Notice of General Meeting 10 April 2017
The Company today announces plans to launch a conditional placing of 60 million new Shares at a placing price of 5 pence per Placing Share, to raise £3 million (before expenses). Completion of the Placing will be conditional inter alia on the approval of the Company’s Shareholders and other conditions precedent as explained below. Accordingly, the Company will be seeking the approval of Shareholders at a General Meeting to provide the Directors with authority to allot and issue the Placing Shares.
In addition, the Company is announcing various changes to its Board, with the appointment of John Zorbas as the Company’s new Non-Executive Chairman, and the appointments of each of Nigel Burton and Trevor Brown as additional Non-Executive Directors. The appointments of Mr Zorbas, Dr. Burton and Mr Brown are conditions of the Placing proceeding. Mr Zorbas is the CEO and a shareholder of URU Metals Limited, which is an existing Shareholder and an intended participant in the Placing. In addition, Chris Berkefeld has resigned as a Director of the Company. The Board thanks Mr Berkefeld for his contribution to the Company. Further details of the new Directors are set out in paragraph 4 below.
As explained in paragraph 7 below, the Placing will be conditional inter alia on the passing of both of the Resolutions by Shareholders at the General Meeting. If both of the Resolutions to authorise the Placing are not passed at the General Meeting and the Placing does not complete, the admission of the Company’s Shares to AIM will be cancelled and the Company will be forced to seek alternative sources of potential funding which may or may not be on similar commercial terms and may or may not be obtainable on a timely basis or at all. If any such alternative sources of potential funding are not available in an extremely short time frame, it is highly likely that the Company or some or all of its operations will be forced into administration.
The Placing and the changes to the Company’s Board are supported by the Company’s former Chief Executive Officer, Paul Morffew, who together with his wife, Santina Morffew, and SCOPN Pty Ltd, a company owned by Santina Morffew, has irrevocably undertaken to vote in favour of the Resolutions to be proposed at the General Meeting, as described in paragraph 8 below.
2. Background to and Reasons for the Placing
The Company announced on 27 October 2016 that, whilst preparing its consolidated accounts for the year ended 30 June 2016, the audit process revealed a number of operational and financial matters that required further review. The Company requested that its Shares be suspended from trading on AIM with immediate effect pending clarification of its financial position.
Internal investigations revealed that there were significant shortcomings in the Group’s contracts with PEAL in Papua New Guinea and with Aiotec in New South Wales. Following legal advice, the Company put these contracts into dispute immediately and ceased all work, thus eliminating a significant ongoing cash drain on the Group. In addition, the Directors were made aware that certain of the funds raised in August 2016 to finance the acquisition of SubZero (now MRS Services Group) were not applied to MRS Services Group’s working capital as anticipated. Both factors resulted in a cash constraint and to cover losses in these contracts a provision of A$6.6m was included in the audited consolidated accounts of the Company to 30 June 2016 which were published on 30 March 2017.
The Company ceased work on the PEAL and Aiotec contracts, which resulted in the closure of the consulting business and enabled savings of approximately A$1.5m. MRS PNG Limited and MRS Guernsey Limited, two of the Company’s subsidiaries, were placed into voluntary liquidation in December 2016 and Management Resource Solutions Pty Ltd, an Australian subsidiary of the Company, was placed into voluntary administration with effect from 7 February 2017.
Since the announcement of 27 October 2016, Paul Morffew ceased to be Chief Executive Officer and was replaced by Joe Clayton, and Murray d’Almeida stepped down and was replaced as Chairman by Christopher Berkefeld, who has since resigned and has now been replaced by John Zorbas.
Following the completion of the FY16 audited accounts and the H1 management accounts for FY17, the Company has found no fraudulent activity, misappropriation of funds or gross misconduct by the former CEO, Paul Morffew, and will not be pursuing these or other matters any further.
As a consequence of these contractual issues and cash constraints the Company now urgently requires additional funding. Accordingly, the Company plans to raise conditionally £3m (before expenses) by the Placing of the Placing Shares to certain investors at 5 pence per Placing Share.