TIDMKAPE
RNS Number : 3819M
Kape Technologies PLC
21 September 2021
21 September 2021
Kape Technologies plc
("Kape," the "Company," or the "Group")
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2021
Kape Technologies plc (AIM: KAPE), the digital security and
privacy software business, announces its unaudited results for the
six months ended 30 June 2021.
Financial highlights
-- Another period of strong financial performance driven by
market dynamics coupled with Kape's expanding product stack and
organic user acquisition expertise
o Revenues increased 61.9% to $95.5 million (H1 2020: $59.0
million), a 27% increase on a proforma basis
o Strong growth in recurring revenues to $ 59.1 million, an
increase of 16.4 % (H1 2020: $50.8 million)
o Adjusted EBITDA(1) up 75% to $28.7 million (H1 2020: $16.4
million), an increase of 19% on a proforma basis. Adjusted EBITDA
margin increased to 30.0% (H1 2020: 27.8%)
o Operating Profit up 299% to $13.6 million (H1 2020: $3.4
million)
o Increase of 70 % in Fully diluted Adjusted Earnings Per Share2
to 9.0 cents (H1 2020: 5.3 cents)
o Strong cash generation; adjusted operating cashflow increase
by 66% to $ 14.6 million (H1 2020: $8.8 million). Reported
operating cash flow increased by 114% to $ 12.6 million (H1 2020:
$5.9 million)
-- In May 2021, entered into an agreement for a new senior
secured debt facility of up to $220 million, comprising a $120
million senior secured term facility, a $10 million revolving
credit facility and a $90 million uncommitted acquisition
facility
Operational highlights
-- In March 2021, acquired Webselenese, the digital platform
which provides independent and highly valued consumer privacy and
security content, for $149.1 million
o Highly strategic, providing Kape with one of the broadest
audiences for consumer digital privacy and security, with over 100
million readers
o Earnings accretive, underpinning expectations for the full
year 2021
o Integration proceeding rapidly with the Group already
realising significant benefits including a reduction in average
customer acquisition cost
-- In May 2021, launched a Privacy First Anti-Virus solution for
PC. Initially offered to CyberGhost customers, it will shortly also
be launched under the Private Internet Access brand
-- Significant progress in implementation of cross-sell initiatives
o 12% of new CyberGhost customers and over 20% of new Intego
users in H1 2021 purchased more than one product
Post period-end and Outlook
-- In July 2021 , introduced Kape's first B2B2C distribution
channel for PIA, entering into an agreement with cellular operator
3 Hong Kong
-- Appointed Ari Margalit as group CTO, with over 20 years of
experience in the technology sector, former CTO of Weissbeerger an
ABInbev company
-- In September 2021, Kape announced the $936 million
acquisition of ExpressVPN, one of the world's leading pure-play
providers of digital privacy and security
o Key milestone, positions Kape as a premium digital privacy and
security player
o Highly and immediately earnings enhancing, enabling Kape to
benefit from ExpressVPN's strong growth rates and attractive
financial profile
o Complementary to Kape's existing portfolio, facilitating the
expansion of the Group's global footprint with 40% of ExpressVPN's
three million customers based in North America
-- It is anticipated that the Group will generate revenues of
between $197-202 million and Adjusted EBITDA of between $73-76
million for the full year 2021 on a reported basis(3)
-- As announced at the time of the Proposed acquisition of
ExpressVPN, the enlarged group is expected to generate revenues for
the year ended 31 December 2022 of between $610-624 million and
proforma Adjusted EBITDA of between $166-172 million.
Ido Erlichman, Chief Executive Officer of Kape, commented:
"2021 is shaping to be a truly exceptional year for Kape.
Pleasingly, our underlying business has continued to deliver record
financial results alongside the hugely impactful acquisitions of
both Webselenese, and more recently, ExpressVPN.
"ExpressVPN accelerates our business growth overnight,
delivering significant earnings accretion and scale to the Group.
We were delighted with the response from both new and existing
investors seen during the accompanying multiple-times
oversubscribed fundraise, which provided a strong endorsement of
our ongoing strategy.
"We believe Kape is positioned better than ever before to
capitalise on the growth in the digital security and privacy
market, which is showing no signs of abating, and we look to the
future with confidence in delivering ongoing growth and realising
significant value for all our key stakeholders."
Kape's management team will be hosting a live webcast today at
12.30 p.m. , the details to join are as follows:
To register and to join the stream on the day, please click the
link below:
https://webcasting.brrmedia.co.uk/broadcast/6141deeb7d0383367bb10985.
(1) Adjusted EBITDA is a non GAAP measure and a company specific
measure which excludes other operating income and expenses which
are considered to be one off and non-recurring in nature.
(2) Adjusted EPS was calculated from the earnings per share
adding back, share-based payments and non-recurring costs
(3) Consolidating Webselenese as from the 5 March 2021, being
the deal's closing date
Enquiries:
Kape Technologies plc via Vigo Consulting
Ido Erlichman, Chief Executive Officer
Moran Laufer, Chief Financial Officer
Shore Capital (Nominated Adviser & Broker)
Mark Percy / Toby Gibbs / James Thomas / Michael +44 (0)20 7408
McGloin 4090
Stifel Nicolaus Europe Limited (Joint Broker)
Alex Price / Brad Topchik / Alain Dobkin / +44 (0) 20 7710
Richard Short 7600
Vigo Consulting (Financial Public Relations)
Jeremy Garcia / Antonia Pollock +44 (0)20 7390
kape@vigoconsulting.com 0237
About Kape
Kape is a leading 'privacy-first' digital security software
provider to consumers. Through its range of privacy and security
products, Kape focuses on protecting consumers and their personal
data as they go about their daily digital lives.
To date, Kape has over 2.7 million paying subscribers, supported
by a team of over 430 people across eight locations worldwide.
Through its subscription-based platform, Kape has fast
established a highly scalable SaaS-based operating model, geared
towards serving the vast global consumer digital privacy
market.
www.kape.com
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Chief Executive Officer's review
Overview
H1 2021 has been another period of significant growth for the
Group, combining both top line growth with increasing global demand
for our products, and now over 2.7 million customers are using one
or more of our products. With a rise in the number of consumers
looking to control their digital privacy and security online, we
continue to focus on evolving our product offering and
infrastructure to ensure our offering captures this growing and
diversifying demand.
The acquisition of Webselenese in March 2021 was another
strategic milestone for the Group, providing Kape with one of the
broadest audiences for consumer digital privacy and security with
over 100 million readers worldwide. The acquisition deepens Kape's
go-to-market capabilities and ensures Kape is ahead of the market
in consumer trends, in turn providing a competitive edge. We are
pleased to see the knowhow and technology of Webselenese already
proving to add value across Kape's security and privacy
businesses.
