TAX.L Regulatory News (TAX)

11 Oct 2007 09:17

Eco City Vehicles PLC11 October 2007 Eco City Vehicles plc ("the Company") formerly Pannal plc ("Pannal") FIRST DAY OF DEALINGS ON AIM Eco City Vehicles plc is pleased to announce that following Pannal'sextraordinary general meeting held yesterday, where the shareholders approvedthe reverse takeover of K.P.M. Autos Limited ("KPM") by Pannal, the Company'sname change and the application for admission to trading on AIM ("Admission"),dealings in the Company's Ordinary Shares began at 8.00am today. The key aspects of the deal were: • The placing of 20,000,000 Ordinary Shares ("Placing") at a placingprice of 5p per share representing 6.6 per cent. of the enlarged issued sharecapital of the Company. • The consideration to acquire the entire issued share capital of KPM("Acquisition") for £12 million satisfied by the issue of 240,000,000 ordinary1p shares at 5p per share. • The total number of Ordinary Shares in issue at Admission of302,050,200. • Market capitalisation of £15.1 million based on the placing price of5p per share. • Gross proceeds of £1 million. It is intended that the net placingproceeds of £120,000 will be used for working capital purposes to help grow thebusiness. • The Company's ticker symbol will be ECV and the ISIN number willremain as GB0034353754. • Numis Securities Limited acted as Nominated Adviser, Broker andPlacing Agent to the Placing and Admission. KPM UK Taxis plc ("KPM UK"), a subsidiary of KPM, has evolved as an establishedspecialist vehicle distributor and one of London's two authorised main dealersfor London Taxis International ("LTI") London Taxis selling new and usedvehicles and offering a range of after sales service. The Company is intendingto expand its product lines by distributing environmentally friendly vehiclesthrough its existing channels to market, targeting local authorities, urbanvehicle fleet owners and other business users. Jeremy Fenn, who stands down as CEO but will be a Non-Executive Director of theCompany going forward, said: "We are delighted to have agreed the terms of the acquisition as we prepare forour first day of trading on AIM. We believe we are now in a position to move thebusiness forward and create value for our shareholders." Peter DaCosta the Company's incoming Chief Executive Officer, said: "The Board of the Company believes that in the coming years, due to tighterenvironmental legislation, the opportunity for forward-thinking moreenvironmentally friendly vehicles within Greater London will be considerable.The combination of KPM's expertise in the London taxi market and the added driveand experience of Pannal's Directors will bring valuable benefits to customersand shareholders." Contacts Eco City Vehicles plcPeter DaCosta (Chief Executive Officer) +44 (0)20 7377 2182Jeremy Fenn (Non-Executive Director - ex Pannal plc CEO) +44 (0)7734 475 888 Numis Securities LimitedDavid Poutney +44 (0)20 7260 1000David Shapton Information on KPM Background In 1975 the Founders identified an opportunity to provide vehicle servicing andrepairs for the owner-drivers of the London Taxi market and so established KPMas a specialist one-shop repair service. This was driven by the Founders' beliefthat fleet operators dominated the London Taxi market and frequently tookprecedence over owner-drivers for vehicle servicing by the manufacturer. KPM grew significantly over the next 13 years. The Directors believe that themajority of cabs operating in Greater London and the suburbs are nowowner-driven. Since 2004 approximately 87% of KPM's sales of new vehicles havebeen to owner drivers. Taxi distribution business In 1989 KPM UK was informally granted franchised dealer status by LTI which wasformalised by way of agreement in 2003. LTI manufactured the Fairway taxi and isa dominant supplier of new vehicles to the licensed London Taxi market. To date,Mann & Overton and KPM UK are the only authorised LTI dealers in London. Following its appointment as a dealer offering ''one-stop shop'' forowner-drivers, KPM UK achieved strong growth. The Directors believe that thecombination of KPM's owner-driver focussed after-sales support and being theonly independent franchised dealer in London, further added to its reputationamongst independent London Taxi drivers. In the six months to 31 March 2007, KPM UK supplied 388 new cabs representingapproximately 30 per cent. of the new licensed taxis sold in London during thatperiod. KPM also offers a wide range of complementary products and services tothis market. Taxi pre and post-sales service The Directors believe that KPM UK's reputation has been established by engagingthe market on several levels, offering a range of services from the KnowledgeSchool (formed in 1991) through to providing one-stop repair and maintenance. KPM UK supplied new London Taxis come with a comprehensive three year warranty.KPM UK also offers finance solutions where drivers require such a service. In addition KPM UK has direct access to Unipart's ''unidial'' next day deliverysystem, enabling parts to be delivered within 24 hours