CINP Cinpart

 

TIDMCINP 
 
RNS Number : 3379O 
Cinpart PLC 
05 March 2009 
 

 
 
5 March 2009 
 
 
CINPART PLC 
("Cinpart" or the "Company") 
 
 
LAUNCH OF NEW BUSINESS - PLACING - TRADING UPDATE - CHANGE OF ADVISERS 
 
 
The Board of Cinpart plc ("the Company") announces that the Company has today 
entered into agreements to establish a new business and that the Company has, 
placed 36,469,613 new ordinary shares ("Placing") of 1p each in the capital of 
the Company ("New Ordinary Shares") at 2p per share. 
 
 
New Business 
 
 
Cinpart has established a subsidiary, Active Energy Limited, ("Active Energy") 
which has been formed to manufacture and sell a range of voltage optimising 
transformers to be known as VoltageMaster. This equipment reduces and stabilises 
the voltage of the electricity supply entering commercial premises, such as 
factories, hotels, schools, offices, and hospitals. 
 
 
The European Union ("EU") has sought to harmonise alternating current voltages 
from the UK standard mains voltage of 240 volts and the European standard of 220 
volts to a common voltage of 230 volts. The costs of replacing all the supply 
equipment within the EU to deliver 230 volts was uneconomic, so to avoid 
accusations of failure to harmonise, the new regulations permit a range of 
operating voltages. As a result, EU regulations now permit a voltage range of 
plus 10 per cent and minus 6 per cent from 230 volts, so allowing both the UK 
and European standard voltages to operate within the permitted range. 
 
 
Electronic devices are designed to operate satisfactorily at the lower end of 
this range but some, particularly lights and heaters, will use all the power 
that is available. By reducing the input voltage, VoltageMaster can cut 
electricity consumption and thereby electricity costs by up to 20 per cent. 
 
 
Cinpart will have a 65 per cent equity interest in Active Energy. Cinpart will 
be joined in this venture by Stephen Coomes who will have a 25 per cent interest 
and Alpha Prospects plc ("Alpha") which will have a 10 per cent interest. 
 
 
Stephen Coomes is the proprietor of SDC Industries Limited ("SDC"). SDC is a 
private company established in 1985 and located in East Kilbride. It specialises 
in the design, manufacture, supply and maintenance of power quality equipment. 
It produces a range of products of which only the rights, intangible assets and 
intellectual property of VoltageMaster are being transferred to Active Energy. 
Stephen Coomes who is to hold a 25 per cent. shareholding in Active Energy will, 
as consideration for his interest, procure the transfer to Active Energy of 
SDC's rights, current sales leads and continuing support for the development of 
the technology.  He will also become a director of Active Energy, providing his 
expertise and services under the terms of service contract carrying fees of 
GBP36,000 per annum. 
 
 
Alpha is an investment company the shares of which are quoted on the PLUS-quoted 
market. It has investments that comprise options to acquire a number of 
independent travel companies. Steven Freudmann, the Chairman of Alpha is a 
director of the Association of British Travel Agents. He is also a director of 
Triton Travel Group Limited. Through these connections in the travel industry, 
Alpha is well placed to develop sales opportunities for Active Energy within the 
hotel industry. 
 
 
The principals of Alpha also have good connections with local and national 
government decision makers in the UK. Through these and other connections 
discussions have already commenced with a number of local authorities. Alpha 
will receive its 10 per cent interest in Active Energy as consideration for the 
delivery of its current sales leads. 
 
 
Structure 
 
 
Cinpart will use an existing subsidiary, Active Energy Limited, as the vehicle 
for this new joint venture. 
 
 
Active Energy has entered into agreements which permit and incentivise SDC to 
continue to sell VoltageMaster equipment as an agent for Active Energy. Alpha 
has also been appointed as a formal sales agent for Active Energy. Cinpart has 
the right to manufacture products for Active Energy and to sell into 
international markets. 
 
 
Cinpart will provide funding for Active Energy, to the extent that it is not 
obtained from external sources, by providing a facility of up to GBP2 million to 
be invested in redeemable preference shares of Active Energy to be drawn down as 
required by budgets to be prepared by Active Energy and agreed by Cinpart. 
 
 
Cinpart also has the right, but not the obligation, to acquire all but not part 
of the minority interest held by Stephen Coomes and/or Alpha in Active Energy. 
This right continues for a period of five years. The option is exercisable 
during the 30 days following the announcement of Cinpart's results for the year 
to 31 December 2009 and each successive financial year until 31 December 2014. 
 
