13 Aug 2009 07:00
13 August 2009
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, JAPAN, CANADA, AUSTRALIA OR THE REPUBLIC OF IRELAND
Electric Word plc
("Electric Word" or the "Company")
Placing of 74.5 million Ordinary Shares at 3.625 pence per share to raise £2.70 million
Electric Word today announces a placing to raise £2.70 million (the "Placing").
Highlights:
Placing at 3.625 pence per share to raise £2.70 million
The Placing Price represents a discount of of 9.4 per cent. to the Closing Price of 4.0 pence per Ordinary Share on 12 August 2009 (being the day before the announcement of the Placing)
Funds to be used to repay debt, strengthen the balance sheet and give Electric Word greater financial flexibility
Conversion of all £875,000 of A Preference Shares into Ordinary Shares
Current trading is in line with the Board's expectations for 2009
The Board perceives further opportunities for organic and acquired growth
Julian Turner, Chief Executive, commented on the Placing:
"The funds raised in the Placing will greatly strengthen Electric Word plc, allowing us to reduce our net debt of £4.5 million, as at 31 May 2009, by £3.4 million taking into account the conversion of the A Preference Shares. We will come out of this with an improved working capital position which will enable us to take advantage of growth opportunities."
This summary should be read in conjunction with the full text of this announcement.
For further information please contact:
| Electric Word plc | Tel: +44 (0) 20 7954 3407 |
| Julian Turner | |
| Panmure Gordon (UK) Limited | Tel: +44 (0) 20 7459 3600 |
| Andrew Potts Ashton Clanfield Callum Stewart | |
| Financial Dynamics | Tel: +44 (0) 20 7831 3113 |
| Tim Spratt | |
| Nicola Biles |
This announcement has been issued by, and is the sole responsibility of, Electric Word. This announcement does not constitute an offer to underwrite, subscribe or otherwise acquire or dispose of any new Ordinary Shares or other shares in Electric Word.
The Ordinary Shares have not been, and will not be registered under the United States Securities Act of 1933, as amended (the 'Securities Act') or under the securities legislation of any state of the United States, and may not be offered or sold in the United States. The relevant clearances have not been, and will not be, obtained from the Securities Commission of any province or territory of Canada; no document in relation to the Placing has been, or will be, lodged with, or registered by, The Australian Securities and Investments Commission; no registration statement has been, or will be, filed with the Japanese Ministry of Finance in relation to the Placing; and no registration statement has been, or will be, filed with the Irish Stock Exchange in relation to the Placing. Accordingly, subject to certain exceptions, the Ordinary Shares the subject of the Placing may not, directly or indirectly, be offered or sold within the United States, Canada, Australia, Japan or the Republic of Ireland or offered or sold to a resident of the United States, Canada, Australia, Japan or the Republic of Ireland.
This press release may contain forward-looking statements with respect to Electric Word and its operations, strategy, financial performance and condition. These statements generally can be identified by use of forward looking words such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe" or "continue" or the negative thereof or similar variations. The actual results and performance of Electric Word could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the transactions contemplated herein are completed. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, changes in government regulation. The cautionary statements qualify all forward-looking statements attributable to Electric Word and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release and the parties have no obligation to update such statements.
Panmure Gordon (UK) Limited is authorised and regulated in the United Kingdom by The Financial Services Authority, is advising Electric Word and no-one else in connection with the Placing and will not be responsible to any person other than Electric Word for providing the protections afforded to their clients or for advising any other person in relation to the Placing.
Electric Word plc
("Electric Word" or the "Company")
Placing of 74.5 million Ordinary Shares at 3.625 pence per share to raise £2.70 million
Electric Word plc (AIM: ELE), the specialist information publisher, is pleased to announce that it has raised £2.70 million before expenses through a placing of 74,482,759 new Ordinary Shares at 3.625 pence each. The Placing Price is at a discount of 9.4 per cent. to the closing price of 4.0 pence per Ordinary Share on 12 August 2009 (being the day before the announcement of the Placing).
