TIDMINVU
RNS Number : 1838W
Invu plc
23 July 2009
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23 July 2009
Invu plc ("Invu" or the "Company")
Proposed Placing and Issue of Convertible Loan Notes to raise GBP1.5 million
Invu announces that it proposes to raise an aggregate of GBP1.5 million through
a placing of 50 million new Ordinary Shares at a price of 2 pence per share and
the issue of the Convertible Loan Notes (together "the Issue"). The Company
intends that the net proceeds of the Issue will be used to repay debt, for
general working capital purposes and will provide the Company with the resources
to execute its revised strategy, details of which are set out below. The Company
has also today separately announced its preliminary results for the year ended
31 January 2009.
The Placing is conditional, amongst other things, upon the Company obtaining
approval from Shareholders granting authority to the Board to allot the Placing
Shares and to disapply pre-emption rights which would otherwise apply to the
allotment of the Placing Shares. The Placing is also conditional on the
execution by the Company of the Convertible Loan Note Instrument and on
Admission.
The Placing Shares have been conditionally placed by Arbuthnot Securities with
institutional and other investors, including certain Directors. Subject, inter
alia, to the passing of the Resolutions at the General Meeting on 10 August 2009
and Admission, dealings in the Placing Shares are expected to commence on AIM at
8.00 a.m. on 12 August 2009. The Placing Shares represent approximately 44.1
per cent. of the Company's existing issued share capital and will, when issued,
represent approximately 30.7 per cent. of the Enlarged Share Capital.
The Company has received irrevocable undertakings to vote in favour of the
Resolutions from Shareholders who in aggregate hold approximately 47.7 per cent.
of the Company's existing issued share capital (including undertakings from each
of the Directors in relation to their respective shareholdings).
Enquiries:
+--------------------------------------+-----------------------------------+
| Invu plc | 01604 859893 |
+--------------------------------------+-----------------------------------+
| Daniel Goldman, Non Executive | |
| Chairman | |
+--------------------------------------+-----------------------------------+
| Colin Gallick, CEO | |
+--------------------------------------+-----------------------------------+
| | |
+--------------------------------------+-----------------------------------+
| Financial Dynamics | 020 7831 3113 |
+--------------------------------------+-----------------------------------+
| Juliet Clarke/Haya Chelhot/Emma | |
| Appleton | |
+--------------------------------------+-----------------------------------+
| | |
+--------------------------------------+-----------------------------------+
| Arbuthnot Securities | 020 7012 2000 |
+--------------------------------------+-----------------------------------+
| Tom Griffiths/Ben Wells | |
+--------------------------------------+-----------------------------------+
Proposed Placing and Issue of Convertible Loan Notes to raise GBP1.5 million
Introduction
Invu announces that it proposes to raise an aggregate of GBP1.5 million through
a placing of 50 million new Ordinary Shares at a price of 2 pence per share and
the issue of the Convertible Loan Notes (together "the Issue"). The Company
intends that the net proceeds of the Issue will be used to repay debt, for
general working capital purposes and will provide the Company with the resources
to execute its revised strategy, details of which are set out below. The Company
has also today separately announced its preliminary results for the year ended
31 January 2009.
The Placing is conditional, amongst other things, upon the Company obtaining
approval from Shareholders granting authority to the Board to allot the Placing
Shares and to disapply pre-emption rights which would otherwise apply to the
allotment of the Placing Shares. The Placing is also conditional on the
execution by the Company of the Convertible Loan Note Instrument and on
Admission.
The Placing Shares have been conditionally placed by Arbuthnot Securities with
institutional and other investors, including certain Directors. Subject, inter
alia, to the passing of the Resolutions at the General Meeting on 10 August 2009
and Admission, dealings in the Placing Shares are expected to commence on AIM at
8.00 a.m. on 12 August 2009. The Placing Shares represent approximately 44.1
per cent. of the Company's existing issued share capital and will, when issued,
represent approximately 30.7 per cent. of the Enlarged Share Capital.
The Company has received irrevocable undertakings to vote in favour of the
Resolutions from Shareholders who in aggregate hold approximately 47.7 per cent.
of the Company's existing issued share capital (including undertakings from each
of the Directors in relation to their respective shareholdings).
Background to and reasons for the Issue
The past financial year has been extremely challenging and the Company's
performance has been disappointing. The Company has struggled to resolve
long-standing issues, mainly relating to its debtors, which have had a
substantial negative impact on losses and operating cash flow. This has led the
Board to initiate the following significant changes in the management and
operations of the Company.
