Statement on historic distributions

RNS Number : 1108W

Non-Standard Finance PLC

12 April 2019

 

This announcement and the information herein is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into the United States, Canada, New Zealand, Japan, or any other Restricted Jurisdiction in which such release, publication or distribution would be unlawful.

12 April 2019

Non-Standard Finance plc
("NSF" or the "Company")

Following a detailed review which concluded today, the Company has identified certain technical infringements regarding historic distributions made by the Company.  All of the infringements can be rectified and the NSF Board considers that none of the issues impacts the Company's financial position or prospects or shareholder value. Accordingly, there will be no impact on the Company's ability to pay its final dividend for 2018 of 2.00 pence per share and NSF remains fully committed to its dividend policy of paying out at least 50 per cent. of future normalised post-tax earnings.  Further details, including the proposed actions to be taken by NSF to rectify the position, are set out in the Appendix to this announcement.

The Company's annual general meeting (the "AGM"), which will consider certain matters in connection with the above, will now be held on 21 May 2019, with the record date for the 2018 final dividend now being 24 May 2019 and the dividend payment date remaining unchanged as 7 June 2019.  The notice of AGM (including the details of timings for the meeting) will be published in due course.

These technical infringements, and the actions being taken to resolve them, have no bearing on NSF's financial and operational performance or its strategy, including its Offer for Provident Financial plc.

Enquiries:

Non-Standard Finance plc

Peter Reynolds, Director, IR and Communications

T: [phone]

Ondra LLP (Financial Adviser to NSF)

Michael Tory Stewart Bennett Oliver Ives Gurnek Teja

T: [phone]

Deutsche Bank, London Branch (Financial Adviser to NSF)

James Arculus Chris Raff Nicholas Hunt Neil Collingridge, Corporate Broking

T: [phone]

Maitland/AMO (Public Relations Adviser to NSF)

Neil Bennett Andy Donald Finlay Donaldson

T: [phone]

Shore Capital (Corporate Broker to NSF)

Mark Percy Daniel Bush

T: [phone]

Further Information

Capitalised terms used but not defined in this announcement have the meanings set out in the announcement of the Offer on 22 February 2019.

This announcement is not intended to and does not constitute or form part of any offer to exchange or subscribe for or any invitation to exchange or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Offer or otherwise. The Offer will be made solely pursuant to the terms of the Offer Document, which contains the full terms and conditions of the Offer. Any decision in respect of, or other response to, the Offer should be made only on the basis of the information contained in the Offer Document.

The contents of this announcement are not to be construed as legal, business, financial or tax advice.

This announcement does not constitute a prospectus or prospectus equivalent document.

Overseas Jurisdictions

The information contained herein is not for release, distribution or publication, directly or indirectly, in or into the United States, Canada, New Zealand, Japan or any other Restricted Jurisdiction where applicable laws prohibit its release, distribution or publication. The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe any applicable requirements. Any failure to comply with the applicable requirements may constitute a violation of the applicable securities laws. This announcement has been prepared for the purpose of complying with English law and the City Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.

Copies of this announcement and any formal documentation relating to the Offer are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from the United States or any other Restricted Jurisdiction and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send it in or into or from the United States or any other Restricted Jurisdiction. Unless otherwise determined by NSF and permitted by applicable law and regulation, the Offer may not be made directly or indirectly, in or into, or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of the United States or any other Restricted Jurisdiction and the Offer may not be capable of acceptance by any such use, means, instrumentality or facilities.

Notice to US investors in Provident:

The Offer is being made for the securities of a UK company and is subject to UK procedural and disclosure requirements, which are different from certain of those of the United States.

For purposes of the US Securities Exchange Act of 1934, as amended (the "US Exchange Act"): the Offer will be made pursuant to Section 14(e) and Regulation 14E under the Exchange Act benefitting from the exemptions available to "Tier II" tender offers. Accordingly, the Offer will be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that may be different from those applicable under US domestic tender offer procedures and law, and certain rules applicable to tender offers made into the United States, including rules promulgated under Section 14(d) of the US Exchange Act, do not apply.

In accordance with, and to the extent permitted by, the Code, normal UK market practice and Rule 14e-5 under the US Exchange Act, the Financial Advisers and their respective affiliates may continue to act as exempt principal traders in Provident Shares on the London Stock Exchange and will engage in certain other purchasing activities consistent with their respective normal and usual practice and applicable law, including Rule 14e-5 under the US Exchange Act. To the extent required to be disclosed in accordance with applicable regulatory requirements, information about any such purchases will be disclosed to the Panel by no later than 12 noon on the next "business day", as such term is defined in the Code, and will be available from any Regulatory Information Service, including the Regulatory News Service on the London Stock Exchange website, www.londonstockexchange.com, and will also be available on NSF's website www.nsfgroupplc.com. To the extent that such information is required to be publicly disclosed in the United Kingdom in accordance with applicable regulatory requirements, this information will, as applicable, also be publicly disclosed in the United States.

