Last checked at 27 May 2010 07:00
27 May 2010 Garner PLC Capital Reorganisation, Subscription, Debt Capitalisation and Change of Name
Garner PLC ("Garner" and or the "Company"), a leading provider of executive search, interim management and leadership consultancy services via its wholly owned subsidiary, Norman Broadbent, is pleased to announce a proposed Subscription, Debt Capitalisation and Capital Reorganisation. A summary of key points follows:
Fundraising and deferred consideration reduction
* Mr Pierce Casey and Mr Jon Moulton, acting in concert, to invest a total of £2 million via a subscription for 4,444,444 New Ordinary Shares at 45p per share (equivalent to 1.5p pre the Capital Reorganisation) equating to 57.58 per cent. of the Company (following implementation of the Proposals). Mr Casey intends to become Chairman following the announcement of the 2009 results. * Additional investment from key management within Garner. * Renegotiation of terms of the Norman Broadbent acquisition reducing the consideration from £5.5m to £2.03m, £627, 484 of which has already been paid.
Strategy
* Change of name to Norman Broadbent plc - re-establishing a global brand * Grow global franchise in USA, Far East and Latin America using similar licence arrangements to Italy and Middle East
Current Trading & Prospects
* Garner has traded profitably in 2010 to date * + Month on month improvement compared to second half of 2009 + 2009 loss of £3.5m including goodwill impairment of £1.9m and provisions of £0.35m
Andrew Garner, Chairman, commented:
"This investment and restructuring represents a complete rebirth of our company. We have a fantastic brand name with a strong global reputation and now we have the strength of balance sheet to drive this business forward. The Board looks forward to working with Pierce and Jon, we are confident that their knowledge and contacts will greatly assist the business in achieving its strategic goals. Using the successful formula of our licensing arrangements in Italy and the Middle East we will look to develop the Norman Broadbent brand in the USA, Far East and Latin America."
Contacts:Garner plc Tel: 020 7629 8822 Andrew Garner/Ben Felton Merchant John East Securities Limited Tel: 020 7628 2200 John East/Simon Clements Buchanan CommunicationsLimited Tel: 020 7466 5000 Tim Anderson/Isabel Podda/Christian Goodbody
Introduction
Garner today announces a number of proposals, which, if approved, will transform the Company and its prospects. These include:
* a subscription by Mr Pierce Casey for 2,222,222 New Ordinary Shares and Mr Jon Moulton for 2,222,222 New Ordinary Shares at 45p per New Ordinary Share, to raise £2,000,000 before expenses. Acting in concert, Pierce Casey and Jon Moulton will together hold 4,444,444 New Ordinary Shares, representing 57.58 per cent. of the Ordinary Share Capital of the Company (following the implementation of the Proposals); * an additional subscription by Mr Jeremy Daniels, a managing director of Norman Broadbent, for 77,777 New Ordinary Shares at 45p per New Ordinary Share, to raise an additional £35,000 before expenses; and * a renegotiation of the terms of the acquisition of the Norman Broadbent Companies and brand, reducing the deferred consideration payable for their acquisition in December 2008, by approximately £3,450,000.
The Subscription is conditional, inter alia, upon Shareholders passing the Resolutions at the General Meeting of the Company to grant the Directors the authority to allot shares and the power to disapply statutory pre-emption rights on allotment; the Subscription is also conditional upon the Subscription Shares being admitted to trading on AIM.
Background to the Proposals
In December 2008, Garner acquired the Norman Broadbent Companies from BNB. The acquisition of these companies, which trade under the Norman Broadbent brand name (which was also acquired as part of the acquisition) increased the scale of the group's operations substantially. The consideration for this acquisition was calculated by reference to a formula, with a minimum total consideration payable, largely as deferred consideration, of £5.5 million. Of this sum, £ 627,484 has been paid to date.
