HydroDec Group plc Proposed placing to raise a minimum of £10m (2049D)

TIDMHYR

RNS Number : 2049D

HydroDec Group plc

08 October 2018

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8 October 2018

Hydrodec Group plc

("Hydrodec", the "Company" or the "Group")

Proposed placing by way of an accelerated bookbuild to raise a minimum of GBP10.0 million

Proposed open offer to raise up to GBP2.8 million

Share Consolidation

Debt Conversion

Hydrodec Group plc (AIM:HYR), the cleantech industrial oil re-refining group, today announces a proposed placing by way of an accelerated bookbuild to raise a minimum of GBP10.0 million (before expenses) via a placing of New Ordinary Shares at a price of no less than 75 pence per New Ordinary Share ("Minimum Issue Price"), following a proposed 100 for 1 share consolidation ("Consolidation"), to institutional investors ("Placing").

Alongside the Placing, the Group intends to provide Qualifying Shareholders with the opportunity to subscribe for New Ordinary Shares ("Open Offer Shares") to raise up to a further GBP2.8 million before expenses ("Open Offer") (together the Placing and Open Offer are referred to as the "Capital Raising").

Andrew Black has also agreed to convert GBP4.5 million of debt owed to him by the Company (out of a total amount of approximately GBP11.3 million outstanding) into New Ordinary Shares (the "Debt Conversion"). In addition he will be repaid GBP3.0 million in cash, subject to completion of the accelerated bookbuild and conditional on Admission. The balance will either remain outstanding or be repaid, so far as possible, out of any net proceeds of the Open Offer. In any event, the Board intends reducing any of this outstanding debt to zero as soon as it considers it appropriate to do so.

Arden Partners plc ("Arden") is acting as Nominated Adviser and Sole Broker to Hydrodec. Defined terms used in this announcement have the same meaning as set out at the bottom of this announcement and in a circular expected to be published shortly following the completion of the accelerated bookbuild in respect of the Capital Raising and the Debt Conversion ("Circular").

Highlights:

-- On the back of the completion of the Board's Group-wide business review announced on 28 September, the Company intends to raise a minimum of GBP10.0 million via the Placing of New Ordinary Shares ("Placing Shares") at a price not less than the Minimum Issue Price.

-- The Group intends to use funds raised through the Placing, and the appointment of David Dinwoodie as Chief Executive Officer, to implement the outcomes from the Board's Group-wide business review: securing additional feedstock for the Company's US operations to maximise utilisation of the facility at Canton; expanding the market opportunity for Hydrodec into the US utility market and building strategic relationships with Slicker Recycling Limited ("Slicker Recycling") to maximise the commercial application of Hydrodec's patented technology. Hydrodec is the only re-refining oil company to receive American Carbon Registry approval for carbon credit awards, with the first bulk sale recently of 165,000 carbon credits, providing the Company with first mover advantage in a green, sustainable business.

-- Intention to enter into collaborative agreements with Slicker Recycling, the UK's largest collector of used lubricant oil, to apply the benefits of its platform as a logistics business with the collection of feedstock in the US, and to participate in a proposed R&D joint venture to develop new IP for lubricant base oil re-refining and potential access to the European carbon credit market.

   --    Proposed Open Offer to Qualifying Shareholders to raise up to GBP2.8 million. 
   --     Net proceeds of the Capital Raising are intended to be used for:

o the acquisition of feedstock to improve supply levels to Canton facility

o working capital injection to deliver a material improvement in utilisation rates

o funding proposed R&D collaboration with Slicker Recycling

o repayment of loans from Andrew Black to reduce debt levels and provide a strengthened balance sheet

o the expenses of the Proposals and for general working capital

-- Intention to sell the Australian business to focus management on the core opportunity in the US market and execute the Company's growth strategy.

-- September performance of Canton facility reinforces strong start to H2 2018, working collaboratively and effectively with G&S Technologies, our leading feedstock supplier.

-- Subject to distributable reserves, the Company intends to introduce a dividend payment for the full year ending 31 December 2019.

-- David Dinwoodie, who over the last three years has designed the turnaround at Slicker Recycling, to be appointed Chief Executive Officer, with Lord Moynihan becoming Executive Chairman focussing on the US utilities sales strategy.

-- The Company intends to recruit a new, full time, Chief Financial Officer as soon as practicable following Admission.

   --    Proposed consolidation of every 100 Existing Ordinary Shares into one New Ordinary Share.

-- The Minimum Issue Price represents a discount of approximately 41 per cent. to the closing price, assuming the Share Consolidation has been effected, on 5 October 2018, being the last practicable date before this announcement.

-- On Admission, and assuming the minimum amount of GBP10.0 million is raised via the accelerated bookbuild, full take up under the Open Offer at the Minimum Issue Price and the Debt Conversion, existing Hydrodec shareholders will own, in aggregate, approximately 56 per cent. of the Enlarged Share Capital.

The Circular, containing further details of the Proposals and notice of a general meeting of the Company to be convened on or around 25 October 2018 to, inter alia, pass the resolution required to implement the Proposals, is expected to be published shortly after the completion of the accelerated bookbuild and to be despatched to Shareholders as soon as practicable thereafter. Following its publication, the Circular will be available on the Group's website at www.hydrodec.com.

Lord Moynihan, Executive Chairman and Interim Chief Executive of Hydrodec, commented:

"Over the last six months, our CFO David Dinwoodie and I have finalised a detailed Group-wide business review with a clear focus on delivering a turnaround for Hydrodec. During the formative years of the Company, it developed a market leading technology yet faced many challenges; successfully recovering operationally from the fire at our facility in December 2013; relying heavily on the valued financial support of Andrew Black; and competing without the competitive advantage of carbon credits and without the working capital needed to maximise the utilisation of our plant in Canton, Ohio. Additionally, management bandwidth was spread globally and carried significant group overheads.

These challenges have been recognised and fully addressed - substantially reducing G&A costs to their lowest level in years; progressing the sale of our Australian business and pursuing a capital raise which we believe will see strong institutional support and will underpin our growth plans. Furthermore, this opportunity for change has coincided with the sale of the first tranche of carbon credits for our Canton production output. Our target is now an ambitious growth story of profitability, with a right-sizing of the balance sheet and debt burden, and an intention to introduce a dividend in respect of the 2019 financial year. A new Chief Executive has been appointed bringing a proven history of turnaround, who will work with me and the management team to execute a substantial recalibration of the business.

We believe today's Capital Raising and the future activities it supports, will enable us to deliver our strategy."

David Dinwoodie, Chief Financial Officer and Chief Executive Officer designate, commented:

"I am delighted to be appointed as CEO at this inflexion point for Hydrodec. This is a relaunch for the Company - an exciting opportunity for the business, with a strong platform for growth. With this raise we can now inject essential working capital into our core US business to broaden access to substantial volumes of reliable and consistent supplies of feedstock. This will enable us to deliver necessary improvements to our US plant utilisation; develop a targeted utility sales strategy; introduce new financial systems and a strengthened balance sheet to support competitive terms on which to buy feedstock and maximise the value of our world leading technology to a wider group of industrial oils. I will be working directly with our Chairman in the US utility market where the need for a sustainable, green product that carries carbon credits is a key component for Hydrodec to move from spot to contract acquisition of feedstock and long term sales contracts. The Company will now focus on controlling its value chain from feedstock collection to the re-refining process and sales opportunities - operationally de-risking

the business in a growth market. This is a rare example of a green, sustainable business without any government subsidies. In that context, the Company will seek to deliver substantial mid-term benefits from a R&D collaboration, creating a leading green re-refiner of transformer oils, reducing dependence on finite crude oil resources. The Board will look to develop and progress rapid paths to growth for the business, building on the recent improvements in performance we have delivered during the course of the strategic review."

 
Hydrodec Group plc                               hydrodec@vigocomms.com 
Lord Moynihan, Executive Chairman and Interim 
 Chief Executive Officer 
Arden Partners plc (Nominated Adviser and 
 Broker)                                         0207 614 5900 
Steve Douglas / Ciaran Walsh / Alex Penney 
 - Corporate Finance 
 Paul Brotherhood - Equity Sales 
Vigo Communications (PR adviser to Hydrodec)     020 7830 9700 
Patrick d'Ancona 
 Chris McMahon

Notes to Editors:

Hydrodec's technology is a proven, highly efficient, oil re-refining and chemical process initially targeted at the multi-billion US$ market for transformer oil used by the world's electricity industry. MarketsandMarkets forecasts that the global transformer oil market is expected to grow from US$1.98 billion in 2015 to US$2.79 billion by 2020 at a CAGR of 7.14% from 2015 to 2020. Spent oil is currently processed at two commercial plants with distinct competitive advantage delivered through very high recoveries (>99%), producing transformer oil that meets or substantially exceeds applicable international standards at competitive cost and without environmentally harmful emissions. The process also eliminates PCBs, a toxic additive banned under international regulations.

In 2016 Hydrodec received carbon credit approval from the American Carbon Registry ("ACR"), enabling its product to be sold with a carbon offset and creating an incremental revenue stream. The Group is now generating carbon offsets through the re-refining of used transformer oil, which would otherwise ordinarily be incinerated or disposed of in an unsustainable manner. This is a highly distinctive feature for the Group, confirming (as far as the Board is aware) Hydrodec as the only oil re-refining business in the world to receive carbon credits for its output. This is a significant endorsement of the Company's proprietary technology and standing as a leader in its field.

Hydrodec's current plants are located at Canton, Ohio, US and Bomen, New South Wales, Australia.

General Meeting and Timetable:

To enable the Capital Raising to take place and to authorise the issue of the New Ordinary Shares, a General Meeting is expected to be convened on or around 25 October 2018 at which a resolution will be voted on to enable the Proposals to proceed.

