Robotic Technology Systems PLC
05 May 2006
Robotic Technology Systems PLC
('RTS' or 'the Company')
Proposed Demerger of Nuclear Services Division
Overview
RTS, the AIM listed supplier of engineering services, products and integrated
systems to automate scientific and industrial processes, has today announced
details of the proposed Demerger and separate public listing of its Nuclear
Services Division under a new holding company, International Nuclear Solutions
plc ('International Nuclear Solutions' or 'INS plc').
The Demerger, which is subject to certain conditions including the approval by
RTS shareholders is expected to be completed and INS plc is expected to start
trading on AIM as a separate company on 31 May 2006.
Under the terms of the Demerger Agreement, RTS Shareholders will receive one
ordinary share for each RTS share held at the Demerger record date (30 May
2006).
It is expected that a circular will be sent to RTS shareholders later today ('
the Circular'), together with an AIM admission document published by INS plc ('
the Admission Document').
INS plc
INS plc will acquire the entire issued share capital of RTS Innovation upon
completion of the Demerger. RTS Innovation, which currently forms the Nuclear
Services Division of RTS, is a specialist provider of nuclear engineering and
consultancy services in the UK, offering services and solutions spanning
front-end definition, detailed design and engineering, procurement, build,
testing and integration, site installation, start-up and operation.
The Company's areas of expertise include waste and nuclear materials handling,
processing and storage, including new build facilities where necessary to
support the clean-up and decommissioning programme. In addition, the Company
provides support for plant asset care and maintenance of redundant facilities.
The Company also supports the commercial operating facilities associated with
fuel fabrication and spent fuel reprocessing activities at Sellafield.
Rationale
The Demerger is expected to create the following benefits:
• the Demerger will offer investors a rare investment opportunity to gain
exposure to a business that operates solely within the nuclear industry and,
most particularly, in the nuclear decommissioning sector;
• International Nuclear Solutions should receive more specialist research
coverage following completion of the Demerger which may lead to a higher
rating as a separate quoted entity;
• the Demerger will allow Shareholders to retain a holding in RTS' Ongoing
Business which should also benefit from receiving specialist research;
• the product and service offerings require different sales, marketing and
other inputs.
RTS Innovation produces engineering solutions and designs with little software
development whereas RTS' Ongoing Business (namely RTS Life Science and RTS
Flexible Systems) designs and assembles systems incorporating significant
software development;
• the Demerger will facilitate more effectively the incentivisation and
retention of key management and employees in both companies; and
• each business will be able to structure its banking, equity funding and
balance sheet according to its chosen business strategy.
Board Structure
Upon completion of the Demerger, the Board will remain unchanged save that it is
proposed that, conditional on the Demerger and Admission, John Ridings will step
down from the Board and become a non-executive director of International Nuclear
Solutions.
Approvals
The Demerger is conditional upon, amongst other things, the passing of the
Demerger Resolution (to be proposed as an ordinary resolution at the RTS EGM),
Admission and no material adverse change occurring in the business or financial
position of either RTS or RTS Innovation in the period prior to Admission. It is
expected that Admission of the Ordinary Shares will take place and dealings in
those shares will commence on 31 May 2006.
The information in this summary should be read in conjunction with the full text
of the attached announcement and definitions used in the Circular apply in this
announcement unless the context otherwise requires.
Chris Brown, Chairman of RTS, said:
'This is a significant strategic move which we believe will pave the way for the
creation of long term value for both businesses. The Demerger will enable
shareholders to invest in two distinct businesses in totally different markets
with clear market valuations and growth prospects.'
Also commenting Tony Moore, Chief Executive of RTS Innovation, said:
'RTS Innovation is a leader in design consultancy in the nuclear industry.
Nuclear clean up and decommissioning is a large market and a growth sector.
Consequently, we believe that there is an exciting opportunity and much
potential. The business has a successful track record and its management team is
among the most experienced in the industry enabling INS plc to be extremely well
positioned to exploit this opportunity.'