It is proposed to effect the Placing in two stages. Under the First Placing, 27,172,414 of the Placing Shares will be allotted on 13 August 2009, conditional on Admission, using the Directors' existing authority to allot Ordinary Shares for cash otherwise than on a pre-emptive basis. Admission of the First Placing Shares is expected to take place on 20 August 2009. Under the Second Placing, Shareholder approval is required to allot the balance of the Placing Shares (47,310,345 Placing Shares) and it is proposed to convene a general meeting to seek the requisite authorities. 47,310,345 Ordinary Shares, representing the balance of the Placing Shares, will be allotted immediately after the GM, conditional on the Resolutions being passed. Admission of the Second Placing Shares is expected to take place on 3 September 2009. The First Placing is not conditional upon completion of the Second Placing.
Reasons for the Placing and Use of Proceeds
The Group's revenues have grown from £6.2 million for the year ended 30 November 2005 to £17.3 million for the year ended 30 November 2008 and adjusted EBITA has grown from £432,000 for the year ended 30 November 2005 to £2.0 million for the year ended 30 November 2008. This has been achieved through a combination of acquisitions and organic growth. A summary of the Group's business and acquisitions made during this period is set out in Part 2 of this document. During this period, the Group's acquisitions have included SBG Companies Limited, Special Education Publishing Limited, Speechmark Publishing Limited and My Child Limited.
Electric Word has funded its acquisitions through a combination of debt, equity and preference shares.
As at 31 May 2009, the Group's net debt position was £4.5 million (inclusive of the A Preference Shares which Sussex Research has elected to convert into the Conversion Shares), comprising cash reserves of £300,000 and the following debt:-
The Board wishes to reduce the Group's debt, which it believes will enable the Group to focus on various growth opportunities, as well as to ensure that it can meet its debt repayment obligations.
The net proceeds of the Placing of £2.45 million will therefore be used as follows:
In addition, Sussex Research has exercised its right to convert its 875,000 A Preference Shares into Ordinary Shares, at the conversion price of 13.25 pence. Sussex Research will be allotted the Conversion Shares following the General Meeting. The allotment of the Conversion Shares is not conditional on the passing of the Resolutions.
The Placing combined with conversion of the A Preference Shares will reduce this net debt by £3.4 million to £1.1 million (pro forma as at 31 May 2009).
The Placing therefore enables the Group to reduce its net debt position and substantially strengthen its overall financial position.
Interim Results and Current Trading and Prospects
The Company today released its interim results for the six months ended 31 May 2009. Key highlights include:
Revenue of £8.7m, down by 3% following the restructuring of the My Child business which has resulted in higher profits, but from a lower revenue base
Revenue (excluding My Child Limited) of £8.4m, up by 4%, driven by increased event activity
Profit improvements in the specialist consumer division lifts Group operating margin1 to 10.4% (2008: 9.0%)
Adjusted profit before tax1 up 19% to £0.8m
Basic earnings per share up 73%, adjusted earnings per share1 up 16%
Cash generation has improved considerably as the impact from acquisitions lessens
Current trading is in line with the Board's expectations for 2009
The Board perceives further opportunities for organic and acquired growth
The Group's emphasis on prioritising profit over revenue during the first half of its financial year has continued to date in its second half, set against the backdrop of a challenging market and investment in product development.
Ongoing strategy
The Electric Word Group continues to evolve and develop new areas. The Directors intend to make the most of organic growth opportunities, focus on higher margin activities and consider opportunities to take advantage of earnings enhancing acquisitions.
Professional education
Books remain a source of potential growth, with many new titles being added this year. Following the general election due in 2010, it is possible that changes in public spending may have a negative impact on this division. However, the Directors believe that policy changes in education may create opportunities across the division's product range and the Company's key markets; professional development, behaviour, gifted children, special education needs and child welfare are all likely to remain high on the political agenda.