 
  Expected Timetable of Principal Events                           Date 
 Record Date for the Open Offer                          5 October 2018 
                                                    ------------------- 
 Publication and posting of the Circular, the            9 October 2018 
  Application Form and Form of Proxy 
                                                    ------------------- 
 Ex-entitlement date for the Open Offer                     8.00am on 9 
                                                           October 2018 
                                                    ------------------- 
 Open Offer Entitlements and Excess CREST Open             8:00 a.m. on 
  Offer Entitlements credited to stock accounts         10 October 2018 
  of Qualifying CREST Shareholders in CREST 
                                                    ------------------- 
 Recommended latest time and date for requesting           4.30 p.m. on 
  withdrawal of Open Offer Entitlements and Excess      18 October 2018 
  CREST Open Offer Entitlements from CREST 
                                                    ------------------- 
 Latest time and date for depositing Open Offer            3.00 p.m. on 
  Entitlements in CREST                                 19 October 2018 
                                                    ------------------- 
 Latest time and date for splitting Application            3.00 p.m. on 
  Forms (to satisfy bona fide market claims only)       22 October 2018 
                                                    ------------------- 
 Latest time and date for receipt of Forms of             10:00 a.m. on 
  Proxy to be valid at the General Meeting              23 October 2018 
                                                    ------------------- 
 Latest date for receipt of completed Application         11:00 a.m. on 
  Forms and payment in full under the Open Offer        24 October 2018 
  or settlement of relevant CREST instructions 
                                                    ------------------- 
 General Meeting                                          10:00 a.m. on 
                                                        25 October 2018 
                                                    ------------------- 
 Announcement of results of the General Meeting         25 October 2018 
  and the Open Offer 
                                                    ------------------- 
 Record date for the Share Consolidation                   6:00 p.m. on 
                                                        25 October 2018 
                                                    ------------------- 
 Admission effective and dealings expected to              8.00 a.m. on 
  commence in the New Ordinary Shares on AIM            26 October 2018 
                                                    ------------------- 
 Completion of the Debt Conversion and Share               8.00 a.m. 26 
  Consolidation                                            October 2018 
                                                    ------------------- 
 New Ordinary Shares credited to CREST stock               8.00 a.m. on 
  accounts                                              26 October 2018 
                                                    ------------------- 
 Expected date by which certificates in respect         On or prior 
  of New Ordinary Shares are to be despatched         to w/c 5 November 
  to certificated Shareholders (as applicable)              2018 
                                                    -------------------

Each of the times and dates above refer to London time and are subject to change by the Company and/or Arden. Any such change will be notified to Shareholders by an announcement on a Regulatory Information Service. The Circular will contain further details of the Proposals.

Additional Information

The Company is seeking to raise a minimum of GBP10.0 million (before expenses) (the "Minimum Placing Amount") via a placing of New Ordinary Shares with institutional investors through an accelerated bookbuild, subject to, inter alia, Shareholder approval.

Subject to the Company raising the Minimum Placing Amount, the Company will offer Qualifying Shareholders the opportunity to participate in the Open Offer.

The funds raised from the Capital Raising will be used to invest in the growth of Hydrodec of North America and repay GBP3.0 million of the existing Company debt that is due to Andrew Black (and that is not converted into New Ordinary Shares).

As part of the transaction, the Company will undertake a Share Consolidation. It is proposed that every 100 Existing Ordinary Shares be consolidated into one New Ordinary Share. Accordingly, the proportion of Existing Ordinary Shares held by each Shareholder immediately before the Share Consolidation will, save for fractional entitlements, be the same as the proportion of New Ordinary Shares held by each Shareholder immediately after the Share Consolidation, but before the other Proposals.

In addition, Andrew Black, a non-executive Director of the Company, has agreed, conditionally on completion of the Proposals, to convert GBP4.5 million of his outstanding loans made to the Company (the total outstanding amount of which, as at the date of this announcement, is approximately GBP11.3 million) into New Ordinary Shares at the Issue Price.

The Proposals will be subject to the approval of Shareholders at a General Meeting. If the resolution to approve the Proposals is duly passed, the Company will apply for the New Ordinary Shares to be admitted to trading on AIM. It is expected that Admission will take place and that dealings in the New Ordinary Shares will commence on 26 October 2018.

In addition, a separate resolution is intended to be proposed at the General Meeting to replace the authorities granted at the Company's annual general meeting held on 27 June 2018 to allow the Directors to issue additional shares in the Company.

The Directors intend to vote in favour of the Resolutions in respect of 210,570,592 Existing Ordinary Shares, representing approximately 28.2 per cent. of the Company's existing issued share capital.

Background to the Capital Raising

As previously announced, the Board has been considering a number of strategic options for the Group which have included potential acquisitions, disposals, investments and capital raisings. The Capital Raising represents the core of the strategic plan for the Group to become a leading global green transformer oil re-refining company, helping to reduce the dependence on finite resources. The Capital Raising will allow the Company to address feedstock supplies to HoNA, expand capacity and build on Hydrodec's existing proprietary technology.

The Board believes the Capital Raising will transform the Group for the following reasons:

-- Provide working capital to access feedstock for the Canton re-refinery - the Group's Canton plant has historically operated at approximately 50 per cent. capacity due to capital constraints resulting in the Company being restricted in its purchase of feedstock. More recently, the plant has increased utilisation to approximately 65 per cent. which has translated into much improved plant profitability, demonstrating the benefits possible from increasing the working capital available to the plant. The Capital Raising is intended to enable the Group to increase utilisation in the short to medium term as well as providing the opportunity for capacity expansion at the existing Canton plant in the longer term. The proposed investment out of the proceeds of the Capital Raising in working capital should enable the Group to purchase the necessary feedstock to meet demand and build up feedstock inventories. Previously, working capital constraints have prevented HoNA from purchasing the feedstock the plant required while demand for the Group's product has remained strong.

-- Proposed collaborative agreements with Slicker Recycling - the Board intends to enter into collaborative agreements with Slicker Recycling, the UK's largest collector of used lubricant oil, to apply the benefits of its platform as a logistics business with the collection of feedstock in the US, and to participate in a proposed R&D joint venture to develop new IP for lubricant base oil re-refining and potential access to the European carbon credit market. The Capital Raising will provide R&D funds for the Company in this respect. Slicker Recycling is owned and controlled by Andrew Black and his wife and any such agreements as may be entered into shall be subject to the approval of the Independent Directors and the requirements of the AIM Rules.

Information on the Company

Background

Hydrodec was incorporated in 2004 as a subsidiary of Virotec International Limited, whose business involved the application of geochemical processes within the environmental protection industry. Hydrodec was established to commercialise the Hydrodec Technology, which is an oil re-refining process designed to remove harmful contaminants, particularly polychlorinated biphenyls ("PCBs"). Today, Hydrodec is a clean-tech industrial oil re-refining group with its principal operations in Canton, Ohio. The Group also currently has operations in Australia which, as previously announced, will either be sold or re-located to the US. The Group applies proprietary technology to re-refine used and contaminated waste oil to produce, market and distribute SUPERFINE transformer oil and naphthenic base oil. The patented hydrogenation process restores the hydrocarbon molecules and eliminates PCBs. A new patent relating to the re-refining technology has recently been granted for 20 years in both Europe and the US. Additionally, the approval of the PCB treatment from the US Environmental Protection Agency ("EPA") was renewed in 2018.

The market for transformer oil is well established and a report by Markets and Markets states that it is expected to grow from $1.98 billion in 2015 to $2.79 billion by 2020 at a CAGR of 7.14 per cent. from 2015 to 2020.

The re-refining process is currently unique in generating US registered carbon credits. As far as the Directors are aware, Hydrodec is the first company in the world which, following independent verification from the American Carbon Registry, generates carbon credits from transformer oil production.

The technology supports a proven, highly efficient, oil re-refining and chemical process that has produced over 40 million gallons of re-refined transformer oil and base oil in the US. The process delivers very high recoveries (>99 per cent.), producing transformer oil that is suitable for original application and that meets or substantially exceeds international standards required for transformer oil refined directly from crude oil. It does this at competitive cost and without environmentally harmful emissions.

Hydrodec of North America

Hydrodec operates in the US through its subsidiary, Hydrodec of North America ("HoNA"). G&S Technologies ("G&S"), a leading New Jersey-based electricity transformer recovery services group, is Hydrodec's partner in HoNA having initially invested in 2013. G&S currently has a 37.5 per cent. voting interest and a 41.65 per cent. economic interest (by reference to net income) in HoNA. G&S is a leading supplier of feedstock to HoNA. As the Company increases its investment in HoNA, the Directors expect further discussions between Hydrodec and G&S to continue constructively to ensure that their respective interests are aligned and protected.

Australia

As previously announced and as part of its Group-wide strategic review, the Board has taken the decision to either sell its Australian business or relocate the plant to the US. The Board has decided that with the capacity of one train in Australia (as opposed to six in Canton, Ohio); the impact of the business on management bandwidth; the nature of the relatively small, fragmented domestic market in Australia; and the feedstock challenges experienced in recent years, Shareholder equity is better invested behind the focused US growth plans. As a result, the Board is well advanced with a formal process to sell the business in Australia whilst simultaneously commissioning a business case to consider the relocation of the plant to the US. The decision reinforces the Board's clear priority to ensure that every investment dollar is put to secure maximum returns for Shareholders. As a result, the Australian business is now accounted for as a discontinued business.

Brexit

The Directors have considered the potential impact of Brexit on the operations of the Group. The earnings of the Group's business are based within the US and, currently, Australia and, as such, the Directors believe any impact will be limited.

Key benefits

The Directors consider the key benefits of the Proposals to be:

-- The Capital Raising will provide the Group with the working capital it requires to purchase further feedstock and increase the utilisation at the Group's Canton plant in the short to medium term.

-- The Capital Raising will also allow the Group to invest in the current plant at Canton with a view to increasing existing capacity in the longer term.

-- The Capital Raising will also provide R&D funds for the Company in respect of the proposed R&D collaboration with Slicker Recycling.

Current trading and prospects for the Company

The following is an extract from the Company's interim results that were announced on 10 September 2018.

Strategic highlights

-- Strategic focus on increased feedstock supplies resulting in the US demonstrating significant performance improvements in late Q2 and post period end

-- First initiative arising from Group-wide business review leads to decision to either sell Australian operating business or relocate the plant to US - considered non-core given sub-scale market and Group's focus on US; to be treated as "discontinued business"

-- Concluded successful sale of historic carbon credits from 2009 to 2013 vintages during H1 - progress underway on selling remaining historic carbon credits up to June 2018

-- Recent new patent granted and under validation in US extended to Europe - UK, Germany and Denmark. Further European applications being progressed

-- Board's business review well developed with full outcomes currently on schedule to be announced by end of September 2018

Trading update

-- New executive management team (Lord Moynihan appointed Executive Chairman and Interim CEO and David Dinwoodie appointed Interim CFO in April 2018) complete five months in post having introduced new governance measures into Hydrodec of North America with first of regular quarterly board meetings and a strong relationship with leading feedstock suppliers and partners, G&S

-- Historical average run rate of 45 per cent. plant utilisation in Canton during the first five months of 2018 has increased to 65 per cent. in June and 69 per cent. in July with support from G&S

-- While sales volumes in H1 from continuing US business of 10.3 million litres were down on prior year (H1 2017: 13.2 million litres) driven by challenging feedstock conditions in Q1, these have been addressed and supplies continue to increase with demand for products and margins remaining strong

-- Higher margin transformer oil sales as proportion of all oil sales in US improved at 64 per cent. (H1 2017: 59 per cent.)

