REG - Pelatro PLC - Placing, Subscription & Notice of General Meeting

PelatroAnnouncement

04/08/2020 07:01

RNS Number : 0027V
  
Pelatro PLC
  
04 August 2020
  
 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
 
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA OR THE UNITED STATES OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
 
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN PELATRO PLC OR ANY OTHER ENTITY IN ANY JURISDICTION.
 
Pelatro plc
("Pelatro" or the "Company")
 
Placing and Subscription to raise £2.1 million 
and
Notice of General Meeting
 
Pelatro Plc (AIM: PTRO), the telecom Customer Engagement software specialist, is pleased to announce a Placing and Subscription to raise £2.1 million (before expenses) through the conditional issue of 4,500,000 Ordinary Shares at the Issue Price of 47 pence per Ordinary Share. The Fundraise has been arranged by Cenkos Securities and the New Ordinary Shares will rank, pari passu, in all other respects with the Company's Existing Ordinary Shares.
Fundraising Highlights:



·    Placing and Subscription to raise £2.1 million through the conditional issue of 4,500,000 New Ordinary Shares to new and existing institutional and other investors at 47 pence per New Ordinary Share
·    The Issue Price equates to a 12.1 per cent. a discount to the closing mid-market price of 53.5 pence on 3 August 2020 
·    The New Ordinary Shares represent 12.2 per cent. of the Enlarged Share Capital
·    The net proceeds of the Fundraise will be used by the Company for the following purposes:
o  strengthen the sales team in both existing emerging and new developed markets
o  marketing at various industry conferences and events to broaden Pelatro's brand recognition and network
o  fund working capital for Managed Services, which the Directors believe will enable the Company to tender for larger contracts
 
General Meeting
The Fundraise is conditional, inter alia, upon Shareholder approval at the General Meeting of the Company which will be held at 49 Queen Victoria Street, London EC4N 4SA, at 11.00 a.m. on 20 August 2020.
 
In accordance with current Government regulations in relation to COVID-19, Shareholders are encouraged to submit their Form of Proxy in advance of the General Meeting, as to attend the General Meeting in person would, as at the date of this announcement, be inconsistent with the relevant regulations in respect of public gatherings. Shareholders who attempt to attend the General Meeting in person in breach of these will not be admitted.
 
The Company will shortly be posting a Notice of General Meeting and an accompanying circular to existing shareholders following this announcement. All relevant documents will also be available to download from the Company website at www.pelatro.com
 
Subject to, inter alia, the passing of the Resolutions at the General Meeting, the EIS/VCT Placing Shares are expected to be admitted to trading on AIM on or around 8.00 a.m. on 21 August 2020, being one Business Day prior to admission to trading on AIM of the General Placing Shares and Subscription Shares, which are expected to be admitted to trading on AIM on or around 8.00 a.m. on 24 August 2020.
 
Subash Menon, CEO of Pelatro plc, said: "We are very pleased with this support from investors as it enables us to continue executing the growth plan for the Company by investing in sales and marketing in both existing and new geographies, particularly developed markets. These investments will help us to expand our footprint while increasing Annual Recurring Revenue, in line with the strategy of the Company." 


For further information contact:



Pelatro Plc








Subash Menon, Managing Director


c/o Cenkos Securities plc




Nic Hellyer, Finance Director























Cenkos Securities plc (Nominated adviser and broker)


+44 (0)20 7397 8900




Stephen Keys / Cameron MacRitchie (corporate finance)








Michael Johnson (sales)







