Matomy Media Group Ltd Matomy Media Group- Update (5136A)

TIDMMTMY

RNS Number : 5136A

Matomy Media Group Ltd

28 December 2017

For Immediate Release

THIS ANNOUNCEMENT, INCLUDING THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION. PLEASE SEE THE IMPORTANT NOTICES AT THE OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

Unless otherwise defined, the capitalised terms used in this announcement shall be the same as defined in the circular to shareholders giving notice of the EGM announced on 15 December 2017 and posted on Matomy's website.

Second and Third Option Exercise for Team Internet AG Shares

Financial update and segmental information

Update on proposed issuance of Bonds

Matomy Media Group Ltd. (LSE: MTMY, TASE: MTMY.TA, "Matomy" or the "Company"), is pleased to announce that following the announcement on 15 December 2017 of a proposed EGM and circular to shareholders of the Company (the "Circular") to approve the disapplication of preemption rights in connection with a possible issue of convertible Bonds to finance the second Sale Exit Sale option of shares in the Munich based company, Team Internet AG ("Team Internet"), which is the entity through which Matomy conducts its domain monetisation activity, following continued negotiation, Matomy has entered into an agreement with Rainmaker Investments GmbH ("Rainmaker") relating to the exercise of the Second and, in addition, the Third Sale Exit option. Rainmaker is the minority shareholder in Team Internet and is a vehicle held by the managing directors of Team Internet, and is therefore a related party of Matomy. The agreement will result in the sale and transfer of all of their remaining minority shareholding in Team Internet (being 20% of the issued share capital of Team Internet in aggregate) to Matomy or its designated affiliate and also sets out clear guidelines for succession ensuring a smooth transition,

The agreement is based on the terms set out in the Team Internet Framework Agreement, as outlined in paragraphs 14.5 and 15.1 of the Additional Information section of Matomy's IPO prospectus, dated 9 July 2014, but with some amendments designed to provide assurance and clarity on the sale of the full 100% of the shares in Team Internet to Matomy and put in place an guidelines for the transition and full transfer of control of Team Internet to Matomy.

The key agreements are as follows:

-- In accordance with the calculation set out in the Team Internet Framework Agreement, the total consideration for the Second Sale Exit is EUR 18.2 Million, which is due in two installments: (i) the first in the sum of EUR 10 Million to be paid no later than 8 February 2018; and (ii) the second in sum of EUR 8.2 Million to be paid no later than 15 March 2018;

-- The consideration for the Third Sale Exit is due no later than 30 November 2018 according to the formula set out in the Team Internet Framework Agreement, except that in a deviation from the Team Internet Framework Agreement, for the purposes of calculating the Third Sale Exit option, Team Internet's EBITDA will include a 10% premium;

-- The parties also agreed on a full dividend distribution to the shareholders in Team Internet of all undistributed eligible profits for FY 2016 (including undistributed retained earnings) of approximately EUR 5M to support payment of the aggregate consideration for Second Sale Exit;

-- As from 31 March 2018, Matomy or a nominee of Matomy shall hold the chair of Team Internet's supervisory board in place of Rainmaker;

-- In a deviation from the Team Internet Framework Agreement, Rainmaker will be entitled to an additional consideration of 8% of the net earnings of Team Internet during the period beginning on 1 September 2018 and ending on 31 December 2018 and in the subsequent financial year beginning on 1 January and ending on 31 December 2019. In addition, a one-off bonus of US$1M will be paid to Rainmaker for the extension of the cooperation between the Team Internet and its unrelated search engine provider beyond 31 July 2019, with a view to ensure their continued and ongoing support and interest in Team Internet.

Matomy intends to use the sums received from the full distribution of all undistributed eligible profits in Team Internet together with net proceeds to be received following the issuance of the Bonds, if and when completed, to finance the Second Sale Exit.

Sagi Niri, Matomy's CEO said: "We are delighted to reach this agreement for the full acquisition of Team Internet. Team Internet is a market leader in its space and one of our core assets. I am confident that Team Internet will continue to grow in revenues and profits, constituting a core part of Matomy's overall growth strategy."

