrevocable commitments of BlueGem,
Aberforth, Fidelity, Lombard Odier and Richard Griffiths, it is by
this mechanism that the Company is ensured that all of the Open
Offer Shares will be subscribed for. Once the estimated total costs
and expenses of the Placing and Open Offer of approximately GBP1.5
million are taken into account, the net proceeds to the Company
will be approximately GBP8.5 million.
In addition, the PH Placing constitutes a firm placing to Pamela
Hackett on a non pre-emptive basis, which will result in the issue
of 5,341,195 New Ordinary Shares. The rationale for the PH Placing
is to align Pamela Hackett's interests with those of Shareholders.
As Pamela Hackett is Proudfoot Chief Executive and is also proposed
to join the Board of Directors of the Company, the PH Placing is
subject to the approval of Shareholders pursuant to Listing Rule
11.
The issue price of 1 penny per Ordinary Share represents a
discount of 68 per cent. to the Closing Price of the Ordinary
Shares on 28 June 2018 (being the last Business Day prior to the
date of this announcement). The Issue Price represents a discount
of 78 per cent. to the average Closing Price for the period of 90
Business Days up to and including 28 June 2018.
In accordance with the requirements of Listing Rule 9.5.10,
shareholder approval is required to issue the New Ordinary Shares
at a discount greater than 10 per cent. to the Closing Price on the
last Business Day prior to the date of this announcement.
Shareholders should be aware that the Board is of the view that it
was necessary to set the issue price at this level to ensure the
success of the Placing and Open Offer.
In addition, the Placing and Open Offer requires Shareholder
approval: (i) of the terms of the Placing and Open Offer and to
direct the Directors to implement the Placing and Open Offer; (ii)
to grant the Directors authority to allot and issue the New
Ordinary Shares; (iii) to disapply statutory pre-emption rights;
(iv) to allot the New Ordinary Shares at the Issue Price; and (v)
to approve the Rule 9 Waiver (as defined below).
The Board believes that there is a material risk that, in the
absence of the Placing and Open Offer, the Group will not have
sufficient working capital for its present requirements, that is,
for at least 12 months from the date of the Prospectus. The factors
influencing the size and timing of any shortfall in working capital
are dependent upon ongoing negotiations around the release of the
KS Funds (as described below) which is subject to the status of any
new active or potential claims arising.
Specifically, if the Placing and Open Offer does not proceed,
then there is a risk that the Group may experience a liquidity
shortfall of GBP0.2 million in February 2019, followed by further
shortfalls of GBP0.2 million in June and July 2019, respectively.
There is then a projected major shortfall of GBP2.5 million in
August 2019. Were the Board to become aware that a near-term
liquidity shortfall was likely to occur, with no reasonable
prospect of remedy, the Board would need to consider whether there
was a reasonable prospect of avoiding insolvent liquidation, and
the Board might at such time conclude that the Group should take
immediate steps to enter into an insolvency process.
The Directors and the Proposed Director believe that the Placing
and Open Offer is the only viable fundraising option to address the
working capital shortfall which was announced by the Company on 23
April 2018. The Directors and the Proposed Director have considered
alternative fundraising options but as the Group does not have
assets of which it can dispose, and, as access to debt financing is
restricted due to the Group's perceived level of credit risk and
the consequent prohibitively high cost of such debt financing, the
Placing and Open Offer is the only option available to the Company
within the required timeframe. The Group has already taken steps to
reduce its capital expenditure and the Directors and the Proposed
Director do not believe there is scope to implement further capital
expenditure reductions within the required timeframe.
The Directors who will receive Open Offer Entitlements have each
irrevocably agreed, subject to certain exceptions, not to dispose
of any interest in any Ordinary Shares held by them until the
earlier of them ceasing to be a member of the Board and the date
falling eighteen months from Admission. The commitments of the
Directors given pursuant to the Directors' Irrevocables demonstrate
their confidence in the future of the Company and help ensure that
their interests remain aligned with those of Shareholders
generally.
The Board believes that the Placing and Open Offer and the PH
Placing are in the Shareholders' best interests and the Directors
(and in the case of Resolution 4, the Independent Directors)
recommend that Shareholders vote in favour of all of the
Resolutions in order that the Placing and Open Offer can
proceed.
2. BACKGROUND TO, AND REASONS FOR, THE PLACING AND OPEN OFFER
The Group provides consultancy and other professional services
across a wide range of industries and sectors via the Proudfoot
business. Proudfoot was established in 1946 and is the original
business around which the Group was built.
During 2015 and 2016, the Company disposed of the Group's Kurt
Salmon businesses by way of a series of separate transactions
thereby leaving Proudfoot as the continuing part of the business.
Proudfoot continues to deliver value to clients and remains a
distinctive and recognised brand as well as an established global
operator in its key sectors. Notwithstanding this market position,
over the last few years Proudfoot has been loss-making and this is
expected to continue in the current financial year. The Board
continues to work on the ongoing transformation of the Proudfoot
business and remains focused on returning it to profitability.
The release of the KS Funds
Following the disposal of several of the Group's businesses,
including Kurt Salmon in Europe, in 2015 and 2016, the Group has
continued to manage the residual activities and contingent
liabilities related to this disposal programme. A material aspect
of managing this process has been the negotiation of the release of
the KS Funds, being the funds held under the arrangements which
guarantee certain contingent liabilities relating to the disposal
of parts of the European Kurt Salmon business to Wavestone
(previously named Solucom) in 2016. The KS Funds represented
approximately GBP6 million of the Group's total cash resources of
GBP16.1 million as at 31 March 2018. Under the terms of the
agreement with Wavestone, the KS Funds were due to be released in
two equal tranches on 7 January 2018, upon expiry of an initial
guarantee period, and on 7 July 2018, being the final expiry date
of the guarantees, in each case subject to the status of any active
claims or potential future claims. However, the release of the
first tranche of the KS Funds has taken longer than the Board had
expected due to negotiations over the treatment of certain
potential indemnification claims. As a result, agreement with
Wavestone as to the release of part of the first tranche was only
reached on 27 April 2018 with an amount of approximately EUR2
million (approximately GBP1.7 million) being released in two parts
on 16 March 2018 and 1 May 2018 respectively, while the balance of
approximately EUR2 million (approximately GBP1.7 million) remains
in an escrow arrangement until certain identified potential
indemnification claims have been settled or otherwise finally
determined on a case by case basis. The agreement reached with
respect to the first tranche of the KS Funds does not impact the
continuing arrangement with respect to the second tranche of the KS
Funds, such that approximately EUR4 million (approximately GBP3.5
million) is due to be released on 7 July 2018, although again that
release will be subject to the status of any new active claims or
potential claims arising prior to that date. The deadline for
making any indemnification claims is 30 months from November 2016
being July 2018 (excluding tax claims, which are subject to
statutory limitations), and therefore additional claims may be made
before that deadline, or in the case of any tax claims, in the
future. On 26 June 2018, the Company received a further letter of
claim from Wavestone which set out a number of disputes with a
potential further estimated aggregate liability of approximately
EUR1.8 million (approximately GBP1.6 million) against the second
tranche of the KS Funds and the Company is assessing the merits of
these further claims.
