Servoca PLC Proposed cancellation of trading on AIM (8903N)

TIDMSVCA

RNS Number : 8903N

Servoca PLC

14 May 2018

This announcement contains inside information

Servoca plc

("Servoca", the "Company" or the "Group")

Proposed cancellation of admission to trading on AIM

Servoca, the AIM listed specialist outsourcing and recruitment solutions provider, announces that it is proposing to cancel the admission to trading on AIM of its Ordinary Shares.

A circular will shortly be published and sent to all Shareholders setting out further details of the Delisting and the implications for Shareholders. The Circular will also contain a notice convening a general meeting which is to be held at Audrey House, 16-20 Ely Place, London EC1N 6SN at 11:30 a.m. UK time on 11 June 2018 at which the approval of Shareholders of the Delisting will be sought. In the event that Shareholders approve the Delisting it is anticipated that trading in the Ordinary Shares on AIM will cease at close of business on 18 June 2018 and cancellation of admission to trading on AIM of the Ordinary Shares will become effective at 7:00 a.m. UK time on 19 June 2018.

Attached below are extracts from the Chairman's letter contained in the Circular.

For further information, please visit www.servoca.com or contact:

Enquiries

 
 Servoca 
  Andy Church 
  Chris Hinton           020 7747 3030 
 N+1 Singer 
  Alex Price             020 7496 3000 
 Newgate Threadneedle 
  Bob Huxford            020 7653 9850 
 

Background to the Cancellation

The Directors believe that, for at least the period of 12 months preceding the date of this document, the performance of the Company's share price has been disappointing. The Directors believe that the improved financial performance of the Group, the underlying stability of the markets in which it operates and the strength of the Company's management team have not been adequately reflected in the value attributed by the public market to the Company's Ordinary Shares.

The current trading value attributed to the Ordinary Shares has led the Directors to question whether the retention of an AIM listing remains in the best interests of the Company.

The Directors believe that there are multiple reasons for this under-valuation but, with over 80 per cent of the Ordinary Shares held by current or immediately past members of the Board and their connected parties, specifically include a severe lack of liquidity. This is evidenced by the fact that less than 10% of the Ordinary Shares have been traded in the last two years.

Through its share buyback programme, which commenced in October 2013, the Company has purchased an aggregate of 3,921,868 Ordinary Shares at a cost of GBP928,000 in circumstances where there was no alternative buyer in the market. Approximately two thirds of these shares were purchased in the last two years. Without this support, the Directors believe the trading price of the Ordinary Shares would have reduced further and faster since, during this period, the Company has been the major purchaser of shares in the public market place. The Company sought to address this issue by appointing a new broker and nominated advisor to find new buyers of the Company's shares. However, this action has not, to date, resulted in any material change in the number of prospective buyers of the shares. The Directors do not believe this position is sustainable.

In the likely event that the Ordinary Shares remain under-valued, the Directors do not therefore believe it would be in the Company's or the Shareholders' best interests to issue additional Ordinary Shares to fund future growth or as consideration for acquisitions. The Board consider these are among the principal benefits of maintaining the listing on AIM.

In addition to the above, the Directors also believe that the costs of remaining listed on AIM could be better spent within the business. The cost involved with being a compliant Company from a regulatory perspective and with maintaining the Company's admission to trading are, in the Directors' opinion, disproportionate to the current benefits to the Company.

The Directors believe that the Delisting will, accordingly, reduce the Company's recurring administrative costs by approximately GBP150,000 per annum and that this, together with the cessation of the share buyback programme, will allow the substantial amount of such expenses to be better spent in running and growing the business in a private capacity.

After careful consideration of the matters laid out above, the Directors have therefore concluded that the commercial disadvantages of maintaining a listing outweigh the potential benefits. It is therefore no longer in the Company's or its Shareholders' best interests to maintain the admission to trading on AIM of the Shares.

Current trading

The Board confirms that underlying trading at the half-year remained consistent with internal expectations with revenues and Adjusted Profit Before Tax in line with prior year. The Board remains of the view that the Group's balanced and diversified portfolio will continue to provide growth opportunities.

