Avesoro Resources Regulatory News (ASO)

1 Jul 2005 07:00

Avesco PLC01 July 2005 Friday 1 July 2005 AVESCO PLC ("Avesco" or the "Company") Placing to raise £2.5 million The Company announces that it has conditionally placed 2,777,778 Placing Sharesof 10p each in the capital of the Company ("Ordinary Shares") at a price of 90pence per share (the "Placing"). Once completed, this placing will raiseapproximately £2.4 million (net of expenses). The proceeds will be used to fundpart of the Company's substantial capital investment programme. When announcing the full year results on 23 June 2005, the Chairman stated thatthe Group is beginning to see a number of attractive opportunities presentthemselves which may require increased capital expenditure. In particular, the Directors believe that: • they are seeing the start of a technology shift in the industry towards high definition television ("HDTV") equipment. The Board intends that Avesco should be a leader in this product field and that the Group should position itself to benefit substantially as this upgrade cycle begins; • additional investment should assist the Group to meet the increasing equipment demands of its customers and should therefore substantially benefit the relationships enjoyed by the Group with its customers; and • increased investment in additional hire stock should produce a reduction in the level of sub-hire costs incurred by the Group to the benefit of profit margins. However, the Board considers that the current capital base of the Group isinsufficient to address all of the available opportunities, or to address themto the extent that it would wish. Therefore the Directors believe that the Groupwould benefit from additional funding, which it is proposed should be raised, inpart, through the proceeds of the Placing. In addition to normal capital expenditure, the Directors plan to investapproximately £12.0 million in these opportunities over the next three years,which will be funded as to £2.4 million by way of the Placing, £2.5 millionthrough additional bank facilities which the Company is currently seeking("Additional Facilities"), with the balance to be funded from existingfacilities and internally generated cash. The majority of the planned capitalexpenditure will be spent during the current financial year and is expected tobe earnings enhancing over that period. The Placing is not conditional on thesecuring of the Additional Facilities. Ian Martin, Chairman stated: "Avesco has made tremendous progress since its demerger last year. The resultsto 31 March 2005, announced last week, fully demonstrated the extent of theturnaround, but for me that is only the beginning of the story. "There are some highly attractive opportunities available to us, not least theshift to high definition television which is probably the most significant eventin broadcasting since the introduction of colour TV. To build on what we havealready established and make the most of the opportunities available to us, weneed to continue with our significant investment programme. Our current capitalbase is a limiting factor, however, and it is now appropriate to raise some newequity funding which, combined with our internally generated cash and someadditional facilities, will give us the flexibility to grasp the opportunitiesavailable to us." PLACING STATISTICS Placing Price 90pNumber of Placing Shares being placed on behalf of the Company 2,777,778Number of Ordinary Shares in issue following Admission 19,094,075Number of Placing Shares as a percentage of the existing issued share capital 17 per cent.Proceeds of the Placing available to the Company (net of expenses) £2.4 million Enquiries: Avesco plc 01293 583 400Ian Martin, ChairmanJohn Christmas, Finance Director KBC Peel Hunt Ltd 020 7418 8900Julian Blunt Weber Shandwick 020 7067 0700Terry GarrettJohn Moriarty *** KBC Peel Hunt Ltd ("KBC Peel Hunt"), which is authorised by The FinancialServices Authority, is acting as nominated adviser and broker to Avesco plc("Avesco") for the purposes of the Placing. KBC Peel Hunt is not acting for anyperson other than Avesco and will not be responsible to anyone other than Avescofor providing the protections afforded to customers of KBC Peel Hunt or forproviding advice in relation to the contents of this announcement or the Placingor any transaction or arrangement referred to in this document. KBC Peel Hunt'sresponsibilities as the nominated adviser to the Company are owed solely toLondon Stock Exchange. No representation or warranty, express or implied, ismade by KBC Peel Hunt as to any of the contents of this announcement for whichthe Directors are solely responsible. The Placing Shares have not been, nor will be, registered under the UnitedStates Securities Act of 1933 (as amended) or under the securities laws of anystate of the United States or qualify for distribution under