5 May 2006
Enquiries:
Robotic Technology Systems Plc Tel: 0161 777 2000
Chris Brown, Chairman
Craig Slater, Group Finance Director
International Nuclear Solutions Tel: 0161 222 5500
Tony Moore, Chief Executive Officer
Collins Stewart Tel: 020 7523 8350
Chris Wells/Mark Connelly/Stewart Wallace
College Hill Tel: 020 7457 2020
Alex Walters/ Matthew Smallwood
Robotic Technology Systems PLC
Details of proposed Demerger of the Nuclear Services Division
The Demerger will be effected by the Company declaring a special dividend equal
to the book value of the Company's shareholding in RTS Innovation on Demerger,
which will be satisfied, in specie, by the allotment and issue by International
Nuclear Solutions of the Demerger Shares, credited as fully paid, to Qualifying
Shareholders in consideration for the transfer by RTS to International Nuclear
Solutions of the whole of the issued share capital of RTS Innovation. Qualifying
Shareholders will receive:
One Demerger Share in respect of each Ordinary Share
held at the Demerger Record Date.
The Demerger is conditional upon, amongst other things, the passing of the
Demerger Resolution (to be proposed as an ordinary resolution at the RTS EGM),
Admission and no material adverse change occurring in the business or financial
position of either RTS or RTS Innovation in the period prior to Admission.
It is expected that Admission will take place and dealings will commence on 31
May 2006. The number of Demerger Shares issued on Demerger is not expected to
exceed 62,335,274 INS plc Ordinary Shares.
Background to, and reasons for, the Demerger
The objective of the Demerger is to enable the Company to divide into two groups
owned by independently operated publicly traded companies, namely INS plc and
RTS. RTS Innovation currently operates, to a significant extent, independently
of the rest of the RTS Group and in a different and distinct market, has a
separate customer base and has been independently audited since 2001.
The Directors believe that the Demerger will enable RTS Innovation further to
establish itself as a specialist provider of nuclear engineering and design
services in the UK. The Directors also believe that Shareholders will be able to
benefit by having the option of holding shares in separate entities as:
• the Demerger will offer investors a rare investment opportunity to
gain exposure to a business that operates solely within the nuclear industry
and, most particularly, in the nuclear decommissioning sector;
• International Nuclear Solutions should receive more specialist
research coverage following completion of the Demerger which may lead to a
higher rating as a separate quoted entity;
• the Demerger will allow Shareholders to retain a holding in RTS'
Ongoing Business which should also benefit from receiving specialist research;
• the product and service offerings require different sales, marketing
and other inputs. RTS Innovation produces engineering solutions and designs with
little software development whereas RTS' Ongoing Business (namely RTS Life
Science and RTS Flexible Systems) designs and assembles systems incorporating
significant software development;
• the Demerger will facilitate more effectively the incentivisation
and retention of key management and employees in both companies; and
• each business will be able to structure its banking, equity funding
and balance sheets according to its chosen business strategy.
The Directors believe that there are no material trading synergy benefits to be
lost as a result of the Demerger nor, given the current independence of the two
businesses, are there any material separation issues that are not addressed by
the Shared Services Agreement which is summarised in the Circular.
RTS Innovation Overview
RTS Innovation is a specialist provider of nuclear engineering and consultancy
services in the UK and has nearly 25 years of experience of working in the
nuclear industry. RTS Innovation, which, prior to the Demerger, will be a direct
subsidiary of RTS, operates, to a significant extent, independently of the rest
of the RTS Group. It operates in a different market, has a separate customer
base and has been independently audited since 2001. International Nuclear
Solutions has been recently incorporated to become the holding company for RTS
Innovation, which it shall acquire from RTS pursuant to the Demerger.
RTS Innovation is a specialist provider of nuclear engineering and consultancy
services in the UK, offering services and solutions spanning front-end
definition, detailed design, procurement, build, testing and integration, site
installation, start-up and operation. The ability to provide this comprehensive
offering brings a number of advantages. Firstly, RTS Innovation can offer a full
life-cycle service providing a 'one stop' shop for its customers including
British Nuclear Fuels ('BNFL'). Secondly, RTS Innovation is able to work on many
different projects which may be at differing phases of the life-cycle from the
initial front end design to eventual commissioning or operation. This provides
RTS Innovation with a level of flexibility and allows it to target work without
being restricted by the project's stage in the life-cycle. RTS Innovation is
currently focused on the clean-up and decommissioning of the nuclear legacy
facilities which fall under the auspices of the Nuclear Decommissioning
Authority ('NDA'). The RTS Innovation management team has a wealth of experience
in the nuclear industry and has grown the revenues of the business over five
fold during the last seven years.
