TIDMCSFG
RNS Number : 9319Y
CSF Group PLC
28 August 2018
28 August 2018
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR")
CSF Group plc
("CSF", the "Company" or the "Group")
Proposed cancellation of admission of the Company's ordinary
shares to trading on AIM
and
Proposed extraordinary general meeting
The Board of CSF announces that the Company intends to seek
Shareholders' approval to cancel the admission of the Company's
ordinary shares of 10p each ("Ordinary Shares") to trading on AIM
(the "Proposal" or the "Cancellation").
Under the AIM Rules for Companies (the "AIM Rules"), it is a
requirement that the cancellation of admission to trading on AIM
must be approved by not less than 75 per cent. of Shareholders
voting in general meeting. Under the AIM Rules, the Cancellation
also requires a notice period of not less than 20 business days
from the date on which notice of the intended Cancellation is
notified via a Regulatory Information Service and is given to the
London Stock Exchange.
The Company intends to send a circular (the "EGM Circular") to
Shareholders, which will also contain a notice of an extraordinary
general meeting (the "Extraordinary General Meeting"), which is
intended to take place at 9:30 a.m. British Summer Time ("BST") /
4:30 p.m. Malaysia Time ("MYT") on 24 September 2018 at the offices
of Allenby Capital Limited ("Allenby Capital"), 5 St Helen's Place,
London EC3A 6AB.
The Extraordinary General Meeting is to be held for the purpose
of considering, and if thought fit, passing the following
resolution (the "Resolution"), to take effect as a resolution of
the Company requiring 75 per cent. of the votes cast (in person or
by proxy) to be in favour: THAT, the admission of the ordinary
shares of 10p each in the capital of the Company to trading on AIM,
a market operated by the London Stock Exchange plc, be cancelled
and that the directors of the Company be authorised to take all
steps which they consider to be necessary or desirable in order to
effect such cancellation.
Certain of the Directors, and members of the Company's senior
management team whose shareholdings in aggregate represent 7.47 per
cent. of the issued share ordinary capital of the Company, have
given irrevocable undertakings to vote in favour of the
Resolution.
Subject to the passing of the Resolution at the proposed
Extraordinary General Meeting on 24 September 2018, Cancellation
will occur no earlier than 5 business days after the proposed
Extraordinary General Meeting and it is therefore expected that
trading in the Ordinary Shares on AIM will cease at the close of
business on 1 October 2018, with Cancellation expected to take
effect at 7:00 a.m. (BST) / 2.00 p.m. (MYT) on 2 October 2018.
Pursuant to Rule 41 of the AIM Rules, the Directors have
notified the London Stock Exchange of the date of the proposed
Cancellation.
The EGM Circular will set out the following, details of which
can also be found further below within this announcement:
-- the background to the Proposal;
-- why the Board has decided to proceed with the Proposal,
subject to Shareholders' approval; and
-- why the Directors believe that the Proposal is in the best
interests of the Company and Shareholders as a whole and why the
Board recommends that Shareholders vote in favour of the Resolution
at the forthcoming Extraordinary General Meeting.
Should Cancellation be approved by Shareholders at the
Extraordinary General Meeting, the Company intends to put in place
a matched bargain settlement facility with BritDAQ Limited which
should facilitate Shareholders buying and selling Ordinary Shares
on a matched bargain basis following Cancellation.
It is anticipated that the EGM Circular, the notice of the
Extraordinary General Meeting and a form of proxy will be posted to
Shareholders on 3 September 2018 and the Company will make a
further announcement once these documents have been posted and are
available to view and download from the Company's website at
www.csf-group.com, in accordance with Rule 26 of the AIM Rules.
Background to, and reasons for, the Proposal
The current size of the Group and the cost of the Company's
listing
On 28 September 2017, the Company announced the conditional
disposal (the "Disposal") of CSF CX Sdn Bhd ("CSF CX"), a direct
wholly-owned subsidiary of the Group. As at 31 March 2016, being
the last audited financial position before the execution of the
conditional sale and purchase agreement in respect of the Disposal,
CSF CX had total assets of RM88.3 million (approximately GBP15.5
million) and total liabilities (excluding amounts owing to Group
companies) of RM144.3 million (approximately GBP25.4 million),
representing approximately 57.9% and 83.6%, respectively, of the
total assets and total liabilities of the Group as at the same
date.
The Disposal was completed on 8 May 2018 and following its
completion the Group is now a substantially smaller company. In
Financial Year ("FY") 2018, the Group recorded revenues from
continuing operations of RM23.9 million (approximately GBP4.4
million) without the inclusion of revenues generated by CSF CX,
whereas total Group revenues for FY 2017 including revenues
generated by CSF CX were RM82.4 million (approximately GBP15.2
million). The Board therefore believes that the Group is now of a
size where it is no longer practical or cost effective for it to
have its Ordinary Shares quoted on AIM.
