ENN Ennstone

    RNS Number : 5528K
  Ennstone PLC
  19 December 2008
   


    Ennstone plc
    ("Ennstone" or "the Group")

    Disposal of certain trade and assets 
    of Ennstone Concrete Products Limited

    Waiver under Listing Rule 10.8 
    of requirement to obtain shareholder approval

    Update on financial position of Group

    Overview

    Ennstone announces that it has today completed the sale of certain of the trade and assets of Ennstone Concrete Products Limited
("Concrete Products"), Ennstone's precast concrete products business, to FP McCann Limited ("FP McCann"). Following this disposal, Ennstone
will cease to have any involvement in the ongoing manufacture of concrete products. As part of the disposal agreement, Ennstone has entered
into a long-term supply agreement with FP McCann which will provide a route to market for aggregates from certain of its quarries to both
the disposal sites and a further FP McCann site, thereby securing this market for its aggregates.

    The total consideration for the disposal is �8.4 million on a cash and debt free basis. The cash consideration is reduced by
approximately �5.1 million, relating to the discharge of certain hire purchase and finance lease obligations in relation to assets that are
subject to the disposal which have been transferred to FP McCann. The total cash received by the Group on completion was �3.3 million. The
proceeds of the disposal were required by the Board, in the absence of any additional facility headroom, to provide short-term, cash funding
for the Group's working capital needs. Without the proceeds of this disposal the Board is of the opinion that the Group would not have had
sufficient liquidity to meet its financial commitments as they fell due and the Board would have had to appoint administrators, liquidators
or receivers.

    The trade and assets subject to the disposal principally comprise of the plant, equipment and stock at the two main operating sites of
Concrete Products, including the freehold title of the Cadeby site in Leicestershire, and a lease agreement over the Telford site in
Shropshire. The Telford site will be leased from the Group for three years on a peppercorn rent, thereafter switching to a commercial rate
for a further three years at the option of FP McCann. FP McCann has also been granted an option to purchase the freehold title to the
Telford site from Ennstone within 18 months of completion for a cash consideration of �2.75 million plus a 50 per cent. share of any gain
above the purchase price on any sale after having received developmental planning permission on the site, which will be payable to the
Group. The option also includes a pre-emption right in favour of FP McCann if a third party offers, during the option period, to acquire the
Telford site at below �2.75 million. All the staff working for Concrete Products have been transferred to FP McCann.

    Based on unaudited management accounts, for the year ended 31 December 2007, the trade and assets of Concrete Products, that are subject
to the disposal, contributed revenue of approximately �22 million and profit before tax and interest of approximately �0.6 million. The net
book value of the assets subject to the disposal are approximately �12 million. Additionally, following the disposal, the Group will be
required to impair the carrying value of certain goodwill in respect of the Concrete Products business by approximately �9.4 million and
write down the carrying value of the Telford site by �7.4 million.

    Background

    On 11 August 2008, due to difficult trading conditions the Group announced that it would require additional equity funding or would need
to undertake asset disposals in order to comply with its banking covenants as at 31 December 2008. Subsequently, the Group's deteriorating
cash position has required it to accelerate its disposal programme and implement a series of cost cutting and cash conservation measures
which were outlined in the Interim Management Statement issued on 19 November 2008. A further update on the Group's financial position was
announced on 16 December 2008.

    The Group has undertaken an extensive marketing process with the intention of concluding major asset disposals. However, whilst this
process has been in hand the appetite for the Group's assets has been adversely impacted by a further deterioration in the availability of
debt finance and the announcement by a number of the industry's major participants of their own disposal and cost reduction programmes.

    The indicative offers received for certain Group assets from the disposal programme have been at valuations significantly below those
which would be expected in more normal conditions. Nevertheless, due to the funding requirements of the Group these negotiations have been
progressed and have been run in parallel with alternative proposals to either refinance the Group or explore the possibility of a sale to a
third party. Whilst these negotiations are on-going, there can be no certainty that either a refinancing or an offer will be forthcoming
within the timeframe required.

    The Group is currently in negotiations to sell both a substantial part of its US business, and, separately certain individual assets to
provide immediate short-term cash to fund the US operation's working capital requirements. These negotiations are currently on-going but no
firm committed proposals have yet been received. Minor UK assets are also being marketed, which would provide additional short-term working
capital funding but there can be no certainty of the outcome of these negotiations.

