Acquisition, Placing and Capital Reorganisation (7305X)

TIDMSKHG

RNS Number : 7305X

Sky High PLC

20 February 2012

20 February 2012

SKY HIGH PLC

(AIM: SKHG)

Capital Reorganisation, Amendments to Articles of Association, Proposed Acquisition, Placing, General Authority to Issue Shares and Notice of General Meeting

Sky High announced today that it has exchanged a conditional contract to acquire the business and certain assets of Count on Us Limited, a national traffic data collection company with a strong market share in the London and Wales, for a consideration of approximately GBP454,928, which is to be satisfied by the issue of 4,135,709 New Ordinary Shares.

The Acquisition is conditional, inter alia, on the Company raising up to GBP500,000 in order to provide additional working capital for the enlarged business. In order to satisfy this condition, the Company has agreed a conditional placing of 4,637,500 New Ordinary Shares at a price of 8 pence per share to raise approximately GBP371,000, before expenses, and intends that the balance will come from working capital facilities and finance agreements to be agreed with the Company's bankers.

The Company's existing share authorities allowing it to issue shares are insufficient to allow the issue of the Placing Shares and the Consideration Shares and therefore the Placing and the Acquisition are conditional on Shareholders' approval.

The placing price of 8 pence per share is lower than the current nominal value of the shares The Company is prohibited from issuing shares at below nominal value and therefore to ensure that the issue of the Placing Shares can proceed the Company has decided to undertake a capital reorganisation which will result in the Company's existing capital being sub-divided. Further details of the Capital Reorganisation are set out below.

Information on Count on Us

Count on Us was incorporated in England in 1987 and was acquired by Clearview Limited in 2005. Count on Us is currently a wholly owned subsidiary of Clearview. It employs approximately 40 people from offices in London, Cardiff, Glasgow, Wakefield and Bicester .

Like Sky High, Count on Us provides traffic surveys, data processing and analysis services to large consulting firms, government departments and local authorities. However, Count on Us operates predominantly in London and Wales, being areas where Sky High has not traditionally had a significant market share.

For the year ended 31 March 2011 Count on Us reported a loss before tax of GBP1.4m on a turnover of GBP3.6 million. As at 31 March 2011 Count on Us had net assets of GBP2.4 million, although Sky High is only acquiring certain assets and some hire purchase contracts which as at 31 December 2011 had a book value of approximately GBP168,000.

In its unaudited management accounts for the 9 months to 31 December 2011 Count on Us recorded a loss before tax of GBP0.5m on a turnover of GBP1.7m.

Background to, and reasons for, the Acquisition

The parent company of Count on Us, Clearview is a manufacturer and provider of equipment to the traffic industry. The board of Clearview believes that the Count on Us business is no longer core to its operations. The Directors believe the acquisition of Count on Us represents an excellent opportunity to consolidate Sky High's market position.

Furthermore, the Directors believe Count on Us will benefit from having a new management team that will be focussed exclusively on traffic data collection and which can draw on the depth of knowledge and experience of the Sky High management team. Given the synergies between the two companies the Directors also believe there are opportunities to centralise some of the core processes which should lead to costs and overhead savings and that there should be further revenue benefits from applying Sky High's business development and tendering processes to Count on Us's customer base.

Finally, the Directors believe that by becoming a larger player in what they perceive is a fragmented market, Sky High will be well positioned to secure and deliver key contracts such as those for large infrastructure and/or government projects. The Directors believe it will be easier to obtain new work through increasing market share in this way than through organic growth.

Appointment of New Directors

Following and conditional on Completion, Nicholas Lanigan, a current director of Count on Us, and Sir John Madejski, the owner of Clearview will be appointed as non-executive directors of Sky High.

Principal terms and conditions of the Acquisition

Pursuant to the terms of the Acquisition Agreement, Sky High will acquire, inter alia, the goodwill; the leased properties in London, Cardiff and Glasgow but not those in Wakefield or Bicester; certain assets such as traffic equipment; the benefit of Count on Us's business contracts; and Count on Us's records. The employees of Count on Us will also transfer on Completion.

The Consideration amounting to GBP454,928 will be settled by the issue of 4,135,709 New Ordinary Shares valued at 11 pence (being the closing middle market price on the business day prior to the signing of the Acquisition Agreement).

The Acquisition is conditional, inter alia, on the passing of the Resolutions at the GM and the Company securing additional working capital funding of GBP500,000.

Capital Reorganisation

The Company's share price has been traded near the nominal value of its Existing Ordinary Shares for some time. Company law prohibits companies from issuing new shares at less than the nominal value, therefore at present the Company is potentially restricted as to how it can use its shares. Therefore the Directors are proposing to reorganise the Company's share capital on the terms set out below.

Under the Capital Reorganisation, each Existing Ordinary Share will be sub-divided into one New Ordinary Share and 9 Deferred Shares.

The rights attaching to the New Ordinary Shares will be identical in all respects to those of the Existing Ordinary Shares.