It is estimated by the Board that the total costs directly
related to the maintenance of the admission of the Ordinary Shares
to trading on AIM are over RM1.1 million (approximately GBP200,000)
per annum. This includes fees payable to the London Stock Exchange,
Nominated Adviser and Broker fees, non-executive directors' fees,
shareholder communication time and costs, and other professional
fees (including increased audit fees). Given that the Company's
operations are principally based in Malaysia, a country currently
experiencing slowdown in economic growth, the fact that a
significant number of these expenses are payable in currencies
other than the Malaysian Ringgit exacerbates the costs to the
Company of maintaining the admission to trading on AIM of the
Ordinary Shares.
The Directors therefore believe that the Cancellation will,
accordingly, reduce the Company's recurring administrative costs,
allowing the funds currently spent on such expenses to be better
spent in running the business in a private capacity which would be
more appropriate given the Group's recently reduced size. These
measures to reduce costs are also in line with the Board's
objective of preserving the Group's financial resources as
highlighted in the Company's Statement of Annual Results released
on 27 July 2018.
Inability to raise capital
Since the point of the Company's IPO on AIM in 2010, the Company
has only been able to secure very limited amounts of additional
capital by way of equity financing. The Company's main reason for
having its Ordinary Shares admitted to trading on AIM in 2010 was
to access capital. However, the Board is of the view that it is no
longer possible for the Company to raise equity capital on AIM.
Conclusion
Mr Phil Cartmell has been a director of the Company since its
flotation on AIM in March 2010 and was appointed Interim Chairman
in July 2013 and Chairman in July 2015. He has worked closely with
the Company's management team as they have successfully addressed
the challenges facing the Company over the last five years,
culminating in the Disposal. As set out above, the Company is now
much smaller as a result of the Disposal and Mr Cartmell considers
that this reduced size means that it is no longer realistically
feasible for the Company to raise material quantum of funds from
the public markets and it is no longer cost effective to have the
Company's shares traded on AIM. The costs associated with being on
AIM are also significant in the context of the Company's expected
future trading performance. On this basis, Mr Cartmell believes
that the Cancellation is the most appropriate next step for the
Company and he has informed the Board of his intention to resign as
both Chairman and as a director of the Company whether or not the
Resolution is approved by Shareholders.
Shareholders should also be aware that if the Resolution is not
approved by Shareholders and Cancellation does not proceed, Mr
Cartmell's resignation (and the factors set out above) may have
implications for Allenby Capital who will need to consider the
commercial rationale for their continuing to act as the Company's
Nominated Adviser and Broker (having had consideration for Allenby
Capital's notice period for any such potential resignation). Should
Allenby Capital decide to resign as the Company's Nominated
Adviser, in the absence of the appointment of a new Nominated
Adviser, trading in the Company's Ordinary Shares on AIM will be
suspended immediately once such resignation becomes effective. If
the Company cannot appoint a replacement Nominated Adviser within
one month of such suspension, the admission of the Company's
Ordinary Shares to trading on AIM will be cancelled.
After careful consideration of the matters laid out above, the
Directors have therefore concluded that the commercial
disadvantages and costs of maintaining the admission to trading on
AIM of the Ordinary Shares outweigh the potential benefits and that
it is no longer in the Company's or its Shareholders' best
interests to maintain the admission to trading on AIM of the
Ordinary Shares. Particular consideration has been given by the
Directors to the significantly reduced current size of the Group,
the relative expense of the Company's quotation on AIM and the lack
of equity financing opportunities available to the Company.
Cancellation of admission of ordinary shares to trading on
AIM
Cancellation
Under the AIM Rules, it is a requirement that the cancellation
of admission to trading on AIM must be approved by not less than 75
per cent. of Shareholders voting in general meeting. Under the AIM
Rules, the Cancellation also requires a notice period of not less
than 20 Business Days from the date on which notice of the intended
Cancellation is notified via a Regulatory Information Service and
is given to the London Stock Exchange. Pursuant to Rule 41 of the
AIM Rules, the Directors have notified the London Stock Exchange of
the date of the proposed Cancellation.
Subject to the passing of the Resolution at the Extraordinary
General Meeting on 24 September 2018, Cancellation will occur no
earlier than 5 Business Days after the Extraordinary General
Meeting and it is therefore expected that trading in the Ordinary
Shares on AIM will cease at the close of business on 1 October
2018, with Cancellation expected to take effect at 7:00 a.m. (BST)
/ 2.00 p.m. (MYT) on 2 October 2018.
