TIDMMRS TIDMURU
RNS Number : 1115C
Management Resource Solutions PLC
10 April 2017
Management Resource Solutions plc
Planned Placing at 5 pence per Share to raise GBP3m
Board changes
Notice of General Meeting
10 April 2017
1. Introduction
The Company today announces plans to launch a conditional
placing of 60 million new Shares at a placing price of 5 pence per
Placing Share, to raise GBP3 million (before expenses). Completion
of the Placing will be conditional inter alia on the approval of
the Company's Shareholders and other conditions precedent as
explained below. Accordingly, the Company will be seeking the
approval of Shareholders at a General Meeting to provide the
Directors with authority to allot and issue the Placing Shares.
In addition, the Company is announcing various changes to its
Board, with the appointment of John Zorbas as the Company's new
Non-Executive Chairman, and the appointments of each of Nigel
Burton and Trevor Brown as additional Non-Executive Directors. The
appointments of Mr Zorbas, Dr. Burton and Mr Brown are conditions
of the Placing proceeding. Mr Zorbas is the CEO and a shareholder
of URU Metals Limited, which is an existing Shareholder and an
intended participant in the Placing. In addition, Chris Berkefeld
has resigned as a Director of the Company. The Board thanks Mr
Berkefeld for his contribution to the Company. Further details of
the new Directors are set out in paragraph 4 below.
As explained in paragraph 7 below, the Placing will be
conditional inter alia on the passing of both of the Resolutions by
Shareholders at the General Meeting. If both of the Resolutions to
authorise the Placing are not passed at the General Meeting and the
Placing does not complete, the admission of the Company's Shares to
AIM will be cancelled and the Company will be forced to seek
alternative sources of potential funding which may or may not be on
similar commercial terms and may or may not be obtainable on a
timely basis or at all. If any such alternative sources of
potential funding are not available in an extremely short time
frame, it is highly likely that the Company or some or all of its
operations will be forced into administration.
The Placing and the changes to the Company's Board are supported
by the Company's former Chief Executive Officer, Paul Morffew, who
together with his wife, Santina Morffew, and SCOPN Pty Ltd, a
company owned by Santina Morffew, has irrevocably undertaken to
vote in favour of the Resolutions to be proposed at the General
Meeting, as described in paragraph 8 below.
2. Background to and Reasons for the Placing
The Company announced on 27 October 2016 that, whilst preparing
its consolidated accounts for the year ended 30 June 2016, the
audit process revealed a number of operational and financial
matters that required further review. The Company requested that
its Shares be suspended from trading on AIM with immediate effect
pending clarification of its financial position.
Internal investigations revealed that there were significant
shortcomings in the Group's contracts with PEAL in Papua New Guinea
and with Aiotec in New South Wales. Following legal advice, the
Company put these contracts into dispute immediately and ceased all
work, thus eliminating a significant ongoing cash drain on the
Group. In addition, the Directors were made aware that certain of
the funds raised in August 2016 to finance the acquisition of
SubZero (now MRS Services Group) were not applied to MRS Services
Group's working capital as anticipated. Both factors resulted in a
cash constraint and to cover losses in these contracts a provision
of A$6.6m was included in the audited consolidated accounts of the
Company to 30 June 2016 which were published on 30 March 2017.
The Company ceased work on the PEAL and Aiotec contracts, which
resulted in the closure of the consulting business and enabled
savings of approximately A$1.5m. MRS PNG Limited and MRS Guernsey
Limited, two of the Company's subsidiaries, were placed into
voluntary liquidation in December 2016 and Management Resource
Solutions Pty Ltd, an Australian subsidiary of the Company, was
placed into voluntary administration with effect from 7 February
2017.
Since the announcement of 27 October 2016, Paul Morffew ceased
to be Chief Executive Officer and was replaced by Joe Clayton, and
Murray d'Almeida stepped down and was replaced as Chairman by
Christopher Berkefeld, who has since resigned and has now been
replaced by John Zorbas.