    Likewise while indicative proposals have been received for both a sale of the Group as a whole and a substantial part of the Group's UK
businesses, as well as a substantial equity investment and refinancing of the Group, all of these alternative solutions are still subject to
further confirmatory due diligence as well as the need to reach an agreement with both the Group's UK and US debt providers and the trustees
of the Group's pension scheme. The Board is hopeful that these alternative solutions can be progressed and formal proposals made to
shareholders during January 2009, however, none of these alternative solutions can be relied on.

    Prior to the receipt of the proceeds, Ennstone was forecasting to require additional cash funding for working capital in order to meet
the Group's UK obligations as they fell due and without the disposal proceeds would have run-out of cash headroom in the UK prior to the end
of December 2008. If this had happened either the Group's Board would have been forced to seek the appointment of administrators without a
realistic possibility of a solvent solution to the Group's funding requirements or the Group's debt providers would have been forced to
withdraw the Group's debt facilities. Accordingly, the Board concluded that, in these exceptional circumstances, and whilst the disposal
only provides a short-term funding solution, they had no option other than to dispose of Concrete Products immediately without prior
shareholder approval.

    Whilst only providing a short-term funding solution, the Directors believe that, all things considered, in undertaking the disposal they
are acting in the best interests of the Group and shareholders as a whole, even in the absence of shareholder approval, as it will provide
additional time to attempt to find a solvent solution to the Group's funding issues. However, if no alternative solution is forthcoming by
the end of January 2009 or the exhaustion of the disposal proceeds then the Group is likely to be unable to trade and the Board will be
forced to seek the appointment of receivers, administrators or liquidators without a realistic possibility of a solvent solution to the
Group's funding requirements.

    Following a request to the United Kingdom Listing Authority ("UKLA"), the UKLA granted a waiver under Listing Rule 10.8 in respect of
the requirement to issue a circular and obtain shareholder approval for this disposal which would have otherwise been required due to the
consideration to market capitalisation class test.

    Funding

    On the 16 December 2008, the Group announced that in addition to previously disclosed technical breaches of its facilities agreement,
that it was now forecasting to exceed its UK banking facility headroom by the end of December 2008.

    Furthermore, as a result of the deteriorating cash position in the US, Ennstone has now suspended payments of interest charges and
finance lease repayments on its US facilities and is in discussions with its US lenders regarding restructuring proposals for Ennstone's US
subsidiary, Ennstone, Inc. Accordingly, the Group is currently in breach of its US facilities, which under the terms of the US facilities
agreement can currently be withdrawn at any point, and therefore the Group is currently in breach of its UK facilities via cross-default.
The US and UK debt providers are aware of the current breaches and are currently considering their position including potential waivers of
the breaches. As previously announced, Ennstone will also be in breach of its UK and US banking covenants as at 31 December 2008 unless
agreement is reached with the lenders. Notwithstanding the above breaches of the Group's facilities, Ennstone continues to be in ongoing
discussions and is co-operating fully with its UK and US banking syndicates.  

    Ennstone also announced that it was in advanced discussions regarding potential disposals to provide sufficient liquidity for the Group
to continue to trade until the end of January 2009. The Group's UK banking syndicate has confirmed it was not prepared to make additional
facilities available and that unless the disposal was effected immediately, current facilities would have been withdrawn. Following
agreement with the Group's UK banks, Ennstone will now retain the cash proceeds of the disposal of Concrete Products in order to provide
short-term working capital into the early part of 2009. The disposal has been driven by the Board's desire to provide additional time to
attempt to provide a solvent solution to the Group's current funding requirements.

    Notwithstanding the receipt of the proceeds of the disposal of Concrete Products the Board confirms that, in the event that an offer for
the Group is not forthcoming, the Group will require substantial additional funding and to reach an agreement with its debt providers on the
restructuring of its existing facilities during January 2009, otherwise it will not have sufficient liquidity to trade as a going concern
and the Board will be forced to seek the appointment of receivers, administrators or liquidators.

    In light of the Group's financial situation the Board concluded that in order for the Group to raise sufficient funds to attempt to
undertake a solvent outcome for the Group, it had to take steps to immediately sell Concrete Products. 