Trading in the Ordinary Shares after Cancellation
Whilst the Board believes that the Cancellation is in the
interests of Shareholders as a whole, it recognises that the
Cancellation will make it more difficult for Shareholders to buy
and sell Ordinary Shares should they wish to do so. Following the
Cancellation, although the Ordinary Shares will remain transferable
they will no longer be tradable on AIM.
Accordingly, the Board intends, following the Cancellation, to
put in place a matched bargain settlement facility with BritDAQ
Limited (the "BritDAQ Facility"), which should facilitate
Shareholders buying and selling Ordinary Shares on a matched
bargain basis following Cancellation. It cannot be guaranteed that
the BritDAQ Facility will offer a comparable degree of liquidity
and share prices that are as attractive as those which are
currently available via the Company's quotation on AIM.
The key terms of the BritDAQ Facility are as set out below:
-- the BritDAQ Facility will be made available through BritDAQ
Limited, who will provide a platform to buy or sell Ordinary Shares
through the BritDAQ website (www.britdaq.com);
-- BritDAQ Limited is authorised and regulated by the Financial Conduct Authority;
-- 'gold' BritDAQ membership is required to buy or sell Ordinary
Shares through the BritDAQ website;
-- if Ordinary Shares are held through a nominee company, then a
Shareholder should request that their Ordinary Shares be
transferred (using a Share Transfer Form) into their own name, in
order to be ready to trade;
-- when a Shareholder wishes to trade on BritDAQ, the
Shareholder enters a buy or sell quantity and an associated price.
Other BritDAQ members will then be able to match that offer or
propose a counter-bid or counter-offer. Once agreed, BritDAQ will
deal with the administration of the transaction and arrange for the
associated transfer of funds between the parties, at which point a
fee for the service will become due and payable by the Shareholder;
and
-- further information can be found on www.britdaq.com or via admin@britdaq.com.
Following Cancellation, it is intended that the Company's CREST
facility will be ceased, and it is likely that Shareholders will
therefore be issued share certificates in respect of their Ordinary
Shares. Following the implementation of the BritDAQ Facility, the
Board intends to monitor its popularity amongst Shareholders and
will review it at regular intervals to consider whether it remains
cost effective.
Effects of Cancellation on shareholders
Market for the Company's Ordinary Shares
The principal effect of the proposed Cancellation is that there
would no longer be a formal market mechanism enabling Shareholders
to trade their Ordinary Shares on AIM or any other recognised
market or trading exchange. As described above, the Company intends
to, shortly following Cancellation, put in place the BritDAQ
Facility to serve as a limited platform for Shareholders and other
persons to seek to buy or sell Ordinary Shares. However, the
BritDAQ Facility is likely to offer a substantially lesser degree
of liquidity and potentially less attractive share prices than are
currently available via the Company's quotation on AIM.
Taxation
Shareholders who are in any doubt about their tax position
should consult with their own independent professional adviser as
soon as possible.
Loss of shareholder protections
Shareholders should also be aware that the Company will no
longer be bound by the AIM Rules following Cancellation. As a
consequence, investors will not be able to benefit from certain of
the protections provided by the AIM Rules. For example, the Company
will no longer be required to announce material events, interim or
final results or transactions (including related party
transactions) and certain previously prescribed corporate
governance procedures may not be adhered to by the Company in the
future. Shareholders' approval will also not be required for
reverse takeovers and/or fundamental changes in the Company's
business. The Company will no longer be bound to comply with the
corporate governance requirements applicable to UK-quoted companies
and the Company would also no longer be required to have a
Nominated Adviser, nor be required to retain a Broker.
The Directors intend to keep Shareholders informed of the
Company's progress from time to time and remain committed to high
standards of corporate governance. Accordingly, following
Cancellation, the Directors intend to:
-- hold an annual general meeting and, when required, other
general meetings, in accordance with applicable statutory
requirements and the Articles;
-- make available to all Shareholders an annual report and the
Company's annual financial statements;
-- maintain an 'investors' section on the Company's website at
www.csf-group.com providing information on any significant events
or developments in which Shareholders may be interested.
Shareholders should, however, be aware that there will be no
obligation on the Company to update this section of the website as
is presently required under the AIM Rules and other currently
applicable regulation; and
-- comply with corporate governance standards appropriate for a
company with the number of Shareholders it has.
