REG - Earnz PLC - Posting of Circular and Notice of GM

EarnzAnnouncement

12/06/2025 17:30

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RNS Number : 6701M  Earnz PLC  12 June 2025

12 June 2025

EARNZ plc

("EARNZ" or the "Company")

 

Posting of circular

and

Notice of General Meeting

EARNZ plc (AIM: EARN), an energy services company whose objective is to
capitalise on the drive for global decarbonisation, announces that it has
posted a circular to its shareholders (the "Circular") convening a general
meeting which is to be held at 10.00 a.m. on 30 June 2025 (the "General
Meeting").

The following has been extracted from the Part 1, the Chairman's Letter of the
Circular, which will be available on the Company's website in due course at
www.EARNZplc.com (http://www.EARNZplc.com) .

Earlier today, the Company announced that it had entered into a conditional
sale and purchase agreement to acquire the issued share capital of A&D
Carbon Solutions LTD for a maximum total consideration of £2.8 million (the
"Acquisition"). In addition, the Company announced the placing of 14,201,965
Placing Shares at 7.2 pence per share to raise approximately £1.023 million.
The Placing Shares are expected to be allotted and issued  on 17 June 2025.
The proceeds from the Placing will be used for general working capital
purposes and to fund the initial cash consideration for the Acquisition. Each
of the Directors is participating in the Placing.

As Shareholders will be aware, on 29 August 2024, the Company completed the
acquisitions of Cosgrove & Drew Ltd and South West Heating Services Ltd
(together, the "Previous Acquisitions") for a total maximum consideration of
£3.1 million and the share capital of the Group (as enlarged by the Previous
Acquisitions) was re-admitted to trading on AIM. In the intervening period,
the Company has sourced and considered various acquisition opportunities in
the energy services sector, including a family-owned company based in the
south of England whose owners signed non-binding heads of terms in October
2024. However, this did not subsequently result in the signing of a binding
sale and purchase agreement. In  April  2025, the Company entered into
discussions with the owners of A&D in relation to the acquisition of the
entire share capital of A&D. The Board expects that following the
acquisition of A&D, for the year ending 31 December 2025 ("FY25"), the
Enlarged Group will generate revenue of approximately £14.0 million and
adjusted EBITDA of approximately £0.5 million (as set out in further detail
below).

The purpose of this document is to provide Shareholders with further
information on the Acquisition and the Placing (together, the
"Proposals").This letter explains why the Board believes that the Proposals
and the Company's intention to complete future acquisitions, as part of its
'buy and build' strategy (for which authority is being sought to issue further
Ordinary Shares at the General Meeting), are in the best interests of the
Company and its Shareholders as a whole, and why the Board therefore
recommends that Shareholders vote in favour of the Resolutions to be proposed
at the General Meeting, as the Directors intend to do so in respect of their
aggregate beneficial shareholdings representing approximately 13.09 per cent.
of the Company's issued share capital.

1.      Information on A&D Carbon Solutions LTD

Given the nature of its buy and build strategy, the Company has signed a
conditional sale and purchase agreement (the "SPA"), with the vendors (the
"Vendors") of A&D to acquire A&D's entire issued share capital for a
maximum total consideration of £2.8 million. A&D operates across the
country, with a particular focus in Wales, using a network of longstanding
contractors as well as in-house staff, delivering whole building solutions for
the decarbonisation agenda, including external wall insulation, cavity wall
insulation, air source heat pumps and solar panels. A&D's focus is
predominantly looking to improve residential properties' Energy Performance
Certificate ("EPC") rating through accessing Government funding under various
schemes. A&D sources its work from customers who manage large scale
domestic retrofit projects, funded by UK Government decarbonisation funds,
such as ECO4 and Warm Homes Social Housing Fund Waves 2 & 3, and has
recently won a new significant customer that has been onboarded on the back of
Wave 3. Its strong relationships with suppliers and sub-contractors and high
quality of work drives repeat business.

