Capital Reorganisation, Subscription and Change of Name

 
TIDMGAR 
 
27 May 2010 
 
                                  Garner PLC 
 
   Capital Reorganisation, Subscription, Debt Capitalisation and Change of Name 
 
Garner PLC ("Garner" and or the "Company"), a leading provider of executive 
search, interim management and leadership consultancy services via its wholly 
owned subsidiary, Norman Broadbent, is pleased to announce a proposed 
Subscription, Debt Capitalisation and Capital Reorganisation. A summary of key 
points follows: 
 
Fundraising and deferred consideration reduction 
 
  * Mr Pierce Casey and Mr Jon Moulton, acting in concert, to invest a total of 
    GBP2 million via a subscription for 4,444,444 New Ordinary Shares at 45p per 
    share (equivalent to 1.5p pre the Capital Reorganisation) equating to 57.58 
    per cent. of the Company (following implementation of the Proposals). Mr 
    Casey intends to become Chairman following the announcement of the 2009 
    results. 
 
  * Additional investment from key management within Garner. 
 
  * Renegotiation of terms of the Norman Broadbent acquisition reducing the 
    consideration from GBP5.5m to GBP2.03m, GBP627, 484 of which has already been 
    paid. 
 
Strategy 
 
  * Change of name to Norman Broadbent plc - re-establishing a global brand 
 
  * Grow global franchise in USA, Far East and Latin America using similar 
    licence arrangements to Italy and Middle East 
 
Current Trading & Prospects 
 
  * Garner has traded profitably in 2010 to date 
 
  * 
      + Month on month improvement compared to second half of 2009 
 
      + 2009 loss of GBP3.5m including goodwill impairment of GBP1.9m and 
        provisions of GBP0.35m 
 
Andrew Garner, Chairman, commented: 
 
"This investment and restructuring represents a complete rebirth of our 
company. We have a fantastic brand name with a strong global reputation and now 
we have the strength of balance sheet to drive this business forward. The Board 
looks forward to working with Pierce and Jon, we are confident that their 
knowledge and contacts will greatly assist the business in achieving its 
strategic goals. Using the successful formula of our licensing arrangements in 
Italy and the Middle East we will look to develop the Norman Broadbent brand in 
the USA, Far East and Latin America." 
 
Contacts: 
 
Garner plc                                                   Tel: [phone] 
 
Andrew Garner/Ben Felton 
 
Merchant John East Securities Limited                        Tel: [phone] 
 
John East/Simon Clements 
 
Buchanan CommunicationsLimited                               Tel: [phone] 
 
Tim Anderson/Isabel Podda/Christian Goodbody 
 
Introduction 
 
Garner today announces a number of proposals, which, if approved, will 
transform the Company and its prospects. These include: 
 
  * a subscription by Mr Pierce Casey for 2,222,222 New Ordinary Shares and Mr 
    Jon Moulton for 2,222,222 New Ordinary Shares at 45p per New Ordinary 
    Share, to raise GBP2,000,000 before expenses. Acting in concert, Pierce Casey 
    and Jon Moulton will together hold 4,444,444 New Ordinary Shares, 
    representing 57.58 per cent. of the Ordinary Share Capital of the Company 
    (following the implementation of the Proposals); 
 
  * an additional subscription by Mr Jeremy Daniels, a managing director of 
    Norman Broadbent, for 77,777 New Ordinary Shares at 45p per New Ordinary 
    Share, to raise an additional GBP35,000 before expenses; and 
 
  * a renegotiation of the terms of the acquisition of the Norman Broadbent 
    Companies and brand, reducing the deferred consideration payable for their 
    acquisition in December 2008, by approximately GBP3,450,000. 
 
The Subscription is conditional, inter alia, upon Shareholders passing the 
Resolutions at the General Meeting of the Company to grant the Directors the 
authority to allot shares and the power to disapply statutory pre-emption 
rights on allotment; the Subscription is also conditional upon the Subscription 
Shares being admitted to trading on AIM. 
 