Takeover Code
The City Code on Takeovers and Mergers (the "Takeover Code")
currently applies to the Company and as such the Shareholders
currently benefit from a number of protections contained in the
Takeover Code. Following Cancellation, the Company's place of
central management and control will not be in the United Kingdom,
the Channel Islands or the Isle of Man and, pursuant to paragraph
3(a)(ii) to the Introduction to the Takeover Code, the Company will
no longer be subject to the Takeover Code.
Shareholders should note that, if the Cancellation becomes
effective, they will not receive the protections afforded by the
Takeover Code in the event that there is a subsequent offer to
acquire their Ordinary Shares.
Brief details of the Takeover Code and the protections given by
the Takeover Code are described below. Before giving your consent
to the Cancellation, you may want to take independent professional
advice from an appropriate financial adviser.
The Takeover Code
The Takeover Code is issued and administered by the Panel on
Takeovers and Mergers of the United Kingdom (the "Panel"). The
Company is presently a company to which the Takeover Code applies
and its Shareholders are accordingly entitled to the protections
afforded by the Takeover Code.
The Takeover Code and the Panel operate principally to ensure
that shareholders are treated fairly and are not denied an
opportunity to decide on the merits of a takeover and that
shareholders of the same class are afforded equivalent treatment by
an offeror. The Takeover Code also provides an orderly framework
within which takeovers are conducted. In addition, it is designed
to promote, in conjunction with other regulatory regimes, the
integrity of the financial markets.
The General Principles and Rules of the Takeover Code
The Takeover Code is based upon a number of general principles
("General Principles") which are essentially statements of
standards of commercial behaviour. The General Principles apply to
all transactions with which the Takeover Code is concerned. They
are expressed in broad general terms and the Takeover Code does not
define the precise extent of, or the limitations on, their
application. They are applied by the Panel in accordance with their
spirit to achieve their underlying purpose.
In addition to the General Principles, the Takeover Code
contains a series of rules ("Rules"), of which some are effectively
expansions of the General Principles and examples of their
application and others are provisions governing specific aspects of
takeover procedure. Although most of the Rules are expressed in
more detailed language than the General Principles, they are not
framed in technical language and, like the General Principles, are
to be interpreted to achieve their underlying purpose. Therefore,
their spirit must be observed as well as their letter. The Panel
may derogate or grant a waiver to a person from the application of
a Rule in certain circumstances.
Giving up the protection of the Takeover Code
Shareholders will be giving up certain important protections
upon Cancellation. Your attention is drawn in particular to the
following protections under the Takeover Code:
(i) all holders of Ordinary Shares must be afforded equivalent
treatment and, moreover, if a person acquires 30 per cent. or more
of the Ordinary Shares in the Company (other than in the context of
a voluntary offer to all Shareholders) such person would be
required to make a mandatory offer to all of the other
Shareholders;
(ii) the holders of Ordinary Shares must have sufficient time
and information to enable them to reach a properly informed
decision on any bid; where it advises the holders of Ordinary
Shares, the Board must give its views on the effects of
implementation of the bid on employment, conditions of employment
and the locations of the Company's place of business;
(iii) the Board would be required to act in the interests of the
Company as a whole and must not deny any holders of Ordinary Shares
the opportunity to decide on the merits of a bid for the Company;
and
(iv) if a bid for the Company were to be made, the Board would
be required to obtain competent independent advice as to whether
the financial terms of any offer (including any alternative offers)
are fair and reasonable and the substance of such advice must be
made known to Shareholders.
The Jersey framework for takeovers following Cancellation
Certain brief details of the Jersey legal framework for
takeovers, which following Cancellation will be applicable to the
Company, as appropriate, are described below.
Acquisitions
A Jersey public limited company may be acquired in a number of
ways, including by means of a "scheme of arrangement" between the
company and its shareholders or by means of a takeover offer.
Scheme of arrangement
A "scheme of arrangement" is a statutory procedure under the Act
pursuant to which the Royal Court of Jersey may approve an
arrangement between a Jersey company and some or all of its
shareholders. In a "scheme of arrangement," the company would make
an initial application to the Royal Court of Jersey to convene a
meeting or meetings of its shareholders at which a majority in
number of shareholders representing 3/4ths of the voting rights of
the shareholders present and voting either in person or by proxy at
the meeting must agree to the arrangement by which they will sell
their shares in exchange for the consideration being offered by the
bidder. If the shareholders so agree, the company will return to
the Royal Court of Jersey to request the court to sanction the
arrangement. Upon such a scheme of arrangement becoming effective
in accordance with its terms and the Act, it will bind the company
and such shareholders.