    Working Capital

    The Group does not have sufficient working capital for its present requirements, that is, for at least the twelve months from the date
of this announcement. 

    Notwithstanding the proceeds of the disposal of Concrete Products, should the Group not be able to raise sufficient funds or reach
agreement on the restructuring of its existing debt facilities prior to the end of January 2009, the Group will no longer be able to
continue as a going concern and the Group's Board will be forced to seek the appointment of receivers, administrators or liquidators without
a realistic possibility of a solvent solution to the Group's funding requirements.

    Without either a refinancing of the Group, further substantial asset disposals, or a sale to a third party, the Group will not be able
to provide sufficient working capital for the next twelve months. Asset disposals alone are unlikely to provide sufficient proceeds for a
twelve month period. The Group believes that the shortfall in funding required to provide sufficient working capital for at least the next
twelve months is estimated to be approximately �50 million to �60 million, on the basis that the current facilities remain in place with
appropriately renegotiated covenants. This figure could potentially be either higher or lower under substantially revised banking terms. The
Directors are unable to confirm at this stage what form any renegotiated banking facilities may take.

    In addition to the above actions intended to fully refinance the Group, smaller individual asset disposals in both the UK and US
businesses are also being considered to provide additional short-term cash funding for working capital in both the UK and US. The proceeds
from any such disposals are unlikely to provide anything other than short-term working capital funding.

    The alternative solutions being pursued by the Group of a third party sale, equity fundraising and recapitalisation/reorganisation of
the Group have been ongoing for sometime, but as yet no firm, committed proposals are available which would provide alternative funding in
place of the disposal. In particular, some of the alternative proposals are likely to occur or fall away within a relatively short
timeframe, with the Board targeting to announce a solution prior to the end of January 2009. However there can be no certainty that either a
refinancing or an offer will be forthcoming within the timeframe required. If no alternative solution is forthcoming at this time then the
Group is likely to be unable to trade and the Board, without a realistic possibility of a solvent solution to the Group's funding
requirements, will be forced to seek the appointment of receivers, administrators or liquidators.

    Application of funds from the disposals

    Given the financial position of the Group, the funds from the sale of Concrete Products will be applied to meet the Group's short-term
working capital requirements. The Directors consider that the disposal of Concrete Products is in the best interests of shareholders as a
whole.

    Conclusion

    The Board of Ennstone confirms that in respect of the disposal of Concrete Products:

    (a)    the negotiations and cash position did not allow time for shareholder approval to be sought;

    (b)    all alternative methods of financing have been exhausted and the only option remaining is to dispose of the trade and assets of
Concrete Products; and

    (c)    by taking the decision to dispose of Concrete Products to raise cash proceeds, the Directors are acting in the best interests of
the Group and shareholders as a whole and that unless the Disposal was completed, receivers, administrators or liquidators are likely to be
appointed.

    By taking the decision to dispose of Concrete Products to raise cash proceeds, all things considered, the Directors are acting in the
best interests of the Group and shareholders as a whole in disposing of Concrete Products in the absence of shareholder approval, and whilst
only providing short-term funding to the end of January 2009, the disposal will provide additional time to attempt to find a solvent
solution to the Group's funding issues. The Board believe that unless the disposal was completed in the absence of shareholder approval the
Group would have been unable to meet its financial commitments as they fell due and consequently would have been unable to continue to trade
resulting in the appointment of receivers, administrators or liquidators.

    The Directors believe that the disposal is in the best interests of the Group and shareholders as a whole and that unless the disposal
was completed the Group would have been unable to meet its financial commitments as they fell due and consequently would have been unable to
continue to trade resulting in the appointment of receivers, administrators or liquidators.

    Altium, which is acting as the Group's sponsor, confirms that, in its opinion and on the basis of the information available to it,
Ennstone is in severe financial difficulty and that the disposal was required in order for Ennstone to be in a position to meet its
obligations as they fell due on the basis of the proposed timetable.

    Further announcements will be made in due course.

    Enquiries:

 Ennstone plc                                 01332 694 444
 Graham Brown/Vaughan McLeod              
 Altium                                       0161 831 9133
 Phil Adams/Adrian Reed

 College Hill                                 0207 457 2020
 Mark Garraway                




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