Subsequently, in May 2021, we announced that we had entered into
an agreement with our existing bank syndicate of Bank of Ireland,
Barclays Bank PLC and Citi Commercial Bank, as well as three new
banks; Citizens Bank, BNP Paribas and Leumi Bank, to provide new
debt facilities of up to $220 million, replacing all of our
existing loan facilities. This is a strong endorsement of our
ongoing strategy and provides us with significant firepower to
execute on further opportunities.
In the six months ended 30 June 2021, trading was again strong
and in line with management's expectations for the full year. Group
revenues increased 60% in the period to $95.7 million (H1 2020:
$59.0 million), with strong underlying organic revenue growth of
27% delivered on a proforma basis. Pleasingly, the Group's Digital
Security division also returned to growth in the period. Adjusted
EBITDA increased 75% to $28.7 million (H1 2020: $16.4 million), an
increase of 19% on a proforma basis. Adjusted EBITDA margin
increased to 30.0% (H1 2020: 27.8%). The board remains confident in
the Group trading in-line with management's expectations.
Post period-end, we announced the proposed acquisition of
ExpressVPN, which is a milestone in the Company's history and is
directly in line with our mission to provide a privacy-first
end-to-end suite of services capable of capturing the increasing
demand in the digital privacy market. The scale of ExpressVPN's
business, in addition to its high-quality people and products, will
augment the Group and deliver myriad strategic benefits.
We believe that Kape is in a stronger position than ever before
to continue our exciting growth trajectory and deliver value for
all our key stakeholders.
Operational review
Key Performance Indicators
Kape performed very strongly across its KPIs during the period,
which the Group reports against to track the ongoing progress of
its SaaS business model, which in-turn underpins the profitability,
earnings predictability and growth potential of the Group.
30 June 31 Dec
2021 2020
'000 '000
Subscribers (thousands) 2,703 2,519
Retention rate 83% 83%
Deferred income ($'000) 34,585 36,592
Six months Six months
ended 30 ended 30
June 2021 June 2020
(unaudited) (unaudited)
Adjusted EBITDA 28,674 16,422
Adjusted operating cash flow(3) :
Attributable to current year ($'000) 28,552 19, 232
Investment in growth (13,960) (10,478)
-------------------------------------- ------------- -------------
Adjusted operating cash flow ($'000) 14,592 8, 754
Total number of subscribers increased to 2,703,000 as at 30 June
2021, up from 2,519,000 at 2020 year-end, with an increase in both
Digital Privacy and Digital Security subscribers during the period.
This was driven by growing performance in the privacy and security
space, as Kape's user acquisition expertise continued to elicit
positive results in gaining customers.
Overall, the Group's retention rate continues at a high of 83%
(31 December 2020: 83%), which is industry-leading for a B2C
SaaS-business. Deferred income was $34.6 million as at 30 June 2021
(31 December 2020: $36.6 million), which was marginally lower as a
result of recognizing higher revenue at the point of sale from
customers that bought more than one product in each purchase.
Integration of Webselenese
In the short period since we acquired Webselenese in March 2021,
we have already seen the positive impact of the implementation of
Webselenese's expertise and proprietary technologies across
CyberGhost, PIA and Intego, and expect this to grow in the future.
As expected, we have also been able to realise a reduction in
average customer acquisition cost, with sign-ups from organic
traffic increasing since the transaction. The initial signs from
the integration have been very positive, and we believe there is
still a lot to come from the Webselenese acquisition, with the
scope to enter new verticals with Webselenese as we continue to
drive Kape's organic user growth.
Product development and cross-promotion
Following the launch of the CyberGhost Privacy Suite in the
fourth quarter of 2020, we have seen significant traction for our
privacy-first security suite. Providing customers with a trusted
one stop solution to managing and gaining control over their
digital lives. This dashboard continues to sit at the centre of our
product strategy.
In the first six months of 2021, we have seen an increase in
users taking more than one Kape product. 12% of new CyberGhost
customers and over 20% of new Intego users in H1 2021 purchased
more than one product. Furthermore, in May 2021, we launched a
Privacy First Anti-Virus solution for PC. This is initially
Intego-branded and has already been rolled-out to CyberGhost
customers and will be rolled out to PIA users in due course ,
providing our customers with comprehensive security coverage from
one point of purchase. With our sizeable and growing user base of
like-minded users, we anticipate a growing number of customers will
trust Kape with more than one of their digital needs.
Post period-end, in July 2021, we announced a first of its kind
agreement for Kape, with PIA's product now offered to customers of
3 Hong Kong. This is the first co-operation between PIA and a
telecom operator. PIA's VPN will be available for all 3 Hong Kong's
postpaid and prepaid customers who can subscribe to the service
directly with 3 Hong Kong. We believe this could be a blueprint for
future roll-out, further reinforcing the global increase in
awareness for digital privacy solutions.
Acquisition of ExpressVPN
Post period-end, in September 2021, we announced the proposed
acquisition of ExpressVPN, an industry-leading provider of digital
privacy products, for $936 million. This acquisition is in line
with our overarching strategy to become the leading provider of
consumer-focused digital privacy and security solutions.
The combined group will service over six million paying
subscribers, with Kape significantly bolstered by the addition of
ExpressVPN's 290 highly experienced employees, a large percentage
of which are R&D-focused. Providing Kape with significant new
cross-sell and revenue generating opportunities in a fast-growing
global market, we will look to leveraging ExpressVPN's extensive
distribution network, including well-known OEM channel partners HP
and HMD Global (home of Nokia phones), to enhance our already
robust go-to-market capabilities.
The transaction is highly earnings enhancing from completion,
with the enlarged group expected to generate revenues for the year
ended 31 December 2022 of between $610-624 million and proforma
Adjusted EBITDA of between $166-172 million.
In order to fund the acquisition, we concurrently announced a
$354 million placing and retail offer. The response to which was
extremely positive, with the placing multiple-times oversubscribed,
which is testament to the market's belief in not only the
transaction with ExpressVPN but also our ongoing growth
strategy.
Outlook
With a growing customer base, expanding product offering and a
clear vision, we are excited about the future periods for Kape.
In the near-term following the completion of the acquisition of
ExpressVPN, which we expect to occur in the coming months we remain
focused on its integration, as well as completing the integration
of Webselenese, to realise the myriad benefits that these
transactions have brought to the Group. In addition, we will
continue to broaden our product suite and focus on providing the
most value to our customers as we believe this central to
accelerating our growth.
We remain on track to deliver on our expectations for the full
year 2021, with the enlarged group expected to generate revenues
for the year ended 31 December 2022 of between $610-624 million and
proforma Adjusted EBITDA of between $166-172 million.
Ido Erlichman
Chief Executive Officer
20 September 2021
Chief Financial Officer's review
Overview
The Company delivered a strong financial performance in the
first half of 2021 as revenues increased by 61.9% to $95.5 million
(H1 2020: $59.0), or 26.8% on a proforma basis. The increase in
revenues is a result of an increase in subscriptions revenue of
16.3% to $59.1 million (H1 2020: $50.8 million), as well as four
months' contribution from Webselenese. Combined Segment results
increased by 47.1% to $46.5 million (H1 2020: $31.6), and Adjusted
EBITDA increased by 75% to $28.7 million (H1 2020: $16.4
million).
