MED.L Regulatory News (MED)

6 Sep 2006 07:03

MicroEmissive Displays Group PLC06 September 2006 6 September 2006 MicroEmissive Displays Group plc ("MED" or the "Company") Placing of 26,500,000 new Ordinary Shares to raise approximately £5.0 million (net of expenses) and Share Re-organisation MED, the AIM listed designer and manufacturer of low-power microdisplays usinglight emitting polymers for portable consumer electronics products, todayannounces its intention to raise approximately £5.0 million (net of expenses) byway of a Placing. Summary of the Placing: • Placing of 26,500,000 Placing Shares at a price 20p per share to raise approximately £5.0 million (net of expenses). • Net proceeds of the Placing will strengthen the Company's balance sheet and help secure the Company's planned move to high-volume manufacturing of its product, eyescreen, in 2007. • New manufacturing facilities to be located in Dresden, Germany, with the first volume shipment from these facilities anticipated in the second quarter of 2007. • Market opportunity in "video-on-the-move" applications as well as the electronic viewfinder market identified. • Traction being achieved with potential customers - first letter of intent received in June 2006 for volume product to commence in 2007. Christopher Smith, Chairman of MED, said: "We are delighted with the progress that Bill Miller and his team have made overthe last 12 months. The proceeds from this placing will help secure theCompany's planned move to volume manufacturing in 2007 in Dresden, Germany. Webelieve that this will enable MED to take advantage of what we consider to besignificant market opportunities for our product, eyescreen." A circular containing a notice of extraordinary general meeting convened for 11a.m. on 2 October 2006 is today being sent to shareholders of the Companyoutlining the terms of the Placing and seeking Shareholder approval to, interalia, enable the Directors to allot the Placing Shares in connection with thePlacing. This summary should be read in conjunction with, and is subject to, the fulltext of the attached announcement. For further information, please contact: MicroEmissive Displays 0131 650 7764Bill Miller, Chief Executive Arbuthnot Securities Limited 020 7012 2140Neil KirtonIan Williams Tavistock Communications 020 7920 3150Christian Taylor-WilkinsonMatt Ridsdale MicroEmissive Displays Group Plc ("MED" or the "Company") Placing of 26,500,000 new Ordinary Shares to raise approximately £5.0 million (net of expenses) and Share Re-organisation 1. Introduction MED today announces that it has conditionally placed in aggregate 26,500,000Placing Shares at a price of 20p per share. Once completed, the Placing willraise approximately £5.0 million (net of expenses). The net proceeds of thePlacing will strengthen the Company's balance sheet and help secure theCompany's planned move to high-volume manufacturing of its product, eyescreen,in 2007. The Placing is conditional, inter alia, upon the Company obtaining approval fromits Shareholders to increase its authorised share capital, grant the Boardauthority to allot the Placing Shares, enable the intended Share Re-organisationto proceed and to disapply statutory pre-emption rights which would otherwiseapply to, inter alia, the allotment of the Placing Shares. The Placing is alsoconditional upon Admission. The Placing is being made on a non pre-emptive basis as the time and costsassociated with a pre-emptive offer resulting from the introduction of the EUProspectus Rules (which came into force in July 2005) are considered by theDirectors to be excessive. The making of a pre-emptive offer would require theproduction of a prospectus which would have to comply with the Prospectus Rulesand be pre-vetted and approved by the FSA. 2. Market opportunity, strategy and customer update MED's product, eyescreen, is a polymer organic top light emitting diode("P-OLED") based full-colour microdisplay. The Directors believe that eyescreenremains a compelling and cost-effective product, the key elements of whichrelative to competing products are the small, lightweight nature of the productcoupled with low power requirements and high image quality. The Directors believe that significant growth opportunities exist in the mobileentertainment and video-on-the-move market segments. It is estimated that theglobal market for mobile entertainment and the global mobile TV and videocontent market will be worth US$40 billion and over US$4 billion respectively by2010 (source: Informa). The Directors believe that MED's P-OLED technology hasthe potential to be an enabling technology for this marketplace, particularly inrelation to the development of the wearable headset market for both monocularand