Inspirit Energy Regulatory News (INSP)

24 Jul 2006 07:02

Inspace Plc24 July 2006 Press Release 24 July 2006 Inspace plc ("Inspace" or "the Company") Pre-close statement Acquisition of Widacre Application for Admission to trading on AIM of 13,201,320 Consideration Shares Notice of Extraordinary General Meeting Inspace plc (AIM:INSP), the property based support services business that is nowone of the UK's leading repair and maintenance service providers, will announceits interim results for the six months ended 30 June 2006 on Tuesday 26September 2006. An analyst briefing will be held at 9:00 a.m. that same morningat the London Stock Exchange, 10 Paternoster Square, London EC4M 7LS. The Directors are pleased to confirm that the overall trading position is inline with consensus forecasts for the first half of 2006. This has beenachieved during a period when the Company has seen a lag in new social housingcontract awards as well as an under spend on a Decent Homes contract. Acombination of these factors is likely to create some pressure on the full yearfigures and the board is taking a more conservative outlook for new contractorders for future years. Notwithstanding this, after a relatively quiettendering period over the last six months, the Company has seen a higher levelof activity more recently. The pipeline of opportunities is some £2.5 billion. The Company also announces today that it proposes to acquire the entire issuedshare capital of Widacre, the owner of two complementary businesses: WillmottDixon Housing, one of the largest social housing providers in the UnitedKingdom; and Widacre Homes, an affordable housing provider. The Company hasagreed to pay an equity value of £64.535 million which is to be satisfied by theallotment and issue of the 13,201,320 Consideration Shares at 151.5p per shareand by £44.535 million in cash. The Acquisition is conditional upon, interalia, the approval of Shareholders, which is to be sought at an ExtraordinaryGeneral Meeting to be convened for 12 noon on 22 August 2006. Acquisition highlights • Acquiring Willmott Dixon's social housing interests: Willmott Dixon Housing and Widacre Homes • Headline price of £64.5 million • Funded by £44.5 million cash and £20 million equity • Expected growth in sales, earnings and EPS • Provides distinct competitive advantages over immediate industry peer group Commenting on the acquisition of Widacre, Andrew Telfer, Chief Financial Officerof Inspace plc, said: "The obvious synergies between Widacre and Inspace makethis an excellent acquisition providing the Company with 'first mover' advantageand positions us as a leading specialist service provider who can now offer acomplete integrated service across the evolving UK social housing market." "This acquisition is also earnings enhancing from day one and will provide asignificant increase in our earnings visibility going forward. Importantly itallows us access to the major RSL maintenance, stock reinvestment and new buildmarket." Further details concerning the background to and reasons for the acquisition,details on the companies, the new board director and the EGM are set out below. - Ends - For further information: Inspace plcAndrew Telfer, Chief Financial Officer Tel: +44 (0) 1462 678 910andrew.telfer@inspace.co.uk www.inspace.co.uk Seymour PierceMark Percy, Corporate Finance Tel: +44 (0) 20 7107 8000markpercy@seymourpierce.com www.seymourpierce.com Media enquiries:AbchurchHenry Harrison-Topham Tel: +44 (0) 20 7398 7700henry.ht@abchurch-group.com www.abchurch-group.com Seymour Pierce Limited, which is regulated by the Financial Services Authority,is acting as nominated adviser exclusively to Inspace plc and will not beresponsible to anyone other than Inspace plc for providing the protectionsafforded to clients of Seymour Pierce Limited nor for providing advice inrelation to the Acquisition. Its responsibilities as the Company's nominatedadviser under the AIM Rules are owed solely to London Stock Exchange plc and arenot owed to the Company or to or any other person in respect of the Acquisitionor any acquisition of ordinary shares in Inspace plc. Introduction Your Board announced today that your Company proposes to acquire the entireissued share capital of Widacre, the owner of two complementary businesses: thefirst, Willmott Dixon Housing, is one of the largest social housing providers inthe United Kingdom specialising in new build projects ranging from largemulti-phase regeneration schemes to greenfield housing; the second, WidacreHomes, is an affordable housing provider specialising in the development of newhomes for sale, alongside registered social landlords, in mixed tenure housingprojects run by Willmott Dixon Housing. The Independent Directors believe thatthe addition of these new skills alongside your Company's well established trackrecord of maintaining and improving existing social housing stock, will providean excellent platform to service the Government's evolving strategy to createintegrated and sustainable communities. The Acquisition (as a consequence of Colin Enticknap being a shareholder inWidacre and a director and shareholder