St James House PLC Notice of GM and Capitalisation of Liabilities (1234C)

TIDMSJH

RNS Number : 1234C

St James House PLC

06 February 2020

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

6 February 2020

ST. JAMES HOUSE PLC

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

Notice of General Meeting and Capitalisation of Liabilities

Further to the announcement of 31 January 2020, the Board of Directors of the Company (the "Board") is pleased to announce it has today published a circular to shareholders with accompanying notice of general meeting. The material elements of the Circular and the definitions used in both the Circular and in this announcement can be found below.

The GM will be held at 12.00 midday on 28 February 2020 at the office of Allenby Capital Limited, 5 St. Helens' Place, London EC3A 6AB. A copy of the Circular has been posted to all Shareholders and can be viewed on the Company's website at https://sjhplc.com/regulatory-news/aim-26-rule/.

For further information, contact:

 
 St. James House PLC 
  Roger Matthews 
  Website www.sjhplc.com                 020 3655 5000 
 Allenby Capital Limited 
  (Nomad, Financial Adviser & Broker) 
  John Depasquale / Nick Harriss         020 3328 5656 
 

Letter from the Chairman

   1.      Introduction 

The General Meeting is being convened for the purpose of asking Shareholders to consider and, if thought fit, to pass the Resolutions. The Notice can be found in Part II of this document.

Full details of the Resolutions are provided within this document.

   2.      Background to the Proposals 

Following the Company's change of name, approved at the general meeting held on 4 March 2019, and the Board changes that took place during 2019, the Company has been working on a substantial turnaround of the business.

The announcement of 31 January 2020 outlined the binding agreement with AIS for their subscription for 1,666,667 Ordinary Shares at the Transaction Price to raise a total of GBP500,000. AIS have expressed their interest in the further development of the Group's existing payment services and lottery management businesses, as well as complementary acquisitions. AIS have agreed in principle to provide additional debt finance in the future on commercial terms for the right opportunities.

The Subscription will significantly strengthen the Group's working capital position, which as previously disclosed, has been significantly constrained. However, to improve the working capital position further, liabilities totalling GBP237,500 are to be capitalised through the issue of the Capitalisation Shares and Fee Shares, both at the Transaction Price, and both with the agreement of AIS.

While the share issuance authorities granted at the AGM are sufficient for the Capitalisation Shares and a reduced Subscription amount of GBP445,620 (in order to keep AIS' holding at below 30 per cent of the Company's voting rights), the Proposals seek to grant additional share issuance authorities in order to facilitate the full amount of the Subscription, the issue of the Fee Shares and to provide flexibility to make further issues of Ordinary Shares where the Board believe it to be in the best interest of the Company. Resolutions 2 and 3 seek shareholder approval to increase the share issuance authorities, detailed further in section 3 below. These increased share issue authorities will also cover the options over 504,164 Ordinary Shares, exercisable at the Transaction Price at any date up to 31 January 2025 that will be granted to AIS subject to the completion of the Subscription.

On 23 May 2019, the Company announced the acquisition of Another, which has subsequently become the core element of the Group's payment services business, and as outlined in the Company's recent trading statement (30 January 2020), is progressing in a promising manner. However, the other element of the Group's payment services business, MAO, which was established in early 2018 has failed to develop as the Board at the time had hoped, and in particular it became apparent that much of the business was of the "non-conforming" type of customer that was prevalent in the Emex business that had been sold to MDC in July 2018. The Group has recently established a new subsidiary, St. Daniel House Ltd, which is now approved as an EMD Agent by the Financial Conduct Authority. The Board has therefore decided to transfer any conforming business to Another and St. Daniel House Ltd and sell MAO to MDC for GBP1.00. The consideration for the purchase of Emex by MDC (see announcement dated 12 July 2018) was a GBP2m loan note secured on the assets of MDC and to be repaid by a sinking fund from the cashflow generated by those assets; MAO will become part of this structure. The Board believes the majority of MAO's business has become a distraction of management time and better fits with MDC's business. While the consideration is nominal, the sale of MAO will have a modest positive impact on both the trading performance and balance sheet of the Group and should accelerate progress on repayment under the sinking fund. Resolution 4 seeks Shareholder approval for the Disposal.

