11 March 2020
For immediate release
THE INFORMATION COMMUNICATED IN THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION EU NO. 596/2014 ("MAR").
TRAFALGAR PROPERTY GROUP PLC
("Trafalgar", the "Company" or "Group")
Diversification into hydroponic vertical farming investment
and
Notice of General Meeting to increase authorities to allot shares
Introduction
Trafalgar (AIM: TRAF) announces that it is posting a circular to Shareholders today, outlining that it intends to add an additional business unit to operate alongside the Company's existing property development operations. The Company intends to invest in the hydroponic vertical farming sector. Hydroponics maximises yield per acre on a reduced physical footprint without soil. This form of food production has the potential to address:
· increasing global population
· insufficient available agricultural land
· degraded soil quality
· excessive forest clearance
Trafalgar's existing property divisions' activities will continue. Trafalgar's group parent will be a holding company with hydroponic investments in a new division.
In order to enable the raising of funds to implement this diversification, it is proposed to seek Shareholders' approval in a General Meeting to increase the current authorities to allot shares and to disapply statutory pre-emption rights as described.
The General Meeting of the Company is to be held at 11.00 a.m. on 27 March 2020 at the offices of Peterhouse at 80 Cheapside, London EC2V 6EE.
Information on the Company and its diversification
The Company was incorporated in December 2001 and its Ordinary Shares have been traded on AIM since July 2013. The Company is the holding company for two property development divisions
· Trafalgar New Homes Limited which was acquired in 2011 and is a regional residential property developer focused on Kent, Surrey Sussex and M25 ring south of London. This division designs and builds its own sites of up to approximately 12 units - a scale that is too small for large developers, but too big for jobbing builders.
· Trafalgar Retirement + Limited which was acquired in March 2018 and is focused on the development of assisted living and extra care schemes intended for older residents. This division sources options to build sites, applying for planning permission and change of use for schemes that offering a degree of care and support that is less than a nursing home, preserving resident independence.
The Group sold the property at Saxons in late 2019 for £1.58 million; four residential properties have been refinanced and rented on assured shorthold tenancies; six units at Sheerness are now on the market for sale with the benefit of the Help-to-Buy Scheme; and planning permission has been obtained for a site in Ashtead, and an offer accepted for disposal which is expected to complete in March 2020.
Since the Company's move into the assisted living sector, the Group has experienced difficulties in obtaining finance for developments in that sector, leading to the loss of the first development opportunity. The residential division has experienced delays to building programmes, combined with a lack of activity in the market for the Company's units.
Accordingly, while actively continuing to develop its property development assets, the Board has looked at other opportunities where it can utilise its property development skills and diversify into other sectors. It has identified hydroponic food production, which requires significant property investment and expertise, as an area for investment.
Hydroponic vertical farming
Traditional agriculture
The Directors consider that there are significant growth opportunities in the hydroponic vertical farming sector. The Company has commenced the search for appropriate hydroponic vertical farming opportunities and is in early stage discussions with a potential hydroponics operator who requires the Company's property expertise. However, there can be no guarantee that this investment will go ahead, and the Company will continue to post regulatory updates.
Meeting the food production needs of a growing global population raises a number of significant challenges, including:
Sufficiency of food production: It is estimated that the global population could grow to approximately 9.7 billion people by 2050 (UN report: World Population Prospects 2019), and that food production (net of food used for biofuels) will need to rise by 70% by 2050 to feed 9.1 billion people (a 2009 forecast, in UN Food and Agricultural Organisation Report: How to Feed the World in 2050).
Amount of agricultural land: It is estimated that to meet food demand by 2050, land equivalent to nearly twice the size of India may need to be brought into cultivation (World Resources Institute article 2018: How to sustainably feed 10 billion people by 2050). Expanding agriculture is responsible for most of the world's deforestation (World Wildlife Fund article), destroying natural ecosystems in the process.
Agricultural soil quality: According to the UN Convention to Combat Desertification, Global Land Outlook 2017, one third of the world's soils are severely degraded. The most significant proximate cause of land degradation continues to be human-induced drivers such as deforestation, wetland drainage, overgrazing, unsustainable land-use practices, and land use change. Many crop and livestock management practices lead to soil erosion/compaction, reduced water filtration/availability, and declining biodiversity. The use of agrochemicals such as fertilizers, pesticides and herbicides, boosts yields in the short term, but also has significant adverse impacts on soil and water quality.
Water resources: Agriculture accounts for 70% of freshwater withdrawals in the world, and is usually seen as one of the main factors behind the increasing global scarcity of freshwater (J Bruinsma, 2009: The Resource Outlook to 2050). Irrigated agriculture covers 20% of arable land, accounting for nearly 50% of crop production. Although there is sufficient water globally, it is very unevenly distributed.
