TIDMADSS
RNS Number : 2245G
Atlas Dev & Support Services Ltd
19 November 2015
Atlas Development & Support Services Limited / Ticker: ADSS
/ Index: AIM / Sector: Support Services
19 November 2015
Atlas Development & Support Services Limited
('Atlas' or the 'Company')
Trading update, establishment of industrial division and
acquisition
Atlas (AIM, NSE: ADSS) is pleased to announce that it is
creating an industrial division with an initial focus on consumer
based industrial projects to broaden its business offering. The
industrial division will allow Atlas to take advantage of unique on
the ground access to highly prospective industrial projects in
exciting growth markets. As part of the Company's first project
within the industrial division, Atlas has signed an acquisition
agreement (the 'Acquisition Agreement') to acquire East Africa
Packaging Holdings Limited ('EAPH'), a company established to build
a new state-of-the-art glass bottle manufacturing facility 45
kilometres north of Addis Ababa, Ethiopia (the 'Chancho Project').
The Company is also pleased to provide a trading update. A
conference call will be hosted by the Company later today at
11.00am UK time to discuss these developments. Further details on
the call can be found below.
Overview:
-- Following the decline in the oil price, trading conditions
for the Company's core services division remain very challenging,
with revenue for the 12 months to 31 December 2015 expected to be
approximately $15 million
-- Initiatives implemented focussed on diversifying the
Company's business, identifying new sectors of operation,
concentrating on profitable jurisdictions and services, and
reducing costs overall
o Atlas is now cashflow break even at an operational level and
the Company is expected to end the year with a cash balance of
approximately US$3 million, ahead of expectations
o Atlas has created an industrial division to broaden sector
focus and diversify cyclical services revenue streams
-- Industrial division has entered into an agreement to acquire
EAPH, a company established to build the Chancho Project, focused
on the growing beverage industry, which will provide the Company
access to the rapidly growing Ethiopian consumer market
Chief Executive of Atlas, Carl Esprey said, "The creation of a
new industrial division will increase the breadth and
sustainability of our business and leverage our current position in
Ethiopia to drive additional activity and future earnings. These
developments will enable us to generate diversified revenue streams
whilst offering significant internal synergies and efficiencies.
With the acquisition of EAPH we will acquire an attractive
cornerstone project for our industrial division in a dynamic
jurisdiction, with likely access to significant project finance
funding.
"As shareholders are aware, we have recently convened a
shareholder's meeting to seek authority to issue new shares and
dis-apply pre-emption rights. The acquisition of EAPH is contingent
on gaining approval to raise the headroom, so we encourage
shareholders to support these resolutions so that we can move
forwards at pace to implement our vision to develop and broaden our
business offering. I would, however, like to note that aside from
these developments, we continue to hold cash to support the
activities of our established support services division.
"Recent months have been highly volatile and difficult for our
business, particularly in Kenya. We appreciate our shareholders'
patience as we combat the down-turn in the oil and gas services
sector and focus on more profitable sectors. We have established a
joint venture with Orchid and are presently working on projects in
the Ethiopian resource space and hope to announce further news on
these in the near future."
For further information please visit www.atlassupport.com or
contact:
Carl Esprey Atlas Tel: +44 (0) 20 7408
9200
Callum Stewart Stifel Nicolaus Europe Tel: +44 (0) 20 7710
Limited 7600
Ashton Clanfield Stifel Nicolaus Europe Tel: +44 (0) 20 7710
Limited 7600
Edward Burbidge Burbidge Capital Tel: +254 (0) 202
100 102
Hugo de Salis St Brides Partners Ltd Tel: +44 (0) 20 7236
1177
Charlotte Heap St Brides Partners Ltd Tel: +44 (0) 20 7236
1177
Trading update and outlook:
Following the decline in the oil price, trading conditions for
the Company's core services division remain very challenging, with
revenue for the 12 months to 31 December 2015 expected to be
approximately $15 million. As a result the board implemented
initiatives aimed at diversifying the Company's business,
identifying new sectors of operation, concentrating on profitable
jurisdictions and services and reducing costs overall. Management
has conducted significant cost-cutting, primarily in Kenya and the
Company has declined to bid for contracts which do not meet Atlas'
return profile. As a result of these initiatives the Company's
operating divisions are now cashflow break even and the Company is
expected to end the year with a cash balance of approximately US$3
million, ahead of expectations. The outlook for services to the oil
& gas sector in Kenya remains poor and the Company's focus for
the services division will be in Ethiopia, where conditions are
more positive and where the recent establishment of a joint venture
with leading Ethiopian industrial company, Orchid, gives unique
access to many exciting industrial projects in the fast growing
Ethiopian market.
