FOR RELEASE 7.00AM 15 MAY 2006
COMPASS FINANCE PLC
("Compass Finance" or "the Group")
Proposed Acquisition of The Debt Advisor
Placing of 11,250,000 new Ordinary Shares at 40 pence per share
Notice of Extraordinary General Meeting
Advised by Zeus Capital Limited
* Acquisition of The Debt Advisor and The Business Debt Advisor for �2
million
*
+ �1 million in cash
+ �1 million in shares
+ Beverley Budsworth, who established The Debt Advisor and The Business
Debt Advisor, to head the Compass Finance Debt Advisory Division to be
chaired by Gren Folwell, the Group Chairman
* Placing to raise �4.15 million net of expenses, including �3.15 million for
business growth and working capital
* Acquisition completes the strategic model of a total in-house product
offering:
*
+ Debt Advisory Division comprising:
+
o IVA
o Debt Management
o Insurance
+ Consumer Loans Division comprising:
+
o Mortgages/Remortgages
o Secured Loans
o Unsecured Loans
o Insurance
Gren Folwell, the Chairman of Compass Finance, commented:
"The acquisition of The Debt Advisor provides a strong strategic fit with our
goal to provide all of our customers with a full range of appropriate financial
solutions to meet each of their needs. The addition of The Debt Advisor
completes our strategic business model.
With personal debt in the UK running at �1,182 billion, we are presented with a
huge market opportunity. We believe that we are one of the few companies in the
sector which will be able to offer its customers `True Best Advice' backed by
an in-house set of products that provides a complete range of solutions to
fulfil their needs. We believe this innovative model differentiates the
Company and provides a competitive edge in the sector.
On average, we are receiving around 2,000 leadsa month which are suitablefor a
possible debt advisory solution. Following the completion of the acquisition
these leads will flow straight into theDebt Advisory Division and I am
confident that this division will grow rapidly."
For further information:
Compass Finance Group plc
Mike Sutcliffe (Chief Executive) 0870 950 0000 (07766 220 172)
Mark Walker (Finance Director) 0870 950 0000 (07789 278 939)
Cubitt Consulting
Brian Coleman-Smith / Allison Reid / Nia Thomas 020 7367 5100 (07802 724 400)
Zeus Capital
Alex Clarkson 0161 831 1512
Chartered Business Finance
Peter Rowe/Gary Taylor 0796 825 8804
PLACING STATISTICS
Number of Ordinary Shares in issue at the date of this Document 72,449,792
Number of Consideration Shares to be issued on Completion in 1,869,159
respect of the Acquisition*
Number of Placing Shares to be issued in respect of the Placing 11,250,000
Number of Ordinary Shares in issue following the issue of the 85,568,951
New Ordinary Shares
Percentage of Enlarged Share Capital represented by the New 15.3%
Ordinary Shares
Placing Price 40p per share
Net proceeds of the Placing �4,150,000
Market capitalisation at the Placing Price �34,227,580
* By way of illustration the number of Consideration Shares has been estimated
on the basis of a Consideration Price of 53 .5 pence per Ordinary Share, the
middle-market closing price on 12 May 2006, the latest practicable date before
the publication of this document. The actual Consideration Price and the number
of Consideration Shares will be determined by the average price at which
Compass Finance shares have been traded over the seven dealing days before
completion of the Acquisition.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication date of this document 15 May 2006
Latest time and date for receipt of completed Forms 10.00 am 10 June 2006
of Proxy for the EGM
Extraordinary General Meeting 10.00 a.m. 12 June 2006
Completion of the Acquisition, subject to Admission 12 June 2006
Commencement of dealings on AIM in the Enlarged 8.00 am 15 June 2006
Share Capital
COMPASS FINANCE GROUP PLC
("Compass Finance" or "the Group")
PROPOSED ACQUISITION OF THE DEBT ADVISOR AND PLACING OF 11,250,000 NEW ORDINARY
SHARES
1. INTRODUCTION
The Board announced on 15 May 2006 that a wholly owned subsidiary of Compass
Finance has agreed, subject inter alia to Shareholders' approval, to acquire
The Debt Advisor for �2 million of which �1 million is to be paid in cash
immediately upon Completion and �1 million is to be satisfied by the issue and
allotment to the Vendor of the Consideration Shares at the Consideration Price.
The Debt Advisor is an insolvency practice founded in 1999 and headed by
Beverley Budsworth. The practice specialises in the provision of IVAs. The
Acquisition and associated fundraising represent a significant step forward in
Compass Finance's strategy of being able to offer its customers a full product
set to meet the range of financial solutions required by its customers.
