TP Group PLC Proposed Reduction of Capital and Notice of GM (5981H)

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RNS Number : 5981H

TP Group PLC

19 August 2016

19 August 2016

TP Group plc

("TP Group" or the "Company")

Proposed Reduction of Capital and Notice of General Meeting

TP Group (AIM: TPG), the specialist technology, engineering and managed solutions group, today announces proposals recommended by the Board to create distributable reserves of the Company and to reduce the nominal value of the Ordinary Shares. The reasons for this proposal are as follows:

-- the creation of distributable reserves would allow the Company the flexibility to pay dividends and make other returns of capital to the Shareholders, should it be considered desirable to do so in the future; and

-- in light of the Group's recent and anticipated further operational progress, the Board believes it is an appropriate time to reduce the nominal value of the Ordinary Shares to allow the Company to issue Ordinary Shares at a price per Ordinary Share below the current nominal value, which would support acquisition and growth activity, as well allowing the Group to put in place appropriate incentive schemes to attract, retain and reward high performing individuals.

Following completion of the Reduction of Capital, there will be no change in the number of Ordinary Shares in issue.

Over the past two years the Group has made good operational and strategic progress, delivering proven solutions and services to customers. The Group's business is now organised to provide a full spectrum of through-life services to its customers, operating in growth areas in its core sectors of defence, energy and process industries. The Board expects that this approach will enable the Group to continue to develop commercially and technically through organic performance improvement, as well as through selected acquisition opportunities, whilst attracting, retaining and rewarding the best talent in its chosen markets.

The Reduction of Capital is conditional upon, inter alia, court approval and the Company obtaining Shareholder approval at the General Meeting to be held at the offices of Nabarro LLP, 125 London Wall, London EC2Y 5AL at 10.00 a.m. on 8 September 2016.

Following completion of the Reduction of Capital, Ordinary Shares will be traded on AIM in the same way as they are currently and will be equivalent in all other respects, with the exception of the reduction in nominal value from 10 pence to 1 penny. Existing share certificates for Ordinary Shares will continue to be valid following the Reduction of Capital, and no new certificates will be issued following completion of the Reduction of Capital.

An explanatory circular, which contains a notice convening a General Meeting (the "Circular") and includes information about the background to and reasons for the Reduction of Capital, is today being posted to Shareholders and is now available to view on the Company's website at www.tpgroup.uk.com. The Circular is accompanied by a form of proxy for Shareholders to vote at the General Meeting.

All capitalised terms in this announcement are as defined in the Circular.

For further information, please contact:

 
 TP Group plc                   Tel: [phone] 
 Phil Cartmell, Chief 
  Executive Officer 
 Derren Stroud, Chief 
  Financial Officer 
 www.tpgroup.uk.com 
 
 Cenkos                         Tel: [phone] 
 Stephen Keys / Mark Connelly 
 www.cenkos.com 
 
 Vigo Communications            Tel: [phone] 
 Jeremy Garcia / Fiona 
  Henson 
 www.vigocomms.com 
 

Notes to Editors

TP Group is a group of innovative UK based engineering companies, supplying technologies and support to global markets. TP Group designs and develops advanced technologies, engineers complex equipment and systems, and provides support throughout their operational life. The Company's shares have been traded on AIM since July 2001.

Background to and reasons for the Reduction of Capital

As previously announced, the Group achieved its stated goal of reporting break-even adjusted EBITDA in 2015. This was achieved ahead of schedule and driven by a combination of strategic changes, successful selective bolt-on acquisitions and the implementation of a number of operational improvements across the Group. This milestone was a notable step on the Group's path to become a highly competitive Tier 2 engineering and services group (being a group occupying an influential position between major prime contractors and specialist technical providers). Group revenues for the year ended 31 December 2015 were GBP20.4 million (2014: GBP21.7 million). Operating losses reduced by 41 per cent. to GBP2.3 million (2014: GBP3.9 million loss) and the adjusted EBITDA was GBPnil (2014: GBP2.1 million loss).

The Group's business is now organised to provide a full spectrum of through-life services to its customers. The Board believes that the Group operates in growth areas in its core sectors of defence, energy and process industry. Recent initiatives have delivered a strategy through which the business operates against a theme of through-life equipment support through four business units:

   --        TPG Design and Technology - front-end services in analysis, modelling and design; 
   --        TPG Maritime - delivery of high technology atmosphere management systems; 
   --        TPG Engineering - delivery of advanced thermal systems and fabricated structures; and 
   --        TPG Managed Solutions - long-term support of equipment and operations. 

Moving forwards, the Board is focused on the following strategic priorities to maximise the Group's current skill set and services:

   --        Leverage existing network of customers to cross sell TPG services; 
   --        Explore new applications for existing technologies; 
   --        Deliver a more agile and responsive service than the larger prime contractors; and 
   --        Be more qualified and better equipped than smaller independent contractors. 

It is these business strengths, strategies and confidence for the future which have led the Board to recommend that the building blocks to create distributable reserves now be put in place. With the creation of distributable reserves, the Board will have the flexibility to distribute future profits to its Shareholders by way of dividends, should it be considered desirable to do so in light of circumstances at the time. The creation of distributable reserves would also enable the Board to buy back shares, subject to Shareholders approving Resolution 4 at the General Meeting, although the Board has no present intention of using such authority.

