9 December 2011

cScape Group plc

("cScape" or the "Company")

Result of Annual General Meeting,

Further to the announcement on 15 November 2011, cScape Group plc announces that at its Annual General Meeting held earlier today, all resolutions were duly passed. 

As a result, the Company will proceed with the proposals for the cancellation of the admission to trading on AIM of the ordinary shares in the Company ("Ordinary Shares") ("Delisting") and re-registration as a private company ("Re-registration"). 

The date of Delisting is 19 December 2011 with Re-registration expected to become effective in mid January 2012.  Should any of these times or dates change, the revised times and/or dates will be notified to Shareholders by an announcement on a regulatory information service.

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Enquiries:

15 November 2011

cScape Group plc

("cScape" or the "Company")

Notice of Annual General Meeting,

Proposed Cancellation of AIM Admission

And

Proposed Re-registration as a Private Company

cScape Group plc announces that a notice convening its Annual General Meeting (the "Notice") has been posted to shareholders, today.  The Annual General Meeting is to be held on Friday, 9 December 2011 at 10:00am at the offices of Taylor Wessing LLP, 5 New Street Square, London EC4A 3TW.

Included with the Notice is a circular (the "Circular") setting out proposals for the cancellation of the admission to trading on AIM of the ordinary shares in the Company ("Ordinary Shares") ("Delisting") and re-registration as a private company ("Re-registration").  The resolutions relating to the Delisting and Re-registration will be dealt with as special business at the Annual General Meeting.

The proposed timetable of events is set out below:

Notes:

1.   References to time in this document are to London time.

2.   If any of the above times or dates should change, the revised times and/or dates will be notified to Shareholders by an announcement on a regulatory information service.

3.   All events in the above timetable following the Annual General Meeting are conditional upon approval by Shareholders of the Resolutions to be proposed at the Annual General Meeting.

A copy of the Circular and the Form of Proxy will be available on the Company's website at www.cscapegroup.com later today and selected information extracted from the Circular is set out below.

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Enquiries:

The following information has been extracted without material adjustment from the Circular.  Defined terms are as set out in the Circular.

Reasons for the Cancellation of Admission

Following careful consideration, the Directors have concluded that it is no longer in the best interests of the Company or its Shareholders to maintain the admission to trading on AIM of the Ordinary Shares. The current economic crisis has led to significant falls in the values of the global stock markets, which have been exaggerated in small cap, low liquidity stocks as well as a dampened demand on the business of the Group. 

With the limited liquidity in the trading of the Ordinary Shares and substantial spreads in the price quoted for Ordinary Shares, the Directors believe that the market currently substantially undervalues the Company.

In December 2010, the Company undertook a placing for cash at a price of 70p per new Ordinary Share issued raising net proceeds of £235,000. Whilst the Group has continued to finance itself out of cash flow, with the aid of a £50,000 overdraft from its bank and the Group continues to reduce its liabilities and actively seeks increased profitability, the Directors are very aware that the ability to raise further capital in the equity markets at the current time is very limited, particularly at a fair price.

Therefore, it is the opinion of the Directors that the Group's continued Admission no longer provides any advantage to the Company and, indeed, with the ongoing costs of maintaining its Admission, it is having an adverse effect on the profitability of the Group to the detriment of the Company and the holders of the Ordinary Shares. 

The Directors believe that the Company's continued Admission:

•        may no longer serve a useful function in terms of access to capital or the ability to use the shares of the Company to effect acquisitions; and

•        results in significant direct costs to the Group, which management estimate to be in excess of £75,000 per annum.

With this in mind, the Board has decided to propose cancelling admission to trading on AIM of the Ordinary Shares to focus on continuing to grow the inherent value of the Company across the businesses of the Group.

Current  Trading and Prospects

As announced in June 2011, the Group's subsidiary, Blue Sky Hosting has continued to perform profitably whilst cScape Strategic Internet Services has had a challenging year as clients have been generally very cautious about spending, leading to a reduction in the value of individual projects.  This has had a material negative impact on the Group's results for the year ended 30 June 2011 with revenues down approximately 15 per cent. compared to the year ended 30 June 2010 and resultant net loss from continuing operations for the period of approximately £500,000 (2010: £166,000).

As at 30 June 2011, the Group's current liabilities exceeded its current assets by over £1 million (2010: £992,000), principally, made up of a current tax liability of £1,400,000.

Trading in the current financial year has continued to be challenging and, as set out above, the Directors continue to seek ways in which to reduce costs and improve profitability.

Re-registration

Following Cancellation, the Directors believe that the Company will not benefit from being a public limited company. In particular, the Directors believe that management time spent in complying with the more significant public company disclosure obligations would be disproportionate to the benefits of remaining a public limited company.