The table below is extracted from the Admission Document and summarises the
combined trading record of RTS Innovation for the three year period ended 31
December 2005 as if RTS Innovation had been owned and controlled by
International Nuclear Solutions for all periods presented.
Year ended Year ended Year ended
31 December 31 December 31 December
2003 2004 2005
£'000 £'000 £'000
Turnover 12,309 24,772 24,610
Gross profit 2,484 4,126 4,787
Operating profit (pre intra-group charge) 857 2,088 2,238
Operating profit (post intra-group charge) 310 1,139 2,238
Net interest receivable 1 6 14
Profit before taxation 311 1,145 2,252
Net assets 1,233 2,482 2,431
Over the last three years RTS Innovation has seen significant growth in
revenues, gross profits and operating profits, with significant growth in the
year ended 31 December 2004, reflecting the successful introduction of its
Multi-Discipline Design House ('MDDH') alliance together with a number of
significant contract awards at Magnox power station sites and at Sellafield.
The financial year ended 31 December 2005 saw a period of consolidation,
following the doubling of turnover in 2004. While revenues increased from the
MDDH alliance and new contract wins at Drigg and Sellafield, the change in
BNFL's competitive tendering process from April 2005, using the OJEU for
procurement, increased the lead-time for contract awards. In spite of these
delays, while revenues for 2005 were negatively impacted, RTS Innovation
achieved a record order book as at 31 December 2005, being close to 150 per
cent. higher than that of the previous year. RTS Innovation has increased its
margins at the operating level since 2003, following strong cost control.
The intra-group charge relates to a re-allocation of plc costs from RTS plc to
RTS Innovation. The charge was not made in 2005 pursuant to the Demerger
discussions.
Information regarding the Company after the Demerger
Following the Demerger, RTS will comprise two operating businesses:
• RTS Life Science which is a major supplier of automation systems and
products for drug discovery, sample management, sample storage and testing. Its
market encompasses drug discovery applications within pharmaceutical and
biotechnology companies, sample preparation and storage for medical research,
clinical trials and pharmaceutical manufacturing applications; and
• RTS Flexible Systems which designs, assembles and distributes vision
guided automated packaging and product handling systems for the food and
consumer goods industries. It provides end-of-line packaging systems that are
based upon robotics and specialist commercially available components integrated
with its proprietary vision technology to identify, track and analyse the
products they are handling.
In the financial year ended 31 December 2005, RTS Flexible Systems and RTS Life
Science generated an aggregate turnover of £17.3 million and generated operating
profits of £1.5 million before central costs.
Relationship with International Nuclear Solutions
Following the Demerger, International Nuclear Solutions and the Company will
each operate as separate publicly traded companies and neither International
Nuclear Solutions nor the Company will retain any shareholding in the other.
Implementation of the Demerger and the relationship between International
Nuclear Solutions and RTS after the Demerger is regulated by the Demerger
Agreement and the Shared Services Agreement.
The Company has agreed with International Nuclear Solutions that, following the
Demerger, each of them will continue to provide certain services and facilities
to the other. These services and facilities will be provided on an arm's length
and, in most cases, transitional basis pursuant to the Demerger Agreement and
the Shared Services Agreement.
Share options
Existing Options
Following the announcement of the proposed Demerger on 29 March 2006, the Board
had the discretion, under the Existing Option Scheme rules, to allow outstanding
options to become exercisable for a specified period. The Board subsequently
exercised its discretion to allow such Exercisable Options to be conditionally
exercised during the period ended 26 April 2006 and the Auditors provided their
written consent to such exercise, as required under the rules of the Existing
Option Scheme. Holders of the existing options have since elected to
conditionally exercise options over up to 1,050,000 Ordinary Shares. The
exercise of these options will become unconditional on the date when, inter
alia, the Admission Document (containing details of the Demerger) is published
(subject to the optionholders having the ability to cancel the exercise of their
options up until the date of publication of the Admission Document). Any options
not conditionally exercised or where such conditional exercise has been
withdrawn by that date will lapse.
