Volvere Regulatory News (VLE)

29 Oct 2007 08:38

Volvere PLC29 October 2007 29 October 2007 VOLVERE plc Proposed Disposal of the Vectra Group Limited and its subsidiaries and Notice of Extraordinary General Meeting Volvere, the activist investor and turnaround investment company, announcestoday the proposed disposal of its wholly owned subsidiary, Vectra Group Limitedand its subsidiaries to ARCADIS Geraghty & Miller International Limited, awholly owned subsidiary of ARCADIS N.V. for an aggregate cash consideration of£6.0 million. Highlights: £€6.0 million cash consideration •Successful turnaround of Volvere's first acquisition •IRR on investment in Vectra of over 40 per cent. per annum •Upon Completion, Volvere will have cash resources of over £10 million to invest in accordance with the Company's investing strategy •Upon Completion Volvere will have cash and net assets per Ordinary Share in excess of £1.90 Due to the size of Vectra relative to Volvere the Disposal is deemed to resultin a fundamental change of business under the AIM Rules and therefore requiresVolvere Shareholder approval. Volvere has therefore today sent a circular toVolvere Shareholders convening an extraordinary general meeting of the Companyto be held at 10.30 am on 14 November 2007 at the offices of Volvere, 9-11Grosvenor Gardens, London SW1W 0BD. To be valid, forms of proxy in respect of the extraordinary general meeting mustbe returned to the Company's registrars no later than 10.30 am on 12 November2007. For further information, please contact: Jonathan Lander, Chief Executive OfficerVolvere plc + 44 (0) 20 7979 7596 Terry GarrettWeber Shandwick Financial + 44 (0) 20 7067 0700 Tom HulmeLandsbanki Securities (UK) Limited + 44 (0) 20 7426 9000 THE PROPOSED DISPOSAL OF VECTRA GROUP LIMITED AND ITS SUBSIDIARIES The following has been extracted from the Circular to be posted to VolvereShareholders today, a copy of which will be available for review on theCompany's website www.volvere.co.uk from Tuesday 30 October 2007. Background and reasons for the Disposal Volvere acquired Vectra on 23 May 2003 for a cash consideration of £2 million,from Amey plc during a period when Amey plc was disposing of various non-coreassets. Vectra is a provider of health and safety consulting services to clientsin, and regulators of, regulated industries. During the five months prior to theacquisition by Volvere, Vectra incurred operating losses in excess of £1million. Following the acquisition by Volvere, Vectra was restructured to focusits activities on the nuclear, rail and the oil and gas sectors. Costs werereduced and working capital management improved. This resulted in an improvedoperating performance both in terms of profitability and cash flow. As a result,the Company recouped the purchase price of Vectra within approximately threeyears. In line with its stated strategy, following Vectra's successful performancepost-acquisition, Volvere has been actively considering how to develop Vectrafurther. The Volvere Board has concluded that the future development of theVectra Business is likely to be better achieved under new ownership where thereis believed to be synergy in both client service offering and central overheadand the possibility of greater investment. The Volvere Board has thereforedecided that the Disposal is the best option for both Vectra and the Company. The IRR on the Disposal is over 40 per cent. per annum from the acquisition dateto the expiry of the warranty period in 2009 (assuming no subsisting claims atthat time, and after all fees, commissions and expenses related to the Disposal,and including all management fees paid by Vectra to Volvere during Volvere'speriod of ownership.) Information on Vectra and its financial performance Vectra's principal activity is the provision of health and safety consultingservices to clients in, and regulators of, regulated industries. It has beeninvolved in this area for over 20 years giving it an international reputation inthis field. Vectra employs approximately 110 staff, is headquartered in Warrington, UnitedKingdom and has a further 10 offices, seven of which are based in the UK, two inmainland Europe and one in the Middle East. Financial information in relation to Vectra, which has been derived from theVolvere Group's management accounts, is set out below: 6 months to 12 months to 12 months to 30 June 2007 31 December 2006 31 December 2005 Unaudited Unaudited