TIDMBRAM
RNS Number : 2886A
Brammer PLC
06 October 2009
Brammer plc
6 October 2009
THIS ANNOUNCEMENT (AND THE INFORMATION CONTAINED HEREIN) IS RESTRICTED AND IS
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE
OR IN PART, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW
ZEALAND, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER
JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF
SUCH JURISDICTION
BRAMMER PLC
PROPOSED RIGHTS ISSUE TO RAISE APPROXIMATELY GBP38.3 MILLION
The Board of Directors of Brammer plc ("Brammer" or the "Company") today
announces a fully underwritten Rights Issue to raise gross proceeds of GBP38.3
million (approximately GBP35.3 million net of expenses). The Rights Issue is
subject to approval by Shareholders at a General Meeting which is expected to be
held at 11.00 a.m. on 29 October 2009.
Highlights
* 1 for 1 fully underwritten Rights Issue to raise GBP35.3 million (net) through
the issue of 53,142,794 Rights Issue Shares at 72 pence per Rights Issue Share,
representing a discount of:
- 57.0 per cent. to the Closing Price of an Existing Ordinary Share of 167.5
pence
on 5 October 2009, being the last Business Day before the date of this
announcement; and
- 39.2 per cent. to the theoretical ex-rights price, when calculated by
reference to
the Closing Price on 5 October 2009, adjusted for the dividend of 2.6 pence
per
Existing Ordinary Share declared by the Company on 28 August 2009.
* The proceeds of the Rights Issue will be used to reduce the Group's financial
indebtedness, in order to create additional headroom over the Group's borrowing
covenants and will provide increased flexibility to reinvest the Group's
underlying cash flows, and so provide additional resources to take advantage of
future value enhancing investment opportunities.
Ian Fraser, Chief Executive of Brammer, said:
"Notwithstanding the difficult economic environment, Brammer continues to show
robust operational performance with stability in most markets and strong cash
flow generation. The proceeds from the fully underwritten Rights Issue will
significantly improve the strength of the Group's balance sheet, providing a
robust capital structure and appropriate financial flexibility to enable the
Group to continue to execute its growth strategy."
Current trading and future prospects of Brammer
On 28 August 2009, Brammer announced its Interim Results including the Board's
outlook for the Group for the financial year ending 31 December 2009.
As indicated in the Interim Results announcement, current trading for the Group
is in line with management expectations. During the two month period ended 31
August 2009, the Group has experienced a reduction in sales of approximately
18.8 per cent. (expressed in constant currency) when compared to the same period
in the previous financial year.
The reduction in sales in the second quarter of the Group's current financial
year on a sales per working day ("SPWD") basis was approximately 21.7 per cent.
The decline in SPWD during July and August of the current financial year was
approximately 19.4 per cent., a modest improvement over the second quarter. Most
territories now appear to have reached stability or are showing slight
improvements in their run-rate. As such, the Board believes that stability could
be starting to return in the majority of the markets in which the Group
operates, albeit at lower levels than during the previous financial year. There
are also signs that confidence is rising in the world's key economies that the
worst of the economic downturn has passed.
For the remainder of the current financial year, the Board anticipates a modest
increase in demand from recent levels together with some of the benefits arising
from new Key Account contract wins. However, the Board recognises that, in the
prevailing environment, its focus on costs and cash must remain a high priority.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
+----------------------------------------------------+--+-------------------+
| Announcement of Rights Issue and publication of | | 6 October 2009 |
| prospectus | | |
+----------------------------------------------------+--+-------------------+
| Record Date for entitlement to the Rights Issue | | 6.00 p.m. on |
| | | 27 October 2009 |
| | | |
+----------------------------------------------------+--+-------------------+
| General Meeting | | 11.00 a.m. on |
| | | 29 October 2009 |
| | | |
+----------------------------------------------------+--+-------------------+
| Admission/Dealings in Rights Issue Shares, nil | | 30 October 2009 |
| paid, commence on London Stock Exchange and | | |
| Existing Ordinary Shares marked "ex-rights" | | |
| | | |
+----------------------------------------------------+--+-------------------+
| Latest time and date for acceptance of payment in | | 11.00 a.m. on |
| full for and registration of renounced Provisional | | 13 November 2009 |
| Allotment Letters | | |
+----------------------------------------------------+--+-------------------+
| Results of Rights Issue to be announced | | 8.00 a.m. on |
| | | 16 November 2009 |
| | | |
+----------------------------------------------------+--+-------------------+
| Dealings to commence in Rights Issue Shares, fully | | 8.00 a.m. on |
| paid, on the London Stock Exchange | | 16 November 2009 |
+----------------------------------------------------+--+-------------------+
Notes:
(1) The dates set out in the expected timetable of principal events above and
mentioned
throughout the Prospectus and the accompanying documents may be
adjusted by the
Company in consultation with RBS Hoare Govett, in which event details
of the new dates will
be notified to the UKLA and the London Stock Exchange and, where
appropriate, to
Shareholders.
(2) The Rights Issue is subject to certain restrictions relating to
Shareholders who are residents
of, or who have registered addresses outside of, the UK.
(3) The times set out in the expected timetable of principal events above and
mentioned
throughout the Prospectus are London times and may be adjusted by the
Company in
consultation with RBS Hoare Govett, in which event details of the new
times and dates will be
notified to the UK Listing Authority, the London Stock Exchange, and,
where appropriate,
Shareholders.
This summary should be read in conjunction with the full text of this
announcement.
A prospectus relating to the Rights Issue (the "Prospectus") is expected to be
published today and will be available at the registered office of Brammer at
Claverton Court, Claverton Road, Wythenshawe, Manchester M23 9NE and on the
Company's website, www.brammer.biz.
RBS Hoare Govett is acting as Sponsor, Financial Adviser, Broker and Underwriter
to the Company.
