10 Jul 2017 07:00
10 July 2017
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA, NEW ZEALAND, JAPAN OR ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
TP Group plc
("TP Group" or the "Company" or the "Group")
Conditional Fundraising of up to approximately £23.9 million
TP Group (AIM: TPG), the services and engineering group, today announces a conditional Fundraising, comprising a £20.0 million Firm Placing (the "Firm Placing") and an up to approximately £3.9 million Open Offer (the "Open Offer") to raise up to approximately £23.9m, in aggregate, by the issue and allotment by the Company of up to 368,044,411 New Ordinary Shares at the Issue Price of 6.5 pence per New Ordinary Share.
Transaction highlights:
• | The net proceeds will be used primarily to fund acquisitions which the Directors believe have the potential to grow the business from its current position to achieve targeted annual revenues in the range of £90 million to £100 million in 2020 with an EBITDA margin of greater than 10 per cent. and to fund investment opportunities in the existing business |
• | The Directors have identified over 20 potential acquisition opportunities and have entered discussions with ten. All targets are intended to be accretive to earnings in the first full year following acquisition and cash generative |
• | The Directors anticipate that the first acquisition will happen during the second half of this year and that the remainder of the net proceeds identified for acquisitions are expected to be deployed within 12 months following Admission |
• | The Directors believe that the Fundraising will increase the Company's negotiating position with the owners of target businesses and reduce execution risk |
• | The Fundraising, in conjunction with existing resources, will allow the Group to implement its intended acquisition programme and put it in a better position to generate Shareholder value |
• | The Fundraising is conditional on the approval of Shareholders at the General Meeting |
Background to and rationale for the Fundraising
• | The Directors believe that 2016 was a pivotal year for the Group, with significant operational progress being made, key personnel recruited and material margin gains achieved |
• | With the Company in a stronger financial position, the Board has, over recent months, focused its strategy on acquisitive growth opportunities and completed the acquisition of ALS Technologies Limited and Flexible Software Solutions Limited in February 2017 |
• | The Directors have continued to identify and assess other acquisition opportunities, certain of which would, if they completed, be substantial relative to the existing Group |
• | The Directors believe that there are a significant number of attractive acquisition opportunities in its target sectors of defence, aerospace and government with a number of these opportunities are privately owned businesses, some of which the Directors believe are capital constrained and where the owners are seeking to realise value |
• | The Directors understand that both the Government and the tier-1 contractors are keen to see a rationalisation of their supply chains and would therefore welcome a consolidator amongst the lower tiers of the supply chain and believe that TP Group, with a stronger balance sheet, would be well placed to be such a consolidator |
Phil Cartmell, Chief Executive Officer of TP Group, commented:
"We are delighted with the strong support from both new and existing shareholders and believe it represents a clear validation of the significant progress TP Group has made over the last two years having successfully acquired businesses alongside converting several sizeable contracts.
"The Board firmly believes the defence, aerospace and government sectors offer scope to accelerate our growth and the strengthening of our balance sheet will enable management to work quickly to consolidate what we believe to be highly fragmented markets.
"I look forward to updating the market on our ongoing progress as we continue to pursue a pipeline of potential growth opportunities and remain confident in the medium term prospects for the Group."
Enquiries:
TP Group plc | www.tpgroup.uk.com |
Phil Cartmell, Chief Executive Officer | Tel: +44 (0)1753 285 810 |
Derren Stroud, Chief Financial Officer |
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Simon Kings, Executive Director |
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Cenkos Securities plc (NOMAD and Broker) | www.cenkos.com |
Mark Connelly / Callum Davidson | Tel: +44 (0)20 7397 8900 |
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Vigo Communications | www.vigocomms.com |
Jeremy Garcia / Fiona Henson / Natalie Jones | Tel: +44 (0)20 7830 9703 |
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Notes to Editors
TP Group designs and develops advanced technologies, engineers complex equipment and systems and provides support throughout their operational life. The Company's shares have been traded on AIM since July 2001.
Unless otherwise defined, capitalised terms shall have the meaning as those set out in the 'Definitions' section of this announcement.
IMPORTANT NOTICES
Cenkos Securities, which is authorised and regulated in the United Kingdom by the FCA, is acting as nominated adviser and broker to the Company and no-one else in connection with the Firm Placing and the Open Offer and Admission. Cenkos Securities will not be responsible to anyone other than the Company for providing the regulatory and legal protections afforded to customers (as defined in the rules of the FCA) of Cenkos Securities nor for providing advice in relation to the contents of this announcement or any matter, transaction or arrangement referred to in it. The responsibilities of Cenkos Securities, as nominated adviser under the AIM Rules for Nominated Advisers, are owed solely to London Stock Exchange and are not owed to the Company or any director of the Company or to any other person in respect of their decision to subscribe for or purchase Firm Placing Shares or Open Offer Shares.
