Statement re Proposed Cancellation of Listing

 

TIDMCVE 
 
RNS Number : 0690Q 
Culver Holdings PLC 
02 April 2009 
 

FOR IMMEDIATE RELEASE 
 
 
CULVER HOLDINGS PLC 
Proposed cancellation of listing of the ordinary shares on the Official List and 
trading on the main market of the London Stock Exchange 
 
 
Culver Holdings plc (the "Company") announces that it is today posting a 
circular to shareholders and convening a General Meeting of the Company seeking 
approval for the cancellation of  the listing of the Company's ordinary shares 
on the Official List and their trading on the main market of the London Stock 
Exchange ("Listing").Under the Listing Rules of the UK Listing Authority, the 
cancellation of the Listing must be approved at a General Meeting of the Company 
by a majority of at least 75% of shareholders present (in person or by proxy). 
Background to and reasons for the proposed cancellation of the Listing 
The Company has over many years aimed to generate shareholder value by 
developing businesses and realising them (or allowing shareholders opportunities 
to realise interests in them) at an appropriate time. This continues to be the 
Company's objective. 
The Company's ordinary shares have been traded on the London Stock Exchange 
since 1991and the original core business was demerged to shareholders in 
1997. It was intended that the Company would use its ordinary shares as a 
currency for acquisitions, but rarely since then has the market value of the 
ordinary shares reflected the value of the company as perceived by the directors 
and when it has there has been little appetite by investors for an issue. As a 
result, the issue of ordinary shares has not been a practical means of funding 
for the Company at any time in the last five years. 
Equally, with a small total market capitalisation and, in terms of total 
monetary value, a very small free float, the liquidity available to shareholders 
in the ordinary shares is negligible and the volume of trading in the ordinary 
shares in the last year has been low. 
The directors believe that the costs of maintaining the Listing are significant 
in terms of annual costs which would not be incurred if the ordinary shares were 
not listed (or otherwise traded). In addition, given a market capitalisation of 
only some GBP500,000, any acquisition (or disposal) of a business at a value of 
more than GBP125,000 is likely to require at the very least shareholders' prior 
approval and a circular to shareholders, the marginal cost of which is likely to 
exceed GBP100,000. Thus the requirement to comply with the Listing Rules of the 
UK Listing Authority is likely to make many proposals to develop the business by 
acquisition or disposal unjustifiable in economic terms. 
The board has concluded, therefore, with considerable reluctance that not only 
are the benefits the Company and shareholders are able to derive from the 
Listing considerably less than the costs to the Company but also, because of the 
current size of the Company, the existence of the Listing is restricting the 
Company's ability to develop to the benefit of shareholders. Accordingly, the 
board has concluded that it would be in the interests of shareholders to seek 
the cancellation of the Listing. 
Having reached this conclusion, the board is aware that the implementation of 
such a proposal would restrict the ability of shareholders who wished to realise 
their shareholdings in the future and that it may force a disposal of ordinary 
shares by certain shareholders (such as those who hold their shares in a PEP or 
ISA). Accordingly it examined the possibility of seeking a trading facility on 
the Alternative Investment Market of the London Stock Exchange (or "AIM" as it 
is more generally known). It is the board's view that, while the regulation of 
the Company on AIM would make at least some transactions more economical, it 
would not reduce the annual running costs of providing a trading facility and 
would produce no added benefits. 
The board has, however, concluded that the Company should seek to arrange, and 
maintain for the foreseeable future, a matched bargain facility on the market 
operated by JP Jenkins. While this is not a market where a market maker will be 
a ready buyer or seller of shares at all times, it should facilitate 
shareholders who wish to deal and will not impose a significant regulatory 
burden on the Company or an economic constraint on undertaking transactions. 
If the resolution approving the cancellation of the Listing is approved by the 
requisite majority, it is intended that a formal request for cancellation of the 
Listing with effect from 20 May 2009 (or such later date as shall be not less 
than 20 business days after the passing of the resolution) will be submitted to 
the UK Listing Authority immediately after the conclusion of the General 
Meeting. 
Current trading and prospects 
The Chairman's statement in the half yearly financial report, alluded to a 
number of initiatives which were being pursued to increase the level of business 
being undertaken by the Group and indicated that the outturn for the full year 
was still unclear and that trading in the second half was unlikely to support 
the overhead of being listed on the Official List and admitted to trading on the 
main market of the London Stock Exchange without the recruitment of further 
productive personnel and/or the creation of new business streams. 
In that half-yearly financial report, a claim was referred to which required 
resolution before the full initial consideration from the sale of Culver 
Insurance Brokers Limited could be received. Following mediation, this claim was 
settled and has resulted in the consideration being reduced by some GBP85,000 
before costs. 
In the second half of the year progress has been made in professional indemnity, 
wholesale and aviation insurance broking and, following a further review of 
potential and since the year end, the trade credit team's operations have been 
terminated. The decline of the US dollar against sterling came too late in the 
year to have a significant effect on the outturn, but at its current level and 
with the current level of business, the aviation business should make a 
contribution to the Group in the current year. The professional indemnity and 
wholesale broking activities need to convert more of the leads that are being 
developed for them, but they are growing their books of business and have the 
potential to make a contribution to Group overheads in 2009.As previously 
reported, the Group has been investing on a limited scale in developing business 
from the Middle Eastern markets using the Group's London-market expertise.  This 
has yet to produce meaningful income but an encouraging number of credible leads 
for significant broking transactions are being followed up. 