For further information, please contact:
+----------------------------------------------------+----------------------+
| Brammer plc | +44 (0) 161 902 5572 |
| David Dunn, Chairman | |
| Ian Fraser, Chief Executive | |
| Paul Thwaite, Finance Director | |
| | |
+----------------------------------------------------+----------------------+
| RBS Hoare Govett Limited | +44 (0) 20 7678 8000 |
| Lee Morton | |
| Justin Jones | |
| Hugo Fisher | |
| | |
+----------------------------------------------------+----------------------+
| Citigate Dewe Rogerson | +44 (0) 20 7638 9571 |
| Martin Jackson | |
| Nicola Smith | |
+----------------------------------------------------+----------------------+
Shareholder enquiries
If you have further questions, please telephone the Shareholder Helpline on the
numbers set out below. This helpline is available from 8.30 a.m. to 5.30 p.m. on
any London Business Day.
Shareholder Helpline
0871 384 2050 (from inside the UK)
or +44 121 415 0259 (from outside the UK)
Calls to Equiniti's 0871 384 2050 number are charged at 8 pence per minute from
a BT landline. Other service provider's costs may vary. Calls to the Equiniti's
+44 121 415 0259 number from outside the UK are charged at applicable
international rates. Different charges may apply to calls made from mobile
telephones and calls may be recorded and monitored randomly for security and
training purposes. Equiniti's Shareholder Helpline is unable to give advice on
the merits of the Rights Issue or provide any financial, legal, tax or
investment advice.
General
This announcement (and the information contained herein) is restricted and is
not for release, publication or distribution, directly or indirectly, in whole
or in part, in or into or from the United States, Canada, Australia, Japan, New
Zealand, the Republic of Ireland, the Republic of South Africa or any other
jurisdiction where to do so would constitute a violation of the relevant laws of
such jurisdiction.
The release, publication or distribution of this announcement, the Prospectus
and/or the Provisional Allotment Letter and/or the transfer of the Nil Paid
Rights, the Fully Paid Rights and/or the Rights Issue Shares in or into
jurisdictions other than the UK may be restricted by law and therefore persons
into whose possession this announcement or any other document in connection with
the Rights Issue comes or to whom this announcement is released, published or
distributed should inform themselves about and observe such restrictions. Any
failure to comply with any such restrictions may constitute a violation of the
securities laws or regulations of such jurisdictions.
This announcement is an advertisement and not a prospectus and investors should
not subscribe for or purchase any Nil Paid Rights, Fully Paid Rights or Rights
Issue Shares referred to in this announcement except on the basis of information
in the Prospectus which is expected to be published by the Company today in
connection with the Rights Issue. Copies of the Prospectus will, following
publication, be available from the Company's registered office.
This announcement does not constitute, or form part of any offer or invitation
to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or
issue, or any solicitation of any offer to sell, otherwise dispose of, issue,
purchase, otherwise acquire or subscribe for, any security in the capital of the
Company in any jurisdiction. Any decision to purchase, otherwise acquire,
subscribe for, sell or otherwise dispose of any Provisional Allotment Letter,
Nil Paid Rights, Fully Paid Rights and/or Rights Issue Shares should only be
made on the basis of information contained in and incorporated by reference into
the Prospectus which contains further details relating to the Company in general
as well as a summary of the risk factors to which an investment in the Rights
Issue Shares is subject. Nothing in this announcement should be interpreted as a
term or condition of the Rights Issue. This announcement is not directed to, or
intended for distribution or use by, any person or entity that is a citizen or
resident or located in any locality, state, country or other jurisdiction where
such distribution, publication, availability, or use would be contrary to law or
regulation which would require any registration or licensing within such
jurisdiction. In particular, this announcement is not for distribution in or
into the United States, Australia, Canada, Japan, New Zealand, the Republic of
Ireland, the Republic of South Africa or any other Excluded Jurisdiction. The
information in this announcement may not be forwarded or distributed to any
other person and may not be reproduced in any manner whatsoever. Any forwarding,
distribution, reproduction, or disclosure of this announcement in whole or in
part is unauthorised. Failure to comply with this directive may result in a
violation of the securities laws or regulations of other jurisdictions.
This announcement and the information contained herein is not an offer of
securities for sale in the United States. The Nil Paid Rights, the Fully Paid
Rights, the Rights Issue Shares and the Provisional Allotment Letters have not
been and will not be registered under the United States Securities Act 1933 (as
amended) or under the applicable securities laws of any state or other
jurisdiction of the United States and will not qualify for distribution under
any of the relevant securities of any of the Excluded Jurisdictions.
Accordingly, unless a relevant exemption from such requirements is available,
none of the Existing Ordinary Shares, the Nil Paid Rights, the Fully Paid Rights
the Rights Issue Shares or the Provisional Allotment Letters may be offered,
sold, resold, taken up, exercised, renounced, transferred or delivered, directly
or indirectly, in or into the United States or any other Excluded Jurisdiction
or to, or for, the account or benefit of a person located in the United States
or any other Excluded Jurisdiction. No money, securities or other consideration
from any person inside the United States is being solicited and, if sent in
response to the information contained in this announcement, will not be
accepted.
RBS Hoare Govett Limited ("RBS Hoare Govett"), which is authorised and regulated
in the United Kingdom by the Financial Services Authority, is acting as sponsor,
financial adviser, broker and underwriter to the Company and for no one else in
connection with the Rights Issue and will not regard any other person (whether
or not a recipient of this announcement) as a client in relation to the Rights
Issue and will not be responsible to anyone other than the Company for providing
the protections afforded to clients of RBS Hoare Govett or for providing advice
to any such person in relation to the Rights Issue, the contents of this
announcement, the Prospectus and the accompanying documents thereto or any
matters or arrangements referred to herein or therein.