Forward-looking statements
Some of the statements in this announcement include forward looking statements which reflect the Directors' current views with respect to financial performance, business strategy, plans and objectives of management for future operations (including development plans relating to the Group's products and services). These statements include forward looking statements both with respect to the Group and with respect to the sectors and industries in which the Group operates. Statements which include the words "expects", "intends", "plans", believes", "projects", "anticipates", "will", "targets", "aims", "may", "would", "could", "continue" and similar statements or negatives thereof are of a forward looking nature.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and therefore are based on current beliefs and expectations about future events. Forward-looking statements are not guarantees of future performance and the Group's actual operating results and financial condition, and the development of the industry in which it operates may differ materially from those made in or suggested by the forward-looking statements contained in this announcement. In addition, even if the Group's operating results, financial condition and liquidity, and the development of the industry in which the Group operates are consistent with the forward looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Accordingly, prospective investors should not rely on these forward-looking statements.
These forward looking statements speak only as of the date of this announcement. The Company expressly disclaims any obligation to publicly update or review any forward looking statement, whether as a result of new information, future developments or otherwise, unless required to do so by applicable law or the AIM Rules for Companies. All subsequent written and oral forward looking statements attributable to the Group or individuals acting on behalf of the Group are expressly qualified in their entirety by this paragraph. Prospective investors should specifically consider the factors identified in this announcement which could cause actual results to differ from those indicated or suggested by the forward looking statements in this announcement before making an investment decision.
Important information
Neither this announcement nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia) (the "United States"), or distributed, directly or indirectly, in the United States. Neither this announcement nor any copy of it may be taken or transmitted directly or indirectly into Australia, Canada, the Republic of South Africa, New Zealand, Japan or to any persons in any of those jurisdictions, except in compliance with applicable securities laws. Any failure to comply with this restriction may constitute a violation of United States, Australian, Canadian, South African, New Zealand or Japanese securities laws or the securities laws of any other jurisdiction (other than the United Kingdom). The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe any such restrictions. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for securities in the United States, Australia, Canada, the Republic of South Africa, New Zealand, Japan or in any jurisdiction to whom or in which such offer or solicitation is unlawful.
The securities to which this announcement relates have not been, and will not be, registered under the Securities Act or with any regulatory authority or under any applicable securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, resold, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offer of the securities in the United States. The securities have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the securities or the accuracy or adequacy of this announcement. Any representation to the contrary is a criminal offence in the United States. In addition, offers, sales or transfers of the securities in or into the United States for a period of time following completion of the Firm Placing and the Open Offer by a person (whether or not participating in the Firm Placing or Open Offer) may violate the registration requirement of the Securities Act.
The securities referred to herein have not been and will not be registered under the applicable securities laws of Australia, Canada, the Republic of South Africa, New Zealand or Japan and, subject to certain exceptions, may not be offered or sold within Australia, Canada, the Republic of South Africa, New Zealand or Japan or to any national, resident or citizen of Australia, Canada, the Republic of South Africa, New Zealand or Japan or any other jurisdiction where to do so might constitute a violation of local securities laws or regulations.
No representation or warranty, express or implied, is made by the Company or Cenkos Securities as to any of the contents of this announcement, including its accuracy, completeness or for any other statement made or purported to be made by it or on behalf of it, the Company, the Directors or any other person, in connection with the Firm Placing and the Open Offer and Admission, and nothing in this announcement shall be relied upon as a promise or representation in this respect, whether as to the past or the future (without limiting the statutory rights of any person to whom this announcement is issued). Cenkos Securities does not accept any liability whatsoever for the accuracy of any information or opinions contained in this announcement or for the omission of any material information from this announcement for which the Company and the Directors are solely responsible.
Introduction
The Board is pleased to announce a conditional Firm Placing to raise £20.0 million (before fees and expenses) by the issue and allotment by the Company of 307,692,308 New Ordinary Shares at the Issue Price of 6.5 pence per Ordinary Share.
In addition, in order to provide Shareholders who have not taken part in the Firm Placing with an opportunity to participate in the proposed issue of New Ordinary Shares, the Company is providing all Qualifying Shareholders with the opportunity to subscribe at the Issue Price for an aggregate of up to 60,352,103 Open Offer Shares, to raise up to approximately £3.9 million (before fees and expenses), on the basis of:
1 Open Offer Share for every 7 Existing Ordinary Shares
held on the Record Date, payable in full on acceptance.
The Firm Placing and the Open Offer are conditional, inter alia, upon Shareholders approving the Resolutions at the General Meeting, which will grant to the Directors the authority to allot the New Ordinary Shares and the power to disapply statutory pre-emption rights in respect of the New Ordinary Shares. Admission is expected to occur at 8.00 a.m. on 28 July 2017 or such later time and/or date as Cenkos Securities and the Company may agree, not being later than 11 August 2017. The Firm Placing and the Open Offer are not underwritten.
The net proceeds of the Fundraising receivable by the Company are estimated to amount to between £19 million and £22.8 million (dependent upon the level of take-up under the Open Offer).
The Issue Price is at a discount of 10.3 per cent. to the closing middle market price of 7.25 pence per Existing Ordinary Share on 7 July 2017 (being the closing middle market price on the last practicable date prior to the date of this announcement).