Colin Gallick appointed as CEO
The Board asked the founder and then CEO of the Company, David Morgan, to step
down in order to identify a new CEO to take the Company forward. David was
replaced as CEO on an interim basis by Bernard Fisher at the beginning of
January 2009, who was then replaced by Colin Gallick on 16 April 2009 in the
role of CEO. Colin is an experienced software executive with a strong track
record of 25 years in the technology industry, during which time he has
successfully focused on growth technology companies. Both of these appointees
were given a mandate to arrest the negative cash flow and stabilise the position
with both the Company's employees and its reseller channel. Colin has been
instrumental in developing the Company's revised strategy, further details of
which are set out below, which is now being implemented.
Historic issues addressed
The Board has addressed the three key factors that have led to the current
situation, namely:
(i)The aftermath of the release of the Series 6 product
As mentioned in the Company's previous announcements, after a period of
difficulties from the initial release of Series 6, significant investment has
brought the product to a position where it is now robust and reliable. The Board
believes that Series 6 has now been strongly welcomed into the market as a
leading document management product.
The issues with Series 6 had a significant impact on the deployments of
out-products to end-users and the level of InvuCare renewals, and a strongly
adverse effect on sales, profit and cash. Since the resolution of the major
product issues, the Company has experienced much higher levels of InvuCare
renewals, back to levels over 80%, having reached well under 50% at its lowest
point.
(ii)High level of debtors
The Series 6 issues, coupled with a high level of stock in the reseller channel,
left the Company with a very high level of debtors across a number of its
reseller channel partners. Despite attempts to do so, the Company was unable to
reduce this level of debtors, resulting in significant cash out flow which
weakened the Company's balance sheet. Radical action has now been taken by the
Company to reduce stock in the reseller channel and to adjust the Company's
focus to sales by partners to end users, with a consequential change to the
Company's accounting policy with respect to revenue recognition.
In addition, the remuneration policy with regards to both sales executives and
also channel partners has been changed to incentivise purely against sales by
partners to their customers, rather than sales made by Invu to those reseller
channel partners.
These changes are already having an impact across the business, and although the
transition is challenging, the Company is now seeing the positive effects of
this as sales, profits and cash become more closely synchronised.
(iii)Non-core product initiatives
Over the last few years the Company has developed non-core products, which the
Board has decided to discontinue. The Company has refocused on its core
business: being the lead vendor of document management solutions to the SME
market, and has created a roadmap solely in support of the core product set
around Series 6.
The Company will seek ways to monetise the Ergo technology in the future through
third party licensing of the technology, and the possible generation of future
licence revenue. To that end, Invu has signed a non-exclusive licensing
agreement with Wagumo, a company controlled by David Morgan, the Company's
former CEO.
Bank financing
As part of the transition phase, the Company's bankers, Bank of Scotland, agreed
a revolving working capital facility of GBP750,000. However, the Board has
decided that it is in the best interests of the Company and its shareholders to
reduce reliance on bank financing for the Company's working capital. As a
result, the Company is taking steps to replace this facility and to provide
additional working capital with alternative sources of funding, which will
include non-bank debt finance, and also the funds raised in the Placing and by
the issue of the Convertible Loan Notes.
On 26 May 2009, the Company announced that it had entered into an agreement with
one of its substantial shareholders, Tyne & Wear Holdings Limited ("Tyne &
Wear"), pursuant to which Tyne & Wear has agreed to provide a term loan facility
of up to GBP0.5 million at an initial annual interest rate of 12.5 per cent.
repayable on or before 31 December 2010.
In addition, the Company has agreed in principle the terms of a GBP0.5 million
secured loan with Shore Capital Limited, acting as the investment manager of the
Puma Venture Capital Trusts. The loan, which remains subject to contract, will
be repayable on 31 January 2011 and bear interest at 7 per cent. per annum.
Revised Strategy
As CEO, Colin has formulated the following strategy to take the Company back to
growth and profit. The main points of the plan are:
(i)Re-engage with existing successful partners
The Company has a loyal base of channel partners, who have continued to perform
despite the recent difficult period. The Company plans to consolidate the
channel from currently over 170 partners to around 50 partners in order to focus
its attention on the more successful partners.
(ii)Dominate existing, and grow new, vertical markets
The Company is successful in certain vertical markets, such as independent
financial advisers, accountants, and construction. In most of these markets
there remains significant potential for long term growth, and the Company plans
to develop specific strategies to secure that growth and allow Invu to dominate
these and other selected markets, including in particular the legal sector.
(iii) Extend into the "M" of the SME market
The Company has always focused on the 'S' of the SME market. The Board believes
that there is a significant opportunity for the Company to sell to medium size
companies as well. The key is to identify partners who are already selling into
this market. The Company has launched an initiative to recruit several new
partners that will be dedicated to the "Invu for Enterprise" product, to be
launched later this year. The Boards aims to concentrate on partners with higher
quality and size in order to assist market penetration particularly with larger
customers.
(iv) Return to market-driven innovation
After previous development of non-core products, the Company now needs to
refocus on its aim to be the dominant vendor of document management to SMEs.
