23 Feb 2023 11:07
This announcement contains inside information
MJ Hudson Group plc
(the "Company", "Group" or "MJ Hudson")
Additional Disclosure Regarding Related Party Transactions
MJ Hudson Group plc (AIM:MJH) announces that, as part of the broader accounting review currently being undertaken, it has reviewed, and continues to review, the specific circumstances surrounding certain related party transactions and certain working capital loans taken out by two subsidiaries of the Company.
Background
Prior to its IPO on 12 December 2019, the Company had historically used short term working capital loans from a variety of loan providers to support its cash flow, and £1.2 million of these loans remained outstanding at the end of June 2020 ("FY 20"), as disclosed in the notes to the FY 20 accounts. As a result of the review being undertaken, the Board now understands that a number of these working capital loans had been personally guaranteed by the then CEO, Matthew Hudson, and for which guarantees, HCO Global Limited ("HCO Global"), a personal consultancy company and family office owned by Mr Hudson and his wife, charged a sum of £18,763, with such sum included in the FY 20 accounts.
These working capital loans were paid back over the course of the financial year ending 30 June 2021 ("FY 21") following receipt of the April 2021 senior loan facility ("Loan Facility") and the FY 21 accounts noted that at the date of the signature of the accounts these had all been fully repaid. It is now understood that Mr Hudson provided personal guarantees in respect of a number of the repaid short term working capital loans, for which HCO Global charged a sum of £61,399 over the year ended June 21, which sum was included in the total paid to HCO Global in the section on related party transactions in the FY 21 accounts.
As the terms of the Loan Facility restricted the level of any additional borrowings, no further significant working capital loans were expected. However, between November 2021 and June 2022, a further twelve working capital loans were entered into by two Group subsidiaries, with approximately £1.5 million outstanding at the end of June 2022, and with a number of these further working capital loans personally guaranteed by Mr Hudson. HCO Global charged a further £13,202 during the year. None of the working capital loans in the two Group subsidiaries during this period was brought to the attention of the Board or the Company's Audit and Risk Committee or to the attention of its senior lender until late 2022.
Since 30 June 2022, further working capital loans were entered into by the same two Group subsidiaries with an aggregate amount of circa £1.2 million. The aggregate amount currently outstanding under the working capital loans as of 31 January 2023 is £970,000. The Company is in discussion with the relevant loan providers in order to agree future repayment arrangements. No fees were charged by HCO Global post June 2022.
Related Party Transactions
While the FY 20 and FY 21 Accounts disclosed the aggregate payments to HCO Global and the related party connection, the nature of the transactions that led to these payments was not disclosed to the Board or set out in the Accounts. The provision of personal guarantees by Mr Hudson in relation to a number of the working capital loans, and the receipt of payments by HCO Global in respect thereof, would likely have been treated as related party transactions under the AIM Rules for Companies requiring disclosure at the time.
In addition, and as part of the Board's ongoing review, the Board has taken note that invoices in the amount of £166,430 were raised by HCO Global and paid by the Company for "services in relation to fundraising support for MJ Hudson IPO". Although later noted in the FY 20 accounts as part of an aggregate disclosure of payments during the year to HCO Global and the related party nature, as these related to work undertaken pre-Admission, the Board considers that these payments and any contract relating to them should have been brought to the attention of the Board and the Nominated Adviser and disclosed in the Admission Document as a related party transaction.
Under AIM Rule 13, the Board is required to consider, having consulted with its Nominated Adviser, whether the terms of related party transactions are fair and reasonable in so far as shareholders are concerned. Given that the Board and its advisers continue their accounting review, the Directors cannot confirm, and Cenkos cannot advise the Board, that the personal guarantees or the HCO Global payments were fair and reasonable.
For further information, please contact:
MJ Hudson Group plc +44 20 3463 3200
Geoff Miller, Executive Chairman
Cenkos Securities plc (Nomad and Broker) +44 20 7397 8900
Giles Balleny
Stephen Keys
Callum Davidson
Buchanan (PR Adviser) +44 20 7466 5000
Chris Lane
Jack Devoy
George Cleary