binocular products. The Directors believe that the wearable headset marketnow represents the largest potential market opportunity for eyescreen in theshort to medium term and that eyescreen is achieving traction with potentialcustomers in this area. The high-volume electronic view finder ("EVF") market, including camcorders,digital still cameras ("DSCs") and digital video cameras ("DVCs"), continues topresent an important target market for MED. The Directors believe that theadvantages of P-OLED technology could over time enable MED to take a share ofthis market. The Company intends to re-engage with tier one suppliers in the EVFmarket once the Company's volume manufacturing arrangements are operational. In addition, the Directors believe that there are further potential markets forMED's product. These include industrial, medical and communicationsapplications. For example, eyescreen is currently being evaluated for potentialuse in thermal imaging equipment and is also undergoing approval for use in amedical product. MED continues to refine its strategy to best position the Company in theevolving potential market for eyescreen. In order to engage further with allpotential customers, MED is keen to secure the Company's planned move tohigh-volume manufacturing of eyescreen in 2007. Alongside this, and in view ofboth the interest generated in eyescreen and the broad nature of the potentialapplications, MED has recently been expanding its sales and marketingactivities. This has culminated in the recent announcement of the appointment ofPaul Van Eynde to the Board as Sales & Marketing Director. Potential customers eyescreen has been well received at a number of trade shows, including the 3GSMConference in Barcelona in March this year, where eyescreen was previewed as oneof three most exciting products, and at the Society for Information Displays'2006 International Symposium, Seminar and Exhibition ("SID 2006"). This exposurehas led to an increased rate of customer enquiries and requests for productsamples. The Company is continuing its discussions with potential customers regardingsignificant off-take agreements for product in 2007 and beyond; in June 2006 MEDreceived a letter of intent from a customer for volume product to commence in2007. Discussions with other potential customers are ongoing, and the Directorsanticipate further progress in the near future. 3.Operational update and volume manufacturing plan Since the appointment of a new senior management team, the Company has achievedsignificant operational progress. In particular, the shipment of MED's firstproduction order in December 2005 was an important milestone for the Company.MED has fulfilled its existing customer obligation with its first generationdisplay technology. The Company has subsequently focused the Edinburgh facilityon the final development of its next generation eyescreen display, which MEDwill manufacture when the Company moves to volume manufacturing. MED's key objective in 2006 is the installation of volume manufacturingequipment to enable large-scale manufacturing of eyescreen. The Company's volumemanufacturing plan is now under way, with initial orders placed in June 2006 forthose pieces of equipment with the longest lead times. The Directors areconfident that the key elements of the equipment will be in place by December2006, with qualification and characterisation taking place in early 2007, andvolume shipment capable of commencing during the second quarter of 2007. Unlike MED's existing manufacturing equipment in Scotland, the new volumeequipment will be fully automated and capable of producing microdisplays incommercial volumes. The Directors anticipate that the recently introducedmanufacturing process improvements, the introduction of the next generationeyescreen product and the move to volume manufacturing in 2007 will improve themanufacturing yield achievable as well as the product quality and durability.The Directors believe that the ultimate capability of the new volume equipmentis up to 10 million units per annum. The Company has been considering a range of options for the location of thevolume manufacturing equipment and has concluded that Dresden, Germany is themost suitable location for this capital intensive operation. • Dresden is an established centre for the semi-conductor and polymer display industries: there are a number of semi-conductor businesses with a presence in the region and there is polymer expertise in the region. • The availability of clean room space in a facility which has a track record for volume manufacturing. • The Directors are more confident of the Company's ability to protect its intellectual property rights in this location compared to other potential manufacturing locations. The Company has held detailed discussions with the Saxony State Ministry forEconomic Affairs and Labour (the "Ministry") and the Inward Investment Councilfor East Germany with regard to locating MED's volume manufacturing facilitiesin Dresden. The Ministry is supportive of MED and its aims and, followingdetailed discussions, the Ministry has provided the Company with a letter ofintent setting out the availability of material grant funding for the Company. 