Background to the Proposals 
 
In December 2008, Garner acquired the Norman Broadbent Companies from BNB. The 
acquisition of these companies, which trade under the Norman Broadbent brand 
name (which was also acquired as part of the acquisition) increased the scale 
of the group's operations substantially. The consideration for this acquisition 
was calculated by reference to a formula, with a minimum total consideration 
payable, largely as deferred consideration, of GBP5.5 million. Of this sum, GBP 
627,484 has been paid to date. 
 
In June 2009, BNB was unable to continue trading and on 29 June 2009, three 
partners of Chantrey Vellacott DFK LLP were appointed joint administrators to 
it. On 25 January 2010 BNB entered into creditor voluntary liquidation. This 
has presented the Company with an opportunity to renegotiate the terms of the 
deferred consideration. Agreement has been reached with the three Chantrey 
Vellacott partners, as joint liquidators, for the remaining deferred 
consideration payable for the Norman Broadbent Companies to be reduced to GBP1.40 
million. This reduces the total consideration to GBP2.03 million. The remaining 
deferred consideration will be paid in three elements: (i) GBP750,000 million 
payable in cash, which will be settled by an initial payment of GBP200,000 from 
the receipt of the proceeds of the Subscription, and additional payments of GBP 
250,000 and GBP300,000, payable on the first and second anniversaries of the 
initial payment, respectively; (ii) GBP93,450 which will be settled by the issue 
of 124,600 New Ordinary Shares on Admission; and (iii) GBP560,829 will be paid in 
quarterly instalments solely from the revenues generated from an overseas 
licensee, without recourse to the Company. 
 
In order to raise the cash required for this purpose and to provide additional 
working capital, the Company has reached an agreement with the Subscribers 
under which they will invest, in aggregate, approximately GBP2.04 million into 
the Company by way of a conditional subscription for 4,522,221 New Ordinary 
Shares at 45p per New Ordinary Share. The Subscription is conditional on the 
passing of the Resolutions at the GM and the admission of the Enlarged Issued 
Ordinary Share Capital to trading on AIM. 
 
The implementation of the Proposals will transform the Company's position and 
prospects. The raising of additional equity capital and the reduction in the 
deferred consideration payable will increase the Group's net assets and reduce 
a future liability, strengthening its balance sheet accordingly. Furthermore, 
the elimination of the need to make deferred consideration payments, save for 
the known amounts set out above, will free cash flow earmarked for that 
purpose, enabling it to be used for the development of the Group. 
 
Current trading and prospects 
 
The Company will shortly be releasing its Annual Report for the year ended 31 
December 2009. As made clear in previous statements, these results will be very 
disappointing. A loss of GBP3.5 million is expected, which includes impairment to 
goodwill of GBP1.9 million and provisions of GBP0.35 million relating to the recent 
liquidation of BNB Recruitment Consultancy Limited. 
 
However, since the last trading update issued on 30 March 2010, the Garner 
group has continued to trade profitably in 2010 to date. Revenues have been 
consistently higher month on month than those reported in the second half of 
2009, primarily driven by a significant level of repeat business from key 
clients. 
 
Also important for the future of the business is the contribution of licence 
fee income from the newly established offices in the Middle East and Italy. The 
Directors are pursuing similar licence arrangements in USA, the Far East and 
Latin America, which, in their opinion will not only provide incremental 
profits for the Company but, more importantly, will re-establish Norman 
Broadbent as a truly global brand. 
 
2009 was clearly a very challenging year for the Company. However, the 
Directors believe that the difficult restructuring decisions taken during the 
last 12 months have resulted in a much more cost efficient business which, 
combined with the proposed capital injection, board changes and the steady 
recovery in trading, will provide the financial stability and operating 
platform required to drive growth and success. 
 