Adjusted cash flow from operations attributable to the current
financial period was $28.5 million (H1 2020: $19.2 million), which
represents a cash conversion of 100%. In addition, during the
period, $14.0 million was reinvested in user acquisition costs that
will be expensed in future periods (H1 2020: $10.5 million). When
including this investment, adjusted cash flow from operations was
$14.6 million (H1 2020: $8.8 million), an increase of 66.7%
compared to the first half of 2020.
On 5 March 2021, the Group acquired 100% of the share capital of
Uma Capital Ltd and Ani Ariel Ltd, the owners of Webselenese, a
digital platform which provides independent and highly valued
consumer privacy and security content to millions of users globally
via market leading review sites. The total consideration was $152.1
million (the "Consideration") to be satisfied by a combination of
$116.1 million in cash and $28.6 million in new shares, amounting
to 12.1 million Kape Ordinary Shares and deferred and contingent
consideration of $7.4 million.
To fund the transaction, the Company has drawn down $85 million
from a $120 million Bridge Loan by TS Next Level Investments
Limited ("TSNLI"). The Bridge Loan carried a fixed coupon of 6.0%
per annum payable on funds drawn and an arrangement fee of 1.0%.
TSNLI is an affiliated company of Unikmind Holdings Limited, Kape's
largest shareholder.
On 28 May 2021, the Company agree d with Bank of Ireland,
Barclays Bank PLC , Citi Commercial Bank, Citizens Bank, BNP
Paribas and Leumi Bank (together, "the Banks"), to replace its
existing Term Facility, RCF and Shareholder loan with a new senior
secured bank facilities of up to $220 million ("New Debt
Facilities"). The New Debt Facilities comprise a $120 million
senior secured term facility (the "Term Facility"), a $10 million
revolving credit facility (the "RCF") and a $90 million uncommitted
acquisition facility (the "Uncommitted Acquisition Facility").
Segment Result
Revenue Segment result
H1 2021 H1 2020 H1 2021 H1 2020
$'000 $'000 $'000 $'000
Digital Privacy 49,552 42,237 27,674 24,560
Digital Security 18,479 16,749 6,735 7,041
Digital Content 27,471 - 12,097 -
Revenue 95,502 58,986 46,502 31,601
======== ======== ======== ========
The segment result has been calculated using revenue less costs
directly attributable to that segment. Cost of sales comprises
payment processing fees and infrastructure costs for the Group's
privacy products. Direct sales and marketing costs are user
acquisition costs.
Digital Privacy
H1 2021 H1 2020
$'000 $'000
Revenue 49,552 42,237
Cost of sales (6,621) (7,526)
Direct sales and marketing
costs (15,257) (10,151)
-------- --------
Segment result 27,674 24,560
-------- --------
Segment margin (%) 55.8 58.1
During the period, the Digital Privacy segment has seen
continued growth with a 17.3% increase in revenue to $49.6 million
(H1 2020: $42.2 million) and a 12.7% increase in the segment result
to $27.7 million (H1 2020: $24.6 million). Revenue growth was
driven by subscriber base growth of 9% to 2.1 million and an
increase in average revenue per subscriber of 6% following the
introduction of the CyberGhost Privacy Suite and other
cross-promotion activities.
Digital Security
H1 2021 H1 2020
$'000 $'000
Revenue 18,479 16,749
Cost of sales (1,279) (1,087)
Direct sales and marketing
costs (10,465) (8,621)
-------- -------
Segment result 6,735 7,041
-------- -------
Segment margin (%) 36.4 42.0
During the period, revenue from the Digital Security segment
returned to growth with an increase of 10.3% to $18.5 million (H1
2020: $16.7 million). The increase was driven by a 20.4% growth in
revenue from Intego's Endpoint security products. In addition,
revenue from the Company's PC performance products has increased by
7.2% but with a lower margin of 24% (H1 2020: 32%) following an
increase in traffic from PPC advertising.
Digital Content
H1 2021 H1 2020
$'000 $'000
Revenue 27,471 -
Cost of sales - -
Direct sales and marketing
costs (15,374) -
-------- -------
Segment result 12,097 -
-------- -------
Segment margin (%) 44.0 -
During the period from 5 March 2021 the digital content segment
revenue was $25.8 million and segment results were $12.1 million.
On a proforma basis, excluding revenue that was generated from
Kape, revenue for the full period from December 2020 has
significantly increased by 52% to $40.3 million (H1 2020: $26.5
million). The growth has been driven by an increase in traffic from
both organic and acquired sources.
Adjusted EBITDA from continued operations
Adjusted EBITDA for the six months to 30 June 2021 was $28.7
million (H1 2020: $16.4 million). Adjusted EBITDA is a non-GAAP
company specific measure which is considered to be a key
performance indicator for the Group. It excludes share-based
payment charges and expenses, which are considered to be one-off
and non-recurring in nature and are excluded from the following
analysis:
H1 2021 H1 2020
$'000 $'000
Revenue 95,502 58,986
Cost of sales (7,900) (8,613)
Direct sales and marketing
costs (41,096) (18,772)
-------- --------
Segment result 46,506 31,601
-------- --------
Indirect sales and marketing
costs (7,929) (4,644)
Research and development
costs (3,178) (2,963)
Management, general and administrative
cost (6,725) (7,572)
-------- --------
Adjusted EBITDA 28,674 16,422
-------- --------
EBITDA margin % 30.0 27.8
-------- --------
The increase in indirect sales and marketing costs is mainly due
to a $2.7 million contribution from Webselenese in the period. The
decrease in Management, general and administrative expenses is
following a full period contribution of the synergies generated
from the integration of Private internet access.
Operating profit
A reconciliation of Adjusted EBITDA to operating profit is
provided as follows:
H1 2021 H1 2020
$'000 $'000
Adjusted EBITDA 28,674 16,422
Employee share-based payment
charge (634) (542)
Exceptional and non-recurring
costs (1,702) (2,683)
Depreciation and amortisation (13,053) (9,790)
Other operating income 324 -
Operating profit 13,609 3,407
-------- -------
Exceptional and non-recurring costs in H1 2021 comprised
non-recurring staff costs of $0.5 million related to onerous
employee and service provider contracts following the integration
of Private Internet Access, $0.8 million for employer costs related
to employee share options exercises, and $0.5 million (H1 2020:
$0.2 million) for professional services related to the acquisition
of Webselenese. The increase in depreciation and amortisation
derives mainly from $2.4 million amortisation charges related to
the acquired intangible assets that were added through the
acquisition of Webselenese in March.
Profit before tax
Profit before tax was $10.0 million (H1 2020: $0.2 million).
