TIDMRSI
RNS Number : 1805Z
Rock Solid Images plc
12 March 2012
PRESS RELEASE
12 March 2012
Houston
RSI (Rock Solid Images plc AIM: RSI)
Strategic Review, End of Offer Period, Trading update, Proposed
Cancellation of Admission of Shares to Trading on AIM
RSI is pleased to provide the following strategic review and
trading update for the six months ended 29 February 2012.
Strategic Review completed and end of the Offer Period:
The strategic review has now been completed and the key outcomes
are:
-- The Company offers two complementary and parallel business
streams to its clients: Well and Surface Seismic services (WSS) and
Well data Integrated with Seismic and Electromagnetic data (WISE).
That offering will remain unchanged as a result of the strategic
review;
-- In its WISE product, the Company has a unique offering that
is at a relatively early stage of the adoption cycle and a sale of
the Company now would be unlikely to deliver full value to
shareholders; and
-- The Board has concluded that raising capital to continue to
build on the significant progress made may well be more achievable
if the Company de-lists from AIM and, accordingly, it has resolved
to take steps to pursue the delisting of the Company's shares from
trading on AIM.
The Company is not in consideration of any offers for the entire
issued share capital of the Company and nor are any further offers
being solicited. Consequently the Company can confirm that it is no
longer in an "Offer Period" for the purposes of the Takeover
Code.
Financial update:
The Group's half year ended on 29 February 2012.
Revenues for each of its operating divisions in the six months
to 29 February 2012 are expected to be as follows:
-- Seismic characterisation revenues are expected to be GBP1.6
million (six months to 28 February 2011: GBP1.3 million); and
-- The WISE seismic/CSEM integrated product line will achieve
revenues of approximately GBP0.3 million (six months to 28 February
2011: GBP0.6 million).
In aggregate, the Group's revenues are expected to be
approximately GBP1.9 million for the six months to 29 February 2012
compared to GBP1.8 million (as adjusted for discontinued
operations) for the six months to 28 February 2011. The Group is
expecting to make a gross profit contribution of approximately
GBP0.7 million representing approximately 35% of revenues for the
six months to 29 February 2012. This compares with a gross profit
contribution of approximately GBP0.5 million representing 29% of
revenues for the six months to 28 February 2011. As revenues
improve in the second half of the financial year so should the
gross profit percentage on revenues.
The Group continues to carry a corporate overhead, which is
currently disproportionately high compared to the contribution from
its trading activities, which will result in a pre-tax loss in the
GBP1.8 to GBP1.9 million range being reported for the six months to
29 February 2012. This compares with a GBP1.5 million pre-tax loss
(as adjusted for discontinued operations) for the same period last
year.
The Group's cash balance at 29 February 2012 was GBP0.3 million,
compared to GBP1.7 million at 31 August 2011.
The figures for the six months to 29 February are unaudited and
have yet to be reviewed by the Group's Independent Auditors.
Current trading and prospects:
Since 18 January 2012, when the Company reported its results for
the 12 months ending 31 August 2011, it has continued to move
forward with developing its business. Sales revenues in January and
February were less than anticipated due to operational delays in
processing client data, however management has now resolved the
issue and the processing team is working hard to catch up.
Revenues in the second half are anticipated to be significantly
above those of the first half and will benefit from the large
contract awards announced in November, December and January.
Consequently the second half is expected to also be significantly
more profitable than the first half at the pre-tax level. Total
revenues for the full year to 31(st) August 2012 are expected to be
in the GBP5.5 to GBP7 million range, which compares favourably with
revenues of GBP4.0 million for the year ended 31(st) August
2011.
Although the Company's backlog and prospective pipeline are at
record levels the aforementioned production delays and larger
contracts require the Company to have a stronger working capital
base and in order to address this short term requirement the Board
has agreed, subject to finalising legally binding documentation,
with EuroTrans Skips AS ("EuroTrans") and East Hill Venture Fund,
LLP (an affiliate of East Hill Hedge Fund, LLC ("East Hill")) two
of the Company's largest shareholders, to put in place a secured
Credit Facility of up to $1 million. To the extent that it is drawn
upon (and an initial advance of $250,000 has already been made) the
Credit Line facility will carry an annual interest charge of 10.75%
above US prime and will expire on 30 September 2012. Due to their
respective holdings of 24.82% and 12.13% in the ordinary share
capital of the Company, EuroTrans and East Hill are classified as
related parties for the purposes of the Credit Facility. The
directors of the Company have consulted with its nominated adviser,
Fox-Davies Capital Limited, and consider that the terms of the
Credit Facility are fair and reasonable insofar as the Company's
shareholders are concerned.