in Willmott Dixon Limited) is a relatedparty transaction under the AIM Rules and is a transaction regulated by section320 of the Act requiring the prior approval of Shareholders. The Acquisition istherefore conditional, inter alia, on the passing of the Resolutions andAdmission. Information on Widacre Widacre is a holding company and has two wholly owned subsidiaries: WillmottDixon Housing and Widacre Homes. Willmott Dixon Housing is a specialist provider of new social housing projects.Its clients are predominantly Registered Social Landlords (RSLs), as well asWidacre Homes. It provides design, consultation, management and contractingservices in relation to the construction of new social housing, with mixedtenure development, key worker accommodation and extra care housing also beingareas of focus. Use of new procedures and technologies to drive performanceimprovement in recent years, including prefabrication and modularisation ofcomponents, have extended Willmott Dixon Housing's capabilities and meant a moveaway from the direct provision of building works, which it subcontracts. In2005, Willmott Dixon Housing established a new division to managepre-construction services, which is now extensively engaged in providing design,planning and cost consultancy advice to clients on a wide range of projects. Widacre Homes is a smaller business launched in 2003 which providespredominantly low cost homes for sale in partnership with RSLs, usuallyalongside social housing built by Willmott Dixon Housing as part of moreextensive mixed tenure schemes. The Independent Directors believe that one ofthe key strengths of Widacre Homes is its ability to cultivate strongrelationships with RSLs and by doing so, helps to facilitate the RSLs' low riskinvolvement in developing homes for sale, their ability to cross subsidisefunding towards social housing, and their ability to create integrated andsustainable communities in line with the Government's clear policy guidelines.Widacre Homes has already established a number of joint venture companies withRSLs and through its involvement in the Key London Alliance consortium, has beenappointed to provide mixed tenure developments under the Government's LondonWide Initiative. Willmott Dixon Housing developed around 1,000 homes last year, predominantlythroughout London and the south east, nearly all of which were conventionalsocial housing. To date, Widacre Homes has completed one development but it isworking on substantial new developments and opportunities. The aim is for thereto be increasing levels of synergy between Willmott Dixon Housing and WidacreHomes, with Widacre Homes using Willmott Dixon Housing as its specialistcontractor for the design, cost planning and construction of new housing, andthe RSLs also using Willmott Dixon Housing for the social housing part of mixedtenure developments. Willmott Dixon Housing expects to build around 1,500 new units this year (whichcompares favourably with competitors) and it currently has fourteen FrameworkAgreements with RSLs with a further eight at the tender stage. Widacre Homesexpects to complete 67 homes this year, rising to 325 in 2008 when the finalphases of its Eastside development, situated alongside the 2012 Olympic site inEast London, are completed. All of the senior management of the Widacre businesses have been in place forseveral years and are to transfer with the business to the Enlarged Group. Inmost cases, they have spent much of their working life with the businesses.Chris Durkin, in particular, is seen as key to the future development of theWidacre businesses. In total, approximately 300 employees are expected totransfer as part of the Acquisition. Last year, the combined Widacre businesses generated post tax profits of £2.61million on turnover of £128.97 million. The Independent Directors believe thatthe combined Widacre businesses should generate turnover of around £125.0million and EBIT of approximately £6.0 million for the year ended 31 December2006 and will make a positive contribution for the four months in which theywill be consolidated into the Enlarged Group's statutory accounts for thiscurrent financial year. The Evolving Social Housing Market The evolving UK market for social housing currently falls into three distinctcategories, which are determined principally by the source of funding for theservices provided: (i) The ongoing repair and maintenance of existing stock is funded by the annual budgets of social landlords, who may be either local authorities or RSLs; (ii) The major refurbishment and improvement market is also in part funded by social landlords but this funding may be considerably enhanced by the Decent Homes initiative which is funded by central government; and (iii) The provision of new social housing in England and Wales is mainly undertaken by RSLs and is funded from reserves, through grants from the Housing Corporation (a central government funded body) and through external debt. Total spending on social housing is currently around £14 billion per annum, ofwhich around £10.3 billion is spent on repair, maintenance and improvement. Ofthis, £4 billion is spent