While the Board remains confident as to the Group's overall
position in terms of the release of the outstanding KS Funds, as
announced on 23 April 2018, it considered that the ongoing
negotiations created undue risk to the Group's short term funding
position such that it was actively considering options to manage
this including raising new funds for the Company. Subsequently, on
1 May 2018, the Company released its preliminary financial results
for the year ended 31 December 2017 with the announcement reporting
that an unqualified audit report including an emphasis of matter in
respect of going concern was issued on the 2017 statutory
accounts.
The ongoing transformation of Proudfoot
As previously reported, the Board believes that the Proudfoot
business needs to implement additional operational change, together
with selective investment, in order to further the continued
process of transformation there and so begin to create future value
for Shareholders.
A new management team, led by Proudfoot Chief Executive, Pamela
Hackett, was put in place in 2017 and good progress has been made
in some of Proudfoot's markets, notably Europe and Asia where the
transformation of the business was started first. In the Americas,
a new management team was recently formed to start the change
process in 2017 and the benefits are expected to start to be
visible in the second half of 2018.
Proudfoot continues to deliver sustainable improvement and
change for its customers and the Board intends to maintain the
momentum of the transformation it has started including maintaining
the appropriate investment in key talent (both retention and new
hires), know-how and intellectual property and brand presence.
In addition, the Board expects to continue to work to reduce the
cost base across the Group and at Proudfoot, thereby continuing the
work started in 2017.
The proposed fundraising
Accordingly, the Board is proposing the Placing and Open Offer
to:
- mitigate the material risks to the Group's short-term funding
position associated with delayed release of the KS Funds;
- afford the Board additional flexibility to manage any disputes
related to the KS Funds in the best long-term interests of the
Group; and
- ensure the Group has sufficient funding to complete the
turnaround of Proudfoot and return the business to
profitability.
The Board considers that the Placing and Open Offer is an
appropriate and proportionate response to the material uncertainty
relating to the Company's ability to continue as a going concern
referred to in its announcement of preliminary results on 1 May
2018 and subsequently in the 2017 Annual Report.
The Directors and the Proposed Director believe that the Placing
and Open Offer is the only viable fundraising option to address the
working capital shortfall announced on 23 April 2018. The Directors
and the Proposed Director have considered the alternative
fundraising options but as the Group does not have assets of which
it can dispose, and, as access to debt financing is restricted due
to the Group's perceived level of credit risk and the consequent
prohibitively high cost of such debt financing, the Placing and
Open Offer is the only option available to the Company within the
required timeframe. The Group has already taken steps to reduce its
capital expenditure and the Directors and the Proposed Director do
not believe there is scope to implement further capital expenditure
reductions within the required timeframe.
3. STRATEGIC AND OPERATIONAL FOCUS
Strategic focus: return the Proudfoot business to
profitability
The Group's strategy is to return its continuing business,
Proudfoot, to profitability through selective investment and the
transformation of its business. The key strategic objectives of the
transformation are to provide Proudfoot with a broader offering and
a more flexible set of contracting options for its clients, so as
to broaden its client base whilst providing more incentive for
existing clients to contract additional work. At the same time, the
Group will continue to seek ways to reduce its costs. Success will
therefore consist of growing revenues at Proudfoot, notably in the
Americas, and a return to profitability, initially on a cash
basis.
This transformation is ongoing, with a number of significant
changes being made in 2017 and 2018 to date. The key pillars of the
transformation are:
- New leadership: in 2017, Proudfoot appointed a new Chief
Executive, Pamela Hackett, who has a 30-year history with the
business. Pamela previously led the Group's Asian and European
businesses where the transformation was introduced first and where
the Group has seen promising results including increases in
activity in 2017. Proudfoot has removed several layers of
management across the business, bringing the Group's most senior
expertise directly into its client teams.
- New services: the addition of new services to the Group's core
capabilities of Proudfoot Analytics and Proudfoot People Solutions,
such as Proudfoot Digital Ready which enables management to lead
digital change through their people processes and
decision-making.
- Investment in key talent: Proudfoot has invested to maintain
its key talent and critically in new hires to ensure it has the
right people with the right skills to market and execute its
offering. The Group has also introduced a new incentive scheme to
retain talent at managing director and sector leadership
levels.
- Leveraging know-how and intellectual property: for over 70
years, Proudfoot has delivered client success based on a deep
understanding of what makes change effective and improvement
sustainable, including taking advantage of the modernisation of
processes enabled by digitalisation. Proudfoot is making this
know-how and experience more visible and readily available to the
Group's existing and prospective clients.
- Direct client engagement: Proudfoot has merged the Group's
selling activities with the Group's delivery capabilities, driving
greater customer satisfaction. Proudfoot's objectives are to offer
more flexibility to clients in the way they engage with the Group.
As a result, repeat business has risen in 2018 with some 68% of
Proudfoot's clients buying a second engagement.
- Marketing: Proudfoot introduced new marketing methods in 2017,
notably digitally-driven marketing in Q4 of that year with early
signs of success in opening other channels to market, specifically
inbound lead generation for new business.