Following the completion of the FY16 audited accounts and the H1
management accounts for FY17, the Company has found no fraudulent
activity, misappropriation of funds or gross misconduct by the
former CEO, Paul Morffew, and will not be pursuing these or other
matters any further.
As a consequence of these contractual issues and cash
constraints the Company now urgently requires additional funding.
Accordingly, the Company plans to raise conditionally GBP3m (before
expenses) by the Placing of the Placing Shares to certain investors
at 5 pence per Placing Share.
The proceeds of the planned Placing of approximately GBP3m will
be applied to:
GBP'm
Payment of trade creditors 2.15
Settlement with Paul Morffew 0.25
Repayment of part of bank overdraft 0.30
Estimated cash costs of the Placing 0.15
Cash retained as working capital 0.15
------
Total 3.00
------
As explained in paragraph 7 below, the planned Placing will be
conditional inter alia on the passing of both Resolutions by
Shareholders at the General Meeting. If both of the Resolutions are
not passed at the General Meeting and the Placing does not
complete, the admission of the Company's Shares to AIM will be
cancelled and the Company will be forced to seek alternative
sources of potential funding which may or may not be on similar
commercial terms and may or may not be obtainable on a timely basis
or at all. If any such alternative sources of potential funding are
not available in an extremely short time frame, it is highly likely
that the Company or some or all of its operations will be forced
into administration.
As trading in the Shares on AIM was suspended on 27 October 2016
(pending clarification of the Company's financial position), under
the AIM Rules the admission of the Shares to AIM will be cancelled
if trading has not resumed on or before 28 April 2017.
The Placing Shares will be issued credited as fully paid and
will rank pari passu with the existing Shares, including the right
to receive all dividends and other distributions declared, made or
paid on or in respect of such Shares after Admission.
The Placing will be conditional inter alia upon the following
condition precedents being satisfied:
-- the passing of the necessary Resolutions by the Shareholders
at the General Meeting to be held on 27 April 2017, as explained in
paragraph 7 below;
-- the suspension of trading in the Shares being lifted;
-- the Group's senior lender confirming to the Company that the
Group's facilities are all operating within arrangements, that no
breach notices have been issued and the senior lender has waived
its covenant test for the quarter ending 31 March 2017 and that,
subject to payment of not less than A$500,000 outstanding under the
Group's temporary overdraft facility the balance of A$600,000 will
be extended and/or amortised for (or over) a period of not less
than 12 months to 31 March 2018; and
-- Admission of the Placing Shares,
in each case, on or before 5.00 p.m. on 28 April 2017.
Application will be made to AIM for the Placing Shares to be
admitted to trading on AIM. Subject to the satisfaction of the
other conditions to the Placing, it is anticipated that the
suspension of the trading of the Shares on AIM will be lifted on or
around 7.30 a.m. and Admission will occur on or around 8.00 a.m. in
each case on 28 April 2017.
3. Current Trading and Prospects
Interim results
On 7 April 2017 the Company announced its unaudited interim
results for the six months ended 31 December 2016. The results show
a net loss before tax of A$3.2m on revenues of A$20.6m and net
liabilities of A$2.5m. The full results are available at
www.mrsplc.net.
In its announcement of 8 March 2017 the Company said that the
interim results would be subject to a review by the auditors.
However, the timing of the Placing has prevented the completion of
this review.
As at 31 December 2016 the Company and its subsidiaries had bank
debt facilities of A$20.4 million (GBP12.3m), comprising term debt,
lease finance, bank guarantee facilities, invoice discounting
facilities and a temporary overdraft facility of A$500,000. The
overdraft facility has since been increased to A$1,100,000 and
extended to 30 April 2017. The Group's senior lender, who provides
this overdraft facility, has confirmed to the Company that the
Group's facilities are all operating within arrangements and that
no breach notices have been issued. The Board is in negotiations
with its senior lender to agree a restructure of the A$1,100,000
facility whereby A$500,000 will be paid out of the proceeds of the
Placing with the balance of A$600,000 to be extended and/or
amortised over a period of not less than 12 months to 31 March
2018.