Apart from the responsibilities and liabilities, if any, which may be imposed on
RBS Hoare Govett by FSMA or the regulatory regime established thereunder, RBS
Hoare Govett accepts no responsibility whatsoever, and makes no representation
or warranty, express or implied, for the contents of this announcement including
its accuracy, completeness or verification or for any other statement made or
purported to be made by it or on behalf of it, the Company or any other person,
in connection with the Company, the Nil Paid Rights, the Fully Paid Rights and
the Rights Issue Shares or the Rights Issue 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. RBS Hoare Govett accordingly disclaims all and any
liability whatsoever, whether arising in tort, contract or otherwise (save as
referred to above), which it might otherwise have in respect of this
announcement or any such statement.
Cautionary note regarding forward looking statements
The statements contained in this announcement and the information referred to in
it includes statements that are, or may be deemed to be, "forward-looking
statements". These forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes", "estimates",
"plans", "anticipates", "targets", "aims", "continues", "projects", "assumes",
"expects", "intends", "may", "will", "would" or "should", or in each case, their
negative or other variations or comparable terminology. These forward-looking
statements include all matters that are not historical facts. They appear in a
number of places throughout this announcement and include statements regarding
the Company's intentions, beliefs or current expectations concerning, among
other things, the Group's result of operations, financial condition, liquidity,
prospects, growth strategies and the industries in which the Group operates.
By their nature, forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances. A number of factors could cause
actual results and developments to differ materially from those expressed or
implied by the forward-looking statements, including without limitation:
conditions in the markets, market position of the Company, earnings, financial
position, cash flows, return on capital, anticipated investments and capital
expenditures, changing business or other market conditions and general economic
conditions. These and other factors could adversely affect the outcome and
financial effects of the plans and events described herein. Forward-looking
statements contained in this announcement based on past trends or activities
should not be taken as a representation that such trends or activities will
continue in the future. None of the statements made in this paragraph in any way
obviate the requirement that the Company complies with the Prospectus Rules, the
Disclosure and Transparency Rules, the Listing Rules or FSMA.
These forward-looking statements speak only at the date of this announcement.
Except as required by the Listing Rules, the Disclosure and Transparency Rules,
the Prospectus Rules and any law, Brammer does not have any obligation to update
or revise publicly any forward-looking statements, whether as a result of new
information, further events or otherwise. Except as required by the Listing
Rules, the Disclosure and Transparency Rules, the Prospectus Rules and any law,
Brammer expressly disclaims any obligation or undertaking to release publicly
any updates or revisions to any forward-looking statements contained herein to
reflect any change in Brammer's expectations with regard thereto or any change
in events, conditions or circumstances on which any such statement is based. In
light of these risks, uncertainties and assumptions, the forward-looking
statements discussed in this announcement might not occur. Prospective investors
should specifically consider the factors identified in this announcement and the
Prospectus which could cause actual results to differ before making an
investment decision.
No statement in this announcement is intended as a profit forecast or a profit
estimate and no statement in this announcement should be interpreted to mean
that earnings per Ordinary Share for the current or future financial years would
necessarily match or exceed the historical published earnings per Ordinary
Share. Prices and values of, and income from, shares may go down as well as up
and an investor may not get back the amount invested. It should be noted that
past performance is no guide to future performance.
No person has been authorised to give any information or to make any
representation other than those contained in this announcement and, if given or
made, such information or representation must not be relied on as having been
authorised by the Company or RBS Hoare Govett. Subject to the Listing Rules, the
Prospectus Rules and the Disclosure and Transparency Rules, the issue of this
announcement shall not, in any circumstances, create any implication that there
has been no change in the affairs of the Group since the date of this
announcement or that the information in it is correct as at any subsequent date.
Neither the content of the Company's website (or any other website) nor the
content of any website accessible from hyperlinks on the Company's website (or
any other website) is incorporated into, or forms part of, this announcement.
This announcement has been prepared for the purposes of complying with
applicable law and regulation in the United Kingdom and the information
disclosed may not be the same as that which would have been disclosed if this
announcement had been prepared in accordance with the laws and regulations of
any jurisdiction outside of the United Kingdom.
BRAMMER PLC
PROPOSED RIGHTS ISSUE TO RAISE APPROXIMATELY GBP38.3 MILLION
1. INTRODUCTION
Today your Board announces that, conditional upon the passing of the
Resolutions, it proposed to raise gross proceeds of GBP38.3 million
(approximately GBP35.3 million net of expenses) by way of the Rights Issue. The
Rights Issue will be undertaken on the basis of 1 Rights Issue Share for every 1
Existing Ordinary Share held at the Record Date at the Rights Issue Price of 72
pence per Rights Issue Share. The Rights Issue, which relates to the issue of
53,142,794 Rights Issue Shares, has been fully underwritten by RBS Hoare Govett
pursuant to the terms of the Underwriting Agreement, other than in respect of an
aggregate of 328,000 Rights Issue Shares, in respect of which all of the
Directors have irrevocably undertaken to take up the rights to which they are
beneficially entitled under the terms of the Rights Issue.
The Rights Issue Price of 72 pence per Rights Issue Share represents a discount
of 57.0 per cent. to the Closing Price of an Existing Ordinary Share of 167.5
pence on 5 October 2009, being the last Business Day before the date of this
announcement and a discount of 39.2 per cent. to the theoretical ex-rights price
when calculated by reference to the Closing Price on 5 October 2009, adjusted
for the dividend of 2.6 pence per Existing Ordinary Share declared by the
Company on 28 August 2009. The Rights Issue is conditional, amongst other
things, upon the passing by Shareholders of the Resolutions (including
resolutions to remove the current limit on the Company's ability to allot shares
contained in the Articles of Association, to authorise the allotment of the
Rights Issue Shares and to disapply section 561(1) of the 2006 Act in relation
to the allotment of the Rights Issue Shares).