The Acquisition and the ongoing working capital requirements of the Group will
be funded by a Placing of 11,250,000 new Ordinary Shares at 40 pence per share
to raise approximately �4,150,000 net of expenses.
The purpose of this announcement is to provide you with information regarding
the Proposals, to explain why the Directors consider the Acquisition to be in
the best interests of the Company and its Shareholders as a whole, and to seek
Shareholders' approval for the Resolutions. This document also contains the
Directors' recommendation that shareholders should vote in favour of the
Resolutions (as those Directors who are also Shareholders or their connected
persons who are Shareholders have irrevocably undertaken to do) to be proposed
at the Extraordinary General Meeting ("EGM"), notice of which is set out at the
end of this announcement.
2. BACKGROUND AND REASONS FOR THE ACQUISITION
In our AGM statement published on 23 February 2006, Mike Sutcliffe commented
that diversification into related markets is a key feature of our strategy
moving forward. As a business, we recognised that we have a responsibility to
offer appropriate financial solutions to all applicants. This approach leads to
a natural affinity with helping customers who are experiencing debt problems
and are looking for help and guidance to resolve these problems, yet are unable
to find a solution. Through the development of our best advice model,
facilitated by having the right expertise and product set, we aim to be able to
offer a financial solution to all of our customers.
In late 2005, consistent with this strategy and as part of our debt advisory
solution, we launched a new debt management business, which is branded Compass
Debt Management. This business division offers debt management advice to its
customers and, whilst still in its infancy, is already positively contributing
to the revenues of the Group and is well placed to become a significant
contributor in the future. This business comprised the first element of our
debt advisory division with the final product solution required for this
division being that of an IVA.
The strategy of providing an appropriate financial solution to meet all of our
customers' needs will not only expand our revenue streams but, through the
provision of debt management and IVA solutions, will add new longer term
annuity income to sit alongside our existing cash generative broking
operations.
The Debt Advisor is a small, well run, insolvency practice specialising in
IVAs. It was established in 1999 to take advantage of the growing market need
for specialist advice in the consumer IVA market. Beverley Budsworth is a
highly experienced insolvency practitioner who sits on a number of government
and industry working parties. An acquisition of the size, scope and nature of
The Debt Advisor enables the Group to leverage the synergy created through its
expertise in managing high volume, system based sales processes, together with
the expertise brought by The Debt Advisor in the highly specialised IVA market.
We will be delighted to welcome Beverley and are pleased to announce that,
subject to Completion, she will head up our debt advisory division.
3. INFORMATION ON THE DEBT ADVISOR
The Debt Advisor currently operates two websites: www.thedebtadvisor.co.uk and
www.thebusinessdebtadvisor.co.uk, which target individuals and sole traders/
small partnerships respectively with financial problems. Beverley Budsworth is
the sole insolvency practitioner and the business currently employs 14 other
individuals of whom 3 are in the process of qualifying to be insolvency
practitioners. In March 2006, The Debt Advisor received consent letters from 24
potential IVA candidates and received formal creditor approval for 22 IVAs. As
at 30 March 2006, The Debt Advisor was responsible for 241 active cases on
which the future contracted income amounts to approximately �900,000.
Whilst The Debt Advisor as a stand alone acquisition is a highly attractive
proposition for Compass Finance, the greater opportunity lies through applying
the Group's marketing techniques and process expertise to significantly uplift
the potential of the existing The Debt Advisor business.
4. FINANCING THE ACQUISITION AND PURPOSE OF THE PLACING
Zeus Capital, as financial adviser to the Company, has arranged the Placing,
and has entered into the Placing Agreement to place firm a total of 11,250,000
New Ordinary Shares at the Placing Price, which will raise approximately �4.15
million net of expenses for the Company. This �4.15 million will fund the cash
consideration of �1 million and provide a �3.15 million ongoing working capital
facility for the Company going forwards.
5. PRINCIPAL TERMS OF THE ACQUISITION AGREEMENT
Compass Finance and its wholly owned subsidiary, Timelab, have entered into the
Acquisition Agreement on 12 May 2006 with the Vendor to acquire The Debt
Advisor comprising fixtures and fittings, office equipment, computer system,
work in progress, goodwill, intellectual property, websites, the benefit of
contracts and the trade names "Budsworth & Co", "The Debt Advisor" and "The
Business Debt Advisor". The purchase consideration for The Debt Advisor is �2
million (exclusive of VAT), which is payable partly in cash (as to �1 million)
and partly by the allotment and issue of shares in Compass Finance (being the
Consideration Shares) to the Vendor, having an aggregate market value on the
date of completion of the Acquisition of �1 million (based on the average price
at which they have traded over the seven dealing days before completion of the
Acquisition).