Unaudited £000 £000 £000 Revenue 5,419 10,358 9,898 ======== ========== ==========Operatingprofit/(loss) (Notes 1 & 2) 382 436 (48) ======== ========== ==========Profit/(loss)before tax (Notes 1 & 2) 371 422 (43) ======== ========== ========== Note 1: In response to acquisitions made in late 2005 and early 2006, Volvereestablished a central service company with effect from 1 July 2006, to providefinancial, IT and personnel services to Volvere Group subsidiaries. Until thatdate these activities were accounted for through the results of Vectra. In orderto present more clearly the results of Vectra, the 2006 results have beenadjusted on a pro forma basis to reflect the existence of the central servicecompany as though it had existed throughout that year. No similar exercise hasbeen performed for 2005 as for most of that year the people within Vectra workedsolely on operations within that business, albeit as a resource whichanticipated partly the Volvere Group's future growth. Note 2: Operating profit/(loss) and profit/(loss) before tax are stated before intra-group charges. As at 30 June 2007, the net assets of Vectra excluding intra-group balances were£1.66 million. At Completion the net assets of Vectra are estimated to be £1.4million. As detailed in the Report and Accounts, Vectra is Volvere's largest subsidiary,representing in 2006 about 75 per cent. of Volvere Group's revenue. FollowingCompletion, Volvere Group's revenue will be significantly reduced. Information on the remaining businesses Upon Completion, Volvere Group will comprise one investing company: NMT GroupPLC ("NMT") and three trading subsidiaries: Sira Test and Certification Limited("STC"), Sira Environmental Limited ("SEL") and Sira Defence & Security Limited("SDS"). NMT has no operating activities and is an investing company with approximately£5.9 million of cash. The Volvere Group owns approximately 95 per cent. of NMT. STC is a provider of certification services covering the safety of products thatare used within potentially explosive environments (such as chemical plants,mines and other hazardous areas). The business also provides training forpersonnel that work in such environments. STC employs 42 staff and has officesin Chester and Bakewell, United Kingdom. SEL provides monitoring and conformity assessment solutions to the environmentalmonitoring community in the specific areas of water quality and emissionsmonitoring. The business has a United Kingdom Accreditation Service accreditedlaboratory for gas and climatic testing and operates the MCERTS program for theEnvironment Agency ("EA"), certifying people and products as conforming tocertain EA technical standards. SEL employs seven people and is based inCrayford, United Kingdom. SDS develops, and advises in relation to, security solutions and surveillanceproducts for government agencies, the Police service and the Home Office. SDSemploys four people and is also based in Crayford, United Kingdom. Principal terms of the Disposal Under the terms of the SPA, Volvere has agreed to sell, subject to VolvereShareholders' approval, the entire issued share capital of Vectra Group Limitedto ARCADIS for a cash consideration of £6.0 million. £5.5 million of the purchase price will be paid at Completion which is due totake place as soon as reasonably practicable after Volvere Shareholders' haveapproved the Disposal, provided that there has been no material adverse effecton the Vectra Group since the SPA was entered into. (For the purposes of theSPA, there will have been a material adverse effect if an event occurs which isnot provided for in the Vectra Group's accounts and which could reasonably giverise to an unforeseen uninsured or otherwise irrecoverable loss or to anunforeseen uninsured liability, which will reduce the profits or turnover of theVectra Group by £0.5 million or more in the current financial year). The balanceof £0.5 million will be held in a retention account until the end of thewarranty period, being 18 months after Completion, and then be released subjectto any subsisting warranty claims by ARCADIS at that time. Volvere has givennormal warranties and indemnities appropriate to a transaction of this type,including warranties concerning the value of Vectra's trade debtors andwork-in-progress (subject to certain limitations). Volvere will pay approximately £0.79 million in fees, commissions and expensesrelated to the Disposal. Use of proceeds