Financial update and segmental information

As of January 1, 2018, Matomy intends to report its financial results on a quarterly basis with a focus on its core assets, Team Internet and Mobfox. In advance of this change, Matomy wishes to provide further financial information on these business units, elaborating on the consolidated financial data for the period ending on June 30, 2017 providing a summary of selected financial data, please refer to Exhibit I of this announcement. Furthermore, a copy of the review letter provided by our independent auditors in connection with the financial review of the Interim results for the period ending on June 30, 2017 is attached to this announcement.

Other developments and financial updates are as follows:

   --     Increased business opportunities in Team Internet, including large publishers. 

-- Mobfox completes integration with Factual, the neutral data company making location data accessible to everyone. By implementing Factual's Geopulse Audience targeting capabilities, MobFox is able to provide DSP partners with advanced mobile targeting using location-based data ensuring effective audience targeting for mobile advertisers and publishers.

-- Proposed sale of Matomy's minority equity interest in Adperio Inc. to an unrelated third party for a total consideration of approximately US$2M.

-- The Company is in the process of performing internal analysis and based on indicative testing and internal unaudited results as of December 2017, the Company currently expects an accretion of redeemable non-controlling interest of approximately $10M for the period from 1 July 2017 to 31 December 2017. This amount is attributable to the "redeemable non-controlling interest", and is recorded in the Company's financial statements under the mezzanine equity provision, which is separate from permanent equity, on the consolidated balance sheets and measured at each reporting period at the higher of their redemption amount (the value of the purchase price) or the non-controlling interest book value.

-- The Company is in the process of performing internal analysis and based on indicative unaudited impairment testing as of December 2017, using the assumptions below and the estimated annual results of 2017, the Company expects to record an estimate impairment charge with respect to its goodwill and intangible assets of approximately $15 million in the second half 2017. The projected impairment charge is preliminary and could change after the finalization and approval of the 2017 results and the Company's cash flow projections.

The Company used the following assumptions in its preliminary analysis:

 
    Reporting      Domain Monetization   Mobile   Non-core 
      Unit* 
----------------  --------------------  -------  --------- 
    Terminal 
   growth rate             3%              3%        3% 
----------------  --------------------  -------  --------- 
    Discount 
    rate (post 
  tax) - (WACC)            15%            15%       15% 
----------------  --------------------  -------  --------- 
 

*For goodwill impairment test, the Company utilizes cash flow projections for a five-year period based on management forecasts, with a terminal value which represents the value of the reporting unit beyond the five-year projection period.

Discount rates used consider the Company's estimated weighted average cost of capital associated with cash flow projections to approximate the weighted average cost of capital of a comparable market participant. Due to the above factors, actual cash flows and values could vary from forecasted future cash flows and related values derived using discounting techniques.

Update on proposed issuance of Bonds

Matomy currently expects to publish the Bond Offering Documents in respect to of the issuance of Bonds, of up to US$25 million, during January 2018 and to complete the Bond offering in February 2018.

AS PREVIOUSLY STATED, THE NEGOTIATIONS RELATING TO THE TERMS OF THE CONTEMPLATED ISSUANCE OF BONDS ARE STILL NOT FINALIZED AND THERE IS NO CERTAINTY THAT THE ISSUANCE OF THE BONDS WILL BE INITIATED AT ALL OR CONSUMMATED. FURTHERMORE THE AMOUNT TO BE RAISED AND THE DEFINITIVE TERMS OF THE BOND ISSUANCE REFERRED TO HEREIN WILL BE ONLY THOSE DESCRIBED IN THE FINAL VERSION OF THE BOND OFFERING DOCUMENTS. FURTHERMORE, THE AFORESAID IS NOT AN OFFER OR INVITATION OR SOLICITATION OF ANY OFFER TO PURCHASE OR SUBSCRIBE FOR PURCHASE OF THE BONDS IN ANY JURISDICTION. FULL DETAILS REGARDING THE CONTEMPLATED ISSUANCE OF THE BONDS WILL BE INCLUDED IN THE BOND OFFERING DOCUMENTS.