Establishment of industrial division & acquisition:
Background
Atlas is creating an industrial division to allow it to leverage
its expertise and position in the regional market and to broaden
its business offering, thereby developing diverse revenue streams
comprising both cyclical services generated and non-cyclical
industrial generated revenues.
The initial focus of the industrial division will be the
ownership, via acquisition or construction, of consumer based
industrial projects. There will be significant internal synergies
and efficiencies as construction of industrial projects will be
supported by Atlas' services division.
Acquisition Agreement:
Atlas has today entered into the Acquisition Agreement to
acquire EAPH (the "Acquisition"). EAPH was established by certain
Directors to incubate the Chanco Project. Atlas will pay no
consideration in relation to the Acquisition. Under the terms of
the Acquisition Agreement, the Company has agreed, subject to an
increase in the Company's headroom at the General Meeting on 1
December 2015, to take on third party funding liability of
approximately US$150,000 in respect of EAPH's working capital
investments incurred to date.
The Chancho Project and the Ethiopian market:
EAPH is currently in the feasibility stages of a project which
will see it complete the construction and operation of a new
state-of-the-art glass bottle manufacturing facility 45 kilometres
north of the Ethiopian capital Addis Ababa. EAPH's principal assets
comprise a long lease on the land identified for the construction
of the facility and the intellectual property relating to the
Chancho Project. Commissioning of the facility is scheduled for
2018 and full production will commence in early 2019. The new
production facility is expected to have capacity to produce 105
million 330ml bottles per annum. The total capital expenditure is
estimated at US$42 million which is expected be funded on a staged
basis by a mixture of debt from local development banks, other debt
providers, industrial partners and equity, once various milestones
have been achieved. The initial cash commitment to complete the
full feasibility study is US$3-4 million.
The key raw materials required for glass production (being
silica sand, limestone, dolomite, feldspar, soda ash) are readily
available in Ethiopia, thereby reducing the project's exposure in
this regard. Silica sand and limestone deposits are found in both
the Mugher Valley and Blue Nile river valley (60-85 kilometres from
Addis Ababa), while dolomite, feldspar and soda ash can also be
sourced domestically; preliminary assessments of potential sources
and studies of local mining operations carried out by EAPH confirm
appropriate grades are available.
The Ethiopian government has designated manufacturing as a top
priority, and support via development debt funding is, in
principle, available for projects that substitute imports. Ethiopia
represents one of the fastest growing economies in the world, as a
result of rising income, population growth, well managed
infrastructure spending, and stable government policies.
For the last five years, due to increasing consumer demand and a
young demographic, Ethiopia has been attracting significant
investment from international beverage companies, with over $500
million invested to date. Beer production has been growing at a
CAGR of 14.3% over the last 14 years with an additional 47%
capacity currently under construction.
The demand for glass bottles is largely unmet by local
production and is at present mainly satisfied by expensive imports.
There is strong demand for locally produced glass bottles in
Ethiopia which Atlas aims to meet, through the development of the
Chancho Project.
A full presentation on the Company's new industrial division and
the Chancho Project will be available on the Company's website
www.atlassupport.com
Conference Call
Atlas is pleased to announce the dial in details for the
shareholder call to be held today at 11.00am UK time.
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