The Circular will set out further details of the Firm Placing and the Open Offer and will also contain the terms and conditions in respect of the Open Offer and set out the key dates in respect of the Fundraising. The Circular, which will also have attached to it the Notice of General Meeting, is expected to be sent to Shareholders later today, 10 July 2017.
An expected timetable of principal events in the Fundraising and key statistics in relation to the Fundraising are set out in Appendices I and II to this announcement.
The Firm Placing and the Open Offer are and will each be conditional on, and accordingly the Fundraising as a whole is and will be conditional on, amongst other things, the passing of the Resolutions to be proposed at the General Meeting. Shareholders should be aware that if the Resolutions are not approved at the General Meeting, the Fundraising will not proceed in its entirety.
Objectives of the Fundraising
The Directors have recognised the potential to grow the business from its current position to target annual revenues in the range of £90 million to £100 million in 2020 with an EBITDA margin of greater than 10 per cent.
The Directors believe that this can be achieved through a programme of investment in the existing business together with the acquisition of suitable businesses that demonstrate synergies with the Group's current activities that are intended to be accretive to earnings in the first full year following completion of the acquisition and cash generative.
At present, the Directors consider that the Group is a tier-3 equipment provider and it is the Directors' ambition to grow and develop from that position.
The intended outcome of the Directors is for the Group to operate more as a tier-2 systems integrator within the markets it serves. Should this be achieved, this will allow the Group to build upon its existing position and to maintain key relationships with the tier-1 platform providers through a broader offering of equipment and services.
TP Group plc overview
TP Group is a services and engineering business with a blue-chip customer base, operating in the defence, aerospace and government sectors. Within these sectors, the Group provides mission and safety critical equipment and systems. The Group's core strengths are built around two main divisions, the Engineering division and the Services division.
The Engineering division
The Engineering division, which represented approximately 90 per cent. of Group turnover in 2016, incorporates TPG Maritime and TPG Engineering. The division seeks to apply high-precision machining, fabrication, assembly, welding and testing to manufacture one-off or low volume equipment that is relied upon for long service life in difficult or dangerous environments. The Directors believe that TP Group has built a strong reputation for reliability and engineering excellence which provides it with a strong platform for growth.
Examples of the Engineering division's projects include:
• | Submarine life-support systems - to support UK nuclear submarines, French Barracuda class and other diesel-electric fleets around the world. Typically, new-build equipment leads to support revenues through their projected 30-year service life; |
• | Thermal transfer solutions - fitted in downstream refineries, chemical plants, conventional and nuclear power plants as new-build and through-life refurbishment; |
• | Renewable energy systems - innovative systems for waste energy recovery and renewable power generation applications; and |
• | Pressure vessels. |
Projects in this division are primarily fixed-price, with some additional revenue drawn from parts supply and maintenance tasks.
The Services division
The Services division, which represented approximately 10 per cent. of Group turnover in 2016, includes the work of TPG Managed Solutions and TPG Design and Technology. The services provided by this division include:
• | Technical consulting - subject matter expertise to support certain of the Group's customers; |
• | Systems engineering - requirements capture and system architecture roles on complex operational system developments and implementations; |
• | Software development - delivery of operational systems; |
• | Feasibility studies - exploring the technical, practical and performance options for new approaches to technology challenges; and |
• | Independent procurement support - technical advisers and process managers supporting the procurement activities on large information programmes. |
Revenue from this business is typically project-based or on a daily rate charge which is consistent with other professional and technical service providers.
Background to and reasons for the Firm Placing and the Open Offer
In the year ended 31 December 2011, the Company reported an Adjusted EBITDA loss of approximately £5.2 million on revenues of approximately £0.3 million. Since that time, the Group has undergone a significant programme to re-focus its business activities, involving a number of key acquisitions, changes to the Board (at both an executive and non-executive level) and a streamlining of the resultant business. During the period between 1 January 2012 and 31 December 2015, the benefits of this programme began to be realised with losses reducing and improvements in the net cash position and order book over the period. The benefits of the programme were even more pronounced in 2016 and the Directors believe that the Group now has the requisite platform, including a high calibre executive management team, from which to grow substantially, both by acquisition and organically.
The Directors believe that 2016 was a pivotal year for the Group, with significant operational progress being made, key personnel recruited and material margin gains achieved. Notably the Group won its first major contract in the Nuclear Power sector, and it also signed two large MoD equipment contracts earlier this year. This operational progress was reflected with improved financial results and, in that year, the Group generated revenue of approximately £21.2 million (2015: £20.4 million) and Adjusted EBITDA of approximately £1.1 million (2015: £0.0 million). Net cash as at 31 December 2016 was approximately £9.2 million, an increase of 31 per cent. over the prior year end. In addition, as at 31 December 2016, the Group order book stood at £17.0 million, up from £14.5 million at the end of 2015.
With the Company in a stronger financial position, the Board has, over recent months, focused its strategy on acquisitive growth opportunities and completed the acquisition of ALS Technologies Limited and Flexible Software Solutions Limited in February 2017, which provided the Group with significant additional services capability and immediate additional revenue and profit contribution.