any of the relevantsecurities laws of Canada, Australia, the Republic of Ireland or Japan.Accordingly, subject to certain exceptions, the Placing Shares may not, directlyor indirectly, be offered, sold, taken up, delivered or transferred in or intothe United States, Canada, Australia, the Republic of Ireland or Japan. This announcement contains forward-looking statements, including, withoutlimitation, statements containing the words "believes", "anticipates","expects", and similar expressions. Such forward-looking statements involveunknown risks, uncertainties and other factors which may cause the actualresults, financial condition, performance or achievements of the Company, orindustry results, to be materially different from any future results,performance or achievements expressed or implied by such forward-lookingstatements. Given these uncertainties, prospective investors are cautioned notto place any undue reliance on such forward-looking statements. The Companydisclaims any obligation to update any such forward-looking statements in thisannouncement to reflect future events or developments. Background to and reasons for the Placing The Directors believe that Avesco has made significant progress over the pastyear. After a period of consolidation and retrenchment, the Company is focusedupon the achievement of prudent and profitable growth. The Company's results forthe year ended 31 March 2005 represent a substantial turnaround in comparison tothe previous year. The Group has moved into profit, with a figure of £0.5mpre-tax (2004: loss of £7.6m), the management and workforce has beenstrengthened and, with a focus on cash generation, net debt has continued toreduce even after substantial capital expenditure. The Group now has a solidinfrastructure on which to build future growth, as well as the managementinformation systems to support that growth. Looking forward, whilst the Board believes the Company has a broader productplatform, a growing population of talented individuals and a more diversefranchise, the Directors consider that there is a limit to the rate at which theCompany will be able to grow based upon its existing capital base. As indicated in our Results announced on 23 June 2005, Avesco is beginning tosee a number of attractive opportunities present themselves across the Group.Whilst taking some of these may require increased capital expenditure, theDirectors wish to maintain net debt at prudent and manageable levels. The Board has identified three main areas where additional capital expenditurewill be required: High Definition Television (HDTV) HDTV technology is set to revolutionise television broadcasting worldwide. It isbeing described by the industry as the biggest development since theintroduction of colour television. Market research suggests that more than 4.5million households will switch onto HDTV by 2008. The BBC intends to produce allof its content in HDTV by 2010. Sky in the UK and M6, TPS and TF1 in France areall planning HDTV services. Most high profile events are now being recorded inHDTV in order to preserve their archive value. Indications are that broadcastersplan to record next year's Football World Cup, Winter Olympics and Asian Gamesin HDTV. Sky has committed to produce much of its Premier League football inHDTV next season. There is a significant opportunity for Presteigne tocapitalise upon as the whole recording and transmission upgrade cycle begins. Presteigne has already established itself as a market leader in Europe for therental of high definition broadcast equipment and Avesco wishes to continue itsinvestment in HDTV equipment in order to meet the increasing market demand forthis new technology. At the end of the Group's last financial year, Presteignelaunched a high definition capable multi-format de-rig facility system, whichthe Directors believe may be the first to be built in Europe. This systemoperates as a portable television production facility, allowing HDTV programmesto be recorded either on location, without the use of an HDTV-enabled outsidebroadcast vehicle, or at a non-HDTV enabled studio. A specialist team has beenput in place to attack this market sector. Presteigne has successfully completeda number of events with the system, the first of which was the Cream reunionconcert at the Royal Albert Hall. A significant level of interest and excitementhas been generated, placing Presteigne in the middle of the developing HDTVmarket. The past year has seen a substantial increase in profit, with Presteignebenefiting from the significant investment in new equipment made during theyear. It is intended that the majority of the finance raised will be appliedtowards the purchase of HDTV equipment for Presteigne. LED Screens The market for the rental of LED screens has transformed in recent years. Earlyscreens were low resolution and therefore only suitable