Finance costs of $3.7 million comprised mainly of $3.1 million of
interest on debt facilities (H1 2020: $1.2 million), $0.5 million
non-cash interest on deferred consideration related to the Private
Internet Access acquisition and finance leases (H1 2020: $0.5
million), and foreign exchange differences of $0.1 million.
Profit after tax
Profit after tax was $7.5 million (H1 2020: $0.2 million). The
tax charge derives mainly from group subsidiaries' residual
profits. Since the amortisation of acquired intangibles and
share-based payment charges are not tax-deductible in the main
jurisdictions in which the Company operates, management believes it
is appropriate to examine the effective tax rate out of Adjusted
EBITDA rather than Profit Before Tax. The effective tax rate out of
Adjusted EBITDA increased to 8.5% (H1: 2020 7.1%).
Cash flow
H1 2021 H1 2020
$'000 $'000
Cash flow/(outflow) from
operations 12,578 5,890
Exceptional and non-recurring
cash outflow 2,014 2,864
Adjusted cash flow from operations 14,592 8,754
------- -------
% of Adjusted EBITDA 51% 53%
======= =======
Excluding increase of deferred
contract costs 13,960 10,478
Adjusted Cash flow from operations
attributable to the current
year 28,552 19,232
------- -------
% of Adjusted EBITDA 100% 117%
======= =======
Cash flow from operations was $12.6 million (H1 2020: $5.9
million cash outflow). Adjusted cash flow from operations after
adding back one-off payments was $14.6 million (H1 2020: $8.8
million). Adjusted operating cash flow attributable to the current
financial period increased to $28.6 million (H1 2020: $19.2
million), which represents a cash conversion of 100%. This excludes
investment in user acquisition that will drive future revenue and
therefore will be recognised in future periods in parallel to these
revenues.
Net tax payments in the period were $2.1 million (H1 2020: $0.3
million). The increase is due to refunds from tax authorities in H1
2020.
Cash spent in the period on capital expenditure of $2.5 million
(H1 2020: $1.4 million), comprises mainly capitalised development
costs and fixed asset purchases. In addition, following the
acquisition of Webselenese, there was a net cash payment of $116.1
million during the period, see Note 10(a).
Cash flow from financing activities of $80.7 million (H1 2020:
$4.8 million outflow) included a drawdown of $85 million
shareholder bridge loan and full repayment of the principal, and
$2.1 million interest and arrangement fees related to the that
loan. The repayment was funded by a $87.9 million increase of
long-term bank debt and RCF, net of issuance costs, see Note 8. In
addition, $0.8 million (H1 2020: $5.9 million) has been received
following the exercise of employee share options and $3.3 million
(H1 2021: NIL) has been paid for purchase of own shares from
employees in the period.
Financial position
At 30 June 2021, the Group had cash of $22.4 million (31
December 2020: $49.9 million), net assets of $263.0 million (31
December 2020: $228.8 million), and net debt of $101.1 (31 December
20: net cash $11.1 million) which represent an adjusted leverage of
x1.47.
Moran Laufer
Chief Financial Officer
20 September 2021
Consolidated statement of comprehensive income
For the six months ended 30 June 2021
Six months Six months
ended 30 ended 30
June 2021 June 2020
(unaudited) (unaudited)
Note $'000 $'000
Revenue 3 95,502 58,986
Cost of sales (7,900) (8,613)
------------ ------------
Gross profit 87,602 50,373
Selling and marketing costs (49,106) (23,457)
Research and development
costs (3,431) (3,054)
Management, general and administrative
costs (8,727) (10,665)
Depreciation and amortisation (13,053) (9,790)
Other operating income 324 -
Total operating costs 5 (73,993) (46,966)
Operating profit 5 13,609 3,407
Adjusted EBITDA 5 28,674 16,422
------------ ------------
Employee share-based payment
charge (634) (542)
Exceptional and non-recurring
costs 5 (1,702) (2,683)
Other operating income 324 -
Depreciation and amortisation (13,053) (9,790)
Operating profit 5 13,609 3,407
--------------------------------------- ---- ------------
Finance costs (3,648) (2,031)
------------ ------------
Profit before taxation 9,961 1,376
Tax charge (2,435) (1,167)
------------ ------------
Profit for the period 7,526 209
Other comprehensive income:
Items that may be reclassified
to profit and loss :
Foreign exchange differences
on translation of foreign
operations - 8
------------ ------------
Total comprehensive profit
for the period 7,526 217
============ ============
Earnings per share attributable
to the ordinary equity holders
of the company:
Basic earnings per share
(cents) 7 3.6 0.11
Diluted earnings per share
(cents) 7 3.5 0.11
------------ ------------
*Adjusted EBITDA is a non GAAP measure and a company specific
measure which is earnings before interest, tax, depreciation,
amortisation, share based payment charges, other operating income
and exceptional and non-recurring costs.
Consolidated statement of financial position
As at 30 June 2021
30 June 31 December
2021 2020
(unaudited) (audited)
Note $'000 $'000
Non-current assets
Intangible assets 371,635 227,949
Property, plant and equipment 1,577 1,375
Right-of-use assets 10,379 4,006
Deferred contract costs 39,084 31,080
Deferred tax asset 4,749 6,282
427,424 270,692
------------ -----------
Current assets
Software license inventory 89 128
Deferred contract costs 27,410 21,454
Trade and other receivables 16,240 8,884
Cash and cash equivalents 22,433 49,912
66,172 80,378
Total assets 493,596 351,070
============ ===========
Equity
Share capital 6 23 22
Additional paid in capital 302,707 273,358
Shares to be issued 1,350 1,350
Foreign exchange differences
on translation of foreign
operations 772 772
Retained earnings (41,887) (46,746)
Equity attributable to equity
holders of the parent 262,965 228,756
------------ -----------
Non-current liabilities
Contract liabilities 8,261 7,463
Loans and Borrowings 8 105,156 29,619
Deferred tax liabilities 7,975 2,640
Long term lease liabilities 6,888 1,975
Provisions 311 679
Deferred and contingent consideration 300 407
128,891 42,783
------------ -----------
Current liabilities
Trade and other payables 27,843 22,468
Loans and Borrowings 8 18,347 7,117
Current tax liability 2,518 3,188
Contract liabilities 26,324 29,131
Short term lease liabilities 4,010 2,572
Provisions 794 721
Deferred and contingent consideration 21,904 14,334
101,740 79,531
------------ -----------
Total equity and liabilities 493,596 351,070
============ ===========
Consolidated statement of cash flows
For the six months ended 30 June 2021
Six months Six months
ended 30 June ended 30
2021 June 2020
(unaudited) (unaudited)
$'000 $'000
Cash flow from operating activities
Profit for the period after taxation 7,526 209
Adjustments for:
Amortisation of intangible assets 11,412 8,780
Profit on sale of intangible assets (275) (27)
Amortisation of Right-to-use assets 1,336 680
Depreciation of property, plant and
equipment 305 330
Loss from lease modification 10 -
Loss/(Profit) on sale of property,
plant and equipment 96 (7)
Tax charge 2,435 1,167
Interest expenses, fair value movements
on deferred consideration 3,413 1,752
Share based payment charge 634 542
Unrealised foreign exchange differences 53 (16)
-------------- ------------
Operating cash flow before movement
in working capital 26,945 13,410
Increase in trade and other receivables (281) (1,265)
Decrease in software licences inventory 39 16
Increase in trade and other payables 2,157 2,610
Decrease in provisions (313) -
Increase in deferred contract costs (13,960) (10,478)
(Decrease)/Increase in contract liabilities (2,009) 1,597
-------------- ------------
Cash flow from operations 12,578 5,890
Tax paid net of refunds (2,123) (294)
-------------- ------------
