APPLICATION TO DELIST, NEW FACILITIES AND TRADING UPDATE
14 Abril 2005 - 4:01AM
UK Regulatory
PRESSAC plc
For immediate release 14th April 2005
APPLICATION TO DELIST, NEW FACILITIES AND TRADING UPDATE
PRESSAC PLC ("PRESSAC" OR THE "COMPANY")
On 17 March 2005, the Board announced that it was in discussions with the Lenders regarding the
extension of its Existing Facilities and that, in light of these discussions, and the potential
conditions which it was anticipated might be required to secure the ongoing support of the Principal
Lenders, the Board was undertaking a review of the Group's ongoing strategy including a consideration
of its ongoing listing status.
The terms of the New Facilities have now been agreed which represent the outcome of extensive
negotiations with the Lenders and which provide for the ongoing support of the Lenders for the Company
to undertake a value realisation strategy through asset disposals. The provision of the New
Facilities requires the implementation of this value realisation strategy and is conditional upon,
inter alia, a delisting of the Company's Ordinary Shares.
In the event that the Delisting is not undertaken the Company would therefore only be able to continue
trading with the support of the Lenders. Based on discussions to date, the terms of the New
Facilities and the contingency planning which the Board is aware has been undertaken by the Lenders,
the Board believes that the Lenders will not be prepared to make any alternative facilities available
if a delisting is not undertaken. In these circumstances it is highly likely that the Board would be
forced to seek the appointment of an administrative receiver or pursue other insolvency proceedings.
Upon an insolvency, the Board believes Ordinary Shareholders would almost certainly receive no value
for their Ordinary Shares.
The Board has therefore concluded that it is in the best interests of the Company and the Ordinary
Shareholders to proceed with the Delisting. The Company has therefore requested that the listing of
its Ordinary Shares is cancelled with effect from the opening of business on 13 May 2005. Pressac
will today be posting a circular to Ordinary Shareholders which details the terms of the New
Facilities and the Delisting.
Pressac has today separately announced its unaudited preliminary results for the year-ended 31
December 2004. The Company's underlying trading performance for 2004 was in line with expectations.
As a result of the professional costs and banking fees which the Company will incur as a result of
entering into the New Facilities, the Company now expects that profit for the current year will be
below management expectations.
Enquiries:
Pressac plc
Chris Woodwark, Chairman and Chief Executive Tel: 01332 821 340
Jane Aikman, Group Finance Director Tel: 01332 821 340
IKON Associates
Adrian Shaw Tel: 01483 535102
Mobile: 0797 9900733
E-mail: adrian@ikonassociates.com
PRESSAC PLC
Delisting from the Official List of the UK Listing Authority and from trading on the London Stock
Exchange's market for listed securities, New Facilities and Announcement of Unaudited Preliminary
Results
1. Introduction
On 8 December 2004 the Company announced the identification of accounting adjustments required in
respect of the Company's Pressac do Brasil subsidiary, largely relating to the valuation of fixed
assets, stock and the incorrect accounting treatment of certain costs. Since that date, the Company
has been operating under a waiver relating to certain covenants under the Existing Facilities. As a
result of this, and in the light of the forthcoming maturity of the Existing Facilities on 30 June
2005, the Company has undertaken discussions with its Lenders in respect of its capital structure
aimed at securing ongoing funding for the Group.
The terms of the revised facility arrangements have been agreed which represent the outcome of
extensive negotiations with the Lenders and provide for the ongoing support of the Lenders through the
provision of the New Facilities. The New Facilities will enable the Board to undertake a value
realisation strategy through asset disposals as set out in paragraph 3 below, which the Board believes
is the best route to maximising value for the Company's stakeholders. However, the ongoing support of
the Lenders through the provision of the New Facilities requires the implementation of this asset
disposal strategy and is conditional upon, inter alia, a delisting of the Ordinary Shares.
