The D&M Group is a long-established business which will
contribute to the Enlarged Group's revenue and profitability
immediately. In addition to being able to provide existing clients
of both companies with new services the directors of MRS believe
there will be significant opportunities to win new clients and
utilise the preferred supplier status the Enlarged Group will have
with a number of companies and governmental agencies which are not
currently engaging MRS or the D&M Group.
Overview of the D&M Group
D&M is a family run business established in 1972 by its
Chairman, Doug Phillips, and based in Queensland, Australia. The
D&M Group operates four businesses, being D&M Plant Hire,
Wrights Plant Hire, DMR and Titan Manufacturing, in three
divisions, wet hire, dry hire and manufacturing. The D&M Group
has a wide base of corporate and public sector clients in oil &
gas, mining, civil engineering, infrastructure and construction as
well as local government, many of whom have brought continued
business over a number years, with some clients having renewed
contracts with the D&M Group for three decades.
The D&M Group currently employs over 60 staff and its hire
fleet includes trucks ranging from 3m to 22m, tippers, semi
tippers, bobcats, positracks, excavators 1.5t - 45t, backhoes,
graders, and rubber-tracked earth moving equipment.
The D&M Group is currently the preferred supplier to,
amongst others, Select, Brisbane City Council and Gold Coast City
Council.
In the year ended 30 June 2014, the D&M Group reported a
profit before taxation and exceptional expenses of approximately
A$1.0m (approximately GBP507,000) on revenue of A$16.87m
(approximately GBP8.56m).
Dry and Wet Hire
D&M Plant Hire, Wrights Plant Hire and DMR supply plant and
equipment to companies and government bodies on a range of
different developments and projects in Eastern Australia. Over the
last 40 years the D&M Group has successfully accomplished large
road works, site developments, bulk earthworks, final trim and
precision earthworks.
A large percentage of the D&M Group's dry & wet hire
revenue is generated by large corporate and public sector customers
and the majority of such revenue is derived from hire periods
lasting longer than 6 months.
Manufacturing
Titan Manufacturing was started in 1997 to provide repairs and
servicing for the D&M Group's equipment in order to extend the
life and preserve the value of its assets. Titan Manufacturing
subsequently expanded into the design and construction of bespoke
earth moving machinery for clients in the coal seam gas and
infrastructure sectors.
Historic financial information, current trading and
prospects
Set out below is a summary of the financial performance of the
D&M Group for the three years ended 30 June 2014 which has been
extracted without material adjustment from the audited accounts of
the D&M Group. The full audited accounts of the D&M Group
are incorporate in the Admission Document
Year ended Year ended Year ended
30 June 2014 30 June 2013 30 June 2012
--------------- -------------- -------------- --------------
A$'000 A$'000 A$'000
--------------- -------------- -------------- --------------
Turnover 16,873 19,032 17,101
--------------- -------------- -------------- --------------
Profit Before
Taxation 339 1,120 1,263
--------------- -------------- -------------- --------------
Profit After
Taxation 145 587 971
--------------- -------------- -------------- --------------
Net Assets 3,692 3,604 3,486
--------------- -------------- -------------- --------------
The year to 30 June 2014 saw a move from "wet" hire, whereby the
D&M Group supplies both equipment and operators, to "dry" hire
of equipment only, resulting in a reduction in fuel and wage
expenses but also in the charge out rate for each item in use,
leading to the slight decrease in turnover for the year.
The D&M Group acquired an additional A$3m of new equipment
during the year, which resulted in an additional depreciation
charge of A$500,000, together with the financing costs for this
equipment. In addition, the D&M Group incurred a number of
extraordinary non-recurring expenses during the year amounting to
$668,000, all of which contributed to a fall in reported profit
before taxation of 70 per cent., although gross and EBITDA margins
increased marginally when compared to 2013.
As the mining sector in Australia has slowed, the infrastructure
sector has started to boom due to federal government initiatives.
The D&M Group now have a number of new wet hire infrastructure
projects about to start, which will see a move back towards the
D&M Group's historic business mix with higher charge out rates
but also higher associated costs.
D&M is currently engaged on numerous projects and has a
pipeline of further projects it hopes to start in the near future.
Following completion, the Enlarged Group intends to invest an
additional A$1.5m in further increasing the D&M Group's plant
and equipment available for hire to service existing and
prospective business.
Terms of the Acquisition
MRS has agreed, conditional inter alia upon the approval of
shareholders to acquire the D&M Group from the Vendors for a
cash consideration as follows:
-- A$6,724,095.70 (approximately GBP3.4m) as reduced by an
amount equal to 70 per cent. of the aggregate monetary value of
entitlements of the employees of the D&M Group as at the date
of completion (estimated to be approximately A$50,000), will be
paid upon completion of the Acquisition Agreement;
-- on or shortly after completion, MRS will pay to Doug Phillips
and Margaret Phillips equally the value of stock held by the
D&M Group at completion, subject to a maximum of A$200,000
(approximately GBP102,000); and
-- within 90 days of completion, accounts will be prepared to
determine the amount of the trade debtors and cash of the business
less the trade creditors of the D&M Group as at the date of
completion. If the accounts result in a net profit, MRS must pay
that net profit to Doug Phillips and Margaret Phillips equally. If
the accounts result in a net loss, the Vendors must pay the net
loss to MRS.
In addition, the Company will upon completion of the Acquisition
grant to Doug Phillips and Margaret Phillips or their nominees
D&M warrants to acquire up to 1,700,000 new Ordinary Shares at
a price of 30 pence per share at any time in the period of seven
years following completion.
No new ordinary shares in the company are being issued in
connection with the Acquisition.
Financing of the Acquisition
To finance, inter alia, the cash consideration payable by MRS
for the Acquisition, MRS has entered into a debt facility ("Debt
Facility") with Halcyon Capital Management Pty Ltd ("Halcyon").
Under the terms of the Debt Facility, Halcyon is advancing, in
aggregate, $17.133m (approximately GBP8.69m) to MRS for the
purposes of the Acquisition and to provide working capital to the
Enlarged Group.
The principal sum of the Debt Facility is repayable on 23 March
2020 and attracts interest, payable monthly in arrears, of 0.6875
per cent. per calendar month, equivalent to 8.25 per cent. per
year.
The Directors anticipate that the sums due under the Debt
Facility, which are required to complete the Acquisition, will be
made available for drawdown immediately following the General
Meeting. If the monies are not made available to the Company
pursuant to the Debt Facility at this time, the Acquisition will be
delayed or may not be capable of completion.
Board of Directors
Murray d'Almeida, Chairman of the Company, has given notice of
his retirement as a director of MRS with effect from 4 June 2015.
Murray has successfully guided the Company through its admission to
trading on AIM and the acquisition of D&M but has now decided
to concentrate on other ventures. A search for his replacement has
started and an update will be provided in due course.
Readmission to trading on AIM
The Company's share capital was admitted to trading on AIM on 11
December 2014.
The Acquisition is classified as a reverse takeover under the
AIM Rules, which requires that the Company seek Shareholder
approval of the Acquisition and apply to have its Ordinary Shares
readmitted to trading on AIM. Application will be made to the
London Stock Exchange for the Ordinary Shares to be readmitted to
trading on AIM with Admission expected to take place on 24 March
2015, subject to the passing of the Resolution by Shareholders at
the General Meeting and the Acquisition completing.
No placing of Ordinary Shares or other equity fundraising is
being conducted in conjunction with the Acquisition or
Admission.
If the Acquisition does not complete for any reason, then the
Ordinary Shares will continue to be admitted to trading on AIM.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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