- Rationalisation of the cost base: the Group has materially
simplified its operating structure (including reducing back office
functions), reducing peripheral activities and locations with the
objective of substantially reducing its cost base. The Group is
progressively basing all operations around hubs in Atlanta, London
and Hong Kong, whilst maintaining its strong focus on key industry
verticals such as natural resources, industrials and digital ready.
This more streamlined operational structure enables staffing of
engagements in the manner that best matches the Group's expertise
to client needs.
Change has been and will continue to be introduced
progressively, with recent success with European and Asian clients,
where the model was rolled out first, supporting the Board's
confidence in Proudfoot's long term potential. Change was started
in 2017 in the Americas and the initial client feedback has also
been positive in this market.
Clients and peers recognised the Group's impact, with its
assignment in natural resources for Rio Tinto receiving an award in
the Best International Project category at the 2018 MCA awards and
Proudfoot's work for Santa Monica Seafood winning their Service
Provider of the Year award. Proudfoot was put on Forbes annual list
of Best Consulting Firms in America.
Proudfoot continues to deliver value to clients and remains a
distinctive and recognised brand and is an established global
operator in key sectors. As stated in the 2017 Annual Report, the
Board remains confident in the longer term potential of the
Proudfoot model to deliver sustainable improvement and change for
its customers, and therefore its ability over time to generate
sufficient revenues and revenue growth to result in strong positive
cash flows. Additional change and investment is required in order
to further progress the transformation the Group started in 2017
and to create value for shareholders. The Board believes that the
Placing, the Open Offer and the PH Placing will support this
plan.
Operational focus: Group structure
The Chairman and Chief Executive, Nick Stagg, remains committed
to delivering further efficiencies in the Group's operations and
infrastructure. This will build upon the reduction of nearly 20 per
cent in its cost base made in 2017. The Group now comprises one
operating unit, Proudfoot, and the Board's intention is to end
progressively the distinction between Proudfoot's and the Company's
activities, notably as the residual activities and contingent
liabilities linked to the prior disposals programme are
concluded.
Notwithstanding that, the management of the residual activities
and contingent liabilities of the Group will be a key focus of the
Board, notably securing the release of the remainder of the KS
Funds, as discussed above.
The Group's management is focused on the transformation of
Proudfoot and its organic growth plans. Selective investment will
be made in Proudfoot's talent and expertise and its brand
awareness. Whilst growth will not be from acquisitions, Proudfoot
may explore potential partnerships to broaden its reach, offering
and expertise.
The Board expects to create future shareholder value through a
combination of reduced costs and structure across the Group, a
transformed Proudfoot that generates positive and growing cash
flows and a conclusion to the material risks linked to the 2015/6
disposal programme.
Board and governance
The Group Chairman and Chief Executive positions are currently
jointly held by Nick Stagg. The Board has decided that it intends
to appoint the current Chief Executive Officer of Proudfoot, Pamela
Hackett to the Board in the near future.
As the Group continues the transformation of Proudfoot, the
Board intends to progressively take steps towards greater
compliance with the FRC Code. The Governance section of the 2017
Annual Report sets out those areas where the Company is not at this
time compliant with the FRC Code. In particular, over the 12 months
following completion of the Placing and Open Offer, the Company
expects to appoint new director(s) who will be independent under
the FRC Code, whilst recognising always the size of the Board and
the profitability of the current Group.
Whilst recognising that the Company does not have a Finance
Director, the Board is confident that the Group possesses
sufficient internal resource, including in its finance function, to
deliver the turnaround of Proudfoot. Day-to-day control and
oversight of the resources, operations and risks at the Company
level remains the responsibility of Nick Stagg, assisted notably by
the Group Treasurer and the Group's Financial Controller.
Day-to-day control and oversight of Proudfoot, including bidding
activity, pricing and monitoring of ongoing projects, resides with
the Proudfoot Chief Executive, Pamela Hackett, assisted notably by
the Proudfoot Head of Finance.
4. DETAILS OF PLACING AND OPEN OFFER
The Company is proposing to raise approximately GBP8.5 million
(net of expenses) under the Placing and Open Offer through the
issue of up to 1,000,050,372 New Ordinary Shares at 1 penny per New
Ordinary Share.
The issue price of 1 penny per Ordinary Share represents a
discount of 68 per cent. to the Closing Price of the Ordinary
Shares on 28 June 2018 (being the last Business Day prior to the
date of this announcement), and a discount of 78 per cent. to the
average Closing Price for the period of 90 Business Days up to and
including 28 June 2018.
Details of the Open Offer
Qualifying Shareholders, subject to the terms and conditions of
the Open Offer, are being given the opportunity to apply for the
Open Offer Shares at the Issue Price pro rata to their holdings of
Existing Ordinary Shares on the Record Date on the basis of:
45 Open Offer Shares for every 23 Existing Ordinary Shares
Fractions of Open Offer Shares will not be allotted to
Qualifying Shareholders in the Open Offer and fractional
entitlements under the Open Offer will be rounded down to the
nearest whole number of Open Offer Shares.
Provided that they take up their Open Offer Entitlements in
full, Qualifying Shareholders are also being given the opportunity
to apply for Excess Shares, subject to availability, through the
Excess Application Facility, up to a maximum number of Excess
Shares equal to two times such Qualifying Shareholder's Open Offer
Entitlement. Excess Shares will become available as part of the
Open Offer where Open Offer Entitlements are not taken up in full
by Qualifying Shareholders.
The Open Offer has not been underwritten although, pursuant to
the Subscription Agreements, BlueGem, Aberforth, Fidelity, Lombard
Odier and Richard Griffiths have irrevocably undertaken to take-up
their own Open Offer Entitlements in full and BlueGem, Lombard
Odier and Richard Griffiths have also agreed between them to
subscribe for up to 337,100,225 further of the Open Offer Shares by
making applications for Excess Shares under the Excess Application
Facility.
It is noted that the Directors who will receive Open Offer
Entitlements have irrevocably undertaken to exercise their Open
Offer Entitlements in full and that Nick Stagg has irrevocably
undertaken to apply for 2,670,597 Excess Shares. When taken
together with the irrevocable commitments of BlueGem, Aberforth,
Fidelity, Lombard Odier and Richard Griffiths, it is by this
mechanism that the Company is ensured that all of the Open Offer
Shares will be subscribed for. Once the estimated total costs and
expenses of the Placing and Open Offer of approximately GBP1.5
million are taken into account, the net proceeds to the Company
will be up to approximately GBP8.5 million.