2. BACKGROUND TO THE GROUP
Brammer is a leading pan-European, added value technical equipment distributor.
The Group provides power transmission components, engineering and other related
industrial services to a broad customer base including a number of leading
European manufacturers such as the Bosch Group, Kraft Foods, TRW Automotive and
Smurfit Kappa Group. With over 300 locations in 16 countries, Brammer has a
large network of branches providing local coverage to its customers and fulfils
an important role between its customers and suppliers.
For the financial year ended 31 December 2008, the Group generated sales in the
UK of GBP133.5 million (28 per cent.), in Germany of GBP121.8 million (25 per
cent.), in France of GBP74.4 million (16 per cent.), in Spain of GBP42.7 million
(9 per cent.) and in Benelux of GBP46.3 million (10 per cent.). The remainder of
the Group generated sales of GBP59.7 million (12 per cent.) thereby generating
total Group sales of GBP478.4 million in the financial year ended 31 December
2008. The figures in brackets represent the percentage of total Group sales
generated by the relevant country or region during the financial year ended 31
December 2008.
The Group's extensive product portfolio includes a wide range of power
transmission components and mechanical MRO Products (such as bearings, belts,
seals, chains, motors and gearboxes) which it supplies to a broad range of
industries (such as metal, automotive, food and drink and transport and
utilities). The Group also provides various industrial services including
"Insite" services (where Brammer staff provide, or a Brammer branch is
established on a customer's premises to provide, a year round service for MRO
Products on a 24 hour, 7 day a week basis).
Key strengths
The Directors believe that Brammer has a number of key strengths and competitive
advantages that are important factors in the Group ensuring it maintains and
further develops its business. These include, but are not limited to:
* a wide geographic footprint across the European continent which attracts large
Key Account customers and diversifies risk for the Group overall;
* close working relationships with its key suppliers based on a "partnering"
approach which encourages support from suppliers but ensures a multi-brand
offering to customers;
* a well developed internal training programme which provides staff with extensive
technical and commercial knowledge;
* a diverse existing MRO Product offering with strong information systems enabling
intra-Group transfers to facilitate trading with customers and greater
visibility on stock levels across the Group;
* a long established reputation and strong industry knowledge but without reliance
on any one particular market segment or customer;
* a strong culture and a set of core values across the Group's employees aimed at
delivering the best possible service; and
* experienced Executive Directors and country management teams working to
implement a consistent and proven strategy.
Strategy
The Group's overall strategy is to be Europe's leading provider of MRO Products
and support services. The principal elements of Brammer's corporate strategy are
to:
* increase organic growth in each of the Group's geographical locations by
increasing sales and enhancing knowledge of customer processes;
* focus on winning Key Account customers on both a national and European level;
* increase the number of Insites and consistently implement best practice across
the Group;
* develop consistency through the implementation of Group information systems and
development of the Brammer brand;
* ensure the capability of Group employees is as high as possible through
training, development and communication;
* supplement organic growth through appropriate acquisitions; and
* minimise costs, wherever possible, throughout all Group functions.
3. CURRENT TRADING AND PROSPECTS
On 28 August 2009, Brammer announced its Interim Results including the Board's
outlook for the Group for the financial year ending 31 December 2009.
As indicated in the Interim Results announcement, current trading for the Group
is in line with management expectations. During the two month period ended 31
August 2009, the Group has experienced a reduction in sales of approximately
18.8 per cent. (expressed in constant currency) when compared to the same period
in the previous financial year.
The reduction in sales in the second quarter of the Group's current financial
year on a sales per working day ("SPWD") basis was approximately 21.7 per cent.
The decline in SPWD during July and August of the current financial year was
approximately 19.4 per cent., a modest improvement over the second quarter. Most
territories now appear to have reached stability or are showing slight
improvements in their run-rate. As such, the Board believes that stability could
be starting to return in the majority of the markets in which the Group
operates, albeit at lower levels than during the previous financial year. There
are also signs that confidence is rising in the world's key economies that the
worst of the economic downturn has passed.
For the remainder of the current financial year, the Board anticipates a modest
increase in demand from recent levels together with some of the benefits arising
from new Key Account contract wins. However, the Board recognises that, in the
prevailing environment, its focus on costs and cash must remain a high priority.
4. BACKGROUND TO AND REASONS FOR THE RIGHTS ISSUE
The Interim Results announced on 28 August 2009 and current trading highlight
that Brammer continues to deliver a resilient trading performance and, despite
the challenging economic conditions prevailing in most of the markets in which
the Group operates, has generated strong underlying cash flows. Whilst this
difficult trading environment may continue for some time and despite the
slowdown in the level of business activity across its markets, Brammer remains
one of the leading European suppliers in its chosen markets. The Company's
strategy of growth, enhanced capabilities, synergies and cost control remains
unchanged and has continued to yield clear benefits to the Group since its
introduction in 2004 and throughout the economic slowdown.
However, notwithstanding this encouraging relative performance and Brammer's
leading position in a very fragmented market, the prevailing economic conditions
are such that the Board continuously monitors the Group's progress and takes
appropriate action to ensure it is well positioned to both meet these difficult
trading conditions and take advantage of any growth opportunities that may arise
in the future. The difficult trading conditions have impacted the Group's sales
as customers' activity has declined and, in response to this, the Board has
undertaken a series of affirmative actions to manage the Group's gearing and net
debt position including:
Inventory reduction
Investment by the Group in improving its management systems over previous
financial years helped the Group to achieve a significant reduction in inventory
levels during the first six months of the 2009 financial year (by significantly
more than the sales decline) whilst still allowing the Group to maintain or
improve its service levels. Those investments include the introduction of:
(i) the Master Data Management (MDM) system which provides a common
unique reference for all of our inventory across Europe;
(ii) MOMASSE, a Brammer proprietary inventory management system used to
manage stock on a pan-European basis; and
(iii) Brammer Inline, an intra-group stock trading system.
