For Immediate Release

21 February 2024

Aquila Services Group plc

("Aquila" or the "Company")

Intended Cancellation of Listing

The Board of Aquila, the provider of professional support services and consultancy advice to organisations in socially focussed sectors in the UK and abroad today announces that it has applied to the Financial Conduct Authority ("FCA") and London Stock Exchange plc ("LSE") to effect a cancellation of listing of its ordinary shares on the standard segment of the FCA's Official List (the "Standard List") and trading on the main market for listed securities of the LSE ("Main Market") ("Cancellation").

The Directors have recently completed an internal strategic review exercise which focused on addressing how the Company might best seek to ensure the growth of the Company in order to provide an improved return to shareholders, maximise the retention of key skilled staff and to attract the best new talent, and unanimously concluded that the Cancellation will be in the best interests of the Company, its business and existing shareholders as a whole.

The Directors must stress that the Company continues to trade well, remains financially robust and debt free.  Further Board rationale for the Cancellation is provided in the letter to Shareholders from the Group Chair, Derek Joseph, which is set out in full in Appendix 1 to this announcement.   

As a Standard Listed company, Aquila is not required to obtain the approval of shareholders for the Cancellation. Pursuant to Listing Rule 5.2.8R though, the Company is required to give at least 20 business days' notice of the intended cancellation of its listing. It is anticipated that the Cancellation will become effective at 8:00 a.m. on 22 March 2024. Following the Cancellation, the Company will no longer be subject to the regulatory and statutory regime which applies to companies admitted to the standard segment of the Official List and traded on the Main Market.

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. Upon publication of this announcement, this inside information is now considered to be in the public domain.

For further information please visit www.aquilaservicesgroup.co.uk or contact:

Aquila Services Group plc

Claire Banks, Group Finance Director

Tel: 020 7934 0175

Beaumont Cornish Limited

Roland Cornish / Asia Szusciak

Tel: 020 7628 3396

Beaumont Cornish Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is Financial Adviser to the Company in relation to the matters referred herein. Beaumont Cornish Limited is acting exclusively for the Company and for no one else in relation to the matters described in this announcement and is not advising any other person and accordingly will not be responsible to anyone other than the Company for providing the protections afforded to clients of Beaumont Cornish Limited, or for providing advice in relation to the contents of this announcement or any matter referred to in it.

Appendix 1

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt about the contents of this letter, its likely impact on you and/or the action you should take, you should immediately consult your stockbroker, bank, solicitor, accountant, fund manager or other appropriate independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are resident in the United Kingdom or, if not, another appropriately authorised independent financial adviser in your own jurisdiction.

If you have sold or otherwise transferred all of your ordinary shares in Aquila Services Group plc (or will have sold or transferred all such shares prior to implementation of the proposals described below), please pass this document to the purchaser or transferee, or to the person who arranged the sale or transfer, for onward transmission to the purchaser or transferee.

21 February 2024

Dear Shareholder,

PROPOSED CANCELLATION OF STANDARD LISTING

As you will be aware, Aquila Services Group plc (the Company) is listed on the standard segment of the FCA's Official List (the Standard List) with its shares being admitted to trading on the main market of the London Stock Exchange.  This listing has been in place since August 2015 when the main trading subsidiary, Altair Consultancy and Advisory Services Limited, was reversed into an existing listed company.  

Further to the regulatory news service announcement made on 21 February 2024, the Company is writing to advise shareholders of its intention to cancel the listing of its ordinary shares on the Standard List (the Cancellation) and to trading on the main market of the London Stock Exchange (the LSE listing). 

As a Standard Listed company, the Company is not required to obtain the approval of shareholders for the Cancellation and is instead required only to provide the FCA with 20 business days' prior notice.  The directors of the Company (the Directors) unanimously consider the Cancellation to be in the best interests of the Company, its business and existing shareholders as a whole. 

The Cancellation will take effect at 8:00 a.m. on 22 March 2024.

Background

The original perceived benefits of the LSE listing were the provision of liquidity for shareholders and the ability for the Company to raise further equity to expand its business, to enable it to attract and retain the best talent through the use of share incentive schemes and to support the making of acquisitions utilising the Company's ordinary shares. 

Initially, the Company made a number of smaller acquisitions and the consideration paid included the issue of new shares.  Later suitable acquisitions were harder to source and, in a number of cases, the Company lost out to private equity firms who were willing to attribute values to businesses that were higher than our calculation of the likely benefits.  In addition, shares with low levels of liquidity were not perceived as attractive by those vendors with which we were negotiating with owners often requiring the receipt of cash in preference to shares. This would have required the Company to engage in significant borrowing which was not part of our strategy. 