Process for Delisting

In accordance with Rule 41 of the AIM Rules, the Company has notified the London Stock Exchange of the intention to delist, subject to Shareholder approval, giving twenty business days' notice. Under the AIM Rules, it is a requirement that the Delisting is approved by not less than 75 per cent of votes cast by Shareholders (in person or by proxy) at the General Meeting. Subject to the Resolution approving the Delisting being passed at the General Meeting, it is anticipated that trading in the Ordinary Shares on AIM will cease at the close of business on 18 June 2018 with the Delisting taking effect at 7.00 a.m. on 19 June 2018.

Upon the Delisting becoming effective, N+1 Singer will cease to be nominated adviser and broker to the Company and the Company will no longer be required to comply with the rules and corporate governance requirements to which companies admitted to trading on AIM are subject, including the AIM Rules.

Irrevocable undertakings

Certain Shareholders have each irrevocably undertaken to exercise (or procure the exercise of) the voting rights in respect their respective interests in 97,654,229 Ordinary Shares in aggregate (representing 80.28 per cent of the Ordinary Shares in issue with voting rights) in favour of the Resolution to be proposed at the General Meeting. A table of such Shareholders is set out below:

 
 Shareholder                   Number of Ordinary   Percentage of issued 
                                Shares                share capital with 
                                                           voting rights 
 Hawk Investment Holdings 
  Limited                      31,862,481                          26.19 
 Groundlinks Limited           16,966,162                          13.95 
 Seraffina Holdings Limited    16,054,659                          13.20 
 Retro Grand Limited           12,540,000                          10.31 
 Southwind Limited             1,350,000                            1.11 
 Hawk Pension Fund Limited     545,000                              0.45 
 Andrew Church                 6,889,413                            5.66 
 Emma Caplan                   6,551,514                            5.39 
 John Foley                    4,895,000                            4.02 
 Total                         97,654,229                          80.28 
 

Principal effects of the Cancellation

Following the Cancellation of trading in the Company's shares on AIM, the Ordinary Shares will not be traded on any public market and the CREST facility will be cancelled. Consequently, there can be no guarantee that a Shareholder will be able to purchase or sell Ordinary Shares. However, as mentioned under the "Dealing and settlement arrangements" section below, the Directors intend to use their reasonable endeavours to put in place a process that will match any Shareholders who wish to sell their holdings with potential buyers.

It is possible that following publication of this document, the liquidity and marketability of the Ordinary Shares may be significantly reduced and the value of such shares may be adversely affected as a consequence.

Although the Ordinary Shares will remain transferable they will cease to be transferable through CREST. Those shareholders who currently hold Ordinary Shares in uncertificated form in CREST will, following the Delisting becoming effective, be sent a share certificate for those Ordinary Shares which were previously held in uncertificated form and such share certificates will be despatched by the end of June 2018.

The Company will not be subject to the AIM Rules and, accordingly, it will not (amongst other things) be required to retain a nominated adviser or to comply with the requirements of AIM in relation to annual accounts and half-yearly reports, the disclosure of price sensitive information or the disclosure of information on corporate transactions.

Shareholders should note that that Takeover Code will continue to apply to the Company following the Cancellation.

Following the Cancellation, Hawk Investment Holdings Limited and related parties will (through holdings in Hawk Investment Holdings Limited, Groundlinks Limited, Seraffina Holdings Limited and Retro Grand Limited) together hold, in aggregate, Ordinary Shares representing 63.64 per cent. of the issued voting ordinary share capital of the Company and, as such, will be able to exercise significant influence over matters requiring Shareholder approval.

All of the current Board members will remain in place following Cancellation.

Dealing and settlement arrangements

The Directors are aware that Shareholders may wish to acquire or dispose of shares in the Company following the Delisting. Accordingly, the Board intends to put in place an internal process that will allow Shareholders or persons wishing to acquire or sell Ordinary Shares to leave an indication that they are prepared to buy or sell at an agreed price. The Company will then use its reasonable endeavours to contact those parties that are willing to buy and sell in order that they may discuss effecting the bargain.

