Fulcrum attacks "opportunistic" takeover bid

Sheffield-based Fulcrum said the offer is an unwelcome distraction for management who are focused on preserving the jobs of 300 employees, including many on furlough.

Fulcrum said it has received significant support for the board’s position with 40 per cent of independent shareholders providing letters of intent rejecting the proposed offer and opposing any subsequent attempt to delist the company from AIM.

Last week, Harwood Capital announced its intention to make a tender offer for up to 53,500,000 of Fulcrum’s ordinary shares at a price of 26.25p per share.

Fulcrum said the offer “significantly undervalues” the company and its prospects and does not reflect a fair value for independent shareholders.

The firm reiterated its recommendation that shareholders should take no action and neither accept the offer, when made, nor sell any shares to Harwood at or below the tender price.

Fulcrum said investors, who may be concerned that the company will be delisted, are strongly urged not to tender their shares and instead to support the board, senior management and independent shareholders. Under AIM Rules, any delisting requires a majority of 75 per cent of votes cast at a shareholder meeting.

Fulcrum said that Harwood’s stated intention, should the offer complete, is to seek board representation for itself and Bayford Group and to use this as a platform to propose a resolution to delist the Company from AIM.

Fulcrum said in a statement to the stock exchange: “The board considers that this would manifestly not be in the best interests of independent shareholders given the loss of liquidity currently provided as a company admitted to trading on AIM.”

Fulcrum said it has a strong financial profile and it is confident about its post Covid-19 trading prospects, particularly following the disposal of its domestic customer gas connection business to ESP which has enabled it to repay all bank debt and leave the group with net cash of £5.6m.

The total net consideration of the disposal is expected to be £33m, with the balance to be received in future tranches.

“The board rejects in the strongest terms Harwood’s unsubstantiated assertion that the ESP disposal ‘may well have been at an undervalue’,” Fulcrum said.

It added that the disposal and the on-going future relationship with ESP is in the best interests of all shareholders, “in contrast to Harwood’s opportunistic tender offer”.

Fulcrum said it is prioritising the strength of its balance sheet and its cash reserves and it has no intention to declare a dividend for 2020.

“Subject to any material unforeseen impacts on the group’s trading and financial position arising from the Covid-19 pandemic, the board intends to return the cash surplus (of up to £20m) expected to be generated by the ESP disposal by way of special dividends over the next three to four years and to reinstate regular dividend payments in line with its previous policy of distributing half of available annual profits when it judges that it is prudent and appropriate to do so,” the group said.

Fulcrum said its sales orders in the third quarter to December 2019 were the highest ever achieved by the group at £17.4m.

Before the impact of Covid-19 in March delayed the signing of two large contracts, the board had expected the final quarter of its 2019/2020 financial year to be even stronger.

Fulcrum expects that the sales orders that did not complete in March will do so in due course.

Not including these deferrals, Fulcrum expects its order book to be around £71m, up 17 per cent year-on-year.

“Looking further ahead, Fulcrum is a fundamentally robust business which gives the board confidence that the group is well positioned to prosper in the long term,” the firm added.