In addition, as the Company will no longer be admitted to trading on any public equity market following the Cancellation, it will no longer be necessary for it to be a public company and accordingly the Directors consider the re-registration as a private company to be appropriate following the Cancellation.

In connection with the re-registration of the Company as a private limited company and pursuant to section 97 of the Companies Act 2006,  the Company proposes to change its name from "cScape Group plc" to "cScape Group Limited" and adopt the New Articles to reflect the name change and to reflect the reduced corporate governance burden upon the Company following the Cancellation. A summary of the key changes between the Articles and the New Articles is set out in Appendix I of this document.

Effect of the Proposals on Shareholders

The principal effects of the Cancellation will be that:

(a)       although the Shares will remain transferable, they will no longer be tradable on AIM or any other market or tracking exchange and the CREST trading facility will be cancelled;

(b)       the Company will not be bound to announce material events or material transactions nor to announce interim or final results;

(c)       the Company will no longer be required to comply with any of the corporate governance requirements for companies admitted to trading on AIM; and

(d)       the Company will no longer be subject to the AIM Rules and Shareholders will no longer be required to vote on certain matters as provided in the AIM Rules. 

Following the Re-registration, the Board will only hold general meetings in accordance with the applicable statutory requirements and the New Articles.

The provisions of the City Code on Takeovers and Mergers will continue to apply to the Company following the Re-registration.

Approving the Proposals

Under the AIM Rules, it is a requirement that the cancellation of the Company's AIM admission is approved by not less than 75 per cent. of the Shareholders voting at the Annual General Meeting. Accordingly, the notice of Annual General Meeting set out on page 10 of the Circular contains a special resolution to approve the application to the London Stock Exchange for the Cancellation. If the resolution is passed, it is expected that the Cancellation will take effect on 19 December 2011, being 20 business days following the date of the Circular and 5 clear business days following the date of the Annual General Meeting.

Under the Companies Act 2006, the Re-registration must approved by not less than 75 per cent. of the Shareholders voting at a general meeting. Accordingly, the Notice also contains a special resolution to approve the Re-registration.

Following the Cancellation

Whilst the Board believes that the Cancellation is in the Shareholders' interests, it recognises that the Cancellation will make it more difficult for the Shareholders to buy and sell Ordinary Shares should they so wish.

Following the Cancellation, the Board intends to set up a matched bargain arrangement to enable Shareholders to trade the Ordinary Shares. Under this facility, it is intended that Shareholders or persons wishing to acquire shares will be able to leave an indication with a matched bargain facility provider that they are prepared to buy or sell at an agreed price. In the event that the matched bargain settlement facility provider is able to match that order with an opposite sell or buy instruction, the matched bargain settlement facility provider will contact both parties and then effect the bargain. Shareholders who do not have their own broker may need to register with the matched bargain settlement facility provider as a new client. This can take some time to process and therefore Shareholders who consider they are likely to use this facility are encouraged to commence it at the earliest opportunity. Once the facility has been arranged details will be made available to Shareholders on the Company's website at www.cscapegroup.com

Recommendation

For the reasons set out above,  the Board considers that the Proposals will promote the success of the Company and are in the best interests of the Company and Shareholders as a whole. Accordingly, the Board unanimously recommends Shareholders to vote in favour of the Resolutions to be proposed at the Annual General Meeting. The Directors who hold Ordinary Shares have irrevocably undertaken to vote in favour of the Resolutions in respect of their beneficial holdings amounting, in aggregate, to 995,398 Ordinary Shares, representing approximately 66.88 per cent. of the issued ordinary share capital of the Company.

Summary of the changes proposed to be made to the Articles

Conditional upon the passing of Resolutions 4 and 5 at the Annual General Meeting,  it is proposed that the Company adopt the New Articles with effect from the Cancellation becoming effective.

The main reasons for adopting the New Articles are to recognise cancellation of trading on AIM and the re-registration of the Company as a private limited company and to remove certain provisions which will no longer be relevant in this context.

The principal changes being proposed by the New Articles are summarised below. Other changes, which are of a minor, technical or clarifying nature, and some other minor changes which reflect changes made by the Companies Act 2006, have not been summarised.

1.         Change of the Company's name from "cScape Group plc" to "cScape Group Limited".

2.         Removal of the restriction of financial assistance given by the Company for the acquisition of its own
            shares, such prohibition not being applicable to private companies.

3.         Disapplication of the statutory pre-emption right on the allotment of new shares for cash.

 4.        Removal of the requirement to hold an annual general meeting.

5.         Removal of the requirement for directors to retire by rotation.

6.         Removal of the requirement to appoint auditors on an annual basis.

7.         Removal of  provisions that restrict the ability of, and the administrative requirements for, a public
            company to pay dividends.

8.         Removal of the requirement to lay accounts before a general meeting of the Company.