4.Unaudited interim results for the six months to 30 June 2006 The Company today announced its unaudited interim results for the six months to30 June 2006. Pre-tax losses for the six month period to 30 June 2006 were £3.4million (six months to 30 June 2005 as restated for the introduction of FRS20:£2.7 million). Net funds at 30 June 2006 were £4.1 million (30 June 2005: £9.7million) after paying initial deposits of £0.7 million on certain pieces ofvolume manufacturing equipment with the longest lead times. 5.Funding and use of proceeds The Directors estimate that the outstanding payments in relation to the volumemanufacturing equipment amount to approximately £5 million payable by December2006. In addition, the Company will need to finance its ongoing working capitalcommitments both prior to the installation of the new equipment and during theramp up phase after installation. As set out above, in order to capitalise on the commercial and technicaldevelopments that it has achieved to date and to secure the opportunitiesavailable to MED, the Company requires additional financial resources.Specifically, the Directors believe that: • the investment in specialist equipment to enable the high-volume production of eyescreen is a key element of the Company's strategy; • the considerable interest being shown by potential customers has led to the need to increase the investment in sales and marketing activities; and • a stronger balance sheet will be required in order to provide comfort to existing and prospective commercial partners. Shareholders should note that in addition to funds raised pursuant to thePlacing, the fulfillment of MED's business plan will require additional sourcesof funding to be forthcoming, for example grant funding in Germany and assetfinance in respect of the volume manufacturing equipment. Whilst the Directorsare confident that such funding will be forthcoming, there can be no assurancethat such funding sources will be available or available on acceptable terms. 6.Directors' participation As part of the Placing, certain Directors will subscribe for up to 550,000Ordinary Shares at the Placing Price. The Company has also resolved toincentivise the executive directors going forward with option grants over up toan additional 950,000 Ordinary Shares at the average of the mid market price ofthe first three days following the Admission to trading of the Placing Shares. 7.Details of the Placing The Company proposes to raise approximately £5.0 million (net of expenses)through the issue of the Placing Shares at the Placing Price of 20p. The PlacingPrice represents a discount of 46.7 per cent. to the closing middle market priceof 37.5p on 5 September 2006, being the last practicable dealing day prior tothe date of this announcement. The Placing Shares will represent 60.7 per cent.of the Company's issued share capital immediately following Admission. The Placing Agreement Pursuant to the terms of the Placing Agreement, Arbuthnot has conditionallyagreed to use its reasonable endeavours, as agent for the Company, to place thePlacing Shares at the Placing Price with certain institutional and otherinvestors. The Placing Agreement is conditional upon, inter alia, theResolutions being duly passed at the EGM and Admission becoming effective on orbefore 8 a.m. on 4 October 2006 (or such later time and/or date as the Companyand Arbuthnot may agree, but in any event by no later than 3 p.m. on Friday 13October 2006). The Placing Agreement contains warranties from certain of the Directors infavour of Arbuthnot in relation to, inter alia, the accuracy of the informationcontained in this announcement and certain other matters relating to the Groupand its business. In addition, the Company has agreed to indemnify Arbuthnot inrelation to certain liabilities it may incur in respect of the Placing.Arbuthnot has the right to terminate the Placing Agreement in certaincircumstances prior to admission, in particular for force majeure or in theevent of a material breach of the warranties set out in the Placing Agreement.Pursuant to the Placing Agreement, Arbuthnot has agreed to the placingcommission due to them under that agreement be satisfied in new Ordinary Sharesat the Placing Price. Admission and dealings Application will be made to the London Stock Exchange for the Placing Shares tobe admitted to trading on AIM. The Placing Shares will, when issued, rank paripassu in all respects with the Existing Shares, including the right to receivedividends and other distributions declared following Admission. It is expectedthat such Admission will become effective and that dealings will commence on 4October 2006. 