of order. The directorsbelieve that this has enabled KPM UK to become a major distributor of LTI partsin the UK, KPM UK now employs over 100 staff and leases nearly 68,000 squarefeet at its premises in Hemming Street, London. Vehicle finance KPM has entered into an agreement with HBOS plc which will enable KPM followingAdmission, to supply vehicle finance through its FSA registered subsidiary KPMUK Finance Ltd. KPM intends to offer its customers financing options for otherproducts as well as London Taxis. Environmentally friendly vehicles The Directors believe that the introduction of new environmental legislation,notably the Mayor of London's emission strategy on 1 July 2006, will make it more likely that driversand fleets of older vehicles will acquire new vehicles rather than to convertolder vehicles to meet the new environmental specifications. For those drivers of older cabs, who do not wish to change their vehicles, theDirectors believe that an opportunity exists to provide lower emission vehicleconversions. KPM has agreed to act as a distributor for SST Emtec, makers of anemission-reduction technology called CleanCab, designed specifically for LondonTaxis. CleanCab is an emission-reduction system approved by the Energy SavingTrust and the PCO for the retrofit taxi programme. The system is based ontechnology such as turbo charging, exhaust gas recirculation, intercooler andexhaust gas recirculation cooling. The Directors believe that the introduction of global automotive legislation andEU emission standards are, and will continue to be, a major factor for thegrowth in sales of emissions-reducing products and technologies such asselective catalytic reduction, exhaust gas recirculation and diesel particulatefilters technology for NOx. KPM UK is able to provide an installation servicefor all these products. This belief is driven by factors including: i. Euro V standards, for heavy duty vehicles, that will come into forcein 2009; ii. The phased introduction of the Low Emission Zone for differentvehicles from 4 February 2008 through to January 2012 with tougher emissionsstandards applied across most of Greater London including HGVs and LCVs needingto meet Euro IV by 2012; iii. Environment Act creation of AQMAs to focus on monitoring and reducingpollution locally with 208 AQMAs throughout the country including 29 out of the32 London Boroughs; iv. GLA endeavouring to ensure that its suppliers implement ''green''contracts; and v. Environmental demands that UK government agencies are placing oncompanies through their social and corporate responsibility policies. The Directors intend to build on their emission-reducing experience by creatinga brand which will become synonymous with environmental protection. KPM's strategy is twofold; first to offer local councils, urban vehicle fleetowners (e.g. supermarket chains) and other business users, that have to enterinto London on a daily basis, eco-friendly vehicles and second, to become aone-stop-shop for eco-friendly vehicles at the point of sale and for after-salessupport. Whilst the Company's initial focus will be on London, it is expected thatfurther cities will follow London's lead in the introduction of LEZs. TheDirectors may look to focus on other cities which have shown an active interestin introducing LEZs including: Bristol, Bath, Liverpool, Manchester, Norwich,Nottingham, Oxford and Sheffield. Investments and licences Cabvision UK Limited Cabvision UK Limited, a wholly-owned subsidiary of KPM, operates, under licencea computer controlled digital technology, providing a platform in over 950vehicles for advertisers to reach audiences in a captive, mobile environment. One80 Limited KPM has made an investment in One80 Limited, a company focused on developingengineering solutions for city vehicles. KPM currently owns 11% of the issuedshare capital of One80 Limited and is committed to pay £0.9m to increase itsshareholding to 33.3% representing a total investment of £1.2 million. Competition KPM is one of two distributors of London Taxis in London and has a longestablished reputation as both a distributor and after-sales service provider.The directors believe that KPM's reputation in these areas represent asignificant barrier to entry for any new competitors. The London Taxi market is controlled by the PCO which maintains regulations onthe specification of vehicles. These restrictions limit the use of standardmulti-purpose vehicles and other vehicles as taxis in London. Market opportunities and key strengths i. A client and supplier base built up over 32 years. ii. Approximately 87% of KPM's sales of London Taxis are to owner-drivers. iii. Sales, service and repairs quality controls, certified by IS09001:2000. iv. The Directors believe increased sales of new and used London Taxis, notonly in the UK, but also across the globe are possible by utilising the existingcustomer base and the KPM website. v. The Directors believe the finance packages offering can includetailored leasing schemes. vi. Vehicle Body Repairers Association accredited and recognised by a numberof