Issue of Equity

RNS Number : 2894B

Optare PLC

15 February 2011

 



Optare plc

("Optare" or the "Company")

Issue of Equity

and

Notice of General Meeting

The Board of Optare is pleased to announce it has raised, subject to certain conditions, £7.4 million (before expenses) through the placing of up to 370,000,000 new ordinary shares by Cenkos Securities plc (the "Placing"), which will be used by the Company to fund the relocation of the Company's Leeds factory, to provide working capital for the Company and to reduce the Company's borrowings.

The Placing is conditional, inter alia, upon the passing of resolutions by shareholders to authorise the Directors to allot the Placing Shares for cash on a non-pre-emptive basis. Accordingly, a General Meeting is being convened on 4 March 2011.

A circular containing the details of these proposals is being posted to shareholders today and will be available on the Company's website:  www.optare.com.

Background to and reasons for the Placing

As noted in the Company's recent trading update, the Company's order book has increased from £24.4 million as at 21 September 2010 to £43 million as at 11 February 2011.

The Board anticipates further growth in the Company's order book during the first quarter of 2011 as a result of the level of tenders being issued by, and requests for quotations being received from, a number of the major operators. As highlighted previously, as the order book increases, significant pressure is placed on the working capital position of the Group. Whilst it is pleasing that the Company is beginning to see an increase in orders and production, the Company is facing supplier credit restrictions and this has placed significant pressure on the Company's working capital position.

As also described in the Company's recent trading update, the Board does not expect the lease on its current factory in Leeds to be renewed beyond the end of 2011. Accordingly, the Board has identified a new site and is in discussions with the landlord of that site. The Directors believe that this new facility will be better able to support the Company as it enters a growth phase by providing not only increased capacity by, inter alia, the introduction of an additional paint plant but also an improved plant layout which is expected to be significantly more efficient.

Whilst the Company has continued to focus on paying down term debt, a short-term facility of £1.5 million was agreed through the parent company of one of the Company's major Shareholders in order to assist the Company in trading. This facility was provided in the light of the disruption to production experienced in December 2010 which was described in the Company's recent trading update. The facility is for a term of 90 days to 13 March 2011 and carries interest at 8 per cent. above base.

Optare's bank term debt at 31 January was £3.3million. In addition to the £1.5 million facility referred to above, the Company also agreed a facility with the same party on the same terms for an additional £750,000. The maturity date on this additional £750,000 has now been extended to 20 March 2011 (or, if earlier, the date on which the Placing proceeds are received) and the combined £2.25 million of facilities were fully drawn down as at 31 January 2011. In addition, the Company had an uncommitted overdraft facility of £3.5 million which was utilised as to £2.8 million as at 31 January 2011.

Since 31 December 2010, the Company has agreed short term overdraft facilities of £0.5 million (included in the £3.5 million referred to above) in January 2011 and £0.12 million in February 2011 with Bank of Scotland PLC. These short term overdraft facilities of £0.62 million are available until 10 March 2011, or if earlier, the date on which the Placing proceeds are received.

In light of the above, the business requires funds for working capital to finance the Company's ongoing operations, to finance the planned factory relocation and to reduce the level of borrowings.

The net proceeds of the Placing will therefore be applied to fund working capital, finance the relocation of the factory, repay the short term facilities and, together with the proceeds from the sale of the Rotherham facility (as described in the Company's recent trading statement), repay the term debt. The Board continues to review options to achieve a more appropriate long-term level of working capital facilities for the business.

Shareholders should be aware that, if the Resolutions are not approved at the General Meeting, the Company will be unable to complete the Placing. This would require the Company to seek to finance its ongoing operations and the factory relocation through alternative means. Whilst the Directors believe that there are a number of possible options to achieve this, they do not believe that these alternative options would currently be in Shareholders' best interests.

Current trading and prospects

The Board believes that market conditions are much more favourable in 2011 than they have been for the last two years. This belief has been validated, to date, by the Company's growing order book. As disclosed in the Company's recent trading update, Optare was not immune from the effects of the extreme weather conditions experienced in December 2010 which, combined with a re-phasing of some customer orders from Q4 2010 to early 2011, impacted turnover for the year ended 31 December 2010. Although this has had a corresponding impact on EBITDA for the year ended 31 December 2010, the Board expects this volume to be recovered in early 2011.

As at 11 February 2011 the Company's order book was at £43 million and, based upon the number of tenders and requests for quotations received to date and the fact that any orders to be placed under the Department for Transport's Green Bus Scheme have to be placed by the end of March this year, the Board expects that order intake will continue to improve. The tenders and requests for quotations which have been received recently give the Board confidence that the major bus operating groups, which generally curtailed capital expenditure during 2009 and 2010, will return to a more normal level of bus purchases from Q2 2011.