8.Share Re-organisation The nominal value of the Ordinary Shares is currently £0.65. As a matter ofScottish law the Company is unable to issue the Placing Shares at a PlacingPrice below their nominal value. It is therefore proposed to convert andre-designate the entire authorised share capital, both issued and unissued,consisting of 29,000,000 Ordinary Shares of £0.65 each, into 29,000,000 OrdinaryShares of £0.01 each and 29,000,000 Deferred Shares of £0.64 each thus enablingthe Company to implement the Placing. 9.Extraordinary General Meeting The circular to be sent out to Shareholders today contains a notice conveningthe EGM to be held at Alder Castle, 10 Noble Street, London EC2V 7QJ at 11 a.m.on 2 October 2006 at which the Resolutions will be proposed for the purposes ofimplementing the Placing. Copies of the circular incorporating the notice convening the EGM will beavailable for collection from the offices of Arbuthnot Securities Limited,Arbuthnot House, 20 Ropemaker Street, London EC2Y 9AR for a period of one monthfrom the date of this announcement. Placing statistics Placing Price 20pNumber of existing issued shares 17,132,206Number of Placing Shares being placed on behalf of the Company 26,500,000Estimated proceeds receivable by the Company, net of expenses £5.0 millionNumber of Ordinary Shares in issue following Admission 43,632,206Number of Placing Shares as a percentage of the enlarged issued share capital 60.7 per cent. Expected timetable of events 2006Latest time and date for receipt of Forms of Proxy 11 a.m. on 30 SeptemberExtraordinary General Meeting 11 a.m. on 2 OctoberAdmission and dealings in the Placing Shares expected to commence on AIM 8 a.m. on 4 October Definitions The following definitions apply throughout this announcement, unless the contextrequires otherwise: "Act" the Companies Act 1985, as amended "Admission" the admission of the new Ordinary Shares to trading on AIM "AIM" the AIM market of the London Stock Exchange plc "Arbuthnot" Arbuthnot Securities Limited, the Company's broker and placing agent "Board" or "Directors" the board of directors of MED "Deferred Shares" deferred shares of £0.64 each in the capital of MED "Extraordinary General the extraordinary general meeting of the Company Meeting" or "EGM" convened for 11 a.m. on 2 October 2006 (or any adjournment thereof) "Form of Proxy" the accompanying Form of Proxy for use by Shareholders in relation to the EGM "Group" MED and its subsidiary, MicroEmissive Displays Limited "MED" or "the Company" MicroEmissive Displays Group plc "Notice of EGM" the notice of EGM, set out at the end of the circular sent to shareholders "Ordinary Shares" ordinary shares in the capital of MED having a nominal value of £0.65 prior to the passing of Resolution 1 set out in the Notice of EGM, and following the passing of such Resolution, having a nominal value of £0.01 "Placing" the conditional placing to be undertaken by Arbuthnot as agent for the Company of the Placing Shares at the Placing Price to raise net proceeds of approximately £5.0 million "Placing Agreement" the conditional agreement dated 5 September 2006 made between the Company (1) and Arbuthnot (2) pursuant to which the Placing Shares will be conditionally placed at the Placing Price; "Placing Price" 20p per Placing Share; "Placing Shares" 26,500,000 new ordinary shares of £0.01 each which are to be conditionally placed in accordance with the terms of the Placing Agreement and whose allotment and issue is conditional on the approval of Shareholders at the EGM including such number of shares to be issued to Arbuthnot in satisfaction of their commission under the Placing Agreement "Resolutions" the resolutions numbered 1 to 7 set out in the Notice of EGM "Shareholders" the persons who are registered as the holders of Ordinary Shares "Share Issuance the authorities proposed to be granted by Authorities" Shareholders to the Directors, pursuant to Resolutions 4 to 7 (inclusive) set out in the Notice of EGM, to enable the Directors to issue Ordinary Shares and/or other securities of the Company, including the Placing Shares, free of pre-emption rights "Share the share re-organisation proposed to be effected by Re-organisation" Resolutions 1 to 3 set out in the Notice of EGM This information is provided by RNS The company news service from the London Stock Exchange