Sport business
The Sport Business Group continues to deliver profits from its valuable global niche of supplying a host of informational products and services to assist the international sports business community administer sport, manage events and negotiate high-profile commercial rights. Opportunities continue to arise from the bidding cycles for major events, notably in the near term, with the 2016 Olympics driving revenue in 2008/9 and the new bidding cycles for the 2018 and 2022 Football World Cups and 2018 Winter Olympics expected to drive revenue in 2010/11. This division has, in 2009, also retained a bespoke publishing contract with the Qatar Olympic Committee.
The market for iGaming Business continues to grow, especially in the affiliate marketing space. Two new events have been added and opportunities for further event, magazine and report offerings appear likely. The business has grown strongly since it was acquired in December 2005, and, in the Directors' view, its sector looks likely to support further growth.
Specialist consumer
The Group's specialist consumer division serves communities in both sports performance (competitive athletes and coaches) and education (parents supporting their children's educational development). This division has already seen much change and will continue to expand as traffic to its websites and its email databases grow. The sports performance and parent educational development teams are now integrated and sharing publishing and e-marketing expertise. In sports performance, there is an opportunity to add advertising revenue through selling access to the Company's e-database, and margins should improve as more customers buy content online, as opposed to in paper form. In the parent education sector, growth in traffic to the website and in the business's email database is translating into online information sales including subscriptions. In the Board's view, there are opportunities for new launches in this division.
Details of the Placing
The Company has conditionally raised approximately £2.70 million before expenses (approximately £2.45 million net of expenses) by the conditional Placing of 74.5 million new Ordinary Shares at 3.625 pence per share to the Placees. The allotment of the First Placing Shares is conditional on Admission. The allotment of the Second Placing Shares is conditional on the Resolutions being passed at the GM and Admission.
Application has been made to the London Stock Exchange for the Admission of the First Placing Shares to trading on AIM. It is expected that First Admission will occur and that dealings will commence at 8.00 a.m. on 20 August 2009 at which time it is also expected that the First Placing Shares will be enabled for settlement in CREST. Application will be made to the London Stock Exchange for the Admission of the Second Placing Shares to trading on AIM. It is expected that Second Admission will occur and that dealings will commence at 8.00 a.m. on 3 September 2009 at which time it is also expected that the Second Placing Shares will be enabled for settlement in CREST. The First Placing is not conditional upon completion of the Second Placing.
The Placing Shares and Conversion Shares will be issued credited as fully paid and will rank pari passu in all respects with the Ordinary Shares then in issue, including the right to receive any future dividends and other distributions. The Placing Shares will be in registered form and no temporary documents of title will be issued.
Reasons for not carrying out a pre-emptive issue
The Directors have considered the most appropriate method to conduct the fundraising, including carrying out a placing and open offer or a rights issue. The Directors concluded that the time and costs associated with a pre-emptive offer were excessive. After careful consideration, they concluded that the benefit of minimising the costs of the fundraising by way of a non pre-emptive cash placing would be in the best interests of Shareholders.
Related Party Transactions
Sussex Trading has subscribed for 17,931,034 Placing Shares at the Placing Price pursuant to the Placing. Stewart Newton held 1,020,000 ordinary shares in Electric Word prior to the Placing (representing 0.69 per cent. of the Existing Ordinary Shares of the Company) and is the beneficial owner of Sussex Trading, which held 23,536,364 ordinary shares in Electric Word prior to the Placing (representing 15.94 per cent. of the Existing Share Capital of the Company). Sussex Research (also beneficially owned by Stewart Newton) has elected to convert the 875,000 A Preference Shares into 6,603,773 Ordinary Shares. Following completion of the Placing and conversion of the A Preference Shares, the combined holding of Stewart Newton, Sussex Trading and Sussex Research in Electric Word is expected to be 49,091,171, representing 21.46 per cent. of the Enlarged Share Capital.
