TIDMDOO
RNS Number : 0490Q
D1 Oils Plc
12 October 2011
D1 Oils plc ("D1" or the "Company")
Proposed placing and changes to the Company's share option
plan
Introduction
The Board of D1 announces today that it intends to raise up to
GBP1.29 million by way of a share placing by WH Ireland Limited.
The Board has concluded its review of D1's operations, announced on
28 June 2011, and has refined the Group's business plan
accordingly. It is carrying out the placing to provide the Group
with sufficient working capital to enable it to prepare for and
finance its targeted production volumes of crude Jatropha oil
("CJO") in India in the forthcoming 2011/2012 Jatropha harvest
season.
The Board also announces today proposed changes to the Company's
share option plan (including an increase in the number of shares
over which options can be granted).
Background to the placing
The Board is pleased to report that the Group continues to
experience continuing upward price pressure for CJO, with prices
currently exceeding US$1,000 per tonne, ex works. The significant
majority of the Jatropha grain collected by the Group is from
regions in India adjacent to the Bay of Bengal, where D1's profile
has enabled it to secure supplies of grain and CJO from third party
suppliers, in addition to its relationship farmers.
Accordingly, the Board has determined to focus the Group's
operations in India, where there is strong demand for bio-fuel, and
to commit an increasing proportion of its working capital to that
country. This will enable the Group to consolidate grain storage
and processing. In addition, the Group will look to obtain
commodity trade finance for the 2012/2013 harvest season, which
will be facilitated by centralised storage and processing.
To enable it to focus its resources on India, the Group will
look to minimise the Group's expenditure in the UK, Zambia, Malawi
and Indonesia. The Board also intends to suspend, until further
notice, the Group's animal feed development programme, together
with the related cattle trials.
The Board expects that these actions will enable it to further
reduce the Group's overheads from a run rate of approximately
GBP3.0 million per annum currently to approximately GBP2.2 million
for the year ending 31 December 2012. The Board estimates that
these savings will involve a one off exceptional cost of
approximately GBP410,000.
India has in recent months experienced good rainfall. As a
result the Directors anticipate improved yields from its maturing
Jatropha crops this harvest season. The Board is now targeting
production of 2,000 tonnes of CJO, at a cost of approximately $690
per tonne, over the next Indian harvest season to May 2012. It is
targeting to sell this production at an average price of $1,000 per
tonne, ex works. The Board anticipates, based on the assumptions
underlying its business plan, that the Group's operations in India
will achieve breakeven in 2013, although the Group itself is not
expected to break even before 2014.
Finally, the Board anticipates that the Group will shortly
contract to supply 275 tonnes of CJO at an equivalent price of
US$1,200 per tonne, ex works, to a major Indian corporation for
product trials. The Directors believe that this contract, upon
fulfilment, would represent the largest fulfilled CJO supply
contract to date. On the basis that the trials are successfully
concluded, they would anticipate further supply contracts of
greater size in due course with the same purchaser.
The Group's net cash balance at 30 September 2011 amounted to
approximately GBP1.75 million.
Use of proceeds
In line with the position stated in November 2010, that D1
required re-financing in 2011, the Board is proposing the placing
to finance the Group's operations until the end of the second
quarter of 2012. By then, the Group will have processed and sold
CJO from the forthcoming harvest season, and the Directors will
have reduced the Group's overhead base as described above and
anticipate that they will have ascertained whether commodity trade
finance is likely to be available to the Group.
The Directors expect that the continuing implementation of the
Group's business plan will then require additional capital in mid
2012. The Directors believe that the Group will by then have made
sufficient progress to attract new capital; however it is possible
that further capital may not be available to the Group.
The Directors intend that the net proceeds of the placing will
be used for working capital purposes, primarily to enable D1 to
finance its targeted volume of CJO production in the forthcoming
Jatropha harvest season in India.
In the event that the placing is not approved by shareholders,
D1 would not have sufficient working capital to implement the
business plan in the forthcoming 2011/2012 harvest season and the
Directors would need to consider whether or not it is appropriate
for the Group to continue to trade.