A&D is a profitable and cash generative company whose figures historically
have not been audited. The table below sets out summary unaudited historical
financial information for the 3 years ended 31 July 2024 and 9 months ended 30
April 2025: -

 £'000                   Unaudited      Unaudited      Unaudited      Unaudited

                         Year ended     Year ended     Year ended     9 months to 30 April 2025

                         31 July 2022   31 July 2023   31 July 2024
 Revenue                 2,380          2,402          2,771          2,893
 Cost of sales           (1,176)        (1,477)        (1,714)        (1,718)
 Gross profit            1,204          925            1,057          1,101
 EBITDA                  439            204            455            216
 Profit before tax       432            181            410            163
 Total profit after tax  445            189            321            122

 Net Assets              108            82             198            144
 Cash                    269            101            259            128

2.      Summary terms of the Acquisition

Under the terms of the SPA, the Company has, conditionally agreed to acquire
A&D for a maximum total consideration of £2.8 million (debt/cash free)
comprising:-

•     initial consideration of £1.3 million to be satisfied by £0.84
million payable in cash on Completion, with an additional £0.2 million to be
held in an escrow account (the "Escrow") and payable dependent on achieving
EBITDA of £0.2 million for the period 1 June 2025 to 31 December 2025, and
£0.26 million payable in Consideration Shares; and

 

•     deferred consideration of up to £1.5 million to be satisfied 60%
in cash and 40% in additional new Ordinary Shares which is payable subject to
A&D achieving certain performance targets to be satisfied, details of
which are set out below.

A&D will be acquired on a debt free/cash free basis with normalised
working capital. The Vendors have agreed to enter into lock-in agreements for
2 years (1 year lock in and 1 year orderly market) following each issue of the
new Ordinary Shares.

The deferred consideration will become payable on A&D delivering agreed
EBITDA targets to be satisfied in two tranches as follows:-

·    Year 1 - £15.96 (Y1 Multiplier) for every £1 by which A&D's
EBITDA for the period from 1 July 2025 to 30 June 2026 exceeds £446,500 plus
any balance in the Escrow (divided by the Y1 Multiplier), up to a maximum of
£750,000 plus any balance in the Escrow of which 60% shall be payable in cash
and 40%  in new Ordinary Shares (at the prevailing share price at the time of
issue);

 

·    Year 2 - £15 (Y2 Multiplier) for every £1 by which A&D's EBITDA
for the period from 1 July 2026 to 30 June 2027 exceeds £490,000, plus any
balance in the Escrow (divided by the Y2 Multiplier), up to a maximum of
£750,000 plus any balance in the Escrow of which 60% shall be payable in cash
and 40% in new Ordinary Shares (at the prevailing share price at the time of
issue).; and

 

·    Year 3 - £15 (Y3 Multiplier) for every £1 by which A&D'S EBITDA
for the period from 1 July 2027 to 30 June 2028 exceeds £510,000 up to a
maximum of the balance in the Escrow (if any).

Each of the directors of A&D will receive performance based share options
to the value of £0.50 for each £1 of additional EBITDA achieved over the
performance targets set out above, up to a maximum total value of £100,000 in
aggregate (£50,000 each) in each of Year 1 and Year 2 following Completion.

3.    Directorate Changes

Immediately following Completion, Peter Smith will be appointed as Group CEO,
I will become Non-Executive Chair, and John Charlton will resign as a director
of the Company but will remain as Company Secretary.

Peter Smith was most recently CEO of Sureserve Group PLC, a formerly AIM
quoted business, specialising in Compliance & Energy Services, which was
sold to private equity in July 2023. Prior to that he was CFO, joining the
business in July 2019. He has a background in finance, particularly in
regulated industries, including Mitie, OCS, Balfour Beatty, and British Gas.
He holds a Henley MBA and ACMA. He is also a Freeman of the City of London and
a Liveryman of the Worshipful Company of Plumbers.