The availability of the New Facilities is conditional upon a delisting of the Ordinary Shares. In the
event that a delisting is not implemented the Company would therefore be unable to repay the
outstanding balance under the Existing Facilities upon maturity on 30 June 2005 and Pressac would only
be able to continue trading with the support of the Lenders.
Based on discussions with the Lenders to date, the terms of the New Facilities and the contingency
planning which the Board is aware has been undertaken by the Lenders, the Board believes that the
Lenders will not be prepared to make any alternative facilities available if a delisting is not
undertaken. In these circumstances it is highly likely that the Board would be forced to seek the
appointment of an administrative receiver or pursue other insolvency proceedings. Upon an insolvency,
the Board believes Ordinary Shareholders would almost certainly receive no value for their Ordinary
Shares.
The Board has therefore concluded that it is in the best interests of the Company and the Ordinary
Shareholders to proceed with the Delisting. The Company has therefore requested that the Listing of
its Ordinary Shares is cancelled with effect from the opening of business on 13 May 2005. The purpose
of this document is therefore to inform the Ordinary Shareholders of the Delisting and to explain the
background to and reasons for it.
2. Background to and reasons for the Delisting
Following entry into the mobile phone industry in 1998, on 14 February 2000 Pressac announced its
intention to invest approximately �20.0 million over three years in expanding its capabilities in this
market, including the construction of a purpose built mobile phone component manufacturing facility at
Bishopbriggs in Scotland. Later that year, the Group acquired WH Smith & Sons Ltd, a manufacturer of high
precision plastic mouldings for the mobile phone industry, for �18.8 million. Between 31 July 1999 and
31 December 2000, net debt more than doubled from �32.2 million to �67.7 million.
On 27 February 2001, the Group announced it was restructuring its mobile phone activities and moving
all production to its new Bishopbriggs facility, resulting in the closure of the recently acquired
East Kilbride facility. Preliminary results for the 17 months to 31 December 2000 set out a number of
issues which had impacted the financial performance of the Group during the period, principally
relating to uncertainty in the mobile phone market and a slowdown in US automotive sales. Lower than
anticipated sales from the East Kilbride facility were also announced, which ultimately led the
Company to issue proceedings for breach of warranty against the vendor of that business.
On 25 June 2001 Geoff White, who had been Chief Executive since 1989, stepped down from the Board with
immediate effect to be replaced by Huw Lewis - the Finance Director at that time. I was appointed as
Chief Executive on 1 May 2002 and assumed the responsibilities of Chairman on 1 June 2002. Immediately
on my appointment, I instigated a detailed review of operations to reassess the Group's strategy. Due
to continuing market difficulties and the high debt levels, actions resulting from this review focused
largely on cost cutting, working capital improvements and undertaking asset sales to reduce borrowing
levels.
During 2002, the Group succeeded in partially reducing its high debt levels that primarily resulted
from the unsuccessful expansion into the mobile phone market. This reduction in debt was driven
principally by a �10.5 million contribution from an out of court settlement arising from the legal
action relating to the acquisition of WH Smith & Sons Ltd (a package which included a cash refund of
part of the purchase price, the offloading of surplus plant, equipment from East Kilbride, the sale of
the East Kilbride facility, and the release from a Scottish leasehold liability) and the disposal of
Interconnect for a cash consideration of �4.3 million.
Other operational measures undertaken included a restructuring of the Group's French facilities by
merging two businesses and closing two factories. Continued margin improvement initiatives helped the
Group to achieve a stronger performance in the first half of 2003. During 2004, operational and margin
improvements continued to impact positively on Group performance. However, throughout this period the
underlying market conditions faced by the Company continued to be challenging, particularly within the
European automotive market and the worldwide telecoms industry.
