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Vertu Capital Ltd (VCBC)

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Tuesday 19 April, 2016

Vertu Capital Ltd

Proposed Acquisition

RNS Number : 6288V
Vertu Capital Limited
19 April 2016
 

            

possible acquisition- EXECUTION OF LETTER OF INTENT

 

THIS ANNOUNCMENT AND THE INFORMATION HEREIN IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN OR INTO AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR THE UNITED STATES OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL

 

Vertu Capital Limited

 

Proposed Acquisition of VCB Malaysia Berhad

 

Vertu Capital Limited ("Vertu" or "the Company") is pleased to announce that it has entered into a non-binding letter of intent ("LOI") with BVS Trinity Sdn Bhd ("the Seller") for the proposed acquisition of the entire issued share capital of VCB Malaysia Berhad ("Target"), a company incorporated in Malaysia. Under the LOI, the Target will be acquired for a consideration of £350,000 payable in cash on completion (the "Proposed Acquisition").

 

The Company's stated strategy, as set out in the prospectus produced at the time of listing, is to look for acquisition opportunities in the financial services sector. The directors of the Company ("the Directors") believe that in the Target they have identified a business that fits with this strategy.  

 

The Proposed Acquisition is subject to certain conditions in the LOI, including:

 

·           satisfactory due diligence in respect of the Target and its group;

 

·           approval of the Proposed Acquisition by the board of directors of the Company, Seller and Target;

 

·           execution by the Seller and the Company of a detailed share acquisition agreement; and

 

·           the re-admission of the Company to a Standard Listing on the Official List and to trading on the Main Market of the London Stock Exchange on completion of the Proposed Acquisition.

 

Accordingly, while discussions regarding the proposed acquisition continue in accordance with the terms of the LOI, there can be no certainty that any transaction will occur. 

 

The Proposed Acquisition would constitute a reverse takeover requiring compliance with the relevant provisions in the Listing Rules.

 

Under Listing Rule 5.6, Vertu is required to provide certain information regarding the Target to ensure that there is sufficient information available to the public with regard to the proposed transaction in order to avoid suspension of the Company's shares. As the Target is not listed on any stock exchange and is not subject to any public disclosure regime, the information required under LR 5.6.15G is set out below.

 

1.         Background on The Target

 

1.1        Introduction 

The Target was established in Malaysia in 1999.  The Target is a management consulting firm that provides financial consultancy and support services in the areas of corporate finance and investment banking.  The Target provides advice to high net worth individuals seeking growth and steady income from their capital as well as providing corporate finance advice to growth companies. The Target has a wholly owned subsidiary VCB Investment Berhad which operates the Target group's private equity investment business.

 

The Target divested its interest (of 100% of the equity share capital) of VCB Capital Sdn Bhd ("VCBC") in December 2015. VCBC is a licensed capital market representative in Malaysia in the area of fund management. Although the Target has divested its interest in VCBC, it continues to have a business relationship with VCBC where it requires a partner to carry out new business in the area of licensed fund management activities.

 

1.2       Business Operations

 

The Target's services cover the following areas:

 

1.2.1        Support Services - providing support services to enterprises in relation to raising funds from debt and/or equity markets, in house private equity participation, external debt/equity as well as on mergers and acquisitions;

 

1.2.2       Management Consultancy - providing consultancy services to small and medium enterprises in developing business plans, realigning business operations and human resource management as well as developing policy and procedures, processes and enterprise resource management;

 

1.2.3       Investor Relations - assisting enterprises manage investor relations including but not limited to maintaining an investor relation desk (as an out-sourced service);

 

1.2.4       Wealth Management -providing wealth management services to qualified investors (mostly high net worth individuals) and/or private companies through VCBC or through the Target's licensed business partners; and

 

1.2.5       Specialised Capital Market Services - providing alternative investment strategy(ies) as part of the fund management services offered through the Target's licensed business partners.

 

1.3       Key non-financial operating or performance measures

 

The key non-financial operating and performance measures for the Target are the number of clients it represents, the number and value of transactions or projects it is mandated on by clients and the number and value of transactions or projects it successfully completes.

