Source - LSE Regulatory
RNS Number : 3935H
Hyve Group PLC
06 April 2022
 

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, HONG KONG, NEW ZEALAND, SINGAPORE, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 which forms part of UK law by virtue of the European Union (Withdrawal) Act 2018 ("MAR").

For immediate release

6 April 2022

Hyve Group plc

("Hyve", the "Group" or the "Company")

Proposed Disposal of Russian Business

Hyve Group plc, the next-generation global events business, today announces the proposed disposal (the "Disposal") of its Russian business (the "Russian Business"). A wholly owned subsidiary of the Company (the "Seller") has entered into a conditional agreement with Rise Expo Limited ("Rise" or the "Buyer") with respect to the sale of the Russian Business for a maximum cash consideration of £72 million, wholly structured as earn-out consideration payable over a ten-year period (the "Earn-out Consideration"). The Disposal is conditional on, among other items, the approval of Hyve shareholders, consent from the Group's existing lenders and regulatory approval.

Transaction rationale

·     

Given the ongoing conflict between Russia and Ukraine and its implications, the Company announced on 15 March 2022 that it had taken the decision to formally exit the Russian market

·     

This decision reflected the significant challenges from a moral, legal, compliance, and operational standpoint that would arise from continuing to operate in Russia

·     

The decision considered feedback from a number of the Company's stakeholders, including several customers of the Company's events outside of Russia. These customers had expressed material concerns relating to any ongoing activities by the Company in Russia, with an indication of boycotts of the Company's Western events

·     

The Disposal also seeks to address the following concerns regarding Hyve's exposure to Russia and the country risk involved:

   o 

The risk of expropriation or a fraudulent business sale in the current political environment

   o 

Increasing risks (under Russian law) for local management from compliance with increased international sanctions versus potential criminal liability (under international sanctions and money laundering laws) for the rest of Hyve's companies, directors and employees from continued involvement with the Russian Business

   o 

The degree of compliance risk would be a material issue for Hyve's future refinancing 

·     

The Board believes that the Disposal achieves Hyve's objective of exiting the Russian market in a prompt manner with the prospect of value being returned to the Company, while offering an outcome which provides some assurance and stability for those affected, including the staff of the Russian Business

·     

Having considered the options available to it with regards to the Russian Business, and taking into account the constraints under which it would be required to operate including the significant implications of the current sanctions environment, the Board has concluded that the alternative to the Disposal would be to wind-down the Russian Business

·     

The Board remains committed to its omnichannel strategy, as well as expansion in developed markets, particularly the US and Western Europe. Hyve perceives particular opportunity to benefit from the growth of sectors in which digital disruption is resulting in substantial underlying industry growth by acquiring or creating relevant industry leading events. The decision to exit the Russian market was not taken lightly, however the sale of the Russian Business will allow Hyve management to focus more clearly on growth opportunities in the US and Western Europe. The first Shoptalk event under Hyve's ownership took place in Las Vegas in March 2022 and delivered an exceptionally strong performance, outperforming its last pre-COVID-19 edition and was the largest event by revenue that the Group has ever run, demonstrating the Company's strong progress in delivering the strategy

 

Key terms of the transaction

·     

The Disposal comprises the sale to Rise of the Group's Russian subsidiaries, and international sales operations relevant to the Russian Business

·     

The Earn-out Consideration will be payable in cash in respect of each financial year following completion until 30 September 2032 based on profits after tax of the entire Russian Business, with a maximum amount payable of £72 million

·     

Maximum Earn-out Consideration to be reduced to £60 million if all paid prior to 30 September 2027

·     

In addition, the Group currently expects to have retained approximately £10 million from the Russian Business prior to the completion of the Disposal

·     

Payment of Earn-Out Consideration is subject to the Buyer having sufficient available cash or cash equivalents and the Seller having received (to the extent it considers that it needs it) regulatory clearances in relation to the receipt of such payments

·     

A substantial part of the revenue generated by the Russian Business is derived from sales to international customers outside Russia, and it is from these international payments that the Earn-Out Consideration payable to the Seller is currently expected to be received

·     

The Disposal is a Class 1 transaction for Hyve under the Listing Rules and requires shareholder and lender approval

·     

Completion of the Disposal is conditional upon the approval by Hyve's shareholders, completion of a reorganisation prior to Disposal, consent from the Group's existing lenders and the satisfaction of a regulatory condition. Publication of the Class 1 circular is expected to take place in early May 2022

