Kazera Global Regulatory News (KZG)

12 Jun 2006 07:01

Worthington Nicholls Group plc12 June 2006 RNS release 12 June 2006 Worthington Nicholls Group plc - Admission to AIM Raises £7.5 million for acquisitions and further organic expansion and £12.5 million for replacement capital Worthington Nicholls Group plc ("Worthington Nicholls" or "the Group"), the UK'slargest independent installer of air conditioning, heating, ventilation andchilled water systems, has successfully raised £20 million (before expenses), inaggregate, from institutional investors and VCTs ahead of its admission to AIM.Trading in the shares is expected to commence on AIM on 12 June 2006, under theticker symbol WNG. The Group is advised by Corporate Synergy Plc, its NominatedAdviser and Broker. On admission, Worthington Nicholls Group plc will have in issue 65,000,000Ordinary Shares, issued at a placing price of 50 pence per share. On marketdebut, the Group will be capitalised at £32.5 million. Of the funds raised, £7.5 million is in expansion capital, and £12.5 million isreplacement capital to allow for a partial exit of the Group's founder, PeterWorthington. The expansion funds will be used to provide working capital for continuedorganic expansion of the business and to fund acquisitions in both the UK andEuropean markets, in order to meet the demands of its growing customer base forsole supplier contracts across European operations. Mark Worthington, Chief Executive of Worthington Nicholls, said: "We are delighted to have successfully raised the money we need to fund ourrapid expansion. During a difficult and volatile period in the equity marketsour fundraising remained oversubscribed. We will now aim to repay investorsbelief in the Company and it's employees by delivering on our current strategy.With much more stringent environmental legislation and a preference by majorhotels and retail clients to deal with a single supplier, we are very optimisticabout expanding our operations and providing an unrivalled level of service." Placing statistics Placing price per Ordinary Share 50 penceNumber of New Ordinary Shares being issued pursuant to the Placing 15,000,000Number of Ordinary Shares in issue immediately following the Placing 65,000,000Market Capitalisation following the Placing at the Placing Price £32,500,000New Ordinary Shares as a proportion of the Enlarged Share Capital 23.08%Estimated net proceeds of the Placing receivable by the Group £6,570,000 Enquiries: Worthington Nicholls 0870 609 1829Mark Worthington, Chief ExecutiveDavid Levis, Corporate Director Gresham PR Ltd 020 7404 9000Neil BoomTanya Feness Corporate Synergy 020 7448 4400Brian Stockbridge / Romil Patel Information on Worthington Nicholls can be accessed via the Group's website:http://www.worthington-nicholls.co.uk/ Background information About Worthington Nicholls Group plc The Group operates as principal contractor for delivery of end to end solutionsin the air conditioning market, from initial survey through design andspecification to installation and ongoing maintenance. The UK market for new airconditioning capital equipment was approximately £650 million per annum in 2005.This figure does not include installation, design and ongoing maintenance costswhich the Directors estimate to be approximately a further £650 million in 2006.The Group currently operates throughout the UK and in Ireland and its aim is tobecome the pre-eminent support services supplier in the heating, ventilating andair conditioning sector in Europe. The business of the Group has been tradingfor over 33 years and has seen its revenue grow from approximately £4m to £13min the last five years. The Group's customers include a range of blue-chip companies operating in anumber of different market sectors including hotel and leisure, retail,restaurants, manufacturing and technology industries. The Group provides support services through its three trading divisions: • project management, design and installation; • maintenance; and • ventilation hygiene. A description of the business undertaken by the Group's trading divisions isgiven below. Project management, design and installation The Group has the capability to manage large scale air conditioning andventilation projects from commission to completion. It offers a full servicefrom survey and design to specification and installation. Large scale projectsoften require the involvement of a number of sub-contracted professional teamsincluding architects, main contractors, engineers and quantity surveyors. TheGroup has experience in managing such teams and all other aspects of the projectto seek to ensure that the costs stipulated during the tender process do notmaterially exceed budget. The costs of each project are fixed prior tocommencement including sub-contractor fees and materials. This approach isfavoured by many customers as it offers budgetary certainty and has led to theGroup winning a substantial amount of repeat business, from amongst othersHoliday Inn, MacDonald Hotels and Arcadia. Installation and commissioning are key areas of the Group's operations whichaccounted for 66 per cent. of the Group's total revenue for the six months ended31 March 2006. The Group has approved installer status for a number of the majormanufacturers of air conditioning equipment, including Daikin. Daikin, the Group's main