During the current financial year, the Directors have continued to identify and assess other acquisition opportunities, certain of which would, if they completed, be substantial relative to the existing Group. The Directors believe that there are a significant number of attractive acquisition opportunities in its target sectors of defence, aerospace and government. A number of these opportunities are privately owned businesses, some of which the Directors believe are capital constrained and where the owners are seeking to realise value. In addition, the Directors understand that both the Government and the tier 1 contractors are keen to see a simplification of the supply chain and would therefore welcome a consolidator amongst the lower tiers of the supply chain. The Directors believe that TP Group, with a stronger balance sheet as a result of the Fundraising, would be well placed to be such a consolidator.
Having undergone a review process, the Directors have now identified over twenty potential acquisition opportunities and have entered discussions with ten. The Directors believe that any resulting acquisitions would expand the Group's portfolio of offerings for the benefit of its existing customer base, certain of which would add significant operational scale to the Group.
Examples of such identified acquisition opportunities include:
Example Company A
• | Manufacturer of ruggedised mission systems for defence and other sectors |
• | Revenue of approximately £22 million and approximately £2.5 million of normalised EBITDA for 2016 |
• | Target purchase price - approximately £12 million |
• | Operates in a similar sector and with a common customer to existing Group business and an acquisition which would present an opportunity to expand the Group's footprint |
Example Company B
• | Service provider in secure communications system integration |
• | The Directors believe that it will achieve annual revenue for 2017/18 of approximately £3.5 million and net profit of approximately 10 per cent. |
• | Target purchase price - approximately £2 million |
• | Crossover with existing Group Services activity, adds specific skills, experience and presence in additional programmes. Constrained by scale, becoming a member of an enlarged Group would open additional doors to new business |
Example Company C
• | Service provider of mission systems development and technical training for military customers in the UK and overseas |
• | Revenue of approximately £9.3 million and approximately £0.6 million of normalised EBITDA for 2016 |
• | Target purchase price - approximately £3 million |
• | Aligned with Group Services activity on air platforms and Group customers. Growing rapidly, presents an opportunity for the Group to expand into training and platform support activities |
In assessing value, the Directors intend to apply a valuation range of circa 4 to 6 times normalised target EBITDA, resulting in a likely consideration range for the identified targets of between £2 million and £15 million. Opportunities would be pursued if they could be demonstrated to be cash generative and accretive to earnings in the first full year following completion of an acquisition.
The Directors believe that the Fundraising, in conjunction with existing resources, will allow the Group to implement its intended acquisition programme and put it in a better position to generate Shareholder value. The Directors also believe that the Fundraising will increase the Company's negotiating position with the owners of target businesses and reduce execution risk. The latter element is important as maintaining secrecy in certain sectors in which the Directors are seeking to acquire businesses, such as the defence sector, is a key factor in the acquisition process.
The Board has also identified opportunities where additional investment into certain of the Group's existing operations would present an opportunity to strengthen the business and its ability to respond to existing market opportunities and thereby accelerate growth.
The Directors are therefore seeking to raise up to approximately £23.9 million (before fees and expenses) from the Firm Placing and the Open Offer, primarily in order to fund the acquisition of certain of the identified acquisition targets referred to above and also to invest in the existing business. Should the Fundraising be approved by Shareholders and the proposed acquisitions complete, the Directors believe that this would be a significant step towards the Group achieving the Board's target of reporting revenues of £90-100 million, together with an adjusted EBITDA margin of greater than 10 per cent., by the end of 2020.
The Fundraising
Details of the Firm Placing
The Company has conditionally raised £20.0 million before expenses by the conditional Firm Placing of 307,692,308 Firm Placing Shares at the Issue Price to the Firm Placees. Qualifying Shareholders are not, subject to certain exceptions, able to participate in the Firm Placing.
The Firm Placing is conditional, inter alia, upon:
(i) | the passing of all of the Resolutions at the General Meeting;
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(ii) | the Firm Placing and Open Offer Agreement becoming or being declared unconditional in all respects and not having been terminated in accordance with its terms prior to Admission; and
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(iii) | Admission becoming effective at 8.00 a.m. on 28 July 2017 or such later time and/or date (being not later than 8.00 a.m. on 11 August 2017) as Cenkos Securities and the Company may agree. |
If any of the conditions are not satisfied, the Firm Placing Shares will not be issued and all monies received from the Firm Placees will be returned to them (at the Firm Placees' risk and without interest) as soon as possible thereafter.
The Firm Placing Shares are not subject to clawback and are not part of the Open Offer.
The Firm Placing Shares and the Open Offer Shares will be issued free of all liens, charges and encumbrances and will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid by reference to a record date after the date of their issue.
Details of the Open Offer
The Company is proposing to raise up to approximately £3.9 million before fees and expenses pursuant to the Open Offer and 60,352,103 Open Offer Shares are available to Qualifying Shareholders at the Issue Price, payable in full on acceptance. Any Open Offer Shares not subscribed for by Qualifying Shareholders will be available to Qualifying Shareholders under the Excess Application Facility. The balance of any Open Offer Shares not subscribed for under the Excess Application Facility will not be available to Firm Placees under the Firm Placing.