The Acquisition Agreement contains certain specific indemnities given by
Compass Finance in respect of Timelab's obligation to perform assumed
liabilities and given by Timelab in respect of claims by employees resulting in
changes to employees' terms and conditions after completion of the Acquisition.
The Acquisition Agreement also contains warranties given by the Vendor to
Timelab relating, inter alia, to the solvency of the Vendor, the accounts of
The Debt Advisor, The Debt Advisor's contractual commitments, litigation,
employees and assets.
Completion of the Acquisition is conditional upon, inter alia, Shareholders'
approval.
Pursuant to the Acquisition the Vendor will enter into a lock in deed with
Compass Finance in respect of the Consideration Shares and the Vendor will
grant to Timelab an underlease of the premises at 454 Chester Road, Old
Trafford, Manchester M16 9HD to Timelab, which will provide for a period of
occupancy of 3 months.
The Vendor will also enter into a service agreement with Compass Finance as
part of the Acquisition process.
Further details of the Acquisition Agreement and the service contracts of the
Directors are contained in Part III of the circular.
6. THE PLACING AND THE CONSIDERATION SHARES
Compass Finance has agreed, subject, inter alia, to obtaining Shareholders'
approval and the Placing, to acquire The Debt Advisor for a consideration of �1
million in cash and the issue of the Consideration Shares. The Company proposes
to raise �4,500,000 (before expenses) by the issue of 11,250,000 Placing Shares
at the Placing Price.
The Placing Shares and the Consideration Shares will rank pari passu in all
respects with the Existing Ordinary Shares, including the right to receive all
dividends and other distributions declared, made or paid after the applicable
dates of allotment.
Application will be made for the New Ordinary Shares to be admitted to trading
on AIM. It is expected that Admission will become effective and that dealings
will commence on 15 June 2006. The New Ordinary Shares will represent
approximately 15.3 per cent of the Enlarged Share Capital.
It is expected that the relevant New Ordinary Shares will be delivered into
CREST on 15 June 2006 and that share certificates for the New Ordinary Shares
will be despatched by 30 June 2006.
Following Admission the Directors will be interested in an aggregate of
20,552,696 Ordinary Shares representing approximately 24 per cent of the
Enlarged Share Capital.
7. DIVIDEND POLICY
The Directors' current intention is to retain the Company's earnings and cash
flows for the foreseeable future in order to finance growth and expansion of
the Group's activities. However, it is the Board's intention to implement a
progressive dividend policy in the future, subject to the Group's performance.
8. EXTRAORDINARY GENERAL MEETING
Set out at the end of the Circular is a notice convening the EGM to be held at
the offices of Compass Finance, Warwick House, Hollins Brook Way, Pilsworth,
Bury BL9 8RR at 10.00 a.m. on 12 June 2006 at which the following Resolutions
will be proposed for the following purposes:
1. to approve the Acquisition;
2. to authorise the Directors to allot and issue inter alia the New Ordinary
Shares, under section 80 of the Act; and
3. to disapply the statutory pre-emption provisions under section 89 of the
Act in relation to the issue of the New Ordinary Shares, and certain other
issues.
The attention of Shareholders is also drawn to the voting intentions of the
Directors and connected parties as set out in the paragraph entitled
"Recommendation" below.
9. RECOMMENDATION
The Directors believe that the Acquisition and the Placing are in the best
interests of the Company and its Shareholders as a whole. Accordingly, your
Directors unanimously recommend that you vote in favour of the Resolutions, as
those of them who are Shareholders and other shareholders have irrevocably
undertaken to do in respect of their own beneficial interests, which in
aggregate amount to 27,132,217 Ordinary Shares, representing approximately 37.5
per cent, of the issued ordinary share capital of the Company.
DIRECTORS
Gren Folwell, 62, Non Executive Chairman
Gren was deputy chief executive of Halifax Plc from 1996 to 1999, having joined
its board as group finance director in 1989. During his time on the board, Gren
was involved in the merger and integration of the Halifax and Leeds Permanent
Building Societies, the �18 billion flotation of Halifax Plc and the �750
million takeover of Birmingham Midshires Building Society. Gren's other current
non-executive directorships include Partnerships UK plc, Institute of Public
Finance Limited, Public Private Partnerships Programme and Software Solutions
Partners Limited.