It is noted that the terms of the Subscription Agreements do not
afford any of BlueGem, Aberforth, Fidelity, Lombard Odier and
Richard Griffiths any rights to subscribe for additional shares in
preference to the other Qualifying Shareholders. Furthermore, none
of BlueGem, Aberforth, Fidelity, Lombard Odier and Richard
Griffiths will be paid any commission pursuant to the Subscription
Agreements.
Qualifying Shareholders may apply for any whole number of Open
Offer Shares up to their maximum entitlement which, in the case of
Qualifying Non-CREST Shareholders, is equal to the number of Open
Offer Entitlements as shown in Box 2 of their Application Form, or,
in the case of Qualifying CREST Shareholders, is equal to the
number of Open Offer Entitlements standing to the credit of their
stock account in CREST.
Qualifying Non-CREST Shareholders who wish to apply to acquire
more than their Open Offer Entitlement should complete the relevant
sections on the Application Form. Qualifying CREST Shareholders
will have Excess Open Offer Entitlements credited to their stock
account in CREST.
Qualifying Non-CREST Shareholders and Qualifying CREST
Shareholders should refer, respectively, to paragraphs 4.1 and 4.2
of Part VII: "Terms and Conditions of the Open Offer" of the
Prospectus for information on how to apply for Excess Shares
pursuant to the Excess Application Facility.
Qualifying CREST Shareholders will receive a credit to their
appropriate stock accounts in CREST in respect of their Open Offer
Entitlements and Excess Open Offer Entitlements on 2 July 2018.
Qualifying Shareholders with holdings of Existing Ordinary
Shares in both certificated and uncertificated form will be treated
as having separate holdings for the purpose of calculating their
entitlements under the Open Offer.
If valid applications under the Excess Application Facility are
received for more than the total number of Open Offer Shares
available under the Excess Application Facility, such applications
will be scaled back in such manner as the Board determines in its
absolute discretion, having regard to both the number of Excess
Shares applied for and the valid shareholdings held by Qualifying
Shareholders (on the Record Date) who make applications under the
Excess Application Facility. Furthermore, applications will be
scaled back to ensure that no Qualifying Shareholder (other than
BlueGem, if the Whitewash Resolution is passed) will as a result of
subscriptions for Excess Shares acquire more than 29.9% of the
voting rights of the Company. Any monies paid in excess of the
amount due in respect of such scaled back applications will be
returned to the applicant (at the applicant's risk) without
interest within 14 days by way of cheque or CREST payment, as
appropriate. There is no guarantee that applications for Excess
Shares by Qualifying Shareholders will be met.
Qualifying Shareholders should be aware that the Open Offer is
not a rights issue. As such, Qualifying non-CREST Shareholders
should also note that their Application Forms are not negotiable
documents and cannot be traded. Qualifying CREST Shareholders
should note that, although the Open Offer Entitlements and Excess
Open Offer Entitlements will be admitted to CREST they will have
limited settlement capabilities (for the purposes of market claims
only), the Open Offer Entitlements and Excess Open Offer
Entitlements will not be tradable or listed and applications in
respect of the Open Offer may only be made by the Qualifying
Shareholders originally entitled or by a person entitled by virtue
of a bona fide market claim. Open Offer Shares for which
application has not been made under the Open Offer will not be sold
in the market for the benefit of those who do not apply under the
Open Offer and Qualifying Shareholders who do not apply to take up
their Open Offer Entitlement and Excess Open Offer Entitlements
will have no rights under the Open Offer or receive any proceeds
from it.
Conditions and Admission
The Placing and Open Offer is conditional upon the passing of
Resolutions 1 through to 5, Admission and the Subscription
Agreements and Sponsor's Agreement becoming unconditional in all
respects (other than as to Admission) and not being terminated. If
these conditions are not satisfied or waived (where capable of
waiver), the Placing and Open Offer will not proceed.
If Admission does not take place on or before 8.00 a.m. on 19
July 2018 (or such later time and/or date as Peel Hunt and the
Company may determine, not being later than 8.00 a.m. on 25 July
2018), the Open Offer will lapse, any Open Offer Entitlements and
Excess Open Offer Entitlements admitted to CREST will thereafter be
disabled and application monies under the Open Offer will be
refunded to the applicants, by cheque (at the applicant's risk) in
the case of Qualifying Non-CREST Shareholders and by way of a CREST
payment in the case of Qualifying CREST Shareholders, without
interest, as soon as practicable thereafter and in any event within
14 days. In these circumstances the Placing and Open Offer will
also not proceed.
Application will be made to the FCA for the New Ordinary Shares
to be admitted to the Official List and to the London Stock
Exchange for the New Ordinary Shares to be admitted to trading on
the London Stock Exchange's main market for listed securities. It
is expected that Admission will become effective on 19 July 2018
and that dealings for normal settlement in the New Ordinary Shares
(including all Open Offer Shares) will commence at 8.00 a.m. on the
same day.
Application has been made for the Open Offer Entitlements and
Excess Open Offer Entitlements to be admitted to CREST. It is
expected that the Open Offer Entitlements and Excess Open Offer
Entitlements will be admitted to CREST at 8.00 a.m. on 2 July 2018.
The Open Offer Entitlements and Excess Open Offer Entitlements will
also be enabled for settlement in CREST at 8.00 a.m. on 2 July
2018.
Qualifying CREST Shareholders should note that, although the
Open Offer Entitlements and Excess Open Offer Entitlements will be
admitted to CREST and be enabled for settlement, applications in
respect of entitlements under the Open Offer may only be made by
the Qualifying Shareholder originally entitled or by a person
entitled by virtue of a bona fide market claim raised by
Euroclear's Claims Processing Unit. Qualifying Non-CREST
Shareholders should note that their Application Form is not a
negotiable document and cannot be traded.
Further information on the Placing and Open Offer and the terms
and conditions on which it is made, including the procedure for
application and payment, are set out in Part VII: "Terms and
Conditions of the Open Offer" of the Prospectus and, where
relevant, on the applicable Application Form.