Qualifying Shareholders may apply for Open Offer Shares under the Open Offer at the Issue Price on the following basis:
1 Open Offer Share for every 7 Existing Ordinary Shares
and so in proportion for any number of Existing Ordinary Shares held on the Record Date. Entitlements of Qualifying Shareholders will be rounded down to the nearest whole number of Open Offer Shares. Fractional entitlements which would otherwise arise will not be issued to Qualifying Shareholders but will be made available under the Excess Application Facility. The Excess Application Facility enables Qualifying Shareholders to apply for Excess Shares in excess of their Open Offer Entitlement. Not all Shareholders will be Qualifying Shareholders. Shareholders who are located in, or are citizens of, or have a registered office in Restricted Jurisdictions will not qualify to participate in the Open Offer. The attention of Overseas Shareholders is drawn to paragraph 6 of Part 3 of the Circular which is expected to be posted to Shareholders later today.
Valid applications by Qualifying Shareholders will be satisfied in full up to their Open Offer Entitlements as shown on the Application Form. Applicants can apply for less or more than their entitlements under the Open Offer but the Company cannot guarantee that any application for Excess Shares under the Excess Application Facility will be satisfied as this will depend in part on the extent to which other Qualifying Shareholders apply for less than or more than their own Open Offer Entitlements. The Company may satisfy valid applications for Excess Shares of applicants in whole or in part but reserves the right not to satisfy any excess above any Open Offer Entitlement. The Board may scale back applications made in excess of Open Offer Entitlements on such basis as it reasonably considers to be appropriate.
Application has been made for the Open Offer Entitlements to be admitted to CREST. It is expected that such Open Offer Entitlements will be credited to CREST on 11 July 2017. The Open Offer Entitlements will be enabled for settlement in CREST until 11.00 a.m. on 26 July 2017. Applications through the CREST system may only be made by the Qualifying CREST Shareholder originally entitled or by a person entitled by virtue of bona fide market claims. The Issue Price for the Open Offer Shares must be paid in full on application. The latest time and date for receipt of completed Application Forms or CREST applications and payment in respect of the Open Offer is 11.00 a.m. on 26 July 2017. The Open Offer is not being made to certain Overseas Shareholders, as set out in paragraph 6 of Part 3 of the Circular which is expected to be posted to Shareholders later today.
Further details of the Open Offer and the terms and conditions on which it is being made, including the procedure for application and payment, are contained in Part 3 of Circular and on the accompanying Application Form (which, in respect of the Circular, will be posted to Shareholders and in respect of the Application Form, will be posted to Qualifying Non-CREST Shareholders, later today).
Use of proceeds
The Company intends to raise up to £20.0 million, before fees and expenses, by the conditional Firm Placing and a further approximately £3.9 million before fees and expenses under the Open Offer (assuming that the Open Offer is fully subscribed). The expenses for the Transaction are estimated to be approximately £1.1 million, dependent on the level of take-up under the Open Offer.
The net proceeds of the Fundraising are expected to be used primarily to help fund the Company's acquisition programme with the remainder being applied towards funding internal investment opportunities.
The Directors anticipate that the first acquisition will happen during the second half of this year and that the remainder of the net proceeds identified for acquisitions are expected to be deployed within 12 months of completion of the Fundraising.
Application for Admission to AIM
The Existing Ordinary Shares are admitted to trading on AIM. Application will be made to the London Stock Exchange for the Admission of the New Ordinary Shares to trading on AIM. It is expected that Admission will occur and that dealings will commence at 8.00 a.m. on 28 July 2017 at which time it is also expected that the New Ordinary Shares will be enabled for settlement in CREST.
Firm Placing and Open Offer Agreement
Pursuant to the Firm Placing and Open Offer Agreement, Cenkos Securities has agreed to use its reasonable endeavours as agent of the Company to procure subscribers for the Firm Placing Shares at the Issue Price.
The Firm Placing and Open Offer Agreement provides, inter alia, for payment by the Company to Cenkos Securities of commissions based on certain percentages of the product of the number of Firm Placing Shares placed by Cenkos Securities and the Open Offer Shares applied for respectively, multiplied by the Issue Price.
The Company will bear all other expenses of and incidental to the Firm Placing and the Open Offer, including the fees of the London Stock Exchange, printing costs, Receiving Agent's fees, all legal and accounting fees of the Company and all stamp duty and other taxes and duties payable.
The Firm Placing and Open Offer Agreement contains certain warranties and indemnities from the Company in favour of Cenkos Securities and is conditional, inter alia, upon:
(a) | the passing of all the Resolutions at the General Meeting;
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(b) | the Firm Placing and Open Offer Agreement having become unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms prior to Admission; and
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(c) | Admission becoming effective not later than 8.00 a.m. on 28 July 2017 or such later time and/or date as the Company and Cenkos Securities may agree, being not later than 8.00 a.m. on 11 August 2017. |
Cenkos Securities may terminate the Firm Placing and Open Offer Agreement in certain circumstances, if, inter alia, the Company is in material breach of any of its obligations under the Firm Placing and Open Offer Agreement; if there is a material adverse change in the financial position and prospects of the Company; or if there is a material adverse change in the financial, political, economic or stock market conditions, which in its reasonable opinion is or will be materially prejudicial to the successful outcome of the Firm Placing and the Open Offer.