Resolution 1 seeks shareholder approval to bring the Articles in line with the latest model articles of association of a UK public limited company, with the addition of the Company's existing deferred shares.

   3.      Share Capital, Issue of Ordinary Shares and Related Party Transactions 

At the AGM, Shareholders approved the following resolutions:

Ordinary Resolution

THAT, in accordance with section 551 of the Act, the Directors be generally and unconditionally authorised to exercise all the powers of the Company to allot equity securities (as defined by section 560 of the Act), up to an aggregate nominal amount of GBP20,000 provided that this authority shall, unless renewed, varied or revoked by the Company, expire on the fifth anniversary of its passing save that the Company may, before such expiry, make offers or agreements which would all might require equity securities to be allotted and the Directors may allot equity securities in pursuance of such offer or agreement notwithstanding that the authority conferred by this Resolution has expired. This Resolution revokes and replaces all unexercised authorities previously granted to the Directors to allot equity securities but without prejudice to any allotment of shares or grant of rights already made, offered or agreed to be made pursuant to such authorities.

Special Resolution

THAT, subject to the passing of Resolution 6 (above), the Directors be generally and unconditionally authorised and granted the power to allot equity securities (as defined by section 560 of the Act) for cash, either pursuant to the authority conferred by Resolution 6 or by way of sale of treasury shares, as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities up to an aggregate nominal value of GBP20,000.The power granted by this resolution shall expire on the first anniversary of its passing or, if earlier 31 December 2020, unless renewed varied or revoked by the Company prior to or on such date, save that the Company may, before such expiry, make offers or agreements which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this Resolution has expired. This Resolution revokes and replaces all unexercised powers and authorities previously granted to the directors to allot equity securities as if section 561(1) of the Act 2006 did not apply, but without prejudice to any allotment of equity securities already made or agreed to be made pursuant to such authorities

The Board proposes to replace the above resolutions passed at the AGM with similar authorities, which adjust the aggregate nominal amount to GBP40,000 for both Resolutions to facilitate the share issues outlined in section 2 above. This is laid out in Resolution 2 and Resolution 3 in the Notice.

The Board yesterday resolved to issue the Capitalisation Shares, in settlement of amounts owed totalling GBP110,000, however the Board does not propose to issue the Capitalisation Shares until after the GM, however the issue of the Capitalisation Shares is not dependent on the passing of Resolutions 2 and 3 at the GM.

The Board yesterday also resolved, subject to approval at the GM of Resolutions 2 and 3, to issue the Fee Shares, in settlement of amounts owed totalling GBP127,500. The Fee Shares consist of the following elements:

1. 16,667 Ordinary Shares at a price of 30 pence per share in settlement of director fees totalling GBP5,000 for Arno Rudolf, a director of the Company, in relation to his contracted services as a non-executive director of the Company.

2. 41,667 Ordinary Shares at a price of 30 pence per share in settlement of director fees totalling GBP12,500 for Roger Matthews, a director of the Company, in relation to his contracted services as a non-executive Chairman of the Company.

3. 13,333 Ordinary Shares at a price of 30 pence per share in settlement of director fees totalling GBP4,000 for Jacques Leuba, a director of the Company, in relation to his contracted services as a non-executive director of the Company.

4. 16,667 Ordinary Shares at a price of 30 pence per share in settlement of director fees totalling GBP5,000 for Graeme Paton, a director of the Company, in relation to his contracted services as a chief executive director of the Company.

5. 210,000 Ordinary Shares at a price of 30 pence per share in settlement of invoices for consultancy fees totalling GBP63,000 in respect of services provided by John Botros, a subsidiary director of the Company, in relation to his contracted services, to be issued to First Hartford Trust, a family trust where Mr Botros' wife is a beneficiary.

6. 76,666 Ordinary Shares at a price of 30 pence per share in settlement of invoices for consultancy fees totalling GBP23,000 from PEP Contracting Limited, a company controlled by Dan Pym, a subsidiary director of the Company, in relation to his contracted services.

