HAYT.L Regulatory News (HAYT)

THIS ANNOUNCEMENT, AND THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, THE REPUBLIC OF SOUTH AFRICA, AUSTRALIA, JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

19 November 2015

Hayward Tyler Group plc

("Hayward Tyler", the "Group" or the "Company")

Proposed Placing of 9,333,334 Ordinary Shares at a price of 90 pence per share

and

Proposed amendment to the Articles of Association to reduce the Extraordinary General Meeting Notice Period

Hayward Tyler has appointed finnCap Ltd to raise gross proceeds of £8.4 million by way of a conditional placing for cash of 9,333,334 ordinary shares of 1 pence each (the "Placing Shares") at a placing price of 90 pence per Placing Share (the "Placing Price") (the "Placing"). The Placing Price represents a price equivalent to the closing middle market price on 18 November 2015 (being 90 pence), being the last practicable date prior to this announcement.

Introduction

The Company today announces that it is conditionally seeking to raise approximately £8.4 million (before expenses) through a proposed Placing of 9,333,334 new Ordinary Shares at the Placing Price. It is proposed that the net proceeds of the Placing (approximately £8.0 million) will be primarily used as follows:

· to repay the £5 million 12 month bridging facility used to part fund the Acquisition;

· for further investment in the Luton factory to allow the Company to utilise the full grant funding available to it;

· to accelerate investment in the Peter Brotherhood premises; and

· for general working capital purposes.

Background and reasons for the Placing

The Company announced on 12 October 2015 the acquisition of the trade and assets of the Peter Brotherhood business from Dresser-Rand Company Ltd, a Siemens-owned business, for a total consideration of US$15.0 million, subject to an adjustment for a working capital benchmark. Peter Brotherhood is a UK-based engineering business specialising in steam turbines, reciprocating gas compressors and combined heat and power units for sugar processing, power generation, oil and gas, marine, process and petrochemical markets. The Director's believe that the aftermarket will be key both in terms of long term service agreements for combined heat and power supply and also due to an ageing installed base. The Acquisition has increased Hayward Tyler's scale, number of customers and orders and diversifies the Group's operations and the Directors believe that there is an opportunity to improve gross and operating margins at Peter Brotherhood. The consideration was paid in cash and was wholly funded through new debt facilities of £11.0 million, including a £5.0 million bridging facility from NatWest Bank.

The Directors believe that given the recent strength in the Company's share price, this is an optimal time for the refinancing of the £5.0 million bridging facility due to the future savings in interest payments (which is 4.75 per cent. above LIBOR, with the Directors estimating an annual cost saving circa £0.25 million in relation to this facility alone), whilst minimising dilution for existing Shareholders. Additionally, the Placing will assist in realigning the net debt:EBITDA ratio to the Company's target multiple of below two times EBITDA. The Directors are intending to make further investment into the Company's Luton Centre of Excellence for Phase 2 of the improvement programme to install a new roof, solar panels and a new façade to the existing building. The Directors believe that if they can commence this work whilst contractors are still on-site, this will also achieve cost savings. In addition, and as previously announced, the Company has received a grant from the Regional Growth Fund, of which £0.445 million remains, subject to making further cash investment into the Luton premises by March 2016. Therefore, proceeds from the Placing will allow the Company to utilise the remaining grant funding.

Furthermore, the Company anticipates further investment being required for the Peter Brotherhood freehold property and the Placing proceeds will help accelerate this investment. The Directors have also discussed effecting a sale and leaseback transaction in the medium term and the Directors believe that making an investment into the freehold property will assist in optimising its value, should a sale and leaseback be pursued. Furthermore, the Directors believe that the Placing will help improve the Company's covenant, thus potentially reducing the yield and increasing the cash proceeds from a sale and leaseback of the Peter Brotherhood property.

Additionally, by reducing the Company's debt by an overall £8.0 million, not including the additional £0.45 million from the Regional Growth Fund grant, the Company will have further debt capacity to support the on-going growth of the Group and its working capital requirements, if required and on potentially more favourable rates.