New Option Schemes
The Remuneration Committee has reviewed the post Demerger remuneration structure
for, in particular, the executive Directors and senior management. The
Remuneration Committee's aim is to develop and implement remuneration policies
which are tax effective and provide both an appropriate motivational framework
and more closely align the interests of the executive Directors and senior
management with the performance of the business and the interests of
Shareholders.
As part of this exercise, the Remuneration Committee has decided that, subject
to Shareholder approval the introduction of a new Executive Share Option Plan
for executives and an all employee savings related share option plan (SAYE Plan)
is key to supporting the business strategy in the future. The proposed plans
will have a duration of ten years. The proposed Executive Share Option Plan will
focus participants on delivering strong year-on-year annual performance and
align their longer-term interests with those of Shareholders, whilst taking into
account institutional shareholder guidelines and the provisions of the Combined
Code on corporate governance. The proposed plan also reflects the Remuneration
Committee's policy of linking remuneration to the performance of the Company's
business.
Director and significant shareholder intentions
Automated Controls is a 24.5 per cent. shareholder of RTS and under the terms of
the Demerger Agreement is entitled to receive the same percentage of ordinary
shares in International Nuclear Solutions. Automated Controls has indicated to
the Company its intention to sell all or part of its holding in International
Nuclear Solutions. It is intended that, subject to there being demand at a
mutually agreeable price, Automated Controls will sell a significant proportion
of ordinary shares in International Nuclear Solutions on, or shortly after
Admission. It has been agreed that Automated Controls and Collins Stewart will
enter into an agreement pursuant to which Automated Controls will undertake not
to sell the remainder of its holding of INS plc Ordinary Shares for six months
following Admission without the prior consent of Collins Stewart and has agreed
to sell INS plc Ordinary Shares only through Collins Stewart for a period of 12
months thereafter.
John Mowinckel, a Non Executive Director of RTS, is also on the board of
Investindustrial General Partner Limited. Automated Controls Limited is a wholly
owned subsidiary of Investindustrial General Partner Limited in its capacity as
general partner of Investindustrial General Partner L.P. in its capacity as
general partner of Investindustrial L.P.
Pursuant to the conditional exercise of options over up to 1,050,000 Ordinary
Shares referred to above, the Selling Option Holders, including the following
Directors, Chris Brown, Philip Johnson and Craig Slater, have also indicated
their intention to sell sufficient Ordinary Shares in the market following
publication of the Admission Document but prior to the Demerger Record Date, to
meet the cost of exercise and any additional tax payable thereon. On Admission,
the remainder of their holding of Ordinary Shares will therefore be eligible to
receive Demerger Shares on the basis set out above.
Current trading and prospects
The current trading for RTS plc is covered in the preliminary statement of
audited results for the year ended 31 December 2005, announced on 29 March 2006,
a copy of which forms part of the Circular.
Since the year ended 31 December 2005, RTS Innovation's trading has been
extremely promising, supported by a strong order book, which is significantly
ahead of the position of the Company at the same time in 2005. This order book
includes an advance order from Carillion for over £3 million for a storage
project at Sellafield. The final order value, once negotiations have concluded,
is expected to be well in excess of £10 million.
Expected timetable for principle events
Latest time and date for receipt of Forms of Proxy 12.05 p.m. on 28 May 2006
Extraordinary General Meeting 12.05 p.m. on 30 May 2006
Latest time and date for lodging transfers of Ordinary Shares in order 5.00 p.m. on 30 May 2006
for transferee to be registered by the Demerger Record Time
Demerger Record Time 6.00 p.m. on 30 May 2006
Admission and dealings in INS plc 8.00 a.m. on 31 May 2006
Ordinary Shares expected to commence on AIM
Completion of the Demerger 31 May 2006
CREST members accounts credited INS plc Ordinary Shares 31 May 2006
Despatch of definitive share certificates for INS plc Ordinary Shares By 7 June 2006
Extraordinary General Meeting
A Notice convening the Extraordinary General Meeting of RTS at which approvals
for the proposals to, inter alia, implement the Demerger are to be sought is
expected to be posted to Shareholders later today, together with the Circular
and Admission document. The Extraordinary General Meeting will be held at
Northbank, Irlam, Manchester, M44 5AY on 30 May 2006 at 12.05 p.m.(or as soon
thereafter as the Annual General Meeting of the Company to be held at the same
place and the same date at 12.00 p.m. shall have been concluded or adjourned).
