BILB.L Regulatory News (BILB)

13 July 2015

Bilby Plc

("Bilby" or the "Company")

Acquisition of Purdy Holdings Limited for a total consideration of £8.07 millionPlacing to raise £2.95 million for the Company

Dealings by Directors

Bilby Plc (AIM: BILB.L), the holding company for P&R Installation Company Limited ("P&R"), a leading gas heating and building services provider, has today announced that it has acquired the entire issued share capital of Purdy Holdings Limited ("Purdy Holdings") for a total consideration of £8.07 million (the "Acquisition"). Purdy Holdings is a privately owned property services business based near Waltham Abbey, Essex.

The consideration is to be satisfied by way of an initial cash payment of £6.57 million together with the issue of 1,250,000 new Bilby ordinary shares at a price of 80 pence per share (the "Consideration Shares") and the issue of a £0.50 million Convertible Loan Note (the "Loan Note"). The Acquisition has been funded through a new term loan of £4.20 million and a mortgage loan of £570,000 from HSBC Bank plc together with a share placing to raise a further £2.95 million for the Company. The share placing was arranged by Charles Stanley Securities and has been heavily oversubscribed. To satisfy market demand certain directors and other existing shareholders (the "Selling Shareholders"), have agreed to place 1,500,000 ordinary shares as part of the share placing (the "Placing").

The Placing therefore comprises the issue of 3,687,500 new Bilby ordinary shares (the "New Shares") and 1,500,000 existing Bilby ordinary shares (the "Sale Shares") at a price of 80 pence per share which represents a discount of approximately 5.9 per cent to the Bilby closing mid market price on 10 July 2015 of 85 pence. The New Shares and the Sale Shares (the "Placing Shares") have been placed with institutional and other investors including Mr David Johnson, non executive director, who has purchased 25,000 Placing Shares.

Purdy - overview

Through Purdy Contracts Limited ("Purdy"), the sole subsidiary of Purdy Holdings, the group operates predominantly as a gas and electrical contractor and is based near Waltham Abbey, Essex. Purdy was established in 1984 as a gas and electrical maintenance and installation contractor. Today Purdy carries out all types of gas and electrical work to both commercial and domestic markets, predominantly focused on social housing and local authority customers.

Purdy provides maintenance services to in excess of 30,000 properties located throughout London, the Home Counties and South East England. Purdy works closely with a number of local authorities and housing associations including Homes for Haringey, the London Borough of Enfield, Aston Group, Central Bedfordshire Council and Hyde Housing. Purdy has also undertaken contracted work for the Salvation Army Housing Association located across England.

Purdy has been notified that it has been awarded two potentially material new contracts which are expected to commence shortly. The first is to undertake annual electrical testing, servicing and reactive works to all properties owned by Peabody Housing. Purdy is also undertaking a pilot project with the London Borough of Barking and Dagenham to install kitchens and bathrooms and to undertake associated mechanical and electrical works. Upon completion of the pilot project Purdy expects to be awarded a new four year contract.

Purdy employs 182 full time staff. The experienced management team is led by owner and Chairman Mr John Horlock.

Further information on Purdy can be found at www.purdycontracts.co.uk.

Purdy - financial information

Purdy Holdings reported consolidated group revenues for the year ended 31 December 2014 of £14.00 million (2013: £15.68 million). Adjusted profit before tax for the year ended 31 December 2014 was £411,000 (2013 £949,000) being the reported group profit before tax adjusted for the impact of amortisation of goodwill arising on consolidation which will not occur under IFRS.

Purdy Holdings currently prepares annual accounts in accordance with UK GAAP. Bilby reports under IFRS. Following the acquisition, Purdy Holdings will also report under IFRS. As such, the charge of £368,000 in relation to amortisation of goodwill arising on consolidation reflected in Purdy Holdings' 2014 UK GAAP group accounts will not be charged under IFRS but instead the goodwill asset will be reviewed annually for impairment. It should be noted that a formal exercise has not yet been undertaken to consider whether an impairment charge will be appropriate in relation to any intangible assets carried on the Purdy Holdings balance sheet under IFRS.

Normalised profit before tax for the year ended 31 December 2014 has been calculated as £1,096,000 being the adjusted profit before tax as stated above but also adjusting for staff restructuring costs, directors' remuneration which will not be incurred after December 2014 and the contribution in relation to the termination of an onerous commercial contract.

Group UK GAAP net assets of Purdy Holdings as at 31 December 2014 were £7.14 million (2013: £7.39 million), with cash balances of £287,000 (2013: £1,045,000). The net assets comprised goodwill with a net book value of £4.89 million (2013: £5.26 million) and trading net assets of £2.25 million (2013: £2.13 million). When prepared under IFRS, based on no other adjustment than the unwinding of the previously charged amortisation in respect of the goodwill, the directors estimate that the IFRS net assets at 31 December 2014 would have been £9.62 million at 31 December 2014, comprising trading net assets of £2.25 million and goodwill of £7.37 million.

Acquisition rationale

The Directors believe that the acquisition of Purdy represents an expansion of services and geographical scope which is complementary to P&R. P&R provides gas maintenance installation and building maintenance services to housing associations predominantly within South East London. In addition to heating and building services, Purdy offers complementary electrical services including repair and maintenance testing, rewiring and system upgrades and operates in neighbouring boroughs in North East London, as well as Essex, Hertfordshire and Suffolk.

The enlarged group will benefit not only from the increase in scale and presence of its operations, but will enable it to qualify to tender for larger contracts which have minimum pre-qualification revenue requirements. The two businesses will continue to operate under their respective brands and will also benefit from the increased purchasing power and the strong financial position of the enlarged Bilby group.