INTRODUCTION
The Company announced today a conditional Placing and Subscription to raise £2.1 million (before expenses) by way of the issue of 4,500,000 New Ordinary Shares in two tranches at the Issue Price of 47 pence per share, a discount of 12.1 per cent. to the closing middle market price of 53.5 pence per Ordinary Share on 3 August 2020 (being the last practicable date before publication of this announcement). 
The Placing and Subscription are conditional, inter alia, upon the Shareholders approving the Resolutions at the General Meeting, which will be held at 49 Queen Victoria Street, London EC4N 4SA, on 20 August 2020 at 11:00 a.m. at which the Resolutions will be proposed. 
BACKGROUND TO AND REASONS FOR THE PLACING 
Introduction and Business Summary
The Company provides specialised, enterprise class software solutions for customer engagement, principally to telcos, who face a series of challenges including market maturity, saturation and customer churn. Pelatro's multi-channel contextual campaign management software enables relevant and personalised interactions with telco subscribers in real time to increase the telco's revenue and reduce customer churn. The Company currently provides its software solutions to 19 telco customers in 17 countries, principally in emerging markets, with a combined user base of more than 1 billion. It is headquartered in the UK and has offices in the USA, Singapore, Russia, Philippines, Malaysia, Brazil and India employing approximately 160 people. The Company is at an inflexion point for its growth prospects, with a complete end-to-end product suite and credibility with tier 1 telcos. The Placing will enable the Group to invest further in the business and capitalise on opportunities available to it, that might otherwise be limited due to capital constraints. The Directors believe that Pelatro can become a $25 million revenue business in the medium term with high recurring revenue streams and strong cash generation.
Products - mViva
Pelatro's Customer Engagement Hub, mViva, is a complete end-to-end product suite covering contextual campaign management, loyalty management, data monetisation and unified communication solutions. The mViva platform has resulted in increases of up to 5 per cent. of annual incremental revenue for our telco customer base. mViva uses big data analytics to study growing end user data to reveal patterns, trends, associations and key behavioural traits. mViva then applies algorithms to analyse this data and to identify patterns for each end user. Based on this analysis, relevant offers (which can include additional services or customised campaigns) are made to end users through a variety of channels like social media, SMS, email and apps. Importantly, Pelatro provides telcos with real time data, within two to three minutes from initial impression, enabling the telco to push targeted offers to users in response to their live online activity. This functionality and the ease of use of the platform for marketing teams when formulating campaigns, has enabled Pelatro to displace global software players who are not as specialised as Pelatro. The Group is continually developing its offering to respond to the changing demands of telco customers and has recently launched a suite of add-on modules to this end. 
Strategy and Opportunity 
Geographic expansion 
It typically takes six to eight months to implement Pelatro's software solutions. Given the Group's technology is deeply embedded within the telco's software architecture, there are significant cross selling opportunities for other products and add-on modules, as well as expansion into new geographies. Accordingly, the Group intends to use certain of the Placing proceeds to strengthen the sales team by two people, in new geographies (Europe, Middle East and Central Asia). Furthermore, the Group intends to build on its existing industry network by attending various industry conferences and events to broaden Pelatro's brand recognition and network. 
Revenue model 
Pelatro was founded in March 2013 and admitted to AIM in December 2017. The Company's revenue model has evolved since its admission to AIM: initially focused on licences, which produced largely one-off revenues, with the expansion of the software suite and the increasing reputation of the Pelatro brand and proposition, the Company decided to transition more to a recurring revenue model in 2019, to improve the quality and visibility of earnings and also to help satisfy customer demand. The Company sells two types of recurring revenue contracts: Revenue Gain Share, in which Pelatro earns a share of the monthly revenue gain generated by using its product; and Managed Services, where Pelatro earns a fixed monthly fee for providing the product and managing the operations. The Company has won six such contracts to date and in H1 2020 recurring revenue accounted for approximately 60 per cent. of total revenue. The Company intends to use the proceeds of the Placing to fund the working capital for Managed Services as well, which will enable Pelatro to tender for larger contracts.
USE OF PROCEEDS 
The Directors intend to use the net proceeds of approximately £1.9 million from the Fundraise for the following purposes:
 
·     £0.75 million (approx.) will be used to strengthen the sales team in both existing emerging and new developed markets;
·     £0.75 million (approx.) will be used for marketing at various industry conferences and events to broaden Pelatro's brand recognition and network; and
·     The remaining proceeds will be used to fund working capital for Managed Services, which the Directors believe will enable the Company to tender for larger contracts.
 