Definitions
In this document, where the context permits, the expressions set out below shall
bear the following meanings:
'Automated Controls Limited' Automated Controls Limited a wholly owned
subsidiary of Investindustrial General
Partner Limited in its capacity
as general partner of
Investindustrial General Partner L.P.
in its capacity as general
partner of Investindustrial L.P.
'Act' The Companies Act 1985, as amended
'Admission' admission of the INS plc Ordinary
Shares to trading on AIM and such admission
becoming effective in accordance with the
rules published by the London Stock
Exchange relating to AIM
'Admission Document' the admission document prepared by International
Nuclear Solutions which accompanies this document
'AIM' the market of that name operated by
the London Stock Exchange
'Board' or 'Directors' the board of directors of the Company
'Collins Stewart' Collins Stewart Limited
'CREST' the system operated by CRESTCo Limited in
accordance with which securities may be
held and transferred in uncertificated form
'CRESTCO' CRESTCO Limited, the operator of CREST
'Demerger' the demerger of RTS Innovation from the
Group as described in this document and
on the terms of the Demerger Agreement
'Demerger Agreement' the conditional agreement dated 5 May 2006
between RTS (1), International Nuclear
Solutions (2) and RTS Innovation (3) relating
to the Demerger
'Demerger Dividend' the dividend, equal to the book value of
RTS Innovation,to be put to Shareholders at the
EGM for their approval
'Demerger Record Time' 6.00 p.m. on 30 May 2006
'Demerger Resolution' the ordinary resolution to approve the
Demerger set out in the notice of EGM
'Demerger Shares' the INS plc Ordinary Shares to be issued
pursuant to the Demerger
'EGM' or 'Extraordinary the extraordinary general meeting of RTS convened for
General Meeting' 12.05 p.m. on 30 May 2006 (or as soon
thereafter as the Annual General meeting of
the Company to be held at the same place and
the same date at 12.00 p.m. shall have
been concluded or adjourned)
'Executive Share Option Plan' the executive share option plan to be adopted
by the Company, following the Demerger,
subject to Shareholder approval
'Existing Option Scheme' the existing unapproved discretionary share
option scheme of the Company, prior to the
Demerger
'Group' the Company and its subsidiary
companies including the RTS Group and RTS
Innovation
'International Nuclear International Nuclear Solutions plc
Solutions' (Company number 5738079)
'INS plc Ordinary Shares' ordinary shares of 1p each in the capital of
International Nuclear Solutions
'IPO Agreement' the IPO Agreement dated 5 May 2006
between the Directors of International Nuclear
Solutions (1), International Nuclear
Solutions (2), RTS (3) and Collins Stewart (4)
'London Stock Exchange' London Stock Exchange plc
'OJEU' Official Journal of the European Union
'Ordinary Shares' or 'Shares' Ordinary Shares of 1p each in the capital of
the Company
'Qualifying Shareholders' Shareholders at the Demerger Record Time
'Resolutions' the resolutions to be passed at the EGM
'RTS or 'the Company' Robotic Technology Systems plc
'RTS Flexible Systems' the RTS Group's Flexible Systems business
'RTS Group' RTS and its subsidiary companies excluding RTS
Innovation following completion of the Demerger
'RTS Life Science' the RTS Group's Life Science business
'RTS' Ongoing Business' the RTS Group's Life Science and Flexible
Systems businesses;
'RTS Innovation' RTS Innovation Limited (Company number
4109440)
'RTS Innovation Group' International Nuclear Solutions and RTS Innovation
'International Nuclear holders of ordinary shares in International Nuclear
Solutions Shareholders' Solutions following the Demerger
'SAYE Plan' the all employee savings related share
option plan proposed to be adopted by the
Company, following the Demerger, subject to
Shareholder approval
'Selling Option Holders' those holders of existing options who have
elected to conditionally exercise their
option holding, and sell, in whole or in part,
the resultant shares
'Share Option Schemes' the Executive Share Option Plan and SAYE Plan
'Shared Services Agreement' the agreement to be entered into by the Company
and International Nuclear Solutions
if and when the Demerger becomes unconditional
'Shareholder' holders of Ordinary Shares as at the
date of publication of the Circular and the
Admission Document
This information is provided by RNS
The company news service from the London Stock Exchange
