DFD Debt Free Dir.

RNS Number:0877Z
Debt Free Direct Group PLC
27 June 2007


DEBT FREE DIRECT GROUP PLC
("Debt Free Direct", the "Company" or the "Group")


Further to the announcement relating to the acquisition of Clear Start UK Ltd 
("Clear Start") released yesterday, the Company announces the following:


Application for Admission

In accordance with the terms of the acquisition of Clear Start, the Company has
made application to the London Stock Exchange for 4,159,671 ordinary shares of
1p each in the Company ("Ordinary Shares") to be admitted to trading on AIM.
Admission of these shares is expected to occur on 29 June 2007.


Posting of circular

A circular proposing resolutions to be considered at an Extraordinary General
Meeting of the Company was dispatched to shareholders yesterday. A copy of the
Chairman's letter to shareholders which forms Part I of the circular is included
below. The Circular is available on the Company's website at 
http://www.debtfreedirect.co.uk/pr.php


"To the shareholders of Debt Free Direct Group plc


Dear Shareholder

Proposed cancellation of the share premium account of the Company and authority
to make market purchases of Ordinary Shares


1. Introduction

Earlier today, the Company announced that it had entered into an agreement to
acquire the entire issued share capital of Clear Start. The consideration for
the acquisition will be settled by the issue of new Ordinary Shares in the
Company. The number of Ordinary Shares issued as consideration initially will be
4,159,671. The Directors expect the acquisition to be earnings enhancing and
believe that, in order to maximise earnings enhancement, it is in the best
interests of Shareholders for the Company to purchase up to 4,500,000 Ordinary
Shares currently in issue, from Shareholders, for cancellation. The Directors
believe that the most effective method of effecting such purchase of Shares is
by way of an on market share buyback programme, to be executed by Numis
Securities Limited acting as agent for the Company. Since the Company's cash
reserves are insufficient to fund such a buyback in full, the Company intends to
fund the buyback with a new debt facility of approximately #16 million.



In order to effect the buyback of Shares, the Company must first create
sufficient distributable reserves to allow the purchase of Shares. It is
proposed that such distributable reserves shall be created by cancelling the
Company's share premium account.



The initial number of Ordinary Shares issued to shareholders of Clear Start has
been agreed on the assumption that the share buyback programme proceeds and that
at least 4,159,671 Ordinary Shares are purchased by the Company. To compensate
the Clear Start shareholders for the diluting effect of the share buyback
programme not being implemented, or not being implemented in full, up to a
maximum of 490,968 additional Ordinary Shares would, in such circumstances, be
issued to them.



The Clear Start Shareholders may become entitled to additional consideration in
the form of a maximum of a further 2,363,940 Ordinary Shares in the Company
depending upon the performance of the share price of the Company over the next
two years.



The purpose of this document is to provide you with information in relation to
the proposed cancellation of the share premium account of the Company and to
recommend that you vote in favour of the resolutions at the EGM to cancel the
Company's share premium account and to authorise the Company to make market
purchases of its own Shares.



It is proposed that the Company will use the distributable reserves created by
the cancellation of the share premium account to fund the buyback of Shares and
for general corporate purposes. If approved, the Cancellation of the Share
Premium Account will increase the distributable reserves of the Company by
approximately #13.7 million.



2. Current Trading

In the Company's preliminary results for the year ended 30 April 2007, which
were announced earlier today, Andrew Redmond, Chief Executive Officer commented:



"The latter half of the financial year under review has been a turbulent time
for all companies operating in the IVA market, as highlighted by the demise of a
number of Debt Free Direct's competitors. I will not be surprised if further
fall out occurs. Our own trading in the second half of the financial year has
been impacted by increased competition, creditor reluctance to accept IVAs, and
consumer unease caused by alarmist press coverage.



Debt Free Direct entered the new financial year trading at run rates in line
with those achieved in the latter half of the previous financial year. However,
with our advertising "share of voice" now improving and, with signs of renewed
understanding within the creditor community, we are well positioned to build our
volumes once more. Whilst fee levels have not, as yet, been impacted by creditor
pressure, it is clear that their long term intention is to ensure their
reduction. Debt Free Direct does, however, have the largest "bank" of IVAs,
which will not be impacted by any change in fee levels and is, therefore, well
placed to cope with the changes ahead.



In view of potential changes to fee structures and continued uncertainty
surrounding advertising costs, it is too early to provide detailed guidance on
the current financial year. Nevertheless, I remain confident that we are still
on track to achieve our vision of becoming the most respected provider of advice
and solutions to over-indebted consumers and that this achievement will maximise
shareholder value."



3. The Proposals

Cancellation of Share Premium Account

Subject to the approval of Shareholders and Court Approval, the Company's share
premium account (standing at #13,777,240 as at 25 June 2007) will be cancelled.
The reserve created will constitute a realised profit and be transferred to the
profit and loss account of the Company and create additional distributable
reserves. The Cancellation of Share Premium Account will not reduce the net
assets of the Company.