DETAILS OF THE CONCERT PARTY SHAREHOLDINGS
Certain shareholders are deemed to be acting in concert under the rules of the Takeover Code. Suresh Yezhuvath, an existing Concert Party member, intends to subscribe for 1,000,000 Subscription Shares at the Issue Price. The admission of the New Ordinary Shares will result in the combined Concert Party shareholding being diluted from 42.19 per cent. to 39.76 per cent. Full details of the Concert Party shareholdings can be found in the table below:   
 



Name


Number of
Ordinary Shares held


% of existing Issued Share Capital


Number of Subscription Shares being subscribed for


Amount Subscribed


Interest in Ordinary Shares on Second Admission


% of Enlarged Issued Share Capital




Subash Menon 


9,684,244


29.77%


-


-


9,684,244


26.15%




Sudeesh Yezhuvath 


3,309,309


10.17%


-


-


3,309,309


8.94%




Suresh Yezhuvath


14,613


0.04%


1,000,000


£470,000


1,014,613


2.74%




Ravi Shanmugam


716,240


2.20%


-


-


716,240


1.93%




Total


13,724,406


42.19%


1,000,000


£470,000


14,724,406


39.76%





DETAILS OF THE PLACING AND SUBSCRIPTION 
The Company is proposing to raise £2.1 million (before expenses) pursuant to the Placing and Subscription. The Company has conditionally raised a total of approximately £1.2 million through the placing of the EIS/VCT Placing Shares, approximately £0.46 million through the placing of the General Placing Shares and £0.47 million via the Subscription. Admission of the Placing Shares and Subscription Shares will occur over two Business Days to assist investors in the EIS/VCT Placing Shares to claim certain tax reliefs available to EIS and VCT investors. 
Subject to, inter alia, the passing of the Resolutions at the General Meeting, the EIS/VCT Placing Shares are expected to be admitted to trading on AIM on or around 8.00 a.m. on 21 August 2020, being one Business Day prior to admission to trading on AIM of the General Placing Shares and Subscription Shares, which are expected to be admitted to trading on AIM on or around 8.00 a.m. on 24 August 2020. The allotment of the EIS/VCT Placing Shares will be conditional on First Admission occurring. The allotment of the General Placing Shares and Subscription Shares will be conditional on Second Admission occurring. Shareholders and potential investors should be aware of the possibility that the First Admission and Second Admission may not occur. 
Although the Company currently expects to satisfy the relevant conditions for EIS/VCT Placing Shares, and the Directors are not aware of any subsequent change in the qualifying conditions or the Company's circumstances that would prevent the EIS/VCT Placing Shares from being eligible for EIS and VCT investments on this occasion, neither the Directors nor the Company, nor Cenkos, nor any of its respective directors or their officers, employees, affiliates or advisers give any warranty or undertaking or other assurance that relief will be available in respect of any investment in the EIS/VCT Placing Shares, nor do they warrant or undertake or otherwise give any assurance that the Company will conduct its activities in a way that qualifies for or preserves its status. As the rules governing EIS and VCT reliefs are complex and interrelated with other legislation, if Shareholders, or other potential investors, are in any doubt as to their tax position, require more detailed information, or are subject to tax in a jurisdiction other than the United Kingdom, they should consult their professional adviser.
The Issue Price of 47 pence per share equates to a discount of 12.1 per cent. to the closing price of 53.5 pence on 3 August 2020, the latest Business Day prior to the announcement of the Fundraise. The New Ordinary Shares will represent approximately 12.2 per cent. of the Enlarged Issued Share Capital. The New Ordinary Shares will, following each of the First Admission and Second Admission, rank in full for all dividends and distributions declared, made or paid in respect of the issued Ordinary Share capital of the Company after the date of their respective issue and will otherwise rank equally in all other respects with the existing Ordinary Shares. 