In June 2009, BNB was unable to continue trading and on 29 June 2009, three partners of Chantrey Vellacott DFK LLP were appointed joint administrators to it. On 25 January 2010 BNB entered into creditor voluntary liquidation. This has presented the Company with an opportunity to renegotiate the terms of the deferred consideration. Agreement has been reached with the three Chantrey Vellacott partners, as joint liquidators, for the remaining deferred consideration payable for the Norman Broadbent Companies to be reduced to £1.40 million. This reduces the total consideration to £2.03 million. The remaining deferred consideration will be paid in three elements: (i) £750,000 million payable in cash, which will be settled by an initial payment of £200,000 from the receipt of the proceeds of the Subscription, and additional payments of £ 250,000 and £300,000, payable on the first and second anniversaries of the initial payment, respectively; (ii) £93,450 which will be settled by the issue of 124,600 New Ordinary Shares on Admission; and (iii) £560,829 will be paid in quarterly instalments solely from the revenues generated from an overseas licensee, without recourse to the Company.
In order to raise the cash required for this purpose and to provide additional working capital, the Company has reached an agreement with the Subscribers under which they will invest, in aggregate, approximately £2.04 million into the Company by way of a conditional subscription for 4,522,221 New Ordinary Shares at 45p per New Ordinary Share. The Subscription is conditional on the passing of the Resolutions at the GM and the admission of the Enlarged Issued Ordinary Share Capital to trading on AIM.
The implementation of the Proposals will transform the Company's position and prospects. The raising of additional equity capital and the reduction in the deferred consideration payable will increase the Group's net assets and reduce a future liability, strengthening its balance sheet accordingly. Furthermore, the elimination of the need to make deferred consideration payments, save for the known amounts set out above, will free cash flow earmarked for that purpose, enabling it to be used for the development of the Group.
Current trading and prospects
The Company will shortly be releasing its Annual Report for the year ended 31 December 2009. As made clear in previous statements, these results will be very disappointing. A loss of £3.5 million is expected, which includes impairment to goodwill of £1.9 million and provisions of £0.35 million relating to the recent liquidation of BNB Recruitment Consultancy Limited.
However, since the last trading update issued on 30 March 2010, the Garner group has continued to trade profitably in 2010 to date. Revenues have been consistently higher month on month than those reported in the second half of 2009, primarily driven by a significant level of repeat business from key clients.
Also important for the future of the business is the contribution of licence fee income from the newly established offices in the Middle East and Italy. The Directors are pursuing similar licence arrangements in USA, the Far East and Latin America, which, in their opinion will not only provide incremental profits for the Company but, more importantly, will re-establish Norman Broadbent as a truly global brand.
2009 was clearly a very challenging year for the Company. However, the Directors believe that the difficult restructuring decisions taken during the last 12 months have resulted in a much more cost efficient business which, combined with the proposed capital injection, board changes and the steady recovery in trading, will provide the financial stability and operating platform required to drive growth and success.
The Capital Reorganisation
The Capital Reorganisation is being proposed because, at present, the spread between the bid and offer prices of the Company's shares is disproportionately large at 57 per cent. of the mid-market price and the Directors believe that there are too many shares in issue at too low a price. They also believe that the proposed consolidation will help to reduce the spread and increase liquidity when trading in the New Ordinary Shares commences. Accordingly, it is proposed to consolidate the Company's share capital, prior to carrying out the Subscription, on the following basis:
a) every 30 Existing Ordinary Shares will be consolidated into one new ordinary share of 30p; and
b) each of the issued ordinary shares of 30p resulting from the consolidation will then be subdivided into and redesignated as one New Ordinary Share and one New Deferred Share. The New Ordinary Shares will then have a nominal value of 1p each.
Holders of fewer than 30 Existing Ordinary Shares will not be entitled to receive a New Ordinary Share following the Capital Reorganisation. Shareholders with a holding in excess of 30 Existing Ordinary Shares, but which is not exactly divisible by 30, will have their holding of New Ordinary Shares rounded down to the nearest whole number of New Ordinary Shares following the Capital Reorganisation. Fractional entitlements, whether arising from holdings of fewer or more than 30 Existing Ordinary Shares, will be sold in the market and the proceeds will be retained for the benefit of the Company.
The rights attaching to the New Ordinary Shares will be identical in all respects to those of the Existing Ordinary Shares.
The New Deferred Shares will rank equally with the Deferred Shares, the Deferred A Shares and the Deferred B Shares and as such will have no voting rights and will not carry any entitlement to attend general meetings of the Company. They will carry only the right to participate in any return of capital to the extent of 29.9p per New Deferred Share but only after each New Ordinary Share has received in aggregate capital repayments totalling £10,000 per New Ordinary Share.