 

Details of clients and new mandates on which the Target has been instructed since 31 December 2014 are set out below:

 

No

Date engaged

Client Description

Mandate

Description

Contracted revenue

RM

Note (1)

Remarks

1.  

03.09.12

Telco Managed Service Provider

Investment

440,000

Contract end 03.09.17

2.  

23.12.13

Property & IT Company

Consultancy - Business Plan & Operation

1,200,000

Renewable yearly

3.  

23.12.14

Renewable Energy Company

Service - Business Plan

100,000

Renewable yearly

4.  

29.12.14

Machinery Rental Company

Service - Financial Management

100,000

Renewable yearly

5.  

01.01.15

Engineering Company

Consultancy - Operation

180,000

Renewable yearly

6.  

01.01.15

Engineering Company

Investment

400,000

Renewable yearly

7.  

16.01.16

Engineering Company

Investment

250,000

Renewable yearly

 

Note (1)

 

Contracted revenue is the revenue during the fixed contract term or the annual fee payable under yearly renewable contracts as applicable.  The contracted amount may not be fully earned during the year 2015.

 

             

During the year ended 31 December 2015, the Target continued to act on mandates for the clients set out above. The Target provided financial consultancy and support services to four clients and investment to two clients. In total it generated revenue of RM 2,628,161 for the Target group for the year ended 31 December 2015.   In January 2016, the Target has entered another investment mandate of RM2.5 million (as set out in paragraph 7 of the table above) in respect of which a fee of 10% of the investment amount is payable.

 

The Target has a pipeline of consultancy and investment mandates for the current financial year from companies in Thailand, Hong Kong, China and Singapore which are in the process of being signed up.

 

The Target continues to receive many enquiries for fundraising activities in areas of information technology, telecommunication, energy, construction and property development.

 

The Target foresees that business will continue to improve this year and next based on the demands seen especially by clients seeking to list companies in Thailand, Hong Kong and the UK.

 

1.4       Trends in the market

 

Malaysia continues to show strong macro-economic indications which directly translates to strong economy. The weak commodities market especially the oil and gas sector had impacted the Ringgit but it had also benefited outer industries as Malaysia remain one of the big exporters of manufactured products especially in industries related to rubber, palm oil, timber and electronics.

Malaysia is a leader in Islamic financing, which has given advantage to its local companies to participate in Islamic fundraising activities which has grown in popularity in the recent decade.

 

The bond market remains strong and the directors believe there are good opportunities to develop the business of the Target.

 

The directors believe that the weaker Malaysian Ringgit with strong economic fundamentals in Malaysia will contribute to higher foreign direct investment, hence increasing the opportunities in financial sector especially in the related sectors the Target is operating in.

 

Globalisation of Malaysian companies has also opened new opportunities for the Target to provide its services.

 

1.5       Reasons for the Proposed Acquisition and development of the Target

 

The Directors believe they will be able to develop the business of the Target if the Proposed Acquisition is completed. They believe the Proposed Acquisition and the ownership of the Target by a UK listed company will assist the Target in pursuing cross border business opportunities from overseas markets such as the United Kingdom, Singapore, Thailand and Indonesia.

 

The Directors believe that they will be able to leverage on the successful transactions executed by the Target and the combined business contacts of the Company and the Target to further develop the business.

 

The Directors intend to develop the Target to become a leading management consulting services provider in the growth SME segment as well as a leading player in alternative investment strategies in wealth management.

 

2.         Financial Information On The Target

 

The audited consolidated financial statements of the Target for the years ended 31 December 2013, 2014, and 2015 are set out in the Appendix to this announcement.

 

The table below contains summary financial information of the Target's group for the three years ended 31 December 2015 extracted from the financial information in the Appendix. Please note that this information includes consolidated financial results of VCBC. For clarity, the Target has divested its interest in VCBC in December 2015.