DETAILS OF THE PLACING AGREEMENT 
Pursuant to the terms of the Placing Agreement, Cenkos Securities has conditionally agreed to use its reasonable endeavours, as agent for the Company, to place the Placing Shares with certain institutional and other investors. The Placing has not been underwritten. The Placing Agreement is conditional upon, inter alia:
·    the Resolutions being passed without amendment at the General Meeting; 
·    compliance by the Company in all material respects with its obligations under the Placing Agreement; and 
·    with respect to the issue of the EIS/VCT Placing Shares only, First Admission becoming effective by not later than 8.00 a.m. on 21 August 2020 (or such later date as is agreed between the Company and Cenkos, being not later than 8.00 a.m. on the Long Stop Date). 
·    with respect to the issue of the General Placing Shares and Subscription Shares only, Second Admission becoming effective by not later than 8.00 a.m. on 24 August 2020 (or such later date as is agreed between the Company and Cenkos, being not later than 8.00 a.m. on the Long Stop Date). 
The Placing Agreement contains warranties from the Company in favour of Cenkos in relation to, inter alia, the accuracy of the information in the Circular and other matters relating to the Company and its business. In addition, the Company has agreed to indemnify Cenkos in relation to certain liabilities it may incur in respect of the Placing and Subscription. Cenkos has the right to terminate the Placing Agreement in certain circumstances prior to the First Admission and/or Second Admission, in particular, in the event of a breach of the warranties given to Cenkos in the Placing Agreement, the failure of the Company to comply in any material respect with its obligations under the Placing Agreement, the occurrence of a force majeure event or a material adverse change affecting the condition, or the earnings, management business, affairs, solvency or prospects of the Company as a whole.
GENERAL MEETING AND THE RESOLUTIONS
The Directors do not currently have authority to allot all of the New Ordinary Shares and, accordingly, the Board is seeking the approval of Shareholders to allot the New Ordinary Shares at the General Meeting. A notice convening the General Meeting, which is to be held at 49 Queen Victoria Street, London EC4N 4SA at 11.00 a.m. on 20 August 2020, is set out at the end of the Circular. At the General Meeting, the following Resolutions will be proposed:
·    Resolution 1, which is an ordinary resolution, to authorise the Directors to allot relevant securities for cash up to an aggregate nominal amount of £112,500.00, being equal to 4,500,000 Ordinary Shares, pursuant to the Placing and Subscription; and
·    Resolution 2, which is conditional on the passing of Resolution 1 and is a special resolution, to authorise the Directors to allot 4,500,000 Ordinary Shares for cash pursuant to the Placing and Subscription on a non-pre-emptive basis. 
The authorities to be granted pursuant to the Resolutions will expire on whichever is the earlier of (a) the conclusion of the next Annual General Meeting of the Company; and (b) the date falling six months from the date of the passing of the Resolutions (unless renewed, varied or revoked by the Company prior to or on that date) and shall be in addition to the Directors' authorities to allot relevant securities and dis-apply statutory pre-emption rights granted at the Company's Annual General Meeting held on 17 June 2020. 
For the purposes of section 571(6)(c) of the Act, the Directors determined the Issue Price after consideration of applicable market and other considerations and having taken appropriate professional advice. 
RECOMMENDATION
The Directors unanimously believe that the Fundraise is in the best interests of the Company and its Shareholders and unanimously recommend you to vote in favour of the Resolutions as they intend to do in respect of their own beneficial holdings in the Company. The Board has a beneficial interest in 13,118,010 Ordinary Shares representing approximately 40.32 per cent. of the Ordinary Shares in issue as at the date of this announcement.
 