7. 50,000 Ordinary Shares at a price of 30 pence per share in settlement of invoices for director and consultancy fees totalling GBP15,000 from RT Associates, a partnership controlled by Lord Tim Razzall, a former director of the Company, in relation to his contracted services as Chairman of the Company at the time.

(Collectively, the "Fee Shares")

The Board believes that the issue of the Fee Shares will be significantly positive for the Company's working capital position. The Fee Shares will not be issued unless both Resolutions 2 and 3 are approved by Shareholders at the GM.

The issue of the Fee Shares are related party transactions under the AIM Rules for Companies. Kathryn Cox, the Senior Independent Non-Executive Director, considers, having consulted with Allenby Capital, the Company's nominated adviser, that the terms of the transactions are fair and reasonable insofar as its Shareholders are concerned. It is anticipated that following the GM, an application will be made for the Capitalisation Shares, the Fee Shares and the Subscription Shares to be admitted to trading on AIM with effect from 6 March 2020.

   4.      The Disposal 

The Board proposes to dispose of MAO to MDC for the reasons outlined above. The disposal of MAO does not constitute a "fundamental change of business" under Rule 15 of the AIM Rules for Companies. However, as MAO will in future form part on the contractual relationship between MDC and the Company that were established as part of the disposal of Emex (see announcement dated 12 July 2018), which did require Shareholder approval, the Board believe it is appropriate for Shareholders to also approve the Disposal. Resolution 4 is to approve the Disposal.

MAO made a loss of GBP148,365 in the year to 31 January 2019. Since the acquisition of Another, new business has been increasingly directed to Another, with no revenues generated by MAO in approximately six months, and as stated above, any remaining clients where the Group wishes to retain a relationship, will be transferred to other Group companies. MAO had a negative net asset position of GBP148,365 as at 31 January 2019 (the first year of trading, and hence corresponds with the loss). As MAO continued to make losses during the financial year to 31 January 2020, the Disposal will have a modest positive impact on both the trading performance and balance sheet of the Group.

MDC is owned by John Botros, a director of certain Group subsidiaries and, with persons closely associated (as defined under the Market Abuse Regulation), a substantial shareholder (as defined by the AIM Rules for Companies) of the Company. The Transaction therefore constitutes a related party transaction under the AIM Rules for Companies. The Board consider, having consulted with Allenby Capital Limited, the Company's nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.

   5.      Change of Articles 

The Company was incorporated in 2002, subsequent which there has been significant changes to UK Company Law. The Board has concluded that the Company's Articles are rather out of date and, having had many piecemeal changes over time, could be improved. They therefore propose to adopt new Articles in accordance with the model articles of association provided by Companies House for a UK public limited company, adjusted for the existing deferred shares of the Company. A copy of the proposed new Articles can be viewed on the Company's website alongside this document.

   6.      The Board, Management and Major Shareholdings 

Subject to the passing of the Resolutions at the GM, the completion of the Subscription and the issue of the Capitalisation Shares and the Fee Shares, the Shareholdings of the Board, other Persons Discharging Managerial Responsibilities (as defined in the Market Abuse Regulation) and Significant Shareholders (as defined in the AIM Rules for Companies) will change as follows (the "Changes"), to the best of the Company's knowledge:

 
 Shareholder                 Number of          Number of      Percentage          Percentage 
                              Ordinary Shares    Ordinary       of Ordinary         of Ordinary 
                              Currently          Shares Post    Shares Currently    Shares Held 
                              Held               the Changes    Held                Post the 
                                                                                    Changes 
 