Use of Proceeds

The Directors intend to use the proceeds of the Placing for the following purposes:

· £5.0 million for the repayment of the bridging facility resulting from the Acquisition, thus saving the Company interest payments at 4.75 per cent. over LIBOR over the remainder of the 12 month term of this facility;

· £1.5 million for completion of the façade of the Company's Luton Centre of Excellence, a new roof and solar panels to improve the environmental footprint and to take advantage of the £0.445 million Regional Growth Fund grant funding available to the Company, which needs to be claimed before end of March 2016;

· £1.0 million for general investment purposes relating to the Peter Brotherhood freehold property; and

· £0.9 million for on-going working capital requirements, including the costs associated with the Placing.

The Placing

The Company intends to conditionally raise, in aggregate, £8.4 million (before expenses) through the issue of the Placing Shares at the Placing Price. The Placing Shares will represent approximately 16.93 per cent. of the Company's Enlarged Share Capital immediately following Admission. The Placing Price represents a price equivalent to the closing middle market price on 18 November 2015 (being 90.0 pence), being the last practicable date prior to this announcement.

The Placing Shares will rank in full for all dividends with a record date on or after the date of Admission and otherwise equally with the existing Ordinary Shares from the date of Admission.

The Placing is conditional, amongst other things, upon:

· A resolution disapplying statutory pre-emption rights in relation to the Placing Shares being duly passed;

· none of the warranties or undertakings given to finnCap prior to Admission being or becoming untrue, inaccurate or misleading in any material respect; and

· Admission,

in each case by no later than 8.00 a.m. on 16 December 2015 (or such time and date as the Company and finnCap may agree, being not later than 5.00 p.m. on 31 December 2015).

The Placing Agreement

Pursuant to the terms of the Placing Agreement, finnCap, as agent for the Company, has agreed to use its reasonable endeavours to procure subscribers for the Placing Shares at the Placing Price.

The Placing Agreement contains customary warranties given by the Company in favour of finnCap in relation to, inter alia, the accuracy of certain information and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify finnCap in relation to certain liabilities which it may incur in respect of the Placing.

finnCap has the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event of force majeure, a breach of the warranties or a material adverse change.

The Placing will not be underwritten.

Settlement

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that admission to AIM will become effective in respect of, and that dealings on AIM will commence in, the Placing Shares, on 16 December 2015.

It is expected that CREST accounts of the Placees who hold their Ordinary Shares in CREST will be credited with their Placing Shares on 16 December 2015. In the case of Placees holding Ordinary Shares in certificated form, it is expected that certificates will be despatched within 10 days of Admission.

Current Trading and Outlook

The Company announced its interim results for the half year ended 30 September 2015 on 10 November 2015. Revenue for 1H2016 was £21.8 million (1H2015: £24.0 million) and trading profit before tax was level at £1.8 million (1H2015: £1.8 million) despite investment of £0.5 million (1H2015: £0.2 million) in the Luton Centre of Excellence. The Company's fully diluted trading earnings per share increased by 19 per cent. to 3.87 pence (1H2015: 3.26 pence). The Company has recently completed its first acquisition as a PLC, the acquisition of the Peter Brotherhood business. The Directors believe that, with Peter Brotherhood the Company has the opportunity to take an underinvested, unloved, orphan asset and transform it both through focus on continuous improvement and the ability to leverage off the existing sales networks of the two businesses. The Directors also believe that the Peter Brotherhood operation has the potential to mark a significant step change in the scale and size of the overall Group.

In addition, the Company recently signed an agency agreement with Ebara Corporation, a leading Japanese manufacturer of pumps for the energy, oil and gas, and general industry sectors to specifically supply Hayward Tyler's boiler circulating pumps in Japan and globally through Ebara with a number of major Engineering, Procurement and Construction groups.

As signalled at the time of the release of the Interim Results, the Company anticipates that the normal H2 weighting to deliver the overall growth in both revenue and profit for the year to meet management's expectations. This is likely to be driven in particular by a stronger performance from the US operations and a higher proportion of nuclear related spares. Additionally, the investment made into the Centre of Excellence combined with the Civil Nuclear Sharing in Growth programme will assist in positioning Hayward Tyler as a provider of equipment to the new build nuclear industry in the UK. Overall, the order outlook remains positive across the range of market segments, particularly in the conventional power market.