and renewal of investing strategy authority Under the terms of the Disposal, at Completion the Company will receive a cashconsideration of approximately £4.71 million (net of fees, commissions andexpenses), with an additional consideration payable of up to £0.5 million 18months after Completion (provided there are no warranty claims outstanding atthat time). The Company intends to use the proceeds of the Disposal and itsexisting cash resources (which as of 30 June 2007 were £6.4 million) to continueto invest in accordance with the Company's investing strategy. Upon Completionthe Company will have cash and net assets per Ordinary Share in excess of £1.90. Upon Completion, Volvere will have disposed of its largest subsidiary and willbe an "investing company" under the AIM Rules. The Company is required to askVolvere Shareholders to approve its ongoing investing strategy details of whichwill be set out in the Circular. Current trading On 27 September 2007, Volvere announced its Interim Results in which it statedthat the Volvere Group trading revenue had grown by almost 12 per cent. duringthe six month period to 30 June 2007 and profit before tax was £4,000 for thesame period compared to a loss of £3,000 for the six month period ended 30 June2006. Cash balances as at 30 June 2007 were £6.4 million. Since that datetrading has been in line with management expectations. Irrevocables The Company has received irrevocable undertakings from certain VolvereShareholders (including all of the Volvere Directors) to vote in favour of theResolutions in respect of, in aggregate, 3,201,151 Ordinary Shares representingin aggregate approximately 56.4 per cent. of the issued ordinary share capitalof the Company. Recommendation The Volvere Directors believe that the terms of the Disposal and Company'sinvesting strategy, are in the best interests of the Company and VolvereShareholders as a whole. Accordingly, the Volvere Directors unanimouslyrecommend Volvere Shareholders to vote in favour of the Resolutions. The Volvere Directors have irrevocably undertaken to vote in favour of theResolutions in respect of their own beneficial holdings, which in aggregateamount to 1,082,735 Ordinary Shares, representing approximately 19.08 per cent.of the Ordinary Shares in issue at the date of this document. DEFINITIONS The following definitions apply throughout this document unless the contextrequires otherwise: "Admission" admission of Volvere Ordinary Shares to trading on AIM on 24 December 2002 "AIM" the market known as AIM operated by the London Stock Exchange plc "AIM Rules" the AIM Rules for Companies of the London Stock Exchange plc governing admission to trading on and operation of AIM "ARCADIS" ARCADIS Geraghty & Miller International Limited, a wholly owned subsidiary of ARCADIS N.V. "Circular" the circular to be posted to Volvere Shareholders today giving details of the Disposal and the Company's investing strategy "Completion" completion of the Disposal pursuant to the terms of the SPA "Disposal" the disposal of the Vectra Business "Interim Results" the unaudited interim report of the Company for the six months ended 30 June 2007 announced on 27 September 2007, a copy of which has been posted to Volvere Shareholders and is also available on the Company's website www.volvere.co.uk "IRR" Internal Rate of Return "Ordinary Shares" ordinary shares of £0.0000001 each in the capital of the Company "Resolution(s)" the resolutions numbered 1 and 2 to be proposed at the extraordinary general meeting of the company as set out in the Circular "Report and the annual audited report and accounts of the Company for theAccounts" year ended 31 December 2006, a copy of which has been posted to Volvere Shareholders and is also available on the Company's website www.Volvere.co.uk "SPA" the sale and purchase agreement entered into between (1) the Company and (2) ARCADIS on 29 October 2007 for the sale of the Vectra Business "United Kingdom" the United Kingdom of Great Britain and Northern Irelandor "UK" "Volvere" or Volvere plcthe "Company" "Volvere Group" Volvere and its subsidiary undertakings as at the date of this document "Volvere Board" the board of directors of Volvereor "VolvereDirectors" "Volvere holders of Ordinary SharesShareholder" "Vectra" or Vectra Group Limited and its subsidiaries as at Completion"VectraBusiness" This information is provided by RNS The company news service from the London Stock Exchange