During the first six months of the 2009 financial year, the Group's internal
inventory reduction target (as quoted at constant exchange rates) was exceeded
with inventory down by approximately GBP19 million, a reduction of approximately
22 per cent. from the level as at 31 December 2008. Net inventory at 30 June
2009 was GBP72 million (GBP103 million as at 31 December 2008). The Group
continues to target further inventory reductions during the remainder of the
current financial year.
Headcount reductions and other reductions in labour costs
As a result of the reduction in the Group's European sales levels (which
coincided with the general economic slowdown in Europe), the Group introduced a
two stage restructuring programme towards the end of 2008 with the aim of
bringing overhead costs down to reflect the current needs of the business. The
Group's workforce has been reduced by approximately 250 staff in 11 countries in
total (representing approximately 10 per cent. of the total Group workforce). In
some countries, such as Germany, the Group has managed to introduce different
working practices to assist the cost reduction process (through government
supported short time working) whereby most of the Group's German staff are now
working approximately 80 per cent. of their normal working week, with
concomitant staff cost savings.
These, and other measures introduced by the Group, have helped reduce total
costs (on an annualised basis) by approximately GBP15 million.
In addition to taking these operational actions, the Board has also given
careful consideration to the Group's overall balance sheet strength and the
levels of its financial gearing in light of the prevailing market conditions.
At the present time, the Group has fully committed facilities of EUR165 million
which remain in place through to 28 February 2012. These facilities were entered
into in 2006 and were most recently amended and restated on 7 November 2008. The
terms of these facilities require that the proceeds of the Rights Issue be
applied to reduce the Group's commitment in respect of the facilities to the
extent that the net proceeds are not used within six months of their receipt by
the Group to pay any outstanding deferred consideration payable by it or used by
the Group to make acquisitions. Should no such deferred consideration be paid
or no acquisitions be made by the Group within the six months following the
Group's receipt of the net proceeds of the Rights Issue, the facilities will
therefore reduce by approximately GBP35.3 million (taking the committed
facilities to approximately EUR126.6 million applying the Closing Exchange
Rate). Further information relating to such facilities is set out in paragraph
20 of Part 10 of the Prospectus.
These bank facilities were utilised to the amount of GBP69.4 million as at 30
June 2009. As at 31 August 2009 the Group had outstanding borrowings or
indebtedness in the nature of borrowing (net of cash) of approximately GBP88.3
million. The Group has traded within its current bank facilities and covenants.
Whilst the Group is pleased to have secured its banking requirements until
February 2012, the Directors believe that, given the uncertain economic outlook
and the current difficulties faced by the global financial markets, it is in the
best interests of the Company and its Shareholders for the Group to target a
reduction in its core net debt/EBITDA ratio.
Accordingly, the primary purpose of the Rights Issue is to provide flexibility
in the event of a more serious downturn in economic conditions than the Company
currently anticipates. This will help provide further downside protection for
the Group as well as ensuring value preservation for Shareholders. Following the
Rights Issue, the Group will be able to reinvest its strong underlying cash flow
and, mindful of gearing levels, will be well positioned to take advantage of
value-enhancing investment opportunities that currently exist within the Group's
core focus area. These would include, but are not limited to:
(a) additional investment in the Group's growth drivers of Key Accounts,
Insites and product
range extension; and
(b) the consideration of appropriate, bolt on value-enhancing acquisitions
to further consolidate
the market, improve critical mass and increase Brammer's leadership
position.
5. USE OF PROCEEDS
The proceeds of the Rights Issue will be used to reduce the Group's financial
indebtedness, in order to provide additional headroom over the Group's financial
covenants and increase flexibility to reinvest the Group's underlying cash flow,
and so provide additional resources to take advantage of future value enhancing
investment opportunities.
6. PRINCIPAL TERMS OF THE RIGHTS ISSUE, ADMISSION TO TRADING AND DEALING
ARRANGEMENTS
The Company proposes to offer up to 53,142,794 Rights Issue Shares at the Rights
Issue Price of 72 pence per Rights Issue Share by way of rights to all
Qualifying Shareholders, payable in full on acceptance, on the following basis:
1 Rights Issue Share for every 1 Existing Ordinary Share
held and registered in their name at 6.00 p.m. on the Record Date and so in
proportion to any other number of Existing Ordinary Shares then held.
Entitlements to Rights Issue Shares will be rounded down to the nearest whole
number. The number of Rights Issue Shares equal to the aggregated fractions will
be treated as if they had not been taken up in accordance with the provisions of
paragraph 3 of Part 6 of the Prospectus. The Rights Issue Shares will, when
issued and fully paid, rank pari passu in all respects with the then Existing
Ordinary Shares, including the right to receive in full all dividends and other
distributions declared, paid or made on the Existing Ordinary Shares. The Rights
Issue Shares will not, however, be entitled to receive the interim dividend
announced by the Company on 28 August 2009 (as part of its Interim Results
announcement) which is to be paid on 5 November 2009 to the holders of Existing
Ordinary Shares on the Company's register of members at the close of business on
9 October 2009.
Holdings of Existing Ordinary Shares in certificated and uncertificated form
will be treated as separate holdings for the purpose of calculating entitlements
under the Rights Issue, as will holdings under different designations and in
different accounts.
If a Qualifying Shareholder does not take up the offer of Rights Issue Shares
pursuant to the Rights Issue, his or her shareholding will be diluted by 50 per
cent. as a result of the Rights Issue.
