Management Resource Solutions Regulatory News (MRS)

11 January 2016

Management Resource Solutions Plc

Acquisition of Bachmann Plant Hire Pty. Ltd.

and

Readmission of the Enlarged Group to trading on AIM

Management Resource Solutions Plc ("MRS", "Company" or the "Group"), the human capital resource consultancy quoted on AIM, is pleased to announce the proposed acquisition of Bachmann Plant Hire Pty Ltd. ("Bachmann") (the "Acquisition") for a consideration of up to A$13.4 million.

Highlights

· MRS has agreed, conditional inter alia upon the passing of the resolutions at the General Meeting and re-admission of the Company's ordinary shares to trading on AIM ("Admission"), to acquire Bachmann for an aggregate consideration of up to A$13,399,999 (approximately £6.5 million)

· Bachmann is a bulk earthworks specialist with over 50 years of operating history providing civil construction services in Queensland, Australia. Complementary to MRS's service offering, it provides "wet" plant hire (whereby Bachmann supplies both equipment and operators) to a variety of clients in the civil and earthworks sectors and currently employ over 100 staff with a fleet of in excess of 200 vehicles (including scrapers, dozers, excavators, compactors, graders, dump trucks and water trucks).

· Bachmann turned over A$21,740,000 for the year ended 30 June 2015, producing a Profit Before Tax of A$1,957,000

· The Acquisition constitutes a reverse takeover under the AIM Rules for Companies and accordingly is conditional inter alia on the approval of shareholders being obtained in general meeting

· The Company has published an AIM admission document (the "Admission Document") containing details of the Acquisition and convening a general meeting to be on 28 January 2016 at 6.00 p.m. Queensland time (8.00 a.m. UK time). A copy of the Admission Document has been sent to shareholders and will be available on the Company's website.

· The Company is also pleased to announce the appointment of Christopher John Berkefeld, 61, as a non-executive director with effect from Admission. Chris has over 20 years' experience on public and private company boards in New Zealand and Australia and currently holds several non-executive directorships.

· The Ordinary Shares were suspended from trading on 19 August 2015 pending publication of an AIM Admission Document in relation to the acquisition of Bachmann. Application has been made for trading in the Ordinary Shares to resume with effect from 14:30 today, 11 January 2016.

Paul Morffew, CEO of MRS said:

"I am very pleased to announce the transformative and immediately earnings enhancing acquisition of Bachmann; which brings to the Group a business with a long history of wet plant hire, long term customer relationships and which will add a division the Company enhancing our service offering to existing customers and allow us to pursue new combined contracts further up the value chain.

"I am also pleased to announce the re-commencement of our shares to trading on the London Stock Exchange, following a period in which we as a management team have been busy bringing this transaction to fruition."

For further information:

Management Resource Solutions Plc

Acquisition of Bachmann Plant Hire Pty. Ltd.

and

Readmission of the Enlarged Group to trading on AIM

Management Resource Solutions Plc ("MRS" or "Company") is pleased to announce the proposed acquisition of Bachmann Plant Hire Pty Ltd. ("Bachmann") (the "Acquisition") for a consideration of up to A$13.4 million.

The Acquisition constitutes a reverse takeover under the AIM Rules for Companies and accordingly is conditional inter alia on the approval of shareholders being obtained in general meeting.

The Company has published an AIM admission document (the "Admission Document") containing details of the Acquisition and convening a general meeting to be held at the offices of MRS, Suite 30402, Tower 3, Level 4, 9 Lawson Street, Southport, QLD 4215, Australia on 28 January 2016 at 6.00 p.m. Queensland time (8.00 a.m. UK time). Copies of the Admission Document have been sent to shareholders and are available to download from the Company's website www.mrsplc.net.

Overview

MRS provides a fully managed service that includes engineering design, procurement, fabrication, site construction and commissioning. Facilities experience includes full site services involving civil, welding, structural, mechanical and piping. Specific project work involves oil & gas and fuel storage tanks, ancillary piping, pipelines and associated works.

Information on Bachmann

Bachmann is a bulk earthworks specialist with over 50 years of operating history providing civil construction services in Queensland, Australia. They provide "wet" plant hire (whereby Bachmann supplies both equipment and operators) to a variety of clients in the civil and earthworks sectors and currently employ over 100 staff with a fleet of in excess of 200 vehicles (including scrapers, dozers, excavators, compactors, graders, dump trucks and water trucks).