4.    Current Trading and Prospects

The Company expects to publish its audited full year results for the financial
year ended 31 December 2024 ("FY24") later this month, The Previous
Acquisitions became part of the Group with effect from 1 September 2024. In Q1
2025, the Group traded ahead of budget and generated positive adjusted EBITDA.

As at the date of this document, the Directors consider that each of the
Previous Acquisitions is on track to achieve its target earnout performance
for the first year following its acquisition and therefore the respective
vendors should receive their year 1 deferred consideration.

The Board expects that following the acquisition of A&D, for FY25 the
Enlarged Group will generate revenue of approximately £14.0 million and
adjusted EBITDA of approximately £0.5 million. In addition, the Board expects
that in Q4 2025 the Enlarged Group's annualised run rate will be revenue of
approximately £17.0 million and adjusted EBITDA of approximately £1.0
million. Furthermore, the Board expects that the Enlarged Group will be
operating cashflow positive in Q4 2025. The Board estimates that A&D will
contribute £2.5 million of revenue and £0.2 million of adjusted EBITDA to
the Enlarged Group in FY25.

5.    Details of the Placing

The Company has raised approximately £1.023 million (before expenses) by
means of the Placing of the Placing Shares at 7.2 pence per Placing Share..
The Placing Price of 7.2 pence per Placing Share is a premium of 125 per cent.
to the closing middle market price of 3.2 pence per Existing Share on 11 June
2025, being the last business day prior to the date of this document.

If the Placing completes on the basis set out in this document, the Placing
Shares will represent approximately 11.83 per cent. of the Enlarged Share
Capital (including the issue of the Consideration Shares).

The Placing Agreement

Pursuant to the terms of the Placing Agreement, Shore Capital Stockbrokers, as
agent for the Company, has conditionally agreed to use its reasonable
endeavours to procure subscribers for the Placing Shares. The Placing has not
been underwritten.

The Placing Agreement contains normal warranties (in relation to, inter alia,
the accuracy of the information in this document and other matters relating to
the Company, its subsidiaries and its business) and indemnities given by the
Company to Shore Capital as well as market standard rights of termination. The
Company will pay Shore Capital commission in respect of those Placing Shares
placed by it.

7.    Use of Proceeds

The proceeds of the Placing will be used to: -

•     satisfy the initial cash consideration payable for A&D; and

•     provide working capital for the Enlarged Group.

 

 

8.    Related Party Transactions

As set out above, each of the Directors is participating in the Placing. As
Directors, my participation (and my associated parties) and that of John
Charlton, Elizabeth Lake (and her spouse Peter Lake), Linda Main, Sandra
Skeete and CEO designate, Peter Smith, in the Placing which, in aggregate,
amounts to 3,652,774 Placing Shares are related party transactions pursuant to
AIM Rule 13. As there are no independent Directors for this transaction, the
Company's nominated adviser, Shore Capital and Corporate, considers that the
terms of our participation in the Placing are fair and reasonable insofar as
the Shareholders are concerned

Gresham House has agreed to subscribe for 3,472,222 Placing Shares. As at 11
June 2025, being the last business day prior to the date of this document, so
far as the Company is aware, Gresham House holds 25,019,808 Existing Shares
representing 24.48 per cent. of the Company's issued share capital. As such,
Gresham House is a substantial shareholder of the Company and its
participation in the Placing is also a related party transaction pursuant to
AIM Rule 13. The Directors consider, having consulted with the Company's
nominated adviser, Shore Capital and Corporate, that the terms of Gresham
House's participation in the Placing are fair and reasonable insofar as the
Shareholders are concerned.

9.    Settlement and Trading

Application has been made to the London Stock Exchange for the Placing Shares
to be admitted to trading on AIM. It is expected that First Admission will
become effective and that dealings in the Placing Shares will commence, at
8.00 a.m. on 17 June 2025. Application will be made to the London Stock
Exchange for the Consideration Shares to be admitted to trading on AIM. It is
expected that Second Admission will become effective and that dealings in the
Consideration Shares will commence, at 8.00 a.m. on or around 1 July 2025,
subject to passing of the Resolutions at the General Meeting.