Cash generated from operations 10,455 5,596
Cash flow from investing activities
Purchases of property, plant and
equipment (342) (193)
Sale of property, plant and equipment - 7
Sales of intangible assets 611 130
Cash paid on business combinations,
net of cash acquired (116,073) -
Intangible assets acquired (365) (148)
Capitalisation of development costs (2,427) (1,205)
-------------- ------------
Net cash used in investing activities (118,596) (1,409)
Cash flow from financing activities
Payment of leases (1,422) (693)
Proceeds from bank loan 85,000 40,000
Proceeds from RCF 4,596 1,654
Proceeds from shareholder loan 85,000 -
Debt issuance costs (1,677) (873)
Repayment of bank loan (1,818) -
Repayment of interest on bank loan (227) -
Repayment of interest on Shareholder
loan (1,275) (1,155)
Repayment of Shareholder loan (85,000) (40,000)
Payment of purchase of own shares (3,299) -
Exercise of options by employees 802 5,904
-------------- ------------
Net cash generated from financing
activities 80,680 4,837
-------------- ------------
Net (decrease)/increase in cash and
cash equivalents (27,461) 9,024
Revaluation of cash due to changes
in foreign exchange rates (18) (223)
Cash and cash equivalents at beginning
of year 49,912 8,211
-------------- ------------
Cash and cash equivalents at end
of year 22,433 17,012
============== ============
Notes
1. General information
The financial information set out in this document is for Kape
Technologies plc (the "Company") and its subsidiary undertakings
(together the "Group") in respect of the six months ended 30 June
2021.
Kape is a leading 'privacy-first' digital security software
provider to consumers. Through its range of privacy and security
products, Kape focusses on protecting consumers and their personal
data as they go about their daily digital lives. To date, Kape has
2.7 million paying subscribers, supported by a team of over 435
people across eight locations worldwide. Through its subscription
based platform, Kape has established a highly scalable SaaS-based
operating model, geared towards capitalising on the vast global
consumer digital privacy market.
The Board of Directors approved this interim financial
information on 20 September 2021.
2. Basis of preparation
This interim consolidated financial information has been
prepared in accordance with UK adopted international accounting
standards. They do not include all disclosures that would otherwise
be required in a complete set of financial statements and should be
read in conjunction with the 31 December 2020 Annual Report. The
financial information for the half years ended 30 June 2021 and 30
June 2020 does not constitute statutory accounts.
The annual financial statements of the Group were prepared in
accordance with the International Financial Reporting Standards
(IFRS) adopted in the European Union (EU).
Subsequent to the United Kingdom's exit from the European Union
on 31 December 2020 the Group has transitioned from International
Financial Reporting Standards (IFRS) as adopted by the European
Union (EU) to UK adopted international accounting standards. The
transition has had no material impact on previously reported
numbers.
The comparative financial information for the year ended 31
December 2020 included within this report does not constitute the
full statutory Annual Report for that period. The statutory Annual
Report and Financial Statements for 2020 have been filed with the
Registrar of Companies. The Independent Auditors' Report on the
Annual Report and Financial Statements for the year ended 31
December 2020 was unqualified and did not draw attention to any
matters by way of emphasis.
The Group has applied the same accounting policies and methods
of computation in its interim consolidated financial statements as
in its 2020 annual financial statements, except for those that
relate to new standards and interpretations effective for the first
time for periods beginning on (or after) 1 January 202 1 , and
are
adopted in the 202 1 financial statements.
There are a number of standards, amendments to standards, and
interpretations that are effective in future accounting periods
that the Group has decided not to adopt early. The following
amendments are effective for the period beginning 1 January
2021:
-- Covid-19 Related Rent Concessions - amendments to IFRS 16 -
The amendments did not have an impact on the financial
statements.
There are a number of standards, amendments to standards, and
interpretations which have been issued that are effective in future
accounting periods that the group has decided not to adopt
early.
-- IAS 37 (Amendment Onerous Contracts - Cost of Fulfilling a
Contract) - clarifies that the direct costs of fulfilling a
contract include both the incremental costs of fulfilling the
contract and an allocation of other costs directly related to
fulfilling contracts. Before recognising a separate provision for
an onerous contract, the entity recognises any impairment loss that
has occurred on assets used in fulfilling the contract. The
amendment is effective for annual reporting periods beginning on or
after 1 January 2022. The Group is currently assessing the
potential impact of this amendment on its financial statements,
however, such impact if any, is not expected to be material.
-- In January 2020, amendments to IAS 1 were issued, which
clarify the criteria used to determine whether liabilities are
classified as current or non-current. These amendments clarify that
current or non-current classification is based on whether an entity
has a right at the end of the reporting period to defer settlement
of the liability for at least twelve months after the reporting
period. The amendments also clarify that 'settlement' includes the
transfer of cash, goods, services, or equity instruments unless the
obligation to transfer equity instruments arises from a conversion
feature classified as an equity instrument separately from the
liability component of a compound financial instrument. The
amendments are effective for annual reporting periods beginning on
or after 1 January 2023. The Group is currently assessing the
potential impact of this amendment on its financial statements,
however, such impact if any, is not expected to be material.
-- Interest Rate Benchmark Reform - Phase 2 - In August 2020,
amendments were issued to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS
16 to address the issues that arise during the reform of an
interest rate benchmark rate, including the replacement of one
benchmark with an alternative one. The Phase 2 amendments provide
the following reliefs:
-- When changing the basis for determining contractual cash
flows for financial assets and liabilities (including lease
liabilities), the reliefs have the effect that the changes, that
are necessary as a direct consequence of IBOR reform and which are
considered economically equivalent, will not result in an immediate
gain or loss in the income statement.
-- The hedge accounting reliefs will allow most IAS 39 or IFRS 9
hedge relationships that are directly affected by IBOR reform to
continue. However, additional ineffectiveness might need to be
recorded.
The amendments are effective for annual reporting periods
beginning on or after 1 January 2021. The Group is currently
assessing the potential impact of this amendment on its financial
statements, however, such impact if any, is not expected to be
material.
The Group does not expect any other standards issued, but not
yet effective, to have a material impact on its financial
statements.
After making enquiries, the directors have concluded that the
Group has adequate resources to continue operational existence for
the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the half-yearly consolidated
unaudited financial statements.