The Group's financial position has continued to be adversely impacted by the high debt levels
associated with the expansion into the mobile telephone industry and the consequent high charges and
costs incurred from negotiations of bank financing, and consequently the benefits of improved
operating performance from the remaining divisions have been, and will continue to be, significantly
diminished as far as the Ordinary Shareholders are concerned. The Board has considered alternative
sources of financing, however as a result of the high debt levels, believes that it would not be
possible to raise third party funding to refinance the Existing Facilities.
The Company has held extensive discussions with the Lenders which have secured ongoing funding beyond
30 June 2005 to enable implementation of the strategic plan. However, this ongoing support remains
conditional upon a delisting of the Ordinary Shares. The Board therefore believes that Delisting
achieves the key objective of securing ongoing funding for the Group to enable implementation of the
strategic plan for the benefit of the Company's stakeholders, including the Ordinary Shareholders.
3. Strategic plan
As previously discussed, the Board believes that the best route to maximising value for stakeholders,
and one which secures the ongoing support of the Lenders, is to undertake a value realization strategy
through asset disposals. Furthermore the Board believes that by achieving the ongoing support of the
Lenders through implementation of the strategic plan, potential returns to Ordinary Shareholders will
be maximised. The strategic plan therefore anticipates the Delisting, followed by a disposal process
whereby offers will be sought for each of the Group's businesses or the Group as a whole, with net
proceeds being distributed to stakeholders. The key reasons for this are:
* Major operational issues have been addressed, providing limited scope for medium term value
enhancement from further operational improvements under the current capital and ownership structure.
* The Group's high debt levels, and the resultant interest burden, place significant financial
pressure on the Group which constrains its development and diminishes the benefits to Ordinary
Shareholders of operational improvements.
Consequently, the Board has developed a strategic plan, the key elements of which are:
* Disposal of the Decorative Division: In recent months the Board has been seeking to ascertain the
level of interest from potential purchasers for the Group's Decorative Division. Following extensive
discussions with a number of potentially interested parties the Company has entered into exclusive
talks with a preferred bidder, with the sale of the division currently anticipated to take place in
May 2005. Whilst there is no guarantee that these discussions will lead to a successful conclusion, it
is currently anticipated that the terms of any sale would be classified as a Class I transaction under
the Listing Rules. However, since it is expected that a sale would be completed following the
Delisting, it is anticipated that the approval of Ordinary Shareholders will not be required.
The Company envisages that discussions with the preferred bidder will continue and, to the extent that
these discussions do not reach a successful conclusion, it is likely that further discussions would be
undertaken with other interested parties.
* Further asset realisations: The Board is committed to undertaking a value realisation strategy
whereby offers will be sought for each of the Group's businesses or the Group as a whole, with net
proceeds from asset disposals being distributed to stakeholders.
* Operational improvements: Whilst seeking to implement its asset realisation strategy, the Company
intends to focus on implementing the latest production techniques, improving manufacturing margins and
taking steps to provide customers with an ever higher level of service and attention.
Implementation of this strategy by the Company is a required condition for the ongoing support of the
Lenders and the terms of the New Facilities provide reduced costs from its successful completion.
The New Facilities include certain commitments by the Company in respect of the Board's timetable to
implement the strategic plan, including a commitment by the Company to use all reasonable endeavours
to (i) conclude the sale of the Decorative Division before 15 May 2005 and (ii) conclude the asset
realisation process before 1 August 2005.
In addition, process steps in respect of the preparation of information materials and the Company
requesting offers must be undertaken within an agreed timetable in order to ensure the ongoing
availability of the New Facilities. Each of these steps is within the Company's control, and the Board
is confident that these conditions will therefore be met.
Further details in respect of the reduced costs and requirements in respect of the strategic plan are
set out in Part III of the shareholder circular.
4. Current trading
The Company's statement of unaudited preliminary results for the year ended 31 December 2004 has been
published today and is included in Part II of the shareholder circular. The Company's underlying
trading performance for 2004 was in line with expectations. As a result of the professional costs and
banking fees which the Company will incur as a result of entering into the New Facilities, the Company
now expects that profit for the current year will be below management expectations.