Proposed Grant of Options

Further to the Acquisition and in order to further align management with the successful growth of the Peter Brotherhood business, the Company announces that it intends to grant certain Directors and senior managers up to 500,000 (in aggregate) nominal options over Ordinary Shares or restricted shares for which the participant pays only the nominal value of the shares, under the LTIP (the "Awards"). The nominal options will vest 18 months from the date of grant, subject to continued service and the achievement of certain performance conditions attached to the successful development and growth of the Peter Brotherhood business (the "Performance Conditions"), the restricted Ordinary Shares are issued and allotted at the date of grant, subject to clawback under the same Performance Conditions.

A further announcement in respect of the proposed Awards will be made in due course.

Dividend Policy

The Company has a progressive dividend policy. As announced in the Results, the Directors declared an interim dividend of 0.552 pence per Ordinary Share, which will be paid on 25 February 2016 to all Shareholders on the register on 15 January 2016, the ex-dividend date being 14 January 2016.

Conditional upon Admission, the Placing Shares will rank pari passu with the Existing Ordinary Shares and therefore the Placing Shares will be entitled to receive an interim dividend of 0.552 pence per Ordinary Share.

Amendment to the Company's Articles of Association

The Board is also intending to ask Shareholders to approve an amendment to the Articles. This amendment, if approved by the requisite majority, will reduce the notice period required to be given to Shareholders in connection with the convening of extraordinary general meetings of the Company. Currently, the Articles require twenty-one clear days' notice to be given to Shareholders in relation to an extraordinary general meeting of the Company convened for the passing of a special resolution or a resolution appointing a person as a Director. If the requisite resolution to be set out in the Notice of Extraordinary General Meeting is passed, it will have the effect of reducing this notice period to fourteen clear days.

Further Information:

Although not a related party transaction pursuant to the AIM Rules, shareholders are advised that Lloyd-Baker & Associates LLP ("LBA"), a partnership that Ewan Lloyd-Baker, Chief Executive Officer of the Company, is a partner of, is due to receive a fee of up to £99,000 in relation to the identification and brokering of the Acquisition. Ewan Lloyd-Baker has waived his claim to any portion of the fee due and will not in any way personally gain from LBA's involvement.

Enquiries:

Placing Statistics

\* This assumes no further new Ordinary Shares are issued following the date of this announcement and before Admission.

Definitions

Important notice

Members of the general public are not eligible to take part in the Placing. This announcement is directed at and is only being distributed to: (A) persons in member states of the European Economic Area who are "qualified investors", as defined in article 2.1(e) of the Prospective Directive (Directive 2003/71/EC) as amended, (B) if in the United Kingdom, persons who (i) have professional experience in matters relating to investments who fall within the definition of "investment professionals" in article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 as amended (the "FPO") or fall within the definition of "high net worth companies, unincorporated associations etc." in article 49(2)(a) to (d) of the FPO and (ii) are "qualified investors" as defined in section 86 of FSMA or (C) otherwise to persons to whom it may otherwise lawfully be communicated (each, a "Relevant Person"). No other person should act or rely on this announcement and persons distributing this announcement must satisfy themselves that it is lawful to do so. By accepting the terms of this announcement, you represent and agree that you are a Relevant Person.

This announcement and the information contained herein is not for release, publication or distribution, directly or indirectly, in whole or in part, in or into or from the United States, Canada, the Republic of South Africa, Australia, Japan or any other jurisdiction where to do so might constitute a violation of the relevant laws or regulations of such jurisdiction.

The Placing Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of this announcement. Any representation to the contrary is a criminal offence in the United States.

No prospectus or offering document has been or will be prepared in connection with the Placing. Any investment decision to buy securities in the Placing must be made solely on the basis of publicly available information. Such information is not the responsibility of and has not been independently verified by the Company or finnCap or any of their respective affiliates.

This announcement does not constitute an offer to sell or issue or a solicitation of an offer to buy or subscribe for Placing Shares in any jurisdiction including, without limitation, the United States, Canada, the Republic of South Africa, Australia, Japan or any other jurisdiction in which such offer or solicitation is or may be unlawful (a "Prohibited Jurisdiction"). This announcement and the information contained herein are not for publication or distribution, directly or indirectly, to persons in a Prohibited Jurisdiction unless permitted pursuant to an exemption under the relevant local law or regulation in any such jurisdiction. No action has been taken by the Company, finnCap or any of their respective affiliates that would permit an offer of the Placing Shares or possession or distribution of this announcement or any other publicity material relating to such Placing Shares in any jurisdiction where action for that purpose is required. Persons receiving this announcement are required to inform themselves about and to observe any such restrictions.