For immediate release                                                                                                                            21 August 2017

Redhall Group plc

("Redhall" or the "Company") 

Proposed Capital Reduction

Notice of General Meeting

Introduction

The Board of Redhall (the "Board") announces that the Company will later today post a circular (the "Circular") to shareholders of Redhall ("Shareholders") detailing a proposed reduction in the capital of the Company (the "Capital Reduction") and convening a general meeting of the Company (the "General Meeting"), the purpose of which is to enable Shareholders to approve the Capital Reduction.

The Company does not currently have distributable reserves and is therefore prohibited from making distributions to Shareholders, including the payment of dividends. The Board believes it is an appropriate time to create distributable reserves, which would allow the Company to pay dividends should it be considered desirable to do so in the future, and is therefore proposing the Capital Reduction to effect this.

A copy of the Circular will shortly be available on the Company's website at www.redhallgroup.co.uk.

Below are extracts from the Circular which should be read in conjunction with the full text. Defined terms used in this announcement have the meaning ascribed to them in the Circular.

The Capital Reduction

At 30 September 2016, the Company had a profit and loss account deficit of £32,973,000. At the same date, the balance standing to the credit of the Company's share premium account and merger reserve amounted to £28,326,000 and £12,679,000 respectively. The Share Premium Account was further increased in July 2017 upon the issue of new Ordinary Shares in connection with a previously announced placing and debt conversion and as at 31 July 2017 stood at £40,934,339. As at 31 July 2017, the profit and loss account deficit had also increased. However, the Capital Reduction, if approved and made effective, will be sufficient to eliminate this deficit entirely and create distributable reserves.

The Capital Reduction is proposed to be effected by cancelling the balances standing to the credit of the Share Premium Account and (having first created and issued Capital Reduction Shares to capitalise the merger reserve) the merger reserve. Cancelling the balance of the Share Premium Account and the Capital Reduction Shares will, subject to the discharge of any undertakings required by the Court, be sufficient to eliminate the deficit on the profit and loss account.  As a result, any positive distributable reserves generated by the Company after the date on which the Capital Reduction takes effect would be available for the Board to use for the purposes of paying dividends (should circumstances in the future make it desirable to do so).

It is therefore proposed that:

a.     the amount standing to the credit of the Company's merger reserve in the sum of £12,678,593 is capitalised by way of a bonus issue of newly created Capital Reduction Shares;

b.     the newly created Capital Reduction Shares are cancelled; and

c.     the amount standing to the credit of the Share Premium Account (such amount being, as at 31 July 2017, £40,934,339) is cancelled. 

In addition to the approval by Shareholders, the Capital Reduction requires the approval of the Court. Accordingly, following the General Meeting, an application will be made to the Court in order to confirm and approve the Capital Reduction.

There will be no change in the number of Ordinary Shares in issue (or their nominal value) following the implementation of the Capital Reduction. The Capital Reduction itself will not involve any distribution or repayment of capital or share premium by the Company and will not reduce the underlying net assets of the Company. The distributable reserves arising on the Capital Reduction will, subject to the discharge of any undertakings required by the Court support the Company's ability to pay dividends, should circumstances in the future make it desirable to do so.

Background to, and reasons for, the Capital Reduction

Following the successful implementation of its strategic turnaround programme, the Group has been transformed from a site-based contractor and manufacturer into a high integrity manufacturing business with significant growth prospects. As at June 2017, the Group's order book had progressed to £32 million with a pipeline of outstanding bids and other identified opportunities. The Group is currently accelerating its growth into key markets, in particular investing in its capability to serve customers in three core (and growing) nuclear-related sectors: defence, decommissioning and new build. Booth Industries and Jordan Manufacturing are the Group's key businesses serving these sectors.

The Group's growth plans anticipate increased volumes and margins driven by improved trading terms with the Group's supply chain, improved competitiveness and by investment in the people, plant and equipment, processes and technology required to meet customer requirements in complex and hazardous environments.

In July 2017, the Company raised £9.53 million through a placing of new Ordinary Shares and converted £3.75 million of debt into equity. The Company has also refinanced its borrowings with HSBC Bank plc and LOIM for a further four years. These actions have significantly improved the Company's balance sheet and, in the Board's opinion, provided the flexibility to implement the Group's growth plans.

In light of the Group's growth prospects, the Board believes that it might be considered desirable in the future to commence paying dividends to Shareholders. However, the Company currently has negative distributable reserves and is, therefore, prohibited under the Act from making distributions to its Shareholders, including the payment of dividends.

The Board, therefore, believes it is an appropriate time to undertake the Capital Reduction and create distributable reserves which would enable the payment of dividends in the future. In addition, the Board believes the Capital Reduction will have the effect of further strengthening the balance sheet and improving the Group's access to capital.

The General Meeting

The General Meeting will take place at 10.00 a.m.  on 5 September 2017 at the offices of Squire Patton Boggs (UK) LLP at 7 Devonshire Square, London, EC2M 4YH. At the General Meeting, a resolution (the "Resolution") will be proposed to Shareholders to seek their approval of the Capital Reduction.

The Resolution will be passed if 75 per cent. or more of the votes cast (in person or by proxy) at the General meeting are in favour of it.

Shareholders should note that unless the Resolution is approved at the General Meeting (and the Court subsequently confirms the Capital Reduction) the Capital Reduction will not take place.

Directors' recommendation

The Directors consider that the Capital Reduction will be beneficial for the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolution to be proposed at the General Meeting, as they intend to do in respect of their aggregate shareholdings, of 3,027,455 Ordinary Shares representing approximately 0.9% of the Ordinary Shares in issue.

Each of the times and dates above refer to London time. The expected dates for the confirmation of the Capital Reduction by the Court and the Capital Reduction becoming effective are based on provisional dates that have been obtained for the required Court hearings of the Company's application. These provisional hearing dates are subject to change and dependent on the Court's timetable. Any such change will be notified to Shareholders by an announcement on a Regulatory Information Service.

Redhall's Chief Executive Officer, Phil Brierley, commented: 

"At the time of our interim results in June we highlighted the momentum in Redhall's recovery and our confidence in being able to deliver profitable growth. At the appropriate time, once this profitability is established, we would like to return Redhall to the dividend list, both to reward existing shareholders and to increase the marketability of Redhall shares. This proposed capital reduction is an essential procedural step to enable dividend payments to be made."

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