on ongoing repair and maintenance, with the remaining£6 billion being spent on capital projects such as major refurbishment andimprovement. This includes a contribution of between £1 billion and £2 billiona year from the Decent Homes initiative. The provision of new housing, which iscurrently running at around 35,000 units a year, adds a further £3.5 billion tothis sum. The Government has recently announced that the present Decent Homes initiativespending round, under which local authorities and their Arms Length ManagementOrganisations (ALMOs) bid for central government funds to improve poor qualityhousing stock, will be the last in its current form. The Decent Homesinitiative, which has been a significant source of funding for social housingprojects, has very recently attracted criticism from some government quarters,which perceive it as encouraging social landlords to improve poor quality homesby, for example, installing replacement kitchens and bathrooms, on estates thatmight better have been considered for wider scale regeneration. The Government housing policy is aimed at creating integrated and sustainablecommunities, capable of supporting improved social and environmental standardsin the longer term. Creating such communities often demands wider scale andmore complex regeneration initiatives. As part of its 2007 Spending Review, theGovernment is expected to consider ways in which future spending can prioritisesuch initiatives, and has recently published a comprehensive consultation paperentitled 'From Decent Homes to Sustainable Communities'. The Independent Directors believe that another important change in the marketrelates to the approach taken by RSLs towards the repair and maintenance oftheir social housing stock. Traditionally, Government incentives and inspectionregimes have encouraged RSLs to prioritise their new build housing programmes,with grant funding favouring those capable of delivering large scale programmeswith minimum subsidy. Whilst this remains the case, measures relating to therepair and maintenance of existing stock have now become key features under theinspection regime, with RSLs expected to demonstrate satisfactory levels ofservice to their tenant population alongside satisfactory levels of value andefficiency. Those who fail to meet minimum criteria now risk their developmentprogrammes being frozen and ultimately the threat of Housing Corporationsupervision. As a result, most RSLs have been forced to review their approachtowards repair and maintenance activity, and many are now seeking to adopt morestrategic partnering led solutions. Details of and Reasons for the Acquisition Taking into consideration the evolving market in which the Company operates (assummarised above), the Independent Directors believe that the Acquisition will: • position the Enlarged Group as one of the UK's leading specialist service providers to the social housing market, and one of the only providers able to offer a comprehensive and integrated service across all sectors; repair and maintenance, refurbishment and improvement and new build; • give Inspace greater exposure to the RSL maintenance and improvement market, in addition to its traditional local authority customer base; • provide transferable contracting and supply chain management skills to enable Inspace Partnerships to expand into stand-alone Decent Homes refurbishment schemes; • afford access to the new build social housing and the low cost homes sectors, significantly enhancing growth prospects; • significantly increase the Company's earnings visibility with secured orders and Framework Agreements of around £1.35 billion; and • ensure that the Enlarged Group is well positioned to take advantage of any change in central government policy relating to funding social housing projects. For these reasons, inter alia, the Independent Directors believe that strategic,operational and financial benefits can result from the Acquisition. Subject to satisfaction of the conditions (see further below), your Board hasagreed to pay an equity value of £64.535 million which is to be satisfied by theallotment and issue of the 13,201,320 Consideration Shares at 151.5p per shareand by £44.535 million in cash. The £44.535 million in cash is to besupplemented by the £7.5 million in surplus cash resources in Widacre, giving atotal cash payment to the Vendors of £52.035 million. In order to fund the cashelement of the consideration and the costs of the transaction, and to providefurther working capital facilities for the Enlarged Group, the Company hasconditionally increased its bank facilities with the Royal Bank of Scotland. New Director The board has agreed that Christopher Durkin, currently Chief Operating Officerof Widacre, will be appointed to the board of Inspace on completion of theAcquisition. Conditions As Colin Enticknap holds Widacre Shares and is a director and shareholder ofWillmott Dixon Limited, the Acquisition is deemed to be a "Related PartyTransaction" under the AIM Rules and also a substantial property transactioninvolving directors under Section 320 of the Act. Pursuant to Section 320 ofthe Act, the