TIDMREAT
RNS Number : 7467O
React Group PLC
03 June 2020
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU Regulation
596/2014) ("MAR"). In addition, market soundings (as defined in MAR
were taken in connection with the Placing as a result of which
certain persons became aware of inside information (as defined in
MAR), as permitted by MAR. This inside information is set out in
this announcement. Therefore, those persons that received such
inside information in a market sounding are no longer in possession
of such inside information relating to the Company and its
securities.
3 June 2020
REACT Group plc
("REACT" or the "Company")
Placing to raise c.GBP1.25 million
The Board of REACT (AIM: REAT), the leading specialist cleaning,
hygiene and decontamination company, is pleased to announce a
placing of 83,101,597 new ordinary shares of 0.25 pence each in the
capital of the Company ("Placing Shares") at a price of 1.5 pence
per Placing Share ("Placing Price") to raise c.GBP1.25 million,
before expenses (the "Placing").
Placing highlights
-- The Placing was materially oversubscribed following demand
from both new and existing institutional and other investors.
-- The Company intends to use the net proceeds of the Placing of c.GBP1.16 million to:
- strengthen the Company's sales and marketing activities;
- support a growing contract pipeline and accelerate organic growth; and
- provide additional working capital and strengthen the
Company's balance sheet to support the Company's aspiration to
secure larger contracts.
-- The Placing utilises the Company's existing authority to
issue new ordinary shares for cash on a non-pre-emptive basis.
-- Appointment of Allenby Capital Limited ("Allenby Capital") as
sole broker to the Company with immediate effect.
Background to and reasons for the Placing
The REACT business is divided into two parts of approximately
equal size of revenues; reactive cleaning services and regular
maintenance services.
The regular maintenance business largely operates in the
healthcare, road and rail sectors. Revenue continues to grow in the
rail and healthcare sectors more than compensating for temporary
disruption in others.
As highlighted in the trading update announcement released by
the Company on 6 April 2020, REACT's reactive cleaning services
business has been experiencing high demand to provide
decontamination and infection control services in all sectors. This
has included thorough deep cleaning of premises thought to be
harbouring SARS-CoV-2, the virus responsible for COVID-19. REACT
provides a rapid response to the threat posed by COVID-19, applying
best practice standards of deep cleaning and testing to enable
customers to return potentially infected properties to safe
operational use.
Recent trading has been ahead of management expectations. As a
result, the Company is expected to deliver a small operating profit
for the six months to 31 March 2020 and the Group remains well
placed to meet or exceed management expectations for the full year
to 30 September 2020.
The Board of REACT believes there is an opportunity to scale the
business through organic growth and carefully selected acquisitions
focusing on markets where REACT has differentiation and access to
higher margins. The Board of REACT also believes there is an
opportunity for the Company to materially grow profitable revenue
with large customers in the health, rail and facilities management
sectors in addition to strengthening recurring revenue streams
through incremental and long-term contracts.
The Board therefore considers it appropriate to undertake the
Placing at the current time in order to strengthen the Company's
balance sheet and to provide the Company with the resources to
ensure it is well capitalised to support organic growth and take
advantage of these opportunities.
Details of the Placing and admission to AIM
The Company has raised GBP1,246,524 before expenses. The Placing
will result in the issue of a total of 83,101,597 Placing Shares
representing, in aggregate, approximately 16.67 per cent. of the
issued share capital of the Company as enlarged by the issue of the
Placing Shares. The Placing Price represents a discount of
approximately 1.6 per cent. to the closing mid-market price per
existing ordinary share of 1.525 pence on 2 June 2020, being the
last practicable trading day prior to release of this announcement.
The Placing Shares will be issued utilising the Company's existing
share authorities.
The Placing Shares, when issued and fully paid, will rank pari
passu in all respects with the existing ordinary shares of 0.25
pence each of the Company in issue and therefore will rank equally
for all dividends or other distributions declared, made or paid
after the issue of the Placing Shares on Admission (as defined
below).