·     

The Company intends to use the net cash proceeds to repay its existing debt facilities and after a refinancing of its existing facilities intends to use the net cash proceeds in pursuit of its strategy

·     

The Group expects to report a loss on Disposal of its Russian Business as a result of the transaction. Further details will be provided at the time of publication of the circular

·     

Following the Disposal, the Group will carry out a review of its costs base to ensure that costs are aligned with the reduced size of the Group. Over the medium term the Group would expect to return to the level of operating margins it had achieved prior to the COVID-19 pandemic

 

Current trading

·     

The Company today also published a trading update for its half year to 31 March 2022 providing further details of the Company's strong trading performance in the first half, reporting revenue of approximately £58 million, excluding Russian revenues of c. £17 million

·     

Forward bookings1 for the full year are currently £103 million, excluding bookings for Russian and Ukrainian events, despite continued COVID-19 disruption in some geographies

·     

The Group's liquidity position is strong:

   o 

Adjusted net debt2 as of 31 March 2022 was approximately £62 million3 (2021 H1: £92m) and total available liquidity was approximately £143 million (2021 H1: £123 million)

   o 

The Group anticipates net debt for the year ending 30th September 2022, to be in the range of £80 million - £100 million, adjusted for the Disposal of the Russian Business. This compares to previous guidance of £70 million - £90 million, which included the Russian Business

·     

The Group's existing facilities expire in December 2023, with leverage and interest cover covenants waived up to and including March 2023, replaced by a minimum liquidity test. The next leverage and interest cover test date is therefore June 2023, by which time the Group expects to have refinanced (or it would otherwise require agreement from its lenders to provide further covenant waivers prior to that time)

The person responsible for arranging for the release of this announcement on behalf of Hyve Group plc is Jared Cranney, Company Secretary. 

1

Forward bookings are contracted revenues for the financial year. This includes revenues on events that have taken place in the first half.

2

Cash and cash equivalents after deducting bank loans

3

Excluding cash held in Russia

 

For further information please contact:

Hyve Group plc

Mark Shashoua, CEO / John Gulliver, CFO

/ Marina Calero, Group Head of Investor Relations

 

+44 (0)20 3545 9400

 

 

 

Numis (Sponsor and Broker)

Nick Westlake / Matt Lewis / Hugo Rubinstein

 

 

+44 (0)20 7260 1000

 

FTI Consulting

Charles Palmer / Dwight Burden / Jamille Smith / Tom Blundell

 

 

+44 (0)20 3727 1000

 

Further Information

About Hyve Group plc

Hyve Group plc is a next-generation global events business whose purpose is to bring together entire sector ecosystems from all corners of the globe. We meet our customer needs to learn, network and trade via both market leading in-person and online events. Hyve Group plc is all about globally consistent best practice and unrivalled quality. Our vision is to create the world's leading portfolio of content-driven, must-attend events delivering an outstanding experience and ROI for our customers. Hyve's market leading portfolio of global brands include: Shoptalk, Spring Fair, Bett, Mining Indaba and Retail Meetup.

Where business is personal, where meetings move markets and where today's leaders inspire.

1                 Information on the Disposal

The Group has operated in Russia since 1991, where its portfolio includes 15 wholly owned exhibitions serving the following industries: transportation and logistics, industrial equipment production, tourism, and agriculture and food production. The largest of these events are MosBuild (buildings and interiors), YugAgro (agricultural machinery and equipment) and RosUpack (packaging). The Russian Business employs approximately 200 individuals. Approximately one-third of the Russian Business's sales are to international customers, which are supported by the Group's international sales structure. The Group's Dubai and China sales offices are to be included within the perimeter of the Disposal. The Russian Business is led by its General Director, Dmitry Zavgorodniy.

In the financial year ended 30 September 2021, the Group's Russian operating segment generated revenues of £27.3 million (Group4 : £55.2 million) and a headline profit before tax of £5.7 million (Group4: £20.8 million). As at 30 September 2021, the Russian Business had gross assets of £37.6 million (Group4: £420.9 million). All of these figures are audited.

2                 Information on the Buyer

The Buyer, Rise Expo Limited, is a newly incorporated entity incorporated in the Ras Al Khaimah International Corporate Centre, United Arab Emirates, as an International Business Company. On Completion, the Buyer will be majority owned by a German national with significant experience in the events industry. The Company has completed due diligence in relation to the Buyer, as well as in respect of those parties who will hold an interest in the Buyer and the Board is satisfied that the Disposal is in accordance with the relevant legal and regulatory restrictions, including applicable sanctions.

4

Group from continuing operations (including Russia)

 

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