Accordingly, the New Deferred Shares will, for all practical purposes, be valueless and it is the Board's intention, at an appropriate time, to make an application to the court for the New Deferred Shares, Deferred Shares, Deferred A Shares and Deferred B Shares to be cancelled.
Existing share certificates will cease to be valid following the Capital Reorganisation and new share certificates in respect of the New Ordinary Shares will be issued by 22 June 2010; no certificates will be issued in respect of New Deferred Shares.
The Subscription
Under the terms of the Subscription Agreement, Pierce Casey, Jon Moulton and Jeremy Daniels have agreed to subscribe for 4,522,221 New Ordinary Shares, in aggregate, at the Subscription Price, raising approximately £2.04 million before expenses for the benefit of the Company.
The Subscription is conditional, inter alia, upon the passing of the Resolutions and the Admission of the Subscription Shares to trading on AIM.
The Subscription Shares, when issued and fully paid, will rank equally in all respects with the issued New Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the relevant Admission.
It is expected that Admission will become effective and dealings in the Enlarged Issued Ordinary Share Capital will commence on 15 June 2010.
Following the Capital Reorganisation, the Subscription and the Debt Capitalisation, the Company will have 7,719,446 New Ordinary Shares in issue and admitted to trading on AIM.
Board Changes
Following the announcement in June 2010 of the Company's financial results for the year ended 31 December 2009, it is intended that Andrew Garner will relinquish the chairmanship, continuing as chief executive, that Mr Casey will join the Board as Chairman and that Mr Brian Stephens will join the Board as a non-executive director. Mr Casey is an entrepreneur and private equity specialist with a successful record of involvement in the recruitment sector. Mr Stephens is a chartered accountant, with wide-ranging experience in private equity and mergers and acquisitions. Mr Casey is chairman and Mr Stephens is a director of Adelaide Capital Limited, an Irish registered private company which has to date acted principally as an investment office for Mr Casey's family interests, managing and structuring investments in public and private companies, real estate, treasury and alternative assets.
In addition, Benjamin Felton ACA and Janet Cameron will join the Board at the same time as Mr Casey and Mr Stephens. Ben Felton, aged 29, qualified as a chartered accountant with FW Stephens and then worked for UBS Investment Bank in the fixed income, currency & commodities division before joining Garner in January 2009 as finance director of Norman Broadbent and group financial controller. He will become the group chief financial officer. Jan Cameron, aged 47, is currently head of human resources and operations for the group and will become an executive director. Prior to joining the Company in 2006, she had been head of human resources for Homebase Limited and, before that, HR project manager for J Sainsbury plc for 14 years. She has been a lay member of the Reading Employment Tribunal since October 2005.
A further announcement will be made in due course.
Debt Capitalisation
Conditional on Admission, certain of the Directors, have agreed to capitalise loans (together with accrued interest, where applicable) and certain other payments owed to them, totalling £191,672. The debts will be satisfied through the issue by the Company of 425,937 New Ordinary Shares to these directors at the Subscription Price. The number of New Ordinary Shares to be issued as a result of the Debt Capitalisation and the resulting aggregate shareholding of each Director is as follows:
Existing debts to be New Ordinary Percentage of the share capitalised Shares issued on capital held following Debt the Subscription and Debt Capitalisation Capitalisation Andrew £80,000 177,777 9.03Garner John Bartle £100,000 222,222 6.68 Bruce £11,672 25,938 1.39Lakefield
Furthermore, Charles Auld, an existing Shareholder, has also agreed to capitalise a loan (together with accrued interest) by subscribing for 142,078 New Ordinary Shares at the Subscription Price.In addition, Mr Auld will receive a warrant over 97,777 New Ordinary Shares pursuant to a warrant instrument dated 27 May 2010. The warrant is exercisable at the Subscription Price immediately from the date of issue for a period of three years expiring on 26 May 2013.
It is expected that Admission will become effective and dealings in the 692,615 New Ordinary Shares arising from the Debt Capitalisation, which includes the New Ordinary Shares to be issued to Chantrey Vellacott as described above, will commence on 15 June 2010.