3. Disaggregation of revenue
Six months Six months
ended 30 ended 30
June 2021 June 2020
(unaudited) (unaudited)
$'000 $'000
Sale of Digital Security, endpoint protection,
and PC performance products 18,479 16,749
Sale of Digital Privacy software solutions 49,552 42,237
Sale of Digital Content and software distribution
services 27,471 -
----------- -----------
95,502 58,986
=========== ===========
The following table presents our revenues disaggregated by the
timing of revenue recognition in accordance with our reporting
segments:
Six months ended 30 June Six months ended 30 June
2021 (unaudited) 2020 (unaudited)
(USD, in thousands) (USD, in thousands)
Digital Digital Digital Total Digital Digital Digital Total
Security Privacy Content Security Privacy Content
---------- --------- --------- ------- ---------- --------- --------- -------
Revenue recognised
over a period 2,566 31,048 - 33,614 2,158 35,884 - 38,042
---------- --------- --------- ------- ---------- --------- --------- -------
Revenue recognised
at a point in
time 15,913 18,504 27,471 61,888 14,591 6,353 - 20,944
---------- --------- --------- ------- ---------- --------- --------- -------
Total 18,479 49,552 27,471 95,502 16,749 42,237 - 58,986
---------- --------- --------- ------- ---------- --------- --------- -------
4. Segmental information
Segment revenues and results
Based on the management reporting system, the Group operates
three reportable segments:
-- Digital Security - comprising software and SaaS products
offering security, endpoint protection and PC performance.
-- Digital Privacy - comprising virtual private network ("VPN")
solutions and other privacy SaaS products.
-- Digital Content - comprising digital platforms which provide reviews and content.
Six months ended 30 June Digital Digital Digital
2021 Security Privacy Content Total
$'000 $'000 $'000 $'000
Revenue 18,479 49,552 27,471 95,502
Cost of sales (1,279) (6,621) - (7,900)
Direct sales and marketing
costs (10,465) (15,257) (15,374) (41,096)
--------- -------- -------- --------
Segment result 6,735 27,674 12,097 46,506
Central operating costs (17,832)
--------
Adjusted EBITDA (note 5) 28,674
Depreciation and amortisation (13,053)
Employee share-based payment
charge (634)
Other operating income 324
Exceptional or non-recurring
costs (1,702)
--------
Operating profit 13,609
Finance costs (3,648)
--------
Profit before tax 9,961
Taxation (2,435)
--------
Profit from the period 7,526
Six months ended 30 June
2020
Digital Digital
Security Privacy Total
$'000 $'000 $'000
Revenue 16,749 42,237 58,986
Cost of sales (1,087) (7,526) (8,613)
Direct sales and marketing
costs (8,621) (10,151) (18,772)
--------- -------- --------
Segment result 7,041 24,560 31,601
Central operating costs (15,179)
--------
Adjusted EBITDA (note 5) 16,422
Depreciation and amortisation (9,790)
Employee share-based payment
charge (542)
Exceptional or non-recurring
costs (2,683)
--------
Operating profit 3,407
Finance costs (2,031)
--------
Profit before tax 1,376
Taxation (1,167)
--------
Profit from the period 209
5. Operating Profit
Adjusted EBITDA
Adjusted EBITDA is calculated as follows:
Six months Six months
ended 30 ended 30
June 2021 June 2020
$'000 $'000
Operating profit 13,609 3,407
Depreciation and amortisation 13,053 9,790
Other operating income (324) -
Employee share-based payment
charge 634 542
Exceptional and non-recurring
costs:
Non-recurring staff and restructuring
costs 1,232 2,465
Exceptional professional services
costs 470 218
---------- ----------
Adjusted EBITDA 28,674 16,422
---------- ----------
Operating costs
Operating costs are further analysed as follows:
Six months Six months Six months Six months
ended 30 ended 30 ended 30 ended 30
June 2021 June 2021 June 2020 June 2020
Adjusted Total Adjusted Total
$'000 $'000 $'000 $'000
Direct sales and marketing
costs 41,096 41,096 18,772 18,772
Indirect sales and marketing
costs 7,929 8,010 4,644 4,685
---------- ---------- ---------- ----------
Selling and marketing costs 49,025 49,106 23,416 23,457
--------------------------------------- ---------- ---------- ---------- ----------
Research and development
costs 3,178 3,431 2,963 3,054
Management, general and administrative
cost 6,725 8,727 7,572 10,665
Other operating income - (324) - -
Depreciation and amortisation 3,110 13,053 2,155 9,790
---------- ---------- ---------- ----------
Total operating costs 62,038 73,993 36,106 46,966
========== ========== ========== ==========
Adjusted operating costs exclude share-based payment charges and
employer costs related to management share-option exercises,
onerous contract costs related to employee termination costs,
professional services related to business combinations, other
operating income and amortisation of acquired intangible
assets.
6. Shareholder's equity
Ordinary share capital as of 30 June 2021 amounted to $23,442
(30 June 2020: $16,014; 31 December 2020: $22,230).
The number of shares in issue as of 30 June 2021 was 234,421,485
(30 June 2020: 160,144,132; 31 December 2020: 222,297,719).
As of 30 June 2021, the Company held in treasury a total of
9,806,501 ordinary shares of $0.0001 (30 June 2020: 436,884; 31
December 2020: 9,713,857). During the six months ended 30 June
2021, 712,019 ordinary shares of $0.0001 were transferred out of
treasury and 600,000 from the Employee Benefit Trust to satisfy the
exercise of options by the Company employees (30 June 2020:
3,428,339).
During the six months ended 30 June 2021 a total of 804,663 of
ordinary shares of $0.0001 per value were transferred to treasury,
of which 756,168 were surrendered by management following non-cash
share options exercise and 48,495 received from the escrow account
related to LTMI acquisition following agreed indemnity claims.
The Kape Technologic Plc Employee Benefit Trust holds 600,000
Ordinary Shares (30 June 2020: 1,200,000; 31 December 2020:
1,200,000), the voting rights to which have been waived.
7. Earnings per share
Basic profit per share is calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Six months Six months
ended 30 ended 30
June 2021 June 2020
cents cents
Basic earnings per share 3.6 0.11
Diluted earnings per share 3.5 0.11
Adjusted basic 9.2 5.5
Adjusted diluted 9.0 5.3
Adjusted earnings per share is a non-GAAP measure and therefore
the approach may differ between companies. Adjusted earnings have
been calculated as follows:
Six months Six months
ended 30 ended 30
June 2021 June 2020
$'000 $'000
Profit for the period 7,526 209
Post tax adjustments:
Employee share-based payment
charge 721 542
Exceptional and non-recurring
costs 1,512 2,213
Amortisation on acquired
intangible assets 9,553 6,785
Other operating income (276)
Finance cost on deferred
consideration and leases 392 550
Adjusted profit for the year 19,428 10,299
Number Number
Denominator - basic:
Weighted average number of equity
shares for the purpose of earnings
per share 210,746,363 186,374,919
Adjustments for calculation of diluted
earnings per share:
Impact of potentially dilutive shares
related to employee options 4,522,219 7,658,686
Denominator - diluted:
Weighted average number of equity
shares for the purpose of diluted
earnings per share 215,268,582 194,033,605
The difference between weighted average number of ordinary
shares used for basic earnings per share and the diluted earnings
per share 4,522,219 (H1 2020: 7,658,686) being the effect of all
potentially dilutive ordinary shares derived from the number of
share options granted to employees.