insurance companies for repairs. vii. Economies of scale on spare parts sales utilising KPM's ''just-in-time''delivery technology. viii. Potential for distribution contracts with electric vehicle manufacturers. Trading For the six month period ending 31 March 2007 London Taxi sales made upapproximately 76.7% of KPM Group's revenue, with 13.6% coming from servicing,7.5% from the sale of parts and accessories and the remaining 2.2% coming fromcommissions. Sales have been rising over the last three years with first halfyear sales revenue and profit before tax (excluding exceptional items) in 2007of £17,627,000 and £665,000 respectively. Sales revenue and profit before tax(excluding exceptional items) for the full year to 30 September 2006 were£27,268,000 and £198,000 respectively. Brand Following Admission, the taxis business will continue to trade under theestablished KPM brand, whilst trade in electric vehicles will be under the brandname Eco City Vehicles and the Directors intend to build a brand which willbecome synonymous with environmental improvement The Company also has ambitionsto expand its brand into other major cities in UK and mainland Europe, basingits new projects on its existing after-sales support and service. Directors & management team The Board of the Company will initially comprise four executive directors andfour non-executive directors. Timothy Yeo (Non-Executive Chairman) - Age 62 Tim Yeo has been MP for South Suffolk since 1983. He held various Ministerialposts under Margaret Thatcher and John Major, including Minister of State at theDepartment of the Environment. Between 1998 and 2005 he was a member of theShadow Cabinet, shadowing a record seven different departments. Since 2005 hehas been Chair of the Environmental Audit Committee. Tim holds a number ofnon-executive directorships in the energy, transport and health sectorsincluding Groupe Eurotunnel SA, Univent plc, ITI Energy Ltd and AFC Energy plc. Peter DaCosta (Chief Executive Officer) - Age 60 Peter DaCosta is a founder of KPM UK and has been Chairman since 1975. Peter wasresponsible for LTI making KPM UK a Main Dealer. Peter is a prominent figurewithin the industry, and is a Freeman of the City of London, and a Fellow ofboth the Institute of Directors and the Institute of the Motor Industry. He isalso Chairman of the Independent Taxi Dealers Association. Peter is a Foundermember of Cabvision, the in-cab digital media network, where he was responsiblefor the design and gaining PCO approval. Keith Marder (Chief Technical Officer) - Age 53 Keith Marder is a founder and Director of KPM UK. Before setting up KPM UK,Keith served his apprenticeship with York Way Motors, a taxi fleet operator.Keith obtained his City and Guilds at Southgate Technical College and isaccredited with the following qualifications: Fellow for the Institute of theMotor Industry (FIMI), Certified Automotive Engineer (CAE), National CraftsmanCertificate and Authorised MOT Examiner. Keith is KPM's Senior TechnicalDirector. Michael Troullis (Chief Operating Officer) - Age 54 Michael Troullis is a founder and Director of KPM UK. Michael has significantcoach building experience and is accredited with the following qualifications:Fellow for the Institute of the Motor Industry (FIMI), Member of the Instituteof Directors, Thatcham's Certificates of Competence for welding including BS1140 and BS 4872, VOSA nominated MOT Tester and VOSA authorised MOT Examiner.Michael headed the team that instituted ISO9001/2000 for KPM UK and is also headof KPM Group's Health and Safety Team. Robert Smith (Finance Director) - Age 43 Rob Smith was Chief Executive of Densitron Technologies plc from October 2005 toDecember 2006, prior to that he was Finance Director from 2002 to October 2005.Rob led Densitron through a number of changes including the sale of subsidiarycompanies, fund raising and negotiation of sales and distribution agreements.Rob currently serves on the board of directors of Curidium Medica plc, apersonalised medicine company, as part-time Finance Director. Rob is a CharteredManagement Accountant, has an MSc in Management Accounting and over 20 years'experience in the engineering industry. Jeremy Fenn, (Non-Executive Director) - Age 44 Jeremy Fenn has been a director of Pannal since February 2004, actinghistorically as Managing and Finance Director. Jeremy was Chief Executive ofSports Internet plc when it was sold to BskyB plc for £301 million in July 2000.He remained as an executive director of Skysports.com, a trading division ofBskyB plc, until January 2004. Before joining Sports Internet Group in July 1999he was Managing Director of Leeds United Holdings plc for three years, and leftthem having reported record profits, minimal debt and a fourth place finish inthe Premiership. Prior to this he held Finance Director positions at a number ofmedia companies, having qualified as a chartered accountant with Coopers &Lybrand in 1988. He was a founding shareholder of DITG and TGC which were bothsold to Yoomedia plc in December 2004. He is currently Finance Director ofMobile Tornado