Financial update

-- Income from continuing operations broadly flat at US$6.6 million (H1 2017: US$6.7 million) following challenging Q1 - expected to materially improve in H2

-- Group EBITDA from continuing operations slightly improved at loss of US$161k (H1 2017: US$204k loss). Operational EBITDA at Canton up at US$799k (H1 2017: US$660k) despite the challenging conditions in Q1. Significant improvement expected in H2 with operational EBITDA at Canton for the month of July alone at US$463k and August expected to be at a similar level

-- Overall loss for the period increased to US$3.3 million (H1 2017: US$2.6 million) due to under performance from discontinued Australian operation

-- Increased loan facility from Andrew Black to pay Australian creditor balances and provide ongoing working capital support

At the time of the interim results, Lord Moynihan, Executive Chairman and Interim Chief Executive Officer of Hydrodec, commented: "This is an important period for Hydrodec and the strong start to the second half of the year has reinforced our belief in the market-leading quality of our technology, plant, product and our ability to resolve the feedstock challenges of the past. The Group-wide business review continues to be the principal assignment for David Dinwoodie and myself. We have already concluded that our Australian business does not possess sufficient materiality or near-term growth prospects to merit further capital deployment when we can deliver stronger returns, especially in North America where there is a significant market for us to grow the business. Our objective is to continue to work to put in place the platform on which to grow Hydrodec rapidly. The business review is on track and subject to Board approval is expected to be announced by the end of September. We are excited about what lies ahead for the Company and its shareholders."

Post Admission Board and Management

It is the intention that, on Admission, David Dinwoodie will be appointed Chief Executive Officer and Lord Moynihan will become Executive Chairman. The Company intends to recruit a new, full time, Chief Financial Officer as soon as practicable following Admission.

Debt Conversion

As at the date of this announcement, the Company has borrowed an aggregate amount of approximately GBP11.3 million (including accrued interest) from Andrew Black that comprises:

-- First facility established pursuant to a facility agreement dated 20 October 2015 (as amended by deeds of variation dated 30 November 2015, 11 April 2016 and 27 December 2017), for a total of GBP2.15 million at an interest rate of 10 per cent per annum (initially 7 per cent per annum; increased with effect from 27 December 2017), payable on repayment of the principal;

-- Second facility established pursuant to a facility agreement dated 30 November 2015 (as amended by deeds of variation dated 11 April 2016 and 27 December 2017) for a total of GBP4.25 million at an interest rate of 10 per cent per annum (initially 8 per cent per annum; increased with effect from 27 December 2017), payable on repayment of the principal;

-- Third facility established pursuant to a facility agreement dated 11 May 2017 (as amended by a deed of variation dated 27 December 2017) for a total of GBP0.8 million at an interest rate of 10 per cent per annum, payable on repayment of the principal; and

-- Fourth facility established pursuant to a facility agreement dated 3 April 2018 (as amended by deeds of variation dated 30 May 2018 and 7 September 2018) for a total of GBP3 million with no interest payable.

All four facility agreements (as amended) provide for a repayment date of 31 December 2018 but Andrew Black has provided the Company with the option to extend the repayment date in respect of all four facilities to 31 December 2019. Each facility would extend on its own respective terms as to interest rates and no additional fees would be payable.

As part of the Proposals, the Company and Andrew Black have agreed, conditional on Admission, to settle GBP4.5 million of the outstanding amount of these loans through the issue of New Ordinary Shares at the Issue Price and the payment of GBP3.0 in cash out of the proceeds of the Capital Raising pursuant to the Debt Conversion Agreement. Following Admission the remaining outstanding balance of these loans shall be deemed to be on the terms of the second facility except that interest shall accrue on any outstanding amount from and including 30 November 2018 at the rate of 8 per cent. per annum and, in the event of a third party gaining control of the Company, Andrew Black would be entitled to convert the then outstanding amount of such facility into New Ordinary Shares at the Issue Price.

The Debt Conversion Shares will be subject to the same security arrangements with Bank Julius Baer & Co. Ltd as those shares transferred on 26 April 2018 by Andrew Black between nominee accounts as announced by the Company on 31 May 2018.

The Debt Conversion constitutes a related party transaction under Rule 13 of the AIM Rules as Andrew Black owns approximately 26.5 per cent. of the Existing Ordinary Shares. Andrew Black is a non-executive Director of the Company and is deemed to be a related party of the Company under the AIM Rules.

The Independent Directors, having consulted with Arden Partners in its capacity as the Company's Nominated Adviser for the purposes of the AIM Rules, consider the terms of the Debt Conversion to be fair and reasonable insofar as Shareholders are concerned.

Share Consolidation

Under the Share Consolidation it is proposed that every 100 Existing Ordinary Shares be consolidated into one New Ordinary Share. Accordingly, the proportion of Existing Ordinary Shares held by each Shareholder immediately before the Share Consolidation will, save for fractional entitlements (which are discussed further below), be the same as the proportion of New Ordinary Shares held by each Shareholder immediately after the Share Consolidation but before the other Proposals.

The New Ordinary Shares will carry equivalent rights to the Existing Ordinary Shares. In the event that the number of Existing Ordinary Shares held by a Shareholder is not exactly divisible by one hundred, the Share Consolidation will generate an entitlement to a fraction of a New Ordinary Share.

Any New Ordinary Shares in respect of which there are such fractional entitlements will be aggregated and sold in the market for the best price reasonably obtainable. Given the small economic value of such fractional entitlements, the Board is of the view that the distribution of the sale proceeds to the relevant Shareholders would result in a disproportionate cost to the Company. Accordingly, such sale proceeds will be retained for the benefit of the Company. Based on a price per Ordinary Share of 1.2265 pence (being the volume weighted average price traded during the five trading days preceding the date of this announcement), the maximum value of the fractional entitlement applicable to any individual shareholding would be 121.4235 pence.

Any Shareholder holding fewer than one hundred Ordinary Shares at the Record Date will cease to be a Shareholder.

The Board believes that the Share Consolidation will result in a more appropriate number of shares in issue for a company of Hydrodec's size in the UK market. The Share Consolidation may also help to make the Company's shares more attractive to investors and may result in a narrowing of the bid/offer spread, thereby improving liquidity.

The entitlements to Ordinary Shares of holders of share options or other instruments convertible into Ordinary Shares will be adjusted in accordance with their terms to reflect the Share Consolidation.

Details of the Open Offer

The Board considers it important that Qualifying Shareholders have an opportunity to participate in the Capital Raising on the same terms as investors in the Placing. Subject to certain conditions, the Company will invite Qualifying Shareholders to subscribe Open Offer Shares at the Issue Price to raise up to GBP2.8 million in aggregate. Further information on the Open Offer will be set out in the Circular and, for Qualifying Shareholders holding their Existing Ordinary Shares in certificated form, the accompanying Application Form.

Conditions and other information relating to the Capital Raising

The Placing, the Open Offer and the Debt Conversion are conditional, inter alia, upon:

   a)    the passing of the necessary resolution at the General Meeting to implement the Proposals;

b) the Placing Agreement becoming unconditional in all respects (save for Admission occurring) and not having been terminated in accordance with its terms; and

c) Admission becoming effective by no later than 8.00 a.m. on 26 October 2018 (or such later time and/or date as the Company and Arden may agree (being not later than 8.30 a.m. on 14 November 2018)).

Accordingly, if such conditions are not satisfied or, if applicable, waived, none of the Proposals will proceed.

The Capital Raising is not underwritten by Arden Partners or any other person.

Use of proceeds

The minimum gross proceeds of the Placing of approximately GBP10.0 million are intended to be applied as follows:

-- invest in working capital for the existing Hydrodec operations in North America to maximise utilisation

   --     fund the upgrade of the North American plant to increase capacity 
   --     fund the proposed R&D collaboration with Slicker Recycling

-- repay GBP3.0 million of the outstanding debt balances to Andrew Black following the Debt Conversion

   --     cover the expenses of the Proposals and general working capital

Settlement and dealings

The New Ordinary Shares will be in registered form and will be capable of being held in either certificated or uncertificated form (i.e. in CREST). Application will be made for the simultaneous cancellation of the Existing Ordinary Shares from CREST and admission of the New Ordinary Shares to CREST and their admission to trading on AIM. Accordingly, following Admission, settlement of transactions in the Ordinary Shares may take place within the CREST system if a Shareholder so wishes. Shareholders who wish to receive and retain share certificates are able to do so.

CREST is a paperless settlement system enabling securities to be evidenced otherwise than by certificate and transferred otherwise than by written instrument in accordance with the CREST Regulations. The Articles permit the holding of New Ordinary Shares in CREST. The Company will apply for the Enlarged Share Capital to be admitted to CREST from the date of Admission.

The ISIN number of the New Ordinary Shares is GB00BFD2QZ40. The TIDM is HYR.

Lock in agreement

Under a lock-in agreement dated 8 October 2018 and made between (1) the Company (2) Andrew Black and (3) Arden Partners, Andrew Black has undertaken to the Company and Arden Partners (subject to certain limited exceptions including transfers to family members or to trustees for their benefit and disposals by way of acceptance of a recommended takeover offer for the entire issued share capital of the Company), not to dispose of the New Ordinary Shares held by him following Admission or any other securities in exchange for or convertible into, or substantially similar to, New Ordinary Shares (or any interest in them or in respect of them) at any time prior to the twelve month anniversary of Admission.

Furthermore, Andrew Black has also undertaken to the Company and Arden Partners (subject to certain exceptions) not to dispose of his New Ordinary Shares for a period expiring 24 months after Admission otherwise than through Arden Partners (on a best execution only basis) for such time as it shall remain broker to the Company with a view to maintaining an orderly market.

These arrangements will not apply to the extent that any New Ordinary Shares are subject to enforcement of the security in favour of Julius Baer & Co. Ltd referred to under the heading "Debt Conversion".

Share Options

The Company has in place an employee share option scheme as adopted on 9 June 2015. There are currently 16 million options over Existing Ordinary Shares outstanding under this scheme.

The remuneration committee of the Board ("Remuneration Committee") intends to undertake a review of the current incentive arrangements applicable to the Group's senior executives (including the executive Directors) following Admission to ensure they remain appropriate to the revised prospects of the Company following the completion of the Proposals. The Remuneration Committee anticipates that due to the position of existing share option grants, future incentives may include the award of new Options (in consideration of the cancellation of existing Options) subject to an overall cap of outstanding Options of 10 per cent. of the Enlarged Share Capital, pursuant to the share option scheme.