8. Loans and Borrowings
Bank Loan Shareholder
loan
$'000 $'000
At 31 December 2020 36,736 -
Bridge Loan - 85 ,000
Term Facility 85 ,000 -
Revolving credit facility 4,596 -
Debt issuance costs (1,718) (850)
Interest expenses 934 2,125
Interest paid (227) (1,275)
Repayment of loan (1,818) (85,000)
-----------
At 30 June 2021 123,503 -
--------- -----------
Shareholder loan
On 5 March 2021, Kape has entered into a binding commitment
letter with TS Next Level Investments Limited ("TSNLI") under which
TSNLI committed, subject to limited conditions, to provide to Kape
the Bridge Loan of up to $120 million in aggregate. The Bridge Loan
carried a fixed coupon of 6.0% per annum payable on funds drawn and
an arrangement fee of 1.0%. The Bridge Loan was subordinated to
Kape's existing bank facilities and was repayable no later than 31
December 2021. The Bridge Loan also included certain customary
obligations on Kape in relation to TSNLI's costs and expenses and
in relation to taxes. On 2 June 2021, Kape repaid the Bridge Loan
in full and accumulated interest following closing of a new bank
debt facility as described below.
Bank loan
(a) General
On 28 April 2020, the company agreed with Bank of Ireland,
Barclays Bank, and Citi Commercial Bank (the 'Banks'), to provide a
senior secured term and revolving credit facilities of up to $70
million (the 'old Debt Facilities'), the facility is a club of
banks with Bank of Ireland acting as the agent bank. The old Debt
Facilities comprised of a $40 million term facility (the 'old Term
Facility'), a $10 million revolving credit facility (the 'RCF'),
and a $20 million uncommitted acquisition facility. The old Debt
Facilities had a three-year term with an option to extend by up to
an additional two years.
On 28 May 2021 the Company agree d with Bank of Ireland,
Barclays Bank PLC , Citi Commercial Bank, Citizens Bank, BNP
Paribas and Leumi Bank (together, "the Banks"), to replace the Old
Term Facility, RCF and Shareholder loan with a new senior secured
bank facilities of up to $220 million ("New Debt Facilities"). The
New Debt Facilities comprise a $120 million senior secured term
facility (the "Term Facility"), a $10 million revolving credit
facility (the "RCF") and a $90 million uncommitted acquisition
facility (the "Uncommitted Acquisition Facility"). Bank of Ireland
is the agent bank. The New Debt Facilities have a three-years term
with an option to extend the term by up to an additional two years.
50% of the Term Facility will be amortised on a quarterly basis
across 36 months starting September 2021 . The New Debt Facilities
carry a n opening M argin of 2% above Applicable Reference Rate per
annum.
Term Facility
The term facility comprised from $34.5 million remaining from
the old term facility and net proceeds of the New Term Facility of
$83.3 million after deducting commissions and other direct costs of
the Term Facility. Commissions and other direct costs of the Term
Facility have been offset against the principal balance and are
amortised throughout the loan.
The Term Facility carries an interest rate of 3 months
Applicable Reference Rate, which is USD or EUR LIBOR or GBP SONIA,
(as of the beginning of the relevant period) plus an opening Margin
of 2% per annum.
The applicable Margin is linked to the Adjusted Leverage, as
defined below, tested at the end of each quarter for the preceding
12 months. In case the Adjusted Leverage will be greater than 2 or
less than 1 the applicable margin will change to 2.25% or 1.85%
respectively. The effective interest rate after considering debt
issuance cost as of 30 June 2021 is 3.1%.
RCF
A $10 million revolving credit facility, that carries a
commitment fee for the unused facility of 35% of the applicable
Margin and interest rate as of the Term Facility for the used
facility. As of the reporting date the total credit facility drawn
amount is $6.39 million.
(b) Security
The New Debt Facilities is secured by first ranking security
over all assets (including material Intellectual Property) of Kape
Technologies Plc ("Parent") and her material subsidiaries
("Obligors") and over the shares in all Obligors (other than the
Parent).
(c) Loan Covenants
The Group is required to comply with the following financial
covenants:
-- The ratio of Adjusted EBITDA to Net Finance Charges
("Interest Cover") shall not be less than 4.0x in respect of any
Relevant Period.
-- The ratio of Total Net Debt on the last day of the relevant
period to Adjusted EBITDA in respect of that Relevant period
("Adjusted Leverage"), shall not exceed 2.5x for the first 4
relevant period and 2.0x thereafter.
As of 30 June 2021, the Group has met the financial covenants as
follows:
-- Interest Cover: 23
-- Adjusted Leverage: 1.47
30 June 2021 Carrying Contractual 3 months Between Between More
amount cash flow or less 3-12 months 1-5 years than
5 years
$'000 $'000 $'000 $'000 $'000 $'000
Bank Loan 123,503 126,148 4,824 13,864 107,460 -
-------------- --------- ------------ --------- ------------- ----------- ---------
9. Related party transactions
The Group is controlled by Unikmind Holdings Limited, registered
in Isle of Man, which owns 60.2% of the Company's shares. Mr. Teddy
Sagi is the sole ultimate beneficiary of Unikmind Holdings
Limited.
On 2 June 2021, the Company fully repaid the shareholder loan
and the accumulated interest following the closing of a bank debt
facility, see Note 8.
During the period the following transactions were carried out
with related parties:
Six months Six months
ended 30 ended 30
June 2021 June 2020
$'000 $'000
Technical support services to end customers
and administration services provided by
common controlled companies (145) (120)
Office expenses to common controlled companies (27) (89)
Amortisation of right-of-use assets with
common controlled companies related to
office leases (209) (496)
Interest expenses from lease liabilities
to common controlled companies related
to office leases (14) (64)
Other operating income from Lease modification
to common controlled companies 10 -
Interest expenses from shareholder short-term
loan and debt facility (Note 8) (2,125) (934)
(2,510) (1,703)
========== ==========
10. Business combinations
(a) Acquisition of Webselense Ltd
On 5 March 2021 (the "Closing date"), the Group acquired 100% of
the share capital of Uma Capital Ltd and Ani Ariel Ltd, which are
the owners of Webselense Ltd ("Webselense"), a digital platform
which provides independent and highly valued consumer privacy and
security content to millions of users globally via market leading
review sites.