 AIS                         0                  1,666,667      0%                  29.90% 
                            -----------------  -------------  ------------------  ------------- 
 Empire Global Management 
  Limited                    500,000            500,000        16.05%              8.97% 
                            -----------------  -------------  ------------------  ------------- 
 J M Malone (1)              248,972            458,972        7.99%               8.23% 
                            -----------------  -------------  ------------------  ------------- 
 Phil Jackson (2)            172,317            415,650        5.53%               7.46% 
                            -----------------  -------------  ------------------  ------------- 
 John Botros (3)             300,000            300,000        9.63%               5.38% 
                            -----------------  -------------  ------------------  ------------- 
 James Rose (4)              298,921            298,921        9.59%               5.36% 
                            -----------------  -------------  ------------------  ------------- 
 Graeme Paton *              25,000             41,667         0.80%               0.75% 
                            -----------------  -------------  ------------------  ------------- 
 Roger Matthews *            0                  41,667         0%                  0.75% 
                            -----------------  -------------  ------------------  ------------- 
 Arno Rudolf *               0                  16,667         0%                  0.30% 
                            -----------------  -------------  ------------------  ------------- 
 Jacques Leuba *             0                  13,333         0%                  0.24% 
                            -----------------  -------------  ------------------  ------------- 
 

1. J M Malone is Mr Botros' wife. Includes 160,000 Ordinary Shares held by Bluedale Corporate Limited, a company controlled by Ms Malone and 42,736 Ordinary Shares held in trust by Ms Malone for the adult children of her and Mr Botros. Post Change, it also includes 210,000 Ordinary Shares held by First Hartford Trust, a trust of which Ms Malone and the aforementioned adult children are all beneficiaries.

2. Includes Ordinary Shares held by Moorhen Limited, a company controlled by Mr Jackson and 33,333 Ordinary Shares, Post Changes, to be held by Tilly Beazley, Mr Jackson's wife.

3. Includes 100,000 Ordinary Shares held by MDC Nominees Limited, a company controlled by Mr Botros. Mr Botros is a subsidiary director of the Group.

4. Includes Ordinary Shares held by Management Express Limited, a company controlled by Mr Rose. Mr Rose is a subsidiary director of the Group.

   *      Directors of the Company 
   7.      Action to be taken 

The Form of Proxy for use in connection with the General Meeting is enclosed with this document. Whether or not you intend to be present at the General Meeting, you are requested to complete, sign and return the Form of Proxy and AGM Form of Proxy in accordance with the instructions printed thereon to the Company's Registrars, as soon as possible and, in any event, not later than 12.00 midday on 26 February 2020, being 48 hours before the time of the General Meeting. The completion and return of a Form of Proxy will not preclude you from attending the General Meeting and voting in person should you subsequently wish to do so.

   8.      Recommendation 

The Directors consider that the Proposals are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the GM.

The Board, Andrew Flitcroft (company secretary), John Botros (subsidiary director), James Rose (subsidiary director), Phil Jackson (senior manager) and certain other shareholders have given irrevocable undertakings that they and persons closely associated (as defined in the Market Abuse Regulation) with them will vote in favour of the Resolutions. These irrevocable undertakings represent a total 1,243,849 Ordinary Shares, equivalent to 39.92 per cent. of the issued Ordinary Shares.

DEFINITIONS

The following definitions apply throughout this document unless the context otherwise requires:

 
 "Act"                     the Companies Act 2006; 
 "AGM"                     the annual general meeting of the Company 
                            for the year to 31 January 2019 held on 
                            31 July 2019; 
 "AIM"                     the AIM Market, a market operated by the 
                            London Stock Exchange; 
 "AIM Rules"               together, the rules published by the London 
                            Stock Exchange governing the admission 
                            to, and the operation of, AIM, consisting 
                            of the AIM Rules for Companies (including 
                            the guidance notes thereto) and the AIM 
                            Rules for Nominated Advisers, published 
                            by the London Stock Exchange from time-to-time; 
 "AIS"                     Auxilum Investere SJ Ltd, a company incorporated 