Following the Capital Reorganisation, the Subscription and the Debt Capitalisation, the Company will have 7,719,446 New Ordinary Shares in issue and admitted to trading on AIM.
Mr Bartle, Mr Lakefield and Mr Garner, as directors of the Company, are related parties for the purposes of the Debt Capitalisation. The Independent Directors, having consulted with MJES, the Company's Nominated Adviser, consider the terms of the Debt Capitalisation to be fair and reasonable insofar as the Company's shareholders are concerned. In advising the Independent Directors, MJES has taken into account the commercial judgement of the Independent Directors.
Change of name
In order to reflect the importance of the Norman Broadbent brand to the group, it is proposed to change the name of the Company to Norman Broadbent plc, and a special resolution to this effect is contained in the notice of GM.
Warrants
The Board believes that the motivation and retention of key employees is vital for the successful growth of the Company. The Board considers that an important element in achieving these objectives is the ability to incentivise and reward staff (including executive directors) by reference to the market performance of the Company in a manner which aligns the interests of those staff with the interests of shareholders generally. Accordingly, on Admission, and conditionally on the passing of the Resolutions, the Company will grant warrants to Sue O'Brian and Richard Robinson over 111,111 New Ordinary Shares and 55,555 New Ordinary Shares, respectively.
Circular and General Meeting
The circular to shareholders and notice of General Meeting will be posted to Shareholders and will be available from the Company's website, www.garnerinternational.com, later today. The General Meeting of the Company has been convened for 10.00 a.m. on 14 June 2010 at the offices of Merchant John East Securities Limited, 10 Finsbury Square, London EC2A 1AD.
Definitions The following definitions apply throughout this announcement unless the contextrequires otherwise: "Admission" the admission of the New Ordinary Shares and Subscription Shares to trading on AIM becoming effective in accordance with the AIM Rules "AIM" the AIM Market of the London Stock Exchange "AIM Rules" the rules published by the London Stock Exchange relating to AIM, as amended from time to time "Bancomm" Bancomm Limited "BNB" BNB Recruitment Solutions plc "BNBRC" BNB Recruitment Consultancy Limited
"Capital Reorganisation" the proposed consolidation and sub-division of every
30 Existing Ordinary Shares into one New Ordinary Share and one New Deferred Share "Debt Capitalisation" the proposed capitalisation of debt amounting to £ 349,057.61 into 692,615 New Ordinary Shares at the Placing Price "Deferred Shares" the 907,118,360 deferred shares of 0.4p each in the capital of the Company in issue at the date of this announcement "Deferred A Shares" the 23,342,400 deferred A shares of 4p each in the capital of the Company in issue at the date of this announcement "Deferred B Shares" the 1,043,566.deferred B shares of 42p each in the capital of the Company in issue at the date of this announcement "Directors" or"Board" the directors of the Company
"Enlarged Issued Ordinary the 7,719,446 New Ordinary Shares in issue at Share Capital"
Admission
"Existing Ordinary Shares" the 75,138,312 ordinary shares of 1p each in the
capital of the Company in issue at the date of this announcement
"GM" or "General Meeting" the general meeting of the Company convened for
10.00 a.m. on 14 June 2010
"Independent Directors" the Directors other than John Bartle, Andrew Garner
and Bruce Lakefield "London Stock Exchange" London Stock Exchange plc "MJES" Merchant John East Securities Limited "New Deferred Shares" the new deferred shares of 29p each arising from the Capital Reorganisation "New Ordinary Shares" the new ordinary shares of 1p each in the capital of the Company arising from the Capital Reorganisation "Norman Broadbent BNBRC, Norman Broadbent Limited and Bancomm Companies" "Proposals" the Capital Reorganisation, the proposed Subscription and the Debt Capitalisation "Resolutions" the resolutions set out in the notice of the General Meeting "Shareholders" holders of Existing Ordinary Shares "Subscribers" Pierce Casey, Jon Moulton and Jeremy Daniels "Subscription" the subscription of the Subscription Shares pursuant to the Subscription Agreement
"Subscription Agreement" the conditional agreement dated 27 May 2010, between
the Company and the Subscribers "Subscription Price" 45p per New Ordinary Share "Subscription Shares" the 4,522,221 New Ordinary Shares to be issued pursuant to the Subscription
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