FUNDRAISING STATISTICS
 



Number of Ordinary Shares in issue at the date of this announcement


32,532,431




Issue Price               


47 pence




Number of EIS/VCT Placing Shares


2,513,952




Number of General Placing Shares


986,048




Number of Subscription Shares


1,000,000




Total number of   New Ordinary Shares


4,500,000




Gross proceeds from the Fundraise 


£2.1 million




Enlarged Issued Share Capital at Second Admission


37,032,431




New Ordinary Shares as a percentage of the Enlarged Issued Share Capital


12.2 per cent.



                                                                                                                                      
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
2020



Announcement of the Fundraise 


4 August




Posting of the Circular 


4 August




Latest time and date for receipt of proxy voting instructions for the General Meeting


11:00 a.m. on 18 August




General Meeting





11:00 a.m. on 20 August




Expected time and date of admission and commencement of dealings of the EIS/VCT Placing Shares on AIM


8.00 a.m. on 21 August




Expected time and date of admission and commencement of dealings of the General Placing Shares and Subscription Shares on AIM


8.00 a.m. on 24 August




Long Stop Date


4 September



Note: All references to times in this timetable are to London times and each of the times and dates are indicative only and may be subject to change. Any such change will be notified by an announcement on a regulatory information service.
 
DEFINITIONS
In this announcement, the following expressions shall have the following meanings, unless the context otherwise requires:






"Act"


the Companies Act 2006 (as amended)




"Admission"


First Admission and/or Second Admission (as the context requires) 




"AIM"


the market of that name operated by the London Stock Exchange




"AIM Rules"


the AIM Rules for Companies as published and amended from time to time by the London Stock Exchange




"Articles"


the articles of association of the Company (as amended from time to time)




"Board"


the directors of the Company from time to time




"Business Day"


a day other than a Saturday, Sunday or public holiday in England when banks in London are open for business




"Cenkos" or "Nominated Adviser" or "Broker"


Cenkos Securities plc, as the Company's nominated adviser and sole broker




"certificated" or "in certificated form"


where an Ordinary Share is not in uncertificated form (i.e. not in CREST)




"Company" or "Pelatro"


Pelatro plc




"Concert Party"


the shareholders of the Company as listed in paragraph 4 of the Circular together with anyone deemed to be acting in concert with them, as defined in the Takeover Code, including Subash Menon




"CREST"


the relevant system for the paperless settlement of trades and the holding of uncertificated securities operated by Euroclear UK & Ireland Limited in accordance with the CREST Regulations




"CREST Regulations"


the Uncertificated Securities Regulations 2001 (SI 2001/3755) including any enactment or subordinate legislation which amends or supersedes those regulations and any applicable rules made under those regulations or any such enactment or subordinate legislation for the time being in force




"Directors"


the directors of the Company as the date of this announcement




"Circular"


the circular to Shareholders




"Enlarged Issued Share Capital" 


37,032,431 Ordinary Shares, being the issued ordinary share capital of the Company immediately following Second Admission




"FCA"


the Financial Conduct Authority of the United Kingdom




"First Admission"


admission of the EIS/VCT Placing Shares to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules which is expected to take place on 21 August 2020




"EIS"


the Enterprise Investment Scheme under Part 5 of the Income Tax Act 2007




"EIS/VCT Placing"


the placing by Cenkos on behalf of the Company of the EIS/VCT Placing Shares at the Issue Price pursuant to the terms of the Placing Agreement




"EIS/VCT Placing Shares"


the 2,513,952 new Ordinary Shares which have been conditionally placed by Cenkos with Placees pursuant to the EIS/VCT Placing




"Fundraise"


together, the EIS/VCT Placing, the General Placing and the Subscription 




"FSMA"


the Financial Services and Markets Act 2000 (as amended)




"General Meeting" or "GM"


the general meeting of the Company convened for 11:00 a.m. on 20 August 2020 at 49 Queen Victoria Street, London EC4N 4SA, notice of which is set out at the end of the Circular




"General Placing"


the placing by Cenkos on behalf of the Company of the General Placing Shares at the Issue Price pursuant to the terms of the Placing Agreement




"General Placing Shares"


the 986,048 Ordinary Shares which have been conditionally placed by Cenkos with Placees pursuant to the General Placing 




"Group"


the Company and its subsidiaries from time to time




"London Stock Exchange"


London Stock Exchange plc




"New Ordinary Shares"


the 4,500,000 new Ordinary Shares to be issued pursuant to the EIS/VCT Placing, General Placing and Subscription 




"Ordinary Shares"


the ordinary shares of 2.5 pence each in the capital of the Company 




"Placees"


those persons who have conditionally agreed to subscribe for Placing Shares




"Placing"


together, the EIS/VCT Placing and the General Placing 




"Placing Agreement"


the conditional agreement dated on or around 3 August 2020 between the Company and Cenkos relating to the Fundraise 




"Issue Price"


47 pence per New Ordinary Share




"Placing Shares"


the EIS/VCT Placing Shares and/or the General Placing Shares (as the context requires) 




"Resolutions"


the resolutions set out in the notice of the General Meeting at the end of the Circular




"Second Admission"


admission of the General Placing Shares and the Subscription Shares to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules which is expected to take place on 24 August 2020




"Shareholders"


holders of Ordinary Shares from time to time




"Subscription"


the Subscription by Suresh Yezhuvath for the Subscription Shares at the Issue Price







"Subscription Shares"


the 1,000,000 Ordinary Shares which have been conditionally subscribed for by Suresh Yezhuvath pursuant to the Subscription 




"United Kingdom' or "UK'


the United Kingdom of Great Britain and Northern Ireland




"VCT"


a Venture Capital Trust under Part 6 of the Income Tax Act 2007




"£"


UK pounds sterling, being the lawful currency of the United Kingdom



 


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