Dividend policy

Subject to available distributable reserves, the Company intends to introduce a dividend payment for the full year ending 31 December 2019.

IMPORTANT NOTICE

This announcement is released by Hydrodec Group plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR") it is disclosed in accordance with the Group's obligations under Article 17 of MAR.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Group by Michael Preen, Company Secretary.

No action has been taken by the Group or Arden, or any of their respective affiliates, that would, or which is intended to, permit a public offer of the New Ordinary Shares in any jurisdiction or the possession or distribution of this announcement or any other offering or publicity material relating to the New Ordinary Shares in any jurisdiction where action for that purpose is required. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions. Persons into whose possession this announcement comes shall inform themselves about, and observe, such restrictions.

No prospectus has been made available in connection with the matters contained in this announcement and no such prospectus is required (in accordance with the Prospectus Directive (as defined below)) to be published.

The New Ordinary Shares to be issued pursuant to the Debt Conversion and Capital Raising will not be admitted to trading on any stock exchange other than the AIM market operated by the London Stock Exchange.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.

Information for Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the New Ordinary Shares have been subject to a product approval process, which has determined that such securities are: (i) compatible with an end target market of investors who meet the criteria of retail and professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment").

Notwithstanding the Target Market Assessment, distributors should note that: the price of the New Ordinary Shares may decline and investors could lose all or part of their investment; the New Ordinary Shares offer no guaranteed income and no capital protection; and an investment in New Ordinary Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Proposals. Furthermore, it is noted that, notwithstanding the Target Market Assessment, Arden will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the New Ordinary Shares pursuant to the Capital Raising.

Each distributor is responsible for undertaking its own Target Market Assessment in respect of the New Ordinary Shares and determining appropriate distribution channels.

IMPORTANT NOTICES

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT (INCLUDING THE APPIX) AND THE TERMS AND CONDITIONS SET OUT HEREIN (TOGETHER, THIS "ANNOUNCEMENT") ARE DIRECTED ONLY AT PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING AND DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESS AND WHO HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND ARE: (1) IF IN A MEMBER STATE OF THE EUROPEAN ECONOMIC AREA ("EEA"), QUALIFIED INVESTORS AS DEFINED IN ARTICLE 2(1)(e) OF DIRECTIVE 2003/71/EC AS AMED, INCLUDING BY THE 2010 PROSPECTUS DIRECTIVE AMING DIRECTIVE (DIRECTIVE 2010/73/EC) AND INCLUDING ANY RELEVANT IMPLEMENTING DIRECTIVE OR MEASURE IN ANY RELEVANT MEMBER STATE (THE "PROSPECTUS DIRECTIVE"); (2) IF IN THE UNITED KINGDOM, QUALIFIED INVESTORS AS DEFINED IN SECTION 86 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 ("FSMA") WHO (A) FALL WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMED (THE "ORDER") (INVESTMENT PROFESSIONALS) OR (B) FALL WITHIN ARTICLE 49(2)(a) TO (d) (HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC.) OF THE ORDER; OR (3) PERSONS TO WHOM IT MAY OTHERWISE LAWFULLY BE COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").

THIS ANNOUNCEMENT AND THE INFORMATION IN IT MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. PERSONS DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS ANNOUNCEMENT DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN HYDRODEC GROUP PLC.

THE NEW ORDINARY SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMED (THE "SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR JURISDICTION OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE NEW ORDINARY SHARES ARE BEING OFFERED AND SOLD ONLY OUTSIDE OF THE UNITED STATES IN "OFFSHORE TRANSACTIONS" WITHIN THE MEANING OF, AND IN ACCORDANCE WITH, REGULATION S UNDER THE SECURITIES ACT AND OTHERWISE IN ACCORDANCE WITH APPLICABLE LAWS. NO PUBLIC OFFERING OF THE NEW ORDINARY SHARES IS BEING MADE IN THE UNITED STATES OR ELSEWHERE.

THIS ANNOUNCEMENT (INCLUDING THE APPIX) AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

The distribution of this Announcement and/or the Placing and/or Open Offer and/or issue of the New Ordinary Shares in certain jurisdictions may be restricted by law. No action has been taken by the Company, Arden or any of their respective affiliates, agents, directors, officers or employees that would permit an offer of the New Ordinary Shares or possession or distribution of this Announcement or any other offering or publicity material relating to such New Ordinary Shares in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company and Arden to inform themselves about and to observe any such restrictions.

This Announcement or any part of it does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States (including its territories and possessions, any state of the United States and the District of Columbia (the "United States" or the "US")), Australia, Canada, Japan or the Republic of South Africa or any other jurisdiction in which the same would be unlawful. No public offering of the New Ordinary Shares is being made in any such jurisdiction.

All offers of the New Ordinary Shares will be made pursuant to an exemption under the Prospectus Directive from the requirement to produce a prospectus. In the United Kingdom, this Announcement is being directed solely at persons in circumstances in which section 21(1) of the Financial Services and Markets Act 2000 (as amended) does not apply.

The New Ordinary Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Capital Raising or the accuracy or adequacy of this Announcement. Any representation to the contrary is a criminal offence in the United States. The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada, no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; the relevant clearances have not been, and will not be, obtained for the South Africa Reserve Bank or any other applicable body in the Republic of South Africa in relation to the New Ordinary Shares and the New Ordinary Shares have not been, nor will they be, registered under or offered in compliance with the securities laws of any state, province or territory of Australia, Canada, Japan or the Republic of South Africa. Accordingly, the New Ordinary Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into Australia, Canada, Japan, the Republic of Ireland or the Republic of South Africa or any other jurisdiction outside the United Kingdom.

Persons (including, without limitation, nominees and trustees) who have a contractual right or other legal obligations to forward a copy of this Announcement should seek appropriate advice before taking any action.

By participating in the Placing, each person who is invited to and who chooses to participate in the Placing (a "Placee") by making an oral and legally binding offer to acquire Placing Shares will be deemed to have read and understood this Announcement in its entirety, to be participating, making an offer and acquiring Placing Shares on the terms and conditions contained herein and to be providing the representations, warranties, indemnities, acknowledgements and undertakings contained in the Appendix.

This announcement does not identify or suggest, or purport to identify or suggest, the risks (direct or indirect) that may be associated with an investment in the New Ordinary Shares. Any investment decision to buy New Ordinary Shares in the Capital Raising must be made solely on the basis of information contained in the Circular in connection with the Debt Conversion and Capital Raising and the proposed admission of the Company's ordinary shares to trading on AIM, a market operated by the London Stock Exchange. Copies of the Circular are available from the Company's website at www.hydrodec.com.

This Announcement may contain "forward-looking statements" with respect to certain of the Company's plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "seek", "may", "could", "outlook" or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the control of the Company, including amongst other things, United Kingdom domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, the effect of competition, inflation, deflation, the timing effect and other uncertainties of future acquisitions or combinations within relevant industries, the effect of tax and other legislation and other regulations in the jurisdictions in which the Company and its respective affiliates operate, the effect of volatility in the equity, capital and credit markets on the Company's profitability and ability to access capital and credit, a decline in the Company's credit ratings; the effect of operational risks; and the loss of key personnel. As a result, the actual future financial condition, performance and results of the Company may differ materially from the plans, goals and expectations set forth in any forward-looking statements. Any forward-looking statements made in this Announcement by or on behalf of the Company speak only as of the date they are made. Except as required by applicable law or regulation, the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this Announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

Arden is authorised and regulated by the FCA in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Capital Raising and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Capital Raising and Admission and Arden will not be responsible to anyone (including any Placees) other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Capital Raising or any other matters referred to in this Announcement.

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Arden or by any of its affiliates or agents as to, or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefor is expressly disclaimed.

No statement in this Announcement or in any previous announcement or in any previous presentation issued by the Company was or is intended to be a profit forecast or estimate, and no statement in this Announcement nor in any previous announcement or in any previous presentation issued by the Company should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

The price of shares and any income expected from them may go down as well as up and investors may not get back the full amount invested upon disposal of the shares. Past performance is no guide to future performance, and persons needing advice should consult an independent financial adviser.

The Placing Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than the London Stock Exchange.

Neither the content of the Company's website (or any other website) nor any website accessible by hyperlinks on the Company's website (or any other website) is incorporated in, or forms part of, this Announcement.

This Announcement has been issued by, and is the sole responsibility, of the Company. No representation or warranty express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Arden or by any of its respective affiliates or agents as to or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

APPIX - TERMS AND CONDITIONS OF THE PLACING

IMPORTANT INFORMATION FOR PLACEES ONLY

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT HEREIN ARE DIRECTED ONLY AT PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING AND DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESS AND WHO HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND ARE: (1) IF IN A MEMBER STATE OF THE EUROPEAN ECONOMIC AREA ("EEA"), QUALIFIED INVESTORS AS DEFINED IN ARTICLE 2(1)(e) OF DIRECTIVE 2003/71/EC AS AMED, INCLUDING BY THE 2010 PROSPECTUS DIRECTIVE AMING DIRECTIVE (DIRECTIVE 2010/73/EC) AND INCLUDING ANY RELEVANT IMPLEMENTING DIRECTIVE OR MEASURE IN ANY RELEVANT MEMBER STATE (THE "PROSPECTUS DIRECTIVE"); (2) IF IN THE UNITED KINGDOM, QUALIFIED INVESTORS AS DEFINED IN SECTION 86 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 ("FSMA") WHO (A) FALL WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMED (THE "ORDER") (INVESTMENT PROFESSIONALS) OR (B) FALL WITHIN ARTICLE 49(2)(a) TO (d) (HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC.) OF THE ORDER; OR (3) PERSONS TO WHOM IT MAY OTHERWISE LAWFULLY BE COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").

THE PLACING SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMED (THE "SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR JURISDICTION OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE PLACING SHARES ARE BEING OFFERED AND SOLD ONLY OUTSIDE OF THE UNITED STATES IN "OFFSHORE TRANSACTIONS" WITHIN THE MEANING OF, AND IN ACCORDANCE WITH, REGULATION S UNDER THE SECURITIES ACT ("REGULATION S") AND OTHERWISE IN ACCORDANCE WITH APPLICABLE LAWS. NO PUBLIC OFFERING OF THE PLACING SHARES IS BEING MADE IN THE UNITED STATES OR ELSEWHERE.