5. Summary of the principal terms of the New Facilities
The Existing Facilities expire on 30 June 2005. The Company has secured the ongoing support of the
Lenders through the New Facilities, which provide for a number of amendments to the Existing
Facilities. The terms of the New Facilities include, inter alia, extending the maturity to 30 June
2006, in order to enable the Company to implement its strategic plan, with an Extension Option
available to the Company, subject to the approval of the Lenders at that time, to extend further the
maturity of the New Facilities to 30 June 2007.
Under the terms of the New Facilities, the Company will benefit from the timely execution of the
strategic plan since the interest margin payable reduces upon completion of divisional disposals,
whilst certain costs payable by the Company are only payable in the event that the disposals have not
been completed by certain dates. As set out in section 3 above, the New Facilities require
implementation of the strategic plan.
A summary of the principal terms of the New Facilities, including details of the conditions in respect
of the implementation of the strategic plan and the Delisting, are set out in Part III of the
shareholder circular.
6. Management incentive arrangements
Execution of management incentive arrangements by 31 May 2005 is a condition subsequent to the New
Facilities, and will therefore be agreed and executed after the Delisting has taken effect. The Board
is confident that these arrangements will be implemented within this timeframe, andthat this
condition will therefore be satisfied.
7. Impact on Ordinary Shareholders
The Company has requested that the Listing of the Ordinary Shares is cancelled with effect from the
opening of business on 13 May 2005. Notwithstanding the cancellation of the Listing, the Company will
remain subject to company law and Ordinary Shareholders will benefit from other protections afforded
to shareholders of an unlisted plc including, to the extent that it applies, The City Code on
Takeovers and Mergers.
Ordinary Shareholders should be aware that if they have not sold or otherwise transferred all their
Ordinary Shares prior to the cancellation (or earlier suspension) of the Listing they will not be able
to sell or otherwise deal in them on the London Stock Exchange after that time. It is not currently
the Board's intention to re-list the Ordinary Shares at a later date.
8. Action to be taken by Ordinary Shareholders
No action is required to be taken by Ordinary Shareholders.
9. Documentation
A circular is being sent to Ordinary Shareholders today. Ordinary Shareholders are recommended to read
the whole of the circular and not just rely on the summary provided here.
DEFINITIONS
The following definitions apply throughout this announcement and the Circular, unless the context
otherwise requires:
''Amendment Agreement'' means the credit facility agreement dated 13 April 2005
between (amongst others) the Company and the Lenders;
''Board'' or ''Directors'' means the board of directors of the Company;
''Company'' or ''Pressac'' means Pressac plc;
''Delisting'' means the cancellation of the listing of the Ordinary Shares
on the Official List of the UK Listing Authority and the
termination of the trading facility for the Ordinary Shares
on the London Stock Exchange's market for listed securities;
''Existing Facilities'' means the Company's existing bank facilities with the
Lenders under the terms of the credit facility agreement
dated 31 July 2002, as amended from time to time, between
(among others) the Company and the Lenders;
''Extension Option'' means the option available to the Company, subject to the
approval of the Lenders, to extend the Final Maturity Date
to 30 June 2007;
''Final Maturity Date'' means 30 June 2006, subject to the Extension Option;
''Group'' means the Company, its subsidiaries and subsidiary
undertakings;
''Lenders'' means HSBC Bank plc, JPMorgan Chase Bank N.A. and J. P.
Morgan Europe Limited in their capacity as lenders under the
Existing Facilities;
''Listing Rules'' means the listing rules of the UK Listing Authority;
''New Facilities'' means the new banking facilities to be granted to (among
others) the Company by the Lenders pursuant to the Amendment
Agreement;
''Ordinary Shares'' means ordinary shares of 5 pence each in the capital of the
Company; and
''Ordinary Shareholders'' means holders of Ordinary Shares.
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