Sussex Trading also holds 987,500 Preference Shares of £1 each, which as described earlier, are expected to be redeemed out of the net proceeds of the Placing.
In June 2008, Sussex Research advanced Electric Word a loan of £1,450,000, of which £250,000 was repaid on 30 November 2008. £600,000 (together with accrued but unpaid interest) is due for repayment on 31 August 2009 and the balance of £600,000 (together with accrued but unpaid interest) is due for repayment on 30 April 2010. As described earlier the outstanding amounts are expected to be repaid out of the net proceeds of the Placing.
Under the AIM Rules for Companies, Sussex Research, Sussex Trading and Stewart Newton are treated as related parties of Electric Word. The Directors of Electric Word consider, having consulted with Panmure Gordon, the Company's nominated adviser, that the terms of the subscription for 17,931,034 Placing Shares by Sussex Trading are fair and reasonable insofar as its shareholders are concerned.
Taxation
In a letter dated 7 August 2009, HMRC confirmed that shares issued by the Company should comply with the requirements of Chapter 4, Part 6 of the Income Tax Act 2007 ("ITA 2007"). The Company has also received confirmation that the Placing Shares to be issued under the Placing will be regarded as eligible shares for the purposes of the Venture Capital Trust scheme. Accordingly, HMRC should regard shares issued by the Company under the Placing as comprising a "qualifying holding" for the purposes of Venture Capital Trusts. The Company is unable to guarantee that the Placing Shares will continue to meet the requirements of a qualifying holding in the future. The main ways in which the Placing Shares might cease to be qualifying are (i) if the Company were to become the subsidiary of another company, (ii) if the Company were to fail to use the proceeds of the Placing for a qualifying business activity within the relevant time limits, or (iii) if the activities of the Company and its subsidiaries were to include substantial non-qualifying activities as set out in section 303 ITA 2007.
Placees should note that eligibility is also dependent on a Shareholder's own position and not just that of the Company. Accordingly, investors should seek advice from their own independent professional advisers on their own eligibility.
General Meeting
The Directors do not currently have authority to allot the Second Placing Shares on a non pre-emptive basis. Accordingly, the Board is seeking the approval of Shareholders to allot Ordinary Shares and to dis-apply statutory pre-emption rights at the GM to the extent required to allot the Second Placing Shares. In addition, it is proposed to put a resolution to shareholders authorising the directors to allot up to 75,487,821 Ordinary Shares. No resolution to disapply statutory pre-emption rights will be sought, other than in connection with the allotment of the Second Placing Shares. As a result, if the Resolutions are passed, Directors will be authorised to allot the Second Placing Shares and a further 75,487,821 Ordinary Shares for a non-cash consideration or in accordance with statutory pre-emption rights.
Shareholders should note that holders of the First Placing Shares will be eligible to vote the First Placing Shares at the General Meeting.
Undertakings
Electric Word has received irrevocable undertakings to vote in favour of the Resolutions from the Directors who hold, in aggregate, 3,660,787 Ordinary Shares, representing 2.09 per cent. of the GM Voting Shares. In addition, certain other Shareholders holding in aggregate 34,749,409 Ordinary Shares, representing 19.88 per cent. of the GM Voting Shares have irrevocably undertaken to vote in favour of the Resolutions.
Accordingly, the Company is in receipt of irrevocable undertakings to vote in favour of the Resolutions in respect of 38,410,196 Ordinary Shares representing in aggregate 21.97 per cent. of the GM Voting Shares.
Recommendation
The Directors believe that the Placing and the passing of the Resolutions are in the best interests of the Company and Shareholders, taken as a whole. The Directors unanimously recommend the Shareholders to vote in favour of the Resolutions.