Bachmann have numerous long term contracts with a wide base of corporate and public sector clients in the oil & gas, mining, civil engineering, infrastructure and construction sectors, including BMD Construction, Pensar Civil and DAC Constructions, as well as local government. With the mining industry slowing, there has been a boom in infrastructure and construction in Australia due to government investment and initiatives. The Australian Government has made commitments to $50 billion for current and future investments of which $43.9 billion is in the Infrastructure Investment Programme.

Bachmann has also recently started to work in the development of sub divisions and housing estates in the Ipswich, QLD region which is a growth corridor towards Toowoomba in the south west of Brisbane.

There have been 28 declared Priority Development Areas (PDAs) in Queensland. PDAs are parcels of land, identified for specific accelerated development with a focus on economic growth.

The Ripley Valley PDA was declared on 8 October 2010 and covers a total area of 4680 hectares located in one of the largest industry growth areas in Australia. The Ripley PDA is an opportunity to provide approximately 50,000 dwellings to house a population of approximately 120,000 people and Bachmann has tendered on the first stage development of approximately 4,000 of these dwellings, a decision on which is expected in the first quarter of 2016.

Terms of the Acquisition Agreement

MRS has agreed, conditional inter alia upon the passing of the resolutions at the General Meeting and re-admission of the Company's ordinary shares to trading on AIM ("Admission"), to acquire Bachmann for an aggregate consideration of up to A$13,399,999 (approximately £6.5 million) as follows:

· A$8.2 million (approximately £4.0 million) will be paid in cash upon Completion, less an amount equal to 70 per cent. of the aggregate monetary value of the employee entitlements (which is not anticipated to be a material sum) and less an amount required to repay the outstanding equipment finance of Bachmann (estimated to be approximately A$4 million (approximately £2.0 million));

· a completion statement setting out the net assets of Bachmann as at the date of Completion will be agreed after Completion. If the net assets amount is a positive number, MRS must pay that amount to the Vendors. If the net assets amount is a negative number, the Vendors must pay that amount to MRS. It is not currently envisaged that this will be a material sum; and

· up to A$5.2 million (approximately £2.5 million) will be paid in three earn-out payments within approximately 80 business days of the end of the financial years ending 30 June 2016, 30 June 2017 and 30 June 2018. These earn-out payments will be satisfied either in cash or by the issue of new Ordinary Shares at MRS' discretion.

The earn-out payments will each be for A$1,333,333 subject to adjustment based upon Bachmann's earnings before interest and taxation ("EBIT") in the financial year preceding the date of payment.

The earn-out payments will be reduced on a dollar for dollar basis if Bachmann's EBIT falls below certain thresholds and increased on the basis of an additional 50¢ for every dollar the EBIT exceeds certain target levels, as set out below:

The additional earn-out payments are capped at A$400,000 per annum, making the maximum payment in each year A$1,733,333.

In the event that MRS chooses to satisfy the earn-out payments by issue of new Ordinary Shares, it must procure that the Company issues a number of Ordinary Shares of equal value to the earn-out payment, such number of Ordinary Shares to be calculated on the basis of a price per Ordinary Share which is equal to the arithmetical average of the closing mid-market price of an Ordinary Shares for each of the 10 business days immediately prior to the date on which the earn-out payment is to be made.

Financing of the Acquisition

To finance the cash consideration payable by MRS to the Vendors under the Acquisition Agreement, the refinance of Bachmann's existing equipment finance and working capital, MRS has obtained approval for a number of debt facilities with Westpac Banking Corporation ("Westpac"), as follows:

1. A$4,000,000 bank bill business loan facility for MRS to assist with the purchase of Bachmann, which is for a 2 year term;

2. A$4,200,000 equipment finance facility for MRS to assist with the refinance of equipment finance loans held by Bachmann, which is for a 4 year term;

3. A$20,000 corporate credit card facility for MRS;

4. A$2,600,000.00 invoice factoring facility for Bachmann;

5. A$800,000.00 invoice factoring facility for MRS;

6. A$650,000.00 revolving credit facility for Bachmann; and

7. A$50,000.00 corporate credit card facility for Bachmann.

These facilities are secured by all of the assets and undertakings of MRS and Bachmann, a guarantee and indemnity granted by MRS and Bachmann and guarantees and indemnities granted by Paul Morffew, CEO of MRS.

Summary Financial Information

Set out below is a summary of the financial performance for the three years ended 30 June 2014 for both MRS and Bachmann, which has been extracted without material adjustment from the audited accounts of those companies. Shareholders should read the accounts in their entirety and not rely solely upon the summarised information below.