Once such a procedure has been put in place details will be made available to Shareholders on the Company's website (www.servoca.com). It is expected that this will take place shortly after the Cancellation.

Transfers of interests in shares in certificated form should be sent to the Company's registrars, Link Asset Services, 34 Beckenham Road, Beckenham, BR3 4TU. Existing share certificates remain valid.

If Shareholders wish to buy or sell Ordinary Shares on AIM they must do so prior to the Cancellation becoming effective. As noted above, in the event that Shareholders approve the Cancellation, it is anticipated that the last day of dealings in the Ordinary Shares on AIM will be 18 June 2018 and that the effective date of the Cancellation will be 19 June 2018.

Recommendation

For the reasons set out above, the Directors believe that the Delisting is the best interests of the Company and of Shareholders as a whole. Accordingly, the Directors unanimously recommend Shareholders to vote in favour of the Resolution.

Definitions

 
 "Admission"               the admission of the Ordinary Shares to 
                            trading on AIM 
 "Act"                     the Companies Act 2006, as amended 
 "Adjusted Profit Before   profit before taxation, amortisation, share 
  Tax"                      based payments, contingent consideration 
                            payments and other exceptional charges 
 "AIM"                     the AIM Market operated by the London Stock 
                            Exchange 
 "AIM Rules"               the AIM Rules for companies admitted to 
                            trading on AIM published by the London Stock 
                            Exchange, as amended from time to time 
 "Cancellation" or         the proposed cancellation of the Company's 
  "Delisting"               Ordinary Shares from trading on AIM subject 
                            to the passing of the Resolution at the 
                            General Meeting 
 "Circular"                the circular to be sent to Shareholders 
                            and including the notice of General Meeting 
 "CREST"                   the relevant system (as defined on the Regulations) 
                            in respect of which Euroclear UK & Ireland 
                            Limited is the Operator (as defined in the 
                            Regulations) 
 "Directors" or "Board"    the directors of the Company 
 "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 
                            convened for 11:30 a.m. on 11 June 2018 
 "Group"                   Servoca and its subsidiaries 
 "London Stock Exchange"   London Stock Exchange plc 
 "N+1 Singer"              Nplus1 Singer Advisory LLP 
 "Ordinary Shares"         ordinary shares of 1 penny each in the capital 
                            of the Company 
 "Regulations"             the Uncertificated Securities Regulations 
                            2001 (SI 2001 No. 3755), as amended from 
                            time to time 
 "Resolution"              the resolution set out in the notice of 
                            General Meeting 
 "Servoca"                 Servoca plc 
 "Shareholders"            the holders of the Ordinary Shares 
 "Takeover Code"           the City Code on Takeovers and Mergers 
 

Expected timetable of principal events

 
 Circular and Form of Proxy posted to Shareholders        14 May 2018 
 Latest time and date for receipt of completed        11:30 a.m. on 7 
  Forms of Proxy to be valid for the General                June 2018 
  Meeting of the Company 
 Date and time of General Meeting                    11:30 a.m. on 11 
                                                            June 2018 
 Expected last day for dealings in the Ordinary          18 June 2018 
  Shares on AIM* 
 Cancellation of admission of the Ordinary           07:00 a.m. on 19 
  Shares to trading on AIM*                                 June 2018 
 

*Assumes that the Resolution to approve the Cancellation is passed by the appropriate majority at the General Meeting.

Dates set out against events that are expected to occur after the date of the General Meeting assume that the General Meeting is not adjourned and that the Resolution is passed at the General Meeting.

Each of the times and dates above is subject to change. If any of the above times and/or dates change, the revised times and/or dates will be notified to Shareholders by announcement on a Regulatory Information Service.

References to time in this announcement relate to London time unless otherwise stated.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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May 14, 2018 02:00 ET (06:00 GMT)