Proposed Cancellation of Admission of Shares to Trading on AIM
and Notice of General Meeting:
1. Background to the proposed Cancellation
Having undertaken a review of both the advantages and
disadvantages of maintaining admission of the Ordinary Shares to
trading on AIM, and after extensive discussions with the Company's
three largest shareholders, the Directors, in consultation with
those shareholders, have concluded that the admission should be
cancelled. In reaching this conclusion, the Directors have taken
the following factors into account:
-- in the Directors' opinion, the trading price of the Ordinary
Shares on AIM does not reflect the true value of the Company and
its business;
-- given the overall market conditions for small quoted
companies, the Directors are of the opinion that it is (and will
continue to be) difficult for the Company to attract meaningful
equity investment through its continuing trading on AIM and the AIM
quotation may be a detracting factor for potential private equity
investors;
-- the AIM quotation of the Ordinary Shares does not, in itself,
offer investors the opportunity to trade in meaningful volumes or
with frequency within an active market. With little trading volume,
the Company's share price can move up or down significantly
following trades of small numbers of shares; and
-- the Directors estimate that annual direct and indirect costs
of the Ordinary Shares' AIM quotation are at least GBP125,000. This
estimate includes quotation expenses and advisory, legal and audit
fees but excludes any costs associated with the considerable amount
of senior executive time which is also spent dealing with the
issues related to the AIM quotation.
Given the overall market conditions for small quoted companies
and the concentrated nature of the Company's shareholding, the
Directors see no reason to believe the low valuation and liquidity
will change substantially and consistently. Further, the Directors
expect that the low valuation and liquidity will continue to impact
directly and negatively on the Company's ability to raise adequate
equity and debt financing based on appropriate valuations, and this
could potentially damage the medium- and long-term interests and
objectives of the Company.
The Directors also believe that following the Cancellation the
Company will, over time, be in a better position to attract
investment from the private market on terms driven by a fundamental
valuation of the business rather than a depressed public market
price. The Directors believe this will, over time, allow a more
favorable development of the Group with less dilution to
shareholders.
Despite the trading progress made as set out in the Company's
trading update published today, the Directors do not anticipate an
improvement in conditions in the short to medium term sufficient
for the benefits of the AIM admission to outweigh the associated
costs.
Pursuant to AIM Rule 41, cancellation of the admission of the
Ordinary Shares to trading on AIM requires the consent of not less
than 75 per cent. of votes cast by Shareholders (in person or by
proxy) in a general meeting.
The Company has notified the London Stock Exchange of the
proposed Cancellation. It is anticipated that a circular (the
"Circular") seeking the approval of Shareholders to the delisting
will be issued to Shareholders on or about Thursday 15 March. In
the event that Shareholders approve the Cancellation, it is
anticipated that the last day of dealings in the Ordinary Shares on
AIM will be 12 April 2012 and that the effective date of the
Cancellation will be 13 April 2012.
2. Principal effects of the Cancellation
The principal effects of the Cancellation will include (amongst
others):
-- there will be no public stock market on which Shareholders
can trade their Ordinary Shares. While the Company intends to put
in place a third party trading facility as described below, there
can be no assurance that a Shareholder will be able to purchase or
sell any Ordinary Shares following Cancellation;
-- no price will be publicly quoted for the Ordinary Shares; and
-- the Company will not be subject to the AIM Rules and,
accordingly, it will not (amongst other things) be required to
retain a nominated adviser or to comply with the requirements of
AIM in relation to the disclosure of price sensitive information or
the disclosure of information on corporate transactions. It is
however the Directors' intention to maintain active communication
with Shareholders as described below.
If the Cancellation becomes effective, this will not affect the
Company's position as a public limited company for the purposes of
the UK Companies Act 2006 and the Board anticipates the Company
will continue to be subject to the rules and other provisions of
the UK Takeover Code for a period of ten years following the
delisting becoming effective.
3. Transactions in the Ordinary Shares following the Cancellation
Whilst the Board believes that the Cancellation is in the best
interests of Shareholders and the Company, it recognises that the
Cancellation will make it more difficult for Shareholders to buy
and sell Shares should they wish to do so. The Company therefore
intends to put in place a third party matched bargain trading
facility for at least one year following the delisting to assist
shareholders to trade in the Company's shares. Under this third
party facility, Shareholders or persons wishing to acquire Ordinary
Shares will be able to leave an indication with the third party
facility provider that they are prepared to buy or sell at an
agreed price. In the event that the third party facility provider
is able to match that order with an opposite sell or buy
instruction, the third party facility provider will contact both
parties and then effect the bargain. Once such arrangements have
been set up by the Company, details will be made available to
Shareholders on the Company's website at
www.rocksolidimages.com.