MRS

The year ended 30 June 2015 saw a material increase in MRS' revenue due to the work done for Pacific Energy Aviation (PNG) Limited, although this was offset by a decline in the revenue derived from the Group's traditional consulting business.

Costs during the year included non-recurring items relating to the successful IPO and the aborted acquisition of the D&M group of companies amounting to approximately A$2m. In addition, the Group recognised a share based payment charge of A$490,000 in respect of the Options. Excluding these items, the profit before taxation for the year ended 30 June 2015 would have been approximately A$786,000, representing a significant improvement on the prior year.

Bachmann

Bachmann's business includes a number of large scale contracts which cause material movements in the profitability of the company as the accounting impact of work over many months or years is recognised in whole at once or in a small number of tranches. 

Current Trading and Prospects

MRS

Since 30 June 2015, the date to which the last audited accounts of the Group were prepared, MRS has tendered on additional work in the Asia Pacific region, including for a project management assignment valued at A$77M and a training solution in New Caledonia for yearly work of A$3.5M, both of which are still in the tender process. On 7 October the Company announced that it had won a new A$5.5m contract in Papua New Guinea connected with the existing work being undertaken there. The Company is currently experiencing a decline in its traditional consulting work but this has been compensated for by project management activity.

Bachmann

Bachmann has traditionally steered away from tender scenarios and has worked on word of mouth marketing. It tendered on its very first project in August 2015 for contracting works of A$12M, the award of which is still pending. They have increased their turnover from last year at the same time by approximately 20 per cent, and increased their staff numbers from 100 to 110 persons.

General Meeting

The Company has posted an AIM Admission Document to shareholders which contains a notice convening the General Meeting to be held at the offices of MRS, Suite 30402, 9 Lawson Street, Southport QLD 4218 Australia on 28 January 2016 at 5.00pm local time (7.00am London time) at which resolutions will be proposed inter alia to approve the Acquisition as a reverse takeover for the purposes of Rule 14 of the AIM Rules.

The Directors and persons associated with them who are interested, in aggregate, in 15,303,629 Ordinary Shares representing 46.6 per cent. of the Existing Ordinary Shares and voting rights of the Company have undertaken to vote in favour of the resolutions.

Proposed Director

The Company is pleased to announce that Christopher John Berkefeld, 61, has agreed to join the Company as a non-executive director with effect from Admission.

Chris has over 20 years' experience on public and private company boards in New Zealand and Australia and currently holds several non-executive directorships.

His background is in industrial, waste and mining services in Australia along with engineering and heavy transportation services in Europe and Asia. He was with services company Brambles for 25 years and ran the waste management and industrial services businesses upon their sale to a private equity group in 2006.

Upon his appointment Chris will sit on both the audit and remuneration committees of the Company.

The following information is disclosed in accordance with Schedule 2, paragraph (g) of the AIM Rules for Companies. Mr Berkefeld is currently a director or partner of the following

Hiway Group Pty Ltd

HSE Group Pty Ltd

Wagner Group Pty Ltd

Within the past five years, Mr Berkefeld was previously a director or partner of the following:

Wilmot Holdings Pty Ltd1

Wilmot Operations Pty Ltd2

WSN Environmental Solutions Pty Ltd

Note 1: Wilmot Holdings Pty Ltd was placed into voluntary liquidation on 5 August 2015

Note 2: Wilmot Operations Pty Ltd was placed into voluntary liquidation on 1 July 2015

Mr. Black does not at present hold any shares in the Company.

Trading of Ordinary Shares on AIM

The Ordinary Shares were admitted to trading on AIM on 11 December 2014 and the Company is subject to the AIM Rules. The Ordinary Shares were suspended from trading on 19 August 2015 pending publication of an AIM Admission Document, which has now been sent to shareholders, and application has been made for trading to resume with effect from 14:30 today, 11 January 2016.

The Acquisition is classified as a reverse takeover of the Company under the AIM Rules, which requires that the Company seek Shareholder approval of the Acquisition and apply to have its Ordinary Shares readmitted to trading on AIM. Application will be made to the London Stock Exchange for the Ordinary Shares to be readmitted to trading on AIM with Admission expected to take place on 29 January 2016, subject to the passing of the resolutions by shareholders at the General Meeting and the Acquisition completing.

If the Acquisition does not complete for any reason, then the Ordinary Shares will continue to be admitted to trading on AIM.