HYR.L Regulatory News (HYR)

2 November 2011

Hydrodec Group plc

("Hydrodec", "the Company" or "the Group") 

Appointment of Ian Smale as Chief Executive Officer and Placing of new Ordinary Shares

Notice of General Meeting

The Board of Hydrodec Group plc, the cleantech industrial oil re-refining group (AIM:HYR), is pleased to announce that Ian Smale has been appointed as Chief Executive Officer Designate and will join the Company in January 2012. He will succeed Mark McNamara who will remain with Hydrodec as Senior Executive Director, working with Ian on the ongoing development of the Group, its technology and new business opportunities.

Mr Smale joins Hydrodec from BP plc, where he has held a variety of leadership roles in a career spanning 30 years at head office and operational levels. Most recently he was BP's Group Head of Strategy & Policy. Previously, he also served as its Global Head of Mergers & Acquisitions and as President and Chief Executive of BP North Africa. He will work with Hydrodec's Board to further strengthen the Group's senior management team as part of its growth strategy to deliver the full global potential of Hydrodec's unique clean technology in the transformer oil and related industrial oil markets.

Neil Gaskell, Chairman of Hydrodec, said: "We are delighted that Ian has agreed to join Hydrodec as Chief Executive Officer. His arrival signals a major strengthening of the management capacity in breadth, depth and experience in preparation for a ramp up of our activities."

Commenting on his appointment Ian Smale said: "I am excited by the possibility to grow Hydrodec as a world class technology offer to meet a global market opportunity. Like the Board, I believe that the Hydrodec technology can be the global standard for the sustainable and environmentally-focused re-refining of waste oils and my strategy will be to expand the Group's activities while ensuring that it has all the resources in place to deliver long term growth and shareholder value."

Placing of new Ordinary Shares

Hydrodec announces that it proposes to raise approximately £5.5 million (before expenses) through a placing ("Placing") of 55 million Ordinary Shares at 10p each ("Placing Price") to fund the development of the growth strategy and the existing business.

The Placing is split into two tranches, the Firm Placing and the Conditional Placing. The net proceeds of the Firm Placing are expected to be approximately £4.0 million. The net proceeds of the Conditional Placing are expected to be £1.4 million, assuming the relevant resolutions put to shareholders at the General Meeting referred to below are passed.

Background to and reasons for the Placing

Further to the encouraging improvement in the Group's half year results for the period ended 30 June 2011 reported on 21 September 2011, current trading continues to build on this forward momentum.

SUPERFINE volumes and margins for the first nine months of the year are up on the respective period last year. Demand and pricing remain robust and feedstock procurement is continuing to improve. At the same time, the development of the Japan business with Kobelco Eco-Solutions continues to build momentum. Pre-marketing of the business is progressing well. Strong pre-operational volume indications from suppliers and customers have been generated at margins that are extremely encouraging. The detailed construction programme for 2012 is now in its final stages.

The Board believes that the Placing will provide the new CEO and strengthened management team with the resources required to build a solid foundation for the next stage of the Group's international development. The funds will be utilised in advancing the Group's existing development goals, especially in Japan, in strengthening the balance sheet, and in developing and testing a long term growth and expansion strategy in both the transformer oil and related industrial oil markets.

Terms of the Placing

The Company has entered into a placing agreement ("Placing Agreement") with Numis Securities Limited ("Numis"). Pursuant to the Placing Agreement, Numis has agreed to use its reasonable endeavours to procure placees for the new Ordinary Shares at the Placing Price. Andrew Black, a non-executive director of the Company, will participate in the Placing.

The Placing will be split into two tranches, a firm placing ("Firm Placing) and a conditional placing ("Conditional Placing"), both at a placing price of 10 pence per Ordinary Share. The Firm Placing consists of the placing of 41 million Ordinary Shares and the Conditional Placing consists of the placing of 14 million Ordinary Shares. The Conditional Placing is subject to shareholder approval at a General Meeting to grant the Directors authority to issue such new Ordinary Shares, and which is expected to be held at 10.00 a.m. on 21 November 2011 at the offices of the Company at 4th Floor, 120 Moorgate, London EC2M 6SS.

The obligations of Numis under the Placing Agreement in respect of the Firm Placing are conditional upon, inter alia, admission of the new Ordinary Shares issued under the Firm Placing to trading on AIM becoming effective on or before 8.00 a.m. on 23 November 2011 (or such later time and date, not being later than 8.30 a.m. on 7 December 2011). The obligations of Numis under the Placing Agreement in respect of the Conditional Placing are conditional upon, inter alia, the relevant resolutions being duly passed at the General Meeting and admission of the new Ordinary Shares issued under the Conditional Placing to trading on AIM becoming effective on or before 8.30 a.m. on 23 November 2011 (or such later time and date, not being later than 8.30 a.m. on 7 December 2011). The Placing Agreement contains provisions entitling Numis to terminate the Placing Agreement at any time prior to admission in certain circumstances. If this right is exercised before admission, the Placing will not proceed. Ian Smale's appointment as Chief Executive Officer is conditional on the completion of the Firm Placing.