where there was areasonable viewing distance between the screen and the audience, making thescreens more appropriate for outdoor use. However, the technology has nowimproved considerably, with higher resolution screens specifically developed forthe indoor market allowing very close viewing distances and high quality images.Consequently, the use of LED screens at major exhibitions around the world isnow common. As exhibitors are attempting to produce more visually interestingand impressive stands, they are incorporating increasing amounts of LED screenpanels into their plans. Consequently, the Group is seeing demand for thisproduct far in excess of its own resources, with the result that the Group hiresin additional screens to the detriment of its margins. The Board believes that the Group would benefit from increasing the level of itsLED ownership, enabling it to provide better support to its customers at futureevents and to reduce the amount of sub-hire costs incurred with third parties inthese projects. However, investment levels will be carefully controlled with aview to achieving appropriate levels of utilisation and, where such levels arenot projected, the Group will continue to sub-hire from external suppliers. New Office Openings Creative Technology ("CT") provides a range of specialist video, audio, IT andlarge screen display services to the corporate, entertainment and sports marketsat events across the globe. Since the year-end, CT North America has establisheda presence in Las Vegas, adding to the existing locations in Los Angeles, SanFrancisco and Chicago. Presteigne hires broadcast equipment and systems to the broadcast, entertainmentand corporate markets. Having made significant new business gains in mainlandEurope during the year, Presteigne has decided to open an operation in Cologneto establish itself in the important German market. The new office will servicePresteigne's existing clients and develop new business in the region. It isanticipated that the new German subsidiary will be operational in early autumnof this year. Whilst operating costs are likely to exceed revenue initially, the approach ineach case has been to target significant markets where the Board believes thatthe Group has the opportunity to become profitable in the short term and toestablish a major presence. While each of these new offices will benefitsubstantially from the ability to source equipment from across the Group, bothCT Las Vegas and Presteigne Germany will require investment in a core level oftheir own equipment. Details of the Placing The Company is proposing to raise approximately £2.5 million (£2.4 million, netof expenses) by the issue of 2,777,778 new Ordinary Shares at 90p per share.Pursuant to the terms of the Placing Agreement, KBC Peel Hunt, as agent forAvesco, has conditionally agreed to use reasonable endeavours to place thePlacing Shares with certain institutional and other investors. The Placing Price represents a discount of approximately 2.7 per cent. to theclosing mid-market price of 92.5 pence per Ordinary Share on 30 June 2005, beingthe last dealing day prior to the publication of this announcement. The PlacingShares represent approximately 14.5 per cent. of the enlarged issued sharecapital of the Company immediately following Admission. The issue of the Placing Shares is conditional, inter alia, upon the passing ofthe Resolution set out in the Notice of Extraordinary General Meeting convenedfor 26 July 2005 and Admission. Application will be made to the London StockExchange for the Placing Shares to be admitted to trading on AIM and it isanticipated that dealings in the Placing Shares will commence on 27 July 2005.The Placing is conditional, inter alia, upon Admission becoming effective andthe Placing Agreement becoming unconditional in all respects by no later than5.00 p.m. on 27 July 2005 or such later date (being not later than 5.00 p.m. on12 August 2005) as the Company and KBC Peel Hunt may agree. The Placing Shares will be issued credited as fully paid and will rank paripassu in all respects with the existing Ordinary Shares, including the right toreceive all dividends and other distributions declared or paid thereon followingAdmission. RecommendationThe Directors of the Company consider the terms of the Placing to be in the bestinterests of the Company and its Shareholders as a whole. Accordingly, theDirectors of the Company unanimously recommend Shareholders to vote in favour ofthe Resolution to be proposed at the Extraordinary General Meeting, as theyintend to do, or procure to be done, in respect of their own beneficial holdingsof Ordinary Shares amounting, in aggregate, to 3,880,514 Ordinary Shares,equivalent to approximately 23.8 per cent. of the existing issued share capitalof the Company. This information is provided by RNS The company news service from the London Stock Exchange