The Deferred Shares 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 the amount paid up or credited as paid up on each Deferred Share but only after the holder of each New Ordinary Share has received in aggregate capital repayments totalling GBP10,000,000 per New Ordinary Share. Accordingly, the Deferred Shares will, for all practical purposes, be valueless and it is the Board's intention, at an appropriate time, to cancel the Deferred Shares.

Following the Capital Reorganisation, existing shares certificates in respect of Existing Ordinary Shares will remain valid and will deemed to represent the same number of New Ordinary Shares. No certificates will be issued in respect of the Deferred Shares, nor will CREST accounts of Shareholders be credited in respect of any entitlement to the Deferred Shares. No application will be made for the Deferred Shares to be admitted to trading on AIM or any other investment exchange.

There will be no change in the Company's ISIN or SEDOL numbers as a result of the Capital Reorganisation.

Placing

Sky High has agreed a conditional placing of 4,637,500 New Ordinary Shares at 8 pence per share to raise GBP371,000, before expenses. The Placing is conditional, inter alia, on completion of the Acquisition. The net proceeds of the Placing will be used to provide additional working capital for the Group following completion of the Acquisition.

Certain Directors of the Company are participating in the Placing. The Directors of Sky High who are participating are detailed as follows:

 
 Name                Number of Placing     Number of New Ordinary      Percentage of New 
                                Shares    Shares held immediately        Ordinary Shares 
                                              following Admission       held immediately 
                                                                     following Admission 
==================  ==================  =========================  ===================== 
 Michael Jackson*              312,500                    797,693                  3.71* 
==================  ==================  =========================  ===================== 
 Richard Jackson*              312,500                  2,329,246                 10.82* 
==================  ==================  =========================  ===================== 
 Mark Mattison                 200,000                  4,129,389                  19.19 
==================  ==================  =========================  ===================== 
 Grant Wilson                  125,000                    540,993                   2.51 
==================  ==================  =========================  ===================== 
 

*Richard Jackson and Michael Jackson also have a joint interest in a family trust that will have a 7.30 per cent, holding immediately following Admission

In addition, Sir John Madejski, the ultimate controlling party of Clearview, has agreed to subscribe for 1,500,000 Placing Shares. On Admission, the aggregate holdings of Count on Us and Sir John Madejski in Sky High will be 5,635,709 New Ordinary Shares, which will represent approximately 26.19 per cent. of the Company's share capital immediately following Admission.

The participation in the Placing of certain Directors is classified as a related party transaction under the AIM Rules. The independent directors, being those Directors not participating in the Placing, consider, having consulted with WH Ireland the Company's nominated adviser, that the terms of the transaction are fair and reasonable insofar as the shareholders of Sky High are concerned.

Current trading

In its interim results for the six months ended 30 September 2011 announced on 16 December 2011, Sky High reported turnover of GBP3 million, up 31 per cent on the corresponding period last year, and a profit before tax of GBP153,000 which compares to a loss of GBP299,000 in the equivalent period last year.

In overall terms the trading performance in the second half of the year is expected to be similar to that of the second half of the last financial year. While demand in the UK traffic market remains flat and competition means that margins have been under pressure, Sky High Australia continues to trade strongly. In addition, the data capture business is trading well. The investment in sales and marketing resource in this area highlighted in the interim results is starting to generate positive results. The business has recently been awarded a four year contract for Bus Origin Destination Surveys Data Processing which will start at the beginning of the next financial year and that is expected to generate approximately GBP140,000 revenue per annum.

General Meeting

A General Meeting to obtain the necessary approvals to, inter alia, the Acquisition, the Placing and Capital Reorganisation is being convened for 16 March at 11.00 a.m. A circular which includes notice convening the a general meeting is expected to be posted to shareholders today and will be available on the Company's website (www.skyhighplc.co.uk ).

Admission of the New Ordinary Shares is expected to take place on 19 March 2012.

The Definitions which apply in the Circular have been used in this announcement.

Commenting on the Acquisition, Mark Mattison, Chief Executive of Sky High, said

"To be acquiring what is probably the best brand name in our market sector is a fantastic achievement. This deal gives us the opportunity is to bring together the strengths of the two leading traffic and transport survey providers in the UK to create a Company which will deliver quality surveys with unrivalled skills, experience, geographical coverage. Count On Us is a highly recognised name and brings with it an excellent heritage, a broad service portfolio, significant experience and a substantial customer base.

Both senior management teams are very excited about the future prospects. For both the Clearview Group and Sir John to have made an investment as part of the deal shows that they have confidence in future prospects for the merged business. This is a testament to how far Sky High Traffic has come and how it has tackled the hardest trading conditions in recent history. We all look to the future with great optimism."

 
 Contacts: 
 
 Sky High plc                      www.skyhighplc.co.uk 
 Mark Mattison, Chief Executive    [phone] 
 Alex Johnson, Finance Director    [phone] 
 
 WH Ireland Limited                www.wh-ireland.co.uk 
 Mike Coe / Marc Davies            [phone] 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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