The Rights Issue is conditional, amongst other things, on:
(i) the passing of the Resolutions at the General Meeting;
(ii) Admission becoming effective not later than 8.00 a.m. on 30 October 2009
(or such later time
and/or date as RBS Hoare Govett and the Company may agree, being not
later than 8.00 a.m.
on 13 November 2009); and
(iii) the Underwriting Agreement not being terminated prior to Admission and
being otherwise
unconditional in all respects (save for the condition relating to
Admission).
An application will be made to the UKLA for the Rights Issue Shares (nil and
fully paid) to be admitted to the Official List and for the Rights Issue Shares
(nil and fully paid) to be admitted to trading on the London Stock Exchange's
main market for listed securities. It is expected that Admission will become
effective and that dealings in the Rights Issue Shares fully paid will commence
at 8.00 a.m. on 16 November 2009. No application is currently intended to be
made for the Existing Ordinary Shares or the Rights Issue Shares to be admitted
to listing or dealt with on any other exchange.
Application will be made for Admission of the Rights Issue Shares and
applications will be made for the Nil Paid Rights and the Fully Paid Rights to
be admitted to CREST. It is expected that the Nil Paid Rights and the Fully Paid
Rights will be enabled for settlement in, and admitted to, CREST, as soon as
practicable after Admission of the Rights Issue Shares, nil paid, has become
effective on 30 October 2009. It is expected that Provisional Allotment Letters
in respect of the Rights Issue Shares will be posted to Qualifying non-CREST
Shareholders following the General Meeting to be held on 29 October 2009 and
that Admission will become effective and dealings in the Rights Issue Shares,
nil paid, will commence on the London Stock Exchange at 8.00 a.m. on 30 October
2009. Qualifying CREST Shareholders are expected to receive a credit to their
CREST stock accounts in respect of the Nil Paid Rights to which they are
entitled as soon as reasonably practicable after 8.00 a.m. on 30 October 2009.
Qualifying CREST Shareholders will not receive a Provisional Allotment Letter.
If for any reason Provisional Allotment Letters are posted later than 29 October
2009, the times and dates referred to in the Prospectus will be revised and the
times and dates so revised will be announced through an RIS.
The latest time and date for acceptance and payment in full under the Rights
Issue is expected to be 11.00 a.m. on 13 November 2009 and the results of the
Rights Issue will be announced on an RIS.
7. STRUCTURE OF THE RIGHTS ISSUE
The Rights Issue has been structured in a way that is expected to have the
effect of realising distributable reserves approximately equal to the net
proceeds of the Rights Issue less the par value of the Rights Issue Shares
issued by the Company. The Company and RBS Hoare Govett have agreed to subscribe
for ordinary shares in Newco. Equiniti will receive, into an account set up
specifically for the purpose, monies from Qualifying Shareholders or renouncees
taking up Rights Issue Shares, as agent for and on behalf of RBS Hoare Govett.
Provided certain conditions are met, RBS Hoare Govett will use the proceeds to
subscribe for redeemable preference shares in Newco.
The Company will issue and allot the Rights Issue Shares to those persons
entitled thereto in consideration for RBS Hoare Govett transferring its holdings
of ordinary shares and redeemable preference shares in Newco to the Company.
Accordingly, instead of receiving cash as consideration for the issue of the
Rights Issue Shares, at the conclusion of the Rights Issue, the Company will own
the entire issued share capital of Newco whose only asset will be its cash
reserves, which will represent an amount equivalent to the net proceeds of the
Rights Issue. The Company will be able to utilise this amount by redeeming the
redeemable preference shares it holds in Newco, or by procuring that Newco loans
or dividends this amount to the Company. This chain of events is governed by the
Subscription and Transfer Deed and the Initial Subscription and Put and Call
Option Deed, summaries of which are set out at paragraph 20 of Part 10 of the
Prospectus.
The Company may elect to implement the Rights Issue without using the structure
described above if it deems it to be in the Company's interest to do so.
8. FINANCIAL EFFECTS OF THE RIGHTS ISSUE
If the Rights Issue had taken place at 30 June 2009, being the date of the
Group's latest balance sheet, the effect on the consolidated net assets of the
Group would have been to increase the consolidated net assets of the Group by an
amount equal to the net proceeds of the Rights Issue. An unaudited pro forma
statement of the consolidated net assets of the Group illustrating the
hypothetical effects of the Rights Issue on the Group's net assets as at 30 June
2009 is set out in Section A of Part 9 of the Prospectus.
If the Rights Issue had taken place at 1 January 2008, being the beginning of
the 2008 financial year, the effect on the Group's 2008 earnings would have been
positive. However, the increased number of Ordinary Shares in issue following
the Rights Issue would have had a negative effect on the Company's earnings per
share for the same period.
9. DIVIDEND POLICY
The Company's current dividend policy is to pay a dividend upon its Ordinary
Shares twice annually at a level which the Board considers (at the time of
declaration or recommendation of such a dividend as appropriate) to be prudent
and reasonable having regard to the current and future working capital needs of
the Group and the level of the Company's distributable reserves at such time.
In respect of the financial year ended 31 December 2008, the Group announced an
interim dividend on 29 August 2008 of 2.6 pence per Ordinary Share (being an
increase of 24 per cent. from the interim dividend paid during the financial
year to 31 December 2007) and the final dividend for the financial year ended 31
December 2008 was maintained at 5.1 pence per Ordinary Share (being the same as
the previous year).
In respect of the financial year ending 31 December 2009, the Group announced an
interim dividend on 28 August 2009 of 2.6 pence per Existing Ordinary Share
(being the same as in the previous year).
The level of future dividend payments will take into account, amongst other
things, the Group's underlying earnings, cash flows, capital investment plans,
distributable reserves, debt repayments and the need to maintain an appropriate
level of dividend cover.
10. GENERAL MEETING
At the end of the Prospectus is set out a notice convening a General Meeting to
be held at the offices of DLA Piper UK LLP at 3 Noble Street, London EC2V 7EE at
11.00 a.m. on 29 October 2009.