Hydroponic vertical farming
Hydroponics is not a new technology, and has existed since the 1950s. It is a form of controlled environment agriculture, where crops are grown under cover using technology to ensure crops are grown in optimal conditions, which can be without soil. Hydroponics is a water-based growth system in which a nutrient solution is pumped around reservoirs in which plant roots grow directly. In vertical farming, crops are cultivated in vertical stacked levels in buildings, under artificial lights, without soil or natural sunlight. Its benefits include:
Reduced pressure on land use: The hydroponic yield per acre is several times higher than traditional agriculture (dependent on crop type), as crops can be continuously grown and harvested. Vertical farming further multiplies the effective yield on any given land footprint by a factor, taking into account the number of levels used, that can be 100 times or more (Journal of Agricultural Studies: Up, Up and Away! The Economics of Vertical Farming, 2014).
Under cover food production: The controlled environment optimises conditions, allowing for all-year round growth without the negative impacts of poor weather.
No need for pesticides or fungicides: As the environment is closed, plants do not need the agrochemicals that are required in an external environment where plants are exposed to pests and weeds. Accordingly, crops are chemical free, healthier plants. Crops produced in this way require less processing and handling, thereby reducing "time to market", resulting in an increased shelf life.
Contained water cycle: Water is recycled; the only water to leave the production facility is that contained in the plants. Water use of up to 90% less than traditional agriculture can be achieved (Journal of Agricultural Studies, as above).
Location: Facilities can be located in urban or brownfield sites closer to population centres, reducing "food miles", and also reducing the need to use agricultural land.
There are certain limitations to hydroponic and vertical farming, including the need for manual pollination, the range of produce suitable for hydroponic growth or vertical farming, dependence on technology (including nascent technology relating to vertical farming), and high costs of establishing production facilities.
Hydroponic market
There has been significant capital flowing into this sector, with Softbank, Amazon's Jeff Bezos, and Google's Eric Schmidt having invested $200m into 'Plenty', a significant project in the US in 2017; Google Ventures investing $80m into Bowery Farming in 2018; and Ocado entering into the market in 2019 when they took a majority stake in Europe's largest vertical farm.
The market appears set to grow significantly. The global vertical farming market was valued at $2.23bn in 2018 and is projected to grow to $12.77bn by 2026, owing to a rise in the popularity of organic food (Allied Market Research: Global Vertical Farming Market, August 2019).
Authorities to allot shares
The Company has an Existing Share Capital of £487,690.38, comprising 487,690,380 ordinary shares of 0.1p each, and has existing authorities to allot shares generally of £244,000 in nominal amount (244,000,000 ordinary shares of 0.1p each) and to allot shares for cash (disapplying statutory pre-emption rights) of £97,500 in nominal amount (97,500,000 ordinary shares of 0.1p each). The Directors do not consider that these authorities are sufficient to allow the Company to raise the levels of finance that would enable the Company to make meaningful investments in hydroponic vertical farming projects.
Accordingly, it is proposed to increase the authorities to allot shares generally by a further £2,000,000 in nominal amount (2,000,000,000 ordinary shares of 0.1p), and to disapply statutory pre-emption rights in respect of the allotment for cash by a further £2,000,000 in nominal amount (2,000,000,000 ordinary shares of 0.1p). Including the existing authorities to allot shares noted above, these authorities would represent approximately 430% of the Existing Share Capital.
It is proposed that these authorities will be used to take advantage of opportunities to raise significant funds for hydroponic investment, and to allow for the exercise of any warrants or options that may be granted in conjunction with such fundraising or the development of the hydroponic investment division.
Recommendation
The Directors consider the Proposals to be in the best interests of the Company and the Shareholders as a whole. The Directors therefore unanimously recommend that you vote in favour of the Resolutions at the General Meeting. Undertakings to vote in favour of the resolutions at the General Meeting have been received from shareholders holding 297,800,461 Ordinary Shares representing approximately 61% of the current issued ordinary share capital.
Enquiries:
Trafalgar Property Group Plc James Dubois |
+44 (0) 1732 700 000 |
SPARK Advisory Partners Ltd - AIM Nominated Adviser Matt Davis |
+44 (0) 20 3368 3550 |
Peterhouse Capital Limited - Broker Duncan Vasey/Lucy Williams |
+44 (0) 20 7409 0930 |
Notes to Editors:
Trafalgar Property Group Plc is the holding company of Trafalgar New Homes Limited, a residential property developer operating in the southeast of England and Trafalgar Retirement + Limited, a property developer in the assisted living and extra care for the elderly sector. The founders have a long track record of developing new and refurbished homes, principally in Kent.
The Company's focus is on the select acquisition of land for residential property development. The Company outsources all development activities, for example the obtaining of planning permission, design and construction, and uses fixed price build contracts, enabling it to tightly control its development and overhead costs.
For further information visit www.trafalgarproperty.group