The Board looks forward to 2011 with renewed confidence given the benefits of an improving order book, recent investments in product development and a strongly supportive long-term partner in Ashok Leyland.

The Placing

The Company is proposing to raise approximately £7.0 million (net of expenses) by way of the issue of the Placing Shares at the Placing Price, which represents a discount of approximately 11.1 per cent. to the closing middle market price of 2.25 pence per Existing Ordinary Share on 14 February 2011, being the last practicable date prior to the publication of this document. The Placing Shares would represent approximately 49.2 per cent. of the Enlarged Ordinary Share Capital.

The Placing Agreement

Cenkos Securities has entered into the Placing Agreement with the Company under which it has agreed to use its reasonable endeavours, as agent for the Company, to procure placees for the Placing Shares.

The placing of the Placing Shares is conditional upon, inter alia, the Resolutions being duly passed at the General Meeting and Admission becoming effective on or before 8:00 a.m. on 7 March 2011 or such later time and/or date as the Company and Cenkos Securities may agree, but in any event by no later than 8:00 a.m. on 21 March 2011. The Placing Agreement contains warranties from the Company in favour of Cenkos Securities in relation to, inter alia, the accuracy of the information in this document and other matters relating to the Company and its business. In addition, the Company has agreed to indemnify Cenkos Securities in relation to certain liabilities it may incur in respect of the Placing. Cenkos Securities has the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular in the event of a material breach of the warranties.

Dealings

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will occur at 8:00 a.m. on 7 March 2011.

The Placing Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares including the right to receive dividends and other distributions declared following Admission.

Ashok has agreed to subscribe for 96,200,000 Placing Shares as part of the Placing.

On completion of the Placing, Ashok will be interested in 195,557,828 Ordinary Shares representing approximately 26 per cent. of the Enlarged Ordinary Share Capital.

As part of the Placing John Fickling, Jim Sumner, Mike Dunn, David Stonehouse and Glenn Saint have agreed to subscribe for 1,000,000, 500,000, 300,000, 250,000 and 300,000 Placing Shares respectively.

Related party transaction

As at 14 February 2011 (the last practicable date prior to the publication of this document), Ashok held 99,357,828 Ordinary Shares representing approximately 26 per cent. of the Existing Ordinary Shares. As stated above, Ashok has agreed to subscribe for 96,200,000 Ordinary Shares in the Placing. Under the AIM Rules, as a Shareholder holding more than 10 per cent. of the Existing Ordinary Shares, Ashok is a related party of the Company and the subscription by Ashok for Placing Shares constitutes a related party transaction. Where a company enters into a related party transaction, under the AIM Rules the independent directors of the company are required, after consulting with the company's nominated adviser, to state whether, in their opinion, the transaction is fair and reasonable in so far as its shareholders are concerned. Having consulted with Cenkos Securities, the Company's nominated adviser, the Independent Directors believe that the participation by Ashok in the Placing is fair and reasonable in so far as Shareholders are concerned.

The AIM Rules do not prohibit Ashok from exercising the voting rights attached to its holding of Ordinary Shares at the General Meeting.

Expected timetable of principal events

This document posted to Shareholders (by first class post)	15 February 2011
Latest time and date for receipt of Forms of Proxy	10:00 a.m. on 2 March 2011
General Meeting	10:00 a.m. on 4 March 2011
Admission and dealings in the Placing Shares expected to commence on AIM	8:00a.m. on 7 March 2011
CREST accounts credited in respect of the Placing Shares	by 7 March 2011
Share certificates despatched in respect of the Placing Shares	by 14 March 2011

Commenting Jim Sumner, CEO of Optare said:

"This placing is a significant milestone after more than 18 months restructuring and repositioning the business. These funds will allow relocation of the business from our current ageing Leeds factory to a new facility with the capability to considerably increase capacity. In addition, term debt will be reduced significantly. These key objectives will help support growth of the business with a record order book now standing at £43million. I continue to be very positive about the Company's prospects in 2011 and beyond."

For further information please contact:

Jim Sumner, CEO, Optare plc Mike Dunn, Finance Director, Optare plc	[phone]
Camilla Hume, Cenkos Securities plc Stephen Keys, Cenkos Securities plc	[phone]

The same definitions apply throughout this announcement as are applied in the Circular.  The Circular will be sent to shareholders today and is available on the Company's website: www.optare.com

 

END

 

 

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