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

The distribution of this Announcement and/or the Placing and/or issue of the Placing Shares in certain jurisdictions may be restricted by law. No action has been taken by the Company, Arden or any of their respective affiliates, agents, directors, officers or employees that would permit an offer of the Placing Shares or possession or distribution of this Announcement or any other offering or publicity material relating to such Placing Shares in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company and Arden to inform themselves about and to observe any such restrictions.

This Announcement or any part of it does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States (including its territories and possessions, any state of the United States and the District of Columbia (the "United States" or the "US")), Australia, Canada, Japan or the Republic of South Africa or any other jurisdiction in which the same would be unlawful. No public offering of the Placing Shares is being made in any such jurisdiction.

All offers of the Placing Shares will be made pursuant to an exemption under the Prospectus Directive from the requirement to produce a prospectus. In the United Kingdom, this Announcement is being directed solely at persons in circumstances in which section 21(1) of the Financial Services and Markets Act 2000 (as amended) does not apply.

The Placing Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of this Announcement. Any representation to the contrary is a criminal offence in the United States. The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada, no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; the relevant clearances have not been, and will not be, obtained for the South Africa Reserve Bank or any other applicable body in the Republic of South Africa in relation to the Placing Shares and the Placing Shares have not been, nor will they be, registered under or offered in compliance with the securities laws of any state, province or territory of Australia, Canada, Japan or the Republic of South Africa. Accordingly, the Placing Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into Australia, Canada, Japan, the Republic of Ireland or the Republic of South Africa or any other jurisdiction outside the United Kingdom.

Arden is authorised and regulated by the FCA in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Placing and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Placing and Admission and Arden will not be responsible to anyone (including any Placees) other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any other matters referred to in this Announcement.

The Placing Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than the London Stock Exchange.

EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL, REGULATORY, TAX, BUSINESS AND RELATED ASPECTS OF A SUBSCRIPTION FOR PLACING SHARES.

A Circular explaining the background to and reasons for the Placing and containing the Notice of General Meeting is expected to be posted to shareholders following the close of the Bookbuilding Process. A copy of the Circular and Notice of General Meeting will thereafter be made available on the Company's website, www.hydrodec.com

Details of the Placing Agreement and the Placing Shares

The Company has today entered into the Placing Agreement with Arden. Pursuant to the Placing Agreement, Arden has, subject to the terms and conditions set out in the agreement, agreed to use reasonable endeavours, as agent of the Company, to procure subscribers for the Placing Shares pursuant to the Bookbuilding Process described in this Announcement and as set out in the Placing Agreement.

The Placing is conditional on the Placing Agreement becoming unconditional and not being terminated in accordance with its terms.

The Placing is not being underwritten.

The Placing Shares will, when issued, be subject to the articles of association of the Company, be credited as fully paid and rank pari passu in all respects with each other and with the New Ordinary Shares resulting from the Share Consolidation, including the right to receive all dividends and other distributions declared, made or paid in respect of the New Ordinary Shares after Admission.

The Placing Shares will be issued free of any encumbrance, lien or other security interest.

Application for Admission

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. Subject to the satisfaction or waiver of the conditions of the Placing Agreement (the "Conditions"), it is expected that Admission will take place and dealings in the Placing Shares will commence on AIM on or around 8.00 a.m. on 26 October 2018.

Bookbuilding Process

Commencing today, Arden will be conducting an accelerated bookbuilding process to determine demand for participation in the Placing by Placees. This Announcement gives details of the terms and conditions of, and the mechanics of participation in, the Placing. However, Arden will be entitled to effect the Placing by such alternative method to the Bookbuilding Process as it may, after consultation with the Company, determine. No commissions will be paid by or to Placees in respect of any participation in the Placing or subscription for Placing Shares.

Participation in, and principal terms of, the Bookbuilding Process

Participation in the Placing is by invitation only and will only be available to persons who may lawfully be, and are, invited to participate by Arden. Arden and Arden Affiliates are entitled to participate as Placees in the Bookbuilding Process.

The Bookbuilding Process will establish the number of Placing Shares to be issued pursuant to the Placing and the Issue Price which will be not less than 75 pence per Ordinary Share.

The book will open with immediate effect. The Bookbuilding Process is expected to close not later than 4.30 p.m. on 8 October 2018, but may be closed at such earlier or later time as Arden may, in its absolute discretion (after consultation with the Company), determine. A further announcement will be made following the close of the Bookbuilding Process detailing the number of Placing Shares to be subscribed for by the Placees at the Issue Price (the "Placing Results Announcement").

A bid in the Bookbuilding Process will be made on the terms and conditions in this Announcement and will be legally binding on the Placee on behalf of which it is made and, except with Arden's consent, will not be capable of variation or revocation after the close of the Bookbuilding Process.

A Placee who wishes to participate in the Bookbuilding Process should communicate its bid by telephone to its usual sales contact at Arden. Each bid should state the number of Placing Shares which the prospective Placee wishes to subscribe for at the Issue Price. If successful, Arden will re-contact and confirm orally to Placees following the close of the Bookbuilding Process the size of their respective allocations and a trade confirmation will be despatched as soon as possible thereafter. Arden's oral confirmation of the size of allocations and each Placee's oral commitments to accept the same will constitute an irrevocable legally binding agreement in favour of the Company and Arden pursuant to which each such Placee will be required to accept the number of Placing Shares allocated to the Placee at the Issue Price and otherwise on the terms and subject to the conditions set out herein and in accordance with the Company's articles of association. Each Placee's allocation and commitment will be evidenced by a trade confirmation issued by Arden to such Placee. The terms of this Appendix will be deemed incorporated in that trade confirmation.

Arden reserves the right to scale back the number of Placing Shares to be subscribed by any Placee in the event that the Placing is oversubscribed. Arden also reserves the right not to accept offers to subscribe for Placing Shares or to accept such offers in part rather than in whole. The acceptance and, if applicable, scaling back of offers shall be at the absolute discretion of Arden.

Each Placee's obligations will be owed to the Company and to Arden. Following the oral confirmation referred to above, each Placee will also have an immediate, separate, irrevocable and binding obligation, owed to the Company and Arden, as agent of the Company, to pay to Arden (or as Arden may direct) in cleared funds an amount equal to the product of the Issue Price and the number of Placing Shares allocated to such Placee.

To the fullest extent permissible by law, none of Arden, any subsidiary of Arden, any branch, affiliate or associated undertaking of Arden or of any such subsidiary nor any of their respective directors, officers, employees, agents or advisers (each an "Arden Affiliate") nor any person acting on their behalf shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, none of Arden, any Arden Affiliate nor any person acting on their behalf shall have any liability (including, to the extent legally permissible, any fiduciary duties), in respect of its conduct of the Bookbuilding Process or of such alternative method of effecting the Placing as Arden may determine.

All obligations of Arden under the Placing will be subject to fulfillment of the conditions referred to in this Announcement including without limitation those referred to below under "Conditions of the Placing".

Conditions of the Placing

The Placing is conditional upon the Placing Agreement becoming unconditional and not having been terminated in accordance with its terms.

The obligations of Arden under the Placing Agreement are conditional, among other things, upon:

1. the warranties on the part of the Company contained in the Placing Agreement being true and accurate and not misleading on and as of the date of the Placing Agreement and at Admission of the Placing Shares;

2. the performance by the Company of its obligations under the Placing Agreement to the extent that they fall to be performed prior to Admission;

3. the obligations of Arden not having been terminated (as described below under "Right to terminate under the Placing Agreement"); and

4. Admission of the Placing Shares occurring not later than 8.00 a.m. on 26 October 2018 or such later time and/or date as Arden and the Company may agree (but in any event not later than 8.30 a.m. on 14 November 2018).

If (a) the Conditions of the Placing are not fulfilled (or to the extent permitted under the Placing Agreement waived by Arden), or (b) the Placing Agreement is terminated in the circumstances specified below, the Placing will lapse and each Placee's rights and obligations hereunder shall cease and determine at such time and no claim may be made by a Placee in respect thereof. None of Arden, any Arden Affiliate, the Company, nor any subsidiary of the Company, nor any branch, affiliate or associated undertaking of any such company nor any of their respective directors, officers and employees (each a "Hydrodec Affiliate") shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision it may make as to whether or not to waive or to extend the time and/or date for the satisfaction of any condition in the Placing Agreement or in respect of the Placing generally.

By participating in the Placing, each Placee agrees that Arden's rights and obligations in respect of the Placing terminate, inter alia, in the circumstances described below under "Right to terminate under the Placing Agreement".

Right to terminate under the Placing Agreement

Arden has the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event of a breach of the warranties given to Arden in the Placing Agreement, the failure of the Company to comply with certain of its obligations under the Placing Agreement, the occurrence of a force majeure event or a material adverse change in the financial or trading position or prospects of any member of the Group.

By participating in the Placing, each Placee agrees with Arden that the exercise by Arden of any right of termination or other discretion under the Placing Agreement shall be within the absolute discretion of Arden and that Arden need not make any reference to the Placees in this regard and that, to the fullest extent permitted by law, neither the Company, Arden, any Arden Affiliate nor any Hydrodec Affiliate shall have any liability whatsoever to the Placees in connection with any such exercise or failure to so exercise.

No Prospectus

No offering document or prospectus has been or will be prepared in relation to the Placing and no such prospectus is required (in accordance with the Prospectus Directive) to be published or submitted to be approved by the FCA and Placees' commitments will be made solely on the basis of the information contained in this Announcement.

Each Placee, by accepting a participation in the Placing, agrees that the content of this Announcement is exclusively the responsibility of the Company and confirms to Arden and the Company that it has neither received nor relied on any information, representation, warranty or statement made by or on behalf of Arden (other than the amount of the relevant Placing participation in the oral confirmation given to Placees and the trade confirmation referred to below), any Arden Affiliate, any persons acting on its or their behalf or the Company or any Hydrodec Affiliate and none of Arden, any Arden Affiliate, any persons acting on their behalf, the Company, any Hydrodec Affiliate nor any persons acting on their behalf will be liable for the decision of any Placee to participate in the Placing based on any other information, representation, warranty or statement which the Placee may have obtained or received (regardless of whether or not such information, representation, warranty or statement was given or made by or on behalf of any such persons). By participating in the Placing, each Placee acknowledges to and agrees with Arden for itself and as agent for the Company that, except in relation to the information contained in this Announcement, it has relied on its own investigation of the business, financial or other position of the Company in deciding whether to participate in the Placing. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation.