Related Party subscriptions
M&G Investment Management, Legal and General and Hargreave Hale have conditionally subscribed for 62,769,231 Firm Placing Shares, 46,153,847 Firm Placing Shares and 46,153,847 Firm Placing Shares respectively at the Issue Price. M&G Investment Management, Legal and General and Hargreave Hale are Substantial Shareholders (as defined under the AIM Rules) and therefore the subscriptions of Firm Placing Shares by M&G Investment Management, Legal and General and Hargreave Hale constitute related party transactions under Rule 13 of the AIM Rules for Companies. Cenkos Securities, the Company's Nominated Adviser, considers that the terms of M&G Investment Management's, Legal and General's and Hargreave Hale's participations in the Firm Placing are fair and reasonable insofar as Shareholders are concerned.
Directors' and senior management's proposed subscription in the Firm Placing and voting intentions
As part of the Firm Placing, all of the Directors and a senior manager intend to subscribe for, in aggregate, 2,461,543 Firm Placing Shares at the Issue Price, representing an aggregate subscription in the amount of approximately £160,000 and subject to, inter alia, the passing of the Resolutions at the General Meeting. A further announcement will be made upon such intended subscriptions becoming effective.
Given the approximately £150,000 intended participation, in aggregate, by the Directors in the Firm Placing, the Directors do not intend to subscribe for their entitlements under the Open Offer.
The Directors, who in aggregate together with their closely associated persons hold 5,500,720 Existing Ordinary Shares, representing approximately 1.3 per cent. of the Existing Ordinary Shares, intend to vote (or procure a vote) in favour of the Resolutions.
Current Trading and Prospects
On 25 May 2017, Andrew McCree, the Company's Non-Executive Chairman made following statement at the Company's Annual General Meeting: "I am pleased to report that TP Group has made a strong start to 2017. We have continued to see good demand for our products and services, and our business development teams continue to pursue a pipeline of potential growth opportunities. Order intake in the opening months was ahead of that of the prior year and the Group is trading in line with market expectations. Integration of the acquired ALS Technologies Ltd. and Flexible Software Solutions Ltd. is progressing well and new cross-selling opportunities have already materialised. We also continue to capitalise on a number of organic growth opportunities that leverage our mission critical equipment and services expertise whilst continuing to evaluate targeted acquisitions which both broaden our product reach and accelerate our routes to market."
Trading since that date has continued to be positive and the Company remains on course to achieve market expectations.
General Meeting
The Directors do not currently have authority to allot all of the New Ordinary Shares on a non pre-emptive basis and, accordingly, the Board is seeking the approval of Shareholders to allot the New Ordinary Shares at the General Meeting and to dis-apply pre-emption rights.
A notice convening the General Meeting, which is to be held at the offices of Deloitte LLP, Abbots House, Abbey St, Reading RG1 3BD at 10.00 a.m. on 27 July 2017, will be set out at the end of the Circular, which is expected to be posted to Shareholders later today.
Recommendation
The Directors believe that the Firm Placing and the Open Offer and the passing of the Resolutions are in the best interests of the Company and Shareholders, taken as a whole. Accordingly the Directors unanimously recommend that Shareholders vote in favour of the Resolutions.
The Firm Placing and the Open Offer are conditional, inter alia, upon the passing of the Resolutions at the General Meeting. Shareholders should be aware that if the Resolutions are not approved at the General Meeting, the Firm Placing and the Open Offer will not proceed.