Takeover offer
A takeover offer is an offer to acquire all of the outstanding
shares of a company (other than shares which at the date of the
offer are already held by the offeror). The offer must be made on
identical terms to all holders of shares to which the offer
relates. If the offeror, by virtue of acceptances of the offer,
acquires or contracts to acquire not less than 90 per cent. in
nominal value of the shares to which the offer relates, the Act
allows the offeror to give notice to any non-accepting shareholder
that the offeror intends to acquire his or her shares through a
compulsory acquisition (also referred to as a "squeeze out"), and
the shares of such non-accepting shareholders will be acquired by
the offeror six weeks later on the same terms as the offer, unless
the shareholder objects to the Royal Court of Jersey and the court
enters an order that the offeror is not entitled to acquire the
shares or specifying terms of the acquisition different from those
of the offer.
The Act permits a scheme of arrangement or takeover offer to be
made relating only to a particular class or classes of a company's
shares.
Further information
Current trading and prospects
On 27 July 2018, the Company announced its audited full year
results for the year ended 31 March 2018. In FY 2018, the Group
recorded revenue from continuing operations of RM23.9 million
(approximately GBP4.4 million) (FY2017: RM26.4 million
(approximately GBP4.9 million)) and a profit for the financial
year, including gain on disposal of subsidiary, of RM113.0 million
(approximately GBP20.9 million) compared to the loss before tax of
RM34.6 million (approximately GBP6.4 million) in FY 2017.
Following the completion of the Disposal, the Group has been
able to focus on improving the operational efficiency of its
remaining data centre (CX1), whilst identifying additional sources
of revenue from CX1 and other business divisions. CX1 is a
commercial data centre facility located in the Selangor state of
Malaysia, which has been in operation since 2003 with a total net
floor area of approximately 37,500 square feet and approximately 1
MW of IT power capacity.
During FY 2018, the Group successfully renegotiated a contract
with an existing tenant at CX1. The Group continues to actively
pursue new customers directly and is in discussion with various
potential resellers and/or business partners to identify additional
sources of revenue from CX1 and other business divisions. The
Group's management has also implemented cross-connect charges for
the utilisation of network connectivity within the CX1 data
centre.
However, in spite of the progress set out above, the Group's
monthly revenues are still insufficient to cover its monthly
operating overheads, and this has been exacerbated by the intense
competition and pricing pressure experienced by the maintenance and
the design and development segments of the business. The Board also
notes that significant capital expenditure will be required for the
replacement of ageing equipment at the CX1 data centre and will
continue to work closely with the Group's management in the careful
planning and implementation of the Group's capital expenditure
budget.
Certain cash deposits lodged by the Group for rental deposits in
connection with the CX2 and CX5 data centres, amounting to RM9.1
million (approximately GBP1.7 million), were refunded to the Group
on 31 May 2018.
Pursuant to the completion of the Disposal, the Board expects
for the Group to be able to reduce its operating losses in the next
financial year although on significantly decreased revenues.
Future strategy of the Company
The Group's strategy involves focusing on achieving growth in
sustainable revenues, while carefully implementing its capital
expenditure plans to ensure that the Group's financial position is
preserved. The Group aims to continue to invest in its employees,
in terms of enhancing their technical knowledge and competency and
remain focused on improving the quality of service to
customers.
The Group continues to pursue a pipeline of potential customers
and marketing activities, which include ongoing discussions with
several potential customers and enhanced marketing efforts focusing
on potential customers and resellers.
Irrevocable undertakings
The Company has received irrevocable undertakings to vote in
favour of the Resolution at the Extraordinary General Meeting from
certain of the Directors and members of the Company's senior
management team in respect of their respective holdings of, in
aggregate, 11,957,931 Ordinary Shares, representing approximately
7.47 per cent. of the total current issued ordinary share capital
of the Company.
The aforesaid irrevocable undertakings will lapse if the
Extraordinary General Meeting is not held or the Resolution is not
put to Shareholders or in the event that the Resolution is not
approved.
Recommendation
The Board considers the Resolution as set out in the notice of
the Extraordinary General Meeting to be in the best interests of
the Company and its Shareholders as a whole. Accordingly, the
Directors unanimously recommend Shareholders to vote in favour of
the Resolution. The Directors intend to vote their own beneficial
holdings in favour of the Resolution, and procure the same from
certain members of the senior management team of the Company,
which, in aggregate, amounts to 11,957,931 Ordinary Shares,
representing approximately 7.47 per cent. of the issued ordinary
share capital of the Company as at the date of this
announcement.
--ENDS--
For further information, please contact:
CSF Group
Phil Cartmell, Chairman +603 8318 1313
Allenby Capital (Nominated Adviser and
Broker)
Nick Naylor / Alex Brearley +44 (0) 20 3328 5656
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCFKODDOBKDNFB
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