supplier of air conditioning units, is the largestsupplier and manufacturer of air conditioning equipment in the UK with anapproximate 20 per cent. market share. Daikin has a global annual turnover ofover £3 billion and a research and development budget of over £100 million peryear. The Directors consider Daikin to be the market leader in the developmentand release of new generation air conditioning equipment. WNL was awarded ''dealer of the year'' in 2002, 2003 and 2004 by Daikin forachieving the highest sales in the UK of its air conditioning equipment. The Group also operates a 'just in time' inventory procurement system withDaikin, reducing the need to hold capital equipment stock. This allows the Groupto manage its working capital more efficiently without having to makesignificant up front payments. The Directors believe that in addition to providing the latest equipment andcompetitive tendering on project costs, the Group adopts innovative installationmethods based around its in-house capabilities, tailored to the needs of theindividual customer. On hotel retro-fit projects each room is on average out ofuse for 5 days, as opposed to an average period of 18 days prior to the Group'schange in operating model. This provides a measurable benefit to the customerwho is able to calculate the additional cost savings resulting from hotel roomsbeing unavailable for a shorter period of time. Owing to significant changes in EU legislation, which are described in thesubsection entitled EU Legislation below, the Directors consider that the marketfor the Group's services will continue to expand as customers replace older airconditioning units with more environmentally friendly and cost efficientsystems. The Group currently operates throughout the UK and in Ireland, but theDirectors intend to expand its operations throughout Europe over the comingyears. Maintenance Once a new piece of air conditioning equipment has been installed it requiresregular servicing to comply with, and retain, the manufacturer's warrantyprovided on all equipment installed by the Group. Servicing and maintenance of equipment are also required to ensure thatcustomers operate within and comply with an EU directive laid down to providesafe and clean environments. The Group provides post installation service andmaintenance packages designed to meet these needs. The Group's status as an approved installer has enabled it to negotiate with anumber of suppliers an additional two year manufacturer's warranty over andabove the more usual three year warranty. The customer can only rely upon thisextended warranty if it is supported by a five year maintenance contract. Thishelps to provide the Group with stable maintenance income over this period.Currently, the Group has over 300 customer sites in the UK and Ireland, where itprovides maintenance on air conditioning and mechanical and electricalequipment. The maintenance operations of the Group accounted for 20 per cent. of theGroup's total revenue for the six months ended 31 March 2006. The Directorsbelieve that the maintenance division forms a core part of the Group'soperations as it provides a stable and visible revenue stream to build upon. Ventilation hygiene Since 2003, the Group has undertaken duct cleaning of grease extract systemswithin commercial kitchens and dry air air conditioning supply duct work. The ventilation hygiene division has grown significantly since 2003 and now hasin excess of 130 customers including McDonalds, BHS, Little Chef, Burger King,and Marriot Hotels, with more than 7,500 customer sites on which it carries outjust under 50,000 service visits per annum. The Directors believe that to date demand for the Group's ventilation hygieneservices has been driven by customers' increased awareness of the fire hazardassociated with the accumulation of grease deposits in kitchen ventilation ductsand insurance companies requiring owners/occupiers of non-domestic premises toregularly maintain and clean ventilation ducts as a condition of insurancecover. Impending legislation due to be enacted later this year for all non-domesticpremises in England and Wales will, the Directors believe, require businesses toclean kitchen grease extraction systems regularly to prevent fires. TheDirectors consider that this legislative change will drive further growth in theGroup's Ventilation Hygiene Services division. In order to take advantage of these opportunities the Group is currentlynegotiating the exclusive UK rights to an automated duct cleaning system, whichwould decrease the Group's requirement for labour, whilst increasing margins andrevenue visibility. The Group is currently trialling this system on a number ofcustomer sites. KEY STRENGTHS The Directors believe that the business of the Group has the following keystrengths: • a 33 year operating track record; • the ability, profitably, to support a range of customers from multi-billionpound corporations to small independent retailers; • good visibility of future earnings due to its ability to support customerswith post-installation maintenance services; • significant gross profit margin (29 per cent. for the six months to 31 March2006), achieved by providing management of project sites and ongoing fullservice and maintenance packages at the end of a project; • the ability to negotiate favourable terms with suppliers