At the General Meeting, Resolutions will be proposed to:
(i) remove the current limit on the Company's ability to allot shares in the
Articles of Association
imposed by virtue of paragraph 42(2) of Schedule 2 to The Companies Act
2006
(Commencement No. 8, Transitional Provisions and Savings) Order 2008;
(ii) grant the Directors authority, pursuant to section 551 of the 2006 Act,
to exercise all the
powers of the Company to allot shares in the Company or to grant rights
to subscribe for, or
to convert any security into, shares in the Company up to a maximum
aggregate nominal
amount of GBP17,714,264.60 in connection with the Rights Issue and
generally;
(iii) disapply the requirements of section 561(1) of the 2006 Act in respect
of the allotment by the
Directors of equity securities in connection with the Rights Issue; and
(iv) disapply the requirements of section 561(1) of the 2006 Act in respect of
any other allotment
by the Directors of equity securities pursuant to sections 570 and 573
of the 2006 Act.
DEFINITIONS
+-----------------------+--+--------------------------------------------------------+
| "2006 Act" | | the Companies Act 2006 to the extent in force at the |
| | | date of the Prospectus; |
+-----------------------+--+--------------------------------------------------------+
| "Admission" | | admission of the Rights Issue Shares (nil and fully |
| | | paid) to the Official List becoming effective in |
| | | accordance with the Listing Rules and the admission of |
| | | such shares (nil and fully paid) to trading on the |
| | | London Stock Exchange's main market for listed |
| | | securities being granted; |
+-----------------------+--+--------------------------------------------------------+
| "Articles" or | | the articles of association of the Company; |
| "Articles of | | |
| Association" | | |
+-----------------------+--+--------------------------------------------------------+
| "Board" or | | the directors of the Company as at the date of the |
| "Directors" | | Prospectus; |
+-----------------------+--+--------------------------------------------------------+
| "Business Day" | | a day (other than Saturday or Sunday or a bank |
| | | holiday) on which banks are generally open for normal |
| | | banking business in the City of London; |
+-----------------------+--+--------------------------------------------------------+
| "Closing Exchange | | the closing spot rate of EUR1.0883:GBP1.00 on 2 October |
| Rate" | | 2009, as published in the Financial Times on 5 October |
| | | 2009; |
+-----------------------+--+--------------------------------------------------------+
| "Closing Price" | | the closing middle market quotation of an Existing |
| | | Ordinary Share as derived from the Daily Official List |
| | | published by the London Stock Exchange; |
+-----------------------+--+--------------------------------------------------------+
| "Company" or | | Brammer plc; |
| "Brammer" | | |
+-----------------------+--+--------------------------------------------------------+
| "CREST" | | the system for the paperless settlement of trades in |
| | | securities and the holding of uncertificated |
| | | securities in accordance with the CREST Regulations; |
+-----------------------+--+--------------------------------------------------------+
| "CREST Regulations" | | the Uncertificated Securities Regulations 2001 (SI |
| | | 2001 No. 3755), as amended from time to time; |
+-----------------------+--+--------------------------------------------------------+
| "Disclosure and | | the disclosure and transparency rules of the FSA; |
| Transparency Rules" | | |
+-----------------------+--+--------------------------------------------------------+
| "Equiniti" | | a trading name of Equiniti Limited; |
+-----------------------+--+--------------------------------------------------------+
| "Euro" or "EUR" | | the lawful currency of the European Union; |
+-----------------------+--+--------------------------------------------------------+
| "Euroclear" | | Euroclear UK & Ireland Limited; |
+-----------------------+--+--------------------------------------------------------+
| "Excluded | | Australia, Canada, Japan, New Zealand, the Republic of |
| Jurisdictions" | | Ireland, the Republic of South Africa, the United |
| | | States or any other country, territory or possession |
| | | where the transmission of this announcement and/or the |
| | | Prospectus into it may contravene local securities |
| | | laws or regulations; |
+-----------------------+--+--------------------------------------------------------+
| "Existing Ordinary | | the 53,142,794 Ordinary Shares in issue at the date of |
| Shares" | | the Prospectus; |
+-----------------------+--+--------------------------------------------------------+
| "EURIBOR" | | the percentage offered rate per annum determined by |
| | | the Banking Federation of the European Union for the |
| | | relevant period; |
+-----------------------+--+--------------------------------------------------------+
| "General Meeting" or | | the general meeting of the Company to be held at 11:00 |
| "GM" | | a.m. at the offices of DLA Piper UK LLP, 3 Noble |
| | | Street, London EC2V 7EE on 29 October 2009, notice of |
| | | which is set out in the Prospectus and including any |
| | | adjournment thereof; |
+-----------------------+--+--------------------------------------------------------+
| "Form of Proxy" | | the form of proxy accompanying the Prospectus for use |
| | | in connection with the GM; |
+-----------------------+--+--------------------------------------------------------+
| "FSA" | | the Financial Services Authority; |
+-----------------------+--+--------------------------------------------------------+
| "FSMA" | | the Financial Services Market Act 2000, as amended |
| | | from time to time; |
+-----------------------+--+--------------------------------------------------------+
| "Fully Paid Rights" | | rights to acquire Rights Issue Shares, fully paid; |
+-----------------------+--+--------------------------------------------------------+
| "Group" | | the Company and its subsidiaries; |
+-----------------------+--+--------------------------------------------------------+
| "Initial Subscription | | the initial subscription and put and call option deed |
| and Put and Call | | between (1) the Company, (2) RBS HG and (3) Newco |
| Option Deed" | | dated 6 October 2009; |
+-----------------------+--+--------------------------------------------------------+
| "Insite" | | a self-contained facility of the Company established |
| | | within a customer's premises through which the Company |
| | | provides support services for a minimum period of four |
| | | hours a day, five days a week; |
+-----------------------+--+--------------------------------------------------------+