This is currently being implemented, and the plan will be presented to partners
and customers later in the year. The key is to return to being a market-driven
company creating solutions for customers that are easy to use, and price
efficient.
Use of proceeds from the Issue
The Company is intending to raise an aggregate of GBP1.5 million (approximately
GBP1.4 million net of expenses) through the Issue. The funds raised will be used
to repay the Company's current bank facilities and to provide the necessary
working capital for the Company to begin executing its revised strategy during
2009.
The Directors consider that the net proceeds of the Issue, together with the
Company's available debt facilities, will provide the funding necessary to
pursue the Company's strategy.
Details of the Issue
The Company is proposing to raise GBP1.5 million (before expenses) by means of
the Issue. Pursuant to the terms of the Placing Agreement, Arbuthnot, as agent
for Invu, has agreed to use its reasonable endeavours to place the Placing
Shares (and the Notes) with investors procured by it. The Issue is not
underwritten.
The Placing Price of 2 pence per Placing Share represents a discount of
approximately 16 per cent. to the closing mid-market price of 2.38 pence per
Ordinary Share on 22 July 2009, being the last dealing day prior to the date of
this announcement.
The issue of the Placing Shares is conditional, amongst other things, on:
(i) the passing of the Resolutions;
(ii) the execution by the Company of the Convertible Loan Note Instrument;
(iii) Admission; and
(iv) the Placing Agreement not being terminated prior to Admission.
The Company has received irrevocable undertakings to vote in favour of the
Resolutions from Shareholders who in aggregate hold approximately 47.7 per cent.
of the Company's existing issued share capital (including undertakings from each
of the Directors in relation to their respective shareholdings).
Application will be made to London Stock Exchange plc for the Placing Shares to
be admitted to trading on AIM. The Placing Shares are expected to be admitted to
AIM and to commence trading at 8.00 a.m. on 12 August 2009.
The Placing Agreement contains warranties given by the Company with respect to
its business and certain matters connected with the Issue. In addition, the
Company has given certain indemnities to Arbuthnot in connection with the
Placing and Arbuthnot's performance of services in relation to the Issue.
Details of the Convertible Loan Notes
The principal terms and conditions of the Convertible Loan Notes are as follows:
(a) the nominal amount of the Convertible Loan Notes shall be GBP1; Herald's
principal amount shall be
GBP300,000 and Unicorn's shall be
GBP200,000;
(b) Noteholders may convert each Note into 40 new Ordinary Shares (a conversion
price of 2.5
pence per Ordinary Share);
(c) any Notes not converted shall be redeemed on 12 August 2014; the
Noteholders at their
discretion shall be entitled to convert any
Notes into new Ordinary Shares in the Company at
any time from 12
August 2012;
(d) interest on the Notes shall accrue at 7 per cent. per annum and shall be
paid to the Noteholders
twice a year semi-annually; and
(e) any Notes outstanding and not redeemed on 12 August 2014 shall be
converted into Ordinary
Shares.
The issue of the Convertible Loan Notes will not proceed unless the Placing
Agreement becomes unconditional in all respects (other than Admission).
Application will be made to London Stock Exchange plc for all Ordinary Shares
(if any) issued pursuant to Convertible Loan Notes to be admitted to trading on
AIM (if and as applicable).
A copy of the draft Convertible Loan Note Instrument will be available for
inspection at the Company's registered office, The Beren Blisworth Farm, Stoke
Road, Blisworth, Northampton, Northamptonshire NN7 3DB from the date of this
document to the time and date of the General Meeting and at the offices of
Arbuthnot at Arbuthnot House, 20 Ropemaker Street, London EC2Y 9AR for 15
minutes prior to and during the General Meeting.
Related Party Transactions
As part of the Placing, Tyne & Wear (a substantial shareholder in the Company,
as defined in the AIM Rules) has agreed to subscribe for 12.5 million Placing
Shares (the "Tyne & Wear Transaction"). Furthermore, Colin Gallick and Bernard
Fisher, each a director of the Company, has agreed to subscribe for 2,500,000
and 500,000 Placing Shares respectively (the "Directors' Transaction"). The
above transactions are classified as transaction with a related party for the
purposes of the AIM Rules.
In accordance with the AIM Rules, the Directors, excluding Daniel Goldman,
having consulted with the Company's nominated adviser, Arbuthnot, consider that
the terms of the Tyne & Wear Transaction are fair and reasonable insofar as
Shareholders are concerned.
In accordance with the AIM Rules, the Directors, excluding Colin Gallick and
Bernard Fisher, having consulted with the Company's nominated adviser,
Arbuthnot, consider that the terms of the Directors' Transaction are fair and
reasonable insofar as Shareholders are concerned.