Mike Hutchins, 62, Non Executive Deputy Chairman
Mike retired from the Royal Bank of Scotland Group ("RBS") in April 2004 after
over 40 years service. For the last 10 years, Mike concentrated on retail
banking operations and latterly was managing director of retail banking for
RBS, being responsible for the entire RBS and NatWest branch network,
comprising 2,300 branches and 23,000 staff. Since his retirement from RBS, Mike
has acted as a management consultant to a number of companies and
organisations, including major high street banks and financial institutions,
and has been working with the executive management at the Company for the last
six months. Mike holds current directorships with Royal Exchange Theatre
Company Limited and Royal Exchange Theatre Catering Limited and is a partner in
The Hutchins Partnership.
Mike Sutcliffe, 37, Chief Executive Officer
Following a strategic review of the Group's business, Mike was appointed as
chief executive officer in May 2005. Mike has extensive business management
experience, and has enjoyed a career in the financial services sector for over
16 years, initially as a manager and then as a regional manager. Mike was
latterly a member of the management board of CitiFinancial Europe Plc, a
subsidiary of Citigroup Inc and prior to that had spent 8 years with Household
International Inc, now a subsidiary of HSBC Bank. As chief executive officer,
Mike has responsibility for all aspects of corporate strategy, compliance,
sales and marketing as well as finance and IT.
Mark Walker, 43, Finance Director
Mark is a chartered accountant, having trained with Price Waterhouse, and has
spent the last 8 years working with a number of venture capital companies and
other stakeholders handling a variety of corporate transactions. He was finance
director at a �30 million management buy-out of a specialty chemicals business
which was sold to a quoted US business in 2001. After heading up the business
integration process, he was headhunted to join an �85 million management
buy-out of a global specialty paper manufacturer. Mark was appointed to the
Board in September 2005 and has specific responsibility for the finance, IT and
administrative functions of the business.
Mark Snape, 43, Chief Operating Officer
Mark has held senior positions with a number of financial services
organisations for the past 10 years. Mark has extensive experience in the
consumer lending market and has had senior executive responsibility for many
functions of the companies he has worked for. Most recently on the management
board of CitiFinancial Europe Plc with responsibility for acquisitions, central
lending and intermediaries, he also had responsibility for future mortgages.
Prior to this Mark was chief operating officer of FirstPlus, the Barclays Bank
plc subsidiary, specialising in the secured loans market, and assisted in
positioning the business as one of the best lenders in the market. Mark was
appointed to the Board in September 2005 and has specific responsibility for
the sales and operational functions of the business.
Richard Hughes, 37, Non Executive Director
Richard has over 18 years experience of corporate activity including
flotations, capital raisings, public to private transactions and mergers and
acquisitions for both public and private companies. He was most recently
managing director of Apax Partners & Co. Corporate Finance Limited, having set
up the Manchester office in 1996. Richard is a partner of Holyrood Partners LLP
and a director of Zeus Capital Limited which is an FSA regulated company
providing corporate finance advice. He is a non-executive director of Cityblock
Plc and Vindon Healthcare Plc as well as a director of a number of private
companies.
Michael Fort, 46, Non Executive Director
Michael has financial and management experience in a number of corporate
environments. He is currently chief executive of Synexus Clinical Research Plc,
an AIM quoted clinical research company, and a non-executive director of
Zi-Medical Plc, an AIM quoted medical devices company. He was a director of
Trinity Pharmaceuticals Limited until its sale to Chiesi Farmaceutical SpA and
has held directorships in a number of other medium sized enterprises.
SENIOR MANAGEMENT
Mark Cawood, 42, Marketing Director
Mark has previously held senior marketing positions, most recently as head of
marketing for CitiFinancial Europe Plc, principal consultant for
PricewaterhouseCoopers and marketing director at HFC Bank, the UK subsidiary of
US finance company Household International Inc. As marketing director he is
responsible for overseeing the marketing function of the business, with
particular emphasis on developing a multi-channel marketing strategy, aimed at
increasing response rates and core business lead volumes.
Julie Hughes, 35, HR & Compliance Director
Julie has worked within the financial services sector for over 16 years,
including running a very successful regional sales team and also heading up a
training function as the national development manager. Julie now oversees the
human resource and compliance functions of the Group with a prime focus being
the Company's provision of a high level of customer service and best advice for
all of its customers within the guidance of the FSA. During the Company's
recent visit from the FSA, Julie received excellent feedback for both the
Company and the department for which she is responsible.