Application will be made to the London Stock Exchange for the
Placing Shares to be admitted to trading on AIM ("Admission"). It
is anticipated that Admission will occur, and dealings will
commence in the Placing Shares at 8:00 a.m. on or around 9 June
2020.
Appointment of broker
Allenby Capital has been appointed as sole broker to the Company
with immediate effect.
Related party transaction
Mr S Rogerson (and connected parties) owns 49,022,750 shares in
the Company representing 11.80 per cent. of the current issued
share capital of the Company and is a "substantial shareholder" in
the Company.
Mr Rogerson (and connected parties) has agreed to participate in
the Placing, by subscribing GBP60,000 for 4,000,000 Placing Shares
as set out below. Mr Rogerson (and connected parties) is
participating on the same terms as all other placees.
Name Amount subscribed Number of No of Ordinary % of Ordinary
Placing Shares Shares held post Share Capital
Admission held post
Admission
Mr S Rogerson
(and connected parties) GBP60,000 4,000,000 53,022,750 10.64%
The participation in the Placing by Mr Rogerson (and connected
parties) constitutes a related party transaction under the AIM
Rules for Companies.
The Directors, who are considered to be independent directors of
the Company for the purposes of AIM Rule 13 in relation to the
related party transaction, have considered the participation of Mr
Rogerson (and connected parties) in the Placing. Having consulted
with SPARK Advisory Partners Limited, the Company's nominated
adviser, the independent directors consider that the terms of Mr
Rogerson's (and connected parties') participation in the Placing
are fair and reasonable insofar as shareholders are concerned.
Total Voting Rights
Following Admission, the Company will have 498,509,350 ordinary
shares of 0.25 pence each in issue, each with one voting right.
There are no shares held in treasury. Therefore, the Company's
total number of ordinary shares and voting rights following
Admission is 498,509,350. This figure may be used by shareholders
from Admission as the denominator for the calculations by which
they will determine if they are required to notify their interest
in, or a change to their interest in, the Company under the
Financial Conduct Authority's Disclosure Guidance and Transparency
Rules.
Shaun Doak, Chief Executive Officer of REACT, commented:
" REACT has built a solid foundation on which to develop
sustainable growth. Whilst we provide a thorough and rapid response
to the demand for deep cleaning and decontamination of property
exposed to SARS-CoV-2, the virus that causes COVID-19, we continue
to build our core business where the demand for REACT's specialist
know how and skills are equally relevant and over time more
sustainable.
This oversubscribed fundraise recognises the progress achieved
so far and provides REACT with the working capital and balance
sheet strength to support ambitions for further sustainable and
profitable growth. "
For further information please contact:
REACT Group plc Tel: +44 (0) 1283 550
Shaun Doak, Chief Executive Officer 503
SPARK Advisory Partners Limited (Nominated Tel: +44 (0) 113 370 8974
Adviser) Tel: +44 (0) 203 328 5656
Neil Baldwin / Henry Todd
Allenby Capital Limited (Broker)
Nick Athanas / Liz Kirchner (Corporate
Finance)
Amrit Nahal / Tony Quirke (Broking)
MB Associates (Strategic Adviser) Mark Tel: +44 (0) 798 222 0001
Braund
The person making this notification on behalf of the Company is
Shaun Doak, Chief Executive Officer of the Company.
Information to 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
"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 Placing
Shares have been subject to a product approval process, which has
determined that the Placing Shares are: (i) compatible with an end
target market of retail investors and investors who meet the
criteria of 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,
investors should note that: the price of the Placing Shares may
decline and investors could lose all or part of their investment;
Placing Shares offer no guaranteed income and
no capital protection; and an investment in the Placing 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 Placing. Furthermore, it is noted
that, notwithstanding the Target Market Assessment, only investors
who have met the criteria of professional clients and eligible
counterparties have been procured. 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 Placing Shares.
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END
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