The New Ordinary Shares will, on each respective Admission, rank pari passu in
all respects with the Existing Shares and will rank in full for all dividends
and other distributions declared, made or paid on New Ordinary Shares after
First Admission and Second Admission. Definitive share certificates in respect
of the Placing Shares and the Consideration Shares will be despatched within
10 business days of the respective date of Admission.

10.  General Meeting

The notice convening the General Meeting, to be held at the offices of Shore
Capital, Cassini House, 57 St James's Street, London SW1A 1LD at 10.00 a.m. on
30 June 2025 to consider the Resolutions, is set out at the end of this
document.

At the Shareholders meeting held on 29 October 2024, Shareholders granted
Directors authority to allot equity securities up to an aggregate nominal
amount of £4,400,000 (110,000,000 Ordinary Shares) as part of the Company's
buy and build strategy, and for working capital purposes, with such authority
to expire on the earlier of the date which is 18 months from the date of the
passing of that resolution and the next annual general meeting of the company,
unless renewed or varied.

Resolution 1, which will be proposed as an ordinary resolution, seeks to vary
the 29 October 2024 resolution granting the Directors authority to allot
equity securities up to an aggregate nominal amount of £4,400,000 such that
such authority shall continue to apply for a period expiring on 30 June 2026
to enable the Company to execute its buy and build strategy (including, in
particular, the acquisition of A&D).

Resolution 2, which will be proposed as a special resolution, seeks to
authorise the Directors to allot the equity securities referred to in
Resolution 1 otherwise than on a pro rata basis to existing Shareholders.

11.   Action to be taken

 

The Form of Proxy for use in connection with the General Meeting should be
completed, signed and returned as soon as possible and, in any event, so as to
reach the Company's registrars, Neville Registrars Limited, Neville House,
Steelpark Road, Halesowen, B62 8HD by no later than 10.00 a.m. on 26 June 2025
(or, if the General Meeting is adjourned, 48 hours (excluding any part of a
day that is not a working day) before the time fixed for the adjourned
meeting).  Completion and return of a Form of Proxy will not preclude
Shareholders from attending and voting in person at the General Meeting should
they so wish.

 

Shareholders who hold their Existing Shares in uncertificated form in CREST
may alternatively use the CREST Proxy Voting Service in accordance with the
procedures set out in the CREST Manual as explained in the notes accompanying
the Notice of General Meeting at the end of this document.  Proxies submitted
via CREST must be received by Neville Registrars Limited (ID 7RA11) by no
later than 10.00 a.m. on 26 June 2025 (or, if the General Meeting is
adjourned, 48 hours (excluding any part of a day that is not a working day)
before the time fixed for the adjourned meeting).  The appointment of a proxy
using the CREST Proxy Voting Service will not preclude Shareholders from
attending and voting in person at the General Meeting should they so wish.

 

12.   Recommendation

The Directors consider the Proposals to be in the best interests of the
Company and the Shareholders as a whole. Accordingly, the Board unanimously
recommends that you vote in favour of the Resolutions, as the Directors intend
to do in respect of their beneficial holdings, which represent, in aggregate,
approximately 13.09 per cent. of the Company's issued share capital.

All defined terms in this announcement are as set out in the Circular, unless
the context requires otherwise.

Enquiries:

 EARNZ plc                                           +44 (0) 7778 798 816
 Bob Holt / Elizabeth Lake / John Charlton
 Shore Capital - Nominated Adviser and Joint Broker  +44 (0) 20 7408 4090
 Tom Griffiths / Tom Knibbs / Lucy Bowden
 Zeus Capital - Joint Broker                         +44 (0) 20 7220 1666
 Antonio Bossi / Andrew de Andrade

 

 

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