The Capital Reorganisation 
 
The Capital Reorganisation is being proposed because, at present, the spread 
between the bid and offer prices of the Company's shares is disproportionately 
large at 57 per cent. of the mid-market price and the Directors believe that 
there are too many shares in issue at too low a price. They also believe that 
the proposed consolidation will help to reduce the spread and increase 
liquidity when trading in the New Ordinary Shares commences. Accordingly, it is 
proposed to consolidate the Company's share capital, prior to carrying out the 
Subscription, on the following basis: 
 
a) every 30 Existing Ordinary Shares will be consolidated into one new ordinary 
share of 30p; and 
 
b) each of the issued ordinary shares of 30p resulting from the consolidation 
will then be subdivided into and redesignated as one New Ordinary Share and one 
New Deferred Share. The New Ordinary Shares will then have a nominal value of 
1p each. 
 
Holders of fewer than 30 Existing Ordinary Shares will not be entitled to 
receive a New Ordinary Share following the Capital Reorganisation. Shareholders 
with a holding in excess of 30 Existing Ordinary Shares, but which is not 
exactly divisible by 30, will have their holding of New Ordinary Shares rounded 
down to the nearest whole number of New Ordinary Shares following the Capital 
Reorganisation. Fractional entitlements, whether arising from holdings of fewer 
or more than 30 Existing Ordinary Shares, will be sold in the market and the 
proceeds will be retained for the benefit of the Company. 
 
The rights attaching to the New Ordinary Shares will be identical in all 
respects to those of the Existing Ordinary Shares. 
 
The New Deferred Shares will rank equally with the Deferred Shares, the 
Deferred A Shares and the Deferred B Shares and as such will have no voting 
rights and will not carry any entitlement to attend general meetings of the 
Company. They will carry only the right to participate in any return of capital 
to the extent of 29.9p per New Deferred Share but only after each New Ordinary 
Share has received in aggregate capital repayments totalling GBP10,000 per New 
Ordinary Share. 
 
Accordingly, the New Deferred Shares will, for all practical purposes, be 
valueless and it is the Board's intention, at an appropriate time, to make an 
application to the court for the New Deferred Shares, Deferred Shares, Deferred 
A Shares and Deferred B Shares to be cancelled. 
 
Existing share certificates will cease to be valid following the Capital 
Reorganisation and new share certificates in respect of the New Ordinary Shares 
will be issued by 22 June 2010; no certificates will be issued in respect of 
New Deferred Shares. 
 
The Subscription 
 
Under the terms of the Subscription Agreement, Pierce Casey, Jon Moulton and 
Jeremy Daniels have agreed to subscribe for 4,522,221 New Ordinary Shares, in 
aggregate, at the Subscription Price, raising approximately GBP2.04 million 
before expenses for the benefit of the Company. 
 
The Subscription is conditional, inter alia, upon the passing of the 
Resolutions and the Admission of the Subscription Shares to trading on AIM. 
 
The Subscription Shares, when issued and fully paid, will rank equally in all 
respects with the issued New Ordinary Shares, including the right to receive 
all dividends and other distributions declared, made or paid after the relevant 
Admission. 
 
It is expected that Admission will become effective and dealings in the 
Enlarged Issued Ordinary Share Capital will commence on 15 June 2010. 
 
Following the Capital Reorganisation, the Subscription and the Debt 
Capitalisation, the Company will have 7,719,446 New Ordinary Shares in issue 
and admitted to trading on AIM. 
 
Board Changes 
 
Following the announcement in June 2010 of the Company's financial results for 
the year ended 31 December 2009, it is intended that Andrew Garner will 
relinquish the chairmanship, continuing as chief executive, that Mr Casey will 
join the Board as Chairman and that Mr Brian Stephens will join the Board as a 
non-executive director. Mr Casey is an entrepreneur and private equity 
specialist with a successful record of involvement in the recruitment sector. 
Mr Stephens is a chartered accountant, with wide-ranging experience in private 
equity and mergers and acquisitions. Mr Casey is chairman and Mr Stephens is a 
director of Adelaide Capital Limited, an Irish registered private company which 
has to date acted principally as an investment office for Mr Casey's family 
interests, managing and structuring investments in public and private 
companies, real estate, treasury and alternative assets. 
 