Registration and settlement

Settlement of transactions in the Placing Shares following Admission will take place within the CREST system, using the delivery versus payment mechanism, subject to certain exceptions. Arden reserves the right to require settlement for and delivery of the Placing Shares to Placees by such other means as Arden may deem necessary, including, without limitation, if delivery or settlement is not possible or practicable within the CREST system within the timetable set out in this Announcement or would not be consistent with the regulatory requirements in the Placee's jurisdiction.

The expected timetable for settlement will be as follows:

 
Trade Date                       24 October 2018 
Settlement Date                  26 October 2018 
ISIN Code                        GB00BFD2QZ40 
SEDOL                            BFD2QZ4 
Deadline for input instruction   3.00 p.m. on 25 October 2018 
 into CREST 
CREST ID for Arden               601

Each Placee allocated Placing Shares in the Placing will be sent a trade confirmation stating the number of Placing Shares allocated to it, the Issue Price, the aggregate amount owed by such Placee to Arden and settlement instructions. Placees should settle against the Arden CREST ID shown above. It is expected that such trade confirmation will be despatched on the expected trade date shown above. Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with either the standing CREST or certificated settlement instructions which it has in place with Arden.

It is expected that settlement will take place on the Settlement Date shown above on a delivery versus payment basis in accordance with the instructions set out in the trade confirmation unless otherwise notified by Arden.

Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of two percentage points above the base rate of HSBC Bank Plc.

Each Placee is deemed to agree that if it does not comply with these obligations, Arden may sell any or all of the Placing Shares allocated to the Placee on such Placee's behalf and retain from the proceeds, for Arden's own account and profit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The Placee will, however, remain liable for any shortfall below the aggregate amount owed by such Placee and it may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of such Placing Shares on such Placee's behalf.

If Placing Shares are to be delivered to a custodian or settlement agent, the Placee should ensure that the trade confirmation is copied and delivered immediately to the relevant person within that organisation.

Insofar as Placing Shares are registered in the Placee's name or that of its nominee or in the name of any person for whom the Placee is contracting as agent or that of a nominee for such person, such Placing Shares will, subject as provided below, be so registered free from any liability to any levy, stamp duty or stamp duty reserve tax. If there are any circumstances in which any other stamp duty or stamp duty reserve tax is payable in respect of the issue of the Placing Shares, neither Arden nor the Company shall be responsible for the payment thereof. Placees will not be entitled to receive any fee or commission in connection with the Placing.

Representations, warranties and terms

By participating in the Placing, each Placee (and any person acting on such Placee's behalf):

1. represents and warrants that it has read and understood this Announcement in its entirety (including this Appendix) and acknowledges that its participation in the Placing and the issue of the Placing Shares will be governed by the terms of this Announcement (including this Appendix);

2. acknowledges that no prospectus or offering document has been or will be prepared in connection with the Placing and it has not received and will not receive a prospectus or other offering document in connection with the Bookbuilding Process, the Placing or the Placing Shares;

3. agrees to indemnify on an after-tax basis and hold harmless each of the Company, Arden, Arden Affiliates and Hydrodec Affiliates and any person acting on their behalf from any and all costs, losses, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings in this Announcement and further agrees that the provisions of this Announcement shall survive after completion of the Placing;

4. acknowledges that the Placing Shares will be admitted to trading on AIM and the Company is therefore required to publish and has published certain business and financial information in accordance with the AIM Rules and MAR and other applicable laws and regulations (the "Exchange Information"), which includes certain business and financial and the Company's announcements and circulars published in the past 12 months, and that the Placee is able to obtain or access this Exchange Information without undue difficulty and is aware of the contents of the Exchange Information;

5. acknowledges that none of Arden, any Arden Affiliate or any person acting on their behalf has provided, and will not provide, it with any material or information regarding the Placing Shares or the Company; nor has it requested any of Arden, nor any Arden Affiliate nor any person acting on their behalf to provide it with any such material or information;

6. acknowledges that (i) none of Arden or any Arden Affiliate or any person acting on behalf of any of them is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that participation in the Placing is on the basis that it is not and will not be a client of Arden and that Arden does not have any duties or responsibilities to it (or any person acting on behalf of a Placee) for providing the protections afforded to its clients or for providing advice in relation to the Placing nor in respect of any representations, warranties, agreements, undertakings or indemnities contained in the Placing Agreement nor for the exercise or performance of any of its rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right, and (ii) neither it nor, as the case may be, its clients expect Arden to have any duties or responsibilities to it similar or comparable to the duties of "best execution" and "suitability" imposed by the Conduct of Business Sourcebook contained in the FCA's Handbook of Rules and Guidance, and that Arden is not acting for it or its clients, and that Arden will not be responsible to any person other than the Company for providing protections afforded to its clients;

7. acknowledges that the content of this Announcement is exclusively the responsibility of the Company and that none of Arden, nor any Arden Affiliate nor any person acting on their behalf will be responsible for or shall have any liability for any information, representation or statement relating to the Company contained in this Announcement or any information previously published by or on behalf of the Company and none of Arden, nor any Arden Affiliate nor any person acting on their behalf will be liable for any Placee's decision to participate in the Placing based on any information, representation or statement contained in this Announcement or otherwise. Each Placee further represents, warrants and agrees that the only information on which it is entitled to rely and on which such Placee has relied in committing to subscribe for the Placing Shares is contained in this Announcement, such information being all that it deems necessary to make an investment decision in respect of the Placing Shares, and that it has relied on its own investigation with respect to the Placing Shares and the Company in connection with its decision to subscribe for the Placing Shares and acknowledges that it is not relying on any other information whatsoever and in particular it is not relying on any investigation that Arden, any Arden Affiliate or any person acting on their behalf may have conducted with respect to the Placing Shares or the Company and none of such persons has made any representations to it, express or implied, with respect thereto;

8. acknowledges: (i) it has knowledge and experience in financial, business and international investment matters as is required to evaluate the merits and risks of subscribing for the Placing Shares; (ii) that it is experienced in investing in securities of this nature and is aware that it may be required to bear, and is able to bear, the economic risk of, and is able to sustain, a complete loss in connection with the Placing; (iii) it has had sufficient time to consider and conduct its own investigation in connection with its subscription for the Placing Shares, including all tax, legal and other economic considerations; and (iv) it has relied upon its own examination of, and due diligence on, the Company, and the terms of the Placing, including the merits and risks involved;

9. unless paragraph 10 applies, represents and warrants that it has neither received nor relied on any inside information for the purposes of MAR and section 56 of the Criminal Justice Act 1993 (CJA) in relation to the Company or its participation in the Placing;

10. it acknowledges and agrees that, if it has received any inside information (for the purpose of MAR and section 56 of the CJA) in relation to the Company and its securities in advance of the Placing, it has consented to receive inside information for the purposes of MAR and the CJA and it acknowledges that it was an insider or a person who has received a market sounding for the purpose of such legislation and it confirms that it has not: (a) dealt (or attempted to deal) in the securities of the Company (or cancelled or amended an order in relation thereto); (b) encouraged, recommended or induced another person to deal in the securities of the Company (or to cancel or amend an order in relation thereto); (c) unlawfully disclosed inside information to any person, in each case, prior to the information being made publicly available;

12. acknowledges that it is not entitled to rely on any information (including, without limitation, any information contained in any management presentation given in relation to the Placing) other than that contained in this Announcement (including this Appendix) and in any Exchange Information and represents and warrants that it has not relied on any representations relating to the Placing, the Placing Shares or the Company other than the information contained in this Announcement or in any Exchange Information;

13. acknowledges that: it has not relied on any information relating to the Company contained in any research reports prepared by Arden or any Arden Affiliate or any person acting on their behalf and understands that (i) none of Arden, nor any Arden Affiliate nor any person acting on their behalf has or shall have any liability for any public information relating to the Company or otherwise or any representation; (ii) none of Arden, nor any Arden Affiliate, nor any person acting on their behalf has or shall have any liability for any additional information that has otherwise been made available to such Placee, whether at the date of publication, the date of this Announcement or otherwise; and that (iii) none of Arden, nor any Arden Affiliate, nor any person acting on their behalf makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of such information, whether at the date of publication, the date of this Announcement or otherwise;

14. represents and warrants that (i) it is permitted to acquire the Placing Shares for which it is subscribing under the laws and regulations of all relevant jurisdictions which apply to it; (ii) it has fully observed such laws and regulations and obtained all such governmental and other guarantees and other consents and authorities which may be required or necessary in connection with its subscription for Placing Shares and its participation in the Placing and has complied with all other necessary formalities in connection therewith; (iii) it has all necessary capacity to commit to participation in the Placing and to perform its obligations in relation thereto and will honour such obligations; (iv) it has paid any issue, transfer or other taxes due in connection with its subscription for Placing Shares and its participation in the Placing in any territory; and (v) it has not taken any action which will or may result in the Company, Arden or any Arden Affiliate or Hydrodec Affiliate or any person acting on their behalf being in breach of the legal and/or regulatory requirements of any territory in connection with the Placing;

15. represents and warrants that it understands that the Placing Shares have not been and will not be registered under the Securities Act or under the securities laws of any state or other jurisdiction of the United States and are not being offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act;

16. represents and warrants that its acquisition of the Placing Shares has been or will be made in an "offshore transaction" as defined in and pursuant to Regulation S;

17. represents and warrants that it will not offer or sell, directly or indirectly, any of the Placing Shares in the United States except in accordance with Regulation S or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act;

18. represents and warrants that, if it is a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, the Placing Shares purchased by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a member state of the European Economic Area which has implemented the Prospectus Directive other than "qualified investors" as defined in Article 2.1(e) of the Prospectus Directive, or in circumstances in which the prior consent of Arden has been given to such an offer or resale;

19. represents and warrants that it has not offered or sold and will not offer or sell any Placing Shares to the public in any member state of the European Economic Area except in circumstances falling within Article 3(2) of the Prospectus Directive which do not result in any requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive;

20. represents and warrants that it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) relating to the Placing Shares in circumstances in which it is permitted to do so pursuant to section 21 of FSMA;

21. represents and warrants that it has complied and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the Placing Shares in, from or otherwise involving, the United Kingdom;