 
The exercise price is based on the value of Active Energy determined by 
reference to its profits as shown in the audited financial statements of Active 
Energy multiplied by 80 per cent of Cinpart's P/E ratio based on the earnings 
per share of Cinpart for that year and the average mid market price of Cinpart's 
shares on the day Cinpart's financial results for that year are announced and 
four trading days thereafter. The consideration for the exercise of the right 
will be the allotment of New Ordinary Shares ("Consideration Shares"). Stephen 
Coomes and/or Alpha may require that up to 50 per cent of the consideration for 
the exercise of the option is payable in cash which Cinpart may raise through a 
vendor placing of the Consideration Shares. If this cannot be achieved the 
option on that occasion will lapse. 
 
 
If Cinpart sells any of the shares of Active Energy it has acquired under the 
option within 12 months for a consideration that is more than 125 per cent of 
the option price, Cinpart shall pay Stephen Coomes and/or Alpha the difference 
between 125 per cent of the option price and the amount of the cash 
consideration received by Cinpart on the sale. 
 
 
Mr Foster and Mr Baker, two of the Directors of Cinpart and Mr Anthony 
Freudmann, who has been nominated by Alpha will join Mr Coomes as directors of 
Active Energy. A participation agreement has been entered into under which 
various matters are to be subject to approval by the shareholders of Active 
Energy or their nominated directors. 
 
 
Mr Foster and Mr Baker will enter into separate service agreements with Active 
Energy in each case subject to 12 months notice and at a salary of GBP36,000 per 
annum. 
 
 
Prospects 
 
 
The Board of Cinpart considers that the prospects for Active Energy are 
excellent. There is well established connection between electricity consumption 
and green house gas emissions. The UK government has pledged to reduce the 
carbon footprint of government offices by 30 per cent. over the next 12 years. 
Installation of the VoltageMaster into Government buildings should help to 
provide a significant contribution towards this target. 
 
 
Whilst overall energy costs have fallen as a result of the recent reduction in 
oil prices, electricity costs have not fallen by a commensurate amount. The 
VoltageMaster typically has a pay back return period of around twelve months and 
should therefore be attractive to most commercial organisations, particularly 
those that have limited control over their electricity usage such as hotels. 
 
 
Placing 
 
 
The Company has placed 36,469,613 New Ordinary Shares at 2p per share to raise 
approximately GBP729,000 before expenses for the Company. The Placing is 
conditional upon admission of the New Ordinary Shares to trading on AIM. 
Admission is expected to become effective and dealings are expected to commence 
on 10 March 2009. The funds raised will be used to provide the working capital 
for Active Energy and to enable Cinpart to configure its factory in Thailand to 
produce components for the VoltageMaster. 
 
 
The directors of the Company have concluded that the Placing was the most 
economic means of achieving the necessary fundraising, as to make an open offer 
to all shareholders would have significantly increased the costs of raising the 
funds and delayed completion of the arrangements 
 
 
Christopher Foster and Kevin Baker, directors of the Company, are subscribing in 
the Placing for 2,500,000 and 500,000 New Ordinary Shares respectively. Their 
participations constitute related party transactions under the AIM Rules. Philip 
Palmer, the only independent director of Cinpart, having consulted with the 
Company's nominated adviser, considers that the terms of these participations 
are fair and reasonable insofar as the Company's shareholders are concerned. 
 
 
As a result of the Placing and following admission of the New Ordinary Shares 
the interests of the Directors will be: 
 
 
+------------------------+------------------------+------------------------+ 
| Name                   |     Number of Ordinary |   % of enlarged issued | 
|                        |                 Shares |          share capital | 
+------------------------+------------------------+------------------------+ 
| Christopher Foster     |              5,375,071 |                  7.86% | 
+------------------------+------------------------+------------------------+ 
| Kevin Baker            |                663,146 |                  0.97% | 
+------------------------+------------------------+------------------------+ 
| Philip Palmer          |              3,081,808 |                  4.50% | 
+------------------------+------------------------+------------------------+ 
 
 
Trading Update 
 
 
The Company advises that the current core business of Cinpart will continue. 
Trading conditions have been difficult during the second half of 2008 and it is 
now expected that the decline in revenue for the full year will not be 
materially different to that announced at the time of the interim results for 
the six month period ended 30 June 2008. There has been significant appreciation 
in the value of the Thai Baht against Sterling and, as a consequence, the 
exchange translation of Thai assets will impact on the results reported for the 
full year. 
 
 
Advisers 
 
 
The Company announces that it has appointed John East & Partners Limited as its 
Nominated Adviser and Rivington Street Corporate Finance Limited as its Broker, 
with immediate effect. 
 
 
Enquiries: 
 
 
Cinpart 
Christopher Foster, Non-executive Director     Tel: 07525 688741 
Kevin Baker, Chief Executive Tel: 00 66 81 836 4750 
 
 
John East & Partners Limited (Nomad) 
John East/Simon ClementsTel: 020 7628 2200 
 
 
Rivington Street Corporate Finance Limited (Broker) 
Monisha VaradanTel: 020 7562 3389 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
 IOEBRGDXXBGGGCS 
 

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