Terms of the Acquisition

The Company has conditionally acquired the entire issued share capital of Purdy Holdings for a total consideration of £8.07 million. The consideration is to be satisfied by way of an initial cash payment of £6.57 million together with the issue of 1,250,000 Consideration Shares at a price of 80 pence per share and the issue of a £0.50 million Loan Note.

The Consideration Shares are to be issued to the vendor, Mr Horlock and are subject to a lock-in agreement until 6 March 2016. The Consideration Shares will rank pari passu with the existing ordinary shares. The Consideration Shares will represent approximately 3.6 per cent of the enlarged issued share capital.

The Loan Note is payable on the second anniversary of completion of the Acquisition. Mr Horlock has the ability to elect to convert the payment into new Bilby ordinary shares at a price per share, which represents the higher of 80 pence per share or the average closing mid market price for the 60 business days before the relevant payment date.

The Acquisition is conditional upon admission of the Consideration Shares and the Placing Shares to trading on AIM ("Admission").

Banking Facility

The Acquisition has been funded through a new term loan of £4.2 million and a mortgage loan of £570,000 from HSBC Bank plc, together with a share placing to raise a further £2.95 million, details of which are set out below.

The term loan runs to July 2020 and is repayable over the period of the loan, while the mortgage runs to July 2025.

Details of the Placing

The Placing will raise gross proceeds of approximately £2.95 million for Bilby through the issue by the Company of 3,687,500 New Shares and will raise £1.20 million for the Selling Shareholders through the placing of the Sale Shares.

The Placing Price represents a discount of 5.9 per cent. to the closing mid market price of 85 pence per share on 10 July 2015, being the last practicable date prior to the announcement of the Placing.

The Placing is conditional upon:

· the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and

· Admission.

The allotment of the New Shares (and the Consideration Shares) can be accommodated within the existing Shareholder authorities.

The Placing Shares have been placed with certain new and existing institutional and other investors. This includes Mr Gary Bruce, a director of Purdy, who has subscribed for 250,000 Placing Shares, representing approximately 0.7 per cent of the enlarged issued share capital. In addition, Mr David Johnson, a non executive director of the Company, has subscribed for 25,000 Placing Shares representing 0.1 per cent. of the enlarged issued share capital and which is his total interest in the share capital of the Company.

The New Shares represent, in aggregate, approximately 12.6 per cent. of the Company's existing issued share capital and approximately 10.8 per cent. of the issued share capital of the Company immediately following completion of the Acquisition and the Placing.

The Directors and other selling shareholders are subject to a lock-in agreement entered into at the time of the Company's admission to trading on AIM in March 2015. Charles Stanley Securities has agreed to release certain of the directors and other shareholders from the lock-in arrangements to the extent necessary to complete the Placing.

The Directors disposing of shares pursuant to the Placing are:

With the exception of Philip Copolo, David Ellingham, Darren Dunnett and David Johnson who are involved in the Placing as related parties, Sangita Shah, non executive Chairman, considers, having consulted with the Company's nominated adviser, that the terms of the Placing are fair and reasonable insofar as its shareholders are concerned.

Application has been made for the Consideration Shares and the New Shares to be admitted to trading on AIM and it is expected that Admission will take place on 14 July 2015. The Consideration Shares and the New Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares, including the right to receive the final dividend of 2.32p per share which, if approved at the forthcoming Annual General Meeting, will be paid on 28 August 2015. The issue of the Placing Shares was made on a non pre-emptive basis.

Following Admission of the Consideration Shares and the Placing Shares, the total issued share capital of Bilby will comprise 34,247,845 ordinary shares. The figure of 34,247,845 ordinary shares may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, Bilby under the Disclosure and Transparency Rules.

Commenting on the acquisition, Phil Copolo, Deputy Executive Chairman of Bilby, said,

"Bilby Plc joined the AIM market with a buy and build strategy and the acquisition of Purdy is a perfect fit. Critically it enables us to tender for larger contracts, whilst broadening the Company's service offering as well as providing a number of opportunities to drive customer and procurement synergies. I have been impressed by the quality, energy and vision of the management team at Purdy and I look forward to working with them to further develop and grow both their and the Bilby business."

John Horlock, Chairman of Purdy Holdings, remarked, 

"This transaction marks a new chapter in the history of the Purdy business. I am confident that being part of Bilby will enable us to accelerate the strong progress we have made over the last few years."

Bilby Plc 020 8269 3777

Phil Copolo, Deputy Executive Chairman

David Ellingham, Finance Director

Charles Stanley Securities 020 7149 6000

(Nominated Adviser and Broker)

Russell Cook

James Greenwood

Hudson Sandler 020 7796 4133

(Financial PR)

Charlie Jack

Emily Dillon

Alex Brennan

Note for Editors

Bilby Plc, the holding company for P&R Installation Company Limited ("P&R"), was established to provide a platform for strategic acquisitions in the gas heating and building services industries. Bilby's first acquisition was P&R, an established and award winning provider of gas heating appliance installation and maintenance services.

P&R provides services predominately to local authorities and housing associations across London and South East England and is responsible for over 100,000 properties. The experienced management team places emphasis on the provision of a high level of service through which P&R has developed long standing relationships with its customers who include the Guinness Partnership, London & Quadrant, Gallions and the Royal Borough of Greenwich. Headquartered in Sidcup, Kent, P&R employs approximately 120 staff, including sub-contractors. Bilby Plc (AIM: BILB.L), is traded on the AIM Market of the London Stock Exchange. For further information, visit www.Bilbyplc.com.