Expected Timetable of Principal Events
| First Placing Shares admitted to AIM | 08.00 a.m. on 20 August 2009 |
| Latest time and date for receipt by Registrars of Form of Proxy in respect of the GM | 10.00 a.m. on 31 August 2009 |
| General Meeting | 10.00 a.m. on 2 September 2009 |
| Second Placing Shares admitted to AIM | 08.00 a.m. on 3 September 2009 |
Definitions
The following definitions apply throughout this announcement, unless the context requires otherwise.
| "A Preference Shares" | the 875,000 convertible preference shares of £1 each issued to Sussex Research as part consideration for the acquisition of Special Education Publishing Limited |
| "AIM" | the AIM market operated by London Stock Exchange |
| "AIM Rules for Companies" | the AIM Rules for Companies and guidance notes as published by the London Stock Exchange from time to time |
| "Admission" | the admission of the Placing Shares and the Conversion Shares to trading on AIM |
| "the Board" or "the Directors" | the directors of the Company as at the date of this announcement |
| "Company" or "Electric Word" | Electric Word plc |
| "Conversion Shares" | the 6,603,773 Ordinary Shares to be issued as a result of the conversion by Sussex Research of the A Preference Shares |
| "Electric Word Group" or "Group" | Electric Word Plc and its subsidiaries |
| "Enlarged Share Capital" | the entire issued share capital of the Company following completion of the Placing and the allotment of the Conversion Shares |
| "Existing Ordinary Shares" | the 147,664,441 Ordinary Shares in issue on the date of this announcement |
| "First Admission" | admission of the First Placing Shares to trading on AIM |
| "First Placing" | the placing of the First Placing Shares |
| "First Placing Shares" | 27,172,414 Placing Shares to be placed pursuant to the First Placing |
| "Form of Proxy" | the form of proxy for use in relation to the GM |
| "FSMA" | Financial Services and Market Act 2000 (as amended) |
| "General Meeting" or "GM" | the General Meeting of the Company, convened for 10.00 a.m. on 2 September 2009 or at any adjournment thereof |
| "GM Voting Shares" | the Existing Ordinary Shares and the First Placing Shares |
| "HMRC" | Her Majesty's Revenue and Customs |
| "LIBOR" | the London Interbank Offered Rate from time to time |
| "London Stock Exchange" | London Stock Exchange plc |
| "New Ordinary Shares" | the Placing Shares and the Conversion Shares |
| "Notice of GM" | the notice convening the GM as set out herein |
| "Ordinary Shares" | ordinary shares of 1p each in the capital of the Company |
| "Panmure Gordon" | Panmure Gordon (UK) Limited |
| "Placees" | subscribers for Placing Shares |
| "Placing" | the placing by the Company of the First Placing Shares and the Second Placing Shares with certain investors and existing Shareholders (or their associated investment vehicles), otherwise than on a pre-emptive basis, at the Placing Price |
| "Placing Price" | 3.625 pence per Placing Share |
| "Placing Shares" | the74,482,759 Ordinary Shares the subject of the Placing |
| "Preference Shares" | the 987,500 convertible preference shares of £1 each issued to Sussex Trading on 28 March 2006 as part consideration for the acquisition of SBG Companies Limited |
| "RBS" | Royal Bank of Scotland plc |
| "Registrars" | Computershare Investor Services PLC of The Pavilions, Bridgwater Road, Bristol, BS13 8AE |
| "Resolutions" | the resolutions to be proposed at the GM |
| "Second Admission" | admission of the Second Placing Shares and the Conversion Shares to trading on AIM |
| "Second Placing" | the placing of 47,310,345 Placing Shares under the Placing |
| "Second Placing Shares" | 47,310,345 of the Placing Shares to be placed pursuant to the Second Placing |
| "Shareholders" | holders of Ordinary Shares |
| "Sussex Research" | Sussex Research Limited, a company incorporated in England and Wales and beneficially owned by Stewart Newton |
| "Sussex Trading" | Sussex Trading Company Limited, a company incorporated in England and Wales and beneficially owned by Stewart Newton |
| "UK" | the United Kingdom of Great Britain and Northern Ireland |
| "VCT" | Venture Capital Trust |