Group plc and Non-Executive Director of Yoomedia plc. John Swingewood (Non-Executive Director) - Age 51 John Swingewood has been a director of Pannal since 2004, acting historically asNon-Executive Chairman. John founded both DITG and TGC in 2001 having previouslybeen responsible for launching interactive TV sports betting whilst Director ofNew Media at Sky. Before joining Sky, he held a number of positions at BritishTelecom including Director of Internet and Multimedia, and General Manager,Broadcast TV Services. John was a founding shareholder of DTIG and TGC whichwere both sold to Yoomedia plc in December 2004. He is currently a Non-ExecutiveDirector of Mobile Tornado Group plc and Deputy Chairman of Yoomedia plc. Guy Saxton (Non-Executive Director) - Age 42 Guy Saxton is a director of a number of companies including the Board orCountermine plc and a leading Corporate Adviser with New World CapitalManagement which represents Equilateral Limited in the UK. He was previously adirector of Fidelity Brokerage, part of the world's largest fund management andbrokerage firm. Mr Saxton has been involved in the financial services sectorsince 1988 when he started work in the City of London with AXA, the world'ssecond largest fund manager. Management Team Steve McCarthy - Sales Director (8 years industry experience) Andy Emilianou - Technical Director (32 years industry experience) Chris Emilianou - Associate Director Body Division (30 years industryexperience) Chris Stoneham - Associate Director Body Division (9 years industry experience) Carl Huggins - Associate Director Parts Division (9 years industry experience) Nigel Andrew - Associate Director Mechanical Division (8 years industryexperience) Steve Ryder - Company Secretary (8 years industry experience) KPM Group employs approximately 105 employees at its Hemming House site, whereit operates an equal opportunity policy for its workforce. Change of Name In order to reflect the new trading business of the Company following completionof the Acquisition, the name of the Company was changed from Pannal plc to EcoCity Vehicles plc. Financial information on KPM The following table sets out key financial information relating to KPM for theperiod from 1 October 2003 to 31 March 2007. The figures for revenue, operatingprofit/(loss) and profit/(loss) before tax have been extracted without materialadjustment from the historical financial information on KPM. Six months ended 31 Year ended 30 Year ended 30 Year ended 30 March 2007 September 2006 September 2005 September 2004 £'000 £'000 £'000 £'000Revenue 17,627 27,268 27,766 20,581Operating profit/(loss) (463) (244) (181) 333Profit/(loss) before tax (423) (321) (162) 290 KPM's current trading continues to be in line with management expectations. Background and Financial Information on Pannal Since 22 February 2005 when its shares were admitted to trading on AIM, Pannaloperated as an investing company with no trading business. On 3 April 2006,Pannal announced that trading in its shares on AIM was suspended and on 13October 2006, Pannal was admitted to trading on PLUS. Pannal's PLUS Marketslisting was cancelled on 10 October 2007 to facilitate the Company's admissionto AIM the following day. As at 30 June 2007, Pannal had cash balances of£1,438,000 and net assets of £1,429,000. Waiver of Rule 9 of the City Code The terms of the Acquisition give rise to certain considerations under the CityCode. Brief details of the Takeover Panel ("Panel"), the City Code and theprotections they afford to Shareholders are described below. Under Rule 9 of the City Code (''Rule 9''), when (i) any person acquires shareswhich, when taken together with shares already held by him or shares held oracquired by persons acting in concert with him, carry 30 per cent. or more ofthe voting rights of a company subject to the City Code or (ii) any person who,together with persons acting in concert with him, holds not less than 30 percent. but not more than 50 per cent. of the voting rights of a company subjectto the City Code and such person, or persons acting in concert with him,acquires any voting rights, that person is normally obliged to make a generaloffer in cash to all shareholders to purchase their shares at the highest pricepaid by him, or any person acting in concert with him, within the preceding 12months. The Code is designed principally to ensure that shareholders are treated fairlyand are not denied an opportunity to decide on the merits of a takeover and thatshareholders of the same class are afforded equivalent treatment by an offeror.The Code also provides an orderly framework within which takeovers areconducted. In addition, it is designed to promote, in conjunction with otherregulatory regimes, the integrity of the financial markets. Peter DaCosta, Keith Marder and Michael Troullis being directors of KPM aredeemed to be a concert party ("Concert Party") for the purposes of the City Codedue to their position as Vendors and their relationship with each other. At Admission, the shareholding of the Concert Party was, in aggregate,240,000,000 Ordinary