The placing
The Company proposes to raise up to GBP1.29 million through the
issue of up to 51,640,000 new ordinary shares at 2.5 pence per
share. The maximum number of placing shares would represent
approximately 28.96 per cent. of the Company's issued share capital
immediately following Admission.
WH Ireland has entered into a placing agreement with the Company
whereby it has agreed to use its reasonable endeavours, as agent
for the Company, to procure placees for the placing shares. The
placing is not being underwritten.
The placing agreement is conditional upon shareholder approval,
Principle Capital Investments Limited ("Principle Capital") and one
further investor subscribing in aggregate not fewer than 51,640,000
placing shares at the placing price, and admission of the placing
shares becoming effective on or before 8.00 a.m. on 2 November 2011
(or such later time or date as the Company and WH Ireland may
agree, being not later than 30 November 2011). Admission is subject
to shareholder approval and to the placing agreement becoming
unconditional in all respects (save only for admission) and not
being terminated in accordance with its terms.
The placing shares will, when issued, rank pari passu in all
respects with the existing shares including the right to receive
dividends and other distributions declared following the
placing.
Related party transactions
Principle Capital, which is interested in 27.54 per cent. of
D1's existing issued share capital, has agreed to subscribe for
10,440,000 placing shares at the placing price. On the basis that
the placing is fully subscribed, upon admission Principle Capital
will be interested in 25.42 per cent. of the enlarged issued share
capital of the Company.
Under the AIM Rules, Principle Capital is treated as a related
party of the Company. The Directors consider, having consulted with
WH Ireland, the Company's nominated adviser, that the terms of the
subscription by Principle Capital are fair and reasonable insofar
as Shareholders are concerned.
Employee incentivisation
The Company has granted options which remain exercisable over
10,042,026 shares, representing approximately 7.93 per cent. of the
Company's existing issued share capital. Of these shares currently
under option, 4,192,026 have exercise prices of at least 21 pence
per share. Accordingly, unexercised options with a price of less
than 21 pence per share represent only 4.62 per cent. of the
Company's issued share capital.
Given the need to incentivise senior management (including the
new Directors) and the overriding requirement to conserve cash for
the operation of the business, the Board (after consultation with
certain major shareholders) considers that it would be appropriate
to increase the pool of options available for grant by the
Remuneration Committee by 10 per cent. of the issued share capital
of the Company as enlarged by the placing. Any options to be
granted pursuant to such authority will be issued under the
Company's current share option scheme but the exercise price will
be not less than the market price of the shares prevailing at the
time of grant, will be subject to performance criteria relating to
an increase in the Company's share price over and above the placing
price and will vest (subject to the Board's discretion to allow
options to vest if an employee leaves the Group's employment) over
a period of at least three years.
The Board considers that share options should reward employees
for their contribution to the success of the Group. The Board also
considers that this principle should be applied when considering
whether to exercise its discretion to allow employees to exercise
share options after they have left the employment of the Group.
This discretion allows these individuals to have the opportunity to
share in any future success of the Group which does not manifest
itself until after they have left the Group's employment. However,
the Board considers that after a reasonable period of time there is
no sustainable rationale for share options to continue to be
exercisable by former employees of the Group. Accordingly, the
Board is seeking authority from shareholders to amend the Share
Option Plan so that the discretion to allow the exercise by former
employees of the Group who hold share options will be limited to a
finite period which shall end three years from the date on which
they ceased to be an employee of the Group.
Both of these changes require shareholder approval.
Circular to shareholders
A circular convening the general meeting to approve the placing
and changes to the Company's share option plan is being sent to
shareholders and a copy will be placed on the Company's website
shortly.
Steven Rudofsky, Chairman of D1, commented:
"As I mentioned in our interim results two weeks ago, the new
Board of D1 is enthusiastic and optimistic about the outlook for
the Company.
"The support from our shareholders for this placing will provide
D1 with working capital for the forthcoming Indian harvest season
and enable us to demonstrate the potential of our business."
For further information please contact:-
D1 Oils plc +44 (0) 20 7936 9104
Steven Rudofsky
Executive Chairman
WH Ireland + 44 (0) 20 7220 1650
Chris Fielding
Ends
This information is provided by RNS
The company news service from the London Stock Exchange
END
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