| "Interim Results" | | the financial results of the Group for the six month |
| | | period ended 30 June 2009; |
+-----------------------+--+--------------------------------------------------------+
| "Key Accounts" | | an account which is serviced by the Group on a |
| | | multi-location basis (and/or which is part of a |
| | | European group) and which includes the Group's minimum |
| | | contractual requirements (such as having a written |
| | | contract in place and which has been approved by the |
| | | Group's management); |
+-----------------------+--+--------------------------------------------------------+
| "Listing Rules" | | the listing rules made by the UKLA for the purposes of |
| | | Part VI of the FSMA; |
+-----------------------+--+--------------------------------------------------------+
| "London Stock | | London Stock Exchange plc; |
| Exchange" or "LSE" | | |
+-----------------------+--+--------------------------------------------------------+
| "MRO Products" | | maintenance, repair and overhaul products such as |
| | | bearings, mechanical power transmission equipment, |
| | | fluid power and tools and the related maintenance of |
| | | such products; |
+-----------------------+--+--------------------------------------------------------+
| "Newco" | | Brammer Jersey No 2 Limited; |
+-----------------------+--+--------------------------------------------------------+
| "Nil Paid Rights" | | Rights Issue Shares in nil paid form provisionally |
| | | allotted to Qualifying Shareholders pursuant to the |
| | | Rights Issue; |
+-----------------------+--+--------------------------------------------------------+
| "Official List" | | the Official List of the UKLA; |
+-----------------------+--+--------------------------------------------------------+
| "Ordinary Shares" | | Ordinary shares of 20 pence each in the capital of the |
| | | Company; |
+-----------------------+--+--------------------------------------------------------+
| "Overseas | | holders of Ordinary Shares with registered addresses |
| Shareholders" | | outside the United Kingdom or who are citizens of, |
| | | incorporated in, registered in or otherwise resident |
| | | in, countries outside the United Kingdom; |
+-----------------------+--+--------------------------------------------------------+
| "Prospectus Rules" | | the prospectus rules made by the UKLA for the purpose |
| | | of Part VI of FSMA; |
+-----------------------+--+--------------------------------------------------------+
| "Provisional | | the renounceable provisional allotment letter to be |
| Allotment Letter" of | | despatched to Qualifying Shareholders pursuant to the |
| "PAL" | | Rights Issue; |
+-----------------------+--+--------------------------------------------------------+
| "Qualifying CREST | | Qualifying Shareholders whose Ordinary Shares on the |
| Shareholders" | | register of members of the Company at 6.00 p.m. on the |
| | | Record Date are in uncertificated form; |
+-----------------------+--+--------------------------------------------------------+
| "Qualifying non-CREST | | Qualifying Shareholders whose Ordinary Shares on the |
| Shareholders" | | register of members of the Company at 6.00 p.m. on the |
| | | Record Date are in certificated form; |
+-----------------------+--+--------------------------------------------------------+
| "Qualifying | | holders of Ordinary Shares on the register of members |
| Shareholders" | | of the Company at the close of business on the Record |
| | | Date other than certain Overseas Shareholders to whom |
| | | the Rights Issue does not apply; |
+-----------------------+--+--------------------------------------------------------+
| "RBS Hoare Govett" | | RBS Hoare Govett Limited; |
+-----------------------+--+--------------------------------------------------------+
| "Record Date" | | the record date for the Rights Issue, being 6.00 p.m. |
| | | on 27 October 2009; |
+-----------------------+--+--------------------------------------------------------+
| "Regulatory | | a service provided by the LSE for the distribution to |
| Information Service" | | the public company of announcements; |
+-----------------------+--+--------------------------------------------------------+
| "Resolutions" | | The resolutions set out in the notice of GM at the end |
| | | of the Prospectus; |
+-----------------------+--+--------------------------------------------------------+
| "Rights Issue" | | the proposed issue by way of rights of Rights Issue |
| | | Shares to Qualifying Shareholders; |
+-----------------------+--+--------------------------------------------------------+
| "Rights Issue Price" | | 72 pence per Rights Issue Share; |
+-----------------------+--+--------------------------------------------------------+
| "Rights Issue Shares" | | 53,142,794 new Ordinary Shares proposed to be allotted |
| | | and issued by the Company pursuant to the Rights |
| | | Issue; |
+-----------------------+--+--------------------------------------------------------+
| "RIS" | | regulatory information service; |
+-----------------------+--+--------------------------------------------------------+
| "Shareholder" | | A holder of Existing Ordinary Shares; |
+-----------------------+--+--------------------------------------------------------+
| "stock account" | | an account within a member account in CREST to which a |
| | | holding of a particular share or other security in |
| | | CREST is credited; |
+-----------------------+--+--------------------------------------------------------+
| "Subscription and | | the subscription and transfer deed between (1) the |
| Transfer Deed" | | Company, (2) Newco and (3) RBS Hoare Govett dated 6 |
| | | October 2009; |
+-----------------------+--+--------------------------------------------------------+
| "UK Listing | | the FSA acting in its capacity as the competent |
| Authority" or "UKLA" | | authority for the purposes of Part VI of the FSMA; |
+-----------------------+--+--------------------------------------------------------+
| "UK" or "United | | the United Kingdom of Great Britain and Northern |
| Kingdom" | | Ireland, its territories and dependencies; |
+-----------------------+--+--------------------------------------------------------+
| "US" or "United | | the United States of America, its territories and |
| States" | | possessions, any state of the United States and the |
| | | District of Columbia; and |
+-----------------------+--+--------------------------------------------------------+
| "Underwriting | | the agreement dated 6 October 2009 between the Company |
| Agreement" | | and RBS Hoare Govett. |
+-----------------------+--+--------------------------------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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