Acquisition requires the prior approval of Shareholders in generalmeeting. The Acquisition is therefore conditional on, inter alia, the passingof Resolution 1, which will be proposed at the Extraordinary General Meeting,and Admission. In addition, pursuant to the AIM Rules, the approval of theAcquisition requires a confirmation from the Independent Directors that havingconsulted Seymour Pierce (its Nominated Adviser) they consider the terms of theAcquisition to be fair and reasonable insofar as the Shareholders are concerned.For the purposes of the Acquisition, Colin Enticknap is not an IndependentDirector. Application will be made for Admission of the Consideration Shares to trading onAIM and it is expected that dealings in the Consideration Shares will commenceon AIM at 8.00 a.m. on 8 September 2006. The Consideration Shares will rankpari passu in all respects with the existing Ordinary Shares in issue. Irrevocable Undertakings Irrevocable undertakings to vote in favour of the Resolutions have been given byShareholders who own, in aggregate, 26,982,965 Ordinary Shares, representingapproximately 39.80 per cent. of the current issued share capital of theCompany. Extraordinary General Meeting The Acquisition is conditional upon, inter alia, the approval of Shareholders,which is to be sought at an Extraordinary General Meeting to be convened for 12noon on 22 August 2006 Recommendation from the Independent Directors The Independent Directors, having consulted with Seymour Pierce in respect ofthe AIM Rules, consider the terms of the Acquisition to be fair and reasonableinsofar as Shareholders are concerned. Accordingly, the Independent Directorsunanimously recommend you to vote in favour of the Resolutions to be proposed atthe Extraordinary General Meeting, as we intend to do so in respect of our ownbeneficial holdings of, in aggregate, 960,471 Ordinary Shares representingapproximately 1.42 per cent. of the Company's existing issued share capital. Colin Enticknap, who is not an independent director in respect of theAcquisition, also intends to vote in favour of the Resolutions in respect of hisbeneficial holding of 3,787,665 Ordinary Shares representing 5.59 per cent. ofthe Company's existing issued share capital. Expected timetable Circular posted to Shareholders 25 July 2006 Latest time and date for receipt of the Form of Proxy 12 noon on 20 August 2006 Extraordinary General Meeting 12 noon on 22 August 2006 Dealings expected to commence in the Consideration Shares 8 September 2006on AIM Definitions The following definitions apply throughout this announcement, unless the contextrequires otherwise: "Act" the Companies Act 1985 (as amended) "Acquisition" the proposed acquisition of the entire share capital of Widacre from the Vendors "Acquisition Agreement" the conditional share purchase agreement dated 21 July 2006 made between the Company (1) and the Vendors (2) "Admission" admission of the Consideration Shares to trading on AIM becoming effective in accordance with the AIM Rules "AIM" the AIM market of the London Stock Exchange plc "AIM Rules" the rules applicable to companies whose shares are traded on AIM published by the London Stock Exchange plc "Board" or "Directors" the directors of the Company at the date of the Circular "Company" or "Inspace" Inspace plc "Consideration Shares" the 13,201,320 new Ordinary Shares to be issued to the Vendors pursuant to the Acquisition Agreement (such number of shares having been calculated on the basis of the average mid market closing price on the 40 days prior to 21 July 2006 (subject to a minimum of £1.515 per share)) "Enlarged Group" the Company and its subsidiaries as enlarged after the Acquisition "Extraordinary General Meeting" or the extraordinary general meeting of the "EGM" Company to be held on 22 August 2006 at 12 noon or any adjournment thereof, notice of which is set out at the end the Circular "Form of Proxy" the form of proxy which accompanies the Circular for use by Shareholders in connection with the EGM "Framework Agreement" the statement of terms or principles under which Willmott Dixon Housing will contract with Registered Social Landlords "Independent Directors" Christopher Sheridan, David Batchelor, Duncan Forbes and Andrew Telfer "Ordinary Shares" ordinary shares of 2 pence each in the capital of the Company "New Director" Christopher Simon Durkin "Resolutions" the resolutions set out in the Notice of EGM at the end of the Circular to be proposed at the EGM "Seymour Pierce" Seymour Pierce Limited "Shareholders" holders of Ordinary Shares "Vendors" Willmott Dixon Limited, Steven Ian Graham Dixon, Christopher Simon Durkin, Colin Enticknap, Rathbone Jersey Trustees Ltd and Richard John Willmott "Widacre" Widacre Limited, the holding company of Willmott Dixon Housing and Widacre Homes "Widacre Homes" Widacre Homes Limited "Widacre Shares" 10,420,000 ordinary shares of 1 pence each and 1,500,000,000 redeemable preference shares of 1 pence each in the capital of Widacre "Willmott Dixon Housing" Willmott Dixon Housing Limited This information is provided by RNS The company news service from the London Stock Exchange