Shares, representing 79.46 per cent. of the Enlarged IssuedShare Capital of the Company as follows: At AdmissionMember Concert Party Number of Ordinary Shares Percentage of Enlarged Issued Share CapitalPeter DaCosta 80,001,600 26.49Keith Marder 79,996,800 26.48Michael Troullis 80,001,600 26.49 240,000,000 79.46 The maximum potential controlling position of the Concert Party is 79.46 percent. of the Enlarged Issued Share Capital. The Panel has agreed, subject to shareholders' approval, on a poll, to waive anygeneral offer obligation resulting from the Proposals. Following completion of the Acquisition and Admission, the members of theConcert Party between them hold more than 50 per cent. of the Enlarged IssuedShare Capital of the Company and (for so long as they continue to be treated asacting in concert) may accordingly be able to increase their aggregateshareholding without incurring any further obligation under Rule 9 to make ageneral offer, although individual members of the Concert Party will not be ableto increase their percentage shareholding through a Rule 9 threshold withoutPanel consent. In the event that the place of central management and control of the Companywere to be determined by the Panel to no longer be within the UK (for example,as a result of a majority of the Company's directors ceasing to be domiciled inthe UK), the City Code would cease to apply to the company and its shareholderswould cease to be protected by the City Code. Lock-in and orderly market arrangement Following Admission, the Directors and persons connected and/or associated withthem are interested, in aggregate, in 250,100,000 Ordinary Shares representingapproximately 82.8 per cent. of the Enlarged Issued Share Capital. Under theterms of the lock-in agreements, each of the Directors have undertaken with theCompany and Numis that, save in certain limited circumstances, including anoffer for the Company, they will not dispose of any interest in any OrdinaryShares held by them for a period of twelve months from Admission. After theexpiry of such period, the Directors have agreed that any sale or disposal ofOrdinary Shares will only be effected through Numis for a further period of 12months. The Directors have also undertaken to procure that their respectiveassociates (as defined by the AIM Rules) comply with the terms of their lock-inagreements. Share Option Schemes The Directors consider that an important part of the Company's remunerationpolicy should include equity incentives through the grant of share options todirectors and employees of the Group. The Directors intend to adopt employeeshare option schemes pursuant to which options to acquire Ordinary Shares may begranted to directors and employees of the Group. It is expected that the totalnumber of Shares under option under the schemes, if implemented, will representa maximum of 10 per cent. of the Company's issued ordinary share capital fromtime to time. Dividend policy The Directors currently intend to apply the Group's cash resources to invest inthe growth of its operations and therefore do not anticipate paying dividends inthe near future. They will reconsider the Company's dividend policy as and whenthe Company is in a position to pay dividends. The declaration and payment bythe Company of any dividends will depend on the results of the Group'soperations, its financial condition, cash requirements, future prospects,profits available for distribution and other factors deemed to be relevant atthe time. Corporate Governance The Directors recognise the importance of sound corporate governance. TheDirectors intend to comply with the Combined Code Principles of Good Governanceand Code of Best Practice taking into account the Company's size and stage ofdevelopment. An audit committee, comprising Jeremy Fenn, Timothy Yeo and John Swingewood, hasbeen established to determine the application of the financial reporting andinternal control principles, including reviewing the effectiveness of theGroup's financial reporting, internal control and risk management procedures andthe scope, quality and results of the external audit. The audit committee ischaired by Jeremy Fenn who is a chartered accountant. A remuneration committee, comprising Timothy Yeo, Guy Saxton and JohnSwingewood, has been established to review the performance of the executivedirectors and will set their remuneration and consider bonus and share optionsschemes. No Director will take part in discussions concerning their ownremuneration. The remuneration committee is chaired by Guy Saxton. The Company does not presently intend to form a nominations committee. Howeverthe Board will keep the situation under review. The Company has adopted theModel Code for directors' share dealings which is appropriate for a companywhose shares are traded on AIM. The Directors will comply with Rule 21 of theAIM Rules relating to directors' dealings and will take all reasonable steps toensure compliance by the Group's applicable employees as well. This information is provided by RNS The company news service from the London Stock Exchange