OneClickHR plc

August 2002
OneClickHR PLC


OneClickHR today announces that agreement has been reached with Herald GP Limited ('Herald') for the issue to the Herald Partnerships (as defined below) of £1m nominal 3.5% Unsecured Loan Stock 2005/7 ('Loan Stock') together with the issue of warrants to subscribe for 13,551,500 ordinary shares in the Company at 7.4p per share ('Warrants'). The agreement is subject to the approval of shareholders in general meeting.

At the request of Herald, Lord Allen Sheppard, Frank Beechinor-Collins, and Angus Dent, all Directors of the Company, have in addition agreed to subscribe(by way of cash of £15,000 and the conversion of existing loans of £100,000 made by them to the Company), also subject to shareholder approval, £115,000 for new ordinary shares at the closing middle market price per share on the day after the announcement of the Company's interim results, which are expected to be released shortly.

A circular will be sent to shareholders seeking authority to approve the transaction with Herald and the proposed subscription by the Directors listed above and convening an Extraordinary General Meeting of the Company to be held at 3.30pm on 5 September 2002.

Background to and reasons for the issue of Loan Stock and Warrants

On 20 June 2002 the Board announced that, in common with many other technology companies, trading in the second quarter of 2002 would not meet expectations.

The Board announced that it had taken firm action to reduce overheads and to improve margins to ensure that the Group traded profitability for the second half of the year. Since that announcement, levels of turnover for the current year have been in line with revised expectations as at the date of the announcement and broadly similar to the levels of last year. However the benefits of cost reduction measures and efforts to improve margins are yet to be fully realized. In addition the Company has suffered from a lag between implementation of cost reductions and the consequent cash flow benefits.

In view of the above, the Directors have been concerned that the Group's cash resources may not be sufficient to carry it through to a period when sales margins and cost reductions result in a positive cash flow. The Directors therefore considered it prudent to enter into discussions with institutions to raise additional finance.

Having considered a number of possible options, including exploring the feasibility of a rights issue or open offer to all shareholders, the Board has concluded that the agreement with Herald offers the best opportunities for the Company, its employees and customers.

Full exercise of the Warrants would result in the Herald Partnerships holding 20 per cent. of the enlarged issued share capital of OneClickHR, based upon the current issued share capital and before taking into account the effect of proposed subscriptions by certain of the directors.

Further details of the Loan Stock and Warrants

Under the Loan Stock Instrument, the principal amount of the Loan Stock is redeemable in three equal tranches on 31 August 2005, 31 August 2006 and 31 August 2007. Interest at 3.5 per cent. per annum is payable by equal half-yearly installments in arrears on 31 August and 28 February in each year.

The Warrants confer the right to subscribe in cash at any time up to the tenth anniversary of the date of issue of the Warrants for 13,551,500 ordinary shares of 1 pence each in the Company at a subscription price of 7.4 pence per share.
The Warrants are in registered form and are transferable.

Information on Herald and the Herald Partnerships

Herald acts as general partner and manager for and on behalf of Herald Ventures Limited Partnership, Herald Ventures Limited Partnership II and Herald Ventures Limited Partnership III (the 'Herald Partnerships'), these being venture capital funds for investment in UK companies operating in the information technology, media and communications sectors. The Herald Partnerships are managed by the same manager, Herald Investment Management Limited, as Herald Investment trust plc, which beneficially owns approximately 7% of the existing share capital of the Company.

Commenting on the proposals, Lord Sheppard of Didgemere, Chairman of OneClickHR, said:

'Although the environment remains tough, the Board can see many exciting opportunities for OneClickHR. As a result of the proposed agreement with Herald and the subscription by some of the Directors, OneClickHR will receive an additional £1.015m in new funding which should allow it to take a longer term view to its approach to developing the business; without this funding the business would continue to be severely constrained.'

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