 

 

 

 

2013

(RM)

 

2014

(RM)

 

2015

(RM)

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

4,471,294

 

1,852,312

 

2,628,161

 

Cost & Expenses

 

 

3,503,915

 

1,511,873

 

1,991,794

 

Profit before tax

 

 

474,171

 

1,109,753

 

636,367

 

Net profit

 

 

474,470

 

971,803

 

603,882

 

Total assets

 

 

13,962,238

 

14,341,171

 

17,396,284

 

Net current assets

 

 

4,495,727

 

4,841,880

 

4,100,474

 

Cash and bank balance

 

 

4,989,819

 

1,655,896

 

1,688,149

 

Shareholders' equity

 

 

12,505,113

 

12,848,658

 

3,223,692

 

 

The Target's consolidated result will improve with the divestment of VCBC as there were contributing losses totalling in excess of RM900,000 for the years 2013, 2014 and 2015 respectively. For ease of reference and comparison, the following table is prepared for the three years ended 31 December 2015 after removing VCBC's financial results for each of the years in consideration to better reflect the Target's financial position.

 

 

 

 

2013

(RM)

 

2014

(RM)

 

2015

(RM)

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

5,326,130

 

2,475,408

 

2,665,173

 

Other Income

 

 

896,125

 

-

 

263,892

 

Interest expenses

 

 

(559,088)

 

(766,571)

 

(864,083)

 

General expenses

 

 

(4,426,326)

 

(739,506)

 

(2,099,049)

 

Profit before tax

 

 

1,236,841

 

969,331

 

(34,067)

 

Net profit

 

 

1,237,140

 

832,381

 

(66,552)

 

Total assets

 

 

13,487,987

 

14,429,301

 

17,614,834

 

Net current assets

 

 

4,586,687

 

6,284,581

 

4,753,025

 

Cash and bank balance

 

 

2,611,318

 

1,143,936

 

1,688,149

 

Shareholders' equity

 

 

3,151,240

 

3,983,621

 

3,317,069

 

Total Liabilities

 

 

10,336,747

 

10,445,680

 

14,297,765

 

Net Cash from/(used in) operating activities

 

 

(2,076,682)

 

(2,239,124)

 

4,809,780

 

 

3.         Key Differences in Accounting Policies

 

The Target prepares its financial statements in accordance with Malaysian Financial Reporting Standards and the Companies Act 1965 in Malaysia.

 

The Company prepares its financial information in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").

 

There are no material differences between Malaysian Financial Reporting Standards and IFRS which would result in any differences in the financial statements for the Target if they were prepared in accordance with IFRS.

 

There are no material differences between the accounting policies adopted by the Company and those adopted by the Target.

 

Confirmations

 

In accordance with Listing Rule 5.6.15G(3), the Directors confirm that they consider that this announcement contains sufficient information about the Target and its group to provide a properly informed basis for assessing its financial position.


In accordance with Listing Rule 5.6.15(G)(4) the Directors confirm that the Company has made the necessary arrangements with the Seller to enable it to keep the market informed without delay of any developments concerning the Target and its group that would be required to be released were the Target part of the Company.

 

The Directors also confirm that until such time as a prospectus is published in relation to the Proposed Acquisition or discussions between the parties are terminated (or such other date as required by the UK Listing Authority), the Company will make any announcement that would be required in order to be compliant with its obligations under the Disclosure and Transparency Rules of the Financial Conduct Authority on developments in relation to the Target as if the Target were already acquired by the Company.

 

Enquiries

 

For any enquiries please contact William Du at Vertu Capital Limited +603 5613 3388

 

IMPORTANT NOTICE

 

The information contained in this announcement is not for release, publication or distribution to persons in Australia, Canada, Japan, the Republic of South Africa or the United States or in any jurisdiction where to do so would breach any applicable law. No public offer of securities is being made by virtue of this announcement.

 

This announcement has been prepared for the purposes of complying with the applicable law and regulation of the United Kingdom 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 and regulations of any jurisdiction outside of the United Kingdom.

 

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward looking statements include all matters that are not historical facts and involve predictions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, results of operations, financial position, liquidity, prospects, growth or strategies and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. Save as required by law or regulation, the Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement.

 

Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly with the total figure given.

 

Except as explicitly stated, neither the content of the Company's website, nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.

 

References in this announcement to RM means Ringgit Malaysia, the lawful currency of Malaysia.

 

 

Appendix

 

The audited consolidated financial statements of the Target for the years ended 31 DECEMBER 2013, 2014, and 2015

 

The financial statements can be viewed here:

 

http://www.rns-pdf.londonstockexchange.com/rns/6288V_-2016-4-19.pdf


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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