If Shareholders wish to buy or sell Ordinary Shares on AIM they
should do so prior to the Cancellation becoming effective. As noted
above, in the event that Shareholders approve the Cancellation, it
is anticipated that the last day of dealings in the Ordinary Shares
on AIM will be 12 April 2012 and that the effective date of the
Cancellation will be 13 April 2012.
4. Settlement on CREST and Registrars
The Shares will remain eligible for settlement in CREST.
Accordingly, Shareholders will continue to be able to hold their
Shares in CREST after the Cancellation. Capita Registrars will
continue to serve as the Company's registrars.
5. Communications with Shareholders following the Cancellation
The Board intends to maintain active communication with its
shareholders, and will continue to post information in relation to
the Company on the Company's investor relations website at
www.rocksolidimages.com.
It is also the Director's current intention to:
-- hold general meetings in accordance with applicable statutory
requirements and the Company's articles of association (the
"Articles");
-- send Shareholders copies of the Company's audited accounts in
accordance with applicable statutory requirements and the Articles;
and
-- post certain information relating to the Company, including
details of any arrangements made to assist Shareholders to trade in
Ordinary Shares, on its website.
As the Ordinary Shares are currently admitted to trading on AIM,
the Company is not currently required to comply with the provisions
of the UK Corporate Governance Code issued in June 2010 by the
Financial Reporting Council. Nevertheless, the Company seeks,
within the practical confines of being a small company and in so
far as practicable, to act in compliance with these principles of
good governance and following the Cancellation, whilst the
Directors currently intend that the Company should continue to seek
to comply with them insofar as is appropriate for an unquoted
company, it is likely that the costs of certain aspects of
corporate governance may be reduced, for instance it may not be
practical to continue to have three independent non-executive
directors on the Company's Board after Cancellation.
6. General Meeting
It is currently anticipated that a General Meeting will be held
at 11.00 a.m. on Wednesday 4(th) April 2012 at the offices of
Pinsent Masons LLP, 30 Crown Place, London EC2A 4ESfor the purpose
of seeking Shareholders' approval to the Resolution. Notice of the
General Meeting will be set out at the end of a Circular explaining
the Board's rationale for seeking the Cancellation and convening
the General Meeting, to be posted to shareholders on Thursday
15(th) March 2012 and to be made available at the Company's website
at www.rocksolidimages.com.
7. Action to be taken
A Form of Proxy for use by Shareholders at the General Meeting
will be enclosed with the Circular to be posted to Shareholders and
available at the Company's website at www.rocksolidimages.com.
Whether or not Shareholders intend to be present at the General
Meeting they are asked to complete, sign and return the Form of
Proxy to the Company's Registrars, Capita Registrars, The Registry,
34 Beckenham Road, Beckenham, Kent, BR3 4TU, as soon as possible
but in any event so as to arrive no later than 11.00 a.m. on Monday
2(nd) April 2012. The completion and return of a Form of Proxy will
not preclude Shareholders from attending the General Meeting and
voting in person should they wish to do so. Accordingly, whether or
not Shareholders intend to attend the General Meeting in person
they are urged to complete and return the Form of Proxy as soon as
possible. The Company's website may not be used for any purpose in
connection with the General Meeting other than as may be expressly
set out in this document.
8. Directors' recommendation
The Directors consider that the Resolution will be in the best
interests of the Company and its Shareholders as a whole and,
accordingly, the Directors intend unanimously to recommend that
Shareholders vote in favor of the Resolution to be proposed at the
General Meeting as they intend to do (or to procure that others do)
in respect of their own direct or indirect legal or beneficial
holdings of 4,092,992 Ordinary Shares representing 2.59 per cent.
of the current issued share capital of the Company.
CONTACT:
Richard Cooper - Chief Executive Officer +1 713 723 2566
Bob Auckland - Chief Financial Officer +44 (0) 7919 490911
Peter Reilly - Non Executive Chairman +44 (0) 7881 920542
FoxDavies Capital (Nominated Advisor and Broker) +44 (0) 203 463 5000
Simon Leathers
Barry Saint
www.rocksolidimages.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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