In addition, Benjamin Felton ACA and Janet Cameron will join the Board at the 
same time as Mr Casey and Mr Stephens. Ben Felton, aged 29, qualified as a 
chartered accountant with FW Stephens and then worked for UBS Investment Bank 
in the fixed income, currency & commodities division before joining Garner in 
January 2009 as finance director of Norman Broadbent and group financial 
controller. He will become the group chief financial officer. Jan Cameron, aged 
47, is currently head of human resources and operations for the group and will 
become an executive director. Prior to joining the Company in 2006, she had 
been head of human resources for Homebase Limited and, before that, HR project 
manager for J Sainsbury plc for 14 years. She has been a lay member of the 
Reading Employment Tribunal since October 2005. 
 
A further announcement will be made in due course. 
 
Debt Capitalisation 
 
Conditional on Admission, certain of the Directors, have agreed to capitalise 
loans (together with accrued interest, where applicable) and certain other 
payments owed to them, totalling GBP191,672. The debts will be satisfied through 
the issue by the Company of 425,937 New Ordinary Shares to these directors at 
the Subscription Price. The number of New Ordinary Shares to be issued as a 
result of the Debt Capitalisation and the resulting aggregate shareholding of 
each Director is as follows: 
 
              Existing debts to be       New Ordinary   Percentage of the share 
                       capitalised   Shares issued on    capital held following 
                                                 Debt the Subscription and Debt 
                                       Capitalisation            Capitalisation 
 
Andrew                     GBP80,000            177,777                      9.03 
Garner 
 
John Bartle               GBP100,000            222,222                      6.68 
 
Bruce                      GBP11,672             25,938                      1.39 
Lakefield 
 
Furthermore, Charles Auld, an existing Shareholder, has also agreed to 
capitalise a loan (together with accrued interest) by subscribing for 142,078 
New Ordinary Shares at the Subscription Price.In addition, Mr Auld will receive 
a warrant over 97,777 New Ordinary Shares pursuant to a warrant instrument 
dated 27 May 2010. The warrant is exercisable at the Subscription Price 
immediately from the date of issue for a period of three years expiring on 26 
May 2013. 
 
It is expected that Admission will become effective and dealings in the 692,615 
New Ordinary Shares arising from the Debt Capitalisation, which includes the 
New Ordinary Shares to be issued to Chantrey Vellacott as described above, will 
commence on 15 June 2010. 
 
Following the Capital Reorganisation, the Subscription and the Debt 
Capitalisation, the Company will have 7,719,446 New Ordinary Shares in issue 
and admitted to trading on AIM. 
 
Mr Bartle, Mr Lakefield and Mr Garner, as directors of the Company, are related 
parties for the purposes of the Debt Capitalisation. The Independent Directors, 
having consulted with MJES, the Company's Nominated Adviser, consider the terms 
of the Debt Capitalisation to be fair and reasonable insofar as the Company's 
shareholders are concerned. In advising the Independent Directors, MJES has 
taken into account the commercial judgement of the Independent Directors. 
 
Change of name 
 
In order to reflect the importance of the Norman Broadbent brand to the group, 
it is proposed to change the name of the Company to Norman Broadbent plc, and a 
special resolution to this effect is contained in the notice of GM. 
 
Warrants 
 
The Board believes that the motivation and retention of key employees is vital 
for the successful growth of the Company. The Board considers that an important 
element in achieving these objectives is the ability to incentivise and reward 
staff (including executive directors) by reference to the market performance of 
the Company in a manner which aligns the interests of those staff with the 
interests of shareholders generally. Accordingly, on Admission, and 
conditionally on the passing of the Resolutions, the Company will grant 
warrants to Sue O'Brian and Richard Robinson over 111,111 New Ordinary Shares 
and 55,555 New Ordinary Shares, respectively. 
 