Any Qualifying Shareholder who has sold or transferred all or
part of his/her registered holding(s) of Ordinary Shares prior to
25 June 2018 is advised to consult his or her stockbroker, bank or
other agent through or to whom the sale or transfer was effected as
soon as possible since the invitation to apply for Open Offer
Shares under the Open Offer may be a benefit which may be claimed
from him/her by the purchasers under the rules of the London Stock
Exchange.
The New Ordinary Shares (including all Open Offer Shares), when
issued and fully paid, will be identical to and rank in full for
all dividends or other distributions declared, made or paid after
Admission and in all respects will rank pari passu with the
Existing Ordinary Shares. No temporary documents of title will be
issued.
Details of the Subscription Agreements
Pursuant to the Subscription Agreements, BlueGem, Aberforth,
Fidelity, Lombard Odier and Richard Griffiths have irrevocably
undertaken to take-up their own Open Offer Entitlements in full and
have also agreed between them to subscribe for up to 337,100,225
further of the New Ordinary Shares by applying for Excess Shares
under the Excess Application Facility.
It is noted that the Directors who will receive Open Offer
Entitlements have irrevocably undertaken to exercise their Open
Offer Entitlements in full and that Nick Stagg has irrevocably
undertaken to apply for 2,670,597 Excess Shares. When taken
together with the irrevocable commitments of BlueGem, Aberforth,
Fidelity, Lombard Odier and Richard Griffiths, it is by this
mechanism that the Company is ensured that all of the Open Offer
Shares will be subscribed for. Once the estimated total costs and
expenses of the Placing and Open Offer of approximately GBP1.5
million are taken into account, the net proceeds to the Company
will be approximately GBP8.5 million.
Under the terms of the Subscription Agreements, subject to
certain conditions:
a) each of BlueGem, Aberforth Fidelity, Lombard Odier and
Richard Griffiths have irrevocably undertaken to exercise their
respective full Open Offer Entitlements (representing a
subscription commitment of GBP7.2 million); and
b) each of BlueGem, Lombard Odier and Richard Griffiths have
irrevocably undertaken to apply for a further 337,100,225 Open
Offer Shares under the Excess Application Facility (representing a
further subscription commitment of up to GBP3.4 million).
The obligations of each of BlueGem, Aberforth, Fidelity, Lombard
Odier and Richard Griffiths under the Subscription Agreements to
subscribe for Open Offer Shares are subject to:
a) the passing of Resolutions 1 through to 5 at the General Meeting without amendment;
b) the Directors' Irrevocables, the Subscription Agreements and
the Sponsor's Agreement each becoming unconditional in all
respects; and
c) Admission becoming effective by not later than 8.00 a.m. on
19 July 2018 (or such later time and/or date as Peel Hunt and the
Company may agree, being not later than 25 July 2018).
For the avoidance of doubt, to the extent that any of BlueGem,
Aberforth, Fidelity, Lombard Odier and Richard Griffiths apply for
Excess Shares under the Excess Application Facility they will do so
on the same terms and conditions as all other Qualifying
Shareholders who choose to apply for Excess Application Shares. In
aggregate, the total number of Open Offer Shares subscribed for by
each of BlueGem, Aberforth, Fidelity, Lombard Odier and Richard
Griffiths pursuant to the Excess Application Facility must not
exceed two times such shareholder's Open Offer Entitlement.
Related party considerations
It is noted that, although BlueGem, Aberforth, Lombard Odier and
Richard Griffiths, by virtue of each controlling more than 10% of
the Company's share capital, are related parties for the purposes
of Chapter 11 of the Listing Rules, these related parties'
participation in the Placing and Open Offer does not require the
approval of a majority of the Shareholders independent of each such
relevant shareholder. The reason for this is that the terms of the
Subscription Agreement do not afford any of BlueGem, Aberforth,
Lombard Odier and Richard Griffiths any rights to subscribe for
additional Ordinary Shares in preference to the other Qualifying
Shareholders and that no underwriting or other commission is
payable to such shareholders pursuant to the terms of the
Subscription Agreements.
As Pamela Hackett is Proudfoot Chief Executive and is also
proposed to join the Board, the PH Placing is subject to
shareholder approval under Listing Rule 11.
Directors' Irrevocables
Each of Nick Stagg and Julian Waldron, as the Directors who will
receive Open Offer Entitlements have entered into the Directors'
Irrevocables with the Company dated 28 June 2018, pursuant to which
they have undertaken to vote in favour of the Resolutions at the
General Meeting and also to take up their full entitlements to
subscribe for New Ordinary Shares pursuant to the Open Offer,
representing a total commitment to subscribe for approximately
GBP63,000 worth of Open Offer Shares. In addition, each of the
Directors has agreed, subject to certain exceptions, not to dispose
of any interest in Ordinary Shares or other equity securities in
the Company, or any securities convertible into, or exercisable, or
exchangeable for, equity securities of the Company, or to publicly
announce an intention to effect any such transaction, until the
earlier of them ceasing to be a member of the Board and the date
falling eighteen months from Admission.
The PH Placing
In addition, the PH Placing constitutes a firm placing to Pamela
Hackett on a non pre-emptive basis, which will result in the issue
of 5,341,195 New Ordinary Shares at an issue price of 1 penny per
New Ordinary Share. The rationale for the PH Placing is to align
Pamela Hackett's interests with those of Shareholders.
As Pamela Hackett is Proudfoot Chief Executive and is also
proposed to join the Board of Directors of the Company, the PH
Placing is subject to the approval of Shareholders pursuant to
Listing Rule 11.
5. Use of proceeds
As announced on 1 May 2018 and set out in the 2017 Annual
Report, the Board has identified certain material risks to the
Group's short-term funding position.
In the first instance, the net proceeds of the Placing and Open
Offer will be used to mitigate these material risks to the Group's
short term funding position and to afford the Board additional
flexibility to manage any disputes related to the KS Funds in the
best long-term interests of the Group which will account for GBP5.8
million of the money raised pursuant to the Placing and Open
Offer.