It is currently expected that the Court's sanction of the cancellation of the
share premium account of the Company will be sought at a hearing on Wednesday
22nd August 2007 and, if the Court's sanction is granted on that date, the
Cancellation of Share Premium Account is expected to become effective on
Thursday 23rd August 2007 (being the date on which it is anticipated that the
court order will be registered with the Registrar of Companies).



The Court will be concerned to protect the interests of creditors of the Company
as at the date the Cancellation of Share Premium Account becomes effective. The
precise form of creditor protection will be determined by the Court and the
Company will take such steps as it thinks appropriate in order to satisfy the
Court in that regard.



Authority to make market purchases of own Shares

The Company is, in addition, seeking authority to purchase Shares in the market
to enable it to conduct the proposed share buyback.



The Board is seeking authority to purchase up to 4,500,000 Shares in the market,
representing approximately 11.97 per cent. of the issued share capital of the
Company at not more than 105 per cent of the average middle market price of a
Share for the five days preceding the purchase and not less than 1p per Share
for purchases of Shares under this authority. Any Shares purchased under the
share buyback will be cancelled and the number of shares in issue reduced
accordingly.



The authority will expire on the earlier of the Company's annual general meeting
in 2008 and 17 January 2009.



The amount of the reserve arising on the proposed Cancellation of Share Premium
Account may be greater than the final amount required to buy back Shares under
the share buyback. In this event the additional distributable reserves will be
available for other corporate purposes of the Company.



4. Directors' intentions

In the unlikely event that Shareholders do not take up the opportunity to
participate in the share buyback, Directors (other than the executive Directors)
might be requested to make Shares available in order to ensure the success of
the share repurchase programme.



5. Shareholder approval

Implementation of the Proposals requires the passing by Shareholders of
Resolutions 1 and 2 to be proposed at the Extraordinary General Meeting which
has been convened for 1pm on Wednesday 18th July 2007.



Notice of the Extraordinary General Meeting is set out at the end of this
document. Descriptions of the Resolutions to be proposed at the Extraordinary
General Meeting are set out below.



Resolution 1 to be proposed at the Extraordinary General Meeting

Resolution 1, which is to be proposed as a special resolution and which is set
out in the notice of Extraordinary General Meeting, will, if passed (and subject
to receipt of Court Approval), cancel the share premium account of the Company.



Resolution 2 to be proposed at the Extraordinary General Meeting

Resolution 2, which is to be proposed as a special resolution and which is set
out in the notice of Extraordinary General Meeting, will, if passed, generally
and unconditionally authorise the Board for the purpose of section 166 of the
Companies Act 1985 to make one or more market purchases of Shares provided that:
     
(a)  the maximum aggregate number of Shares authorised to be purchased is
     4,500,000, representing 11.97 per cent, of the Company's issued   share 
     capital;

(b)  the minimum price which may be paid for such shares is 1p per Share
     (exclusive of expenses);

(c)  the maximum price (exclusive of expenses) which may be paid for a Share 
     shall be not more than an amount equal to 105 per cent of the average of 
     the middle market price of a Share as derived from the Official List of the
     London Stock Exchange for the five business days immediately preceding the 
     date on which the Share is purchased; and

(d)  unless previously renewed, varied or revoked, the authority conferred shall 
     expire on the earlier of the holding of the Company's annual general
     meeting for 2008 and 17 January 2009.


All previous authorities to make market purchases of Ordinary Shares (to the
extent unused) will be revoked.



6. Further Information with respect to the Proposals and action to be taken

Your attention is drawn to the financial information set out in Part II of this
document.



Shareholders will find enclosed a Form of Proxy for use in connection with the
Extraordinary General Meeting. Whether or not you intend to attend the EGM, you
are requested to complete and return the Form of Proxy so as to be received by
Capita Registrars at Capita Registrars, Proxy Department, The Registry, 34
Beckenham Road, BR3 4ZB not later than the close of business on 16th July 2007.
Completion and return of the Form of Proxy will not prevent you from attending
and voting in person at the EGM should you wish to do so.



7. Recommendation

The Board considers the Proposals to be in the best interests of the Company and
Shareholders as a whole. Accordingly, the Board unanimously recommends that
Shareholders vote in favour of the Resolutions to be proposed at the
Extraordinary General Meeting as they intend to do in respect of their own
beneficial holdings of 11,530,405 Ordinary Shares, representing in aggregate
30.67 per cent. of the issued share capital of the Company.



Yours faithfully,


Jeffrey Michael Blackburn
Chairman"


Enquiries:

Debt Free Direct Group plc
Andrew Redmond, Chief Executive Officer                          0845 296 0100
Paul Latham, Finance Director                                    0845 296 0200

Numis Securities                                                 020  7260 1000
Iain McDonald, Corporate Broking
Lee Aston, Corporate Finance

Financial Dynamics
Ed Gascoigne-Pees                                                020 7269 7132
Nick Henderson                                                   020 7269 7114




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

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