For purposes of the US Securities Act of 1933, as amended (the "US Securities Act"): this document does not constitute a public offer of securities in the United States or an offer to the public in the United States to acquire or exchange securities. The New NSF Shares have not been, and will not be, registered under the US Securities Act, and may not be offered, sold or resold except in transactions exempt from, or not subject to, the registration requirements of the US Securities Act.  The New NSF Shares have not been, and will not be, registered under the relevant securities laws of any other Restricted Jurisdiction and the relevant clearances have not been, and will not be, obtained from any securities commission of any Restricted Jurisdiction and no prospectus in relation to the New NSF Shares has been or will be lodged with, or registered by, any such securities commission. Accordingly, the New NSF Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold, delivered or transferred, directly or indirectly, in or into any Restricted Jurisdiction if to do so would constitute (or result in the Offer constituting) a violation of relevant laws or require registration thereof.

Important Notices relating to Financial Advisers

Ondra LLP, which is regulated in the United Kingdom by the FCA, is acting as financial adviser to NSF and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters set out in this announcement and will not be responsible to anyone other than NSF for providing the protections afforded to clients of Ondra LLP nor for providing advice in relation to any matter referred to herein.

Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank) and, in the United Kingdom, by the PRA. It is subject to supervision by the European Central Bank and by BaFin, Germany's Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the PRA and FCA. Neither Deutsche Bank nor any of its subsidiaries, branches or affiliates will be responsible to any person other than NSF for providing any of the protections afforded to clients of Deutsche Bank nor for providing advice in relation to any matters referred to in this announcement. Neither Deutsche Bank nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Deutsche Bank in connection with this announcement, any statement contained herein, or otherwise. Deutsche Bank is acting as financial adviser to NSF and no other person in connection with the contents of this announcement.

Shore Capital, which is authorised and regulated in the United Kingdom by the FCA, acts as broker to NSF and will not regard any other person as its client and will not be responsible to anyone other than NSF for providing the protections afforded to clients of Shore Capital nor for providing advice in relation to any matter referred to herein. Neither Shore Capital nor any of its subsidiaries, associates, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Shore Capital in connection with this document, any statement contained herein, or otherwise.

Forward-Looking Statements

This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and business of Provident and certain plans and objectives of NSF with respect thereto. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', 'hope', 'aims', 'continue', 'will', 'may', 'should', 'would', 'could', or, in each case, their negative or other words of similar meaning. They appear in a number of places throughout the announcement and include statements regarding the intentions, beliefs or current expectations of the NSF and the NSF Board. These statements are based on assumptions and assessments made by NSF in light of its experience and its perception of historical trends, current conditions, future developments and other factors it believes appropriate. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this document could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and you are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this document. NSF does not assume any obligation to update or correct the information contained in this document (whether as a result of new information, future events or otherwise), except as required by applicable law.

There are several factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. No statement in this announcement is intended as a profit forecast or profit estimate and no statement in this presentation should be interpreted as such.

The forward-looking statements contained in this announcement speak only as at the date of this announcement. Except as required by the FCA, the London Stock Exchange or applicable law (including as may be required by FCA's Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules), NSF and its directors expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement, whether as a result of any change in events, conditions or circumstances or otherwise on which any such statement is based.

Ondra LLP and Deutsche Bank (and their respective affiliates) expressly disclaim any obligation or undertaking to update, review or revise any forward-looking statement contained in this announcement whether as a result of new information, future developments or otherwise.

Publication on website

A copy of this announcement will be made available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on NSF's website at www.nsfgroupplc.com no later than 12 noon (London time) on the Business Day following this announcement. For the avoidance of doubt, the content of this website is not incorporated by reference into, and does not form part of, this announcement.

Appendix

Introduction

This Appendix describes the technical infringements of the Companies Act 2006 (the "Act") relating to the dividends paid by the Company in 2016, 2017 and 2018 (the "Previous Dividends") and the purchases by the Company of its own shares conducted between 2017 and 2019 (the "Previous Buybacks", together with the Previous Dividends, the "Previous Distributions"). This Appendix also includes information relating to the actions which the NSF Board is taking to both rectify the technical infringements relating to the Previous Distributions and to ensure that such infringements cannot be repeated. It also includes details relating to the AGM and 2018 final dividend. It should be noted that the audited financial statements for the years ended 31 December 2016, 2017 and 2018 remain valid and that no restatement of those financial statements is necessary.

Technical infringements of the Act

The Act provides that a public company may make a distribution if, at the time of the distribution, it has sufficient distributable reserves and the requisite net assets. Distributable reserves and net assets are to be assessed by reference to the Company's most recent 'relevant accounts' (as defined in the Act), which may be interim accounts if such accounts have been filed at Companies House prior to the relevant distribution being made. Other examples of similar procedural issues which have arisen at a number of listed companies are available for reference on our website at www.nsfgroupplc.com/investors/.