Recent increases in the cost of living have led our employees to seek higher basic remuneration and the value of share options as an incentive has also diminished.  The Company has found that operating within the LSE framework has made it difficult to devise suitable alternative equity incentives. 

We must stress that the Company continues to trade well, remains financially robust and debt free. 

Strategic review

The Directors have recently completed an internal strategic review exercise which focused on addressing how we might best seek to ensure the future growth of the Company in order to provide an improved return to shareholders, maximise the retention of key skilled staff and to attract the best new talent.

The key conclusions of this review were that:

1.   The LSE listing has not enabled the levels of liquidity that were expected for shareholders and increasingly, it is more complex and difficult for smaller companies to benefit from a public listing. 

2.   The costs of maintaining the LSE listing (including annual audit fees, FCA and London Stock Exchange charges and advisers' fees) are currently over £100,000 per annum and are likely to increase significantly in the future.  This cost is approximately equal to a third of the Company's total current annual dividend distribution. 

3.   In order to secure its succession strategy, the Company needs to enable the next generation of senior executives to hold significant ownership stakes in the Company through enhanced equity participation schemes.  Part of this strategy might also include our considering wider alternatives for future ownership of the Company, including the possibility of setting up an employee share ownership trust or similar employee ownership model.  However, at this point in time such a structure would require significant borrowings and the Company would need to generate future additional reserves before it became a viable proposition.

4.   Many of the Company's existing major shareholders might wish to consider the flexibility that could be available in their individual financial positions if the LSE listing were cancelled.

5.   The Company should consider taking a different approach to the making of further acquisitions, possibly through partnership and joint venture arrangements where the consideration can be related to performance without the complexity and legal costs that a public quotation requires. 

Future proposals

Although our future strategy has many different elements, subject to our maintaining the Company's continuing profitability, one of the principal benefits of the Cancellation and subsequent cost savings will be to allow the Company to both improve returns to shareholders (by a progressive increase in annual dividends starting from 2024/25) while also growing its business.

Whilst, following the Cancellation, the Company will endeavour to facilitate arrangements whereby shareholders wanting to sell their shares can be matched with those interested in purchasing, it is unlikely this will achieve any significant level of liquidity in the near future. 

The Directors also realise that many smaller shareholders, particularly those who acquired their shares not as investments but as part of previous share option schemes, via an inheritance or who otherwise hold their shares within a tax wrapper such as an ISA, may not consider a continuing investment in an unlisted company to be within their investment strategy.    Although the Directors' preference is for all shareholders to remain investors in the Company and we believe the Company has a positive future ahead of it, following Cancellation, we will explore options for holders of smaller interests, excluding staff and Directors, to dispose of their shareholdings to the Company for a cash consideration.

For larger shareholders who are not members of staff and Directors, the Company will also explore the possibility for existing holdings to be partly exchanged for a debt instrument bearing an appropriate interest coupon. 

Both of these schemes will be priorities for the Company but their introduction will be subject to the obtaining of all necessary shareholder approvals and to ensuring the Company retains sufficient funds for both its current and reasonably foreseeable working capital requirements as well as for further business growth. 

Prior to progressing with our cancellation of the LSE listing, the Directors consulted a number of the Company's larger shareholders and our proposals received widespread support.  The outcome of these consultations has been taken into account in the key considerations mentioned above. 

Conclusion

As at the date of this letter, there were 101 shareholders recorded on the Company's members' register and 39,961,955 ordinary shares in issue and the market capitalisation of the Company as at 20 February 2024, at the bid price of 17p, was approximately £7.39m.  The Directors believe, however, that the inherent value of the Company is likely to be in excess of this sum and that, without the ongoing burden of the listed regulatory environment and associated costs of listing, the Company could well grow and further enhance its business as well as providing increased returns for shareholders. 

The Directors will, immediately following Cancellation, be retaining all of those ordinary shares as are presently held by them and are looking to benefit from any future growth and would also encourage shareholders to have confidence in the future of the business. 

Shareholders should consult their own professional advisers as to whether continuing to hold shares in the Company following the Cancellation is suitable or whether the Cancellation has any tax consequences for them.  Tax rules can change and the precise tax implications for shareholders will depend on their particular circumstances.

Any shareholder who would like to discuss the contents of this letter with a Director should please contact our Company Secretary, Claire Banks, whose email address is Claire.Banks@aquilaservicesgrp.co.uk to make suitable arrangements.

Yours faithfully,

Derek Joseph,

Group Chair, Aquila Services Group plc-