In addition, the remaining part of the net proceeds of the
Placing and Open Offer and the proceeds of the PH Placing (together
being approximately GBP2.7 million) will be used to ensure the
Group has sufficient funding to complete the turnaround of
Proudfoot and return the business to profitability.
As the KS Funds are subsequently released to the Company, the
available cash resources will be used for general corporate
purposes.
6. Current trading and prospects
As previously announced on 1 May 2018, Proudfoot grew revenues
in Q1 2018 compared with a particularly low Q4 in 2017 and early
indications are for a continuation of this trend into Q2. The
customer reaction to its offering continues to be strong where the
Group wins work.
The Board is focusing on the Group's sales and marketing teams
and infrastructure to promote its offering more effectively and the
Board remains confident in the strength of the Proudfoot model to
deliver sustainable improvement and change for its customers.
Nonetheless, revenues for the year ending 31 December 2018 are
likely to be lower than revenue reported in 2017. In addition and
as previously announced, management is continuing its work to
reduce costs across the Group as a whole. The Group's total costs
were GBP10.7 million for the year ended 31 December 2017.
The Board is conscious that the turnaround of the business is
taking longer than expected but remains focused on continuing to
promote the changes needed to restore the Group's growth and
profitability.
7. Proposals to be voted on at the general meeting
For the purposes of effecting the Placing and Open Offer and the
PH Placing, the Resolutions will be proposed at the General
Meeting. As noted above, the notice convening the General Meeting
will be set out in the Prospectus.
It should be noted that Resolutions 1 through to 5 are
inter-conditional, such that if any one of those Resolutions is not
passed by the requisite majority of Shareholders eligible to vote
on that Resolution, then the Placing and Open Offer will not
proceed. If the Placing and Open Offer does not proceed then the
Board believes that there is a material risk that the Group will
not have sufficient working capital for its present requirements,
that is, for at least 12 months following the date of the
Prospectus.
The factors influencing the size and timing of any shortfall in
working capital are dependent upon ongoing negotiations around the
release of the KS Funds which is subject to the status of any new
active or potential claims arising.
More specifically, if the Placing and Open Offer does not
proceed, then there is a risk that the Group may experience a
liquidity shortfall of GBP0.2 million in February 2019, followed by
further shortfalls of GBP0.2 million in June and July 2019,
respectively. There is then a projected major shortfall of GBP2.5
million in August 2019. Were the Board to become aware that a
near-term liquidity shortfall was likely to occur, with no
reasonable prospect of remedy, the Board would need to consider
whether there was a reasonable prospect of avoiding insolvent
liquidation, and the Board might at such time conclude that the
Group should take immediate steps to enter into an insolvency
process.
Resolution 1 (Ordinary) is required by the Listing Rules and
seeks to approve the issue of New Ordinary Shares for cash at a
price of 1 penny per New Ordinary Share (being a discount of 68 per
cent. to the Closing Price at the last practicable Business Day
prior to the date of this announcement). Under the Listing Rules,
shareholders must approve an issuance of ordinary shares at a
discount of greater than 10 per cent. to the Closing Price on the
last Business Day prior to the announcement of the same.
Resolution 2 (Ordinary) seeks a new authority to enable the
Directors to allot relevant securities. The Directors may not allot
new shares in the Company without the prior approval of
Shareholders in general meeting. For the reason that it was known
that the General Meeting would be called in connection with the
Placing and Open Offer, no general authority to allot new shares in
the Company will be sought at the annual general meeting to be held
on 29 June 2018. Resolution 2 seeks authority to allot relevant
securities up to an aggregate nominal amount of GBP15,109,010,
including, but not limited to, the issue of equity securities
pursuant to the Placing and Open Offer and PH Placing. This
represents approximately 196 per cent. of the Company's Existing
Ordinary Share Capital as at the date of this announcement and will
provide headroom of approximately 33 1/3 per cent. of the Enlarged
Issued Share Capital following the completion of the Placing and
Open Offer and PH Placing (assuming no further exercise of options
granted or other issue of shares pursuant to the Share Incentive
Plans). The Directors currently have no specific plans to allot
relevant securities other than in connection with the Placing and
Open Offer, the PH Placing and pursuant to the Share Incentive
Plans.
Resolution 3 (Special) seeks a new authority to disapply
statutory pre-emption rights in relation to the allotment of equity
securities for cash. The Directors may also only issue shares on a
non-preemptive basis with the prior approval of Shareholders in
general meeting. Again, for the reason that it was known that the
General Meeting would be called in connection with the Placing and
Open Offer, no disapplication of pre-emption rights will be sought
at the annual general meeting to be held on 29 June 2018. If
approved, Resolution 3 will authorise the Directors to allot shares
for cash for the purposes of the Placing and Open Offer and PH
Placing and otherwise to allot shares for cash up to a maximum
nominal amount of GBP10,812,180. This represents approximately 196
per cent. of the Company's Existing Ordinary Share Capital as at
the date of this announcement and will provide headroom of
approximately 5 per cent. of the Enlarged Issued Share Capital
following the completion of the Placing and Open Offer and PH
Placing (assuming no further exercise of options granted or other
issue of shares pursuant to the Share Incentive Plans).
Resolution 4 (Ordinary) is the Whitewash Resolution which is
proposed as an ordinary resolution to the Independent Shareholders
(other than BlueGem, Marco Capello and Emilio Di Spiezio Sardo who
are unable to vote pursuant to the City Code). Under the City Code,
the grant of the waiver by the Panel of any requirement under Rule
9 of the City Code on Takeovers and Mergers for BlueGem to make a
general offer to the shareholders of the Company as a result of the
potential for BlueGem to pass through the 30% threshold by virtue
of its participation in the Placing and Open Offer must be approved
by a majority of the Shareholders independent of BlueGem.
BlueGem has undertaken to the Company not to vote on Resolution
4, the Whitewash Resolution. BlueGem and its associates will not be
entitled to vote on Resolution 4 and any votes cast by BlueGem or
its associates will be deemed void.
Resolution 5 (Ordinary) seeks to generally approve the terms of
the Placing and Open Offer and PH Placing and to authorise the
Directors to implement the Placing and Open Offer and PH
Placing.