through economies ofscale which in turn, can be passed on to customers which is helpful to theGroup's success during the tendering process; • regular cash flows generated from a customer base of over 7,500 client sites;and • Directors and key employees with substantial industry-specific experience. STRATEGY Organic Growth The Group's market is currently subject to several compelling drivers of growthas highlighted above in this document. The Directors believe that the Group cancontinue to exploit the large potential market available and will utilise thefunds to be received pursuant to the placing funds in order to do this. Geographical growth As the Group has grown, it has focused its efforts on readily accessiblemarkets, such as mainland Britain. The Group has, however, recently been invitedto tender both in the Republic of Ireland and mainland Europe. The Directorsconsider that these geographical markets offer significant growth opportunitiesfor future years and that neither market should present significant additionalchallenges because of the availability and mobility of the required labour forceand materials. Acquisitions The Group is regularly in discussions with competitors and is seekingappropriate acquisition targets which would increase the Group's turnover andprofit and would provide access to an enlarged customer base. The Directorsbelieve such acquisitions would further enhance the Group's principal contractorbusiness model. DIRECTORS Peter Worthington, aged 69, Non Executive Chairman Peter Worthington founded the business in 1973 as a sole trader. Previously heworked as a hotel engineer for Intercontinental Hotel Corporation working onprojects in Europe, Africa and South America where he became director ofengineering for all I.H.C. hotels in Latin America. Prior to this he served inthe army. He initially served in a six year apprenticeship in mechanicalengineering after leaving school in 1952. Mark Worthington, aged 40, Chief Executive Officer Mark joined the business in September 1985 as an apprentice engineer spendingnine years in the field. He progressed through the organisation to servicemanager and then general manager of the Seasonmaster division in September1997. In April 1999 the division was acquired by McLeod Russel Holdings Plc withMark spending 4 years as managing director reporting to the main board. Hereturned to Worthington Nicholls Limited in April 2003 as group chief executiveofficer and was instrumental in implementing the change in the business modeltaking the Group from its role as an air conditioning sub contractor to that ofa support services principal contractor. David Levis, aged 41, Corporate Director David Levis previously worked as finance and commercial director for SurfaceTransforms plc. He was responsible for all corporate activity including funding,shareholder relations, public relations and leading the company through itssuccessful flotations and fundraising, first on OFEX, then on AIM. Previously heworked in the corporate finance department of KPMG in Manchester for four and ahalf years, running business analysis and research for the northern region andadvising clients on mergers, acquisitions and corporate funding. David alsoworked in corporate finance at BDO Stoy Hayward, Manchester, advising on mergersand acquisitions. Prior to this, he established Ravenflow Limited, an aerospacedesign consultancy that he ran for three years working on the design of UK, USand European aircraft, after leaving British Aerospace plc where he worked forseven years in aerospace design. David is currently a director and shareholderin Noah North West Limited, a property developer operating in the affordablehousing sector. Finance Director - The Board have identified the need for a Finance Director andplan to interview suitably qualified candidates in the very near term. Alastair Stoddart, aged 63, Non Executive Deputy Chairman Alastair Stoddart is renowned in the City as an entrepreneur. As part owner ofCearns & Brown Limited he helped grow the company from revenues of £4m to £200mand sold the business in 2000 for £24m. Alastair was also chairman of LindleyCatering Limited which was also sold in July 2005. He is currently chairman ofWetherby Building Systems Limited. Stephen Mulligan, aged 55, Non Executive Director Stephen Mulligan's career spans over three decades of international hoteloperations at practically every level of the industry, having managed a numberof key properties in London as well as Intercontinental hotels in Dusseldorf,Hanover and Vienna. Prior to this he spent over six years in the Middle Eastwhere he was involved the opening of Intercontinental hotels in Dubai, Muscatand Bahrain. He is experienced in managing hotels through pre-opening,turnaround, refurbishment and re-branding. Until March 2004 Stephen was directorof operations for Intercontinental Hotels' and three Intercontinental brandedhotels in London, containing a total of some 1,200 rooms in the 5 star sector.Previously he was based in the Frankfurt corporate office of IntercontinentalHotels Group as area vice president of operations in northern Europe andresponsible for a portfolio of 27 hotels including Intercontinental, CrownePlaza, Holiday Inn and Express by Holiday Inn. This information is provided by RNS The company news service from the London Stock Exchange