This announcement and the information contained in it is restricted and is not for publication, release or distribution, in whole or in part, directly or indirectly, in, into or from the United States, Australia, Canada, South Africa or Japan or any other state or jurisdiction in which publication, release or distribution would be unlawful, restricted or unauthorised (each a "Restricted Territory"). This announcement is for information purposes only and does not constitute an offer to sell or issue, or the solicitation of an offer to buy, acquire or subscribe for the Bonds in any Restricted Territory or any other state or jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions. Subject to certain exemptions, the securities referred to in this announcement may not be offered or sold in any Restricted Territory or for the account or benefit of any national resident or citizen of any Restricted Territory. The Bonds have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold, taken up, resold, transferred or delivered, directly or indirectly, in, into or within the United States.

The Bonds, may be offered and sold only in Israel pursuant to a prospectus, once the publication thereof has been approved by the Israel Securities Authority ("ISA") and subject to Tel Aviv Stock Exchange ("TASE") approval of the registration of the Bonds for trade. This announcement is for information purposes only and does not constitute an offer to sell or issue, or the solicitation of an offer to buy, acquire or subscribe for the Bonds in Israel, or any other jurisdiction.

No offering of the Bonds referred to in this announcement will be made in the United States, the European Economic Area, any Restricted Territory or elsewhere outside Israel.

The Bonds have not been and will not be approved or disapproved by the US Securities and Exchange Commission, any state securities commission or any other regulatory authority in the United States or elsewhere other than in Israel, nor have any of the foregoing authorities passed upon or endorsed the merits of the Bonds or the accuracy or adequacy of this announcement. Any representation to the contrary is unlawful.

This announcement includes forward-looking statements, which include all statements other than statements of historic facts, including, without limitation, those regarding Matomy's and/or its subsidiaries' (the "Group") financial position, business strategy, plans and objectives of management for future operations, or any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or negatives thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Group's control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. These forward-looking statements speak only as at the date of this announcement. The Company, its directors and its or their advisers expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based unless required to do so by applicable law or the Rules of the High Growth Segment.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.

http://www.rns-pdf.londonstockexchange.com/rns/5136A_-2017-12-28.pdf

Exhibit I

Selected Mobile Financial Data (U.S. dollars in thousands)

 
 Mobfox selected 
  financial data 
-----------------  --------  --------  --------  --------  -------- 
                    H1 2017   H2 2016   H1 2016   H2 2015   H1 2015 
-----------------  --------  --------  --------  --------  -------- 
 Revenue            25,030    27,833    14,308    12,879     5,029 
-----------------  --------  --------  --------  --------  -------- 
 Adjusted gross 
  profit             6,804     7,193     3,259     2,832      991 
-----------------  --------  --------  --------  --------  -------- 
 Adjusted gross 
  margin             27.2%     25.8%     22.8%     22.0%     19.7% 
-----------------  --------  --------  --------  --------  -------- 
 Adjusted EBITDA     1,638     2,587     (567)      589       160 
-----------------  --------  --------  --------  --------  -------- 
 

Selected Financial Data for Team Internet

Summary Team Internet financial Data (U.S. dollars in thousands)

 
                                     Six months         Year 
                                       period           ended 
                                        ended          December 
                                      June 30,           31, 
                                        2017 
                                                         2016 
 
 
 ASSETS 
 
 CURRENT ASSETS: 
 Cash and cash equivalents             12,408           5,048 
 Trade receivables                     9,147            6,068 
 
 Domains                                  -             9,965 
 Other receivables 
  and prepaid expenses                 1,073            1,288 
 
 Total current assets                  22,628          22,369 
 
 LONG-TERM ASSETS: 
 Property and equipment, 
  net                                   592              590 
 Other long-term assets                  65              36 
 Domains                               10,931             - 
 
   Investment in affiliated 
   companies                           1,883            1,887 
 