Finally, Resolution 6 (Ordinary) seeks to approve the PH Placing
as a related party transaction for the purposes of Chapter 11 of
the Listing Rules. As Pamela Hackett is Proudfoot Chief Executive
and is also proposed to join the Board of Directors of the Company,
the PH Placing is subject to the approval of Shareholders.
8. The Importance of the Shareholder Vote
The Directors and the Proposed Director believe that the Placing
and Open Offer is the only viable fundraising option to address the
working capital shortfall announced on 23 April 2018. The Directors
and the Proposed Director have considered alternative fundraising
options but as the Group does not have assets of which it can
dispose, and, as access to debt financing is restricted due to the
Group's perceived level of credit risk and the consequent
prohibitively high cost of such debt financing, the Placing and
Open Offer is the only option available to the Company within the
required timeframe. The Group has already taken steps to reduce its
capital expenditure and the Directors and the Proposed Director do
not believe there is scope to implement further capital expenditure
reductions within the required timeframe.
Even if shareholders do not intend to participate in the Open
Offer, they are urged to vote on the Resolutions to enable the
Placing and Open Offer and PH Placing to proceed.
The Board believes that the Placing and Open Offer and the PH
Placing are in the Shareholders' best interests and recommends (and
in the case of Resolution 4, the Independent Directors recommend)
that Shareholders vote in favour of all of the Resolutions in order
that the Placing and Open Offer and PH Placing can proceed.
DEFINITIONS
"Aberforth" Aberforth Partners LLP as discretionary
fund managers for Aberforth UK
Small Companies Fund, Aberforth
Smaller Companies Trust PLC and
other segregated accounts;
"Admission" the admission of the New Ordinary
Shares to the Official List of
the FCA and to trading on the
main market for listed securities
of the London Stock Exchange,
becoming effective, and references
to "Admission becoming effective"
means its becoming effective
in accordance the Listing Rules
and the Admission and Disclosure
Standards published by the London
Stock Exchange;
"Application Form" the personalised application
form being sent to certain Qualifying
Shareholders on which Qualifying
Non- CREST Shareholders who are
registered on the register of
MCG PLC at the Record Date may
apply for Open Offer Shares under
the Open Offer;
"Australia" the Commonwealth of Australia,
its territories and possessions;
"BlueGem" BlueGem Secondary LP, a fund
managed by BlueGem Capital Partners
LLP, and its associated entities
BlueGem Delta S.a`r.l., BlueGem
Beta Limited, BlueGem General
Partner L.P. and BlueGem Capital
Partners LLP;
"Board" the board of directors of the
Company;
"Business Day" any day (excluding Saturdays
and Sundays and any public holidays
in England and Wales) on which
banks generally are open in London
for normal banking business;
"Canada" Canada, its provinces and territories
and all areas under its jurisdiction
and political subsidiaries thereof;
"City Code" the City Code on Takeovers and
Mergers;
"Closing Price" the closing middle market quotation
of an Ordinary Share, as derived
from the Daily Official List;
"CREST" the relevant systems (as defined
in the CREST Regulations) for
paperless settlement of share
transfers and the holding of
shares in uncertificated form
in respect of which Euroclear
is the operator (as uncertificated
form in respect of which Euroclear
is the operator (as defined in
the CREST Regulations);
"Crest Manual" the rules governing the operation
of CREST consisting of the CREST
Reference Manual, the CREST International
Manual, the CREST Central Counterpart
Service Manual, the CREST Rules,
the CCSS Operations Manual, the
Daily Timetable, the CREST Application
Procedures and the CREST Glossary
of Terms (as updated in November
2001);
"CREST payment" shall have the meaning given
in the CREST Manual issued by
Euroclear;
"CREST Regulations" the Uncertificated Securities
Regulations 2001 (S.I. 2001/3755),
as amended from time to time;
"Daily Official the daily record setting out
List" the prices of all trades in shares
and other securities conducted
on the London Stock Exchange;
"Directors" the directors of the Company,
and "Director" means any one
of them save that where the context
requires in relation to taking
up Open Offer Entitlements, "Director"
shall mean a director who is
a party to a Directors' Irrevocable;
"Directors' Irrevocables" the irrevocable undertakings
between the Company and each
of Nick Stagg and Julian Waldron;
"Disclosure Guidance the Disclosure Guidance and Transparency
and Transparency Rules of the FCA;
Rules"
"enabled for settlement" in relation to Open Offer Entitlements,
enabled for the limited purpose
of settlement of claim transactions
and unmatched stock purpose of
settlement of claim transactions
and unmatched stock by Euroclear;
"Enlarged Issued the ordinary share capital of
Share Capital" the Company following completion
of the Placing and Open Offer
and the PH Placing;
"EU" the European Union;
"Euroclear" Euroclear UK & Ireland Limited,
the operator of CREST;
"Excess Application the arrangement pursuant to which
Facility" a Qualifying Shareholder may
apply for Open Offer Shares in
excess of their Open Offer Entitlement
(up to a maximum number of Open
Offer Shares equal to two times
such Qualifying Shareholder's
Open Offer Entitlement, provided
they have agreed to take up their
Open Offer Entitlement in full;
"Excess Open Offer in respect of each Qualifying
Entitlement" Shareholder, the entitlement
(in addition to his or her Open
Offer Entitlement) to apply,
subject to availability, for
Open Offer Shares pursuant to
the Excess Application Facility;
"Excess Shares" New Ordinary Shares for which
Qualifying Shareholders may apply
under the Excess Application
Facility;
"Existing Ordinary the ordinary share capital of
Share Capital" the Company as of today;
"Existing Ordinary the Ordinary Shares in issue
Shares" as the date of this announcement,
or as the context requires, the
Record Date;
"Fidelity" FIL Investments International
as agent for various funds;
"form of proxy" the form of proxy relating to
the General Meeting;
"FCA" the Financial Conduct Authority;
"FRC Code" FRC Corporate Governance Code;
"FSMA" the Financial Services and Markets
Act 2000, as amended;
"General Meeting" the general meeting of the Company
to be convened for 11.00 a.m.