4. Changes to the Board
It is a condition of the Placing proceeding that John Zorbas is
appointed as the new Non-Executive Chairman of the Company and that
each of Nigel Burton and Trevor Brown be appointed as additional
Non-Executive Directors of the Company. Mr Zorbas, Dr Burton and Mr
Brown were appointed as Directors today.
Mr Zorbas is also Chief Executive Officer and a 3.7 per cent.
shareholder of AIM-listed URU Metals Limited, an AIM-listed mining
exploration and development company (AIM: URU). URU is an existing
Shareholder with an interest in 7,550,000 Shares representing 8.8
per cent. of the Existing Share Capital.
Chris Berkefeld resigned as a Director on today. The Board
thanks Mr Berkefeld for his contribution to the Company.
Details of the new Directors are set out below:
John Zorbas, Non-Executive Chairman
John Zorbas is a resource entrepreneur with a proven track
record in the metals exploration and development industry. He has
held senior advisory positions in various facets of business
including operations, marketing, sales, strategic planning and
structured finance. Mr. Zorbas is the Chief Executive Officer of
URU Metals Limited. He served as Executive Chairman and Managing
Director of NWT Uranium Corp. from June 2008 to December 2016. He
also served as the President of MGM Productions Group Inc., as well
as Director of both ZorCorp Capital Holdings and Starline Capital
Holdings Infrastructure Fund. He served as the Chief Executive
Officer and a Director of Monchhichi PLC (formerly: Mercom Capital
PLC) until 23 December 2016. Mr. Zorbas also served as a director
of Millennial Esports Corp. until 20 October 2016 and Stratton
Capital Corp. He is a founding shareholder of Asian Coast
Development Ltd.
Nigel Burton, Non-Executive Director
Dr Nigel Burton has over 25 years' experience in operational and
financial management, debt and equity financing, acquisition and
integration of businesses, disposals, IPOs and trade sales.
Following over 14 years as an investment banker at leading City
institutions including UBS Warburg and Deutsche Bank, including as
the managing director responsible for the energy and utilities
industries, Nigel has spent 15 years as CFO of a number of private
and public companies, including Navig8 Product Tankers Inc,
PetroSaudi Oil Services Limited, Advanced Power AG, and Granby Oil
and Gas plc. Nigel is currently CEO of Nu-Oil and Gas plc, which is
listed on AIM. Nigel is a Chartered Electrical Engineer (FIET) and
a Past President of the IET. He has a B.Sc. (First Class Hons) in
Electrical and Electronic Engineering and a Ph.D in Acoustic
Imaging from University College London.
Trevor Brown, Non-Executive Director
Trevor Brown has been a strategic investor in real estate and
equities for more than 30 years. He is the chief executive officer
of Braveheart Investment Group plc and Flying Brands Ltd, and has
been a director of Peterhouse Corporate Finance Limited.
John Zorbas, aged 45, Nigel Burton, aged 59, and Trevor Brown,
aged 70, are currently directors of the following companies
respectively:
John Zorbas Nigel Burton Trevor Brown
Zorcorp Capital Highbec Limited Free Publishing
Holdings Limited Limited
Uru Metals Limited Wasdale Head Limited Flying Brands
Holdings (UK)
plc
Eaton Equities Wasdale Head Inn Feedback plc
Limited Limited
Sensetoys Limited Braveheart Investment
Group plc
NU-Oil and Gas Stone Checker
plc Software Ltd
Prostate Checker
Software Ltd
Ridings Holdings
Limited
Kirkstall Limited
Caledonia Portfolio
Realisations Limited
Caledonia LP Limited
Strathclyde Innovation
Fund GP Limited
Braveheart Nominees
Limited
The Ridings Early
Growth Investment
Company Limited
Paraytec Limited
Braveheart Academic
Seed Fund GP Ltd
In the past five years, they have been directors of the
following companies respectively:
John Zorbas Nigel Burton Trevor Brown
Monchhichi plc Procurement Services Peterhouse Corporate
(Delaware) Inc. Finance
Stratton Capital New Day Energy Advanced Oncotherapy
Corp. Indonesia
Starline Capital Free Association
Holdings Books Limited
MGM Productions
Group
NWT Uranium Corp.
