Thursday 1 August, 2019 – As part of providing an update to its investors, OS3 Digital announced the launch of a new strategic review and several changes to the board and executive team.

Changes to the OS3 Digital Board

All of the OS3 Digital board changes that are being announced today are effective from 1 August, 2019.

With unanimous support of the OS3 Digital board, Tim Scurry has moved from his position as Chief Executive Officer of OS3 Care Approved, to Group Chief Executive Officer.  Tim became a senior member of the executive team shortly after joining the OS3 Digital board in 2016 and has been involved in all major investment and strategic decisions since that time. 

His appointment to Group Chief Executive Officer is in line with the company’s longer term plans as Tim is based in North America and he is key to the company’s future success.  The North American market was previously identified as, and still remains, the market where the board anticipate that the majority of the company’s potential growth will occur.  Without pre-judging the outcome of the new strategic review, if the business’s previously announced longer term share price targets are met, any potential IPO, whether in the form of a partial or full listing, will be based in North America.

The board has been informed that due to personal, family and health reasons, Rob Terry will be stepping down from his position as Executive Chairman and Group Chief Executive Officer of OS3 Digital Limited.  Going forward, Rob will adopt a non-executive role on the Board, has been appointed Head of OS3 Digital’s Audit Committee, and will remain Head of its Nominations Committee.  With a reduced time commitment, Rob will also continue to provide consultancy to the company, based in the UK, on the same terms as those provided under his previous position.  As part of this element of the restructure, the apartment owned by the Group in Canada, which was considered a non-core asset by the board, but was used by various executives whilst working in this location, has been disposed of.  This non-core asset disposal has raised circa £1.75m for the company.

As part of the broader restructure, the current Non-Executive Deputy Chairman, Steve Scott, will be assuming the role of  Non-Executive Chairman of the Board.

On his appointment to Group Chief Executive Officer, Tim Scurry said,

“I am delighted to be leading the execution of OS3 Digital’s strategy in this new and exciting phase of the business, with significant progress already being made on our activities in North America.  We will be conducting a comprehensive strategic review of the business, the results of which will be presented to the board within twelve months. I would also like to take this opportunity to thank Rob for his hard work in successfully growing the company to date, and I look forward to continue working with him in his new role.”

On his change in position, Rob Terry said,

“Purely for personal, family and health reasons, I have informed the board that I am stepping down from all Executive and Chairman roles in all companies that I am involved in, other than those where the majority of the board is made up of my family – at this time being my family office investment company, Quob Park Limited, and Quob Park Wickham Vineyard Limited.”

“I would like to assure OS3 Digital investors, of which I remain the largest by some margin, still controlling over 75% of voting rights including my family interests, that I believe our investment in the company is in very capable hands with the revised executive team and board in place.  Whilst stepping down from executive duties, I remain on hand to provide support if requested to both the Chief Executive and to the Chairman. Additionally, I remain fully engaged as a strategic consultant when required, non-executive director, and in my role as Head of the Audit Committee.”

Non-Executive Chairman, Steve Scott said,

“Following the restructure of the board and executive teams, I continue to have every confidence in Tim’s abilities. Based upon his track record, I am sure he will be successful in leading the execution of the board’s future strategy.”

As the business enters into this next phase, and as a priority, the revised executive team will be undertaking a new strategic review to be concluded within the next twelve months, and then presented to the board for approval.  This strategic review will encompass all aspects of the business, and in parallel the board will consider whether or not any further board changes are desired to meet its long term goals.  The company’s balance sheet remains strong with significant cash resources available to fund its currently planned growth.

Investment in OS3 Care Approved

Acting in his new role as Head of the OS3 Digital Audit Committee, Rob Terry has recommended that OS3 Digital take a significant provision against the carrying value of its OS3 Care Approved investment, and certain other non-core investments, until such time as an ‘Economic Moat’ – being the ability to maintain competitive advantage to protect potential long-term profits – can be fully established by the executive team.

Whilst the form of this Economic Moat can’t be fully determined by the board until after the new strategic review is completed, it is likely to involve the integration of ‘The Waterfall Effect’ into the supply chains of this business. In the 2017 OS3 Digital Annual Report, included within Post Balance Sheet Events, it was stated that the longer term goals of the company could potentially be largely underpinned by the investment into the joint venture, Bikers Care Approved, subject to implementing The Waterfall Effect methodology into the supply chain and meeting its previously announced longer term targets. The view of the board has not changed in this regard, and the scale of the commercial opportunity remains, though the way this could be achieved by the executive team and the timescale for such action will be considered as part of the new strategic review.

In light of the above, the first action of the revised board will be to fully support the implementation of the recommendations made by OS3 Digital’s Audit Committee to take a significant provision against the carrying value of the OS3 Care Approved investment, and for prudence this will be reflected in the 2018 Annual Report when published.

Funding following new strategic review

To date, OS3 Digital has had the facility to use loan notes from its founders to support the business and fund acquisition activity as and when needed during the incubation and growth phases.  Despite the capital intensive nature of this growth stage, OS3 Digital has not had a significant requirement to call on this facility, but has instead been able to use its own equity, at rapidly increasing valuations, to fund its activities.

As part of the new strategic review, any outstanding loan notes provided to OS3 Digital by Rob Terry are anticipated to be repaid prior to the publishing of the 2018 Annual Report.  No loan notes from any other of the founders are outstanding.  On an ongoing basis, the founders have made clear that the provision of further loan note facilities is not guaranteed, but will be considered on a case by case basis following the conclusion of the new strategic review.

Investors should take note that while there have been changes to the board, and a while a new strategic review is undertaken, the current minimum £25+ price per share target level short term, rising to £33+ level medium term, at which significant funds are raised, or at which OS3 Digital utilises its own equity as capital for significant acquisitions, is unchanged.  The longer term aims of making distributions to investors via either dividends, partial IPO, or full IPO in North America are also unchanged, though the targeted timescales for such activity will be considered as part of the new strategic review.