on 18 July 2018, notice of which
is to be set out at the end of
the Prospectus;
"Group" the Company and its subsidiary
undertakings and, where the context
permits, each of them;
"Independent Directors" Nick Stagg, Julian Waldron and
Fiona Czerniawska;
"Independent Shareholders" all Shareholders other than BlueGem,
Marco Capello and Emilio Di Spiezo
Sardo;
"Issue Price" 1 penny per New Ordinary Share;
"Japan" Japan, its cities, prefectures,
territories and possessions;
"KS Funds" the funds held under arrangements
which guarantee certain contingent
liabilities relating to the disposal
of parts of the European Kurt
Salmon business to Wavestone
(previously named Solucom) in
2016;
"Listing Rules" the Listing Rules of the FCA;
"Lombard Odier" Lombard Odier Asset Management
(USA) Corp acting in its capacity
as discretionary investment manager
of the Lombard Odier Funds and
not in its personal capacity;
"Lombard Odier Funds" means certain funds or accounts
managed on a discretionary basis
by Lombard Odier holding 71,719,167
Existing Ordinary Shares;
"London Stock Exchange" London Stock Exchange plc;
"MAR" Regulation (EU) No. 596/2014
on market abuse
"MCG PLC" or the Management Consulting Group PLC;
"Company"
"New Ordinary Shares" the new Ordinary Shares to be
issued by the Company in accordance
with the Placing and Open Offer
and the PH Placing;
"Official List" the list maintained by the FCA;
"Open Offer" the offer to Qualifying Shareholders
to subscribe for New Ordinary
Shares;
"Open Offer Entitlement" an offer to a Qualifying Shareholder
pursuant to the Open Offer to
subscribe for 45 New Ordinary
Shares for every 23 Existing
Ordinary Share held by such Qualifying
Shareholder on the Record Date,
but excluding the offer under
the Excess Application Facility;
"Open Offer Shares" the 1,000,050,372 Ordinary Shares
to be offered to Qualifying Shareholders
under the Open Offer (which for
the avoidance of doubt includes
the Excess Shares);
"Ordinary Shares" the Ordinary Shares of one pence
or "shares" each in the capital of the Company
and "Ordinary Share" or "share"
means one of them;
"Panel" UK Panel on Takeovers and Mergers;
"Peel Hunt" Peel Hunt LLP;
"PH Placing" the firm placing of New Ordinary
Shares to Pamela Hackett in accordance
with the PH Placing Letter;
"PH Placing Letter" the placing letter to be entered
into on or around the date of
this announcement between the
Company and Pamela Hackett setting
out the terms on which the PH
Placing will be effected, a summary
of which is set out in paragraph
10 of Part XV: "Additional Information"
of the Prospectus;
"Placing" the placing of the Open Offer
Shares by way of subscription
by BlueGem, Lombard Odier and
Richard Griffiths in accordance
with the Subscription Agreements;
"Proposed Director" Pamela Hackett, current Chief
Executive Officer of Proudfoot;
"Prospectus Rules" the rules made for the purposes
of Part VI of FSMA in relation
to offers of securities to the
public and admission of securities
to trading on a regulated market;
"Qualifying CREST Qualifying Shareholders whose
Shareholders" Ordinary Shares on the register
of members of the Company at
the close of business on the
Record Date are in uncertificated
form;
"Qualifying Non-CREST Qualifying Shareholders whose
Shareholders" Ordinary Shares on the register
of members of the Company at
the close of business on the
Record Date are in certificated
form;
"Qualifying Shareholders" holders of Ordinary Shares on
the register of members of the
Company at the close of business
on the Record Date;
"Record Date" 6 p.m. 25 June 2018;
"Regulatory Information a regulatory information service
Service" that is approved by the FCA and
that is on the list of regulatory
information service providers
maintained by the FCA;
"Resolutions" the resolutions to be proposed
at the General Meeting;
"Restricted Territory" United States, Canada, Australia,
New Zealand, the Republic of
South Africa, Japan, or any country
or territory where to do so may
contravene local securities laws
or regulations;
"Richard Griffiths" Mr Richard Griffiths holding
shares in his personal capacity
and also through Blake Holdings
Limited, Cream Capital Limited,
Seren Investment Management Limited
and Oak Trust Limited;
"Rule 9 Waiver" the conditional waiver by the
Panel of the obligation that,
following the issue of the New
Ordinary Shares, would otherwise
arise on BlueGem to make a general
offer to all Shareholders pursuant
to Rule 9 of the City Code as
a result of BlueGem's participation
in the Placing and Open Offer;
"Securities Act" the US Securities Act of 1933,
as amended;
"Shareholders" the holders of any shares issued
in the share capital of the Company
from time to time and "Shareholder"
means any one of them;
"Subscription Agreements" the subscription agreements and
undertakings to be entered into
on or around the date of the
Prospectus between the Company
and certain of the Shareholders
in terms of which the Placing
will be effected, summaries of
which are set out in paragraph
10 of Part XV: "Additional Information"
of the Prospectus;
"United Kingdom" the United Kingdom of Great Britain
or "UK" and Northern Ireland;
"United States or the US of America, its territories
US" and possessions, any state of
the US of America and the District
of Columbia;
"Whitewash Resolution" the ordinary resolution of the
Shareholders other than BlueGem,
Marco Capello, and Emilio Di
Spiezo Sardo, concerning the
waiver of obligations under Rule
9 of the City Code to be proposed
at the General Meeting in connection
with BlueGem's participation
in the Placing and Open Offer
and set out in the Notice of
General Meeting as the resolution
numbered 4.
All references to "pounds", "pounds sterling", "sterling",
"GBP", "pence", "penny" and "p" are to the lawful currency of the
United Kingdom.
All references to "Euros", "EUR" and "c" are to the lawful
currency of the member states of the European Union that adopt a
single currency in accordance with the Treaty establishing the
European Community as amended by the Treaty on European Union.
All references to "US dollars" and "$" are to the lawful
currency of the United States.
All references in this announcement to times are, unless the
context otherwise appears, references to the time in London, United
Kingdom.
This information is provided by RNS
The company news service from the London Stock Exchange
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCFLMATMBMTMFP
(END) Dow Jones Newswires
June 29, 2018 02:01 ET (06:01 GMT)
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