The acquisition will support and improve the Group's organic
growth prospects in the fast-growing consumer digital Privacy and
Security markets through Elevating Kape as a leading force across
the global consumer privacy and security arena, Supporting the
Group's product and broader software portfolio development and
retaining Webselenese's highly experienced management team.
Webselenese's results are reported as new segment within the
group management reporting system, Digital Content.
Details of the provisional fair value of identifiable assets and
liabilities acquired, purchase consideration and goodwill, are as
follows:
Acquiree's
carrying Provisional
amount before Fair value
combination
$'000 $'000
Fixed assets, net 255 255
Trade and other receivables 7,257 7,257
Deferred tax asset 615 615
Cash and Cash equivalents 3,087 3,087
Right of use assets 507 591
Brand - 25,829
Customer list - 10,927
Non-compete - 4,291
Technology 1,224 12,993
Trade and other payables (2,885) (2,885)
Lease liabilities (554) (591)
Deferred tax liability - (5,906)
9,506 56,463
------------------------------------------- -------------- -------------
Fair value of consideration
Cash 119,160
Shares 28,548
Deferred and contingent cash consideration 7,357
Goodwill 98,602
------------------------------------------- -------------- -------------
Net cash outflow on acquisition of business
2021
$'000
Cash consideration 119,160
Cash and cash equivalents acquired (3,087)
116,073
=======
Webselense is being acquired for a total consideration of $155.0
million (including the acquisition of Gclid Ltd activity) to be
satisfied by combination of:
-- A payment upon closing of $119.2 million in cash. Out of the
cash consideration, Webselense's founders purchased $1.34 million
worth of the Group shares in the market following the closing.
-- Issuance of 12,123,769 ordinary shares of $0.0001, to
Webselense's founders and two senior members of staff. Webselense's
founders share consideration is subject to lock-up periods, of
which 50% until the first anniversary of closing, 25% until 18
months from closing and the remaining 25% until the second
anniversary.
-- Deferred consideration of $2.99 million will be paid by the
company for the excess working capital of Webselense at the closing
date.
-- Contingent consideration of $2.6 million which depend on the activity performance.
-- Deferred cash consideration of $1.76 which represents the
excess Income tax advances that were paid by Webselense before the
acquisition date. The amount will be settled only upon achieving
the amount back from the local tax authorities.
Webselense's founders are subject to Non-Competition and
Non-Solicitation agreement for the employment term and period of 18
months thereafter.
The initial cash consideration founded through Kape's internal
cash resources a $34.2 million and a $85.0 million bridge facility
(the "Bridge Loan") from TS Next Level Investments Limited
("TSNLI"), an affiliate of Unikmind Holdings Limited, Kape's
majority shareholder. The Group completed re-financing of the
Bridge loan as of May 28, 2021. Further details of the Bridge Loan,
which is a related party transaction, and the re-financing are set
out on note 8.
11. Subsequent Events
On 13 September 2021, the Group has entered into a sale and
purchase agreement to acquire certain assets, liabilities and
service entities together comprising the ExpressVPN business
("ExpressVPN") from Access Global Limited and its subsidiaries
("Access Global") for a total consideration of approximately US$936
million (the "Acquisition") comprised of:
-- $354 million in cash, to be satisfied by a combination of
$334 million payable on completion plus $20 million in cash within
six months of completion paid from excess cash of the Buyer
group;
-- Deferred cash consideration to be paid in two instalments of
$172.5 million each, 12 and 24 months post-completion of the
Acquisition ("Deferred Consideration")
-- $237 million in new ordinary shares in the capital of the
Group (amounting to 47,782,800 ordinary shares) ("Consideration
Shares") to be issued on completion of the Acquisition.
Completions of the acquisition is subject to, inter alia,
certain merger control consents having been received or the
relevant waiting periods having expired, shareholder approval at
the General Meeting in respect of the issue of the Consideration
Shares and the shares to be issued in the Placing (the "Placing
Shares"), and certain other conditions which are customary for an
acquisition of this nature, it is anticipated that completion of
the Acquisition will occur in Q4 2021.
At the day of signing, and in order to part fund the
Acquisition, The Group has successfully raised gross proceeds of
approximately $354 million (GBP256.5 million) pursuant to the
Placing and approximately $2.5 million (GBP1.8 million) pursuant to
the Retail Offer (together the "Fundraise"). Conditionally, in
aggregate, a total of 76,543,209 new ordinary shares of $ 0.0001
each ("Ordinary Shares") will therefore be issued pursuant to the
Fundraise.
Further, prior to completion of the Acquisition, the Group will
seek consent from its existing lender group (the "Banks") for the
Company's existing $120 million senior secured term facility and
$10 million revolving credit facility to remain in place, absent
which the existing senior secured term facility and revolving
credit facility will become repayable on completion of the
Acquisition.
The Group has entered into binding commitment letters with TSNLI
(Affiliate of Unikmind, the Group main shareholder) under which
TSNLI has committed, subject to limited conditions, to provide to
Kape the Deferred Consideration Facility of up to $345 million in
aggregate (in connection with the Group's obligation to pay the
Deferred Consideration) and the Refinancing Facility of up to $130
million to, if required, repay the Banks in full.
The Deferred Consideration Facility will carry a variable
coupon, depending on the leverage ratio: if greater than or equal
to 3:1 the coupon will be 4.75% per annum, if greater than or equal
to 2:1 but less than 3:1, then the coupon will be 4.25% per annum
and if less than 2:1 then the coupon will be 4.00% per annum, in
each case, on funds drawn. The rates set out above will each
increase by 1.00% per annum on and from the second anniversary of
the completion of the Acquisition and will increase by a further
1.00% per annum on and from the third anniversary of the completion
of the Acquisition.
The Deferred Consideration Facility will also carry an
arrangement fee of 1.5% of the total commitments, payable on
completion of the Acquisition, and a commitment fee accruing at the
rate of 3.50% per annum on undrawn commitments, payable on the
earlier of the commitments being cancelled or utilised. Should the
Group find an alternative source of financing to fund the payment
of the Deferred Consideration or to refinance the Deferred
Consideration Facility, the commitment fees will only be payable
pro rata for the period during which the commitment under the
Deferred Consideration Facility is in place.
The Refinancing Facility will carry the same coupon as sets out
above, if drawn, and an arrangement fee of 1.5% of the total
commitments, payable on closing. If the Refinancing Facility is
drawn, TSNLI will be granted substantially the same security as has
been granted to the Banks in connection with the existing term and
revolving credit facilities that the Refinancing Facility will, if
drawn, refinance.
12. Cautionary statement
This document contains certain forward-looking statements
relating to Kape Technologies plc ('the Group'). The Group
considers any statements that are not historical facts as
"forward-looking statements". They relate to events and trends that
are subject to risk and uncertainty that may cause actual results
and the financial performance of the Group to differ materially
from those contained in any forward-looking statement. These
statements are made by the directors in good faith based on
information available to them and such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information.
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END
IR FFFSIARIIFIL
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