General Meeting
It is proposed that the General Meeting will be held at the offices of Arbuthnot
at Arbuthnot House, 20 Ropemaker Street, London EC2Y 9AR at 10.00 a.m. on 10
August 2009 at which the Resolutions will be proposed.
The Company has received irrevocable undertakings to vote in favour of the
Resolutions from Shareholders who in aggregate hold approximately 47.7 per cent.
of the Company's existing issued share capital (including undertakings from each
of the Directors in relation to their respective shareholdings).
Enquiries:
+--------------------------------------+-----------------------------------+
| Invu plc | 01604 859893 |
+--------------------------------------+-----------------------------------+
| Daniel Goldman, Non Executive | |
| Chairman | |
+--------------------------------------+-----------------------------------+
| Colin Gallick, CEO | |
+--------------------------------------+-----------------------------------+
| | |
+--------------------------------------+-----------------------------------+
| Financial Dynamics | 020 7831 3113 |
+--------------------------------------+-----------------------------------+
| Juliet Clarke/Haya Chelhot/Emma | |
| Appleton | |
+--------------------------------------+-----------------------------------+
| | |
+--------------------------------------+-----------------------------------+
| Arbuthnot Securities | 020 7012 2000 |
+--------------------------------------+-----------------------------------+
| Tom Griffiths/Ben Wells | |
+--------------------------------------+-----------------------------------+
| | |
+--------------------------------------+-----------------------------------+
Definitions
Unless the context otherwise requires, the following meanings apply throughout
this announcement: -
+-----------------------+------------------------------------------------------+
| "Admission" | the admission of the Placing Shares to trading on |
| | AIM becoming effective in accordance with the AIM |
| | Rules |
| | |
+-----------------------+------------------------------------------------------+
| "AIM" | AIM, a market operated by London Stock Exchange plc |
| | |
+-----------------------+------------------------------------------------------+
| "AIM Rules" | the rules published by London Stock Exchange plc |
| | relating to AIM, being the AIM Rules for Companies |
| | and the AIM Rules for Nominated Advisers |
| | |
+-----------------------+------------------------------------------------------+
| "Arbuthnot" | Arbuthnot Securities Limited |
| | |
+-----------------------+------------------------------------------------------+
| "Board" or | the board of Directors of the Company |
| "Directors" | |
+-----------------------+------------------------------------------------------+
| "Company" or "Invu" | Invu plc |
| | |
+-----------------------+------------------------------------------------------+
| "Convertible Loan | the 500,000 GBP1 convertible unsecured loan notes to |
| Notes" or "Notes" | be constituted by the Convertible Loan Note |
| | Instrument and issued to the Noteholders |
| | |
+-----------------------+------------------------------------------------------+
| "Convertible Loan | the draft convertible loan note instrument |
| Note Instrument" | constituting the Notes to be executed by the Company |
| | following the General Meeting |
+-----------------------+------------------------------------------------------+
| "Enlarged Share | the Company's issued share capital immediately |
| Capital" | following Admission |
| | |
+-----------------------+------------------------------------------------------+
| "General Meeting" | the General Meeting of the Company proposed to be |
| | convened for 10.00 a.m. on 10 August 2009 (or any |
| | adjournment thereof), |
| | |
+-----------------------+------------------------------------------------------+
| "Herald" | Herald Investment Management Limited |
| | |
+-----------------------+------------------------------------------------------+
| "Noteholders" | Unicorn and Herald |
| | |
+-----------------------+------------------------------------------------------+
| "Ordinary Shares" | the ordinary shares of 1 pence each in the Company |
| | |
+-----------------------+------------------------------------------------------+
| "Placing" | the conditional placing by Arbuthnot of the Placing |
| | Shares at the Placing Price pursuant to the Placing |
| | Agreement |
| | |
+-----------------------+------------------------------------------------------+
| "Placing Agreement" | the conditional agreement dated 23 July 2009 between |
| | (1) the Company and (2) Arbuthnot relating to the |
| | Placing |
| | |
+-----------------------+------------------------------------------------------+
| "Placing Price" | 2 pence per Placing Share |
| | |
+-----------------------+------------------------------------------------------+
| "Placing Shares" | 50,000,000 new Ordinary Shares to be placed pursuant |
| | to the Placing at the Placing Price |
| | |
+-----------------------+------------------------------------------------------+
| "Resolutions" | the resolutions to be proposed at the General |
| | Meeting |
| | |
+-----------------------+------------------------------------------------------+
| "Shareholders" | holders of Ordinary Shares |
| | |
+-----------------------+------------------------------------------------------+
| "Unicorn" | Unicorn VCT plc |
| | |
+-----------------------+------------------------------------------------------+
| "United Kingdom" or | the United Kingdom of Great Britain and Northern |
| "UK" | Ireland |
| | |
+-----------------------+------------------------------------------------------+
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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