DEFINITIONS
The following definitions apply throughout this announcement, unless the context requires otherwise:
"Adjusted EBITDA" | operating profit adjusted to add back depreciation of property, plant and equipment, amortisation and impairment of acquired intangible assets and any other acquisition-related charges, share based payment charges and exceptional items
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"Admission" | the admission of the New Ordinary Shares to trading on AIM in accordance with the AIM Rules for Companies
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"AIM" | the market of that name operated by London Stock Exchange
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"AIM Rules for Companies" | the AIM Rules for Companies and guidance notes as published by the London Stock Exchange from time to time
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"Application Form" | the application form accompanying the Circular to be used by Qualifying Non-CREST Shareholders in connection with the Open Offer
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"Board" or "Directors" | the directors of the Company as at the date of this announcement
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"Cenkos Securities" | Cenkos Securities plc
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"certificated" or "in certificated form" | the description of an Ordinary Share or other security which is not in uncertificated form (that is not in CREST)
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"Circular" | the document detailing the Transaction to be posted to Shareholders containing the Notice of General Meeting
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"Company" or "TP Group" | TP Group plc
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"CREST" | the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the operator (as defined in the CREST Regulations)
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"CREST Manual" | the compendium of documents entitled "CREST Manual" issued by Euroclear from time to time and comprising the CREST Reference Manual, the CREST Central Counterparty Service Manual, the CREST International Manual, the CREST Rules (including CREST Rule 8), the CREST CCSS Operating Manual and the CREST Glossary of Terms
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"CREST member" | a person who has been admitted to CREST as a system-member (as defined in the CREST Manual)
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"CREST Regulations" | the Uncertificated Securities Regulations 2001 (SI 2001/3755) (as amended from time to time)
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"Enlarged Share Capital" | the entire issued share capital of the Company following completion of the Firm Placing and the Open Offer on Admission, assuming the Open Offer is fully subscribed and no other Ordinary Shares are issued between the date of this announcement and Admission
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"EU" | the European Union
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"Euroclear" | Euroclear UK & Ireland Limited
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"Excess Application Facility" | the arrangement pursuant to which Qualifying Shareholders may apply for additional Open Offer Shares in excess of their Open Offer Entitlement in accordance with the terms and conditions of the Open Offer
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"Excess CREST Open Offer Entitlement" | in respect of each Qualifying CREST Shareholder, his entitlement (in addition to his Open Offer Entitlement) to apply for Open Offer Shares in accordance with the Excess Application Facility, which is conditional on him taking up his Open Offer Entitlement in full
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"Excess Shares" | Open Offer Shares applied for by Qualifying Shareholders in accordance with the Excess Application facility
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"Excluded Overseas Shareholders" | other than as agreed by the Company and Cenkos Securities or as permitted by applicable law, Shareholders who are located or have registered addresses in a Restricted Jurisdiction
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"Ex-entitlement Date" | the date on which the Existing Ordinary Shares are marked "ex" for entitlement under the Open Offer, being 10 July 2017
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"Existing Ordinary Shares" | the 422,464,726 Ordinary Shares in issue on the date of this announcement
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"FCA" | the Financial Conduct Authority of the United Kingdom
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"Firm Placees" | subscribers for Firm Placing Shares
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"Firm Placing" | the placing by the Company of the Firm Placing Shares with certain existing and new institutional investors, otherwise than on a pre-emptive basis, at the Issue Price pursuant to the Firm Placing and Open Offer Agreement
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"Firm Placing and Open Offer Agreement" | the agreement entered into between the Company and Cenkos Securities in respect of the Firm Placing and the Open Offer dated 10 July 2017, as described in this announcement
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"Firm Placing Shares" | the 307,692,308 new Ordinary Shares the subject of the Firm Placing
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"Form of Proxy" | the form of proxy for use in relation to the General Meeting to be enclosed with the Circular
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"FSMA" | Financial Services and Markets Act 2000 (as amended from time to time)
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"Fundraising" or "Transaction" | together, the Firm Placing and the Open Offer
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"General Meeting" | the General Meeting of the Company, convened for 10.00 a.m. on 27 July 2017 at the offices of Deloitte LLP, Abbots House, Abbey St, Reading RG1 3BD or at any adjournment thereof, notice of which is set out at the end of the Circular
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"Group" | the Company and its subsidiaries and subsidiary undertakings
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"Hargreave Hale" | Hargreave Hale Limited
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"Issue Price" | 6.5 pence per New Ordinary Share
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"Legal and General" | Legal and General Investment Management Limited
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"London Stock Exchange" | London Stock Exchange plc
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"M&G Investment Management" | M&G Investment Management Limited
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"MoD" | the UK Ministry of Defence
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"New Ordinary Shares" | the Firm Placing Shares and the Open Offer Shares
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"Notice of General Meeting" | the notice convening the General Meeting as set out at the end of the Circular
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"Open Offer Shares" | the up to 60,352,103 new Ordinary Shares being made available to Qualifying Shareholders pursuant to the Open Offer
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"Open Offer" | the conditional invitation made to Qualifying Shareholders to apply to subscribe for the Open Offer Shares at the Issue Price on the terms and subject to the conditions set out in Part 3 of the Circular and, where relevant, in the Application Form