As at 31 December 2015, the Company had a profit and loss account deficit of GBP40,176,076 and the balance standing to the credit of the Company's share premium account was GBP13,768,971. In addition, a sum of GBP575,000 was standing to the credit of the Company's capital redemption reserve. The Company is therefore seeking the approval of the Shareholders to cancel 9 pence of the nominal value of its Ordinary Shares and its share premium account and capital redemption reserve, creating realised profits of approximately GBP12,189,720 (representing the aggregate nominal amount of the cancelled nominal value of the Ordinary Shares (GBP38,021,825), the amount of the cancelled share premium account and the amount of the cancelled capital redemption reserve less the profit and loss account deficit), which will, subject to the discharge of any undertakings required by the Court as explained below, be sufficient to eliminate the accrued deficit. If approved by the Shareholders, the cancellations will require subsequent approval by the Court.

As a result of the Reduction of Capital, any positive distributable reserves of the Company after the date on which the Reduction of Capital takes effect would then be available for the Directors to use for the purposes of paying dividends (should circumstances in the future make it desirable to do so).

In addition, the reduction in the nominal value of the Ordinary Shares to below their current trading price will mean the Company is able to issue new Ordinary Shares at a price below 10 pence per Ordinary Share, providing it more flexibility for fundraisings and acquisitions going forward, which is key to enabling and supporting future growth. In addition, it will give the Group the flexibility to put in place appropriate incentive schemes to attract, retain and reward high performing individuals should it wish to do so in the future.

Following the implementation of the Reduction of Capital, there will be no change in the number of Ordinary Shares in issue.

The Reduction of Capital

The Company is seeking to reduce its share capital and share premium and capital redemption reserves so as to eliminate the deficit on the profit and loss account of the Company, standing at GBP40,176,076 as at 31 December 2015 and to create distributable reserves for the payment of dividends and other corporate purposes.

It is proposed that the Reduction of Capital will involve the cancellation of:

   --     paid-up capital of 9 pence on each issued Ordinary Share of 10 pence each; 

-- the amount standing to the credit of the Company's share premium account (such amount being, as at 31 December 2015, GBP13,768,971); and

-- the amount standing to the credit of the Company's capital redemption reserve (such amount being, as at 31 December 2015, GBP575,000).

The cancellations, if approved by the Court, will create realised profits sufficient to eliminate the accrued deficit on the Company's profit and loss account.

The Reduction of Capital is conditional on:

   --     the passing of Resolution 1 to be proposed at the General Meeting; 
   --     the Reduction of Capital being approved by the Court; and 
   --     the Court Order being registered by the Registrar of Companies. 

It is anticipated that the initial directions hearing in relation to the Reduction of Capital will take place on 15 September 2016, with the final hearing taking place on 28 September 2016 and the Reduction of Capital becoming effective on that day, following the necessary registration of the Court Order at Companies House.

The Court will require to be satisfied that the interests of the Company's creditors will not be prejudiced as a result of the Reduction of Capital. The Company will put into place such form of creditor protection (if any) as the Court may require. This may include seeking the consent of the Company's creditors to the Reduction of Capital or the provision by the Company to the Court of an undertaking to deposit a sum of money into a blocked account created for the purposes of discharging the non-consenting creditors of the Company. As at 30 June 2016, the Company owed approximately GBP2,425,211 to its main creditors of which approximately GBP2,000,000 was owed to its subsidiary companies with the balance of approximately GBP425,211 being trade creditors, amounts due to employees and Directors and accruals for certain items. As at the date of the Circular, consent to the Reduction of Capital has been obtained from approximately 82 per cent. of such creditors by value, representing approximately GBP2,000,000 of the Company's outstanding debt.

The Reduction of Capital itself will not involve any distribution or repayment of capital or share premium by the Company and will not reduce the underlying net assets of the Company. The distributable reserves arising on the Reduction of Capital will, subject to the discharge of any undertakings required by the Court as explained below, support the Company's ability to pay dividends, should circumstances in the future make it desirable to do so.

Following completion of the Reduction of Capital, there will be no change in the number of Ordinary Shares in issue. Ordinary Shares will be traded on AIM in the same way as at the date of the Circular and will be equivalent in all other respects, with the exception of the difference in nominal value. Existing share certificates for Ordinary Shares will continue to be valid following the Reduction of Capital, and no new certificates will be issued following the Reduction of Capital. In addition, the ISIN of the Ordinary Shares will not change.

In the event that the Court does not confirm the Reduction of Capital, the Ordinary Shares will retain their current nominal value of 10 pence each.

The General Meeting

The Circular contains a notice convening the General Meeting to be held at 10:00 a.m. on 8 September 2016 at the offices of Nabarro LLP at 125 London Wall, London EC2Y 5AL at which the Resolutions will be proposed to, inter alia, approve the Reduction of Capital.

RECOMMENDATION

The Board believes the Reduction of Capital to be in the best interests of Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions, as the Directors intend to do in respect of their own beneficial holdings, amounting in aggregate to 5,056,196 Ordinary Shares representing approximately 1.20 per cent. of the current issued share capital of the Company.

EXPECTED TIMETABLE OF KEY EVENTS

 
 Publication of the Circular              19 August 2016 
 
 Latest time and date for receipt         10:00 a.m. on 
  of Form of Proxy or CREST Proxy          6 September 2016 
  Instruction for the General Meeting 
 
 General Meeting                          10:00 a.m. on 
                                           8 September 2016 
 
 Initial directions hearing               15 September 
                                           2016* 
 
 Court hearing to confirm the Reduction   28 September 
  of Capital                               2016* 
 
 Effective date of the Reduction          28 September 
  of Capital                               2016* 
 

*These dates are subject to change. Any change will be notified via a Regulatory Information Service.

This information is provided by RNS

The company news service from the London Stock Exchange

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August 19, 2016 02:00 ET (06:00 GMT)