24 Sep 2010 11:35
24 September 2010
Hydrodec Group plc
("Hydrodec", the "Company", or the "Group")
Placement of Ordinary Shares
Notice of General Meeting
Hydrodec Group plc, the cleantech industrial oil refining group, is pleased to announce that it proposes to raise approximately £3 million (before expenses) through a placing ("Placing") of 50,000,000 Ordinary Shares at 6p each to implement certain operational and sales initiatives aimed at generating early and sustained cash-flow benefits, to invest in the growth of the business and to strengthen the Company's balance sheet.
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 £2.0 million. The net proceeds of the Conditional Placing are expected to be approximately £0.8 million, assuming the 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 Company's half year results for the period ended 30 June 2010 reported on 31 August 2010, the Board believes the Group is entering a long term growth phase with a strengthened management team. Despite a tight working capital position, revenues in the first half increased by 82 per cent. over the same period last year to US$8.2m, driven by record second quarter sales of the Company's SUPERfine transformer oil.
These positive trends have continued into the third quarter, with current demand exceeding the Group's capacity in the US. Solid progress is also being made in executing the Group's Japanese strategic alliance with Kobelco Eco Solutions, a member of the Kobe Steel group.
The Board believes that a strengthening of the Company's capital base should enable it to capitalise on these market opportunities as well as planning for the longer term development of other markets and potential alternative applications for Hydrodec's core technology. In particular, the new funds will enable the Company to:
·; take steps designed to improve the Group's operating efficiency through some modest investments to upgrade existing sales and production capabilities, which should result in lower plant operating costs and increased sustainable sales and production levels;
·; strengthen the cash position of the balance sheet in order to help increase and diversify the Group's feedstock supplies and secure new customers in the face of a continuing tight credit market in the US, whilst providing a cushion to ensure the year end interest payment on the Loan Notes can comfortably be made; and
·; support the bond required for final approval from the US Environmental Protection Agency to treat PCB-contaminated feedstock.
This funding should also assist the Company in building its presence in Japan, moving towards expected positive net cash generation during the first half of 2011 and, beyond that, planning the longer-term development of the business.
Neil Gaskell, chairman of Hydrodec, said: "The Board has been encouraged with shareholder responses to the results and operational update and believes that this is an appropriate time to raise further funds to enable the Company to capitalise on recent encouraging trends and continue the growth of the business in the US, Australia and Japan."
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.
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 6 pence per Ordinary Share. The Firm Placing consists of the placing of 36,200,000 Ordinary Shares and the Conditional Placing consists of the placing of 13,800,000 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 14 October 2010 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 ("First Admission") becoming effective on or before 8.00 a.m. on 1 October 2010 (or such later time and date, not being later than 8.30 a.m. on 14 October 2010). The obligations of Numis under the Placing Agreement in respect of the Conditional Placing are conditional upon, inter alia, First Admission becoming effective, the resolutions being duly passed at the General Meeting and admission of the new Ordinary Shares issued under the Conditional Placing to trading on AIM ("Second Admission") becoming effective on or before 8.30 a.m. on 25 October 2010. The Placing Agreement contains provisions entitling Numis to terminate the Placing Agreement at any time prior to Second Admission in certain circumstances. If this right is exercised before First Admission, the Placing will not proceed or, if the Placing Agreement is terminated (in respect of the Conditional Placing only) after First Admission but before Second Admission, the placing of the new Ordinary Shares to be issued under the Conditional Placing will not proceed.
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 under the Firm Placing will be issued and admitted to trading on AIM on or about 8.00 a.m. on 1 October 2010 and the new Ordinary Shares under the Conditional Placing will be issued and admitted to trading on AIM on or about 8.00 a.m. on 18 October 2010.
Neil Gaskell, Chairman of the Company, and John Gunn, Deputy Chairman, will be participating in the Placing. Mr Gaskell will subscribe for 300,000 Ordinary Shares at the Placing Price, representing a total subscription of £18,000. Following the completion of the Placing (assuming both elements of the Placing take place), Mr Gaskell's beneficial holding of Ordinary Shares will be 420,000 (representing approximately 0.1 per cent. of the Company's issued voting shares). Mr Gaskell also has an interest in options over 2,200,000 Ordinary Shares and in £50,000 of the Company's convertible loan stock. Mr Gunn, together with his family, will subscribe in aggregate for 290,000 new Ordinary Shares at the Placing Price, representing a total subscription of £17,400, of which Mr Gunn will have a beneficial interest in 200,000 new Ordinary Shares. Following the completion of the Placing (assuming both elements of the Placing take place), Mr Gunn's beneficial holding of Ordinary Shares will be 5,037,500 (representing approximately 1.4 per cent. of the Issued Voting Shares). 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 1,865,000 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 6,699,249 Ordinary Shares and in a further £827,925 of the Company's convertible loan stock through his and his family's shareholding in Ludgate 181 (Jersey) Limited, a Jersey investment company.
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 website www.hydrodec.com.
Effect of the Placing on the CULS
The instrument constituting the CULS provides for certain adjustments to be made to the rights under the CULS following the occurrence of certain specified events. More particularly, following any issue of Ordinary Shares (other than an issue which is ten per cent. or less below the average closing trading price of an Ordinary Share over the five trading days immediately preceding the announcement of the issue of such securities), the Company's auditors are required to certify to the Company in writing the adjustments to the number and value of the Ordinary Shares into which any outstanding CULS would convert which they consider necessary so that, after such adjustment and conversion, each holder of CULS shall be placed in the same position in relation to capital (as nearly practicable) as would have been the case had no such issue of Ordinary Shares occurred.
Accordingly, as the Placing Price is more 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, the Company will refer the matter to its auditors in order for them to determine if any adjustment should be made and, if so, what that adjustment should be.
For further information please contact:
| Hydrodec Group plc | 020 7786 9810 |
| Neil Gaskell, Chairman Mark McNamara, Chief Executive Mike Preen, Company Secretary |
|
| Numis Securities Limited | 020 7260 1000 |
| Nominated Adviser: Simon Blank Corporate Broker: David Poutney, Alex Ham |
|
| Corfin Public Relations | 020 7596 2860 |
| Neil Thapar, Alexis Gore, Harry Chathli | |