Circular and General Meeting 
 
The circular to shareholders and notice of General Meeting will be posted to 
Shareholders and will be available from the Company's website, 
www.garnerinternational.com, later today. The General Meeting of the Company 
has been convened for 10.00 a.m. on 14 June 2010 at the offices of Merchant 
John East Securities Limited, 10 Finsbury Square, London EC2A 1AD. 
 
                                  Definitions 
 
The following definitions apply throughout this announcement unless the context 
requires otherwise: 
 
"Admission"                the admission of the New Ordinary Shares and 
                           Subscription Shares to trading on AIM becoming 
                           effective in accordance with the AIM Rules 
 
"AIM"                      the AIM Market of the London Stock Exchange 
 
"AIM Rules"                the rules published by the London Stock Exchange 
                           relating to AIM, as amended from time to time 
 
"Bancomm"                  Bancomm Limited 
 
"BNB"                      BNB Recruitment Solutions plc 
 
"BNBRC"                    BNB Recruitment Consultancy Limited 
 
"Capital Reorganisation"   the proposed consolidation and sub-division of every 
                           30 Existing Ordinary Shares into one New Ordinary 
                           Share and one New Deferred Share 
 
"Debt Capitalisation"      the proposed capitalisation of debt amounting to GBP 
                           349,057.61 into 692,615 New Ordinary Shares at the 
                           Placing Price 
 
"Deferred Shares"          the 907,118,360 deferred shares of 0.4p each in the 
                           capital of the Company in issue at the date of this 
                           announcement 
 
"Deferred A Shares"        the 23,342,400 deferred A shares of 4p each in the 
                           capital of the Company in issue at the date of this 
                           announcement 
 
"Deferred B Shares"        the 1,043,566.deferred B shares of 42p each in the 
                           capital of the Company in issue at the date of this 
                           announcement 
 
"Directors" or"Board"      the directors of the Company 
 
"Enlarged Issued Ordinary  the 7,719,446 New Ordinary Shares in issue at 
Share Capital"             Admission 
 
"Existing Ordinary Shares" the 75,138,312 ordinary shares of 1p each in the 
                           capital of the Company in issue at the date of this 
                           announcement 
 
"GM" or "General Meeting"  the general meeting of the Company convened for 
                           10.00 a.m. on 14 June 2010 
 
"Independent Directors"    the Directors other than John Bartle, Andrew Garner 
                           and Bruce Lakefield 
 
"London Stock Exchange"    London Stock Exchange plc 
 
"MJES"                     Merchant John East Securities Limited 
 
"New Deferred Shares"      the new deferred shares of 29p each arising from the 
                           Capital Reorganisation 
 
"New Ordinary Shares"      the new ordinary shares of 1p each in the capital of 
                           the Company arising from the Capital Reorganisation 
 
"Norman Broadbent          BNBRC, Norman Broadbent Limited and Bancomm 
Companies" 
 
"Proposals"                the Capital Reorganisation, the proposed 
                           Subscription and the Debt Capitalisation 
 
"Resolutions"              the resolutions set out in the notice of the General 
                           Meeting 
 
"Shareholders"             holders of Existing Ordinary Shares 
 
"Subscribers"              Pierce Casey, Jon Moulton and Jeremy Daniels 
 
"Subscription"             the subscription of the Subscription Shares pursuant 
                           to the Subscription Agreement 
 
"Subscription Agreement"   the conditional agreement dated 27 May 2010, between 
                           the Company and the Subscribers 
 
"Subscription Price"       45p per New Ordinary Share 
 
"Subscription Shares"      the 4,522,221 New Ordinary Shares to be issued 
                           pursuant to the Subscription 
 
 
 
END