Application will be made to the London Stock Exchange for the new Ordinary Shares to be admitted to trading on AIM. It is expected that the new Ordinary Shares will be issued and admitted to trading on AIM on or about 8.00 a.m. on 23 November 2011.

Andrew Black, a non-executive Director, will subscribe for 16.8 million Ordinary Shares at the Placing Price, representing a total subscription of £1.68 million. Following the completion of the Placing (assuming both elements of the Placing take place), Mr Black's beneficial holding of Ordinary Shares will be 53,734,525 (representing approximately 13.1 per cent. of the Company's issued voting shares). Mr Black also holds warrants to subscribe for 7 million Ordinary Shares. In addition, Mr Black will be taken to be interested (for the purposes of the AIM Rules) in the subscription for 1 million Ordinary Shares at the Placing Price by a family trust, representing a subscription of £100,000.

John Gunn, Deputy Chairman, will be taken to be interested (for the purposes of the AIM Rules) in the subscription for 300,000 Ordinary Shares at the Placing Price by certain family trusts, representing a total subscription of £30,000. Mr Gunn's beneficial holding of Ordinary Shares is 5,037,500 (which will represent approximately 1.2 per cent. of the issued voting shares following completion of the Placing). Mr Gunn also has a beneficial interest in options over 3,000,000 Ordinary Shares and in £111,000 of the Company's convertible loan stock. In addition, following the completion of the Placing, Mr Gunn will be taken to be interested for the purposes of the AIM rules in a further 2,165,000 Ordinary Shares and in a further £99,000 of the Company's convertible loan stock by virtue of being a trustee (but non-beneficiary) of certain family trusts and in a further 5,899,249 Ordinary Shares and in a further£827,955 of the Company's convertible loan stock through his and his family's shareholding in Ludgate 181 (Jersey) Limited, a Jersey investment company.

As Directors, both Mr Gunn's and Mr Black's participation in the Placing constitute related party transactions for the purposes of the AIM Rules. When taken together with his subscription for loan notes in June 2011 (as is required by the AIM Rules), Mr Black's participation in the Placing exceeds 5 per cent. of the Company's market capitalisation as at the date of this document. The Directors, with the exception of Mr Black, consider, having consulted with Numis, that the terms of the Placing are fair and reasonable insofar as Shareholders are concerned.

Effect of the Placing on the CULS

The instrument constituting the Company's convertible unsecured loan stock ("CULS") provides for certain adjustments to be made to the rights of the CULS following the occurrence of certain specified events, including on an issue of Ordinary Shares at a discount of more than ten per cent. below the average closing price of an Ordinary Share over the five trading days immediately preceding the announcement of the issue. Accordingly, as the Placing Price is less than ten per cent. below the average closing trading price of an Ordinary Share over the five trading days immediately prior to the announcement of the Placing, no adjustment will be made to the rights of the CULS.

Proposed Long Term Incentive Plan

At the General Meeting, the Company will be proposing that shareholders approve the Hydrodec Group plc 2012 Long Term Incentive Plan (the "LTIP") for the purposes of attracting, retaining and motivating key executives of the Group and securing greater alignment of shareholders' and management's interest with transparency over performance targets.

A summary of the key elements of the LTIP will be available in the circular to shareholders referred to below. The LTIP will cover the period from 15 January 2012 to 15 January 2015. Performance targets will be share price driven with hurdles at 16p, 20p and 25p. Awards will be calculated by reference to the increase in the market capitalisation of the Company at the time of meeting the performance targets and will depend on continued employment with the Group.

As awards under the LTIP may be made to senior employees of the Group (including executive directors), it constitutes a related party transaction for the purposes of the AIM Rules. The non-executive Directors consider, having consulted with Numis, that the terms of the LTIP are fair and reasonable insofar as Shareholders are concerned.

Circular

The Company will shortly be posting to shareholders a circular attaching a notice convening the General Meeting, which will also be available on the Company's new website at www.hydrodec.com.

For further information please contact:

The following information on Ian Smale is provided pursuant to AIM Rule 17:

Full name and age: Ian Michael Smale (51)

Current directorships:

National Nuclear Laboratory Ltd

Previous directorships (past 5 years):

BP Algerie Ltd

BP Exploration North Africa Ltd

BP Exploration Libya Ltd

BP Exploration (Algeria) Ltd

BP Amoco Exploration (In Amenas) Ltd

Notes to Editors:

Ian Smale

Ian Smale (51) has spent his entire career with BP plc and held various senior roles in a career spanning 30 years. Most recently Ian was Group Head of Strategy & Policy working directly with BP's CEO and the executive team. He has held a variety of leadership positions across BP, including Business Unit Leader for Commercial Marketing and Distribution in South Africa, Global Head of Mergers and Acquisitions, and as President and Chief Executive of BP North Africa.

Hydrodec Group plc

The Group's technology is a proven highly efficient oil re-refining and chemical process which was initially targeted at the multi-billion US$ market for transformer oil used by the world's electricity industry and now supplies oil to several other industries. The Group takes spent transformer oil, including polychlorinated biphenyl ("PCB") contaminated oil, as the primary feedstock, which is then processed at its two plants enabling 99 per cent or greater recovery of oil for reuse while also eliminating PCBs, a toxic additive banned under international regulations, without environmentally harmful emissions.