Save for the above, there is no further information that is
required to be disclosed in accordance with Rule 17 and paragraph
(g) of Schedule 2 of the AIM Rules for Companies with respect to
the appointments.
5. Proposed Open Offer
The Group's financial position, as outlined in paragraphs 2 and
3 above, has necessitated the Board seeking to conclude a
fundraising as soon as practicable. The Board considers that the
Placing will, if it completes, provide funds for the Group in the
shortest practicable timeframe, and that it is not practicable or
cost-effective to conduct a general pre-emptive offer to its
Shareholders at this time.
However, it is the intention of the Board that the Company will
conduct an open offer to its Shareholders as soon as practicable
and at a price per Share not greater than the Placing Price.
Accordingly, the Resolutions to be proposed at the General
Meeting would, if passed, inter alia authorise the Board to conduct
such an open offer as soon as practicable.
6. Settlements with Management and Creditors
The Company has agreed, or will seek to agree, settlements or
amendments to the terms of engagement of certain of its former and
current management, advisers and creditors.
As at the date of this document:
-- it has been agreed in principle that Joe Clayton, the
Company's Chief Executive Officer, will, upon completion of the
Placing and subject to the passing of the Resolutions, be granted
Warrants to subscribe for 2,500,000 new Shares (representing 1.62
per cent. of the Enlarged Share Capital) at 5 pence per Share for a
period of five years, subject to the lapse of such Warrants if Mr
Clayton leaves the Group as a 'bad leaver' during the first year.
These Warrants are to be granted to Mr Clayton in lieu of a
reduction in his base salary;
-- it has been agreed that Chris Berkefeld, the Company's former
Chairman, will be granted Warrants to subscribe for 547,120 new
Shares (representing 0.36 per cent. of the Enlarged Share Capital)
at 5 pence per Share for a period of five years. These Warrants are
to be granted to Mr Berkefeld in lieu of his being paid in respect
of his notice period provided that the Warrants are granted by 5
May 2017;
-- it has been agreed in principle that Vantage Performance, a
financial adviser to the Company, will, upon completion of the
Placing and subject to the passing of the Resolutions, be issued
with 1,823,708 Shares (representing 1.2 per cent of the Enlarged
Share Capital) in lieu of fees and will be granted Warrants to
subscribe for 5,000,000 new Shares (representing 3.25 per cent. of
the Enlarged Share Capital) at 5 pence per Share for a period of
five years in satisfaction of fee arrangements;
-- it has been agreed with Tim Jones that the Company will
discharge its liability to pay certain accrued fees to Mr Jones by
the allotment to Mr Jones of 347,240 new Shares credited as fully
paid up at the Placing Price. In addition it has been agreed that
the notice provision in Mr Jones' agreement of three months on
either side will be waived in consideration of the grant of
Warrants to subscribe for 360,000 new Shares (representing 0.23 per
cent. of the Enlarged Share Capital) at 5 pence per Share for a
period of five years, subject to the passing of the
Resolutions;
-- it has been agreed that Mr Morffew will be repaid a loan of
A$323,910.66 and paid AS$90,000 (less tax) in respect of employment
entitlements (including superannuation), out of the proceeds of the
Placing, in full and final settlement of all amounts owing by the
Group to Mr Morffew, Santina Morffew or SCOPN Pty Ltd. In addition,
subject to the passing of the Resolutions, Mr Morffew will be
granted Warrants over 2,000,000 new Shares (representing 1.3 per
cent. of the Enlarged Share Capital), exercisable at 5 pence per
Share for five years; and
-- it has been agreed that broking commission amounting to 10
per cent. of the value of the Placing will be satisfied by the
issue of 6,000,000 new Shares credited as fully paid up at the
Placing Price.
