Ceps Regulatory News (CEPS)

CEPS PLC

 ("CEPS" or the "Company")

Aford Awards Limited ("AAL")

As part of a restructuring and exit for a minority shareholder, CEPS announces that a new holding company has been formed, called Aford Awards Group Holdings Limited ("AAGHL"), to facilitate the purchase of CEPS' 70% owned subsidiary Aford Awards (Holdings) Limited ("AAHL"), which holds 100% of Aford Awards Limited ("AAL"), in order to (i) buy out the 30% minority shareholder in AAHL, Jon Ford, under the terms of a put option agreed at the time of the acquisition of AAL by CEPS in 2014, and (ii) to issue new shares and loan notes to AAL's incoming management team (the "Transaction").

Under the terms of an existing put option agreement, Jon Ford is selling his 30,000 shares in AAHL (representing 30% of the issued ordinary share capital of AAHL) to AAGHL and is stepping down as Managing Director of AAL and director of AAHL. Paul Wood will be joining AAL as Managing Director and Robert Ferguson, who is already employed by AAL, has been promoted to Sales and Marketing Director of AAL. Paul Wood and Robert Ferguson will be appointed as directors of AAGHL and AAL.

CEPS is selling its 70% interest in AAHL to AAHGL, which will consequently own 100% of both AAHL and AAL. As disclosed in the report and accounts of the Company for the year ended 31 December 2019, AAL's EBITDA before exceptional items was £411,000.

Jon Ford will still be involved with AAL on a part-time consultancy basis, but will be taking on new challenges outside the Aford Awards group. CEPS is pleased to welcome Paul Wood as the Managing Director of AAL and looks forward to working alongside Paul Wood and Robert Ferguson to develop and grow the business.

AAGHL

On completion of the Transaction, AAGHL will have 100,000 ordinary shares of £1.00 each in issue, £150,000 of Acquisition Loan Notes ("AAGHL Acquisition Loan Notes") and £500,000 Shareholder Loan Notes ("AAGHL Shareholder Loan Notes") in issue.

CEPS is subscribing for £150,000 of AAGHL Acquisition Loan Notes and £131,420 of the AAGHL Shareholder Loan Notes. Furthermore, in consideration for the sale of its 70,000 ordinary shares in AAHL (representing 70% of AAHL) to AAGHL, CEPS has been issued with 75,000 ordinary shares in AAGHL (including the paying up of the subscriber share), representing 75% of the issued share capital of AAGHL following completion of the Transaction, and a further £243,580 AAGHL Shareholder Loan Notes. CEPS will hold, in aggregate, £375,000 AAGHL Shareholder Loan Notes.

Up to a further £500,000 will be paid as deferred consideration to CEPS in the form of AAGHL Acquisition Loan Notes, subject to the performance of AAL in financial years 2021 and 2022.

Paul Wood and Robert Ferguson will each subscribe for £62,500 AAGHL Shareholder Loan Notes and 12,500 ordinary shares in AAGHL at par. They are each entering into new put option agreements with CEPS which will give them the right to sell their shares in AAGHL to CEPS between the fifth and twentieth anniversaries of completion (in the case of Paul Wood) and between the tenth and twentieth anniversaries of completion (in the case of Robert Ferguson), with the sale price to be determined with reference to the profits of AAGHL and its subsidiaries on a consolidated basis.

AAHL

Under the terms of the 2014 put option agreement, Jon Ford will receive a cash payment of £381,420 for his 30,000 ordinary shares in AAHL.

The existing £300,000 Shareholder Loan Notes in AAHL ("AAHL Shareholder Loan Notes") issued in 2014 and currently held by CEPS (£210,000) and Jon Ford (£90,000) will remain outstanding.

Details of the Loan Notes

As to the ranking of loan notes, the AAHL Shareholder Loan Notes (issued in 2014) will be repaid first, followed by the AAGHL Acquisition Loan Notes and then the AAGHL Shareholder Loan Notes. All Vendor Loan Notes and Acquisition Loan Notes constituted by AAHL in 2014 have been fully repaid.

The AAGHL Acquisition Loan Notes will bear interest at a rate of 6 per cent, and the AAGHL Shareholder Loan Notes will bear interest at a rate of 7 per cent. The AAHL Shareholder Loan Notes will continue to bear interest at a rate of 8 per cent.

AAHL Related Party Transaction

The sale of Jon Ford's 30,000 ordinary shares in AAHL to AAGHL ("Sale") is deemed to be a Related Party Transaction pursuant to AIM Rule 13 as it is a transaction with a director of a subsidiary of the Company. The directors of the Company, all of whom are considered independent for the purposes of the Sale, having consulted with the Company's nominated adviser, Cairn Financial Advisers LLP, consider that the terms of the Sale are fair and reasonable insofar as the Company's shareholders are concerned.

Director's Loan

David Horner, a director of the Company, has provided a loan facility (the "Loan Facility") to the Company of £425,000 to fund the £281,420 cost of the purchase of the AAGHL Acquisition Loan Notes and AAGHL Shareholder Loan Notes by CEPS, and to provide additional working capital during the current Covid-19 situation.

Director's Loan Related Party Transaction

The Loan Facility, which is unsecured, carries zero interest and has no fixed repayment date, is deemed to be a Related Party Transaction pursuant to AIM Rule 13 as David Horner is a director of the Company. The directors of the Company who are considered independent for the purposes of the Loan Facility (being the whole Board save for David Horner), having consulted with the Company's nominated adviser, Cairn Financial Advisers LLP, consider the terms of the Loan Facility to be fair and reasonable insofar as the Company's shareholders are concerned.

The announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

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