The following definitions shall apply throughout this announcement unless the
context otherwise requires:
"Act" the Companies Act 1985, as amended;
"Acquisition" the proposed acquisition by Timelab from the
Vendor of Budsworth pursuant to the Acquisition
Agreement;
"Acquisition Agreement" the conditional business transfer agreement
entered into between Timelab, Compass Finance
and the Vendor subject to Shareholder approval;
"Admission" admission to trading on AIM in the New Ordinary
Shares;
"AIM" the AIM Market of the London Stock Exchange;
"AIM Rules" the rules of the London Stock Exchange
governing AIM;
"Articles" the Company's articles of association;
"Audit Committee" the audit committee of the Board;
"Circular" the circular posted to all shareholders on the
15th of May;
"Compass Finance" or "the Compass Finance Group plc (registered in
Company" England and Wales under number 4728183);
"Combined Code" the Combined Code on Corporate Governance
issued by the Financial Reporting Council;
"Completion" Completion of the Proposals;
"Consideration" �2 million, of which �1million is to be paid in
cash and �1million by way of the Consideration
Shares;
"Consideration Price" the average price at which Compass Finance
shares have been traded over the seven dealing
days before completion of the Acquisition;
"Consideration Shares" new Ordinary Shares to be allotted to the
Vendor on Completion determined by the
Consideration Price;
"CREST" the relevant system (as defined in the CREST
Regulations) in respect of which CRESTCo is the
Operator (as defined in the CREST Regulations)
in accordance with which securities may be held
and transferred in uncertificated form;
"CRESTCO" CRESTCo Limited;
"CREST Regulations" the Uncertified Securities Regulations 2001 (SI
2001 No. 3755);
"Directors" or "Board" the directors of the Company, whose names
appear on pages 7 and 8;
"EGM" or "Extraordinary General the extraordinary general meeting of the
Meeting" Company convened for 12 June 2006 at 10.00
a.m., or any adjournment thereof, notice of
which is set out in this document;
"Enlarged Share Capital" the issued share capital of the Company
following the issue of the New Ordinary Shares;
Shares)
"Existing Ordinary Shares" the Ordinary Shares in issue as at the date of
this document;
"Form of Proxy" the form of proxy for use by Shareholders
enclosed with this document, to enable
Shareholders to appoint one or more proxies to
attend the EGM and, on a poll, to vote instead
of that Shareholder; Shareholder
"FSA" the Financial Services Authority;
"Group" the Company and its subsidiaries;
"IVA" an individual voluntary arrangement, being a
legally binding arrangement with creditors to
allow the repayment of debt in affordable
monthly payments over a fixed period of time,
usually five years;
"London Stock Exchange" London Stock Exchange plc;
"New Ordinary Shares" the Consideration Shares and the Placing
Shares;
"Options" options to acquire new Ordinary Shares pursuant
to the Share Option Schemes;
"Optionholders" the holders of Options;
"Ordinary Shares" ordinary shares of 0.5p each in the share
capital of the Company;
"Placing" the conditional placing of the Placing Shares
at the Placing Price, pursuant to the Placing
Agreement described in this document;
"Placing Agreement" the placing agreement between Zeus Capital, W H
Ireland and the Company, further details of
which are contained in paragraph 5 of Part III
of the Circular;
"Placing Price" 40 pence per Ordinary Share;
"Placing Shares" 11,250,000 new Ordinary Shares to be issued,
which have been placed conditionally by Zeus
Capital pursuant to the Placing Agreement;
"Proposals" the Acquisition and the Placing;
"Regulatory Information any of the services set out in Schedule 12 of
Service" the Listing Rules of the UK Listing Authority;
"Remuneration Committee" the remuneration committee of the Board;
"Resolutions" the resolutions contained in the notice of EGM
enclosed with this document;
"Shareholders" the persons who are registered as holders of
Ordinary Shares as at the date of this
document;
"Share Option Schemes" the unapproved share option scheme and the
enterprise management incentive scheme of the
Company, further details of which are contained
in paragraph 3.3 of Part III of the Circular;
"The Debt Advisor" the business and certain assets of the Vendor
trading as Budsworth & Co, The Debt Advisor and
The Business Debt Advisor;
"Timelab" Timelab Limited, a wholly owned subsidiary of
Compass Finance (registered in England and
Wales under number 5761180);
"United Kingdom" or "UK" United Kingdom of Great Britain and Northern
Ireland;
"Vendor" Beverley Ellice Budsworth;
"W H Ireland" W H Ireland Limited (registered in England and
Wales under number 2002044); and
"Zeus Capital" Zeus Capital Limited (registered in England and
Wales under number 4417845).
END
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