22. represents and warrants that it has complied with its obligations; under the CJA and MAR, and, in connection with the laws of all relevant jurisdictions which apply to it, it has complied, and will fully comply, with all such laws (including where applicable, the Criminal Justice Act 1988, the Terrorism Act 2000, the Anti-Terrorism, Crime and Security Act 2001, the Proceeds of Crime Act 2002 (as amended), the Terrorism Act 2006, the Counter-Terrorism Act 2008 and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017) and, to the extent applicable, any related or similar rules, regulations of any body having jurisdiction in respect thereof and the Money Laundering Sourcebook of the FCA and that it is not a person: (a) with whom transactions are prohibited under the Foreign Corrupt Practices Act 1977 or any economic sanction programmes administered by, or regulations promulgated by, the Office of Foreign Assets Control of the U.S. Department of the Treasury; (b) named on the Consolidated List of Financial Sanctions Targets maintained by HM Treasury of the United Kingdom; or (c) subject to financial sanctions imposed pursuant to a regulation of the European Union or a regulation adopted by the United Nations ((i), (ii), (a) and (b), together, the "Regulations") and, if it is making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations;

23. if in the United Kingdom, represents and warrants that: (a) it is a person having professional experience in matters relating to investments who falls within the definition of "investment professionals" in Article 19(5) of the FPO, or (b) it is a person who falls within Article 49(2) (a) to (d) ("High Net Worth Companies, Unincorporated Associations etc") of the FPO, or (c) it is a qualified investor as defined in section 86(7) of FSMA, being a person falling within Article 2.1(e)(i), (ii) or (iii) of the Prospectus Directive, or (d) it is person to whom this announcement may otherwise lawfully be communicated;

24. represents and warrants that its participation in the Placing would not give rise to an offer being required to be made by it or any person with whom it is acting in concert pursuant to Rule 9 of the City Code on Takeovers and Mergers;

25. undertakes that it (and any person acting on its behalf) will pay for the Placing Shares acquired by it in accordance with this Announcement and with any trade confirmation sent by Arden (or on its behalf) to it in respect of its allocation of Placing Shares and its participation in the Placing on the due time and date set out therein (or as otherwise notified by Arden) against delivery of such Placing Shares to it, failing which the relevant Placing Shares may be placed with other Placees or sold as Arden may, in its absolute discretion, determine and it will remain liable for any shortfall below the net proceeds of such sale and the placing proceeds of such Placing Shares and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties due pursuant to the terms set out or referred to in this Announcement) which may arise upon the sale of such Placee's Placing Shares on its behalf;

26. acknowledges that none of Arden, nor any Arden Affiliate nor any person acting on their behalf is making any recommendations to it or advising it regarding the suitability or merits of any transaction it may enter into in connection with the Placing, and acknowledges that none of Arden, nor any Arden Affiliate nor any person acting on their behalf has any duties or responsibilities to it for providing advice in relation to the Placing or in respect of any representations, warranties, undertakings or indemnities contained in the Placing Agreement or for the exercise or performance of any of Arden's rights and obligations thereunder, including any right to waive or vary any condition or exercise any termination right contained therein;

27. undertakes that (i) the person whom it specifies for registration as holder of the Placing Shares will be (a) the Placee or (b) the Placee's nominee, as the case may be, (ii) neither Arden nor the Company will be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement and (iii) the Placee and any person acting on its behalf agrees to acquire the Placing Shares on the basis that the Placing Shares will be allotted to the CREST stock account of Arden which will hold them as settlement agent as nominee for the Placee until settlement in accordance with its standing settlement instructions with payment for the Placing Shares being made simultaneously upon receipt of the Placing Shares in the Placee's stock account on a delivery versus payment basis;

28. acknowledges that it irrevocably appoints any director of Arden as its agent for the purposes of executing and delivering to the Company and/or its registrars any documents on its behalf necessary to enable the Placing Shares allocated to it and agreed to be taken up by it under the Placing to be credited to the CREST stock account it has specified or for it to be registered as the holder of any of the Placing Shares allocated to it and agreed to be taken up by it under the Placing;

29. represents and warrants that it is not a resident of any Restricted Jurisdiction and acknowledges that the Placing Shares have not been and will not be registered nor will a prospectus be cleared in respect of the Placing Shares under the securities legislation of any Restricted Jurisdiction and, subject to certain exceptions, may not be offered, sold, taken up, renounced, delivered or transferred, directly or indirectly, within any Restricted Jurisdiction;

30. represents and warrants that any person who confirms to Arden on behalf of a Placee an agreement to subscribe for Placing Shares and/or who authorises Arden to notify the Placee's name to the Company's registrar, has authority to do so on behalf of the Placee;

31. acknowledges that the agreement to settle each Placee's acquisition of Placing Shares (and/or the acquisition of a person for whom it is contracting as agent) free of stamp duty and stamp duty reserve tax depends on the settlement relating only to an acquisition by it and/or such person direct from the Company of the Placing Shares in question. Such agreement assumes that the Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to issue or transfer the Placing Shares into a clearance service. If there were any such arrangements, or the settlement related to other dealing in the Placing Shares, stamp duty or stamp duty reserve tax may be payable, for which neither the Company nor Arden will be responsible. If this is the case, the Placee should take its own advice and notify Arden accordingly;

32. acknowledges that when a Placee or any person acting on behalf of the Placee is dealing with Arden, any money held in an account with Arden on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the relevant rules and regulations of the FCA and that the money will not be subject to the protections conferred by the client money rules; as a consequence, this money will not be segregated in accordance with the client money rules and will be used by Arden in the course of its business; and the Placee will rank only as a general creditor of Arden (as the case may be);

33. acknowledges and agrees that in order to ensure compliance with the Criminal Justice Act 1988, the Terrorism Act 2000, Anti-Terrorism, Crime and Security Act 2001, the Proceeds of Crime Act 2002 (as amended) the Terrorism Act 2006, the Counter-Terrorism Act 2008 and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, and, to the extent applicable, any related or similar rules, regulations of any body having jurisdiction in respect thereof and the Money Laundering Sourcebook of the FCA, Arden (for itself and as agent on behalf of the Company) or the Company's registrars may, in their absolute discretion, require verification of its identity. Pending the provision to Arden or the Company's registrars, as applicable, of evidence of identity, definitive certificates in respect of the Placing Shares may be retained at Arden's absolute discretion or, where appropriate, delivery of the Placing Shares to it in uncertificated form may be delayed at Arden's or the Company's registrars', as the case may be, absolute discretion. If within a reasonable time after a request for verification of identity Arden (for itself and as agent on behalf of the Company) or the Company's registrars have not received evidence satisfactory to them, Arden and/or the Company may, at its absolute discretion, terminate its commitment in respect of the Placing, in which event the monies payable on acceptance of allotment will, if already paid, be returned without interest to the account of the drawee's bank from which they were originally debited;

34. acknowledges and understands that the Company, Arden, and others will rely upon the truth and accuracy of the foregoing representations, warranties, agreements, undertakings and acknowledgements;

35. acknowledges that the basis of allocation will be determined by Arden at its absolute discretion and that the right is reserved to reject in whole or in part and/or scale back any participation in the Placing;

36. irrevocably authorises the Company and Arden to produce this Announcement pursuant to, in connection with, or as maybe required by any applicable law or regulation, administrative or legal proceeding or official inquiry with respect to the matters set forth herein;

37. acknowledges and agrees that its commitment to subscribe for Placing Shares on the terms and conditions set out herein will continue notwithstanding any amendment that may in future be made to the terms of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to the Company's or Arden's conduct of the Placing;

38. acknowledges and agrees that time is of the essence as regards its obligations under this Appendix;

39. acknowledges and agrees that any document that is to be sent to it in connection with the Placing will be sent at its risk and may be sent to it at any address provided by it to Arden;

40. acknowledges and agrees that it will be bound by the terms of the articles of association of the Company; and

41. acknowledges and agrees that these terms and conditions in this Appendix and all documents into which this Appendix is incorporated by reference or otherwise validly forms a part and/or any agreements entered into pursuant to these terms and conditions and all agreements to acquire Placing Shares pursuant to the Placing and any non-contractual obligations arising out of or in connection with such agreements will be governed by and construed in accordance with the laws of England and Wales and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the courts of England and Wales in relation to any claim, dispute or matter arising out of or in connection with any such agreements and any non-contractual obligations arising out of or in connection with such agreements, except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by the Company or Arden in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange.

The acknowledgements, agreements, undertakings, representations and warranties referred to above are given to each of the Company and Arden (for their own benefit and, where relevant, the benefit of any Arden Affiliate or Hydrodec Affiliate and any person acting on their behalf) and are irrevocable.

No claim shall be made against the Company, Arden, any Arden Affiliate, any Hydrodec Affiliate, or any other person acting on behalf of any of such persons by a Placee to recover any damage, cost, loss, charge or expense which it may suffer or incur by reason of or arising from or in connection with the performance of its obligations hereunder or otherwise howsoever in connection with the Placing or Admission.

No UK stamp duty or stamp duty reserve tax should be payable to the extent that the Placing Shares are issued or transferred (as the case may be) into CREST to, or to the nominee of, a Placee who holds those shares beneficially (and not as agent or nominee for any other person) within the CREST system and registered in the name of such Placee or such Placee's nominee.

Any arrangements to issue or transfer the Placing Shares into a depositary receipts system or a clearance service or to hold the Placing Shares as agent or nominee of a person to whom a depositary receipt may be issued or who will hold the Placing Shares in a clearance service, or any arrangements subsequently to transfer the Placing Shares, may give rise to stamp duty and/or stamp duty reserve tax, for which neither the Company nor Arden will be responsible and the Placee to whom (or on behalf of whom, or in respect of the person for whom it is participating in the Placing as an agent or nominee) the allocation, allotment, issue or delivery of Placing Shares has given rise to such stamp duty or stamp duty reserve tax undertakes to pay such stamp duty or stamp duty reserve tax forthwith and to indemnify on an after-tax basis and to hold harmless the Company and Arden in the event that any of the Company or any Hydrodec Affiliate or Arden or any Arden Affiliate has incurred any such liability to stamp duty or stamp duty reserve tax.

In addition, Placees should note that they will be liable for any capital duty, stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the UK by them or any other person on the acquisition by them of any Placing Shares or the agreement by them to acquire any Placing Shares.

References to time in this Announcement are to London time, unless otherwise stated. All times and dates in this Announcement may be subject to amendment. Arden shall notify the Placees and any person acting on behalf of the Placees of any such changes.

This Announcement has been issued by the Company and is the sole responsibility of the Company.

Each Placee and any person acting on behalf of the Placee acknowledges and agrees that Arden or any Arden Affiliate may, at their absolute discretion, agree to become a Placee in respect of some or all of the Placing Shares.

The rights and remedies of Arden and the Company under these terms and conditions are in addition to any rights and remedies which would otherwise be available to each of them and the exercise or partial exercise or partial exercise of one will not prevent the exercise of others.