The issues of Warrants and Shares to Messrs Clayton, Berkefeld,
Jones and Morffew are classed as related party transactions under
the AIM Rules for Companies. The independent directors, being
Messrs Zorbas, Burton and Brown, having consulted Northland, the
Company's nominated adviser, consider that the terms of the grants
are fair and reasonable.
The Board considers that it is important for the Company to
conserve cash, and accordingly it will endeavour to agree
appropriate settlements with former management and other corporate
and trade creditors of the Group, which may or may not include the
allotment of new Shares and/or the grant of Warrants.
Any issue of new Shares or grant of Warrants requires the
approval of Shareholders, as outlined in paragraph 7 below. It is a
condition of the Placing that the necessary Resolutions to enable
such issues of Shares and grants of Warrants as are described above
be passed to provide the Board with flexibility to agree
appropriate settlements with management and creditors. Accordingly,
the Resolutions to be proposed at the General Meeting would, if
passed, inter alia authorise the Board to issue such Shares and
grant such Warrants.
7. Resolutions to be proposed at the General Meeting
At the Company's Annual General Meeting held in December 2016,
the customary annual resolutions to authorise the Company's
directors to allot Shares and to disapply statutory pre-emption
rights in respect of issues of Shares for cash were not passed. As
a result, the Company cannot allot the Placing Shares without the
approval of its Shareholders.
In addition, the Company will seek the approval of Shareholders
to provide the Directors with additional limited authority to allot
further Shares and securities convertible into Shares, it being
envisaged that this would be used to issue Shares and grant the
Warrants and satisfy any other arrangements that the Company
concludes as explained in paragraph 6 above, conduct an open offer
as explained in paragraph 5 above and otherwise as may be required
for future fundraising to assist with the Group's working
capital.
Accordingly, the Company will today, subject to the Placing
being concluded, announce the calling of a General Meeting of the
Company to be held at the offices of Memery Crystal, 44 Southampton
Buildings, London WC2A 1AP at 10.00 a.m. on 27 April 2017 at which
the necessary Resolutions will be proposed.
The planned Placing will be conditional inter alia on the
passing of both of the Resolutions by Shareholders at the General
Meeting. If both of the Resolutions are not passed at the General
Meeting and the Placing does not complete, the admission of the
Company's Shares to AIM will be cancelled and the Company will be
forced to seek alternative sources of potential funding which may
or may not be on similar commercial terms and may or may not be
obtainable on a timely basis or at all. If any such alternative
sources of potential funding are not available in an extremely
short time frame, it is highly likely that the Company or some or
all of its operations will be forced into administration.
8. Irrevocable Undertakings
The Company has received irrevocable undertakings to vote in
favour of both of the Resolutions at the General Meeting from
existing Shareholders in respect of, in aggregate, 15,303,629
Shares representing approximately 17.8 per cent. of the Existing
Share Capital.
URU, which is an existing Shareholder, has irrevocably
undertaken to vote in favour of both of the Resolutions to be
proposed at the General Meeting in respect of, in aggregate, the
7,550,000 Shares in which it is interested, representing
approximately 8.8 per cent. of the Existing Share Capital. MRS's
Non-Executive Chairman, John Zorbas, is the Chief Executive Officer
of URU and is interested in 3.9 per cent. of the issued share
capital of URU.
The Company's former Chief Executive Officer, Paul Morffew,
together with his wife, Santina Morffew, and SCOPN Pty Ltd, a
company owned by Santina Morffew, has irrevocably undertaken to
vote in favour of both of the Resolutions to be proposed at the
General Meeting in respect of, in aggregate, the 7,620,296 Shares
in which they are interested, representing approximately 8.9 per
cent. of the Existing Share Capital.
In addition, an irrevocable undertaking to vote in favour of
both of the Resolutions at the General Meeting has been received
from Tim Jones (the only Director who has an interest in Shares) in
respect of the 133,333 Shares in which he is interested,
representing approximately 0.2 per cent. of the Existing Share
Capital.
This Announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014 ("MAR"). In addition, market
soundings (as defined in MAR) were taken in respect of the Placing
with the result that certain persons became aware of inside
information (as defined in MAR), as permitted by MAR. This inside
information is set out in this Announcement. Therefore, those
persons that received inside information in a market sounding are
no longer in possession of such inside information relating to the
Company and its securities.
For further information:
Management Resource Solutions PLC +1 (0)778 938-7631
John Zorbas, Chairman
Northland Capital Partners Limited +44 (0)203 861 6625
(Nominated Adviser and Joint Broker)
Tom Price
Gerry Beaney
Peterhouse Corporate Finance Limited +44 (0)20 7469 0932
(Joint Broker)
Charles Goodfellow
Lucy Williams
About MRS
MRS provides project, quality, environmental and health &
safety management services to some of the largest companies and
projects across Australia, Oceania and Southeast Asia. MRS is a
sector specialist in the construction, engineering, civil
engineering, petrochemical and coal seam gas sectors. MRS sources
its contractors from a database of over 23,000 professionals around
the globe, allowing it to react quickly and fully to client
requirements.
Further information on the Company can be found at
http://www.mrsplc.net/.
DEFINITIONS
The following definitions apply throughout this announcement
unless the context requires otherwise:
"2006 Act" the Companies Act 2006, as amended from time to
time;
"Admission" admission of the Placing Shares to trading on
AIM;
"AIM" the AIM market of the London Stock Exchange;
"AIM Rules" the AIM Rules for Companies or, as applicable, the
AIM Rules for Nominated Advisers, published by the London Stock
Exchange, as amended from time to time;
"Business Day" any day on which banks are generally open in
England and Wales for the transaction of business, other than a
Saturday, Sunday or public holiday;
"Company" or "MRS" Management Resource Solutions plc;
"CREST" a relevant system (as defined in the CREST Regulations)
in respect of which Euroclear is the Operator (as defined in the
CREST Regulations);
"CREST Regulations" the Uncertificated Securities Regulations
2001 (SI 2001/3755), as amended from time to time;
"Directors" or "Board" the directors of the Company from time to time;
"Enlarged Share Capital" the expected issued ordinary share
capital of the Company immediately following completion of the
Placing and Admission, being the Existing Share Capital, the
Placing Shares and certain Shares to be allotted in lieu of fees,
as explained in paragraph 6 of the letter from the CEO and
Chairman;
"Euroclear" Euroclear UK & Ireland Limited;
"Existing Share Capital" the existing ordinary share capital of
the Company as at the date of this announcement, being 85,897,138
Shares;
"Form of Proxy" the form of proxy for use in connection with the
General Meeting;
"General Meeting" the general meeting of the Company to be held
at 10:00 a.m. (UK time) on 27 April 2017 at the offices of Memery
Crystal LLP, 44 Southampton Buildings, London WC2A 1AP (or any
adjournment of it), notice of which will be set out in the Notice
of General Meeting;
"London Stock Exchange" London Stock Exchange plc;
"Notice of General Meeting" the notice convening the General
Meeting which is set out at the end of this announcement;
"Northland" Northland Capital Partners Limited, the Company's
Nominated Adviser;
"Placing" the conditional placing of the Placing Shares at the
Placing Price as described in this announcement;
"Placing Price" 5 pence per Placing Share;
"Placing Shares" the 60,000,000 new Shares that are the subject
of the placing;
"Regulatory Information Service" the regulatory information
services approved by the London Stock Exchange for the distribution
of AIM announcements;
"Resolutions" the resolutions to be proposed at the General
Meeting, details of which are to be set out in a Notice of General
Meeting, and each a "Resolution";
"SCOPN" SCOPN Pty Ltd, a company owned by Santina Morffew, the
wife of Paul Morffew, the former Chief Executive Officer of the
Company;
"Shares" ordinary shares of EUR0.01 each in the capital of the
Company;
"Shareholders" the holders of Shares from time to time;
"URU" URU Metals Limited; and
"Warrants" the proposed warrants over Shares referred to in
paragraph 6 of this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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