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"Open Offer Entitlement" | the entitlement of Qualifying Shareholders to subscribe for Open Offer Shares allocated to Qualifying Shareholders on the Record Date pursuant to the Open Offer calculated on the basis of 1 Open Offer Share for every 7 Existing Ordinary Shares held by that Qualifying Shareholder on the Record Date
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"Ordinary Shares" | ordinary shares of 1p each in the capital of the Company
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"Overseas Shareholders" | a Shareholder with a registered address outside the United Kingdom or who are citizens of, incorporated in, registered in or otherwise resident in, countries outside the United Kingdom
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"Qualifying CREST Shareholders" | Qualifying Shareholders holding Existing Ordinary Shares in uncertificated form
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"Qualifying Non-CREST Shareholders" | Qualifying Shareholders holding Existing Ordinary Shares in certificated form
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"Qualifying Shareholders" | holders of Existing Ordinary Shares on the register of members of the Company at the Record Date (but excluding, subject to certain exceptions, Excluded Overseas Shareholders)
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"Receiving Agents" | Equiniti Limited
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"Record Date" | 6.00 p.m. on 5 July 2017 in respect of the entitlements of Qualifying Shareholders under the Open Offer
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"Regulatory Information Service" | has the meaning given in the AIM Rules for Companies
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"Resolutions" | the resolutions to be proposed at the General Meeting as set out in the Notice of General Meeting
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"Restricted Jurisdictions" | United States of America, Canada, Australia, New Zealand, Japan and the Republic of South Africa and any other jurisdiction where the extension or availability of the Firm Placing and the Open Offer would breach any applicable law
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"Securities Act" | US Securities Act of 1933 (as amended)
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"Shareholders" | the holders of Ordinary Shares from time to time
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"United Kingdom" or "UK" | the United Kingdom of Great Britain and Northern Ireland
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"United States", "United States of America" or "US" | the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia
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"uncertificated" or "uncertificated form" | recorded on the relevant register or other record of the Ordinary Shares or other security concerned as being held in uncertificated form in CREST, and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST
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APPENDIX I
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for the Open Offer | 6.00 p.m. on 5 July 2017
|
Announcement of the Firm Placing and the Open Offer, publication and posting of the Circular, the Application Form and Form of Proxy
| 10 July 2017 |
Ex-entitlement Date for the Open Offer
| 8.00 a.m. on 10 July 2017 |
Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders in CREST
| As soon as possible after 8.00 a.m. on 11 July 2017 |
|
|
Recommended latest time and date for requesting withdrawal of Open Offer Entitlements and Excess CREST Open Offer Entitlements from CREST (i.e. if your Open Offer Entitlements and Excess CREST Open Offer Entitlements are in CREST and you wish to convert them to certificated form)
| 4.30 p.m. on 20 July 2017 |
Latest time and date for depositing Open Offer Entitlements in CREST | 3.00 p.m. on 21 July 2017
|
Latest time and date for splitting Application Forms(to satisfy bona fide market claims only)
| 3.00 p.m. on 24 July 2017 |
Latest time and date for receipt of completed Forms of Proxy to be valid at the General Meeting | 10.00 a.m. on 25 July 2017 |
|
|
Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instructions (if appropriate) | 11.00 a.m. on 26 July 2017 |
|
|
General Meeting | 10.00 a.m. on 27 July 2017 |
|
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Announcement of results of the General Meeting and the Open Offer | 27 July 2017 |
|
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Admission and commencement of dealings in the New Ordinary Shares on AIM | 8.00 a.m. on 28 July 2017 |
|
|
Firm Placing Shares and Open Offer Shares credited to CREST members' accounts (uncertificated holders only) | As soon as possible after 8.00 a.m. on 28 July 2017 |
|
|
Expected despatch of definitive share certificates in certificated form | 2 August 2017 |
|
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Notes:
(i) If any of the details contained in the timetable above should change, the revised times and dates will be notified by means of an announcement through a Regulatory Information Service.
(ii) Certain of the events in the above timetable are conditional upon, amongst other things, the approval of the Resolutions to be proposed at the General Meeting.
(iii) All references are to London time unless stated otherwise.
(iv) The ability to participate in the Open Offer is subject to certain restrictions relating to Qualifying Shareholders with registered addresses or located or resident in countries outside the UK (particularly the Excluded Overseas Shareholders), details of which are set out in paragraph 6 of Part 3 of the Circular. Subject to certain exceptions, Application Forms will not be despatched to, and Open Offer Entitlements and Excess CREST Open Offer Entitlements will not be credited to the stock accounts in CREST of, Shareholders with registered addresses in any of the Restricted Jurisdictions.
(v) Different deadlines and procedures for applications may apply in certain cases. For example, if you hold your Ordinary Shares through a CREST member or other nominee, that person may set an earlier date for application and payment than the dates noted above.
APPENDIX II
KEY STATISTICS
FIRM PLACING STATISTICS
Number of Existing Ordinary Shares |
422,464,726 |
|
|
Number of Firm Placing Shares | 307,692,308 |
|
|
Issue Price | 6.5p |
|
|
Percentage of the Enlarged Share Capital represented by the Firm Placing Shares | 38.9% |
|
|
Gross Proceeds of the Firm Placing | £20.0 million |
OPEN OFFER STATISTICS
Number of Open Offer Shares |
up to 60,352,103 |
|
|
ISIN Code for Open Offer Entitlements | GB00BF4VC969 |
|
|
ISIN Code for Excess CREST Open Offer Entitlements | GB00BF4VCB83 |
|
|
Issue Price | 6.5p |
|
|
Basis of Open Offer | 1 Open Offer Share for every 7 Existing Ordinary Shares |
|
|
Gross proceeds from the Open Offer* | approximately £3.9 million |
|
|
Enlarged Share Capital following the Firm Placing and the Open Offer* | 790,509,137 |
|
|
Percentage of the Enlarged Share Capital represented by the Open Offer Shares * | 7.6% |
|
|
Percentage of the Enlarged Share Capital represented by the New Ordinary Shares * | 46.6% |
|
|
Estimated net proceeds of the Firm Placing and the Open Offer* | approximately £22.8 million |
|
|
Market Capitalisation of the Company immediately following the Firm Placing and the Open Offer at the Issue Price* | £51.4 million |
* on the assumption that the Open Offer is fully subscribed