Whilst the directors are confident of the long term success of the insurance 
broking business, the costs of development will inhibit its short term 
profitability. 
The Employee Benefits segment of the business has been progressively affected by 
the economic downturn in recent months. At the end of last summer a new business 
development director and a senior adviser were appointed. They joined the 
company in the autumn, increasing the company's cost base, just as the business 
started to feel the effect of the so-called "credit crunch" which started to 
reduce revenue. 
Steps have been taken to reduce other aspects of the cost base in the short 
term and the business is now being reorganised through the creation of a new 
"multi-tied" subsidiary. This should enable the Group to capitalise on the 
recent experience of our development director, to enable development of further 
revenue from neglected parts of the Group's client database and to enable the 
business to recruit from a wider pool of potential personnel who can become 
productive after a shorter induction period than the "whole of market" 
advisers. If successful this subsidiary should move into profit in the second 
half of 2009. 
As a result of these changes, the second half of 2008 bore an increase of costs, 
and suffered a reduced income due to the economic climate 
Since the year end, additional experienced advisers have been recruited in 
London for the mainstream IFA business. 
The board expects that despite the continuing difficult climate the steps that 
it has taken will enable it to match income with the costs of operating this 
business although this process will now take another few months to achieve. 
The Group continues to invest in the development of its businesses by funding 
trading losses and this has drained the group's liquidity. The Directors have 
recently arranged a medium term loan facility which has eased the immediate 
liquidity concerns. The Directors are seeking to arrange further financing 
facilities to enable growth of the group although this is extremely difficult in 
the current environment and consider that the cancellation of the Listing would 
give the Company greater flexibility in achieving this, particularly in terms of 
time and cost. 
The Directors believe that trading in 2009 has the potential to be positive in 
the insurance broking areas of the business but that the Employee Benefits 
business as it is now being restructured will not make an overall contribution 
until 2010. They do not expect that the net trading contribution from the 
businesses will, however, be sufficient to cover the Group's overhead at its 
current level. The Board considers that that the prospects of a profitable 
outcome given the reduced group overhead arising from cancellation of the 
Listing and the Company's potential ability to undertake small acquisitions on 
an economic basis will be enhanced, particularly beyond the current year. 
Future development of the Group 
The Directors intend to pursue a strategy of building the group and its two 
businesses of insurance broking and employee benefits and financial advice into 
substantial businesses through the employment of further producing staff and 
selective acquisitions. 
The Directors continue to take no account of the possibility of receiving any 
deferred consideration in the second half of 2009 in connection with the 
disposal last year of Culver Insurance Brokers Limited as they have no positive 
control over the way that business is being managed.  Contractually, the maximum 
deferred consideration which might be payable is two million pounds although the 
directors are not confident that this or any sum will be payable. 
It is likely, as indicated above, that the Group will need to arrange further 
funding over the coming months to enable the businesses to move forward (as they 
must to become adequately profitable) through both the employment of further 
producing staff and organic growth of business, both of which increase the need 
for working capital.  The precise timing and size of this need will depend in 
large part on the rate at which new producing staff are employed by the Group 
and the speed with which they start generating income when employed. It is 
likely, however, that following a cancellation of the Listing and assuming that 
no deferred consideration as referred to above is received, the need for funds 
will arise in the second half of 2009 and will be for of the order of 
GBP400,000.  If the Listing is maintained, the Directors consider that the 
timing for the fund raising will be advanced to within the next two to three 
months and would be increased by at least GBP100,000 (solely to fund the 
additional costs being incurred directly and indirectly in maintaining the 
Listing).  The Directors will seek to arrange such funds either from banks or 
from investors although, as indicated above, this may be extremely difficult in 
the current environment. 
The Directors believe that, in addition to the cost and other benefits discussed 
above, the cancellation of the Listing will give the Company greater flexibility 
to arrange funding without regard to the costs of complying with the laws and 
regulations applying to listed companies (such as the cost and potential delays 
arising from producing the necessary public documentation in connection with the 
issue of as few as 25,000 new ordinary shares) which would be significant to the 
Company because of its size. 
Over the longer term, the Directors will continue to assess the best ways of 
achieving and realising value for shareholders which may be by any one of a 
number of routes including a trade sale of the business as a whole or, more 
likely, in two parts. 
Re-registration as a private limited company 
Following the cancellation of Listing, the Board believes that the additional 
regulatory requirements and associated costs of the Company maintaining its 
public company status will be difficult to justify and that the Company will 
benefit from the more flexible regulatory requirements and lower costs 
associated with private limited company status. 
It is therefore the intention of the Directors that the appropriate resolutions 
to achieve this will be proposed at the forthcoming Annual General Meeting and 
an application to the Registrar of Companies to re-register the Company as a 
private limited company will be made thereafter. 
 
 
 
 
General Meeting 
Notice convening a General Meeting of the Company, to be held on 21 
April 2009 to consider the  resolution to approve  the cancellation of Listing 
is being posted to shareholders today. 
 
 
2 April 2009 
 
 
For further information: 
John Biles - Culver Holdings plc - [020 7456 1350/029 2067 5101] 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
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