Each Placee may be asked to disclose in writing or orally to Arden and, if so, undertakes to provide:

   1.            if he is an individual, his nationality;

2. if he is a discretionary fund manager, the jurisdiction in which the funds are managed or owned; and

   3.            such other "know your client" information as Arden may reasonably request.

DEFINITIONS

The following definitions apply throughout this document, unless the context requires otherwise:

 
 Admission                             admission of the New Ordinary Shares 
                                        of the Company 
                                        to trading on AIM becoming effective 
                                        in accordance 
                                        with Rule 6 of the AIM Rules. 
 Application Form                      the application form on which Qualifying 
                                        Non-CREST 
                                        Shareholders may apply for Ordinary 
                                        Shares under the 
                                        Open Offer. 
 AIM                                   the market of that name operated 
                                        by the London Stock Exchange. 
 AIM Rules                             the AIM Rules for Companies published 
                                        by the London 
                                        Stock Exchange from time to time. 
 Arden or Arden Partners               Arden Partners plc, the Company's 
                                        nominated adviser and broker. 
 Articles                              the articles of association of the 
                                        Company. 
 Board                                 the board of directors of the Company 
                                        from time to time. 
 Capital Raising                       the Placing and the Open Offer taken 
                                        together. 
 CA 2006                               the Companies Act 2006, as amended. 
 Circular                              the circular expected to be published 
                                        shortly following the completion 
                                        of the accelerated bookbuild in 
                                        respect of the Capital Raising and 
                                        the Debt Conversion and containing 
                                        notice of the GM. 
 Company or Hydrodec                   Hydrodec Group plc, incorporated 
                                        and registered in England and Wales 
                                        (with registration number 05188355), 
                                        whose registered office is at Dorset 
                                        House, Regent Park, Kingston Road, 
                                        Leatherhead 
                                        KT22 7PL, United Kingdom. 
 Completion                            completion of the Proposals. 
 Consolidation Shares                  the New Ordinary Shares to be issued 
                                        to holders of Existing Ordinary 
                                        Shares as a result of the Share 
                                        Consolidation becoming effective. 
 CREST                                 the computerised settlement system 
                                        (as defined in the CREST Regulations) 
                                        operated by Euroclear which facilitates 
                                        the holding and transfer of title 
                                        to shares in uncertificated form. 
 CREST Regulations                     the Uncertificated Securities Regulations 
                                        2001 (SI 2001 No. 2001/3755) and 
                                        any modification thereof or any 
                                        regulations in substitution thereof 
                                        for the time being in force. 
 Debt Conversion                       the conversion of outstanding loans 
                                        owed by the Company to Andrew Black 
                                        into New Ordinary Shares at the 
                                        Issue Price pursuant to the Debt 
                                        Conversion Agreement. 
 Debt Conversion Agreement             the agreement entered into on 8 
                                        October 2018 between the Company 
                                        and Andrew Black giving effect to 
                                        the Debt Conversion. 
 Debt Conversion Shares                the New Ordinary Shares to be issued 
                                        pursuant to the Debt Conversion. 
 Directors                             the directors of the Company as 
                                        at the date of this document. 
 Euroclear                             Euroclear UK & Ireland Limited, 
                                        a company incorporated in England 
                                        and Wales and the operator of CREST. 
 Enlarged Share Capital                the issued ordinary share capital 
                                        of the Company immediately following 
                                        Admission (comprising the Debt Conversion 
                                        Shares, the Consolidation Shares, 
                                        the Placing Shares and the Open 
                                        Offer Shares). 
 Existing Ordinary Shares              the 746,682,805 Ordinary Shares 
                                        in issue at the date of this announcement. 
 FCA                                   the Financial Conduct Authority 
                                        of the United Kingdom. 
 G&S                                   G&S Technologies Inc. 
 FSMA                                  the Financial Services and Markets 
                                        Act 2000, as amended. 
 General Meeting or GM                 the general meeting of the Company 
                                        expected to be held at the offices 
                                        of CMS Cameron McKenna Nabarro Olswang 
                                        LLP, Cannon Place, 78 Cannon Street, 
                                        London EC4N 6AF at 10.00 a.m. on 
                                        or around 25 October 2018.

 Group                                 the Company and its subsidiaries 
                                        and subsidiary undertakings. 
 HoNA                                  Hydrodec of North America LLC, the 
                                        Company's US subsidiary. 
 Hydrodec Technology                   proprietary technology relating 
                                        to the process for re-refining used 
                                        and contaminated waste oil to produce 
                                        SUPERFINE transformer oil and naphthenic 
                                        base oil. 
 Independent Directors                 the Directors other than Andrew 
                                        Black and David Dinwoodie. 
 Issue Price                           the price per New Ordinary Share 
                                        (which, for avoidance of doubt, 
                                        is calculated on the basis that 
                                        the Share Consolidation has occurred) 
                                        at which the Placing Shares are 
                                        to be subscribed for as determined 
                                        by the accelerated bookbuild process. 
 London Stock Exchange                 London Stock Exchange plc. 
 MAR                                   the Market Abuse Regulation (EU) 
                                        No 596/2014 and all delegated regulations, 
                                        technical statements and guidance 
                                        relating thereto. 
 New Ordinary Shares                   the ordinary shares of 50 pence 
                                        each in the capital of the Company 
                                        to be issued pursuant to the Debt 
                                        Conversion, the Placing and the 
                                        Open Offer and resulting from the 
                                        Share Consolidation. 
 Open Offer                            the conditional invitation expected 
                                        to be made to Qualifying Shareholders 
                                        to apply to subscribe for New Ordinary 
                                        Shares at the Issue Price on the 
                                        terms and subject to the conditions 
                                        as set out in the Circular and, 
                                        where relevant, in the Application 
                                        Form. 
 Open Offer Entitlement                the entitlement of Qualifying Shareholders 
                                        to subscribe for Open Offer Shares 
                                        allocated to Qualifying Shareholders 
                                        on the Record Date pursuant to the 
                                        Open Offer. 
 Open Offer Shares                     the New Ordinary Shares being made 
                                        available to Qualifying Shareholders 
                                        pursuant to the Open Offer. 
 Options                               options over Ordinary Shares. 
 Ordinary Shares                       ordinary shares of 0.5 pence each 
                                        in the capital of the Company in 
                                        existence prior to the Share Consolidation 
                                        becoming effective. 
 Overseas Shareholder                  holders of Existing Ordinary Shares 
                                        who are neither resident in, nor 
                                        have a registered address in, the 
                                        UK. 
 PCBs                                  polychlorinated biphenyls are synthetic 
                                        chemicals which were historically 
                                        added to coolants and lubricants 
                                        in transformers, capacitors, and 
                                        other electrical equipment. Due 
                                        to their toxic nature, PCBs are 
                                        now banned internationally but still 
                                        remain in legacy equipment and are 
                                        often found in used transformer 
                                        oil. 
 Placees                               persons who agree to subscribe for 
                                        the Placing Shares in the Placing. 
 Placing                               the placing of the Placing Shares 
                                        by Arden Partners, at the Issue 
                                        Price, pursuant to the Placing Agreement 
                                        and carried out by an accelerated 
                                        bookbuild process following the 
                                        release of this announcement. 
 Placing Agreement                     the conditional agreement dated 
                                        8 October 2018 between (1) the Company 
                                        and (2) Arden Partners relating 
                                        to the Placing. 
 Placing Shares                        the New Ordinary Shares to be allotted 
                                        pursuant to the Placing. 
 Proposals                             together, the Placing, the Open 
                                        Offer, the Share Consolidation, 
                                        the Debt Conversion and Admission 
                                        and the resolution to be proposed 
                                        at the GM to approve them. 
 Prospectus Rules                      the Prospectus Rules (in accordance 
                                        with section 73A(3) of FSMA) of 
                                        the FCA. 
 Qualifying CREST Shareholders         Qualifying Shareholders holding 
                                        Existing Ordinary Shares in uncertificated 
                                        form. 
 Qualifying Non-CREST Qualifying       Qualifying Shareholders holding 
  Shareholders                          Existing Ordinary Shares in uncertificated 
                                        form. 
 Qualifying Shareholders               subject to any restrictions imposed 
                                        on Overseas Shareholders, holders 
                                        of Existing Ordinary Shares whose 
                                        names appear on the register of 
                                        members of the Company on the Record 
                                        Date as holders of Existing Ordinary 
                                        Shares and who are eligible to be 
                                        offered Open Offer Shares under 
                                        the Open Offer in accordance with 
                                        the terms and conditions to be set 
                                        out in the Circular and, if applicable, 
                                        the Application Form. 
 Resolutions                           the resolutions to be proposed at 
                                        the GM. 
 Restricted Jurisdiction               each and any of the United States 
                                        of America, Australia, Canada, Japan, 
                                        New Zealand, Russia, and the Republic 
                                        of South Africa and any other jurisdiction 
                                        where the Open Offer would breach 
                                        any applicable law or regulations. 
 R&D                                   research and development undertaken 
                                        to develop new products and services 
                                        or enhance existing products and 
                                        services. 
 Securities Act                        the US Securities Act of 1933, as 
                                        amended. 
 Share Consolidation                   the proposed consolidation of every 
                                        100 Existing Ordinary Shares into 
                                        1 New Ordinary Share. 
 Shareholders or member                holders of Existing Ordinary Shares 
                                        and/or New Ordinary Shares as the 
                                        context requires. 
 subsidiary and subsidiary             have the meanings given to them 
  undertaking                           by CA 2006. 
 SUPERFINE                             brand name of high quality transformer 
                                        and base oils produced by the Group. 
 UK or United Kingdom                  the United Kingdom of Great Britain 
                                        and Northern Ireland. 
 uncertificated or in uncertificated   recorded on the relevant register 
  form                                  of the share or security concerned 
                                        as being held in uncertificated 
                                        form in CREST and title to which, 
                                        by virtue of the CREST Regulations, 
                                        may be transferred by means of CREST. 
 US or United States                   the United States of America, its 
                                        territories and possessions, any 
                                        state of the United States of America 
                                        and the district of Columbia and 
                                        all other areas subject to its jurisdiction.

Unless otherwise indicated, all references in this document to "GBP", "GBP", "pounds sterling", "pounds", "sterling", "pence" or "p" are to the lawful currency of the United Kingdom and all references to "$", "US$", "USD" or "US dollars" are to the lawful currency of the United States.

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

IOEUBSKRWOARRAA

(END) Dow Jones Newswires

October 08, 2018 02:00 ET (06:00 GMT)

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