 Other intangible assets, 
  net                                  1,770            2,281 
 
 Total long-term assets                15,241           4,794 
 
 Total assets                          37,869          27,163 
 
 
 CURRENT LIABILITIES: 
 Short-term bank credit 
  and current maturities 
  of bank loan                          909              840 
 Trade payables                        8,732            5,492 
 Accrued expenses and 
  other liabilities                    5,105            2,669 
 
 Total current liabilities             14,746           9,001 
 
 LONG-TERM LIABILITIES: 
 Deferred tax liability                 277              275 
 Accrued expenses and 
  other liabilities                     661              288 
 Bank loan                             2,476            2,707 
 
 Total long-term liabilities           3,414            3,270 
 
 SHAREHOLDERS EQUITY                   19,709          14,892 
 
 Total liabilities 
  and equity                           37,869          27,163 
 
 Revenues                              51,674          63,306 
 
 Adjusted gross profit                 15,216          19,319 
 EBITDA                                11,633          14,115 
 
 Net Profit                            6,832            8,407 
 
 

Team Internet liquidity and cash flows:

 
 
                                             Six months                       Year ended 
                                                period                         December 
                                                ended                             31, 
                                               June 30, 
                                                 2017 
                                                                                 2016 
 
 Cash flows from 
  operating activities: 
 
 Net income                                         6,832                                8,407 
 Increase in domains 
  held for sale                                               -                         (4,151) 
 Other adjustments 
  to reconcile net 
  income to net cash 
  provided by operating 
  activities                                             4,138                           (396) 
 
 Net cash provided 
  by (used in) operating 
  activities                                    10,970                                     3,860 
 
 Cash flows from 
  investing activities: 
 
 Purchase of property 
  and equipment                                            (5)                           (425) 
 Capitalization of 
  research and development 
  costs                                           (246)                                  (547) 
 Sale of Domains                                 114 
                                                                                              - 
 Purchase of domains                             (1,002) 
                                                                                              - 
 
 Net cash used in 
  investing activities                          (1,139)                                  (972) 
 
 
 
   Cash flows from 
   financing activities: 
 
 Receipt of bank 
  loans                                                    -                              3,021 
 Repayment of bank 
  loans                                             (455)                                (513) 
 
 Dividend paid                                   (2,016)                                (5,702) 
 
 Net cash provided 
  by (used in) financing 
  activities                                      (2,471)                                (3,194) 
 
 
 Increase (decrease) 
  in cash and cash 

  equivalents                                             7,360                          (306) 
 Cash and cash equivalents 
  at beginning of 
  period                                                5,048                            5,354 
 
 Cash and cash equivalents 
  at end of period                                      12,408                           5,048 
 
 
 Team Internet 
  - P&L information 
--------------------  ----------             --------- 
                         6 months period       12 months period 
                               ended                 ended 
--------------------  ---------------------  -------------------- 
                                              December   December 
                                                 31,        31, 
                         June      June 30, 
                        30, 2017     2016       2016       2015 
--------------------  ----------  ---------  ---------  --------- 
 Revenue                51,673      30,636     63,280     54,265 
--------------------  ----------  ---------  ---------  --------- 
 Change 
  %                      68.6%      20.3%      16.6%      23.1% 
--------------------  ----------  ---------  ---------  --------- 
 Adjusted 
  gross profit          15,215      9,502      19,296     14,700 
--------------------  ----------  ---------  ---------  --------- 
 Adjusted 
  gross margin           29.4%      31.0%      30.5%      27.1% 
--------------------  ----------  ---------  ---------  --------- 
 EBITDA                 11,539      7,149      14,162     10,293 
--------------------  ----------  ---------  ---------  --------- 
 % of Income             22.3%      23.3%      22.4%      19.0% 
--------------------  ----------  ---------  ---------  --------- 
 Net profit 
  (GAAP)                 6,832      4,155      8,407      6,344 
--------------------  ----------  ---------  ---------  --------- 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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December 28, 2017 13:27 ET (18:27 GMT)