                            in England & Wales with registration number 
                            12401199, controlled by Michael and Linda 
                            Peters 
 "Allenby Capital"         Allenby Capital Limited, the Company's 
                            financial adviser, nominated adviser and 
                            broker, authorised by the Financial Conduct 
                            Authority with registration number 489795; 
 "Another"                 the Group's payment services business and 
                            the trading name of Market Access Limited, 
                            (previously Another Ops Limited), a wholly 
                            owned subsidiary of the Company; 
 "Articles"                the articles of association of the Company 
                            for the time being; 
 "Board"                   the collective body of the Directors of 
                            the Company from time to time; 
 "Capitalisation Shares"   the 366,667 Ordinary Shares being issued 
                            in settlement of certain liabilities, as 
                            detailed in Part I of this document; 
 "Circular" or "this       this document, including the Notice in 
  document"                 Part II and the Form of Proxy; 
 "Company" or "SJH"        St. James House PLC, incorporated and registered 
                            in England & Wales under the Companies 
                            Act 1985, registered number 04458947 and 
                            having its registered office at Gainsborough 
                            House, 59-60 Thames Street, Windsor, Berkshire, 
                            SL4 1TX; 
 "CREST"                   the relevant system for paperless settlement 
                            of share transfers and the holding of shares 
                            in uncertificated form, which is administered 
                            by Euroclear UK & Ireland Limited; 
 "Directors"               the directors of the Company as at the 
                            date of this document whose names are set 
                            out on in Part II of this document; 
 "Disposal"                the disposal of MAO, as detailed in Part 
                            I of this document; 
 "Emex"                    the subsidiaries sold to MDC Nominees Limited, 
                            as detailed in the general meeting circular 
                            dated 12 July 2018; 
 "Fee Shares"              the 425,000 Ordinary Shares being issued 
                            to certain members of the Board, a former 
                            director and subsidiary directors, to settle 
                            outstanding liabilities, as detailed in 
                            Part I of this document; 
 "Form of Proxy"           the form of proxy for use by the Shareholders 
                            in connection with the General Meeting 
                            which accompanies this document; 
 "General Meeting"         the General Meeting of the Ordinary Shareholders 
  or "GM"                   of the Company to be held at 12.00 midday 
                            on 28 February 2020 at the offices of Allenby 
                            Capital, 5 St. Helen's Place, London, EC3A 
                            6AB and including any adjournment or postponement 
                            thereof; 
 "Group"                   the Company together with its subsidiaries, 
                            both directly and indirectly owned; 
 "London Stock Exchange"   London Stock Exchange plc; 
 "MAO"                     Market Access Ops Limited, the Company's 
                            wholly owned subsidiary; 
 "MDC"                     MDC Nominees Limited, a company incorporated 
                            in England & Wales with registration number 
                            09606912; 
 "Memorandum"              the memorandum of association of the Company 
                            for the time being; 
 "Notice"                  the notice of the General Meeting, which 
                            is set out at Part II of this document; 
 "Ordinary Shares"         ordinary shares of GBP0.01 each in the 
                            capital of the Company; 
 "PPS"                     Prize Provision Services Limited, the Company's 
                            wholly owned subsidiary, approved as an 
                            External Lottery Manager by the Gambling 
                            Commission; 
 "Proposals"               together, the proposals for: 1) amend the 
                            Articles; 2) to grant the Directors authority 
                            to allot shares; 3) dis-apply pre-emption 
                            rights; and 4) the Disposal; 
 "Registrars"              SLC Registrars, Elder House, St Georges 
                            Business Park, Brooklands Road, Weybridge, 
                            Surrey, KT13 0TS, the Company's registrar; 
 "Resolutions"             the resolutions to approve the Proposals, 
                            which are set out in the Notice in Part 
                            II of this document; 
 "Shareholder(s)"          holder(s) of the Ordinary Shares; 
 "Subscription"            the binding agreement for the subscription 
                            for 1,666,667 Ordinary Shares by AIS at 
                            the Transaction Price; 
 "Subscription Shares"     the 1,666,667 Ordinary Shares to be issued 
                            to AIS under the Subscription, subject 
                            to completion of the Subscription; 
 "Transaction Price"       30 pence per Ordinary Share; 
 "United Kingdom" or       the United Kingdom of Great Britain and 
  "UK"                      Northern Ireland; and 
 "Uncertificated" or       recorded on the register of Ordinary Shares 
  "in Uncertificated        as being held in uncertificated form in 
  Form"                     CREST, entitlement to which by virtue of 
                            the CREST Regulations, may be transferred 
                            by means of CREST. 
 

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February 06, 2020 02:00 ET (07:00 GMT)