2016 intra-group transactions

NSF undertook a series of intra-group transactions in June 2016 (the "2016 Transactions"). The purpose of the 2016 Transactions was to pass distributable reserves that were held by NSF's wholly owned subsidiary, S.D. Taylor Limited ("SDT") and recorded in SDT's annual accounts for the year ended 31 December 2015, up through the NSF Group and, in turn, for NSF to pay the 2016 interim dividend to its shareholders. When assessing the effectiveness of such intra-group transfers of distributable reserves, it is necessary to consider whether there are any grounds to conclude that they should be regarded as 'circular' (as such concept is defined within the applicable professional guidance at the time, the ICAEW's Tech 02/10 technical release) and thereby liable to be set aside.

NSF believes that the 2016 Transactions were a reasonable course of action, having consulted with its professional advisers at the time. NSF's view is that each of the individual steps within the wider series of transactions served a legitimate purpose and it considered that the transactions had been effected in accordance with the relevant legislation and guidance.   

However, NSF recognises that the relevant professional guidance in this area is complex and is subject to difficult judgments in relation to which different interpretations are possible. NSF has therefore decided to adopt a more conservative interpretation of the guidance in respect of the 2016 Transactions and is consequently taking appropriate steps to remove any uncertainty as to the validity of all Previous Distributions regardless of the interpretation of the guidance.

Impact of analysis of the 2016 Transactions

The effect of taking the position set out above is that NSF is proceeding on the basis that the 2016 Transactions did not move distributable reserves up the NSF Group.  Consequently, the level of NSF's distributable reserves has since June 2016 been lower than previously stated, which means that there were not sufficient distributable reserves available for the purpose of making the Previous Distributions.

Other technical infringements of the Act

The Company identified certain other technical infringements of the Act relating to Previous Distributions made either without sufficient distributable reserves and/or the requisite level of net assets (for reasons including distributions being made before the relevant interim accounts (and other relevant documents) had been filed at Companies House and necessary adjustments not being made to reflect reductions in the Company's distributable reserves following share buybacks and certain share-based payments). The Company also identified certain technical infringements of the Act relating to distributions made by subsidiaries within the NSF Group, which the NSF Board is now taking the appropriate steps to resolve in full.

Annual General Meeting

The technical infringements of the Act relating to the Previous Distributions described in this announcement can be rectified by, amongst other things, the passing of certain resolutions by the Company's shareholders. Accordingly, the Company will now propose appropriate resolutions (the "Resolutions") at the Company's forthcoming AGM. The Resolutions will be set out in the Company's notice of AGM.

Actions being taken by NSF

The NSF Board has conducted a detailed review of each of NSF's distributions since its shares were first listed on the London Stock Exchange to identify the historic technical and procedural issues (the findings of which are outlined above). In parallel, the NSF Board has reviewed its financial procedures, systems and controls for the assessment of distributable reserves, the payment of dividends and the purchase by the Company of its own shares. To ensure that the matters referred to in this announcement do not arise in relation to any future distributions, NSF is taking steps, with full involvement of, and advice from, its professional advisers, to further enhance its procedures for the making of future distributions and to further strengthen its financial procedures, systems and controls. These enhanced procedures have been formalised in a revised internal control policy which has been reviewed and adopted by the NSF Board and includes the following elements:

·      Commencing with the 2019 financial year, NSF will include in: (a) its annual financial statements; and (b) its half-year results, a note setting out the quantum of reserves of the Company which, as at the relevant accounts date, represent realised profits for the purposes of the Act. These statements will be, respectively, covered by the audit or review opinion (as applicable) provided by NSF's retained auditor from time to time.

·      Each future distribution made by NSF or one of its group companies, whether by way of dividend, share buyback or otherwise, will be reviewed by external legal counsel and external accounting advisers from time to time to ensure it is in compliance with IFRS, the ICAEW technical guidance and the Act and to confirm that the appropriate administrative actions (such as the filing of relevant accounts with Companies House) have been carried out in a prompt and fully compliant manner. Any future corporate actions by NSF or other companies within the NSF Group which may have an effect on its equity and/or distributable reserves position will also be subject to external review.

·      Effective immediately, NSF will maintain a rolling forecast of its distributable reserves position and track actual reserves as part of its ongoing dividend planning activities, ensuring that any variances from plan are managed within reasonable levels of tolerance and highlighted to the NSF Board accordingly.

The NSF Board attaches great importance to due and proper procedures, systems and controls and has full confidence in the Company's financial management.

2018 final dividend

The NSF Board confirms that there will be no change to NSF's current dividend policy, nor to its recommended final dividend of 2.00p per NSF Share, which will now be paid to those shareholders on the Company's share register on 24 May 2019, with payment being made on 7 June 2019. Although the Company's distributable reserves as at 31 December 2018 were lower than had been assumed, there is no change in substance as the Company's total reserves are unchanged and the NSF Group's proposed remedial actions will place the Company's distributable reserves in the position in which they should always have been. Given this position and the fact that the Company's future ability to pay dividends will be primarily driven by the annual profit generation of its subsidiaries, the NSF Board does not expect any impact on the Company's future ability to pay dividends in line with its stated policy.

 

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